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, like downtown lunch spots that rely on servicing white-collar professionals, remote work options could pose an existential risk.

Sweetgreen, the fast-casual salad chain, is feeling the pain, the DealBook newsletter reports. Its stock has fallen more than 60 percent in the past 12 months. In November, the company noted the effect of the shift to hybrid working practices in its third-quarter earnings report. Inflation is also making its already premium-priced salads even more expensive, pushing the cost of a Cobb salad to around $14 in Manhattan.

Companies in the nation’s downtown districts that depend on the spending of office workers are wondering whether business will come back. CBRE, the commercial real estate firm, says the role of the office is changing permanently. A survey of big office tenants found that 71 percent of respondents were looking to expand hybrid work arrangements in the next three years.

Layoffs, particularly in the tech industry, are also leaving office spaces empty. On Wednesday, Microsoft became the latest tech giant to announce job cuts as it tries to trim costs, following on the heels of similar announcements from Amazon, Meta, Salesforce and others.

Higher interest rates are also weighing on the commercial real estate sector as many landlords are stuck with aging office buildings that have become too expensive to upgrade. Compounding the problem, tenants are not renewing their leases and instead opting for smaller spaces.

Those industry trends could pose a long-term risk for companies like Sweetgreen, which has been pushing online options to replace in-person sales. For now, analysts are still bullish on the company because it has moved to build digital sales and loyalty. In the third quarter, 60 percent of Sweetgreen’s orders were made through online channels, compared with 37 percent at Chipotle and about 40 percent across Yum Brands, and Sweetgreen is piloting a subscription service.

Mitch Reback, Sweetgreen’s chief financial officer, noted on a call with analysts in August that the “erratic urban recovery” caused a “sales growth lag,” but he said he remained “confident” that downtown locations would recover. The company laid off 5 percent of its work force last year.