Sweetgreen (SG) Risk Analysis

To continue to attract and retain customers, we believe that we must continue to invest in new offerings that add value for customers and differentiate us from competitors. We have invested, and expect to continue to invest, in such offerings. For example, in fiscal year 2025, we increased the chicken and tofu portioning in our products. We also deployed additional Infinite Kitchen units in our restaurants, such that 30 of our restaurants used this technology as of the end of the 2025 fiscal year. And in fiscal year 2024 we also added steak to our menu. We regularly introduce seasonal, limited-time, and digital-exclusive menu offerings. The success of these initiatives depends on factors such as timely development, introduction, and market acceptance. If customers do not recognize the value of our new offerings, they may not continue to purchase products from us or they may reduce the frequency or size of their purchases, which could adversely affect our business, financial condition, and results of operations. Developing and delivering new or upgraded offerings may increase expenses and cause operational and technical challenges, which could negatively impact our business. New offerings may not function as intended,may have unintended consequences, or may not provide the expected value to customers. In fiscal year 2025, we launched a menu item named Ripple Fries, but later removed Ripple Fries from our menu due to operational challenges caused by this product that negatively impacted our business. Efforts to enhance our websites and applications also involve inherent risks, and we may not successfully manage these initiatives. If, as a result of changes to our websites or applications, customers choose not to order through certain of our channels, they may instead order from competitors or third-party marketplaces, which could adversely affect our business. We may also license or integrate third-party applications, content, or data into our online and mobile ordering platforms. These integrations impose costs, require internal resources, and increase reliance on third parties whose priorities may differ from ours. We may be unable to continue accessing such technologies or content on commercially reasonable terms, or at all.

Operating our business involves the collection, use, storage, and transmission of sensitive, proprietary, and confidential information, including personal information of customers, our personnel, the personnel of our business partners, and others. For example, we collect certain customers' home and business addresses for processing delivery orders, mobile phone numbers from users of our platform, and personal information from our personnel, including in connection with the administration of our benefit plans. Security incidents or other events compromising the confidentiality, integrity, or availability of our sensitive, proprietary, and confidential information and information technology systems, or those of the third parties with whom we work, could result from cyberattacks, malicious internet-based activity, online or offline fraud, or similar activities including as described below. These threats are prevalent, continue to increase in frequency and sophistication, are increasingly difficult to detect, and may originate from a variety of sources, including from "hackers", threat actors, "hacktivists", organized criminal groups, company personnel misconduct or error, nation states, and nation-state-supported actors. For example, in fiscal year 2024, a third party with whom we work experienced a distributed denial-of-service (DDoS) attack, which temporarily limited some customers' ability to access their online Sweetgreen accounts and transact in certain of our Owned Digital Channels. Certain threat actors, including nation-state actors, have engaged and are expected to continue to engage in cyberattacks for geopolitical reasons, including in connection with military conflicts and defense activities. During periods of war or other major conflicts, we and the third parties with whom we work may face heightened risk of such attacks, including retaliatory cyberattacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our goods and services. We and the third parties with whom we work face a variety of evolving cybersecurity threats, including social-engineering attacks (such as phishing), malicious code, malware, advanced persistent threat intrusions, denial-of-service attacks, credential stuffing, credential harvesting, ransomware, personnel misconduct or error, software bugs, supply-chain attacks, server malfunctions, software or hardware failures, loss of data or other information technology assets, telecommunications failures, natural disasters, attacks enhanced or facilitated by artificial intelligence, and similar threats. Ransomware attacks, in particular, have become increasingly severe and prevalent and could result in significant operational disruption, loss of sensitive data or income, reputational harm, and diversion of resources. While extortion payments may mitigate certain impacts, we may be unwilling or unable to make such payments, which may be due to applicable laws or regulations prohibiting such payments. In addition, remote work arrangements increase risks to our information technology systems and data as employees access systems from locations and devices outside of our controlled environments. Security incidents have occurred in the past and may occur in the future, resulting in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of sensitive, proprietary, or confidential information. For example, during the first fiscal quarter of 2024, we experienced multiple incidents that we believe involved credential-stuffing activity, in which malicious third parties accessed our online services using credentials potentially compromised through unrelated third-party incidents. Although we implemented security measures in response and believe those measures have mitigated the activity, these measures may not prevent future incidents or disruptions. Risks relating to security incidents are likely to increase as we grow and process increasing volumes of data. We rely on third parties to support and operate critical business systems and to process sensitive, proprietary, or confidential information, including payment processors, account management providers such as Stripe, cloud infrastructure providers, data center operators, encryption and authentication vendors, email providers, content delivery services, and other service providers. Our ability to monitor the security practices of these third parties is limited, and they may have vulnerabilities or experience security incidents that compromise the confidentiality, integrity, or availability of the systems that they operate for us or data that they process on our behalf. Supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third-party infrastructure in our supply chain or partner systems have not been compromised. We have experienced adverse consequences from security incidents and service interruptions at third-party providers in the past and may experience additional adverse consequences in the future. While we may have contractual remedies in some instances, any recovery may be insufficient to cover our damages or unavailable. Business transactions, such as acquisitions or integrations, may also expose us to additional cybersecurity risks and vulnerabilities, including vulnerabilities that are not identified during due diligence or that arise during integration into our information technology environment and security program. Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive, proprietary, or confidential information or our information technology systems, or those of the third parties with whom we work. Due to the prominence of our brand, we may be an attractive target for cyberattacks. Although we have implemented security measures designed to protect our systems and data and to detect and remediate vulnerabilities, we cannot guarantee that such measures (or similar measures by the third parties with whom we work) will be effective or sufficient to prevent all incidents or address all vulnerabilities on a timely basis. We expend significant resources and modify our business activities to try to protect against these risks, and the costs of responding to, mitigating, and/or remediating security incidents and vulnerabilities may be significant and could result in service disruptions, delays, negative publicity, or other harm to our business or competitive position. If we or the third parties with whom we work experience, or are perceived to have experienced, a security incident, we may suffer loss of customer or partner confidence, reputational harm, reduced demand for our offerings, operational disruption, and other adverse consequences. Such incidents have in the past required and may in the future require investigation, remediation, or notification efforts and may expose us to litigation, regulatory enforcement actions, indemnification obligations, and other liabilities. Our agreements with certain partners, including Stripe and DoorDash, require us to maintain appropriate security measures and protect their information, and a breach of these obligations could require us to indemnify them for resulting losses. Laws in all states and U.S. territories require businesses to notify affected individuals, governmental entities, and/or credit reporting agencies of certain security incidents affecting personal information. These laws vary by jurisdiction, and compliance following a widespread security incident is complex, costly, and difficult to execute. Our insurance coverage may not cover all losses associated with a security incident or may be insufficient, and coverage may not remain available on acceptable terms. In addition, third parties may collect or infer sensitive information about us from public sources, data brokers, or other means, which could be used to undermine our competitive position. Sensitive information may also be disclosed or misused in connection with our employees', personnel's, or vendors' use of generative artificial intelligence technologies.

Both our in-restaurant and online and mobile ordering businesses depend on the performance and reliability of internet infrastructure to process and fulfill orders, which is not under our control. Nearly all access to the internet is maintained by telecommunications network operators. Disruptions in internet infrastructure, or failures by telecommunications operators to provide sufficient bandwidth, could temporarily shut down our in-restaurant ordering business and interfere with the speed and availability of our online and mobile ordering platforms. If our online and mobile ordering platforms are unavailable when customers attempt to access them, or do not load as quickly as customers expect, customers may reduce their use of our platforms or may not return to them at all. Our online and mobile ordering business also depends on the efficient and uninterrupted operation of mobile communications systems. Despite precautions we may take, unanticipated events-such as power outages, telecommunications delays or failures, security breaches, or computer viruses-could result in service interruptions and business disruption for us and our customers. Any such events could damage our reputation, disrupt our operations, and subject us to liability, which could adversely affect our business, financial condition, and results of operations.

Various federal, state, and local employment laws govern our relationship with employees and impact operating costs. These laws include requirements relating to employee classification as exempt or non-exempt, predictive scheduling, wage and hour requirements, unemployment tax rates, workers' compensation rates, immigration status, the employment of minors, and other wage and benefit requirements. Significant legal or regulatory changes in any of the following areas could have an adverse effect on our business, financial condition, and results of operations: - predictive scheduling;- minimum wages;- mandatory health benefits;- paid leave;- vacation accruals;- termination requirements;- tipping;- employment of minors;- I-9 compliance; and - tax reporting. Compliance with these laws and regulations subjects us to substantial expense, and non-compliance could expose us to significant liabilities. We incur legal costs to defend, and could suffer losses from, litigation and disputes relating to these and similar laws and regulations, and the amount of such costs or losses could be significant. In addition, several states and localities in which we operate, as well as the federal government, have from time-to-time enacted minimum wage increases, changes to overtime eligibility, paid leave requirements, mandatory vacation accruals, and similar measures. These changes have increased our labor costs and may further increase our labor costs in the future. For example, several jurisdictions in which we operate, including New York City, Philadelphia, Chicago, Evanston, Seattle, Berkeley, Emeryville and San Francisco, have implemented fair workweek legislation that imposes complex scheduling requirements on certain restaurant employees and can be difficult to comply with. The regulations governing these requirements have changed and may continue to change over time. We are currently under investigation by the New York City Department of Consumer and Worker Protection for fair workweek violations at one of our New York City locations, and we may be subject to similar investigations in New York City or other jurisdictions in the future. Other jurisdictions in which we operate are considering enacting similar legislation. In addition, New York City implemented "just cause" termination legislation in July 2021 as part of its fair workweek framework, which restricts fast food restaurant companies' ability to terminate employees absent "just cause" or a "bona fide economic reason." These regulations impose additional obligations on us and could increase our costs of doing business or require changes to our business model. Failure to comply with these laws and regulations could result in higher employee turnover, negative publicity, penalties, or other legal liabilities, which could adversely affect our business and results of operations and could result in restaurant closures in these jurisdictions. A significant number of our restaurant employees are paid at rates impacted by applicable minimum wage laws. Federal, state, and local proposals to increase minimum wages or mandate other employment-related requirements could, if implemented, increase our labor and other costs. Several states in which we operate have approved minimum wage increases above the federal minimum. For example, as of April 1, 2024, California increased its minimum wage for certain restaurant chains, including Sweetgreen, to $20.00 per hour, and a state-appointed council may further increase this minimum wage annually. In addition, municipalities may establish minimum wages above applicable state standards, including in jurisdictions in which we operate. As more jurisdictions implement minimum wage increases, we expect our labor costs will continue to rise. Our ability to offset these increases through menu price adjustments or other customer-facing fees, such as delivery or service fees, depends on customer willingness to pay higher prices and our perceived value relative to competitors. In addition, our distributors and suppliers may be subject to higher labor, benefit, and compliance costs, which could increase the cost of goods and services we purchase. Any increase in our labor costs, or the labor costs of our distributors or suppliers, could have an adverse effect on our results of operations.

We operate our restaurants in leased facilities, and payments under our restaurant leases account for a significant portion of our operating expenses. We expect that most of the new restaurants we open in the future will also be leased. It is becoming increasingly challenging to locate and secure favorable lease facilities for new restaurants, as competition for restaurant sites in our target markets is intense, and development and leasing costs, particularly in urban locations, are increasing. These factors could negatively impact our ability to manage occupancy costs and may adversely affect our profitability. In addition, these factors may be exacerbated by economic conditions, which could increase demand for developers and contractors and further drive up construction and leasing costs. As we open and operate more restaurants, our rate of expansion relative to the size of our existing restaurant base has declined and is likely to continue to decline, making it increasingly difficult to achieve the levels of sales and profitability growth we achieved in prior years. We are obligated under long-term, non-cancelable leases for all of our restaurants and the current and prior location of our Sweetgreen Support Center. Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges, and other operating costs, and certain leases also provide for contingent rental payments based on sales thresholds. Additional sites we lease are likely to be subject to similar long-term, non-cancelable lease terms. If an existing or future restaurant is not profitable and we decide to close it, we may nonetheless remain obligated to perform our lease obligations (or to negotiate a buyout with the landlord) including paying base rent for the remainder of the lease term. For example, in 2022, we vacated the premises for the former Sweetgreen Support Center and relocated to a smaller office space adjacent to its prior location. To date, we have been unsuccessful in subleasing our vacated former Sweetgreen Support Center, and it is uncertain whether we will be successful in doing so, or on what commercial terms. As our leases expire, we may be unable to negotiate renewals on commercially acceptable terms, or at all, which could result in increased occupancy costs or require us to close restaurants in desirable locations. Increased occupancy costs or restaurant closures could have an adverse effect on our business, financial condition, and results of operations. In addition, if we are unable to renew or extend leases in key metropolitan areas, or if such leases are terminated, any resulting inability to operate in those markets, as well as adverse publicity related to such non-renewals or terminations, could adversely affect our business, financial condition, and results of operations.

In the course of operating our business, we collect, use, receive, store, process, generate, transfer, make accessible, protect, secure, dispose of, transmit, share, and disclose personal information and other sensitive information about customers, personnel, business contacts, and others; proprietary and confidential business data; trade secrets; intellectual property; and sensitive third-party data and financial information. These activities are or may become regulated by a variety of domestic and foreign laws, regulations, guidance, industry standards, external and internal data privacy and security policies, contractual requirements, and other obligations relating to data privacy and security, which are complex, rapidly evolving, and increasingly stringent. In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal information privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). Additionally, numerous U.S. states have enacted comprehensive data privacy and security laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal information. As applicable, such rights may include the right to access, correct, or delete certain personal information, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal information, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the CCPA applies to personal information of consumers, business representatives, and employees who are California residents, and requires covered businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights related to their personal information. The CCPA also imposes restrictions on "sales" of personal information that allow California residents to opt-out of certain sharing of their personal information and may restrict the use of cookies and similar technologies for advertising purposes. Our platform relies on such technologies for advertising purposes and could be adversely affected by the CCPA's restrictions if a significant number of users opt-out of certain information sharing on which our advertising relies, which would impair our ability to advertise. This could decrease the effectiveness of our marketing and advertising strategies and decrease our level of customer acquisition and/or retention, may cause us to seek new avenues to market and advertise, and may cause us to increase our marketing and advertising expenditures. The CCPA provides for civil penalties for violations and allows private litigants affected by certain data breaches to recover significant statutory damages. Similar laws have been proposed in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws complicates compliance efforts, and increases legal risk and compliance costs for us and the third parties with whom we work. We are also subject to laws governing the privacy of consumer health data. For example, Washington's My Health My Data Act broadly defines consumer health data, places restrictions on processing consumer health data (including imposing stringent requirements for consents), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law. Other states have passed, are considering, and may adopt similar laws. In addition to the risks we face under privacy laws, the restrictions on text message communications imposed by the Telephone Consumer Protection Act ("TCPA") have long been a source of potential liability for our business. The TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax, or text message. TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private litigation or by state authorities. Claims that we have violated the TCPA could be costly to litigate and could expose us to substantial statutory damages or settlement costs. We are also subject to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM"), which imposes specific requirements on our email communications with current or potential customers. Separately, certain of our data practices have been, and may in the future be, challenged under wiretapping, eavesdropping, or similar laws. Plaintiffs in these actions have alleged, and may in the future allege, that our use of third-party technologies on websites and mobile applications, including chatbots, session replay tools, or marketing pixels, constitute unlawful "interceptions" of visitors' communications. Such allegations may result in class action litigation, mass arbitration demands, and significant defense costs or settlements, regardless of the ultimate merit of the claims. Privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards by which we are, or may become, legally or contractually bound. Moreover, certain privacy laws, such as the CCPA, require us to impose specific contractual restrictions on our service providers. If we fail to comply with these contractual obligations or standards, we may face public or regulatory scrutiny, substantial liability, fines, or other adverse consequences. In addition, under various data privacy and security laws and other obligations, we may be required to obtain certain consents to process personal information. Our inability or failure to obtain required consents could result in adverse consequences. We also publish privacy policies, statements and other documentation regarding data privacy, security, and our processing, of sensitive information. If these policies, statements, and other materials are found, or alleged, to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigations, regulatory enforcement actions, litigation, or other adverse consequences. Additionally, our business relies in part on revenue from customers acquired through behavioral, interest-based, or tailored advertising. Consumer resistance to the collection or sharing of data used to deliver such advertising, the use of consent or "do not track" mechanisms as a result of legal, regulatory, or industry developments, the adoption by consumers of ad-blocking software or browser settings, and the development or deployment of new technologies could limit our ability to collect data or engage in marketing and advertising, which could have an adverse effect on our business, financial condition, or results of operations. We are subject to the Payment Card Industry Data Security Standard ("PCI DSS"), which applies to companies that collect, store, or transmit certain payment card and related transaction data. We rely on third-party vendors to handle PCI DSS matters and to address PCI DSS compliance. Despite our compliance efforts, we may become subject to claims that we have violated the PCI DSS based on past, present, or future business practices. Our actual or perceived failure to comply with the PCI DSS could subject us to fines, increased transaction fees, termination of banking relationships, or other penalties. In addition, compliance with the PCI DSS does not guarantee that illegal or improper use of our payment systems, or theft, loss, or misuse of payment card data or transaction information, will not occur. Obligations and consumer expectations related to data privacy and security continue to evolve rapidly, and create uncertainty. These obligations may also be subject to differing applications and interpretations that may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and business practices, as well as those of third parties that process personal information on our behalf. Despite our efforts, we may not be successful in complying with the rapidly evolving data privacy and security requirements discussed above, and our personnel or third parties with whom we work may be unable or fail to comply with such obligations. If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant adverse consequences, including, but not limited to, government enforcement actions (such as investigations, fines, penalties, audits, or inspections), litigation (including class claims), additional reporting requirements or oversight obligations, restrictions or bans on data processing, orders to destroy or cease using personal information, indemnification obligations, negative publicity, reputational harm, diversion of management attention, operational disruptions (including reduced data availability), or financial losses. Any of these consequences could have a material adverse effect on our reputation, business, financial condition, or results of operations.

We are subject to various federal, state, and local laws and regulations concerning waste minimization, recycling, disposal, pollution, environmental protection, and the presence, discharge, storage, handling, release, disposal of, and exposure to hazardous or toxic substances. These environmental laws, which often vary significantly at the local level, provide for significant fines and penalties for noncompliance and liabilities for remediation, in some cases without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of hazardous or toxic substances. Compliance with these regulations may become increasingly complex as we expand into additional markets. We primarily rely on third-party vendors to manage waste disposal and to ensure that our waste is transferred, recycled, or disposed of in accordance with applicable regulations and our standards. If these third parties fail to comply with applicable requirements, we could be subject to liability. In addition, third parties may assert claims against owners or operators of properties for personal injury or property damage associated with releases of, or actual or alleged exposure to, hazardous or toxic substances at, on, or from our restaurants. Particularly in light of our focus on environmental sustainability and social impact, environmental conditions relating to the release of hazardous substances at prior, existing, or future restaurant locations could adversely affect our brand and reputation, business, financial condition, and results of operations. Further, environmental laws, and their administration, interpretation, and enforcement, are subject to change and may become more stringent over time, which could increase the complexity of our waste management efforts and adversely affect our business, financial condition, and results of operations.

New restaurants may not perform as planned or achieve our expected Average Unit Volumes, Same-Store Sales Change, or Restaurant-Level Profit Margin, which could adversely affect our business, financial condition, and results of operations. Our restaurant concept may have limited appeal in new markets, and the popularity of our restaurant concept may decline in existing markets. Newly opened restaurants, whether in existing or new markets, may take longer to reach expected sales and profit levels and may not be successful. Any such underperformance could slow our overall growth and have an adverse effect on our business, financial condition, and results of operations. The customer target area for each restaurant varies by location, depending on factors such as population density, nearby retail and business activity, demographics, and geography. Opening new restaurants in or near markets where we already operate could reduce sales at existing restaurants, particularly in highly concentrated markets, such as New York City, Los Angeles, Boston, Chicago, and the Washington D.C./Maryland/Virginia metropolitan area. We periodically open locations near existing restaurants that are operating at or near capacity to more effectively serve our customers. We believe these openings cause some sales cannibalization. Such sales cannibalization may increase as we expand our restaurant footprint, especially where food delivery radii overlap. Additionally, our restaurants must be able to support growth across our In-Store and Pick-Up Channels and, depending on location, through our Native Delivery, Outpost and Catering, and Marketplace Channels. Although we seek to select sites that align with our geographic sales channel strategy, we may not be successful with identifying and securing such sites. Moreover, our geographic sales channel strategy might be incorrect. Historically, shifts in customer behavior (for example, the slower than expected pace of employees' return to offices following the COVID-19 pandemic) have resulted in some restaurants operating under capacity and others operating over capacity. We are developing and implementing new restaurant formats, including drive-up and Infinite Kitchen-enabled formats. We have limited experience operating these new formats and we may not be able to operate them as efficiently as we operate our traditional restaurant formats. Accordingly, such formats may not achieve expected efficiencies or returns. We have closed restaurants for performance reasons in the past and may do so again, which could adversely affect our business, financial condition, and results of operations.