Sweetgreen’s IPO Proves, Once and for All, That It’s a Big Boy Tech Company

This week, fast-casual salad chain Sweetgreen announced its intent to go public and start trading on the New York Stock Exchange. As part of its S-1 filing with the U.S. Securities and Exchange commission to begin the IPO process, the company finally proved that it is, as it’s been arguing for years, actually a tech company and not just a run-of-the-mill expensive salad chain — by following in Uber and Doordash’s footsteps and posting consistent yearly net losses in the millions of dollars. As Dan Primack at Axios points out, those losses reported in the IPO filing — occurring every year since 2014 — contradict the chain’s claims in 2018 and 2019 that it was profitable.

Sweetgreen’s IPO follows in the footsteps of many restaurant brands (including Oregon-born coffee shop Dutch Bros. and Chicago hot dog favorite Portillo’s) — to pursue going public in the last year alone. It’s a huge step for the company, which plans to double the number of restaurants it operates across the country in the next five years, which would mean more than 280 locations for the chain scattered across 13 (or more) states. After its latest funding round, the company boasted a $1.78 billion valuation.

Sweetgreen’s owners have long insisted that the company sells a whole lot more than just salads. In a 2018 interview with Recode, co-founder Jonathan Neman described the chain as a “food platform,” not simply a restaurant. Eventually, it hopes to build a full “food ecosystem” that can facilitate delivery, managing its supply chain, and operating its stores via its proprietary tech platforms.

“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,” Neman said in 2018. “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.”

In its S-1 filing, the chain reports that despite serving more than 1.3 million customers in the 90 days prior to its filings and raking in revenues of more than $300 million, Sweetgreen is not a profitable business — and it’s unclear when it will be. The company blames the pandemic for lower revenues in 2020, but the company is also burning tons of cash as it pursues both growth via new restaurants and making acquisitions like Spyce, a company that makes service robots which could, theoretically, end up making Sweetgreen’s salads instead of human workers.

In the world of tech, of course, this is par for the course. Plenty of wildly popular tech start-ups, like Uber and Netflix, were not profitable before going public. More than a decade after it was founded in 2009, Uber is finally hoping to have its first profitable quarter — ever! — this year. In the world of tech investing, growth is king. As long as Sweetgreen continues to promise its investors that it will open new stores and work on fancy salad robots, it’s likely that the company’s hype among investors will stay fully intact.

But what happens when, in five years, there is a Sweetgreen on every corner and it has to now, you know, be a restaurant? When every salad costs $30 because of inflation and supply chain shortages, and when we’re all tired of eating the same damn kale and quinoa salad for lunch every week? There are only so many ways to make a salad, and it’s unclear whether or not, even considering plans to add side dishes and desserts, Sweetgreen will ever be able to reach Chipotle or Starbucks levels of ubiquity. That question also becomes more complicated considering that the COVID-19 pandemic is still lingering. Sweetgreen’s business has largely been fueled by office workers, many of whom will now be able to work from home permanently. The company’s financials indicate that it has been able to replace some of the revenue lost from restaurants in central business districts by opening new restaurants in the suburbs, but it’s hard to think that the fates of in-person work and Sweetgreen aren’t intertwined, even as the popularity of delivery apps and ghost kitchens grows.

What is clear, though, is that the latest “restaurant unicorn” to be valued at more than $1 billion is maybe just a regular old tech unicorn, at least in the eyes of the venture capitalists that have already fueled its rise. What exactly that means for those of us who are more interested in the salads than stonks, remains to be seen.