The 100% Trap: When Keeping the Upside Becomes a Liability

Investors love a rising store count. When a trendy brand announces massive expansion plans, it sounds like easy growth. 

But scaling a physical footprint is anything but. Securing prime real estate, quality fit-outs, and hiring new staff burns through cash fast. 

Revenue might surge as new doors open. Yet, aggressive expansion only creates value if the business model is sound. 

Every new location comes with a cost. But how do you pay for it? Tap cash reserves. Pay interest on debt. Issue stock and dilute shareholders. Take out long-term leases that must be paid regardless of performance. Or franchise out and share profits. 

The ideal choice isn't always so clear. Share the risk, share the profits. And crucially, vice-versa. 

Rapidly growing food chains like Sweetgreen (SG) and Domino’s (DPZ) show a clear contrast in how this plays out. Both are expanding. But only one is doing it in a way that consistently delivers real returns. 

Sweetgreen built its reputation as a modern lifestyle brand. Healthy choices, a tech-forward app, and lines of young professionals at lunchtime. 

It went public in late 2021, right at the peak of the zero-interest-rate era. Markets were flooded with liquidity. Investors chasing growth handed the company over $364 million in its IPO. No interest. No profit sharing. 

Backed by that capital, the company delivered reliable double-digit revenue growth for years. Yet that is where the good news stops. 

In 2025, momentum stalled, with total revenue flat at $679.5 million, while restaurant-level profit sank more than 22% to $103.5 million. Once full operating costs are included, Sweetgreen’s net loss hit $134 million. Returning to a multi-year trend of annual net losses over $100 million. 

Despite flat sales and ongoing losses, the company continues to push expansion. Last year, it spent $106.5 million in property and equipment purchases just to open 35 new stores. 

But that only captures the upfront investment. 

Each new location also carries a long-term operating lease. These liabilities now total $354.5 million. Fixed obligations that remain in place regardless of store-level performance. 

By funding its own expansion, Sweetgreen kept all the risk. Now, shareholders are carrying the losses. Using Other People's Money 

Domino’s operates on a completely different playbook. It relies on a capital-light franchise model. 

Instead of draining its own balance sheet to build kitchens and sign leases, franchisees put up cash. The company provides the brand, the supply chain, and the tech. The franchisees take on the localized financial risk. 

In exchange for giving up a portion of the store-level profits, Domino's strips the heavy capital burden off its own books.

The efficiency of this model is staggering. In 2025, Domino’s added 776 net new locations worldwide. It achieved this massive physical expansion using just $120 million in capital expenditures. Largely on consumer and store technology and supply chain centers. 

The result? A record $4.9 billion in revenue, $1.4 billion gross profit, and $601.7 million in net profit after all costs. 

By avoiding most of the obligation to build and pay for stores, Domino’s has been able to funnel the surplus directly back to investors. Last year, it spent over $591.6 million on share repurchases and dividends. 

Also a record. 

A great brand doesn’t automatically make a great business. 

When cash was cheap, Sweetgreen’s strategy made sense. Control the footprint, control the growth, and capture all the upside. 

But economies change. Now, its investors are sharing in the expansion of a money-losing operation. A rising store count is only a victory if it puts cash in your pocket. 

Domino’s chose to share the profits with franchisees. In return, it outsourced much of the risk and built a cash machine.