Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen Inc. Second Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Please limit yourself to one question. Thank you. I would now like to turn the conference over to Rebecca Nounou. You may begin. Thank you and good afternoon, everyone. Speaking on today's call will be Jonathan Neman, Co-Founder and Chief Executive Officer, and Mitch Reback, 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. Our earnings release can be found on our investor website. Now I'll turn the call over to Jonathan to kick things off. Thank you, Rebecca, and good afternoon. For the past 18 years, we have been building a generational brand, one that reimagines fast food to be healthy, craveable, and rooted in the highest standards of sourcing. The brand resonates broadly across geographies, demographics, and dayparts, reinforcing our conviction in the significant white space ahead and our long-term potential. For the second quarter, we reported sales of $185.6 million and a same-store sales decline of 7.6%. Restaurant-level margin for the quarter was 18.9%, and we posted an adjusted EBITDA of $6.4 million. Let me be clear. We are not satisfied with the results we're reporting today. These results reflect the convergence of several external headwinds and internal actions, which were a more cautious consumer environment starting in April, lapping a tough comparison with last year's successful steak launch, and the transition of our new loyalty program at the beginning of the quarter. I want to take a moment to provide more context around these dynamics and the steps we're taking in response. In the second quarter, we operated in a subdued industry backdrop, particularly in several of our largest urban markets. To address this, we've made thoughtful changes to enhance our value proposition, including increasing our chicken and tofu portioning by 25%, updating our chicken and salmon recipes to improve taste and quality, and addressing price perception through strategic LTO pricing, menu board architecture, and loyalty-exclusive $13 menu bowl drops. These initiatives are already driving an impact in the third quarter. Our summer menu, which launched July 7th, is mixing at 15% of all entrees, and one in three customers who tried a seasonal entree returned within two weeks. We've also seen a meaningful uptick in guest satisfaction with the 30% improvement in feedback related to our new protein portion sizes. We are focused on elevating the quality and freshness of every item we serve by reducing hold times and improving consistency. To support this, we're thoughtfully evolving our menu strategy to balance innovation with operational excellence. Looking ahead, we have two more seasonal menus slated in 2025 and are planning at least eight seasonal or LTO moments in 2026. We remain focused on strengthening our value proposition and driving frequency through both menu innovation and our reimagined loyalty program, which launched at the start of the second quarter. The transition to SG Rewards created around a 250 basis point headwind to our second quarter same store sales. This was driven by two factors. First, deferred revenue recognition tied to the structure of the new program, and second, a falloff in revenue from a small but highly important cohort of former Sweetpass+ members following the discontinuation of the subscription program. We believe these impacts from the loyalty program are temporary. Active membership in the program is growing and 90-day frequency trends have steadily improved. We're also seeing early signs of frequency recovery in our former Sweetpass+ cohort as a result of our personalized CRM offers. While we recognize that broadening benefits across a larger base of customers has brought some near term headwind, we're confident this trade off will deliver positive results starting in the fourth quarter. In the last 100 days, we made two significant hires to our executive team. On September 2, we will welcome Zipporah Allen as our new Chief Commercial Officer. Zipporah brings deep experience in brand building and customer engagement. Having led digital at Taco Bell and marketing at Strava, she will play a critical role in sharpening our brand positioning and menu, driving demand and strengthening the overall guest experience. In May, Jason Cochran joined us as Chief Operating Officer and his positive impact is being felt all across the organization. As Jason has spent time in the field, he's been inspired by the strength of our team and the culture we've built. At the same time, he sees clear opportunities to raise the bar. The fundamentals like sourcing, cooking, and throughput are there, but they're not always delivered with the consistency our guests expect or deserve. Today, about one third of our restaurants are consistently operating at or above standard, while the remaining two-third s represent a meaningful opportunity for improvement. Jason's assessment is grounded in a set of six operational metrics related to P&L, people, customer health, and throughput that allow us to objectively measure restaurant performance and identify where support and focus are most needed. He has launched Project One Best Way, a system wide effort to elevate operational excellence by implementing clear operating standards, performance-based leadership, accountability, and measured execution. Project One Best Way isn't about reinventing our operation, it's about applying the standard of excellence with operational process, building on what's already working and ensuring every restaurant delivers to our highest standard. We expect to see substantial improvement over the coming quarters. Customer satisfaction has improved, especially around accuracy, food quality, and portioning, thanks to focused actions we've taken to drive consistency and reinforce value. This momentum reflects the resilience and determination of our teams to deliver the best guest experience, along with the clarity, urgency, and operational discipline Jason has brought to the organization. His leadership is already making an impact, and we're confident in his ability to drive lasting change across the fleet. We remain highly encouraged by the financial and operational performance of the Infinite Kitchen, which continues to outpace comparable restaurants in both age and volume. These units are delivering significant labor savings driven by greater efficiency, throughput capacity, and consistent execution. Our current cohort is also seeing elevated native digital sales, reflecting the model's ability to deliver fast, high quality food at scale. While this quarter doesn't reflect the standard we set for ourselves, we're energized by the early traction we're seeing, from the return of our summer seasonals to the momentum and loyalty at Sweetgreen, everything starts with the guests. We're relentlessly focused on delivering the superior experience through every touch point, with a focus on reinvesting efficiencies from G&A and other areas to make investments in protein portions, delivering value through loyalty, and investing in our team to create faster, more hospitable experiences. This will create a flywheel of increased traffic and frequency as we continue to delight and deliver increased value to our guests. Thank you for believing in Sweetgreen. Thank you, Jonathan, and good afternoon, everyone. Total revenue for the quarter was $185.6 million, up from $184.6 million in the second quarter of 2024. Same store sales for the quarter declined 7.6% compared to the prior year period. This reflects a 2.5% benefit from menu price increases and a negative 10.1% impact from traffic and mix. Our average unit volume in the second quarter was $2.8 million. We opened nine restaurants, four of which were Infinite Kitchens, ending the second quarter with 260 restaurants. Notably, Forest Hills in Queens, New York, opened as one of the strongest in the company history. Our 2024 class of new restaurants continues to track towards its year two metrics in year one, delivering a second quarter margin well above the fleet average. Notably, 40% of this class is located in legacy markets and 60% in new markets. This reaffirms our confidence in the effectiveness of our real estate strategy and the significant long term growth opportunity that lies ahead. We are taking important steps to sharpen our portfolio in New York City. In July, we closed two restaurants, Bleecker and Astor Place. These were older, smaller footprint locations, and we strategically redirected volume to three newer, larger restaurants nearby. In just a few weeks, those receiving locations have seen same store sales increase by 15%- 20%, an early sign that we've successfully recaptured demand. While we've done relatively little to our footprint in New York City since the pandemic, we're now actively reinvesting in the market. This summer, we opened Forest Hills, Park Slope, and 23rd and Park, with the Lower East Side expected this fall. We're also relocating Union Square, which opened in 2015, and NoMad, our first New York City location, which opened in 2013. We are relocating them to improved locations, and both will contain Infinite Kitchens. As leases mature on a small number of older locations, we see opportunities to consolidate volume into newer units, particularly in established urban markets where the footprint no longer aligns with our strategy. We expect this disciplined approach will strengthen AUVs, same store sales, and margins as we scale towards 1,000 domestic locations. For 2025, we anticipate opening at least 40 new restaurants and plan to enter four new markets: Arkansas, Sacramento, Phoenix, and Cincinnati. We continue to expect at least 20 new restaurants will have the Infinite Kitchen, with an additional two relocations that will be upgraded with the Infinite Kitchen. This year's pipeline also includes two new Sweetgreen Lane locations, one classic and our first with an Infinite Kitchen. Restaurant-level profit margin for the quarter was 18.9% compared to 22.5% a year ago, primarily driven by sales deleverage and some tariff impact. Restaurant-level profit for the second quarter was $35.1 million, down 15% year-over-year. For a reconciliation of restaurant-level profit and restaurant-level margin to comparable GAAP figures, please refer to the earnings release. Food, beverage, and packaging costs were 27.7% of revenue for the quarter, roughly 70 basis points above the prior year period, primarily driven by a 40 basis point increase due to tariffs and duties on packaging. This is a level we expect to persist in the near term. Labor-related expenses were 27.5% of revenue for the second quarter, a 60 basis point increase year-over-year. This year-over-year increase is attributable to deleverage from the change in sales volume and wage rate increases. Offsetting these pressures is improvements in our labor optimization. Occupancy and related expenses were 8.9% of revenue, 80 basis points higher than the prior year period. Operating support center costs in the second quarter decreased versus the prior year period on a dollar basis as a percent of revenue year-over-year. Operating support center costs for the second quarter decreased to 14.1% from 15.2% in the third quarter. We restructured parts of our team and eliminated 10% of open and existing roles. Net loss for the quarter was $23.2 million as compared to a loss of $14.5 million in the prior year period. The increase in net loss is primarily due to a $6.4 million decrease in our restaurant-level profit and a $5.3 million impairment charge due to the closure of two restaurants and three other restaurants that we will continue to operate. Adjusted EBITDA, which excludes stock-based compensation and certain other adjustments, was $6.4 million for the second quarter compared to $12.4 million in the prior year period. We ended the quarter with a cash balance of $168 million. Now turning to our fiscal year 2025 outlook. For the fiscal year 2025, we are anticipating the following: at least 40 net new restaurant openings, revenue ranging from $700 million to $715 million, negative same-store sales of 6%- 4%, restaurant-level margin of approximately 17.5%, and adjusted EBITDA between $10 million and $15 million. On the development front, half of the 2025 pipeline is opening in the fourth quarter. We do not anticipate any price increases for the rest of the year. Q2 was a challenging quarter shaped by a combination of internal and external headwinds. Several pressures converged at once, but the actions we've taken are already beginning to show positive results. We brought back fan favorite seasonals and chef collaborations, introduced more moderate price points to strengthen value perception, made strategic adjustments to our New York City footprint, and we are making improvements in our operations. On the loyalty front, we're seeing steady weekly improvement in guest frequency since the April relaunch, an encouraging sign. While we're not yet where we want to be, we're confident that these actions position Sweetgreen to emerge stronger, more focused, and better aligned with what our guests and investors expect from us. I'll turn the call back to the operator to start Q&A. Your first question, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from the line of Sharon Zackfia with William Blair. You may go ahead. Hi. Good afternoon. I guess maybe two questions. First, there was a lot in the prepared commentary that kind of indicated reasons for hope, if you will. I'm wondering if you are actually seeing comps improve so far in the third quarter. Secondarily, Jonathan, you had a lot there about operations. It sounds like the bulk units are not kind of hitting the standards where you want them to be. At this point, what is the biggest issue? Is it accuracy, is it portion, is it speed? Is there incremental labor that you need to invest to kind of get to where you want to be at those units? Thank you. Thank you, Sharon. On your first question, the answer is yes, we see some encouraging signs so far in Q3. We have seen a modest improvement in same-stor e sales, and I think a lot of that has been due to the rollout of the seasonal menu as well as the loyalty program. That is one in terms of comp. Despite what we see as a really, really rough quarter, I am very confident in the plan ahead. As to your second question, I absolutely believe that us delivering an excellent guest experience is how we're going to win. For us, that means a few things. One, it's a focus on people and culture. I've said many times the Head Coach as our General Manager is the most important role inside of our restaurant. A huge focus on hiring, training, and developing the best Head Coaches. Today, some kind of early indicators of that success is our Head Coach stability. It's higher than it's ever been. It's continued to increase. Head Coaches in role for over a year, our stability metric is up to 57%. Some early indications of that working. We're also seeing team member turnover at its historic low. We should end the year in somewhere in the 80%, 80ish% range. Huge, huge focus on people and culture, and we believe that is going to be the number one driver of delivering an excellent guest experience. With that, a huge focus on internal development because we know when we develop leaders internally, not only do they deliver better guest experiences, it creates a great culture and it creates that people flywheel. Second, I want to talk about Project One Best Way and Jason Cochran, our new C OO. We are very encouraged. He's been here just 90 days, but already his impact has been felt and we've launched what we call Project One Best Way. Really two major focuses there. One is throughput. For us, the reason throughput is so important is it's not just about the speed of service, but in order to deliver fast throughput, it means you have to be fully staffed, trained, properly deployed, food prepped, and energized to deliver for our guests. We have goals of increasing our throughput. For every 10% increase in our peak throughput, we see about a 1% comp lift, and we know there's a lot of room for us to increase our speed of service. Second is around elevating food standards. For us, there's a couple things underneath that. One, we talked about portioning. We made a strategic decision to reinvest in the guest experience and increase our chicken and tofu portions by 25%. I'm really giving back to the guests. We've found many offsets to fund that through G&A and working on other productivity efficiencies within the restaurant to offset that investment. Already it's being felt. I mentioned in the prepared remarks that we're seeing about a 30% lift in the satisfaction around portioning and we haven't even spoken about it yet. This is the first time we've talked to our customers about it. Lastly, it's really about how we elevate our food standards. We've looked really closely at our hold times, our freshness standards, and how do we make sure in all of our recipes and making sure that we're delivering our best. We buy the best food from great farmers and the idea is we need to make sure we are delivering on that promise. The stores that we are doing this in are doing fantastically well. We see them comping. When you have that all working and you're delivering an excellent guest experience, we're seeing comps and transactions grow. If I could leave with one thing, our main focus is on executing brilliantly with a focus on people throughput and quality food standards. Thank you. Your next question comes from the line of Jon Tower with Citi. You may go ahead. Thanks for taking the questions. Maybe just a couple real quick. Hopefully. Mitch, I think you touched on something earlier in the commentary prepared remarks regarding labor, and I'm just curious if you could follow up on that because your labor costs per store week were down pretty nicely year-over-year. Obviously, you delevered on sales being down, but I'm just hoping you could flesh out what's going on there and if we can expect that to continue going forward this year and into next year and what those driving forces are. Thank you, Jon. Yeah, we're real happy with the improvements we've seen in labor. Our workforce management is working really, really well. As you commented, our productivity in the second quarter actually held with where we were last year, despite some of the challenges in sales. We're seeing the lowest level of turnover the business has seen since COVID, and some of the hiring we've done has really driven up our retention at the team member level. Our head coach stability is probably at an all-time high. We're just very encouraged by the systems we put in place, the processes, the hiring, and the head coach stability. We anticipate further gains as we kind of look out on the future. Really pleased with the progress we've been able to make and think it would only improve as we get to our sales flywheel a little bit faster. Got it. Okay. You had spoke to in Manhattan, closing down a few stores and hopefully consolidating some of the sales into other stores in the market. As you look across the rest of your store base, are there other kind of troubled markets or maybe markets where you feel like there's a few more stores that perhaps need in that bottom two thirds of the underperforming store base in terms of the operations that you feel like might be on that chopping block for closure? John, let me qualify that a little bit. I don't think the store closure was related to problems in the market. I think the store closures were related to the fact that the stores were coming up on 10 years and most of our leases are 10 years. In this particular instance, roughly the stores are approximately 1,500 sq ft. We had newer, larger locations that were, when I did it, probably within a five minute walk of these stores. It was more a function of moving the volume to newer stores that would have a better customer experience and a better team member experience and closing the older, smaller footprint stores. I would say as we look out there remains opportunity to do that, particularly in the urban centers that were opened up around 10 years ago. You're probably on balance talking, you know, if I had a guess, a handful of stores, not a dramatic change in the footprint. We're very pleased with what we're seeing right now. As I think was in the prepared remarks, the volume is transferring to the three nearby stores. Instead of having five stores, we now have three very strong stores. Great, thanks for taking the questions. Your next question comes from the line of Andrew Charles with TD Cowen. You may go ahead. Great, thank you very much, John. Despite the strong performance of new stores and the guidance for 40 openings in 2025 that was maintained, you know, why not consider a slowdown of development to focus more intensely on the same store sales turnaround and to help better preserve cash. Thank you, Andrew. First, I'd like to say we have very strong conviction in the long term cam of the company of at least a thousand stores and our algo of at least, you know, 15% or 20%. We're continuing to build the 2026 pipeline and are really being super disciplined around the stores, taking the learnings from the past few years, how we choose real estate, making sure we're operationally prepared to run them and also have a huge focus on build out costs. We believe as we're able to continue to drive down build out cost, we'll be able to continue to drive our return on capital. All to say, going to be super disciplined. We'll come back more on what our pipeline is for 2026, but the focus is only on doing stores that meet our thresholds and hopefully we can actually improve our unit economics as we continue to grow. Okay, and then Mitch, as a follow. Can you help contextualize? What's driving the restaurant-level margin guidance down by 200 basis points? Is this more of a function of sales deleverage, or would you attribute more to the portioning investment, or perhaps something else? Now Andrew, I think you caught it. It would be largely sales deleverage. The portioning impact is roughly 120 basis points, and we are continuing to look for offsets to that both in the restaurant-level margin area as well as VA. There were 40 basis points for tariffs. Thank you. Your next question comes from the line of Sara Senatore with Bank of America. You may go ahead. Thank you. I guess maybe I just wanted to go back to maybe the Q2 trends. I know you're making investments in portioning. It looks like some of the margin compression was actually from higher restaurant-level advertising spend, but you didn't see it in transaction growth. I guess I'm trying to understand, do you think that the issue was that people didn't recognize the portion investments and the marketing perhaps didn't work? Typically, I would have expected maybe a little bit of a sequential improvement, but actually, trends got worse on a stack basis, even after you had some of these idiosyncratic headwinds in the first quarter. If you could maybe talk about what didn't work if you think about the traffic-driving initiatives you had in place versus your expectations. I do have one more follow-up, please. Thank you, Sara. First of all, the protein increase was made in July. It was not something that we saw in Q2, and since July, with both the protein portioning, loyalty, and frequency continuing to increase as well as the rollout of our seasonal menu, we have started to see sequential improvement. Okay, the advertising piece that was present in the quarter, right? Yeah. Sara, I want to come on the advertising. The total advertising in the company was up marginally in the quarter. The amount of advertising through the four wall margin went up a lot more, as the allocation between G&A and four wall switched this quarter, as more of the advertising was geared towards local stores versus national brand. Okay. I guess on that point, you know, do you rethink how you allocate national versus local again? It doesn't seem like you had a lot of payoff from that, whether it was by channel or dollar amount. I'd say, you know, I mentioned in the prepared remarks we have a new head of marketing joining in September. We're really continuing to look at our marketing mix. I think one of the shifts that, you know, one of the things we're seeing is much greater ROI on social kind of influencer-led marketing. You'll see us continue to lean in there more. We'll come back with more on that in future calls. Okay, thanks. Sorry, just a quick follow up. Last year, and I apologize, I joined late on the call last year. Among last quarter, you talked about sort of maybe pressure on white collar workers, how the central business was doing, you know, perhaps more pressure than farther out in the suburbs. Do those dynamics persist? Trying to reconcile those with maybe some of what we've heard from your peers? Yeah, I'd say our trend is probably similar to what you've seen across the industry, where we've seen most of the pressure in the urban northeast environment. Very similar, you know, again, very similar to others. We do see, you know, kind of like you said, pressure on consumer spending for many of our consumers has persisted longer than we expected. Thanks. Your next question comes from the line of Rahul Krotthapalli with JPMorgan. You may go ahead. Yes, thanks for all the detail in the prepared remarks. The question is on marketing strategy outside the loyalty program. I understand you have a new executor coming on board, but is there a thought process to rethink the strategy or the approach to broaden the brand appeal? Were you able to see and dissect what is landing or resonating with the target demographic and then also get them into the store before getting on the app? I have a follow up. Thank you. Yeah. Rahul, we are continuously looking at our marketing strategy. One of the things, and I mentioned on calls before, is moving away from our seasonal menu is something that we really missed. Our customers have told us that. We've seen again huge engagement on our seasonal menu, and we think one of the best ways for us to drive acquisition and frequency of our guests is newness on our menu. We've learned a lot about what kind of newness works and what we can put on our menu that we can consistently execute. That's where you'll see us do two more seasonal menus this year with two fall beats. We have a great lineup, so newness and great menu items work. We did see really great reaction with our KBBQ as well. As I mentioned on the prepared remarks, we're expecting at least eight moments next year, again leaning into what people love about us. We will continue to broaden from salads and continue to introduce other warm bowls as well, which have resonated really well. If I could take it, really, the number one thing we can do is create excellent guest experiences in our restaurants. Our number one driver, our best marketing, is word of mouth and creating great experiences. You did mention an opportunity around getting people to eat more in stores. We do see that as an opportunity. Like most restaurants, when you dine in, it is probably the best experience as the food is made fresh right in front of you. The loyalty program is one way of continuing to do that and driving more customers to try our product in store before they become a digital customer. That is another focus area for us. Thank you. The follow-up is on the loyalty headwind. You guys discuss a 250 bps headwind in second quarter. How did this trend as we moved across the quarter and exit rate of it, and what are we currently seeing on the headwind today given some of the reversals should have been happening as people are coming back? Thank you. Hey Rahul. Yeah. We did talk about the loyalty headwind coming in two big areas. One was the deferred revenue and the second one was a decline in frequency from Sweetpass+, that small group of customers that were high frequency. What we really find is the deferred revenue piece, which was negative in the second quarter when we started the program, will turn more neutral as we get to the back half of the third quarter and will be accretive thereafter. That is largely just a timing and accounting issue with starting up the program and pretty much as we expected. That piece will dissipate. What we're finding with our frequency with our former Sweetpass+ members as we continue to reengage them, we continue to see them and have them as customers, and their frequency appears to be moving up. As we look out over the following quarters, we believe that the loyalty impact will move from a headwind in the business to a tailwind certainly as we get closer to year end. Thank you. Your next question comes from the line of Brian Bittner with Oppenheimer. You may go ahead. Thank you. I think the primary question on investors' minds is, ultimately, do you believe the sales weakness that you've witnessed this year has anything to do with degradation in the price value perception of Sweetgreen? I realize there's a lot of external headwinds, but it does sound like you're pivoting towards trying to put more value on the menu, you're creating bigger portion sizes, et cetera. I do think it's worth further unpacking whether your data and your insights suggest that this is a dynamic that is a headwind to demand trends that you're trying to improve. I think it's pretty obvious that the consumer is not in a great place overall. For us, when we think about price, it's really around price value. We know that when we deliver on our product and we tell our story the right way, the price value is there. What I'd say is, yes, we would like to continue to introduce, give more value to the guest, larger proteins, larger portions on protein sizes, a better experience in stores. The number one thing is going to be just delivering great guest experiences, which again, starts with an amazing team and leaders in our stores, a great culture, us driving throughput and elevating our food standards. That's really going to be how we continue to drive our price value. Things like our seasonal menu again reinforce our positioning. What we do, the product we serve is superior to much of our competition, both from how we source it and how we make it in store. It's almost entirely made from scratch and it's a very high quality product that not only tastes good, but makes you feel good. I think our opportunity is just executing more consistently so we can deliver on that promise. I'll just say we don't see it as a large price value issue. We see it more as executing to our standards. Okay, thanks for that. Mitch, I appreciate the EBITDA look change for 2025, kind of marking the market just for the current environment. How are you positioning the model for 2026? I think consensus had been modeling a pretty dramatic step up in the EBITDA generation in 2026 relative to 2025. I know you're not giving 2026 guidance, but any guardrails you can put on consensus for next year would probably be helpful. Thank you for the question. Let me first begin by saying what you commented on, that we generally give our 2026 guidance on the, I believe, the February earnings call for year end. We'll have a lot more to say at that point in time. Let me just speak for a minute about 2025, which may help GOB shape the thoughts on 2026. We think a lot of what we're seeing in 2025 in our business today has temporary headwinds as the business kind of adjusts its loyalty program comps over. Certainly, the second quarter where we had our fastest comp growth in 2024 in Q2 with the launch of steak, all coinciding with really a very significant change in the external environment which happened kind of suddenly around the beginning. What we believe happens to the business, kind of looking out, is that the company grows through these things and that these headwinds prove to be more temporary in the business. Many of them, like loyalty, convert to tailwinds. I think echoing what Jon said, as we get our operational standards to really, really drive them and improve the execution at the store level, return our menu to more of our seasonal core, we're convinced that we will see the business kind of get back to the trajectory we were on. Thank you. Your next question comes from the line of Logan Reich with RBC Capital Markets. You may go ahead. Hey, good afternoon. Thanks for taking my question. I was curious what the sort of average cost would be for those relocations. I don't know if you're able to provide any sort of estimate or color on what we should be putting in their models for those relocations. Talking about the two relocations in New York City. Yeah. The other handful of stores that Mitch alluded to are in other urban centers. I'm trying to. Logan, I want to be sure I understand the average cost of them. Yeah. Closures on the reopening. I think what I would typically say is there was no cost to the, call it receiving or beneficiary store. They just continued to carry on as they were previously operating. The closure cost for these stores is directly related to whether there was any outstanding leases on them or if they were at the terminal value at the end of their 10 year lease. It's a long way of saying it really depends upon the rent structure and the fixed asset, but generally no real cost to the movement of the store. Yeah. Just to add, if you're referring to the stores that are relocating, those are stores where the lease is up and the new stores will be just, you know, the cost of any store in that market. We don't guide to the exact, you know, cost per store, but both of those stores will be Infinite Kitchen stores and they should be within the average of what those stores usually cost. Got it. Okay, that's helpful. I guess just on the. Same store sales in Q2, just any way you can sort of slice that out between maybe income cohorts, urban versus suburban. Any way you can provide some additional color on where the weakness is coming from, or it's more just broad based across the entire portfolio. Logan, I think what we could tell you is that what we found was, as it were, in the prepared remarks about 250 basis point impact from the loyalty changeover, and certainly a more pronounced impact in the Northeast, as other people have stated, and largely that coming through the macro environment and customer concerns that we saw. Got it. Super helpful. Your next question comes from the line of Brian Harbour with Morgan Stanley. You may go ahead. Yeah, thanks, guys. I wanted to come back to just the operations question. You mentioned that sort of people and training manager stability is key to it. It sounds like that's actually pretty good, though, right? I guess the question is, what do you think is sort of lacking currently? In these two-thirds of stores that are sort of below standard, I guess I'm curious as to whether that includes a lot of new stores. Do you think to some extent there's a lack of consistency in the newer stores you've opened or is that not the case, perhaps? Yeah. In terms of your first question, yes, we've seen improvements in terms of our stability and turnover, which you've seen in some of our productivity. There's been a lack of clear standards and a real focus on the two things I mentioned, which is throughput and food quality. As we really double down on those things under new leadership, we believe that the people component is going to be a leading indicator for what we should see with the performance of those stores. That's typically what we've seen as stores get stable too. Once a head coach, for example, hits a year, the store begins to perform better. We feel, we believe strongly that as we continue to stabilize our people and drive more internal promotion, we'll continue to see better experiences in our stores, which will lead to transaction growth. As it relates to the second part of your question, around the two thirds, yes, obviously many of those are newer stores that are still ramping. Some of that is normal and expected. Our goal is to tighten the variance between our best and worst stores significantly by the end of the year. We have action plans in place to get that done. If I could just mention one other thing. No one's asked about ripple fries, but I do think it's important to bring it up. Ripple fries is something that we've learned consumers loved. We had a great reaction from it. As we studied what it was doing to the restaurant operation and the distraction for our teams, we realized that it became a complexifier for us delivering on our core. One of the other big changes we've made is starting next week we will be disabling, discontinuing ripple fries in order to focus on our core. In stores where we have tested this, we've seen huge improvements in customer satisfaction because teams can really focus on the core products, making sure all of our hot food, whether it be our chicken, our hot, our cooked vegetables, etc., are—we're cutting our hold times. As we cut our hold times, the product quality improves. The focus is really focusing in our core and delivering on that with a focus on what we can control within our four walls. Our next question comes from the line of Brian Mullan with Piper Sandler. You may go ahead. Thanks. Just to follow up on a prior price value question, can you just talk about the Monday LTOs you ran in June, what you saw from a consumer behavior perspective? I'm wondering if you feel like this price point to be a traffic driver or motivator for your guests. I'm also wondering if it causes any kind of trade downs from those digital guests that are getting the offer. Any color would be great. Yeah, it was overall, I'd say very successful. There was really strong reception for them. I think it was a combination of price and newness. It's something we're going to continue to double down on. You should see more of them coming, maybe not always at that price point, but really the focus on bringing more newness to guests. I think one of the interesting things about the Sweetgreen model is it's a very high frequent habitual model. Offering ways to offer, figuring out ways to offer newness to our frequent guests without complexifying our operations is something that can drive frequency. We did see this newness and these Monday drops drive frequency for our guests. Very high mix. It's something we're going to continue to push on and it can be a good way for us to offer a value lever for our guests as well. Okay, thank you. A question about menu innovation. Just talk about the opportunity you might see on beverages or desserts or handhelds over time. You might have answered this with the ripple fry commentary, but I was curious if you could test anything at the same time you have Project One Best Way going on, or would you want to pause on all new innovations for a bit, focus on the operations? Yeah, great question. We do believe that menu innovation is going to be very important for us. Under Jason's leadership, we've rebuilt our stage gate process, so how we test things and understand both the consumer reaction to it, but also what are the second-order effects to the rest of the operation. If anything, we're actually increasing our top of the funnel menu innovation but being much more thoughtful in how we test and truly understand it. As it relates to house-made beverage, we actually are live and I believe by this September we'll be in three markets on a house-made beverage test. It's four house-made beverages. They're doing really, really well. We're very encouraged by it, and it is something that we will continue to roll out over the balance of this year and through 2026. As it relates to other sorts of menu innovation and things like wraps, again, those are things that we will continue to test. We will get it, we will do it, we will follow our stage gate process. We do see a huge customer desire for us to continue to expand our menu, but the focus is to make sure whatever we put in our menu we can execute really, really well and continue to execute the rest of the menu. Really learning from a lot of the innovation we've done, we've gotten much clearer on what the OP sandbox is for us, what we can execute, and how we can equip our teams with the right tools and trainings to execute whatever we do. Expect a lot more menu innovation, but expect a much tighter stage gating process for us to make sure that not only does it work from a consumer perspective, but we can continue to deliver excellent guest experiences within our four walls. Thank you. Your next question comes from the line of Christine Cho with Goldman Sachs. You may go ahead. Great. Thank you for taking my question. In the last call I think you mentioned about 20,000 new loyalty members joining each week as of May. I was wondering if there are any updates you can share on kind of customer acquisition and how it's faring versus your prior expectation. More importantly, how do you plan to kind of convert those sign ups into more sustained increases in guest frequency? Are there any specific customer cohorts that are responding more positively to the revamped loyalty program? Thank you. Thank you for the question. Yes, we've continued to see around 20,000 new members joining, so it's been strong. Like most restaurants, one of our best acquisition drivers is in the store. We continue to push that in store and convert in store customers into loyalty. One of the big improvements that we will be rolling out later this year will be the ability to scan and pay in store. Today, you have to scan and then pay. We will be moving into a ScanPay single transaction, which will help our throughput but also gives another reason for our guests to sign up for loyalty and get through our lines quicker. We've been very encouraged, as I mentioned earlier and I think Mitch spoke about as well, around the loyalty program and the increases in frequency. We continue to test and learn all sorts of different canvases and journeys and are getting more and more personalized on what are the different types of offers we can leverage for different cohorts in order to drive frequency. We've learned a ton and we're doubling down on the things that are working and do expect loyalty to create this digital flywheel for us as we continue to perfect. Thank you. Your next question comes from the line of Jeffrey Bernstein with Barclays. You may go ahead. Great. Thank you very much. My first question is just on the restaurant-level margin. I know you mentioned earlier kind of the back half reduction that's implied based on your guidance. I know it's in large part due to deleveraging. I'm just wondering, as you think about it over the next few years, your confidence in that reacceleration back towards the 20% or maybe past margins, you've maybe overrun a little bit and they would be wise to maybe reinvest more in the operations and the execution. You're talking about how you think about the balance of getting back to the higher margin versus investing for the long term. I had one follow-up. Thank you very much. No, I would say we see the margin expanding over the next several years and continuing to grow. We think a lot of that's going to come from improved operations as Jonathan's been talking about during the call, as well as the re-acceleration in the growth in sales that we see happening as we get past some of these near-term headwinds. As we look out on the business, we think we still remain with a lot of opportunity for margin expansion in our core operations. That will also be accelerated by the deployment of the Infinite Kitchen. Just in even the classic stores, we think that the margin trajectory remains pretty good. Understood. Just following up on a comment you guys made earlier about the new units that you're opening and kind of stepping up the scrutiny in terms of these new units to increase the likelihood of success and being a lot more diligent and careful. Just wondering if there's any current learnings that help drive that decision or maybe change your decisions in terms of new units and whether they're in new versus existing markets. I got the impression that you were maybe implying that for next year it could potentially fall to sub 15%-20% if this added scrutiny leads to a few less potential sites. Thank you. One of the things that we're really, there's a couple things that we're really focused on there. One is the actual store design and experience. We've done a lot of work over the past year and are going to be opening stores with updated designs and flows for both our classic restaurants as well as our Infinite Kitchen restaurants. The idea with these designs is to create not only a better customer experience, but a better experience and easier flow for our team members, which should lead to both better food quality as well as better labor deployment given some of the adjacencies put in. We're very excited about those. There's been a huge focus on build-out costs. We think that there's an opportunity to really drive build -out costs down. Some of that is going to be through these new prototypes as well as attacking our size of store. One of the lessons has been, you know, smaller, kind of keeping our stores on the smaller side. Actually they do better. It creates a better environment. The teams are happier and the stores are less expensive to build. A huge focus on targeting stores a bit smaller square foot with lower cost to really focus on expanding the return on capital of our investments. Got it. The idea of getting back to or being married to that 15%-20%, you don't see a problem in being able to achieve that next year even with this greater scrutiny. You know. We're still building the pipeline. I do believe that can be, that is a long-term algorithm. We have a very robust pipeline, but we're looking at it very carefully and making sure that every single store is vetted and we can deliver on our return on capital. We'll be coming back more on that in future quarters. Thank you. Your final question comes from the line of Chris Carril with KeyBanc. You may go ahead. Hi. Thanks for taking my questions. Could you talk maybe a bit more about what you're seeing in Infinite Kitchen stores relative to your classic stores, particularly from a sales perspective, and if there is a meaningful delta between the performance of Infinite Kitchen versus classic, is there anything there that informs your thought process and strategy here moving forward. Sure. As we mentioned in the prepared remarks, we are seeing higher AUVs for the Infinite Kitchen stores. We also see better customer satisfaction scores. You have better accuracy, faster throughput, and as we've mentioned previously, we've continued to see our team members be more engaged and stay with us longer. Much lower turnover in those stores. Overall, we're very encouraged about those. The focus with the Infinite Kitchen stores is really putting them in the shot selection of where we put it, making sure we put it in stores that have the volume where the return on capital makes sense. Overall, we're very encouraged, and as I mentioned on the previous question, some new updated designs featuring the Infinite Kitchen that we think are going to create an even better store experience. Stay tuned for some more on that as those begin to open. Got it. Thanks. And then just following up on Jeff's question. What's your latest thinking about development from a market perspective? I mean, just in light of the changes that you're making in the New York City market specifically, how are you thinking about those opportunities for further growth in your core legacy markets versus newer Sweetgreen markets? We continue to see opportunities in our core legacy as well as new markets. New markets have done really well for us over the past few years. One of the, I think, changes in some of the markets that we had opened years ago is now we have delivery in the business. Now, a lot of those stores share delivery radiuses, and we're much more careful about the dilution of stores in existing markets. Looking for net new white space, but there's plenty of white space for us in all of our legacy markets. Some of that may not be all in the downtown core, but expanding out from the core. That's where we've seen a lot of success. Going from Boston to the suburbs of Boston, for example, has been very successful for us, similar in the Bay Area. Very successful in the Bay and extremely successful as we've worked our way down the peninsula in the East Bay. Really leveraging the brand we built in these core urban markets and expanding out from those, still within those markets, but out into the suburbs. Got it. Thank you. Thank you for joining. This concludes today's conference call. You may now disconnect.