In 2007, Keany Produce Co., a family-run produce distributor in Hyattsville, Maryland, received a call: Three entrepreneurs were starting a salad restaurant in Washington, D.C., and needed to set up a regional supply chain for fresh greens and vegetables. Like most potential customers, the aspiring restaurateurs wanted to try the product before they bought it. So Keany packed up some arugula samples and sent them straight to the entrepreneurs' personal residences--the under­graduate dorms at Georgetown University.

"We had an industrious sales lady," says Ted Keany, the distributor's vice president of sales. "She believed in everybody."

It didn't take long for that initial leap of faith to look like a very smart bet on Sweetgreen, the fast-growing, healthy-hipster salad chain started by Nicolas Jammet, Jonathan Neman, and Nathaniel Ru. By the time Keany and his brother Kevin met the co-founders and co-CEOs, Sweetgreen had opened its first storefront, in the Georgetown neighborhood--one that regularly had lines down the block.

Fast-forward a decade: Sweetgreen is slinging salad in 70 locations across the country, with plans to expand to 90 by the end of this year. Jammet, Neman, and Ru are selling an aspirational lifestyle along with their kale caesar salads and quinoa-stuffed grain bowls, a savvy package that appeals to food-world celebrities as much as to nutrition-conscious consumers. Each Sweetgreen location proudly proclaims its transparent, farm-to-table bona fides, with seasonally tweaked menus and chalkboards listing the local farms that supply many of its salad ingredients.

"They've done a very impressive job," says R.J. Hottovy, senior retail and restaurant analyst at Chicago-based investment research firm Morningstar (with which Inc. shares an owner). "It's not easy building out a local and regional supply chain while building a national brand."

It's a huge, ongoing challenge--one that will only intensify with the company's expansion. While Sweetgreen won't discuss revenue or profitability (sales were last estimated to be $50 million in 2014, with the company unprofitable), in the past several months it gave Inc. an unprecedented, extensive peek inside its national farm-to-bowl operation. The lessons Sweetgreen and its partners have learned along the way can apply whether your business is a supplier to bigger companies or one that's trying to set up its own supply chain.

Sweetgreen readily acknowledges that it's impossible to find, say, fresh arugula in Chicago in the middle of January. But when it can't source locally, it tells customers where their salad ingredients were shipped from. "I think that level of transparency is admirable," says Mark Bittman, the longtime food writer and sustainability advocate, who co-created a salad for Sweetgreen in 2014 and now considers Jammet a friend. "Offhand, I can't think of a better way to make this work. And you can't argue with their success."

Sweetgreen's supply chain counts hundreds of regional growers, producers, and distributors, and has played a major role in its race to achieve national scale. Food-world connections also help: Sweetgreen has raised $135 million from investors including Shake Shack co-founder Danny Meyer, Momofuku overlord David Chang, and prolific French restaurateur Daniel Boulud. Jammet, whose parents owned high-end New York City eatery La Caravelle, grew up in this world and now oversees Sweetgreen's food operations: "One of the reasons why we're building this business is to create a different kind of relationship with food," he says.

The Brains Behind the Bowls

Since their undergraduate days, Sweetgreen's co-founders have shared the chief executive role--and one giant desk. Ten years later, they've divided and conquered nine markets.

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Still, in the race to become the king of sustainable salads, Sweetgreen is facing mounting competition from other fast-casual startups, including Dig Inn and Tender Greens (another Meyer-backed salad chain). But its biggest challenge might be growth itself. As Sweetgreen tries to do for bowl-based vegetables what Chipotle did for burritos, the younger company is also trying to avoid its elder's stumbles. Chipotle, one of the first national brands to market where its ingredients come from, has faced supply-chain issues and food-borne-illness outbreaks as its restaurants have grown in number to more than 2,300. Jammet is hoping that Sweetgreen's slower growth plans, which restrict it to markets that can support at least five to 10 restaurants at a time in a region, will prevent similar problems.

The other question: Can Sweetgreen's suppliers keep up with its growth, and its demands for sustainable raw ingredients? "You can't convert land to organic in less than three years," as Bittman says. "You can't create farmers when land is so expensive. It's not instantaneous, obviously."

As shown on these pages, Sweetgreen has already worked with some of its suppliers to increase their capacities or improve the efficiency of their operations. But the salad chain's growth has also yielded some complications for its farmers, cheesemongers, and other local food suppliers. Now, as more companies try to tell stories around where their products come from to meet increasingly informed consumer tastes, you can learn a lot from how Sweetgreen and its suppliers went from begging a local distributor for arugula to selling Americans on steelhead trout.

How It All Works

Unlike most traditional fast-food chains, Sweetgreen eschews the efficiency of centralized food sourcing and production. Its preparations to enter a new market begin a year in advance. Before finalizing a restaurant location, the company's supply-chain team is on the ground vetting farms and pitching distributors to come on board--a tough sell when there is only one location to service in the beginning. But the company is up front about the fact that it can't run a national restaurant chain and source everything organically, locally, and from mom-and-pop farms. When a vegetable is in season, it likely comes from a regional supplier; when it's not, it comes from a big supplier in California. That's practical now that Sweetgreen has locations in Washington, D.C., Philadelphia, New York City, Boston, Chicago, L.A., San Francisco, and Maryland and Virginia.

Where the Greens Come From

Jayleaf in Hollister, California

 

 

The volume: About 67,000 pounds of mesclun, spinach, and arugula per month are shipped to locations in California, Philadelphia, D.C., Maryland, and Virginia.

The challenge: In 2016, Sweetgreen needed a spring-mix farmer that could ship tons of greens across the country. Jayleaf checked a lot of boxes: Its greens are organic, and its plant is 100 percent solar powered. But the farm had never shipped outside of California, so its greens weren't holding up well over the long haul to the East Coast.

The solution: Distributor Keany Produce helped Jayleaf figure out how to pack its greens more effectively, swapping in a different bag that allowed the lettuce to breathe better and packing fewer bags per box. Jayleaf has also changed its systems so that it can supply Sweetgreen with detailed data. "We have to stay on top of our volumes and transfer that info to Sweetgreen," Jayleaf COO Henry Catalán says. "In the end, it actually helps our sales team understand where the farm is at any given moment."

The payoff: Catalán says the Sweetgreen account is responsible for increasing Jayleaf's revenue by 15 percent since 2016. As a result of the relationship, Jayleaf has added 180 acres to its farms and invested in a new packaging machine that has cut down on product-prep time.

How It All Gets There

Keany Produce Co. in Hyattsville, Maryland

 

 

The volume: Keany delivers produce six days a week, to all 32 East Coast Sweetgreen locations.

The challenge: When most restaurants want, say, lettuce, they specify a certain volume, not a source. Sweetgreen specifies primary and secondary suppliers that meet its standards--but the onus is on Keany not to mix up the cases from different suppliers once they're brought back to its sorting facility. "We're required to be fully transparent on all products. It's a pain­staking process," says founder and president Kevin Keany.

The solution: By midnight every night, the distributor must log into Sweetgreen's proprietary supplier portal and note which stores are getting lettuce from the primary supplier and which are getting it from the secondary supplier so the chalkboard in every Sweetgreen store is up to date. Keany says getting the systems in place to do this kind of reporting took two to three months, and the company created two positions just to do the tracking. "We don't do this for anyone else," he says. "It turned our selection process upside down."

The payoff: Despite the extra upfront expenses of taking on Sweetgreen as a client, Keany says it has boosted net sales. Thirty-two Sweetgreen stores is a "very sizable account," he says.

Where the Cheese Comes From

FireFly Farms Creamery & Market in Accident, Maryland

 

 

The volume: About 2,100 pounds of goat cheese per week is shipped to restaurants in D.C., Maryland, and Virginia.

The challenge: Sweetgreen's founders came across FireFly in 2007 at Washington's Dupont Circle Farmers Market, which is outside their second restaurant. FireFly buys its goat milk from seven family farms near the creamery, still makes its cheeses by hand, and has made a firm commitment to paying its workers a living wage. But the initial relationship was rocky: Sweetgreen didn't always get its forecasts right, so unexpectedly large orders sometimes left FireFly scrambling.

The solution: It took about three years for Sweetgreen to fine-tune its forecasts--which FireFly waited out, occasionally running out of milk for other cheeses. "I didn't like that, but we did what we needed to do," says co-founder Mike Koch. Even now, FireFly can't provide enough volume at times, sending Sweetgreen to a temporary supplier. Keany picks up orders directly at the creamery, saving the cheesemaker on transportation costs.

The payoff: Koch says Sweetgreen has been a significant driver of revenue growth for FireFly since 2010, and, as of June, accounted for 34 percent of FireFly's revenue in the previous year. "My margin with Sweetgreen is as thin as I can let it be, but the tradeoff there is volume and efficiency," Koch says. Plus, "our ability to service a customer like Sweetgreen is like a résumé gold star when we go to other large buyers."

Where the Fish Comes From

Pacific Seafood in Clackamas, Oregon

 

 

The volume: 4,500 pounds of steelhead trout per week are shipped to all locations.

The challenge: Seafood is a particularly big challenge for any conscientious food business: "It's this big blue ocean that is unregulated," Jammet says. Sweetgreen first chose farm-raised salmon from Chile, a popular fish that received a "good alternative" rating from California's Monterey Bay Aquarium, a sustainability advocate. But two years ago, as scrutiny of the seafood industry and its rampant supply and labor problems mounted, Sweetgreen started looking for a domestic source of fish.

The solution: Pacific Seafood's farmed steelhead trout is native to the Pacific Northwest and looks a lot like salmon; Monterey Bay considers it a "best choice" for the environment (though some critics caution that farms use too much fish meal to be truly sustainable). Sweetgreen pitched the less-familiar steelhead to customers as "salmon's sexy, more sustainable cousin." As Jammet says, "There are all of these regional species that we should be eating."

The payoff: For 76-year-old Pacific Seafood, which also supplies large grocery chains such as Kroger, Sweetgreen is a smaller but important customer. "They have 70-some restaurants and their growth is aggressive," says Craig Appleyard, who manages Pacific Seafood's salmon and steelhead operations. "They're the future--the kind of company we want to work with."

Where It All Comes Together

Sweetgreen has more than 3,500 employees. About 95 percent work in the restaurants, each of which averages 40 to 50 people.

 

 

The challenge: Despite Sweetgreen's "fast-food" label, "scratch cooking is a fairly labor-intensive business," says COO and president Karen Kelley. "Consider the amount of vegetable prep, roasting, cooking, and falafel-making that goes through our restaurants. The biggest growing pain is making sure we find the right people."

The solution: The past few years have brought increased scrutiny, and regulations, to fast-food wages. (Sweetgreen investor Danny Meyer is also a big voice for paying fair wages in the restaurant industry.) Kelley says that Sweetgreen has always paid above the minimum wage; in June, the company increased base pay in some markets by more than 20 percent. In New York City, where the minimum fast-food wage was raised to $12 an hour last year, Sweetgreen now starts entry-level workers at $12.50 to $13.50 an hour. Head coaches, Sweetgreen's general managers, start on average at $60,000 a year plus a bonus. Kelley says Sweetgreen also now spends more time training employees and gives them more opportunities to move up.

The payoff: Within the past year, 35 percent of Sweetgreen's restaurant managers have been employees who were internally promoted. Nine of those managers started off in entry-level Sweetgreen positions, and overall eight of the company's 15 "area leaders," or regional managers, have come up through Sweetgreen's ranks.

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FROM THE OCTOBER 2017 ISSUE OF INC. MAGAZINE