The trend toward hybrid or fully remote work has impacted restaurants in urban areas that relied on office workers as their main customers. Fast-casual chains that have reigned supreme in city centers are now among those seeing lower sales as a result. Sweetgreen, a favorite lunchtime destination, just announced it will be laying off a chunk of its employees because of slower sales.
The Los Angeles-based chain said its "erratic urban recovery" after the pandemic resulted in a sales growth lag. Consequently, the company will be laying off 5% of its workforce in order to get back to profitability.
Summertime is usually Sweetgreen's best season, but instead, the chain didn't notice a lift in sales during the season. The company said it was first made aware of the sales slump around Memorial Day, which prompted it to lower its expectations.
As part of its new plan, Sweetgreen said it will also be relocating its support center to a smaller space. The company now expects its same-store sales to land between 13% and 19% this year, which is still lower than the expected 26%.
Even before the pandemic, the fast-casual was transitioning out of the city and into suburban neighborhoods. It still has a heavy footprint in those regions but is working on moving away from high-density areas.
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"At the end of 2019, our footprint was 65% urban, 35% suburban," CFO Mitch Reback said on an earnings call Tuesday. "Today it's 50/50. At the end of 2019, our urban restaurants had an AUV (average sales) of $3.1 million and our suburban restaurants had an AUV of $2.7 million. At the end of the second quarter of 2022, AUVs flipped (and) urban SUVs are now $2.7 million and suburban EVs are $3.1 million."