Suburbs And Drive-Thrus On The Menu For Sweetgreen As It Plans To Double Its Retail Footprint

Sweetgreen is factoring the work-from-home phenomenon into its future expansion plans. 

The health-focused restaurant chain went public this week, detailing growth plans in its initial public offering. Plans include roughly doubling its retail footprint over the next five years with a focus on new markets, new concepts like drive-thrus, and forging a path into the suburbs — in part as a hedge against the possibility that the office workers with whom it has been so popular might not come back, documents filed with the Securities and Exchange Commission show. 

Culver City-based Sweetgreen specializes in healthy bowls in 140 locations across 13 states, most of them in big, urban areas and locations among affluent populations that can swing a $15 salad. 

The company has so far put down roots in higher-end markets, often near offices and other big traffic drivers that bring large lunch crowds, said Kennedy Wilson Brokerage Senior Associate Kyle Fishburn, who does not represent Sweetgreen but is active in areas where they operate. 

In LA, the company has stores in Century City, Santa Monica and Downtown LA, and signed leases earlier this year in Beverly Hills and Westwood. 

Fishburn noted that the company's headquarters at Culver City’s Platform, a boutique retail center, is strategically located a short distance from current and future offices for Apple, Amazon and HBO. 

“There’s going to be tons of office space for them to get traffic from,” Fishburn said. 

Still, Sweetgreen appears to be weighing the effects that workers’ still-pending return to their offices could have on its business. 

“It is uncertain whether workers will return to offices in urban centers on a consistent basis, and even if they do, whether they will have a more flexible work schedule, which could reduce our revenues at our urban locations," the company wrote in documents filed with the SEC. 

The company's plans to roughly double its current footprint over the course of the next three to five years include opening new stores in at least two to three new markets every year over the next three years. More traditional residential and suburban locations could be on the books as part of that expansion.

The company will “diversify our store formats by adding drive-thru and pick-up only locations to densify our markets, and to bring Sweetgreen into a wider variety of neighborhoods,” according to the filings.

Dembo Realty’s Chuck Dembo wasn’t surprised by the company’s lean into drive-thru concepts, especially after the past two years of pandemic precautions. Dembo said some of his clients have seen great success with curbside pickup-type approaches at their restaurants. 

Fishburn said that entering into the drive-thru game would likely find Sweetgreen up against the Starbucks and Chick-fil-As of the industry, and that competition would be stiff for those spaces, which are harder to come by in urban areas and hotly sought after generally. Rents on a per SF basis are also much higher for drive-thrus, Fishburn said. 

It is unclear how much of Sweetgreen's expansion will be centered on the suburbs, or where Southern California might expect to see new locations. One potential growth market is Orange County, which does not have any Sweetgreen locations, according to the company's website. Sweetgreen representatives did not respond to a request for comment from Bisnow. 

The company’s SEC filings also note that a key part of its ability to grow is being able to find and lock down leases for new restaurant space. Sweetgreen says that “competition for restaurant sites in our target markets is intense.” 

Though in some parts of Los Angeles there are far more spaces than there are new restaurants waiting to fill them, the competition is still tight for busier retail corridors eyed by Sweetgreen, Dembo said. 

“If it’s a good site, yes, there will be a lot of competition,” he said. 

Sweetgreen has been headquartered in Runyon Group’s Platform development in Culver City since 2016, but in 2019, it leased the entirety of  Luzzatto Co.’s 3101 Exposition Blvd. property in Jefferson Park. It is expected to move into the 57,600 SF space in 2022, the Los Angeles Business Journal reported, with its lease running through February 2032.