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spk02: quarter was .5% compared to .4% a year ago. This is more than a 200 basis point improvement from the second quarter of 2023. Margins were strong across all regions and age cohorts. -to-date restaurant level profit margin is 20.5%. Restaurant level profit for the second quarter was 41.5 million, a more than 30% increase year over year. For reconciliation of restaurant level margin to comparable gap figures, please refer to the earnings release. In the second quarter of 2024, we opened four restaurants, including restaurants in Washington, D.C., Chicago, Morristown, New Jersey, and Salem, New Hampshire, a new market for us. We ended the quarter with a total of 231 restaurants. Our infinite kitchens continue to deliver on our financial, operational, and customer service metrics. Naperville just crossed its one-year anniversary in May with 2.8 million in sales. For the second quarter, the restaurant level margin was 31.3%. In its first year, team member turnover was around 45% less than what we see in a classic restaurant at a similar stage. Our Huntington Beach IK is six months old and following a similar trajectory. Our Penn Plaza retrofit, open for a few weeks, has shown strong performance. On its second day, the infinite kitchen produced nearly 200 bowls in 30 minutes with 100% on-time reliability and has the potential to reach 500 bowls per hour. As Jonathan mentioned, Penn Plaza offers the fastest way to get sweet green with an average order completion time of just under three and a half minutes. For 2024, we are on track to open between 24 and 26 new restaurants, seven of which will contain the infinite kitchen. These seven restaurants are scheduled to be opened in Q3 and Q4 of 2024, one of which was opened this week in Fashion Island in Newport Beach, California. Food, beverage, and packaging costs were 27% of revenue for the quarter, flat year over year. Labor and related expenses were 27% of revenue for the second quarter, a 200 basis point improvement year over year. While we experienced wage rate increases, this is more than offset with improvements to labor optimization. Occupancy and related expenses were revenue, a 100 basis point improvement year over year. General and administrative expense was 39.2 million or 21% of revenue for the second quarter of 2024, as compared to 40.4 million or 26% of revenue in the prior year period. The decrease in general and administrative expenses was primarily due to a 3.6 million decrease in stock-based compensation expense, which was partially offset by an increase in our investment in advertising. Net loss for the second quarter of fiscal 2024 was 14.5 million, as compared to a loss of 27.3 million in the prior year period. The decrease in net loss is primarily due to a 10.4 million increase in our restaurant level profit and a 4.5 million decrease in restructuring, a 1.2 million decrease in pre-opening, and a 1.1 million decrease in general and administrative expenses described above. These decreases were partially offset by an increase in depreciation and amortization expense, primarily associated with an increase in restaurants as well as an increase in other expenses related to the change in fair value of our contingent consideration. Adjusted EBITDA, which excludes stock-based compensation and certain other adjustments, was $12.4 million for the second quarter, an improvement of $9.1 million from the second quarter of 2023. We ended the quarter with a cash balance of $245 million. During the first six months of 2024, we generated a positive operating cash flow of $22.5 million. Now turning to guidance. For the fiscal year 2024, the raise in guidance reflects our strong performance in the first half of the year. We remain cautious for the second half of the year, given what we are reading about the uncertain U.S. economic backdrop. Additionally, our guidance reflects the retrofitting of two high-volume restaurants with the infinite kitchen, including Willis Tower in Chicago. 24 to 26 net new restaurant openings, revenue ranging from $670 to $680 million, same store sales growth between 5 and 7%, restaurant level margins between 19 and 20%, and adjusted EBITDA between $16 and $19 million. As we shared before, we remain committed to capital-efficient growth and driving profitability so that we can accelerate the sweet green flywheel. We remain focused on building our brand, culinary innovation, leveraging our unique supply chain, and delivering operational excellence. With this focus, we believe we are well positioned to deliver long-term growth for our stakeholders. With that, I'll turn the call back to the operator to start Q&A.
spk10: Thank you. The floor is now open for questions.
spk11: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, we do request for today's session that you please limit yourself to one question and one follow-up. Your first question comes from the line of Sharon Zaksia with William Blair. Please go ahead.
spk09: Hi, thanks for taking the question. You know, the quarter comp was really impressive and obviously had this nice uptick sequentially in transaction and mix. Can you talk about what was the primary driver between those two components? I recognize a stake was probably a mix benefit. I'm not sure how much we should really attribute to traffic versus mix. Secondarily, when you're talking about the uncertainty in the macro environment, it doesn't seem like you're seeing anything. I just want to clarify if that is in fact
spk10: the case. Thank you very
spk02: much, Sharon, for the question. So let me break the question apart into two buckets and take the first one, which was on the second quarter. We have any kind of comments about the traffic and mix and how it's sequentially built. Let me just say that for the quarter, our traffic was positive and it's sequentially built each month during the quarter. The mix benefit was largely attributable to the launch of stake. Your second question, I believe, was what are we seeing in terms of the cautious guide? And I guess I'll translate that a little bit to what are we seeing early on in Q3. Like a lot of other people have reported, the first week of the quarter was soft around the 4th of July. As we moved away from the 4th of July, our business picked up. And for the last three weeks of July, our business comped at the top end of our guidance. I think what I would say in kind of making an overall comment is we feel really happy and comfortable with the things that we control in our business. We're very happy with the menu innovation and more importantly, the customer acceptance of our new items. We're very happy with our marketing that we've moved to more out of home and it's showing very strong results. We talked in the past about improving our labor scheduling and deployment in order to improve hospitality and lower labor costs as a percent of revenue and we're very pleased with our results. And so we alluded to in the script, very pleased with our new market response and the strong comp growth rates we're seeing across all of our new markets and the class of 2024 opened up very strong with higher weekly revenue than we're seeing in the fleet. However, we feel like we do not control the outside world and we kind of read the same stuff and the same papers everybody reads and reports on and I think we have a degree of kind of cautiousness around the external environment. Having said that, we are pleased with the fact that July, the last three weeks of July came in at the top end of our guidance.
spk09: Thanks for that and as my follow up on the IK at Penn, are you seeing customers discover the improved throughput via walk-in or does it happen more in the digital channel first? Thanks.
spk12: Hi Sharon, good to hear from you and thank you for the question. So just before I begin, love to just thank our the whole Swekern team for a phenomenal quarter. A lot of hard work to get to this point and I just want to take a moment to thank every single person, especially our frontline team members, our head coaches that really bring the Swekern mission to life every day. As it relates to Penn Plaza, I think if you go and experience it, it's pretty amazing. I mean we're delivering food in under three and a half minutes. If you had gone to that store before at peak, you would have waited in line 10 to 15 minutes and then once you started your order, you're about another three minutes until you get your food. You can now pretty much walk in. There's almost the way we've designed it with the kiosk ordering as well as the concierge ordering, practically zero wait to order and your food is out in three and a half minutes. So that is aside from the digital orders, which again, if you're ordering on your phone, it's also that fast. So very encouraged. We're seeing some really positive feedback from consumers, also seeing some great positive feedback from our team members, which is really important. This is the first restaurant where we had team members that worked in an old and existing Sweetgreen that are now working in the new model. So we get an interesting test on seeing how they view the experience and they're really thrilled. It's just a lot more fun and it's an easier place to work for them. So really excited about it. I think it's early but encouraging and I think over time as customers understand how fast they can get through and get their Sweetgreen, I think we will continue to see some traffic driving potential there.
spk09: Thank you.
spk11: Your next question comes from the line of Katherine Griffin with Bank of America. Please go ahead.
spk14: Hi, thanks for the question. First, I wanted to ask another question, I guess, on marketing. It's been a different tact for Sweetgreen, the advertising around the caramelized garlic steak lunch. It's clearly been successful. It seems like you're seeing a return on it. So I'm curious if this is something you're thinking about incorporating in your go-forward strategy or if it's more something that's reserved for a big culinary launch. Any thoughts, I guess, on advertising for Sweetgreen going forward?
spk12: Sure. Thank you for the question. So I'd say it's much more of how you can expect us to go forward. We've made some good investments in the talent around our marketing team. So shout out to our marketing team. They've done a great job really thinking about 360 campaigns, including how we leverage out of home, digital, community, and we're seeing some really great results around it. So we will be incorporating this into our go-forward strategy. Many people still think about Sweetgreen as a salad company. We've never viewed it that way. From the very beginning, the idea was to create a company that leveraged in a really unique fresh supply chain, craft around how we make our food, and then apply that to different types of food. Of course, we started with salads and that's what we're very much known for. But as you're seeing, we're starting to branch out and leverage that license the brand has around the quality, craveable, fresh food, and then apply it to plates. Over the next year or so, you're going to see a lot more menu innovation. One of the things that we're really excited about that we've seen in this quarter, which is something we've been working on for a while, is that broadening of our consumer and broadening of our day part. We've seen a nice shift in dinner with huge growth of that dinner day part. We've broadened the consumer. Some of the results we've seen, a lot of the success was actually from a lot of the emerging markets that one point were a little bit questionable for us. We saw massive comps in those markets and I attribute that to a combination of the great culinary innovation we've had with this new approach to marketing.
spk14: That's great. Thank you. Then on the menu innovation that Sweet Green's been executing, I'm curious how it's resonating with your existing, more habitual customer base and I guess what that means for how you're thinking about balancing menu innovation going forward in order to appeal to your new cohorts versus existing.
spk12: We've seen success across both. If we look at both the customer acquisition and the frequency trends, we've been pretty pleased about both how it's brought in new customers and removed that veto vote in many ways and created that occasion where I want that Sweet Green experience. I may want a bowl full of greens but now I can get a steak bowl with wild rice and caramelized garlic steak and it's a really hearty dinner option with a really great value especially in this environment and our existing guests are loving it too. I'd say we're seeing it in both existing and with new customers.
spk14: Great. Thanks, John.
spk11: Your next question comes from the line of Brian Mullen with Piper Sandler. Please go ahead.
spk05: Thank you. Just a question on development. As you look to next year, do you have visibility yet in terms of how many of those locations might have infinite kitchens or is that still yet to be determined? I'm really just wondering if that answer has more to do with the way you're constructing your pipeline or if there are any contract manufacturer constraints to think about as well.
spk12: Sure. The short answer is you expect a much higher percentage of infinite kitchens in the pipeline. We're not yet disclosing exactly how many as we're finalizing designs but expect, I'd say, a majority, more than 50% of new units would include an infinite kitchen next year. Thank you.
spk05: Then just to follow up, John, more of a strategic question for you but if the infinite kitchen continues to progress the way you hope, you just talk about the strategic optionality that gives the company over the next five, 10 years or even longer, what does that help you do with development and does it also give you opportunities to do anything with the value perception with consumers and the value proposition?
spk12: Yeah, absolutely. One of the reasons, the reason we were so excited about this is we saw this as a huge tool for us especially as labor becomes more challenging and more expensive. Today we're seeing a lot of success but to your point, over time there's a lot of optionality whether that be things we do from a price value perspective, the unlocking cam that it allows us for with the margin increase and the fewer employees that we can run it with, it should unlock a lot of white space for us. The way it's been designed in the innovation team we have around automation is we believe that there's applications outside of this core bowl application as well. I'd say there's a lot of option value around automation and what we built with the infinite kitchen and I just want to take a moment to thank the whole spice team who've done just an incredible job
spk10: leading this project. Your next question comes from the line of Logan Rach with RBC
spk11: Capital Markets. Please go ahead.
spk04: Hey, thanks for taking the question. Congrats on the really solid results. My question was on restaurant margins, obviously really impressive growth this quarter or margin expansion this quarter year over year. Obviously, steak is coming in the mix more so going forward but I guess just like how do you sort of think about restaurant level margins sort of trending and what are the things that you guys are most looking out for and then I have a follow up.
spk10: Thanks, Logan. I
spk02: think, let me answer that question more in the broader term over the next few years since I think that's the way the question was phrased. We continue to see our margins expanding near term and I think most of that is going to come from a few areas. Continuing to see more improvements around labor and labor deployment and I think we've seen great success in the past few years but we could see a lot of opportunity coming forward. There's going to be some opportunity of course in our occupancy. You know, as a small company our occupancy was heavily influenced by deep urban areas and as we grow and grow in newer markets our occupancy will steadily come down and I think the other area of the P&L basically in the area of other expenses we continue to find leveraging opportunities throughout them and you'll see us continue to drive some of those. So I believe over the next few years you'll see our margins increase. I want to caution it may not be on an exactly at a quarter by quarter basis but on an annual basis they should improve over the next few years and this is absent the deployment of the IK. The IK I believe will supercharge the margin expansion particularly if we can retrofit very high volume stores rapidly.
spk04: Great thanks and then on the Penn Plaza retrofit I guess one of the sort of key learnings there that sort of instructs your views going forward on the retrofits whether that be sales performance through that six or seven week period. How does that sort of impact your guys' views on on the retrofits going forward?
spk12: So is the question what did we learn or what are we trying to learn?
spk04: Yeah I guess like what were your learnings relative to expectations during that retrofit?
spk12: Yeah I'd say well first of all I think it was impressive that we were able to keep the store operating during that time. So we were able to do the for the first one we were able to turn that store in seven weeks and keep it running from a with a digital ordering so delivery and pickup running during that time for six of the seven weeks. We made the decision to close for one week really to to focus on hospitality training for the team in that week but I think it was an encouraging start for us and I think over time we should be able to bring that down. Other learnings I think we're under we're learning continuously with each new Infinite Kitchen. We just opened one this week on Tuesday on Tuesday. Like I've said many times in the past we feel very good about the technology and that will continue to improve and will continue to scale the cost down. We're still working to perfect the overall experience and I think with each new one you see you'll you'll notice a lot of things that we're trying and testing as we start to really perfect. It's really that feeling that you get the look and feel the vibe of that restaurant when you walk in as well as the team member experience and making sure we just nail down all the right adjacencies from a labor perspective and the right flow from a customer perspective all while trying to bring our build out cost down pretty significantly as we look to accelerate opening. So it's a huge focus area for us. We're learning both about new builds and retros but I'd say you know with four under our belt we've learned a ton and I'm very pleased with the results thus far which is what has given us the confidence to continue to accelerate this year. Seven more you know we'll open a bunch more this year and next year we're going to open a lot more and we wouldn't have that confidence if we didn't see the results we're seeing today.
spk04: Okay thank you very much.
spk11: Your next question comes from the line of Rahul Kroh with JP Morgan. Please go ahead.
spk08: Good evening guys. Congrats on excellent results and execution. As Sweetgreen expands from being regional to truly national over time can you share some of your early thoughts or your philosophy of reinvesting some of the margins you realize back into customer balls or menu price? How are you as an organization thinking about this today as you build out into your team and I have a follow-up?
spk12: Sure so thanks for the question Rahul. So to your point one of the one I think for me one of the most encouraging things that we've seen over the past couple quarters has been the momentum across the company the breadth and depth of the sales growth specifically a lot of the momentum we've seen in the emerging markets in the upper Midwest where we grew a lot we planted a lot of restaurants last year in Texas in Florida and Atlanta all markets that that we're seeing really robust growth. I think that you know once we get to a scale I mean people have a different number whether that's four or five hundred units in national I think it does unlock a lot of marketing efficiencies as we're able to advertise more nationally. We're still a couple years away from that but we do think that over time we are seeing a lot of success with our with with our marketing activities and brand awareness and as we continue to drive our margin to get scale I think there's a lot of opportunity to get more people aware in trying sweet green because one thing that we know is once consumers try sweet green they're very sticky there is a natural flywheel built in given the habitual nature of the food something that we just got to do is just get more people to know who we are and give us a try.
spk08: Perfect and then considering the labor savings we discussed in the past on the infinite kitchen longer term would you expect to build any stores without infinite kitchens at all?
spk12: So I think I heard the question being would you build any stores without an infinite kitchen? You know the way the way to answer that question is is that correct Raul? Yes. Yeah so I'd say the the vision would be to get to a place where all stores in the future do feature an infinite kitchen. At this moment we're very we're still learning a lot and we're we're trying to make sure we meet our our capital return threshold so you're seeing it put into you know more more stores that have higher volume or higher throughput needs or maybe have more challenges from a labor perspective is where you'll see us prioritize but over time as we bring down the overall build out costs around the not just the infinite kitchen the cost of the the automation but the entire build I think it will unlock the ability to be in in really most and eventually all restaurants. Thank
spk11: you John. Your next question comes from the line of John Tower with Citi. Please go ahead.
spk07: Great thanks maybe just a little bit more on the kitchen one other after. Just on the retrofit itself can you maybe give us a range of of the cost to retrofit the store? Obviously you gave the timing and specifically on the machine I think you had mentioned that you've now moved on to the contract manufacturer and originally you talked about a cost of roughly 400 to 550k for the machine itself. Are you seeing that begin to bend a little bit lower?
spk02: Hi John. Let me say the costs are coming in right in line with the guidance that we gave. These are early machines you know that are just kind of rolling off for the fact I think Penn Plaza was the first unit made at the contract manufacturer so by no means have we obtained any type of scale in manufacturing. We would anticipate some of that to come down the road. In terms of the total cost of Penn you know we really don't want to give out the CapEx numbers on an individual store by store basis but the number you have is what the IK did cost. There were of course other modeling done at the same time when we had the store available.
spk07: Okay and then just maybe pivoting to pricing. I know this year you're running about five percent price given some of the inflation that you're seeing across the model but I'm just curious as you know you alluded to earlier Mitch there is some softness seemingly forming with the consumer and you know how do you guys think about pricing in the 2025 if we're kind of in a backdrop where consumers are you know a little bit more pinched on their spend?
spk02: Yeah John yeah first let me just make a comment that in the month of July we did have one point the price roll off so we're currently running at about four points in price. We really haven't begun to finalize our view of 2025 or certainly at the pricing level but I can say that we take a from this vantage point today taking a slightly more cautious view than maybe we have in the past couple years like a lot of people and reflected in our guidance we're kind of watching the outside world pretty closely.
spk07: Got it awesome thanks for taking the questions.
spk11: Your next question comes from the line of Brian Bittner with Oppenheimer and Co. Please go ahead.
spk01: Thanks on the restaurant margins the upside that you're demonstrating in restaurant margins relative to expectations it's continuing to be driven by significant leverage on labor. As it relates to this quarter and moving forward is that just a result of the strengthening same store sales? Is there maybe some other strategic factors that keep you optimistic about this line item as you execute moving forward? And secondly to that Mitch can you help us understand what's going on with the other restaurant operating expense line item? There is some deleverage there this quarter despite the very strong comp.
spk12: Yeah so I'll let me let me talk about labor for me and some of the things that we're seeing. So yes obviously we're seeing some leverage with sales. We're also we've also seen the addition of stake and a lot of positive developments there. But beyond that we've been very very focused on finding and developing the best head coaches and improving our the retention of our teams. And we really believe by having the greatest the best head coaches that stay with us and that are promoted from within they create a stable great working environment for their teams and that reflects in the results. And we had a lot of improvements over the past year there. So our turnover has continued it has stabilized at at lows. We continue to see our head coach stability grow and our head coach tenure grow. And we're working on some very exciting things that we think can continue to drive that. Beyond that we're working on some things around labor deployment that we think can help us not just on hospitality and throughput making sure we're staffing the peaks properly but also in terms of continuing leverage that labor line. So all to say I think we have some really some exciting things in the works to continue to drive leverage on labor and drive our restaurant level margins.
spk02: Brian I'll take the second part of your question which I think was on the other other expenses. The other expenses were largely the result of channel mix shifts in the business. And really a higher level of our repair and maintenance particularly around HVAC. Not unlike what other people have reported as things have heated up across the country.
spk01: Okay thanks for that and my follow-ups on Infinite Kitchen surprise surprise. I know the math behind these basically says every store you open should be an Infinite Kitchen. And you know ultimately you know even Jonathan you just said to a question yeah you know that's true. But I guess the question is you know we're obviously still in the early stages of the learnings here but are you starting to gain more and more confidence that this prototype can work in more and more trade areas than maybe you originally thought. And I just think it's an important thing to understand because at only 230 units the vast majority of the scaling of this brand remains in front of us. And the portability of this prototype is how you're thinking about the portability of this prototype is obviously very important to the long-term future of the company.
spk12: Absolutely and I say that the short answer is yes and I think you'll start to see that this year. So already very intentionally with the deployments of the Infinite Kitchen we've piloted in very unique environments and in neighborhoods. So whether it be Penn Plaza, heavily urban, fast-paced environment just this week in Fashion Island and then hunting in Dun Beach and Naperville being more suburban. You'll see us you know this year open try to try to open in a new market. First store in a market with an Infinite Kitchen. You know we'll open in other more urban markets more suburban markets really perfect this and we do believe it's going to help us a lot on the portability. And I think it's you know what we're really waiting to learn is again less about the technology more about perfecting the overall experience including how we make sure we get the experience right with the broadening of the menu and the broadening of the brand position that we're pushing for Beyond Salad. So you know we're excited to share more about where that's going in coming quarters but you know with the success of Place and Stake expect us to continue to push to broaden what really sweet green needs from a format perspective to consumers and how we can leverage the Infinite Kitchen to power that.
spk01: Thank you.
spk11: Your next question comes from the line of Andrew Charles with TD Cowan. Please go ahead.
spk06: Great thanks. Mitch on the positive track for the quarter I'm first I'm curious if first you can just disclose what that was within the four percent combined mixed traffic. I know you said it was positive and picked up the quarter but first off we could skip a number and second can you help just rank order the drivers of positive traffic. You know it's obviously a rarity right now in the industry but you've got a couple of tailwinds between outsize contributions from new store sales ramps that historically grow substantially in their second year the buzz around stake speed of service improvements from more streamlined operations. So how do you help rank order what drivers of that positive traffic was in the quarter?
spk02: Now thank you Andrew. Let me say that in a high level I think you kind of hit it that everything that we seem to have fired on all cylinders as they say in the second quarter. The stores that came into our comping base were very very positive. Our new markets had very strong comp growth and very strong traffic. The menu was very well received and broadly well received and I think it was really just a comp and of course the labor deployment picked up on our throughput and I think it was just a question that all of these things kind of coalesced and had very positive traffic and as I said earlier on the call the traffic grew sequentially throughout the quarter something that we're really happy with.
spk06: Gotcha and then just a follow-up question is labor deployment driving speed of service enhancement. Can you help us quantify what you're seeing there? Is it transactions per peak labor hour or peak 15 minutes? How are you monitoring this and what kind of improvement did you see to help us better understand how those efforts are resonating?
spk12: Andrew I'd say it's a little bit too early. I'd like to come back and share more on that but we would expect to see higher throughput at peak as well as overall labor leverage through better scheduling. You see you know things like less overtime, better management around fair work week etc. So I think we see a lot of benefits from this new way of deploying labor. We've also really done a lot of work we've talked about in the past around simplifying both the role in the restaurant whether it be at the head coach level, how do we make that job easier more joyful across all their everything they do whether that be administrative tasks tasks or in-store tasks and similarly for our team members. How can we make that continue to make that job a little bit easier to do and that's through you know you know micro changes like we could do things like upstreaming tools systems layout adjacencies you know the restaurant business it's a game of inches and we just continue to optimize and look to be better every single day. So we see as Mitch mentioned earlier you know steady path to continue to leverage our margin over the next few years.
spk06: Very good thank you.
spk11: Your next question comes from the line of Christine Cho with Goldman Sachs. Please go ahead.
spk13: Hi thank you. First off congrats on a great quarter. Firstly could you help us under a bridge of the gap between kind of really solid same-stay sales growth averaging kind of six percent in the last four quarters versus kind of a flattish AUV of 2.9 million since second quarter of last year. I think you know I would imagine some of this is coming from the new store dynamics but if you look at the new store mix it's actually coming down a bit on a year over a year basis so it would be great if you can help us understand the factors that are driving that and also what you need to see in terms of AUV increasing again. That's the first question and then I'll do a follow-up.
spk02: Thank you Christine. You're right the same store sales has grown about six percent over the trailing 12 months it's been up seven percent in the first half of 2024 and our AUVs remained at about 2.9 million dollars. It's really just two factors one is the one you articulated it's just a new store dynamics as we're bringing in more stores every quarter into that comping base and the second one is just a degree of rounding in the fact that we take it to 2.9 million dollars. There is some build underneath it and we are mindful of it.
spk13: Great thank you. And John I think I've heard you highlight attachments as kind of a largely untapped opportunity for Sweetgreen. Is this something that you're increasingly thinking about and whether there are any kind of specific products or marketing initiatives we can look forward to in the near future? Thank you.
spk12: Thank you absolutely. I don't want to share too much because we're not not quite ready to announce everything but we do have a very robust culinary roadmap and some of that includes how we tackle both attachments whether that be a signature side dish how we think about beverage which if you look at our business we're you know we do not index near the industry where we should from a beverage perspective and we think there's opportunity around kind of like treat the treat occasion as well so all things that we have really nice robust innovation going on a lot of testing and piloting across the country that we're learning from and expect to see some exciting things next year both within the core kind of core entree format of innovation there but also as you mentioned kind of outside of the bowl around sizing beverage and treat.
spk11: Your next question comes from the line of Dennis Gugger with UBS. Please go ahead. Your next question comes from the line of Dennis Gugger with UBS. Please go ahead. Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.
spk15: Yeah hey guys good afternoon. A quick one Mitch would you mind citing wage and food inflation in 2Q of course?
spk02: Yeah thanks Brian by the way. What we really saw was very low level of inflation in the second quarter. Wages were in both wages and cogs were in very low single digits.
spk15: Okay thanks. Curious about Salem New Hampshire. I think you call it a new market. It's sort of on the periphery of one of your existing strong markets. How's that one done kind of out of the gate? How much of your pipeline is sort of that you know expansion into kind of peripheral towns of of some of your core markets as you think about this year next year? Are you finding it easier to open some of those units given your scale kind of in New England?
spk12: Yeah I'm actually glad you asked. It's actually something that we're seeing a lot of success in as we think about how to expand out of really strong core markets. And if you look at Sweet Green today we're in you know most major major metros at this point and very intentionally when we set out we wanted to build a national brand as a category leader and so we went out and we planted flags across all these major cities. But if you look at a lot of them you know you got your very you know you're just really not dense in a lot of these places. You know all of Texas we have sub 20 restaurants and you know if you look at the Midwest it's just brand new and there's so much room to run. So as we look forward we actually see a huge opportunity of densifying existing markets and tackling more of the adjacent markets. And the benefits there is we'll see a lot of leverage around around our food costs, our supply chain, a lot of the economies of scale happen regionally. So we'll see some leverage there. Obviously anyone in the restaurant business knows opening an existing market is a lot easier from an operations perspective. We'll be able to leverage management and build a really robust bench of leaders. And we also get to leverage a lot of our marketing spend within within those markets and kind of the overlapping eyeballs between places like Boston and New Hampshire. So we think that in some ways we did the hard part first planting flags in all these places. And as we look forward you'll see fewer new markets and going back and going deep in existing markets where we see a lot of room and kind of expanding just out into these other adjacent markets. So I'm actually quite excited for this way and it's how we think we can accelerate our footprint and do so in a really profitable and disciplined way.
spk11: And your last question comes from the line of Dennis Gugger with UBS. Please go ahead.
spk03: Hi guys, can you hear me?
spk11: We can hear you.
spk03: Great, terrific. Congrats to the team. Two quick questions. The first one, as it relates to the IK margin versus the non-IK, helpful to get the Naperville solid number there. Sounds like Huntington Beach seeing something I assume probably somewhat similar. Just wanted to get a sense on sort of that margin spread if it's sort of in the ballpark of what we saw last quarter. How you kind of frame that up if there's anything more to add there.
spk02: Thanks, Dennis. I would say it is certainly in the ballpark or slightly better than we thought in all of our modeling and what we've seen in the past. Largely coming out of the labor line, obviously, which you can see when you visit an IK store with some additional benefits and cost so very good. So very pleased with the early results.
spk03: Appreciate that. And then just the second one, just as it relates to thoughts on average unit volumes on the IK stores now that we have another quarter kind of under your belt. I know it's early days, but thinking about kiosks, thinking about throughput, any kind of latest views on where that potential could go at this early juncture from an AUV to non-IK AUV? Thank you.
spk12: Yeah, I'd say on the suburban stores, we continue on the two original pilots, we continue to see similar trends with the higher ticket. We do believe with the better experience that customers are having, it's more accurate, it's on time. We just have Naperville as the first store to now hit a year to start to see comp numbers, but we do expect based off a better experience to see some comp opportunity in those restaurants that will drive AUV. The real test of this is when we go into urban environments where we do have long lines and we can capture more customers. And that first time we're seeing this is now with the Penn Plaza, Fashion Island should be a pretty heavily traffic store as well. But I think that's when we're really going to start to understand in these high traffic locations, can we get an AUV lift just by serving more customers in those peak periods. So in some ways I'd say we're very encouraged, think better experience will help us continue to drive comps and in more high traffic locations, definitely an opportunity, but pretty early to say for now.
spk06: Great, thank you.
spk11: This concludes today's Q&A session and today's conference call. Thank you for attending. You may now disconnect.
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