Co-founder Jonathan Neman tells Recode’s Kara Swisher the company is way bigger than a chain of salad restaurants: “We see this as building the food platform.”
To be like other restaurants, the fast-food salad chain Sweetgreen might join the crowd in partnering with a tech giant like Amazon or Uber. But co-founder Jonathan Neman doesn’t want to surrender that part of the business. Instead, he wants Sweetgreen to be the next giant.
“We see this as building the food platform,” he said on the latest episode of Recode Decode, hosted by Kara Swisher. “A restaurant creates content, so our salads are our hits. If you just have your restaurant itself, you own your platform, you go direct to consumer. … In the media world, you had networks and distributors that took the content and distributed it. In our world, you now have these platforms, these Uber Eats of the world.”
Already, he told Recode’s Kara Swisher, 50 percent of Sweetgreen’s orders come in through its mobile app, which more than a million people have downloaded. And as the company expands into more markets and gets into delivery, it wants to keep those customers ordering through the app, to preserve “that direct relationship with the customer.”
Neman said there will always be physical restaurants, but “they will have to find a place online as well.” To that end, he envisioned a network of “ghost and virtual kitchens” that would prepare items for rapid delivery, without a public-facing storefront.
“You can light them up in different parts of the country, in the world. As you have demand and as you want to expand your menu, you can imagine how salad can now become more, warm food can become breakfast, because you’re popping up additional servers, and you have that digital connection to your customer, the menu changes on your app, and then it’s delivered to you,” he said.
Below, we’ve shared a lightly edited full transcript of Kara’s conversation with Jonathan.
Kara Swisher: Hi, I’m Kara Swisher, editor at large of Recode. You may know me as the inventor of the Swisher Diet — the only things you eat are salad and deep-fried marshmallows — but in my spare time I talk tech and you’re listening to Recode Decode from the Vox Media Podcast Network.
Today in the red chair is Jonathan Neman, the co-founder of Sweetgreen. It’s a fast-casual restaurant that serves salads with 87 locations around the country, but unlike most salad restaurants they raise tens of millions of dollars in venture capital from people like Steve Case.
Jonathan, welcome to Recode Decode.
Jonathan Neman: Thanks for having me.
You know, it’s actually Steve who was always saying I should talk to you, which was great, which I always wanted to because I’m very interested in how new companies are formed, and we’ve interviewed the people from Philz. There’s a bunch of companies — coffee companies mostly, actually, oddly enough — that have raised a lot of money for venture capitalists, but it’s unusual for a restaurant type of chain.
First, why don’t you take me through how you founded Sweetgreen. They’re all over the place. You find them everywhere.
Talk to me a little bit about how you came to do that.
Sure. So, Sweetgreen started 11 years ago. We were students at Georgetown, senior year, trying to figure out what we’re gonna do with our life and had a simple problem: [We] had nowhere to eat. Saw the world in which food was either fast and cheap and really bad for you, or it was delicious, slow and good.
And we wanted to create …
You didn’t like Booeymongers? I went to Georgetown.
I was a Georgetown graduate. Sure was.
Yeah, Hoya Saxa, baby.
You know, we actually …
I was just there last weekend.
We were writing our business plan at Booeymongers. But the idea was …
This is a sandwich shop near Georgetown University, where everybody goes.
And it’s really great.
The idea was creating a restaurant that … or a place to eat that made you feel excited to eat it, good while you’re eating it, good right after, and good many years after.
And all restaurants before had only really solved half of the problem.
Right. Either excited to eat and delicious while you’re eating it, or made you feel good and were good for you long term. But no one had optimized across the four stages of food. And we wanted to create a place that made you, you know …
Why restaurants? What did you major in at Georgetown?
Studied business. For me, it started with …
You were in the business school?
I was in the … I was MSB. And I just wanted to, first of all, it was for friendship with my two partners, but also it was wanting to create something. All of our parents were first-generation immigrants and entrepreneurs. And we always saw a world in which we wanted to create something that … a business that had a big impact on the world.
And being at this … I’m 33 years old. I’m the upper edge of the millennial, saw a world in which our generation and the generation after us was not gonna accept the food system that we were being handed. It was not … McDonald’s did not speak to us, Chipotle, these places did not make sense for us. And there was going to a be a McDonald’s …
Not even Chipotle?
Not even Chipotle.
My kids love Chipotle.
There was going to be a McDonald’s of our generation. What Starbucks did for coffee.
And we saw an opportunity to completely create a new type of food system and an iconic brand that spoke to this generation.
And there hadn’t been that many salad-oriented. You have a few competitors, we’ll talk of that in a little bit, but there hadn’t been very many salad-oriented places.
Yeah. And it was … salads was always, and still is, just kind of the first act of … And where we chose salads because it’s a great way to focus on vegetables, which focuses on the soil, and really build that supply chain in that way and build our brand around real food.
But the vision long-term is to be way beyond salads. Today, 35 to 40 percent of our menu is warm bowls … sold in warm bowls, and a lot of hot food.
Over time, salads will just be …
To go back to the place.
Kind of how I think about it, it’s our books. Amazon books.
Oh, that’s an interesting way of thinking of it.
And we will expand way beyond salads.
So you started this thing and you … D.C. is not the center for venture capital. There is Steve Case and Ted Leonsis, and I think that’s it.
And a couple of guys that they work with. And I say guys because they’re all guys, but … There’s not much venture going on in that part of the world.
Yeah. And for the first six years, we had no venture money. So, we opened our first … To open our first restaurant, we raised money from 50 people and it was $300,000.
Who was it from? Like parents?
It was a college professor, college classmates, someone we met on a plane. An uncle. All our old bosses from when we were interns. It was …
So it was like $10,000 each kind of thing.
Yeah, it was less than that, on average. It was like a Kickstarter before there was Kickstarter. We were raising like $5,000 a person.
And you were saying, what? We want to open a restaurant that’s a salad restaurant.
“We wanna open a restaurant that it is farm-to-table fast food.” That was the pitch. It was these two things that shouldn’t go together, which is very high-quality food and a very quick, casual environment. And we had a tiny little space right across from our dorm. It was 500 square feet. On … You remember The Little Tavern?
Yeah. Oh yeah.
So, we took over The Little Tavern.
Oh that place. Yeah. On the corner. On that weird alley. Where they had burgers. Like real greasy burgers.
That was the one.
Really good greasy… Yeah.
So we took that tiny little space.
Why was it open? Did they close?
It closed. It became a Philly Cheesesteak. And then it was empty when we were there. And so we took that over.
It’s near Dixie Liquors.
So people would go get beer and then go get a greasy burger.
And now they’re getting organic food.
Yeah, it is there. I just passed … I was at CB2, which is right near it, next to where you …
Yeah. So the first … raised $300,000 from family and friends. And then it was … the next five years was us building a network and asking for money and getting advice or asking for advice and getting money. But it … we raised about just over $10 million in the first five years.
These are from professional investors?
No. Some professional, some angels, some, you know, mentors of ours, whether it was Walter Robbs, you know, one of the CEOs of Whole Foods. Or Danny Meijer or people like that who were …
They saw what you were doing.
They saw what we were doing and gave us angel investment checks. And so we did that for the first five years. Raised about $10 million. Got up to about 20, 25 restaurants, and had just started to expand outside of D.C. — we were in Philly, Boston and New York at this point — and then Steve and Ted came in.
Right. So both of them. Wow. That’s a big … Don’t you have a lot of patience. I know them very well.
Yeah, they’ve been great.
So … and how did they … how did you attract them? This is Steve Case and Ted Leonsis, the early AOL executives. The CEO and the president.
We’ve attracted pretty much all of our investors as customers first.
So they had been using.
They were using. They were just … We now had 20 restaurants in D.C. Steve was eating it, and one of Steve’s associates, or one of the partners at the firm, his name’s Evan Morgan, was a … became a good friend. And it was helping us with the business, helping us think about capital structure and things like that. And he then introduced it to Steve.
Yeah. And Steve actually was a personal investor, to start.
Moved it into Revolution.
Moved in and then we did our first …
So how much did you raise and how much have you raised in total?
Today we’ve raised about $150 million.
And that’s beyond Steve. Who else has moved in?
Henry Ellenbogen at T. Rowe Price is our other biggest.
Oh. Henry. Wow.
Wow. That’s a good investor.
We have very good … he’s the best.
Yeah. He is. He’s from Baltimore. So, you … so what was the idea of using veggies, because restaurants don’t do that. Like, the pressure … restaurants are notoriously difficult. And you don’t really have a restaurant, do you? It’s sort of … there’s not that many places they sit in them. How do you look at them? There are seats in some of them.
There are seats. You know, we see this as building the food platform.
Okay. I wanna hear this. Food platform.
So the way to think about it is. Restaurants are content creators. Think about it in the media world.
All right. Okay. I shall.
Whereas a restaurant creates content. So our salads are our hits. Our series. Most restaurants, you know, if you’re just in … if you just have your restaurant itself, you own your platform, you go direct to consumer.
The world is now shifting where there’s some sort of digital disintermediation of the customer. In the media world, you had networks and distributors that took the content and distributed it. In our world, you now have these platforms. These Uber Eats of the world.
Our goal is to be a content creator and a food platform. So a full vertically integrated food system, from supply chain, production, content creation and ordering.
Which is the platform. And I think that’s what’s interesting in terms of how we’re positioning the restaurant, is having that direct relationship with our customer so we can better understand them, better understand their taste profile, their nutrition profile, how they live their life, and then be able to create different kinds of food for them.
And also meet them wherever they are. So over time, we see us not as a restaurant company but really as a food ecosystem.
So restaurants of all different shapes and sizes. We have delivery on demand so we create an outpost, which is kind of like a batch delivery service. And then being able to order in many, many different ways, whether it’s voice ordering, text ordering, Slack ordering. We wanna take these trends we’ve seen in e-commerce and apply it to food, which is so huge. You know, food is one-and-a-half trillion dollars. And it’s one percent digitally …
So applying all those digital platforms — we’ll get to that in the next section — but restaurants are notoriously hard for margins, very tight margins. It’s not a business that has attracted venture money because of that, because it’s not something that’s, I guess “scalable” would be the right word. But you think it is.
It is scalable. Yes. It is scalable.
Well, I guess McDonald’s is … Yeah, yeah, yes.
The example we use is Starbucks as the best global iconic brand that’s scaled food, or food and coffee. We’d like to do that for real food.
Right. For any kind of real food.
And what they’ve done, they’ve done it in a different era, so their innovation’s really on format, in terms of store format. Whether it’s all different shapes of sizes of that Starbucks exist, whether it’s in hospitals or airports or universities, in your office, etc. How do you … You know, whether it’s Via or the pods, how do we do that for real food? And take this promise, this trust, of our supply chain and the way we source, and our understanding of the customer, and then meet you in all of these different channels.
So what do you compare … who did you look to then for inspiration? Or wasn’t there anybody doing this?
No one really doing it. And I think at different stages of the business, we’ve looked to different people.
Mm-hmm. Starbucks being one of them.
We’ve looked to Starbucks. In the early days we definitely looked to Whole Foods in terms of the food ethos that they had. Looked at a brand like Patagonia and their commitment to sustainability. But also looked at companies, you know, this sounds cliché, but like Apple. And their ecosystem strategy of both products, experiences and services. And so our idea is just applying that to food.
Finding that food. Now what’s the challenge when it’s food and not, say, a cup of coffee? Because that’s a very easy delivery.
A lot of … just complexity. So there’s definitely a lot of complexity in terms of the operation, and people matter, right? People and the service matters. The thing about, you know, I used the media example, right, where we create hits and then we have a platform where we distribute it.
“Hits” being the salads.
The salads and the bowls and the meals. But the difference is, you make “Game of Thrones” once, it’s really, really, really hard to make. It costs a lot of money, but it scales really, really well. For us, you gotta come up with it, but then you gotta replicate it every single time.
In each store.
So what we’ve spent a lot of time thinking about is how do we redesign the operating environment to also be scalable? So, how do we think about the processes within the kitchen. How we build technology that makes it easier for our store teams to execute real food from scratch.
One thing about Sweetgreen is, not only do we have a local supply chain, but we make all our food from scratch, in every location, every single day. So our dressings are made from scratch, everything’s roasted from scratch. Like, on the hour, every hour.
So it’s not distributed like a McDonald’s.
So it’s not distributed.
Where you pull … I assume that’s in a plastic package.
But what’s allowed us to do that is getting really … just being intentional and thoughtful about the process. So we built something that we call Sweetgreen OS inside of the kitchen.
Okay. All right.
It’s our operating system. Which, I’ve used …
It’s like the McDonald’s movie, which is funny.
When they were on the tennis court. I thought that was brilliant.
Love that scene.
Isn’t that a great scene?
And we do that, both in terms of like the physical space and how do you design a physical space for something that can be executed in a consistent and scalable way. But also, what’s the … what I say, the Uber-turn-by-turn instructions, so when you’re working in a kitchen, how do you make it easier to not mess things up so you can focus on the consumer experience and not, “Okay, what needs to go in this bowl?” “How much chicken do I need to make?” “How much kale do I need to chop?” “What are my sales gonna be today?” “How much food do I order?”
So you think about an OS that tells a head coach or a GM, you know, here’s what your sales are gonna be for the day, based off of weather, events, recent trends, etc. Based off that, here’s what it is spread out through the day by hour, and the product mix that’s gonna be there by channel.
Right. That you need to have it in there.
For delivery versus in-store. And it tells you, you know, how much … essentially we have an app for ovens and our cold prep that says, whoever’s running that, here’s exactly what you need to make, when, so it’s ready … you have just enough food ready to be then made for the consumer.
And then the cool thing about what we do, is because our food is made, it’s essentially made like mise en place. So what that means is we make … the food is prepped and then it’s assembled in a customizable way.
You’re prepped just before and then so when an order comes in, it takes us just seconds to put it together. Today we have about 120 ingredients, which means we can make combinations two to the 120th combinations with those ingredients.
So it takes our experience and makes it very customizable, and our vision for it is to make a personalized food experience. So your menu should be different than someone else’s menu based off of your tastes and your nutrition and what you like and what makes you feel good.
And so, when you’re putting these in place … there’s been a bunch of restaurants that have tried to do this. Like Eatsa in San Francisco and there’s been a bunch of others that haven’t worked as well.
Which is … you know, the idea of putting process in place makes sense, because McDonald’s did it. I mean, they just did.
It’s how they …
My theory on this, and my philosophy is art and science. Where first we are a brand. At our core, we are a …
So everybody that goes in knows, this is what they are getting.
We are a food company first. You can have the best tech, the best process, doesn’t matter. If the food is not delicious, like, you say content is king. The user experience can be beautiful, if the food is not delicious, and food is emotional …
If it’s not … if it doesn’t taste good and you don’t have that trust, nothing matters. So our team is built around great chefs, great supply chain, a huge focus on the culinary credibility about what … who we are and what that experience is. And then, you apply the tech.
So you can’t have one without the other. And before … you know, everyone before us, it’s either you’re a great restaurant that’s not scalable, you’re delicious food but no process. Or you had all the process but no culinary credibility.
Delicious food. Yeah.
So you need to merge the two.
All right. We’re here talking with Jonathan Neman. He is the founder of Sweetgreen. It’s a … fast food casual, is that correct?
Healthy fast food.
Healthy fast food. It’s … how many stores do you have now?
We have 90 restaurants.
We’re here with Jonathan Neman. He’s the co-founder of Sweetgreen. You founded it with two friends, right?
Do … when you were thinking of entrepreneurialism, when you were a younger person, most of the people who move to California, essentially. Most entrepreneurial efforts have gone on there. And there’s … your competitor, you have one competitor that’s pretty big, is in salads … it’s one or two? You have a couple in the area. How do you differentiate between you and them, because you know, they pop up … most things pop up first in San Francisco. I mean you see them come and go, like Eatsa. Various things. How do you think about yourself with competitors? Or don’t you look at it that way?
Well, for us, we have a lot of small regional competitors, and at the end of the day, anyone who sells food is in a way a competitor.
Sure, sure. But, you know, “I want a salad. Therefore I’ll go to Sweetgreen.” Or I want a taco or I want a … There’s all of a sudden a bunch of sushi places that are opening. Fast food sushi places.
Yeah. So, for us it starts with our brand and the trust. So what we stand for. And a lot of that comes from the supply chain.
Yeah. So talk about that. The supply chains. So you get everything locally in every restaurant area?
Not everything locally. But we have supply chain set up in every city that we’re in. So we think about our company almost market-by-market. We work with a combination of small, medium and large farmers. And a large portion of what we do is organic and then pretty much the rest of that is local. For us, it’s less about these monikers of what that is, but it is about the soil. So unlike most restaurants, we don’t buy food directly from a distributor. We go straight to our growers. We get to know the growers themselves.
So no Sysco-ing.
No Sysco. So we get to know the growers themselves-
Even my kid knows about Sysco. He’s like, “Oh my god, they delivered Sysco food.” And I’m like, “How do you know that?”
Yeah. And the thing is, you don’t know what you’re getting then. So for us we get to know the farmer and it really starts with the soil, because that’s where the taste and the nutrition comes from. From there, we establish relationships with them and we actually build our menus based off of the supply.
What you can get. Yeah.
So it’s how a high-end chef would build their menu. And that means our food will be different in different parts of the country, and different parts of the world eventually, and will be different at different times of the year.
We celebrate that. We celebrate the fact that food …
So, no more this, no more that?
Yeah, that food should taste different at different places. We reject this homogenous food system that you created this burger and it should be the same everywhere, exactly.
Well, there’s so many people who like that. When you think about it, some people like knowing what a Starbucks is like. There’s a certain comfort in Starbucks tasting the same.
But we think that’s … That’s actually something we are combating. That’s a problem. That’s not how the world creates food. Right? That’s how humans want it to just be comfortable in this consistency, but if you go back in time before we created this food system that we now have here, which was created to solve hunger, which now has created all these other issues, we’re trying to unwind that and remind people that you should eat with the seasons and you should eat what is available, because that is, one, more delicious, it’s better for the environment, and it’s better for you.
For the local scene. So, in each thing, you get local things. What do you do nationally? Is there things that you distribute nationally?
Yeah. So, there’s definitely things we do nationally. So, we have a lot of …
Yeah. So, bowls, olive oil, organic olive oil, organic wild rice. There’s definitely things that come nationally, and for us it’s all about transparency. It’s about actually knowing … Transparency and traceability, knowing where all our food comes from at any given moment, which is very unique. So, to know in this store, in this bowl, our lettuce came from here, and being able to share that with you is very unique. Most restaurants have about 20 percent traceability into where their food comes from. We’re approaching 100 percent traceability into where all of our food comes from.
And your customers are interested in this?
I think it creates this level of trust, and so in all of our restaurants, we have a local list where you get to see exactly which farm or which grower it comes from, and it will say what’s local and what’s from … You’re in New York, it’ll say what’s from California, but it’s that trust of saying we’re proud of it, and we will show you under the hood of where everything comes from.
So, you wouldn’t ship some California tomatoes into New York when it’s the middle of winter? You’d have to, because everybody wants tomatoes all the time, right, for example?
Yes. So, there’s certain things that you do ship, that you do have year-long, but the idea is because the menu shifts five times a year, if shifts seasonally, a large portion of things are always available locally.
Locally, okay. So, when you were doing this, how do you look at competition then, because again, there’s been a bunch of salad startups that you see them, or whatever genre of people want to go into of this fast … Is it fast casual? Is that the right term? Chipotle I think started it.
Fast casual. I kind of call it fast food, actually.
Right. How do you look at it?
It’s fast food.
Now, I’d say Chipotle’s a competitor. So is McDonald’s, but over time we’re trying to get more people to eat this way, and so the pie has gotten bigger as more people have gotten in because we’re educating the customers against this processed food system.
But remember, McDonald’s went into salad, and nobody wanted salad from McDonald’s. I mean, they were like, “We’re trying to be healthy.” I’m like, “Nobody wants healthy food from McDonald’s.”
Well, there’s no trust. I mean, you gotta ask …
Well, you can’t even think about it.
You go talk to generations, like a Gen-Z, and ask them about McDonald’s, and they don’t want to eat that. They’re completely rejecting that.
Right, right. You have to offer them something else. So, talk a little bit about putting processes in place, because I’m very interested in the way restaurants are changing, because it’s one of the areas that’s been sort of immune to technology. It seems like it. It’s done very … I don’t know. It just is not … It seems immune to technology, even delivery, even the ability to get things, and there’s been startup after startup I’ve seen that’s tried to get the food elsewhere, to move it around. Talk about how you think about the technology in the food preparation. What is growing? Is it the app, the on-demand delivery?
Yeah. So, mobile’s been a huge unlock. For us, that has been a huge unlock in the business. If you think about restaurants, you have a classic supply and demand issue, or at least a restaurant that has a lot of demand where you have a lot of demand in a very short period of time.
Like a Shake Shack. The other night, I did that. I was near a Shake Shack, saw a million millennials in front of me. I ordered it online and I had it before almost all of them. It was fascinating for my kid.
Right. So, if you think about Sweetgreen when we started 10 years ago, you have a line, just one line, where people come in, and you can serve X number of people, let’s say 200 people an hour.
Yeah, they move fast. Your lines are really long. It’s fascinating.
But at lunchtime, you may have demand for 20 times that, but only for that one hour of lunch. But a restaurant, if you think about it as a utilization game, you’re open for 12 hours and you’re utilized for two.
Mostly. So, how do you leverage technology to capture more demand in that peak, and also spread it into the shoulders? So, for us, what our app did was allow us to capture 5X the demand in a very short period of time in terms of … We, at that point, redesigned our stores to be mobile first, almost like responsive design, with second, third, fourth lines to facilitate the online orders.
The delivery. Mm-hmm.
Today, about 50 percent of our business is done through our app.
Wow. That’s a lot. So, the people order it on the app and then come in and just grab it from a bag? That’s it.
Exactly. That means … We have over a million customers on our app, and it’s growing rapidly because it creates this convenience for the customer. Their experience starts to get personalized over time, and it just becomes really sticky. For us, while we are a restaurant, the difference between us and most restaurants is, it’s very habitual. Our app users come four times a month. That means they’re treating it more like coffee than they are like a treat.
Right? It’s fuel for them. It’s a trusted place where they can just go to.
Why don’t you think restaurants do avail themselves to that? Getting back to McDonald’s, I was in a McDonald’s the other day. I don’t know why. I think I had a french fry desire or something, and when I walked in, they tried to push me towards their screen that you order on, but the person who was doing it didn’t know how to use the screen, and then it took 900 steps, and I could’ve just walked up to the counter. It was a really interesting thing, and I was sitting there going, “Why are you deploying this technology in a place that’s right next to a line that I can see is faster?”
It was just interesting, and I started to ask them, and I thought, “Oh, this is ridiculous. I can’t,” but I was fascinated by how many steps it took to order, and I thought, “This isn’t the way.” Putting a screen in a restaurant to do ordering does make sense, because I was also at another place, I think it was in Europe, where you go to a table, and there’s an iPad there, and you order. There’s no people, only the people that would bring you stuff out, and you order it on there, and there’s no waiters. There’s no waiting and stuff like that, and it was really … I’m fascinated by how food delivery is changing. It is all around screens, how you order on screens and what you do.
Well, screens today. Tomorrow, voice.
Uh-huh. So, on an Amazon app or something like that?
Yeah. Eventually, the screen is … You feel it. It’s slowly disappearing from our lives.
Right, right. So, explain that to me. How do you … Because I know these restaurants are slowly integrating this stuff in.
Well, no one’s really done it well yet. I think Domino’s is probably the closest.
As an app.
Who has done it and have it integrated into these other services, but eventually you gotta be able to meet the customer where they are, if they want to use voice, if they want to be in person.
To your point, the in-store’s not gonna go away. It’s just gonna be supplemented by all of these other channels. So, to your question about technology, mobile’s been a huge piece of this, and what that’s done, payment and creating a mobile payment option order.
Till it’s … Yeah, which is quick.
Now it’s delivery. So, delivery’s about a $30 billion market today. Depending on what estimate you believe, it’s gonna grow 10X in the next 10 years.
All right. Talk about delivery. So, who do you use, Uber or Google or …
So, today we don’t use it at all. We’re preparing our own delivery launch.
Oh, wow, your own?
Yeah. So, we’ll be partnering with a logistics service for the delivery, but the ordering itself, the platform will be Sweetgreen native.
So, it won’t be Uber Eats or whatever.
No. So, you’ll be ordering on Sweetgreen, and again, we want to own the customer in that way. We want to have the relationship with them. This is that media example where we do not want … God bless all the platforms that are there to help certain companies, but for us, they take a huge cut, and then they take that customer …
Right, have that.
… and they have the relationship with them, and we’ve seen this story before. We’ve seen it in travel. You’ve seen it in media. You’ve seen it in retail, and we have a strong brand that people love, and we can provide a better experience by having that direct relationship with the customer.
So, everything they do goes up, and then you might utilize an Uber Eats or something like that?
For the logistics.
So, they wouldn’t order on Uber Eats?
Correct. They’d be ordering … You’re ordering on Sweetgreen.
How do they feel about that? Because their goal is to own customer. He says nothing. He just gave me an, “Mm-hmm, mm-hmm.” But how do you convince them to do that?
The power of our brand. I think there’s always … I can’t say a lot about it because we’re launching …
Because I think a lot of the other food services are sort of giving over their world to these things.
Correct, and I think the power …
Generally, I would assume they’d think about it as supplemental income rather than the income.
Very short-sighted, and I can’t say a lot about it. We’re gonna launch our delivery in January on our platform, and then we’ll be able to say a lot more about how we were able to do that.
Yeah, yeah. How much do you imagine that’s gonna be part of your service?
I’d say in the next year to two years, it’s somewhere between 20 and 25, 20 to 30 percent channel.
Half of your stuff is on the app, though, you’re saying. Is that right?
Half is on the app …
… but it’s being picked up.
Picked up, right. These deliveries go to offices or where?
Offices, homes, anywhere.
Wherever it is.
So, I think delivery is an on-demand channel, so one-to-one. Customer delivery will be, let’s say, 20, 25 percent channel in the short term. Over time as the physical infrastructure shifts, and the logistics infrastructure gets it so we can get deliveries under 15 minutes, that’s a different world. If you look at China where you can now have food in under 15 minutes …
It’s amazing. That’s through … Not Alibaba. It’s Alibaba, yeah.
Yeah, through … What’s the store? It’s … I’m blanking what it’s called.
Right? So, if you can do that and get your food in under 15 minutes and not have to pay for delivery or pay something very, very marginal, that changes. Why would I go outside? So, I think over time, if we think about five years, five or more years out, you could look at delivery being a 50-plus percent channel. Right?
Absolutely. Absolutely. To me, it’s super fascinating. I just got a second home in DC, and tried very hard to shop locally, very hard, but one, couldn’t find the goods; two, surly people; three, me wandering around stores. The whole idea of wandering, hunt and gather, was insane, and I went to Amazon finally. It’s mostly for the commodity stuff, not for the cool stuff, and so there were two stores I shopped at. One was called Home Away on 14th Street, and another one was called Logan Hardware. The reason I stopped at Logan Hardware …
Our headquarters used to be right on top of Logan Hardware.
Oh, you’re kidding.
Because it’s a great store. You know why? They’re just pleasant, friendly, wonderful people helping you. Now, they didn’t have as much selection as I like, but they sort of did. They had enough, and the other, Home Away, they had unique products, which I didn’t feel like searching for on Amazon, but everything else, it was really fascinating of who could provide me the delivery, the speed and the selection, and it was fascinating. I’m gonna write about it.
Yeah, and what’s gonna shift is the infrastructure piece is also gonna shift. Where we produce food is going to change, and what the actual layouts of … There will be restaurants that will have to be optimized for delivery, so the restaurant looks different. It has to act different. It has to be digitally enabled in a different way, and then there’s going to be ghost and virtual kitchens. Right? So, your brand is very important, that trust and that demand …
Right, but they won’t know.
The demand generation is important, but the food can come from anywhere, and it may be easier …
Did you say ghost kitchen?
Yeah, ghost or virtual kitchen, and what that means is your food can also be made … It unlocks a lot of the constraints around what the food can be when you have kitchens that are not consumer-facing, and you can almost treat them like servers that you can turn on and turn off.
Right? You can light them up in different parts of the country in the world as you have demand, and as you want to expand your menu, you can imagine how salad can now become more warm food can become breakfast, because you’re popping up additional servers, and you have that digital connection to your customer, the menu changes on your app, and then it’s delivered to you. So, things are gonna … Like I said, one percent of food is ordered online today. It’s gonna change. You look at where this was in e-commerce …
In regular commerce, yeah.
In regular commerce, it’s approaching 30 percent this year. Food’s gonna move probably quicker than it did for commerce.
Quicker, yeah. We’re here with Jonathan Neman. He is the co-founder of Sweetgreen, which is a salad store, essentially. You get salads and lunches and things like that. I’m curious why you picked salads to start with. Just because you thought that’s what millennials like, or that’s the food kind of thing? You didn’t go with other kinds of food.
Yeah. We started with it because it focused on the supply chain, and it was something that really highlighted the vegetable, and we think the vegetable’s been uncelebrated. There’s so much flavor and …
Yes. People don’t like … “Eat your vegetables,” yeah.
… nutrition in it, and we wanted to make vegetables sexy. We really wanted to make it fun and cool, and that’s been part of our brand, is this cultural relevancy. The reason we ran a music festival for seven years, the reason we do these chef collaborations, whether they’re with Dan Barber or Kendrick Lamar. These things all create this relevancy where vegetables have never been celebrated in that way.
All right. So, you’re not a restaurant. You’re talking an experiential kind of thing.
Yeah, absolutely. We look at companies like Nike, and the athlete is their superstar. For us it’s the chef, and so how do we create that desire around healthy eating, the same … What I tell my team all the time is Coca-Cola sells happiness.
Yeah, yeah. They’re the greatest brand in the world. They were. They have been.
Right, and we’re gonna tell people …
They’re having trouble now, because it’s sugar water.
We’re gonna tell people, “Eat your vegetables because it’s good for you”? Yes, it’s good for you, but you have to compete on taste. You gotta compete on experience. You gotta compete on brand and that just desire for being a cool brand.
So, doing that, what’s the fear? Is it people think of you as a chain, right, because that’s sort of the kiss of death among some people, that you’re a chain and you’re too much … Think about what happened to Chipotle. They were very hot, and then they were not. Well, they had issues around safety of foods, which is something that you all need to watch out for …
… given salad, but what is the dangers you’re worried about in that when you think about that, because I would think becoming a chain, and oh, it’s a chain restaurant, my kids don’t like chain restaurants. It’s really interesting.
Yeah. It’s something that we’re very conscious of, and how do we design unique experiences wherever we go? How does it feel different, and how do we … In different places and play to that local community, no matter where we go?
Our mission is to build healthier communities by connecting people to real food, and that shows up in different ways in different communities, and so we talk about this idea of the intimacy at scale. How do we design restaurants in an intimate way to that community?
What does the next restaurant look like? It’s one of the things that really shouldn’t go because of digital, people like the experience of it, and restaurants should remain in …
Restaurants will remain.
Right. They should, because people like to go out.
Restaurants will remain, but they will have to find a place online as well. I think we’ve seen … In a way, we’re very lucky in food that we’ve gotten to see these industries before us be transformed, and have got to … History repeats itself in a lot of ways.
A company that I look at as a brand is Nike. Right? Niketown is an amazing experiential environment.
Yeah, you want to go there.
But they have the Nike Run Club and the community on the app, but they also have the physical, the actual Nike Run Club that meets up at the store. You gotta kind of have both of these. Apple is a similar way. Twenty percent of Apple’s sales come from their stores, but over 90 percent of people …
Well, Ikea did it, too, didn’t they?
Ikea as well, but 90 percent of people have probably been to an Apple Store. It’s an important part of that experience.
Right, right. So, you want them to go. So, what happens in the stores? How do you look at, say, the purchase of Whole Foods by Amazon? Did that surprise you?
I thought it was really smart for Amazon. Talking about this idea of how we’ve had a lot of technology companies that didn’t get food, and there’s a culture to food that you have to get similar to the way that there’s a culture to technology and building a technology company. Amazon could never crack food and the culture and the trust around food, and so Whole Foods has really helped them in doing so. They got a brand that had built over many decades, for them, a really good price.
Why do you think Whole Foods sold, then? They were having financial …
They were having troubles.
They were having troubles. I think while they were so innovative for so many years, and I respect them a lot and their leadership a lot, they failed to innovate and embrace technology soon enough, and by the time they hit some bumps, it was too late. It was too hard to change and innovate fast enough to meet the consumer. You had Instacart stealing their customers.
You had Amazon coming in and offering a better experience, and so you have a brand, you have your core promise, but the consumer moves, and you have to move with the consumer, and that’s what Whole Foods failed to do, and that’s what technology is to us. It’s just an enabler of meeting the customer where they are. It’s not technology for technology’s sake.
Do you see other tech companies moving into food? They’ve moved into entertainment, sure. They sure have and nobody expected them to. Now it’s Amazon, Google, Apple, all in entertainment, which is adjacent to their businesses.
Yeah. We haven’t seen it yet. I mean, Amazon …
Amazon’s the only one.
… Amazon’s the only one.
And they’re not really allowed in this country yet.
Yeah, but it wouldn’t surprise me. It will happen. Food is such a …
Alibaba getting in this country?
… it’s such a big … No, not Alibaba, but just more tech …
Have you met the politicians in Washington?
No, not Alibaba, but just technology companies coming after food.
Yeah, that’s what I mean.
Because it’s just such a big opportunity.
Who do you imagine, or would you think? I’m thinking of who might buy you. Amazon’s the only person I can think … only company I can think of, not person. It is one person, really.
I don’t know.
Yeah, do you think about that?
We really play our own game. We’ve always … It’s been 11 years, and we have our own … we find our lane, we follow the customer, we use our values.
Where does it go for you then? You’ve got venture money, which brings a whole nother level of pressure.
We’d like to take what we do in eight communities and take it to the world.
You mean, become a Starbucks? Become your own …?
Yes. Yeah, we’d like to be the biggest food company in the world. We see us as the McDonald’s of our generation, so this is just the first 10 years, 11 years I’d say, is building the seeds, that brand, the foundation of what we are.
Act Two for us is how do we meet the customer on different channels beyond the restaurants, or whether it’s delivery and all these other forms. How does the food expand? The categories go from salads to other places, and how do we go from eight cities to all over the world?
Right, so eight right now?
Are there any abroad? Do you have any?
No? What’s the challenges of doing that? Well, just the logistical challenges?
Just operating challenges, but we actually … because of the way our menus are constructed and the brand having such a local connection, I’m actually really excited about … Imagine what Sweetgreen would look like in Japan. That’s a really exciting thing. Imagine what it would look like in different parts of the world.
Would have to be very different, yeah.
It would have to be very different, but our brand actually allows for that. I don’t have to sit here and be like, “Oh, what does our food … will they like this there?”
Yeah, Starbucks in Japan is very different than …
They had to really think about-
… how their food is different, but that went against their brand, which was all about the same things for us. We do that anyways. We’re going to Houston next year, and we go to Houston …
What does the people of Houston want?
Yeah. Our Houston menu’s going to be different than our menu here.
For us, it’s going to be a little bit more hearty food. We’re testing some warmer options and plates, things like that. We’re actually testing wine and beer. And then the vibe is also different. People could drive and they want to sit, and there’s more seating. So there’s an example of how we build bigger restaurants with more seating.
Right. Seating in these restaurants?
All right, so let’s finish up talking about the challenges you face as three entrepreneurs who are very young. You invested an enormous amount of money. You’ve got a lot of stories. What are some of the mistakes? You said you had Patty McCord, who I’ve interviewed, was one of your advisers, she’s from Netflix, in terms of people. I see right on your desk here you have Scott Belsky’s book, “The Messy Middle.” We’re going to be talking to him.
Yes, Scott is a good friend. He used to actually be on our board.
Yeah, so what are the challenges? Look at all your books. You have all your business help … oh, John Doerr, that one.
I love the John Doerr book.
Yeah, it’s an interesting book.
Talk about what’s been hard for you.
Let’s see. That’s a good question. I think your job as an entrepreneur changes every year, and you have to be very conscious to switch gears. Very conscious of each stage of the business of, “Okay, that was that stage. Now, how do I have to … how do I lift and empower my team to do certain things that I was doing so I can lead the company forward?” So, there’s a constant change, and just embracing of change as you grow.
How many employees do you have now?
We’ve over 4,000 employees, but 200 in our headquarters.
And no franchises, right?
And you don’t even want to do that?
Can’t control the experience the way we want to, and quite honestly, the returns of the restaurants are great, and where we have the capital …
So why do it?
So why do it?
Other things, it’s always people. We’re an execution business, and like any business, it’s building a culture to attract that best, and for us it’s you have like two businesses. You got the field teams and creating the best in-store experiences, and head coach is such an important role in our company. They are the ones that …
That’s what they call them?
That’s what we call our GMs, the “head coach.” We give our head coach equity because they’re such an important part of just creating that experience for our customers. How we treat our team members, and the way we pay them, the benefits we offer them, the development opportunities. There’s a whole world in thinking about people in the field and in our restaurants, and there’s a whole ‘nother world of how we think about our team at the headquarters or in our regional offices. How do we attract, as a restaurant company, great tech talent? How do we …
What’s your pitch to them?
Well, “We’re going to use technology to transform food and create the biggest food company in the world, and it’s complex as hell. Do you want to solve challenging problems or do you want to create another social media app?”
That’s a good pitch. “Do you want to ruin the world or do you want to feed it?”
”Do you want to feed the world and make the world a better place?” The pitch, which is true, is could you imagine … imagine the world if Sweetgreen is the size of McDonald’s. Imagine how the environment would be different. Imagine how the jobs of these people that are working and not making minimum wage. Imagine the health of the country because pretty much all of our problems start from food. Long term, we see food as healthcare.
Okay. All right.
Long term, that’s where the data and just understanding our consumer comes in, is we seem to understand how the food actually makes you feel and how that changes your life. And that’s a better healthcare program than any insurance you can buy.
All right, so what are some of the challenges you face? What have you messed up? Entrepreneurs are listening, they want to know, and everything’s not hunky-dory.
Not letting go of people sooner when you know … there’s times when you know that someone’s not working, and out of fear, just all kinds of fear, fear of hurting their feelings, fear of not being able to do it without them. Especially as a young entrepreneur, you sometimes hold on to people way too long. It’s just a very scary thing to do, to let people go, or bring in people to help them. Those are usually the biggest lessons from where I am, is it’s all about team, right? It’s all about finding the best people, creating a container for them to do the best work and empowering them to be great.
Where are you getting people from?
We have people from … I think one of the reasons for our success is a very diverse group of people, both in terms of people and experience and ages and backgrounds. You have people who’ve joined us from tech, you have people who’ve joined us from other iconic brands, places like Starbucks. You have people from Nike. You have people from Domino’s.
Then you have a lot of people from completely outside of food, right? Most food companies are created from people from other food companies. For many years, we completely actually rejected that. We looked to reimagine the system, and so we didn’t want people who were stuck to, “This is how you do things.” It was, “Get really smart people and have them hack the system.”
Okay, one of the things that’s really interesting is technology uses in the food collection, I guess you would call it. Now, you guys are doing some really interesting things around blockchain. Explain? The blockchain.
Yeah, so we started … you know, you hear the word …
The application of blockchain.
The world of blockchain and how do we use it?
We actually have a very great use for it, and so what we do is we use blockchain to track and trace all of our ingredients … or not all of our ingredients today, but some of our ingredients.
Because you worried about this idea, what happened to Chipotle where they had the bad salad because this is a …
It started from a food safety perspective.
When you saw the Chipotle thing, part of the issue was they didn’t know where it came from. They could not pinpoint it at all.
Where the salad was, or what was it?
Where that ingredient came from.
What was the ingredient? Whatever got people sick.
So, for us, it was, “Okay, so how do you apply this for — it was a pretty simple technology of knowing where your food comes from?” With that, we founded this company called Ripe.io.
So, they’re trying to create the blockchain of food. We’ve partnered with them to be kind of like customer No. 1, and what we’ve done is not only tag our ingredients, but also put sensors in the ground at the farms. So you have sensors that are tracking different variables in the soil as well as in the microclimate.
Then now on the blockchain, when we have it live on the public ledger, which it is today, you’re able to see the ingredient — when it was picked, when it hit the store, the timestamps — but also what was the soil health? What were the conditions in the air? Then where we actually tracked some of the taste variables. So, what is like the sugar content, the salt content in like a tomato? They call it Ripe.io because they’re trying to optimize ripeness.
So you get it at its most ripe point rather than having hard, non-ripe tomatoes in …?
Yeah, exactly. So, how do we use this technology to, over time, figure out how to serve the tastiest food?
Not just subjectively tasty, but actually the brightest, most explode-in-your-mouth, tasty food.
Why are so many companies scared of using the blockchain like this, or are there more doing it? There are certainly none in food that I have talked to.
Well, you saw Walmart just did it with IBM.
Yes, they did. Yes.
And I think that’s going … with them doing it, it’s going to set a standard.
That’s right, Walmart.
We were hoping to do it in our industry of … the idea of traceability is, “Hey, we know where our food comes from, do you?”
What our goal …
So, it’ll be sort of the — you have to have that.
Yeah, we’re going to have it, and that will play up … you talk about our mode, our competitive advantage, a lot of it is our supply chain. It’s what makes our food taste so good, and the fact that we are proud of our suppliers and where our food comes from, and when you order food on your app, imagine you order delivery and you never see a restaurant, how do we create that trust with you? So, now it’s on the app. You get to see that your food came from exactly this farm, and the fact that …
And was picked here then …
And the conditions were this. The fact that we know that, and then it creates a level of trust for you.
And you think consumers care about that?
I do, yeah. I think consumers really care where their food comes from.
Rather than just shovel whatever the hell in their mouth.
They care, especially if we can show you that where it comes matters for your health, for the taste and for the environment.
Right. Wow. All right, to finish up, I want to talk about what do you think food is going to look like in 10 years? The supermarkets, do they exist? You know, there’s these cashier-less stuff, which I think is just a stunt, as far as I’m concerned. Robotics deliverators or robotic hamburger flipper in San Francisco. How do you look at …
I see robotics as being something real in food.
With the wage pressure you have in food, what people are doing are passing that price right now onto consumers. There’s going to be a point …
Where you can’t.
… where you cannot pass that on to consumers. Imagine a world with $20 minimum wage, so how do you do that? Not all parts will be robotic, but there will be …
It will be kitchen assist. It will be a kitchen assistant. There will just be, you’ll have to get more efficient. If you think about like your clothes that used to all be made by hand, and now you don’t really think twice that a lot of them are assembled by machines. So, there’s still things you can’t do with food for a while in terms of like the art of it, of like the final composition, but there’s parts of it that can be automated.
For us, assembly could probably be automated, right?
Parts of it, and then you may need someone to finish it and make sure the avocado fans and the dressing comes on nicely.
The avocado fans. That’s a key part.
There’s things that …
Avocado fanning is an art form.
And then the service piece will not go away. Hospitality will not go away. But how do we create better jobs for our team members?
Yeah, that’s the thought.
… and allow them to do …
Without it being rote.
Yeah, I keep telling everyone, any rote job will not exist.
Working in a restaurant is really hard. It’s really hard. I work in the restaurant at least five times a year with every menu change, and it’s a very difficult job. How do we make it easier so they can kind of go up and work in a more creative and service-oriented place?
Other things around food, I do think food will become personalized. The fact that your media is becoming personalized, and you see now Netflix is going to now let you choose your own show based off the types of stuff you like to see, even within your show they’re going to take you down. The fact that food is completely like you have three options, like the value meal one, two, three, or four. That makes no sense because, let’s use kale as an example, every other …
Let’s always use kale as an example.
All right. People think kale is good for you.
I love kale.
It’s good for some people.
Oh, it is?
You feel good. Some people, it makes them feel bloated and terrible. How do we create food that is personalized both in taste and in feeling to our individual customers, right?
When you go onto Amazon it knows exactly what you want.
It knows where you are and what you want.
How come your food is just like your … there’s this constant indecision of food. The stress around food decisions, you ever think about how many times a day or a week you’re like, “What should we eat? What should we eat?”
Right, I’m thinking about food right now.
When you see the big menu you’re like, “Oh, I don’t know what I want.”
My answer is always, “Oysters,” but go ahead. That cannot be computerized.
That’s why people love these chef … where you go to a restaurant and there’s a menu, and there was like there’s one thing. It’s so liberating.
It is. There’s several restaurants in California like that.
When they’re like, “Eat this.” Like the Omakase restaurants, “Okay, just shut up and eat. This is how it’s supposed to be done.” How do we do that at scale?
That’s a really good question. All right, last question, are you profitable?
And you hope to go public, is that the goal?
I wouldn’t call it a goal, but it may be another step on the journey as we look to build a really, really big company.
And then become the Starbuck … be like a Starbucks. Then you’ll run for president like Howard Schultz, right?
I hope he does it.
We’ll see. Thank you so much, Jonathan. This is really interesting. I’m here, actually, at the Sweetgreen’s headquarters, right?
Yeah. We call it the Treehouse.
So, this is where you moved from Washington… You’re not staying in Washington, D.C.? You moved here to California.
Yeah, our headquarters is …
It’s a beautiful area called Culver City in California. Where are your employees? Just all over the place then?
All over, but mostly here. This is where most of our core team is.
Right. Anyway, it’s lovely here. I’m very excited to be here, and thank you so much for coming on the show.
Thank you so much for having me.
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