Last week, the health-conscious Millennial’s favorite lunch spot, Sweetgreen, announced a $150 million funding round that puts Sweetgreen’s paper value at $1.6 billion, “up from a $1 billion valuation when it last raised capital 10 months ago,” according to the Wall Street Journal.
Traditionally, it’s unusual for a restaurant chain to raise private equity money to fund its growth, as the large returns that equity investors want do not come easily from the food business. Restaurants employ a lot of people, they require substantial real estate and capital, and kitchens generally do not deliver fat profits. But in the last decade, private equity, venture capital, and hedge funders have all warmed up — with varying degrees of success — to getting into restaurants. The San Francisco-based Blue Bottle Coffee is perhaps the best known example, having parlayed its popularity with the tech-employed into venture-capital funding and a fantastically large exit.
Blue Bottle sold a majority stake of itself to Nestlé in 2017 at a valuation of about $625 million, at the time operating 40 stores between the U.S. and Japan. This was an exceptionally happy ending. The Melt, a grilled cheese chain also based in San Francisco and funded by Sequoia Capital (one of the most prestigious VC firms in Silicon Valley) is perhaps a somewhat more typical story of how these investments go. Back in 2014, you could get away with things like promising an app that would “sense when a consumer is within a block of the restaurant and prepare your grilled cheese based on distance and speed.” Of course, this did not happen. While The Melt is still alive, it operates only seven stores, all in California, “far short of its goal of opening hundreds of locations” as Wired wrote in 2017.
Which brings me back to Sweetgreen, which is now based out of Los Angeles. In the Journal write-up of Sweetgreen’s monster new funding round, CEO Jonathan Neman insisted that his company is more than just kale, quinoa, and chicken:
Sweetgreen also uses digital products to forecast sales, deploy labor, and order food, Mr. Neman said. The technology is primarily driven by data and machine learning, he said.
“We don’t consider ourselves just a salad place,” Mr. Neman said.
But using “digital products to forecast sales, deploy labor, and order [insert material]” is a deliciously asinine way of describing how virtually every business in 2019 operates. If I sell a bolo tie on eBay, I can “forecast” my earnings by checking the value of other bolo ties on the site, I can “deploy labor” by offering free or expedited shipping, and I can order other bolo ties and sell them at a mark-up. This does not make me more than a guy making a bit of cash on eBay — just as encouraging its diners to use an app does not make Sweetgreen more than “just a salad place.”
Neman, who co-founded the company with two pals from his MBA class at Georgetown in 2007, likely knows this. But he also probably knows that investors wouldn’t want to put money behind a salad restaurant unless there was some strong differentiating factor to its business (what in Silicon Valley they unironically call a “killer app”) that draws in customers beyond good salads. This is also why Sweetgreen executives, in a doozy of a WSJ. Magazine profile from this summer, described a Manhattan test-kitchen — industry standards in restaurants from from Shake Shack to Taco Bell — as an “incubator” developing whiz-bang shit like sensors that let customers know exactly where on the pick-up rack their order sits, sparing them the horrible business of having to “sift through bags” to get their salads.
Perhaps I am being overly harsh. After all, if banal techspeak is what helps Sweetgreen spread its verdant tentacles close to my office, then so be it. They have a good menu of salads, their employees are treated at least relatively well, and their faux-tech branding isn’t even an iota as obnoxious as, say, WeWork’s self-proclaimed mission “to elevate the world's consciousness.”
But so-called innovation like this does tend to leave some people underfoot. In 2016, Sweetgreen announced that all of its stores would be going cashless, as it was “always looking for ways to innovate and challenge the status quo.” The maneuver, the company claimed, would allow employees “to do 5 to 15 percent more transactions an hour.” It was efficient for Sweetgreen and efficient for customers, many of whom are youngish office drones more familiar with plastic than paper currency these days, anyway. This past April, however, Sweetgreen said that it would start accepting legal tender once again. “Going cashless had these positive results,” Sweetgreen said in a statement, “but it also had the unintended consequence of excluding those who prefer to pay or can only pay with cash.” Imagine that!