Wentong Xing

wx2345
2/13/23
Pre-Class Case
Financial Statement Analysis with Patrick Badolato

Sweetgreen:
i. What Sweetgreen performed well is that its revenue is continually increasing since
its IPO. For example, its revenue in three quarters in 2022 has steadily increased to
124,026, compared to 95,844 in 2021, the year it went public. However, even though
its revenue has increased, it still has net loss now, which even went worse after IPO.
Its net loss of three quarters in 2021 is 30,066, while this number is 47,377 in 2022,
which worsened a lot. I think the reason why this happened I think is because
Sweetgreen spent too much on labor costs and administrative expenses, which are
38,006 and 41,381, largely increasing from the IPO year. These two numbers are
almost as high as Sweetgreen’s revenue, so it is hard to be profitable with these
expenses. I think the situation could be Sweetgreen needs more human labor to
maintain the financial work after being public, but currently, I do not think
Sweetgreen has the ability to afford these expenses, which could only make its
operation worse.

ii. I think Sweetgreen’s business model is similar to its competitors. Sweetgreen’s

main competitors include Alfalfa, Just Salad, and Chop't Creative Salad. However, it
stands out when sourcing from farms following regenerative practices, which is also
the reason why it has the opportunity to become public. Raising customer’s awareness
of protecting the environment, Sweetgreen’s competitive advantage increase. In
addition to the food side, Sweetgreen also has evolution on its restaurant model. It is
the first company that has drive-thru pathways in its market. This method was also
successful during the pandemic period.

Dutch Bro:
i. After IPO, Dutch Bro managed to change its income loss to net income, which is
really a progress for the company. Its income loss is 116,830 in the first three quarters
of 2021, while it has net income of 1594 in 2022. It is impressive that Dutch Bro can
change this amount of loss to profits in just one year. I think the main reason why this
happened is that Dutch Bro decreased its selling, general, and administrative expenses
a lot in 2022, from 153,700 to 45,378. This should be the right effects that IPO brings,
which help the company’s operations.

ii. Dutch Bro’s main competitors in the market are Biggby Coffee, The Coffee Bean &
Tea Leaf, Lavazza and Krispy Kreme. From the revenue generation side, Dutch Bro’s
business model is similar to its competitors, which is selling coffees to customers. The
company differentiates itself by the values and ethos that it embodies. It has “bro-
istas” instead of regular baristas and has employees and franchisees wanting to stay
part of the “Dutch Mafia.” Its operation profits rely on its values of speed, service,
and quality. It also values its connections with customers.

Final question: （2）The reason why there are fewer IPOs in 2022-2023 is because
of increased market volatility and also dismal performance of companies listed in
2021. Because of the high inflation rate and rising interest rates, investors decided to
choose investments that had lower risks. The policies used to combat inflation also
affected the behaviors of investors. In 2022, the number of IPOs dropped by 77%
compared to the previous year. Therefore, I think this situation is mostly due to the
weakened the market, and while passing the pandemic period, it is possible for the
IPOs to better, though investor will remain their preferences towards more resilient
companies.