Shift to Remote Work Puts Pressure on Chains Like Sweetgreen
It’s a tough time for companies that cater to the needs of office workers. For some, such as downtown lunch spots that rely on serving white-collar professionals, telecommuting options can be daunting. existential risk.
Sweetgreen, the casual fast salad chain, is feeling pain, DealBook newsletter report. Its shares have fallen more than 60 percent in the past 12 months. In November, the company noted the impact of the shift to a combined working method in its third-quarter earnings report. Inflation has also made their already expensive salads even more expensive, driving up the price of a Cobb salad to about $14 in Manhattan.
Companies in the nation’s downtown districts that depend on office worker spending are wondering if business will return. CBRE, the commercial real estate company, said The role of the office is changing forever. A survey of large office tenants found that 71% of respondents were looking to expand their combined work arrangement over the next three years.
Layoffs, especially in the tech industry, also leave offices empty. On Wednesday, Microsoft became the latest tech giant to announce job cuts as it tries to cut costs, following similar announcements from Amazon, meta, Sales force and others.
Higher interest rates is also weighing on the commercial real estate sector as many homeowners are stuck with aging office buildings that have become too expensive to upgrade. Complicating matters further is that tenants don’t renew their leases and instead opt for smaller spaces.
Those industry trends could pose long-term risks for companies like Sweetgreen, which are promoting online options to replace brick-and-mortar sales. Currently, analysts are still increasing about the company as it has moved into building digital sales and loyalty. In the third quarter, 60% of Sweetgreen’s orders were made through online channels, compared with 37% at Chipotle and about 40% on Yum Brands, and Sweetgreen is piloting a subscription service.
Mitch Reback, Sweetgreen’s chief financial officer, noted in a call with analysts in August that “erratic urban revitalization” caused a “sales growth lag,” but he said he remains “confident” that downtown locations will recover. The company laid off 5% of its workforce last year.