Sweetgreen, Inc.

Current report

Changes in food and supply costs or failure to receive frequent deliveries of food ingredients and other supplies could have an adverse effect on our business, financial condition, and results of operations.

Current report

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs, and our ability to maintain our menu depends in part on our ability to acquire ingredients that meet our specifications from our suppliers. Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, our inability to accurately forecast our supply needs, problems in production or distribution, food contamination, inclement weather, or other conditions could adversely affect the availability and cost of food and supplies or the quality of our ingredients (including requiring distributors to provide substitute products, which may not be of equal quality), which could harm our operations and expose us to risk. We have a localized set of suppliers, and in some cases rely on a single regional distributor for our produce items and another single regional distributor for grocery products in each geographical market where we operate, which may make our supply chain inherently more difficult to manage than if we partnered with national distributors, which is the approach of many of our competitors. In addition, we partner with farmers and suppliers of various sophistication, and certain of those farmers and suppliers may have low inventory levels and limited ability to mitigate any supply disruptions that they experience, which may place our business at risk. This may further limit our ability to grow and scale and, in some situations, to serve our customers on a daily basis. Additionally, our farmers may not maintain food safety certifications, which may increase our risk in the event of a food safety incident. We have developed a process to monitor food safety certifications and standards of our farmers and we do not generally source products from farmers that do not have a comprehensive food safety plan. We periodically audit our farmers’ compliance with our food safety and other standards, and in the event of material noncompliance with our standards (which occurred with one of our leafy greens suppliers in fiscal year 2024 and with one of our pickle suppliers in fiscal year 2023), our policy is to pause our relationship with such farmer until they become compliant.

Current report

Any increase in the prices, or lack of availability, of the food products and other supplies most critical to our business, whether due to natural forces like weather or climate change, other companies offering more competitive terms to our suppliers, inflation, animal diseases, increased labor costs for our suppliers, or other reasons could have an adverse effect on our business, financial condition, and results of operations. For example, in fiscal year 2024, avian influenza outbreaks disrupted our supply of chicken and eggs in certain of our geographic regions, resulting in shortages and higher prices. United States’ immigration laws are currently a topic of considerable political focus, and U.S. Immigration and Customs Enforcement (ICE) recently intensified certain of its immigration enforcement efforts. Changes in immigration or work authorization laws or additional enforcement activities of existing immigration or work authorization laws by federal or state authorities could increase those suppliers’ labor costs, increase the prices, and limit the availability of the food products that we purchase from those suppliers. Additionally, the markets for some of the ingredients we use, such as avocados, are particularly volatile due to factors such as limited supply sources, crop yield, seasonal shifts, climate conditions, industry demand, food safety concerns, product recalls, government regulations, and international trade barriers. Further, the implementation of tariffs has impacted, and is expected to continue to impact, the cost of certain of our supplies. Material increases in the prices or decreased availability of the ingredients and supplies most critical to our business could adversely affect our business, financial condition, and results of operations or cause us to consider changes to our product delivery strategy or adjustments to our menu pricing.

Current report

Our ability to maintain consistent price and quality throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities from our suppliers and distributors at a reasonable cost. Because of the way our supply chain is structured, finding a substitute product that meets our culinary requirements in any one geographical market where we operate, particularly with respect to our fresh food products, may be difficult. We do not control the businesses of our suppliers or distributors, and our efforts to specify and monitor the standards under which they perform may not be successful.

Current report

In the past, we experienced supply chain disruptions for our bowls and plates, which resulted in the use of alternative packaging solutions. Additionally, most of our bowls and plates are produced outside the United States, and beginning in 2025 we have been, and may continue to be, subject to new and increased tariffs and duties in connection with the importation of those items into the United States. Any additional tariffs or duties may significantly increase the price that we must pay for such items. We are also in the process of transitioning a portion of the production of our bowls and plates to a new supplier, which has increased certain of our costs and caused certain supply disruptions. If we experience further supply disruptions or further cost increases with respect to our bowls and plates, and if we are unable to mitigate those supply disruptions or further cost increases by identifying and securing alternative packaging solutions acceptable to our customers in a timely manner and on commercially reasonable terms, this may result in customer dissatisfaction and store closures and could adversely affect our business, financial condition, and results of operations (including, in particular our Restaurant Level Profit Margin).

Current report

If any of our distributors or suppliers performs inadequately or is unable to grow and scale with our business, or if our distribution or supply relationships are disrupted for any reason, there could be an adverse effect on our business, financial condition, and results of operations. Currently, we typically have shorter-term contracts for the purchase or distribution of most of our food products and supplies. As a result, we may see certain of our food or supply costs increase with limited or no notice, and we may not be able to anticipate or react to such increases by adjusting our purchasing practices or menu prices, which could cause our results of operations to deteriorate. When we have fixed-price agreements in place for particular ingredients or supply chain services, the durations of those agreements typically range from three months to multiple years, depending on our strategy and the pricing outlook with respect to that particular ingredient or service. In some cases, we have minimum purchase obligations.

Current report

We have tried to increase, where practical, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign demand, weather, crises, and other world events that may affect our ingredient prices. In the event of a dispute with a distributor or supplier, we may not have adequate contractual recourse, and any insurance maintained by our distributors and/or suppliers, or by us, may not be sufficient to cover the cost of a potential claim. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants such as packaging or paper products, which could cause a restaurant to remove items from its menu. If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, if customers change their dining habits as a result. In addition, we may choose not to, or may be unable to, pass along commodity price increases to customers. These potential changes in food and supply costs could have an adverse effect on our business, financial condition, and results of operations.

Current report

Furthermore, certain food items are perishable, and we have limited control over whether these items will be delivered to us in appropriate condition for use in our restaurants. If any of our vendors or other suppliers are unable to fulfill their obligations to our standards, including if we do not accurately forecast our needs (which has been historically challenging when there have been events outside of our control, such as the COVID-19 pandemic), or if we are unable to find replacement providers in the event of a supply or service disruption, we could encounter supply shortages and incur higher costs to secure adequate supplies or, alternatively, receive lower-quality substituted products, which would have an adverse effect on our business, financial condition, and results of operations. Additionally, unanticipated store closures may result in our donation of an excess supply of perishable products, which may also have an adverse effect on our financial condition.

Current report

As we expand into new markets, because of our commitment to our Food Ethos, we may be unable to find vendors to meet our supply specifications or service needs as we expand. We could likewise encounter supply shortages and incur higher costs to secure adequate supplies, which would have an adverse effect on our business, financial condition, and results of operations. For example, during the fourth fiscal quarter of 2024, as a result of extreme weather conditions, we experienced supply chain disruptions for tomatoes and cucumbers, which resulted in higher prices for those products or resulted in temporarily discontinuing those products in certain geographic markets. In the event of such shortages in the future, there can be no assurance that we will be able to identify or negotiate additional or alternative sources on terms that are commercially reasonable to us, if at all. If our suppliers or distributors are unable to fulfill their obligations under their contracts or we are unable to identify alternative sources, we could encounter supply shortages and incur higher costs, each of which could have an adverse impact on our results of operations. Similarly, if we are unable to accurately forecast demand, we may end up with overages of custom and/or perishable products, which may result in food waste and in us paying suppliers or farmers for products that we do not end up using.

Current report

Our international supply chain subjects us to tariffs and duties, which have had and may continue to have an adverse effect on our business, financial condition, and results of operations.

Current report

Our international supply chain subjects us to tariffs and duties, which have caused and may continue to cause an increase in certain of our costs. While our core ingredients are predominantly sourced from domestic suppliers, we also source certain items for our restaurants from outside the United States. Notably, most of our bowls and plates are produced outside of the United States, including in China. The items procured from outside the United States expose our business to tariffs and duties implemented by the U.S. government, including new tariffs initiated by recent changes to U.S. trade policy. For our second fiscal quarter of 2025, we realized a tariff and duty impact from our food, beverage, and packaging supply chain of approximately 40 basis points, and we expect a similar impact in future fiscal periods. We also expect the recent tariffs implemented by the U.S. government to increase our new restaurant build-out costs and the cost of the Infinite Kitchen units that we purchase. If we fail to mitigate the financial impact of the tariffs and duties imposed by the U.S. government, such tariffs and duties could have an adverse effect on our business, financial condition, and results of operations.

Current report

There is currently significant uncertainty with respect to future trade regulations, including the possible imposition by the U.S. government of additional tariffs and penalties on products from non-U.S. countries. The U.S. government may impose additional tariffs or other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs or other trade restrictions. Further, these tariffs could cause a general increase in the price of items we purchase within the United States. If there is a further escalation of existing tariffs or new tariffs are imposed, costs on a significant portion of our ingredients and equipment, as well as the costs of opening new restaurants and renovating existing restaurants, may increase further and our financial results may be negatively affected.