Q1 2026 Sweetgreen Inc Earnings Call

May 7, 2026

Speaker #1: For joining us. And welcome to the Sweetgreen, Inc. first quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator: For joining us, welcome to the Sweetgreen Incorporated Q1 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Rebecca Nounou, Vice President, Head of Investor Relations. Please go ahead.

Speaker #1: To which all your question, press star 1 again. I will now have the conference over to Rebecca Nounou, Vice President, Head of Investor Relations, please go ahead.

Speaker #2: Thank you, everyone, and good afternoon. Speaking on today's call will be Jonathan Neman, co-founder and chief executive officer, and Jamie McConnell, chief financial officer.

Rebecca Nounou: Thank you, everyone, and good afternoon. Speaking on today's call will be Jonathan Neman, Co-founder and Chief Executive Officer, and Jamie McConnell, Chief Financial Officer. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. The earnings release is available on the investor relations section of Sweetgreen's website at investor.sweetgreen.com. I'd like to remind everyone that the information under the heading Forward-looking Statements included in our earnings release also applies to our comments made during the call. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. We also direct you to our earnings release for additional information regarding our use of non-GAAP financial measures, including reconciliations of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Speaker #2: Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen's website, at investor.sweetgreen.com.

Speaker #2: I'd like to remind everyone that the information under the heading "Forward-Looking Statements" included in our earnings release also applies to our comments made during the call.

Speaker #2: These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. We also direct you to our earnings release for additional information regarding our use of non-GAAP financial measures, including reconciliations of non-GAAP financial measures, mentioned on the call, with their corresponding GAAP measures.

Speaker #2: Our earnings release can be found on our investor website. And now I'll turn the call over to Jonathan to kick things off.

Rebecca Nounou: Our earnings release can be found on our investor website. Now I'll turn the call over to Jonathan to kick things off.

Speaker #3: Thank you, Rebecca. And thank you, everyone, for joining us today. We entered 2026 focused on executing our sweet growth transformation plan with a clear priority on strengthening our fundamentals and improving execution across our restaurants.

Jonathan Neman: Thank you, Rebecca, and thank you everyone for joining us today. We entered 2026 focused on executing our Sweetgrowth transformation plan with a clear priority on strengthening our fundamentals and improving execution across our restaurants. As we communicated last quarter, this work takes time to translate into results, and we expected Q1 to be the most challenging given a difficult comparison to the prior year Ripple Fries launch, weather-related headwinds, and more work to be done on our transformation plan. While the quarter was pressured, we saw improvement as the quarter progressed with a further step-up in April, reflecting early progress from the actions we have underway through the Sweetgrowth transformation plan. As restaurant operations continue to improve, we are bringing innovation to market with stronger discipline.

Speaker #3: As we communicated last quarter, this work takes time to translate into results, and we expected the first quarter to be the most challenging. Given a difficult comparison to the prior year ripple fries launch, weather-related headwinds, and more work to be done on our transformation plan.

Speaker #3: While the quarter was pressured, we saw improvement as the quarter progressed, with the further step up in April reflecting early progress from the actions we have underway through the sweet growth transformation plan.

Speaker #3: As restaurant operations continue to improve, we are bringing innovation to market with stronger discipline. Yesterday, we launched wraps nationwide, following a rigorous stage-gate process that validated both the consumer opportunity and our ability to execute in restaurants.

Jonathan Neman: Yesterday, we launched wraps nationwide following a rigorous stage gate process that validated both the consumer opportunity and our ability to execute in restaurants. Test results were strong, driving incremental traffic from new and returning guests while expanding our ability to serve more occasions. Now turning to results. For Q1 of fiscal 2026, revenue was $161.5 million with comparable sales down 12.8%. We opened 4 net new restaurants, including 3 Infinite Kitchens. Restaurant level margin was 10% and adjusted EBITDA was a loss of $8.1 million. As we moved into April, traffic trends improved, supported by stronger execution in our restaurants, the performance of our Chicken Sesame Crunch Bowl, and early contribution from wraps in test markets, which ran in about a quarter of our restaurants, including New York, our largest market.

Speaker #3: Test results were strong, driving incremental traffic from new and returning guests while expanding our ability to serve more occasions. Now, turning to results. For the first quarter of fiscal 2026, revenue was $161.5 million, with comparable sales down 12.8%.

Speaker #3: We opened four net new restaurants, including three Infinite Kitchens. Restaurant-level margin was 10%, and adjusted EBITDA was a loss of $8.1 million. As we moved into April, traffic trends improved, supported by stronger execution in our restaurants, the performance of our Chicken Sesame Crunch Bowl, and early contribution from wraps in test markets, which ran in about a quarter of our restaurants, including New York, our largest market.

Speaker #3: This reflects a deliberate sequencing. Strengthening operations first to build a more consistent foundation and then layering in menu innovation to drive more durable traffic.

Jonathan Neman: This reflects a deliberate sequencing, strengthening operations first to build a more consistent foundation, and then layering in menu innovation to drive more durable traffic. NY is an important example of the progress we are beginning to see. Given its significance to our footprint, it has been a key focus as we strengthen leadership, improve head coach stability, and drove more consistent execution through Project One Best Way. While we still have work to do, transaction trends improved in April, supported by better operations in the wraps test. We view the progress in NY as an early signal of how the broader system can respond as we continue to execute through the wraps launch and beyond. We know there is more work ahead of us, and we remain focused on executing against the 5 strategic priorities under our Sweet Growth transformation plan. 1, operational excellence.

Speaker #3: New York is an important example of the progress we are beginning to see. Given its significance to our footprint, it has been a key focus as we strengthen leadership, improve head coach stability, and drove more consistent execution through project One Best Way.

Speaker #3: While we still have work to do, transaction trends improved in April, supported by better operations in the wraps test. We view the progress in New York as an early signal of how the broader system can respond as we continue to execute through the wraps launch and beyond.

Speaker #3: We know there is more work ahead of us, and we remain focused on executing against the five strategic priorities under our sweet growth transformation plan.

Speaker #3: One, operational excellence. Two, food quality and menu innovation. Three, personalized experience. Four, brand relevance. And five, disciplined profitable investment. Starting with operational excellence, which remains the foundation of our ability to deliver a consistent, high-quality, and hospitable experience for our guests.

Jonathan Neman: 2, food quality and menu innovation. 3, personalized experience. 4, brand relevance. 5, disciplined, profitable investment. Starting with operational excellence, which remains the foundation of our ability to deliver a consistent, high quality, and hospitable experience for our guests. We continue to strengthen consistency across the system through Project One Best Way, which defines what great looks like at Sweetgreen across craveable food, hospitality, operational flow, and people culture. The program is grounded in both customer and restaurant-level performance data and is focused on building scalable systems and routines that allow every restaurant to execute at a high level, not just the best ones. Work like this takes time to translate into results, but we are beginning to see improvement in several key operational metrics, including throughput during peak periods, ingredient availability, and fewer quality complaints, reflecting stronger operational readiness across the fleet.

Speaker #3: We continue to strengthen consistency across the system through project One Best Way, which defines what great looks like at Sweetgreen across craveable food, hospitality, operational flow, and people culture.

Speaker #3: The program is grounded in both customer and restaurant-level performance data and is focused on building scalable systems and routines that allow every restaurant to execute at a high level, not just the best ones.

Speaker #3: Work like this takes time to translate into results, but we are beginning to see improvement in several key operational metrics, including throughput during peak periods, ingredient availability, and fewer quality complaints.

Speaker #3: Reflecting stronger operational readiness across the fleet. At the same time, we recognize there are still meaningful opportunity ahead and we will continue raising the bar as performance improves.

Jonathan Neman: At the same time, we recognize there is still meaningful opportunity ahead, we will continue raising the bar as performance improves. That stronger foundation has been critical as we move into the national rollout of wraps. We have taken a disciplined stage gate approach to get here, with teams spending months in development and testing, including extensive work in restaurants to build capability, train teams, and ensure operational readiness. One of the core principles for our wraps experience is that the first bite should be the best bite. To deliver on that consistently, we refined our preparation process through multiple rounds of testing and iteration, including in-restaurant ops shakedowns to validate equipment, positioning, and workflows. This work ensured we can deliver on quality while maintaining throughput at peak.

Speaker #3: That stronger foundation has been critical as we move into the national rollout of wraps. We have taken a disciplined stage-gate approach to get here, with team spending months in development and testing, including extensive work in restaurants to build capability, train teams, and ensure operational readiness.

Speaker #3: One of the core principles for our wraps experience is that the first bite should be the best bite. To deliver on that consistently, we refined our preparation process through multiple rounds of testing and iteration, including in-restaurant ops shakedowns, to validate equipment, positioning, and workflows.

Speaker #3: This work ensured we can deliver on quality, while maintaining throughput at peak. We then validated the concept through a multi-month market test across approximately 70 restaurants, where we saw strong guest response alongside solid execution in the field.

Jonathan Neman: We validated the concept through a multi-month market test across approximately 70 restaurants, where we saw strong guest response alongside solid execution in the field. The energy in the field is strong, and we are encouraged by how teams are performing out of the gate. Our focus remains on execution, ensuring every wrap is made right, throughput is strong, and the guest experience is consistent from day 1. This quarter, we brought our New York market head coaches together for an impact day focused on reconnecting our restaurant leaders to the guest experience through culture and hospitality. 2 weeks ago, we also brought our area leaders together for a 2-day summit to reinforce consistent execution across markets. The focus was on 3 major themes: strengthening head coach performance, building a culture of hospitality where speed and service work together, and delivering consistent food quality that drives repeat visits.

Speaker #3: The energy in the field is strong, and we are encouraged by how teams are performing out of the gate. Our focus remains on execution, ensuring every wrap is made right, throughput is strong, and the guest experience is consistent from day one.

Speaker #3: This quarter, we brought our New York market head coaches together for an impact day focused on reconnecting our restaurant leaders to the guest experience through culture and hospitality.

Speaker #3: Two weeks ago, we also brought our area leaders together for a two-day summit to reinforce consistent execution across markets. The focus was on three major themes: strengthening head coach performance, building a culture of hospitality where speed and service work together, and delivering consistent food quality that drives repeat visits.

Speaker #3: Together, these sessions are helping create greater alignment on the experience we want to deliver and the standards required to deliver it every day. To continue this focus, we will bring our head coaches together for impact days across our remaining regions in the coming weeks.

Jonathan Neman: Together, these sessions are helping create greater alignment on the experience we want to deliver and the standards required to deliver it every day. To continue this focus, we will bring our head coaches together for Impact Days across our remaining regions in the coming weeks. What stood out most to me from Impact Day and the Area Leader Summit was the importance of the connection between our restaurant support center and our field teams. Delivering a better guest experience starts with strong alignment between the teams closest to our guests and those supporting them. Our head coaches and area leaders are closest to day-to-day operations, and their input is critical in helping us refine how we deliver on our standards across food, hospitality, and operations. The best ideas come from our restaurants.

Speaker #3: What stood out most to me from impact day and the area leader summit was the importance of the connection between our restaurant support center and our field teams.

Speaker #3: Delivering a better guest experience starts with strong alignment between the teams closest to our guests and those supporting them. Our head coaches and area leaders are closest to day-to-day operations and their input is critical in helping us refine how we deliver on our standards across food, hospitality, and operations.

Speaker #3: The best ideas come from our restaurants. Building on that operational foundation, one of our key priorities this year is menu innovation. Led by the national launch of our wraps platform.

Jonathan Neman: Building on that operational foundation, one of our key priorities this year is menu innovation, led by the national launch of our wraps platform. This represents our most significant menu expansion in several years, designed to expand occasions and introduce a more accessible entry point into the brand. We launched wraps with a core lineup of craveable flavors, including the Classic Chicken Caesar, Chicken Jalapeño Ranch, and Cali Chicken Club, along with the limited time KBBQ Chicken. We started with our food ethos, delivering flavors through ingredients that don't just taste good but also make you feel good. That means preparing seasonal ingredients from scratch every day, cooking our grains, vegetables, and antibiotic free proteins without seed oils, and using no artificial flavors, colors, or dyes. We were intentional about every component of the wrap, starting with the tortilla.

Speaker #3: This represents our most significant menu expansion in several years, designed to expand occasions and introduce a more accessible entry point into the brand. We launched wraps with a core lineup of craveable flavors, including the classic chicken Caesar, chicken jalapeño ranch, and Cali chicken club, along with a limited-time KBBQ chicken.

Speaker #3: We started with our food ethos, delivering flavors through ingredients that don't just taste good but also make you feel good. That means preparing seasonal ingredients from scratch every day, cooking our grains, vegetables, and antibiotic-free proteins without seed oils, and using no artificial flavors, colors, or dyes.

Speaker #3: We were intentional about every component of the wrap, starting with the tortilla. Early in development, we were unable to find a tortilla in the food service market that met our standards.

Jonathan Neman: Early in development, we were unable to find a tortilla in the food service market that met our standards. We partnered to create one made with only 4 ingredients: extra virgin olive oil, unbleached and unenriched wheat flour, sea salt, and water with no preservatives. Guests can taste and feel the difference, with social reviews consistently highlighting the quality and flavor of the tortilla. The energy around the test leading into yesterday's launch has been incredible. Wraps are already appearing in a meaningful share of social content tagging Sweetgreen, with positive sentiment of around 85%. Guests are responding to the value, with entry price points starting at $10.45 and ranging up to $14.95.

Speaker #3: So we partnered to ingredients: extra virgin olive oil, unbleached and unenriched wheat flour, sea salt, and water, with no preservatives. Guests can taste and feel the difference, with social reviews consistently highlighting the quality and flavor of the tortilla.

Speaker #3: The energy around the test leading into yesterday's launch has been incredible. Wraps are already appearing in a meaningful share of social content tagging Sweetgreen, with positive sentiment of around 85%.

Speaker #3: Guests are responding to points starting at $10.45 and ranging up to $14.95. This launch is supported by one of our largest social marketing campaigns to date, partnering with hundreds of micro and scaled creators who authentically represent culture to drive awareness and engagement across a range of diverse communities.

Jonathan Neman: This launch is supported by one of our largest social marketing campaigns to date, partnering with hundreds of micro and scaled creators who authentically represent culture to drive awareness and engagement across a range of diverse communities. Our confidence in wraps is based on the results we saw in testing. Over a multi-month period across approximately 70 restaurants in NY, the Midwest, and LA, wraps drove incremental traffic from new and returning guests, helped reengage lapsed customers, and showed strong repeat behavior. We are pleased with the combination of incremental traffic and improved customer retention, reflecting strength as a new platform and expanding how guests engage with the brand. Importantly, execution remains strong, with throughput maintained and lower than average guest complaints. Taken together, these results give us confidence in both the strength of the wraps platform and our ability to scale it nationally.

Speaker #3: Our confidence in wraps is based on the results we saw in testing. Over a multi-month period across approximately 70 restaurants in New York, the Midwest, and Los Angeles, wraps drove incremental traffic from new and returning guests.

Speaker #3: It helps re-engage lapsed customers and has shown strong repeat behavior. We are pleased with the combination of incremental traffic and improved customer retention, reflecting strength as a new platform and expanding how guests engage with the brand.

Speaker #3: Importantly, execution remains strong, with throughput maintained and lower-than-average guest complaints. Taken together, these results give us confidence in both the strength of the wraps platform and our ability to scale it nationally.

Speaker #3: We are also continuing to innovate and strengthen our core menu. The chicken sesame crunch bowl, which launched in March, is already our second highest mixing salad and contributed to improving trends as the quarter progressed.

Jonathan Neman: We are also continuing to innovate and strengthen our core menu. The Chicken Sesame Crunch Bowl, which launched in March, is already our second highest mixing salad and contributed to improving trends as the quarter progressed. It is now a permanent menu item reflecting strong guest response. At the same time, we have rebuilt our pipeline of both core and seasonal innovation for the balance of the year, including summer and fall menu updates, new core offerings, continued expansion of the wraps platform, and upcoming collaborations with leading chefs, bringing distinctive chef-driven flavors into the menu that reflect the core of our brand. This approach allows us to stay relevant with our existing guests while continuing to bring new guests into the brand. I'm encouraged by the product innovation we're bringing this year, as well as the progress we're making to elevate the quality and consistency of our core menu.

Speaker #3: It is now a permanent menu item, reflecting strong guest response. At the same time, we have rebuilt our pipeline of both core and seasonal innovation for the balance of the year.

Speaker #3: Including summer and fall menu updates, new core offerings, continued expansion of the wraps platform, and upcoming collaborations with leading chefs, bringing distinctive chef-driven flavors into the menu, that reflect the core of our brand.

Speaker #3: This approach allows us to stay relevant with our existing guests while continuing to bring new guests into the brand. I'm encouraged by the product innovation we're bringing this year, as well as the progress we're making to elevate the quality and consistency of our core menu.

Speaker #3: We've continued to see an increase in salmon entrée sales following our internal Miso My Salmon campaign, which was designed to sharpen execution and elevate quality across the system.

Jonathan Neman: We've continued to see an increase in salmon entree sales following our internal Miso My Salmon campaign, which was designed to sharpen execution and elevate quality across the system. We've taken the same approach to our other core menu ingredients. For example, we've refined our measurement of protein cook cycles and hold times to ensure dishes are served at peak freshness and have elevated 7 of our core ingredients like romaine, quinoa, carrots, napa cabbage slaw, and breadcrumbs. This remains an area of focus as we continue to drive greater consistency across the fleet. Looking ahead, we will begin testing a re-architected pricing ladder in late June. Central to this work is the introduction of clear entry price points and a new create your own construct that is designed to deliver greater price clarity and a more intuitive ordering experience.

Speaker #3: We've taken the same approach to our other core menu ingredients. For example, we've refined our measurement of protein cook cycles and hold times to ensure dishes are served at peak freshness and have elevated seven of our core ingredients like romaine, quinoa, carrots, Napa cabbage slaw, and breadcrumbs.

Speaker #3: This remains an area of focus as we continue to drive greater consistency across the fleet. Looking ahead, we will begin testing a re-architected pricing ladder in late June.

Speaker #3: Central to this work is the introduction of clear entry price points and a new create-your-own construct that is designed to deliver greater price clarity and a more intuitive ordering experience.

Speaker #3: Together, these efforts will make pricing clearer and make it easier for guests to choose and order, supporting incremental transactions across price points. We are pacing these initiatives deliberately, using disciplined reads on guest response and P&L impact to guide rollout decisions, with a focus on bringing more guests into the brand and increasing frequency over time.

Jonathan Neman: Together, these efforts will make pricing clearer and make it easier for guests to choose and order, supporting incremental transactions across price points. We are pacing these initiatives deliberately, using disciplined reads on guests' response and P&L impact to guide rollout decisions, with a focus on bringing more guests into the brand and increasing frequency over time. Turning to our personalized digital experience, our strategy focuses on deepening our connection with customers, driving engagement, and increasing customer lifetime value through more targeted one-to-one interactions. At the center of this strategy is our SG Rewards loyalty program, which enables us to deliver personalized offers, incentives, and experiences that make it easier for customers to engage with the brand while driving frequency and spend.

Speaker #3: Turning to our personalized digital experience, our strategy focuses on deepening our connection with customers, driving engagement, and increasing customer lifetime value through more targeted one-to-one interactions.

Speaker #3: As the center of this strategy is our SG Rewards loyalty program, which enables us to deliver personalized offers incentives and experiences that make it easier for customers to engage with the brand while driving frequency and spend.

Speaker #3: At the beginning of the year, we introduced our craving of the month program, a key pillar within SG Rewards and a loyalty exclusive limited-time offer available through the Sweetgreen app at a compelling value.

Jonathan Neman: At the beginning of the year, we introduced our Craving of the Month program, a key pillar within SG Rewards and a loyalty exclusive limited time offer available through the Sweetgreen app at a compelling value. The retention and incremental spend signals are encouraging. Of guests who redeemed a Craving of the Month offer, we see higher frequency and higher net average revenue per user. We also see that this program draws in at-risk and lapsed customers while driving incremental visits with lighter frequency cohorts. While still nascent, this exclusive platform within our loyalty program is helping us win back customers, drive incremental transactions, and incremental spend. Later in Q2, we will introduce lower redemption thresholds to our loyalty program, designed to be achievable in fewer visits, making the program more accessible and engaging for a broader set of customers.

Speaker #3: The retention and incremental spend signals are encouraging. Of guests who were deemed a craving of the month offer, we see higher frequency and higher net average revenue per user.

Speaker #3: We also see that this program draws in at-risk and lapse customers while driving incremental visits with lighter frequency cohorts. While still nascent, this exclusive platform within our loyalty program is helping us win back customers, drive incremental transactions, and incremental spend.

Speaker #3: Later in the second quarter, we will introduce lower redemption thresholds to our loyalty program. Designed to be achievable in fewer visits, making the program more accessible and engaging for a broader set of customers.

Speaker #3: These new redemption thresholds will include a $3 credit at 700 points, a $5 credit at 1,200 points, and a free wrap reward at 2,000 points.

Jonathan Neman: These new redemption thresholds will include a $3 credit at 700 points, a $5 credit at 1,200 points, and a free wrap reward at 2,000 points. Based on the current customer redemption behavior, we expect these changes to drive increased loyalty engagement and higher visit frequency, especially in our lower frequency customer cohorts. Before I close, we are excited to welcome Ryan Slemons as our new Chief Development Officer. Ryan brings deep experience across real estate design, construction, and portfolio management with a strong track record of scaling high quality growth across leading retail and restaurant concepts. His focus on thoughtful design and site selection will be critical as we expand our footprint, reimagine our spaces, and create better experiences for our guests and team members. It will also reinforce discipline around build-out costs and capital allocation, supporting consistent high return unit growth.

Speaker #3: Based on the current customer redemption behavior, we expect these changes to drive increased loyalty engagement and higher visit frequency, especially in our lower frequency customer cohorts.

Speaker #3: Before I close, we are excited to welcome Ryan Slemans as our new Chief Development Officer. Ryan brings deep experience across real estate design, construction, and portfolio management with a strong track record of scaling high-quality growth across leading retail and restaurant concepts.

Speaker #3: His focus on thoughtful design and site selection will be critical as we expand our footprint, reimagine our spaces, and create better experiences for our guests and team members.

Speaker #3: He will also reinforce discipline around build-out costs and capital allocation, supporting consistent, high-return unit growth. To close, while the quarter was pressured, we are still in the early innings of our transformation, and we are beginning to see signs that the actions we are putting in place are gaining traction.

Jonathan Neman: To close, while the quarter was pressured, we are still in the early innings of our transformation, and we are beginning to see signs that the actions we are putting in place are gaining traction. We are seeing improvement in execution across our restaurants, greater consistency in the guest experience, and stronger alignment across our teams. The progress through the quarter and into April, along with the energy in the field, reinforces that we are focused on the right operational priorities and building a stronger foundation for Sweetgreen. I want to thank our restaurant teams for leaning in and embracing the higher bar we are setting on hospitality and execution, especially as we build momentum coming out of our recent Area Leader Summit. At the same time, we are operating with greater focus as we rebuild the top line.

Speaker #3: We are seeing improvement in execution across our restaurants, greater consistency in the guest experience, and stronger alignment across our teams. The progress through the quarter and into April, along with the energy in the field, reinforces that we are focused on the right operational priorities and building a stronger foundation for Sweetgreen.

Speaker #3: I want to thank our restaurant teams for leaning in and embracing the higher bar we are setting on hospitality and execution. Especially as we build momentum, coming out of our recent area leader summit.

Speaker #3: At the same time, we are operating with greater focus as we rebuild the top line. The national launch of wraps is an important step forward and a clear example of how we are approaching innovation differently.

Jonathan Neman: The national launch of wraps is an important step forward and a clear example of how we are approaching innovation differently. We took the time to test, learn, and ensure we could execute at a high level, and the early response gives us confidence in the opportunity to drive incremental traffic and expand into new locations. As we move through the year, we will continue to build on this foundation by improving execution, refining our menu and pricing architecture, strengthening the guest experience, and driving greater discipline in our investments. As these actions take hold, we expect to see stronger restaurant-level performance over time. We are confident in the path we are on and in our ability to build a more consistent, profitable, and durable Sweetgreen brand. With that, I'll turn it over to Jamie.

Speaker #3: We took the time to test, learn, and ensure we could execute at a high level, and the early response gives us confidence in the opportunity to drive incremental traffic and expand into new occasions.

Speaker #3: As we move through the year, we will continue to build on this foundation by improving execution, refining our menu and pricing architecture, strengthening the guest experience, and driving greater discipline in our investments.

Speaker #3: As these actions take hold, we expect to see stronger restaurant-level performance over time. We are confident in the path we are on and in our ability to build a more consistent, profitable, and durable Sweetgreen brand.

Speaker #3: With that, I'll turn it over to Jamie.

Speaker #1: Thank you, Jonathan, and good afternoon, everyone. First quarter results were below our expectations, with comparable sales down 12.8%. As Jonathan outlined, we saw improvement as the quarter progressed, with trends continuing to improve into April.

Jamie McConnell: Thank you, Jonathan, and good afternoon, everyone. Q1 results were below our expectations, with comparable sales down 12.8%. Jonathan outlined, we saw improvement as the quarter progressed, with trends continuing to improve into April. Sales in Q1 were $161.5 million compared to $166.3 million a year ago. The decline in comparable sales were driven by an 11.2% decrease in traffic and a 2.3% decline in mix, partially offset by approximately 70 basis points of menu price. Traffic was impacted by weather and a difficult comparison to the prior year Ripple Fries launch, which created a headwind to both traffic and mix. Mix declined in Q1, reflecting strategic promotional offers to re-engage guests as well as the transition to SG Rewards.

Speaker #1: Sales in the quarter were $161.5 million compared to $166.3 million a year ago. The decline in comparable sales was driven by an 11.2% decrease in traffic and a 2.3% decline in mix, partially offset by approximately 70 basis points of menu price.

Speaker #1: Traffic was impacted by weather and a difficult comparison to the prior year ripple fries launch, which created a headwind to both traffic and mix.

Speaker #1: Mixed decline in the quarter reflecting strategic promotional offers to re-engage guests, as well as the transition to SG Rewards. Traffic improved sequentially through the quarter, supported by menu innovation and targeted loyalty offers, with improvement continuing into April.

Jamie McConnell: Traffic improved sequentially through the quarter, supported by menu innovation and targeted loyalty offers, with improvement continuing into April. As we look ahead, we expect comparable sales trends to improve as we continue to execute our transformation plan with wraps now launched nationally. The comparisons also become easier as we move through the year. Restaurant level margin was 10%, down from 17.9% last year. Food, beverage, and packaging costs in the quarter were 29% of revenue, an increase of 250 basis points year over year. The increase was primarily driven by higher ingredient usage, portion investments, and targeted pricing and promotional investments, partially offset by supply chain saving initiatives. Ingredient usage was a headwind of approximately 140 basis points year over year.

Speaker #1: As we look ahead, we expect comparable sales trends to improve, as we continue to execute our transformation plan, with wraps now launched nationally. The comparisons also become easier as we move through the year.

Speaker #1: Restaurant-level margin was 10%, down from 17.9% last year. Food, beverage, and packaging costs in the quarter were 29% of revenue, an increase of $250 basis points year over year.

Speaker #1: The increase was primarily driven by higher ingredient usage, portion investments, and targeted pricing and promotional investments, partially offset by supply chain saving initiatives. Ingredient usage was a headwind of approximately 140 basis points year over year.

Speaker #1: We have taken additional steps to improve visibility into these drivers for our field teams, which is helping us better identify and prioritize the opportunities across the system.

Jamie McConnell: We have taken additional steps to improve visibility into these drivers for our field teams, which is helping us better identify and prioritize the opportunities across the system. Our focus is on improving the flow of food in our restaurants, from receiving orders to inventory management, prep, and ensuring accuracy at the point of sale. While we are still early, we see this as a meaningful opportunity to improve consistency and reduce variability over time. We are taking a disciplined approach. While we have made progress on visibility, there is more work to do to strengthen the tools and processes that support the field. This requires alignment between the systems and how our restaurants operate, so we are being thoughtful about how we evolve and roll this out to ensure it works effectively in our restaurant and delivers consistent results.

Speaker #1: Our focus is on improving the flow of food in our restaurants, from receiving orders to inventory management, prep, and ensuring accuracy at the point of sale.

Speaker #1: While we are still early, we see this as a meaningful opportunity to improve consistency and reduce variability over time. We are taking a disciplined approach.

Speaker #1: While we have made progress on visibility, there is more work to do to strengthen the tools and processes that support the field. This requires alignment between the systems and how our restaurants operate, so we are being thoughtful about how we evolve and roll this out to ensure it works effectively in our restaurant and delivers consistent results.

Speaker #1: For the second quarter, we expect food, beverage, and packaging costs to be in line with the first quarter. With pressure from weather-related produce costs, as well as fuel surcharges, we expect the produce-related pressure to be transitory and largely concentrated in the quarter.

Jamie McConnell: For Q2, we expect food, beverage, and packaging costs to be in line with Q1, with pressure from weather-related produce costs as well as fuel surcharges. We expect the produce-related pressure to be transitory and largely concentrated in the quarter. Q1 labor and related expenses were 31.4% of revenue, an increase of 250 basis points year over year. This was primarily driven by sales deleverage and wage inflation. In our restaurants, we are focused on getting the right labor in the right place at the right time, with work underway across staffing and scheduling to better align labor to demand throughout the day, particularly during peak hours, where better coverage supports throughput in the customer experience. For Q2, we expect labor costs to be in the low 29% range, reflecting low single-digit wage inflation.

Speaker #1: First quarter labor and related expenses were $31.4% of revenue, an increase of $250 basis points year over year. This was primarily driven by sales de-leverage and wage inflation.

Speaker #1: In our restaurants, we are focused on getting the right labor and the right place at the right time. With work underway across staffing and scheduling to better align labor to demand throughout the day, particularly during peak hours, where better coverage supports throughput in the customer experience.

Speaker #1: For the second quarter, we expect labor costs to be in the low $29% range, reflecting low single-digit wage inflation. Other operating expenses for the quarter were $18.5% of revenue, an increase of $110 basis points year over year, driven primarily by sales de-leverage.

Jamie McConnell: Other operating expenses for the quarter were 18.5% of revenue, an increase of 110 basis points year over year, driven primarily by sales deleverage. G&A expense in the quarter was $29.3 million, a decrease of $9.1 million year over year. The improvement was primarily driven by lower stock-based compensation and reduced salary and benefits following our 2025 headcount reduction initiative. Underlying support center costs, excluding stock-based compensation and one-time expenses, was $23.2 million, a decrease of $4.5 million year over year. We are maintaining discipline in support center spending while continuing to invest in the capabilities that matter most to the transformation. Net income for the quarter was $125.8 million, compared to a net loss of $25 million in the prior year.

Speaker #1: G&A expense in the quarter was $29.3 million, a decrease of 9.1 million year over year. The improvement was primarily driven by lower stock-based compensation and reduced salary and benefits following our 2025 headcount reduction initiatives.

Speaker #1: Underlying support center costs, excluding stock-based compensation and one-time expenses, were $23.2 million. A decrease of 4.5 million year over year. We are maintaining discipline in support center spending, while continuing to invest in the capabilities that matter most to the transformation.

Speaker #1: Net income for the quarter was $125.8 million, compared to a net loss of $25.0 million in the prior year. This was primarily driven by one-time gains in the sales SPICE, which closed during the first quarter of 2026.

Jamie McConnell: This was primarily driven by 1-time gains in the sale of Spyce, which closed during Q1 2026. Adjusted EBITDA was a loss of -$8.1 million, compared to a gain of +$285,000 last year, driven primarily by lower restaurant level profit. We ended the quarter with $156.8 million in cash. During the quarter, we opened 4 net new restaurants and ended the quarter with 285 restaurants, of which 33 restaurants are powered by the Infinite Kitchen. Now turning to fiscal year 2026 guidance. We are reiterating our same-store sales guidance with wraps now in Sweetgreen restaurants nationwide and comparisons easing. We expect same-store sales to be a decline in the range of -4% to -2%.

Speaker #1: Adjusted EBITDA was a loss of 8.1 million compared to a gain of $285,000 last year, driven primarily by lower restaurant-level profit. We ended the quarter with $156.8 million in cash.

Speaker #1: During the quarter, we opened four net new restaurants and ended the quarter with $285 restaurants, of which 33 restaurants are powered by the Infinite Kitchen.

Speaker #1: Now turning to fiscal year 2026 guidance, we are reiterating our same-store sales guidance, with wraps now in Sweetgreen Restaurants nationwide and comparisons easing. We expect same-store sales to be a decline in the range of -4 to -2%.

Speaker #1: We expect restaurant-level margin to range from 14.2% to 14.7%. An adjusted EBITDA to range between $1 million and $6 million. On unit growth, we now expect to open approximately 13 net new restaurants this year, reflecting 18 openings and a handful of lease-related closures.

Jamie McConnell: We expect restaurant-level margin to range from 14.2% to 14.7% and adjusted EBITDA to range between $1 million and $6 million. On unit growth, we now expect to open approximately 13 net new restaurants this year, reflecting 18 openings and a handful of lease-related closures, where we mostly see an opportunity to strengthen nearby locations. Our development pipeline is equally weighted this year and nearly half of our openings will feature the Infinite Kitchen. To close, we are still early in our transformation work, but we are beginning to see progress from the actions we have taken. As execution improves and we bring more discipline to how we operate and invest, we expect to see more consistent performance over time, supported by initiatives like the national launch of wraps as we rebuild top-line momentum and improve restaurant-level economics.

Speaker #1: Where we mostly see an opportunity to strengthen nearby locations. Our development pipeline is equally weighted this year at nearly half of our openings will feature the Infinite Kitchen.

Speaker #1: To close, we are still early in our transformation work, but we are beginning to see progress from the actions we have taken. As execution improves and we bring more discipline to how we operate and invest, we expect to see more consistent performance over time.

Speaker #1: Supported by initiatives like the National Launch of Wraps, as we rebuild top-line momentum and improve restaurant-level economics. Our focus remains on strengthening execution in our restaurants, restoring traffic, and managing cost and capital with discipline.

Jamie McConnell: Our focus remains on strengthening execution in our restaurants, restoring traffic, and managing cost and capital with discipline. With that approach, we are focused on building a more consistent and profitable Sweetgreen over time. Now we're happy to take your questions.

Speaker #1: With that approach, we are focused on building a more consistent and profitable Sweetgreen over time. And now we're happy to take your questions. Thank you, everyone, and good afternoon.

Rebecca Nounou: Thank you, everyone, and good afternoon. Speaking on today's call

Speaker #1: Speaking on today's.

Speaker #3: We will now begin the question-and-answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand to withdraw your question, press star 1 again we ask that you pick your pick up your handset when asking a question to allow for optimum sound quality.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeff Bernstein with Barclays. Please go ahead.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. When our first question comes from the line of Jeff Bernstein with Barclays, please go ahead.

Speaker #4: Great. Thank you very much. This is product on for Jeff. Very encouraging to hear the April traffic trends improving. And in, you know, in the release, you referred to the momentum you have could you just level set with us what degree of improvement you've been seeing?

Pratik: Great. Thank you very much. This is Pratik on for Jeff. Very encouraging to hear the April traffic trends improving, and in the release you refer to the momentum you have. Could you just level set with us what degree of improvement you've been seeing? It'd just be helpful to get kind of an embedded assumption from you for how you see the rest of the quarter playing out, even if you're not explicitly guiding to a comp number in the Q2. Thank you.

[Analyst] (J.P. Morgan): Great. Thank you very much. This is Pratik on for Jeff. Very encouraging to hear the April traffic trends improving, and in the release you refer to the momentum you have. Could you just level set with us what degree of improvement you've been seeing? It'd just be helpful to get kind of an embedded assumption from you for how you see the rest of the quarter playing out, even if you're not explicitly guiding to a comp number in the Q2. Thank you.

Speaker #4: It'd just be helpful to get kind of an embedded assumption from you for how you see the rest of the quarter playing out, even if you're not explicitly guiding to a comp number in the second quarter.

Speaker #4: Thank you.

Speaker #5: Hi. Yeah. So we saw January and February starting with Q1. We saw some pressure with the weather. But as we moved into March, we saw about 100 basis improvement in transactions.

Jamie McConnell: Hi. Yeah. We saw January and February starting with Q1. We saw some pressure with the weather, but as we moved into March, we saw about 100 basis improvement in transactions. We also have price fully rolling off, and we had some mixed headwinds due to some of the promotional activities and as we launched SG Rewards. In April, we improved to about a decline of -8% and we just launched wraps. We're excited about our launch from all the results that we saw in the testing, and we expect that Q2 to land around -4%.

Speaker #5: We also have price fully rolling off. And we had some mixed headwinds due to some of the promotional activities. And as we launched SG Rewards, and in April, we improved to about a decline of -8%.

Speaker #5: And we just launched Wraps. And so we're excited about our launch from all the results that we saw in the testing. And we expect the Q2 to land around -4%.

Speaker #4: That's a very helpful thanks, Jamie.

Pratik: That's very helpful. Thanks, Jamie.

[Analyst] (J.P. Morgan): That's very helpful. Thanks, Jamie.

Speaker #3: Your next question comes from a line of Brian Bittner with Oppenheimer & Company. Please go ahead.

Operator: Your next question comes from the line of Brian Bittner with Oppenheimer and Company. Please go ahead.

Michael Tamas: Hi. Thanks. This is Michael Tamas for Brian. You know, you talked about the improving operations and also, you know, the incrementality from wraps. I guess, can you maybe just help us understand what that incrementality looked like from the wraps? You know, as the year unfolds, you're talking about doing more menu innovation, but also having all of these improvement operations that you've done so far and more to come. What guardrails are you putting in place to sort of make sure that the operations don't deteriorate as you step up that amount of menu innovation? Thanks.

Speaker #6: Hi. Thanks. This is Mike Tameson for Brian. You know, you talked about the improving operations and also the incrementality from Wraps. So I guess, can you maybe just help us understand what that incrementality looked like from the Wraps?

Speaker #6: And then, you know, as the year unfolds, you're talking about doing more menu innovation, but also having all of these improvement in operations that you've done so far and more to come.

Speaker #6: So what guardrails are you putting in place to sort of make sure that the operations don't deteriorate as you step up that amount of menu innovation?

Speaker #6: Thanks.

Speaker #7: Sure. Thanks for the question. So as it relates to Wraps, as I mentioned in the prepared remarks, we took a very disciplined approach, starting with an off-shake down, a rapid ops test, and eight stores, and then a multi-month Sage gate process in three separate markets.

Jonathan Neman: Thanks for the question. As it relates to wraps, as I mentioned in the prepared remarks, we took a very disciplined approach starting with an ops shakedown, a rapid ops test in 8 stores, and then a multi-month stage gate process in 3 separate markets. We were able to both understand the operational impacts as well as the customer behavior. While I'm not gonna guide to an exact number on incrementality, I'll say that we were very encouraged. It mixed in really well. We saw really high return rates of the wraps. I think most importantly, customers were really delighted with the quality as well as the price. You know, the chicken Caesar wrap it starts at $10.45 in certain markets, and no wrap in any market is above $15.

Speaker #7: And we were able to both understand the operational impacts as well as the customer behavior. While I'm not going to guide to an exact number on incrementality, I'll say that we were very encouraged.

Speaker #7: It mixed in really well. We saw really high return rates of the Wraps. I think most importantly, customers were really delighted with the quality as well as the price.

Speaker #7: You know, the chicken Caesar Wrap in most starts at $1,045 in certain markets, and no Wrap in any market is above $15. So I think both from a quality, craveability, and price value, we are really delivering and customers are noticing it.

Jonathan Neman: I think both from a quality, cravability, and price value, we are really delivering and customers are noticing it. It, it definitely is incremental, you know, and that was all before media. Typically, we do see a pretty nice lift once we advertise things. We have a really, one of probably our largest social first campaign going live right now, getting much more awareness and trial. We're still very early. We launched yesterday, but very encouraged by how it's mixing in the response and the comeback rate on wraps. As it relates to operations and menu innovation, you know, we really spent last year instituting Project One Best Way, really building the operational foundation with a focus on people, food, feel, and flow. We've gotten much, much better. We've seen our quality complaints come down significantly.

Speaker #7: So it definitely is incremental. You know, and that was all before media. So typically, we do see a pretty nice lift once we advertise things.

Speaker #7: And we have a really one of probably our largest social-first campaign going live right now, getting much more awareness in trial. So we're still very early.

Speaker #7: We launched yesterday, but very encouraged by how it's mixing in the response and the comeback rate on Wraps. As it relates to operations and menu innovation, you know, we really spent last year instituting Project One Best Way, really building the operational foundation.

Speaker #7: With the focus on people, food, feel, and flow. And we've gotten much, much better. We've seen our quality complaints come down significantly. We've seen our in-stock percentages, so like our 86ing, go down significantly.

Jonathan Neman: We've seen our in-stock percentages, so like our 86ing go down significantly. Much more in stock. We feel good about how we're operating there. The focus has really moved more towards culture within our restaurants and the hospitality and as well as continuing to elevate the quality and consistency of what we do. We, given the stage gate process we have, everything that we're putting out from a menu innovation perspective both has to meet our ops sandbox requirements in terms of complexity, number of ingredients, and any incremental labor hours, but also has to go through a stage gate process to make sure it doesn't disrupt our core operation.

Speaker #7: So much more in stock. So we feel good about how we're operating there. And the focus is really moved more towards culture within our restaurants and the hospitality.

Speaker #7: And as well as continuing to elevate the continuing to elevate the quality and consistency of what we do. Given the Sage gate process we have, everything that we're putting out from a menu innovation perspective both has to meet our ops sandbox requirements.

Speaker #7: In terms of complexity and number of ingredients, and any incremental labor hours, but also it has to go through a Sage Gate process to make sure it doesn't disrupt our core operation.

Speaker #7: I think if I could leave you with anything, it's that the most important thing we are focused on right now is the fundamentals of delivering an excellent customer experience.

Jonathan Neman: I think if I could leave you with anything, it's the most important thing we are focused on right now is the fundamentals of delivering an excellent customer experience. The menu innovation is all layered on top of that. That's what gives us confidence with wraps and future menu innovation is we believe we've laid the operational foundation to continue to innovate. We have a robust innovation calendar coming for the rest of the year, but done in a way which really limits the complexity for our store teams and should be something that really customers love. Very encouraged by the recent momentum, but, as I mentioned, we still early in the transformation and a lot of work to do.

Speaker #7: And the menu innovation is all layered on top of that. And that's what gives us confidence with Wraps and future menu innovation, is we believe we've laid the operational foundation to continue to innovate.

Speaker #7: We have a robust innovation calendar coming for the rest of the year, but done in a way which really limits the complexity for our store teams.

Speaker #7: And should be something that really customers love. So very encouraged by the recent momentum, but as I mentioned, we still early in the transformation.

Speaker #7: And a lot of work to do.

Speaker #6: Thank you.

Isaiah Austin: Thank you.

Isiah Austin: Thank you.

Speaker #3: Your next question comes from the line of Sarah Senator with Bank of America. Please go ahead.

Operator: Your next question comes from the line of Sara Senatore with Bank of America. Please go ahead.

Isaiah Austin: Hi, Isaiah Austin on for Sara. Thanks for the question. Just in the line of menu additions, it kind of seemed like Protein Plates were an important driver back in 2024, but kind of faded moving into 2025. Are there any learnings on how you guys will manage that with wraps on the menu now just going through the remainder of the year?

Isiah Austin: Hi, Isaiah Austin on for Sara. Thanks for the question. Just in the line of menu additions, it kind of seemed like Protein Plates were an important driver back in 2024, but kind of faded moving into 2025. Are there any learnings on how you guys will manage that with wraps on the menu now just going through the remainder of the year?

Speaker #8: Hi. Isaiah Austin off for Sarah. Thanks for the question. Just in the line of menu additions, it kind of seemed like protein plates were an important driver back in 2024, but kind of faded moving into 2025.

Speaker #8: Are there any learnings on how you guys will manage that with Wraps on the menu now just going through the remainder of the year?

Speaker #6: Yeah. That's a good question. One of the learnings is to consistently bring new news to a category. So what you'll see us do with Wraps is not only the launch of Wraps compelling, but continuing to support it with media.

Jonathan Neman: Yeah, that's a good question. One of the learnings is to consistently bring new news to a category. What you'll see us do with wraps is not only the launch of wraps compelling, but continuing to support it with media, but also new news and new wrap builds. Today we have three core wraps, one LTO. We have a couple planned incremental wraps that we will introduce throughout the year, whether that be core or LTO. Today it's four signature wraps. All can be modified. We know customers eventually want a build your own wrap, which is something that we, you know, we're looking at. Plates have been successful. They've helped us grow our dinner.

Speaker #6: But also new news and new Wrap builds. So today we have three core Wraps, one LTO. We have a couple planned incremental Wraps that we will introduce throughout the year, whether that be core or LTO.

Speaker #6: Today, it's four signature Wraps. All can be modified. We know customers eventually want a build-your-own Wrap, which is something that we're looking at. And plates, have been successful.

Speaker #6: They've helped us grow our dinner. They have some of those plates do exceptionally well, like our miso salmon plate. And so we do expect to continue innovating on the plates category.

Jonathan Neman: They have, you know, some of those plates do exceptionally well, like our Miso Salmon plate. We do expect to continue innovating on the Plates category. Expect some more innovation on Plates. It's something that we know our customers love.

Speaker #6: So expect some more innovation on plates. It's something that we know our customers love.

Speaker #8: Thank you.

Isaiah Austin: Thank you.

Isiah Austin: Thank you.

Operator: The next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.

Speaker #3: Your next question comes from a line of Sharon Zakfia with William Blair. Please go ahead.

Sharon Zackfia: Hi. Thanks for taking the question. You've done so much work over the last year in different efforts to improve your value perception, I'm curious if you have any kind of quantifiable research on how the consumer has recognized that. You know, do you think you're getting credit for all of the efforts you've done? You know, what have you done that's really landed well and where were maybe you a bit more disappointed in something that you rearchitected that the customer just didn't really appreciate? Thanks.

Speaker #5: Hi. Thanks for taking the question. You've done so much work over the last year in different efforts to improve your value perception. And I'm curious if you have any kind of quantifiable research on how the consumer has recognized that.

Speaker #5: Do you think you're getting credit for all of the efforts you've done? And what have you done that's really landed well? And where were maybe you a bit more disappointed in something that you re-architected that the customer just didn't really appreciate?

Speaker #5: Thanks.

Jonathan Neman: Thank you, Sharon. As you mentioned, we have been working on value perceptions through a number of different initiatives. I think first and foremost, we are proud of the food we serve, and we believe when we execute on our core fundamentals and deliver a great customer experience, that given all that we do from a sourcing and scratch cooking perspective, that we offer tremendous value. Having said that, we do see opportunities to offer more entry-level pricing and kind of a different pricing ladder for different consumers to drive acquisition and repeat behavior. A few of the things that we've done that we believe are resonating. One is wraps.

Speaker #6: Thank you, Sharon. So as you mentioned, we have been working on value perceptions through a number of different initiatives. I think first and foremost, we are proud of the food we serve.

Speaker #6: And we believe when we execute on our core fundamentals and deliver a great customer experience, that given all that we do within from a sourcing and scratch cooking perspective, that we offer tremendous value.

Speaker #6: Having said that, we do see opportunities to offer more entry-level pricing and kind of a different pricing ladder for different consumers to drive acquisition and repeat behavior.

Speaker #6: So, a few of the things that we've done that we believe are resonating—one is Wraps. If you look at the social commentary on Wraps, some of the lower pricing is really resonating.

Jonathan Neman: If you look at the social commentary on wraps, the some of the lower pricing is really resonating, and we are seeing the comeback rate or the return rate of many of those customers as an encouraging sign. Two, we're getting more juice out of our loyalty program, both the core program as well as our Craving of the Month. We're seeing high adoption of that. As I mentioned on the call, we're seeing the average revenue of those users be incremental. It's a good activation for both new customers and lapsed customers, but those customers stick with us. We do not plan on, you know, continuing the promo and discount at this level. We do expect to really wean off of this.

Speaker #6: And we are seeing the comeback rate or the return rate of many of those customers as an encouraging sign. Two, we are getting more we're getting more juice out of our loyalty program, both the core program as well as our cravings of the month.

Speaker #6: We're seeing high adoption of that. And as I mentioned on the call, we're seeing the average revenue of those users be incremental. So it's a good activation for both new customers and lapsed customers.

Speaker #6: But those customers stick with us. We do not plan on continuing the promo and discount at this level. We do expect to really wean off of this.

Jonathan Neman: We are also, you know, the biggest price moves we're going to make, we're going to go into test in about a month or so on a whole kind of pricing architecture change, which I described in the prepared remarks, both on our build your own framework, as well as testing some more entry-level pricing. As it relates to data to, you know, quantifiable research, we have now done a baseline on price value, and over coming quarters, we'll share more on how that has changed. To leave you with anything, really the focus is delivering on the fundamentals and delivering a great customer experience. When we do that, the food, you know, what we offer is really worth the money, and we're proud of that.

Speaker #6: We are also the biggest price moves we're going to make. We're going to go into test come in about a month or so. On a whole, kind of pricing architecture change, which I described in the prepared remarks, both on our build-your-own framework as well as testing some more entry-level pricing.

Speaker #6: As it relates to data to quantifiable research, we have now done a baseline on price value. And overcoming quarters will share more on how that has changed.

Speaker #6: But to leave you with anything, really the focus is delivering on the fundamentals and delivering a great customer experience. And when we do that, the food what we offer is really worth the money.

Speaker #6: And we're proud of that.

Speaker #3: Your next question comes from the line of John Tower with City. Please go ahead.

Operator: The next question comes from the line of Jon Tower with Citi. Please go ahead.

Speaker #8: Yeah, thanks for taking the question. Maybe you can help us think through it, as there are a lot of moving parts in the business right now.

Jon Tower: Yeah. Thanks for taking the question. Maybe you can help us think through it. There's a lot of moving parts on the business right now and, you know, whether it's wraps or, you know, changing the pricing architecture in the future, like how you're thinking about incremental flow-through going forward for the business and specifically, you know, with focusing on lower price points, I would assume that check is gonna be a little bit lower. Can you help us think through that?

Speaker #8: And whether it's Wraps or changing the pricing architecture in the future, how you're thinking about incremental flow-through going forward for the business. And specifically, with focusing on lower price points, I would assume that check is going to be a little bit lower.

Speaker #8: Can you help us think through that?

Speaker #5: Yeah. So we still expect flow-through to be around the 40% range. And what we are seeing with Wraps is there is some check dilution, but we are getting the incremental transactions.

Jamie McConnell: Yeah. We still expect flow-through to be around the 40% range. What we are seeing with wraps is there is some check dilution, but we are getting the incremental transactions. What we're also seeing is the prep for the produce that goes into the wraps is less, and also the waste is less. We're actually seeing favorable cost of goods sold on our wraps, even with the lower price point. As we test, when we look at the menu price architecture, that's something that we're going to be very careful and sequenced about, and that's why we've paced every kind of discount and promotion that we've done because we wanna measure the results in making sure that we get the return. Same with the price architecture.

Speaker #5: And what we're also seeing is the prep for the produce that goes into the Wraps is less. And also the waste is less. So we're actually seeing favorable cost of goods sold on our Wraps, even with the lower price point.

Speaker #5: And so as we test, when we look at the menu price architecture, that's something that we're going to be very careful and sequenced about.

Speaker #5: And that's why we've paced every kind of discount and promotion that we've done, because we want to measure the results in making sure that we get the returns.

Speaker #5: So same with the price architecture. We're going to be disciplined about that approach and make sure that it's working.

Jamie McConnell: We're gonna be disciplined about that approach and make sure that it's working.

Speaker #3: Your next question comes from the line of Andrew Charles with TD Cohen. Please go ahead.

Operator: Your next question comes from the line of Andrew Charles with TD Cowen. Please go ahead.

Speaker #8: Great. Thank you. This is Zach Ogden on for Andrew. So for the full-year restaurant-level margin guidance, it does imply about 100 basis points, maybe a little bit more in the second half of the year.

Zach Ogden: Great. Thank you. This is Zach Ogden on for Andrew. For the full-year restaurant level margin guidance, it does imply about 100 basis points, maybe a little bit more in H2, in terms of leverage. Can you talk about the drivers that will get you back to that margin level leverage, maybe talk about any pricing plans as a part of that? Thank you.

Speaker #8: In terms of leverage, so you can talk about can you talk about the drivers that will get you back to that margin level leverage?

Speaker #8: And then maybe talk about any pricing plans as a part of that. Thank you.

Speaker #5: Yeah. So when you look at our margins for the quarter, about half of it is sales fee leverage. And then we also have wage inflation of about 40 bips.

Jamie McConnell: Yes. When you look at our margins for the quarter, about half of it is sales deleverage, and then we also have wage inflation of about 40 basis points. The remainder is really within our control. There's a lot of work being done behind the scenes, especially as it relates to cost of goods sold. We have just introduced visibility to the field on the waste, by the different categories, but there's still a lot more work to be done to make sure that they're ordering the correct amount, they're prepping the right amount, and that we're giving them the tools to be successful to properly do this. We've just unlocked the visibility, but we plan to unlock the tool through the H2. We are seeing quarter-over-quarter improvements.

Speaker #5: But the remainder is really within our control. And so there's a lot of work being done behind the scenes especially as it relates to cost of goods sold.

Speaker #5: And so we have just introduced visibility to the field on the waste by the different categories. But there's still a lot more work to be done to make sure that they're ordering the correct amount, they're prepping the right amount, and that we're giving them the tools to be successful to properly do this.

Speaker #5: So we've just unlocked the visibility. But we plan to unlock the tools through the back half of the year. But we are seeing quarter over quarter improvements.

Speaker #5: And so also within labor, we have a labor study going on right now. And so we are looking at our labor as well and making sure that we have the right people staffed during the peak hour to drive the throughput and make sure that we're getting sales leverage on those transactions.

Jamie McConnell: Also within labor, we have a labor study going on right now. We are looking at our labor as well and making sure that we have the right people staffed during the peak hour to drive the throughput and make sure that we're getting sales leverage on those transactions. A lot of work being done behind the scenes on the margin.

Speaker #5: So a lot of work being done behind the scenes on the margin.

Speaker #8: Great. Thank you.

Zach Ogden: Great. Thank you.

Speaker #3: Your next question comes from the line of Rahul Krathapali with JP Morgan. Please go ahead.

Operator: Your next question comes from the line of Rahul Krotthapalli with J.P. Morgan. Please go ahead.

Speaker #9: Good afternoon, guys. Can you update us on where you are in the efforts around re-establishing the coolness factor, if you will, or the as you continue to be a premium and aspirational brand while also being affordable and making progress in democratizing wellness and mindful eating?

Rahul Krotthapalli: Good afternoon, guys. Can you update us on where you are in the efforts around reestablishing, like, the coolness factor, if you will, on the brand as you continue to be a premium and aspirational brand, but also being affordable and making progress in democratizing, wellness and mindful eating? I have a follow-up.

Speaker #9: And I have a follow-up.

Speaker #8: Thanks, Rahul. Yeah. One thing I'll just point to, but broadly, is last year we really rebuilt our leadership team. And underneath Zip, our chief commercial officer, have rebuilt much of our marketing and brand team.

Jonathan Neman: Thanks, Rahul. You know, one thing I'll just point to broadly is, last year we really rebuilt our leadership team, and underneath Zip, our Chief Commercial Officer, have rebuilt much of our marketing and brand team. We are taking a new approach to how we invest in the brand and leaning more into the lifestyle elements. The first thing that I think builds a brand, and our team hears me all the time, is word of mouth on delivering a great experience in our restaurants. First and foremost is just executing on excellent customer experience and living up to our promise around consistency, quality, and hospitality. We're also leaning into some new things.

Speaker #8: So we are taking a new approach to how we invest in the brand. And leaning more into the lifestyle elements. The first thing that I think builds a brand, and our team hears me all the time, is word of mouth on delivering a great experience in our restaurants.

Speaker #8: So first and foremost, is just executing on excellent customer experience and living up to our promise around consistency, quality, and hospitality. But we're also leaning into some new things.

Speaker #8: For example, with our Wraps launch, you'll see a different kind of launch with us, more of a bottoms-up approach with social-first content, really and other moves getting into culture.

Jonathan Neman: For example, with our wraps launch, you'll see a different kind of launch with us, more of a bottoms-up approach with social-first content, really, and other moves getting into culture. As you move into the summer, you'll see us do some really cool things, leaning into some collaborations in both culture and both culture broadly as well as chefs, something that we've done in the past that definitely resonates with our guests. You're also seeing us do a lot more kind of events in real life. Even tonight, you know, we're celebrating our wraps launch with an awesome event here in Los Angeles at our Silver Lake restaurant. So much more with creators, influencers, storytelling, and leaning into the lifestyle elements of the brand. Expect to see more as the year continues.

Speaker #8: As you move into the summer, you'll see us do some really cool things leaning into some collaborations in both culture and both culture broadly as well as chefs.

Speaker #8: Something that we've done in the past that definitely resonates with our guests. And you're also seeing us do a lot more kind of events in real life.

Speaker #8: Even tonight, we're celebrating our Wraps launch. With an awesome event here in Los Angeles at our Silver Lake Restaurant. So much more with creators, influencers, storytelling, and leaning into the lifestyle elements of the brand.

Speaker #8: So expect to see more as the year continues.

Speaker #9: Thank you for that. And then the follow-up is on the own digital customers, like approaching 40% is good to see. Any insights you can share around the frequency of these customers?

Rahul Krotthapalli: Thank you for that. The follow-up is on the own digital customers, like approaching 40% is good to see. Any insights you can share around the frequency of these customers? I know we spoke about the monthly active users in the past. How is this cohort interacting with the brand directionally?

Speaker #9: I know we spoke about the monthly active users in the past. How is this cohort interacting with the brand directionally?

Speaker #5: Yeah. So I would say there's a lot of work being done on our loyalty channel. So that's why we're beginning to see some momentum there, especially within our native channel.

Jamie McConnell: I would say there's a lot of work being done on our loyalty channel. That's why we're beginning to see some momentum there, especially within our native channel. With the Craving of the Month and then the targeted loyalty actions, we are seeing some improvements in our own channel, and we're actually also seeing increases of loyalty users signing up month after month.

Speaker #5: And so with the cravings of the month and then the targeted loyalty actions, we are seeing some improvements in our own channel. And we're actually also seeing increases of loyalty users signing up month after month.

Speaker #8: Yeah. The other thing where you're seeing the own the other change in the own digital is we've continued to see really nice momentum on people using loyalty in restaurants.

Jonathan Neman: Yeah. The other thing where you're seeing the own, the other change in the own digital is we've continued to see really nice momentum on people using loyalty in restaurants from a scan-to-pay perspective. The scan to pay has reached about 20% of in-store transactions, and that's a positive signal because once we get them into our digital ecosystem, we love them ordering in-restaurant, but that gives us the benefit of ordering in-restaurant and having a connection digitally where we can market to them directly. Some nice, encouraging signs around their frequency, but a lot more work to do.

Speaker #8: From a scan-to-pay perspective, the scan-to-pay has reached about 20% of in-store transactions. And that's a positive signal because once we get them into our digital ecosystem, we love them ordering in restaurant, but that gives us the benefit of ordering in restaurant and having a connection digitally where we can market to them directly.

Speaker #8: So some nice encouraging signs around their frequency. But a lot more work to do.

Speaker #9: Thanks, guys. And congrats on the Wraps launch. The K-BBQ is my favorite. And it's fire. Thank you.

Rahul Krotthapalli: Thanks, guys. Congrats on the wraps launch. The K Barbecue is my favorite, and it's fire. Thank you.

Jonathan Neman: Oh, great to hear. Thank you, Earl.

Speaker #8: Oh, great to hear. Thank you, all.

Speaker #5: Thank you.

Speaker #3: Our next question comes from the line of Carrie Merrill with Morgan Stanley. Please go ahead.

Operator: Our next question comes from the line of Carrie Merrill with Morgan Stanley. Please go ahead.

Speaker #10: Hi, thanks for taking our question. I just wanted to continue on with the digital conversation and see if you had anything else to add, as percent digital revenue and own digital revenue saw a nice tick-up sequentially and year over year.

Carrie Merrill: Hi. Thanks for taking our question. I just wanted to continue on with the digital conversation and see if you had anything else to add as percent digital revenue and own digital revenue saw a nice tick up sequentially and year over year. Then just one more, wanted to ask what trends have you been seeing on third-party delivery as of late?

Speaker #10: And then just one more wanted to ask, what trends have you been seeing on third-party delivery as of late?

Speaker #8: Sure. So I mean, just to reiterate what I said before, we've continued to invest in our digital ecosystem. I think it's somewhere where we're probably best in class around our digital the digital experience in our restaurants.

Jonathan Neman: Sure. I mean, just to reiterate what I said before, you know, we've continued to invest in our digital ecosystem. I think it's somewhere where we're probably best in class around our digital, the digital experience in our restaurants. Not only what we do within our app, but how we support it within our restaurants. We've been very intentional about how to build an omni-channel restaurant where we don't disrupt the in-store experience for those digital customers. We've done a lot of work on, call it, the back end, where it'd be our throttle management and working on things like accuracy on time and on-time rates, so people can trust those digital channels. Continue to A/B test features.

Speaker #8: Not only what we do within our app, but how we support it within our restaurants. So I've been very intentional about how to build an omnichannel restaurant where we don't disrupt the in-store experience for those digital customers.

Speaker #8: And we've done a lot of work on, call it, the back end where it'd be our throttle management and working on things like accuracy on time and on-time rates so people can trust those digital channels.

Speaker #8: We continue to A/B test features. We've continued to come out with a number of new features within our app, and we have a robust roadmap across the rest of this year where, actually, we've accelerated our digital roadmap.

Jonathan Neman: We've continued to come out with a number of new features within our app. We have a robust roadmap across the rest of this year, where actually we've accelerated our digital roadmap, especially given the advent of AI, we can move faster on a lot of those things. Customers really, you know, really love and trust our digital, our digital experience. Remind me the second part of your question.

Speaker #8: Especially given the advent of AI, we can move faster on a lot of those things. So customers are really really love and trust our digital experience.

Speaker #8: Remind me of the second part of your question.

Speaker #10: Just on trends in third-party delivery recently. Thank you.

Carrie Merrill: Just on trends in third-party delivery recently. Thank you.

Speaker #5: Yeah. So trends in our third-party delivery, that is a channel that we're very focused on right now. So we're looking there's a number of work streams under place to, one, make sure that we're delivering a great experience; we're not missing items or inaccurate.

Jamie McConnell: Trends in our third-party delivery, that is a channel that we're very focused on right now. There's a number of work streams under place to, one, make sure that we're delivering a great experience. We're not missing items or inaccurate, so we've been working on that, also with our kind of our time to order and pick up. There's a lot of work being done behind the scenes. We've seen some good improvement on our native channel and marketplace is starting to improve.

Speaker #5: So we've been working on that, as long also with our, kind of, our time to order and pick up. And so there's a lot of work being done behind the scenes.

Speaker #5: We've seen some good improvement on our native channel. And marketplace is starting to improve. And we've seen the trends improvement to April.

Jonathan Neman: Yeah.

Jamie McConnell: We've seen the trends improve into April.

Speaker #8: Yeah. Marketplace, we've seen a huge improvement into April. I think we've optimized both the paid side of the marketplace, but also the as Jamie mentioned, the organic side.

Jonathan Neman: Yeah. Marketplace, we've seen a huge improvement into April. I think we've optimized both the paid side of the marketplace, but also the, as Jamie mentioned, the organic side. There's a lot we can do to show up higher in the algorithm, especially around wait times, order readiness, and even, you know, little things around SEO management on the marketplace. Getting smarter and sharper there, and we expect marketplace to be a strong growth channel for us as we look throughout the rest of the year.

Speaker #8: There's a lot we can do to show up higher in the algorithm, especially around wait times, order readiness. And even little things around, call it, SEO management on the marketplace.

Speaker #8: So getting smarter and sharper there. And we expect marketplace to be a strong growth channel for us as we look throughout the rest of the year.

Speaker #3: Your next question comes from the line of Brian Mullen with Piper Sandler. Please go ahead.

Operator: Your next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

Speaker #8: Thank you. Just a question on development, specific to next year. Not looking for precise guidance, but really most trying to understand your current appetite to build new restaurants beyond projects that are already underway.

Brian Mullan: Thank you. Just a question on development, specific to next year. You know, not looking for precise guidance, really trying to understand your current appetite to build new restaurants, beyond projects that are already underway, you know, during the time period that you're going through this fleet transformation plan process. Just how you're thinking about development right now.

Speaker #8: During the time period that you're going through this sweet transformation plan process. So just how you're thinking about development right now.

Speaker #9: Yeah. I'd say we're taking right now a very disciplined approach. Really focused on higher return on invested capital, restaurants that we have a high level of confidence in.

Jonathan Neman: I'd say we're taking right now a very disciplined approach. Really focused on high return on invested capital restaurants that we have a high level of confidence in. We don't expect an acceleration in development until we start to see the flywheel and working here, comps improving significantly, and feel much better about the core operation. We will continue to develop new restaurants. We're continuing to work on both the design and prototype of those new restaurants. We're really excited to welcome our new Chief Development Officer, Ryan Slemons. Expect a tempered year of development, we'll come back with more as the year progresses.

Speaker #9: We won't be I'd say we don't expect an acceleration in development until we start to see the flywheel and working here, comps improving significantly.

Speaker #9: And feel much better about the core operation. But we do we will continue to develop new the design and prototype of those new restaurants.

Speaker #9: We're really excited to welcome our new chief development officer, Ryan. So expect a tempered year of development. And we'll come back with more as the year progresses.

Speaker #3: And our final question comes from the line of Dennis Geiger with UBS. Please go ahead.

Operator: Our final question comes from the line of Dennis Geiger with UBS. Please go ahead.

Speaker #8: Great. Thanks, guys. This is Paul On with Dennis. Thank you so much for the question. My first part is just encouraging to see the improvement in April so far and appreciate the color that you provided on transactions and pricing.

Paul: Great. Thanks, guys. This is Paul on with Dennis. Thank you so much for the question. My first part is just encouraging to see the improvement in April so far, and appreciate the color that you provided on transactions and pricing. Just wondering if you've felt as any shift in consumer behavior during the past few months. The second part was just following up on the development pipeline question, particularly over the longer term. What is the like future opening mix between entering new markets and penetrating further in existing markets? Thank you so much.

[Analyst] (UBS): Great. Thanks, guys. This is Paul on with Dennis. Thank you so much for the question. My first part is just encouraging to see the improvement in April so far, and appreciate the color that you provided on transactions and pricing. Just wondering if you've felt as any shift in consumer behavior during the past few months. The second part was just following up on the development pipeline question, particularly over the longer term. What is the like future opening mix between entering new markets and penetrating further in existing markets? Thank you so much.

Speaker #8: Just wondering if you noticed any shift in consumer behavior during the past few months. And then the second part was just following up on the development pipeline question, particularly over the longer term.

Speaker #8: What is the future opening mix between entering new markets and penetrating further in existing markets? Thank you so much.

Speaker #5: Yeah. In terms of consumer behavior, we are seeing some improvements in our younger cohorts. So the 18 to 35 has really started to pick up, which is good to see.

Jamie McConnell: Yeah. In terms of consumer behavior, we are seeing in some improvements in our younger cohort. The 18 to 35 has really started to pick up, which is good to see. In March, we launched our Chicken Sesame Crunch salad. That was a huge hit. Now we have now launched wraps, we're hoping to continue to see some of this momentum. In terms of development pipeline, Alan, if there's anything else you want to add.

Speaker #5: In March, we launched our chicken sesame crunch salad. That was a huge hit. And then now we have now launched wraps. So we're hoping to continue to see some of this momentum.

Speaker #5: And then in terms of development pipeline, I don't know if there's anything else you want to add.

Jonathan Neman: As it relates to development pipeline, we're really focused on building out a lot of the newer markets where we have seen success. One of the bright spots in development recently has been a number of those new markets. For example, we entered Phoenix last year. We're seeing about $3.2 million AUVs in that market. We're in Sacramento with about $3 million AUVs. Some really bright spots in some of these new markets, but we still have a number of new markets, where we're very lightly penetrated and have a lot of room to grow. Probably not a whole lot of net, like, totally greenfield markets and more building out those lightly penetrated markets so we can get the efficiencies around supply chain operations and brand.

Speaker #9: As it relates to development pipeline, we're really focused on building out a lot of the newer markets where we have seen success. One of the bright spots in development recently has been a number of those new markets.

Speaker #9: For example, we entered Phoenix last year. We're seeing about 3.2 million dollar AUVs in that market. We're in Sacramento with about $3 million AUVs.

Speaker #9: So, some really bright spots in some of these new markets. But we still have a number of new markets where we're very lightly penetrated and have a lot of room to grow.

Speaker #9: So probably not a whole lot of net totally greenfield markets and more building out those lightly penetrated markets so we can get the efficiencies around supply chain operations and brand.

Speaker #8: Great. Appreciate the color.

Brian Mullan: Great. Appreciate the color.

Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may disconnect.