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Financing

Here’s how Cava plans to spend its $190M investment

Brett Schulman, CEO of Mediterranean fast casuals Cava and Zoes Kitchen, said the suburbs are where it’s at and catering is starting to bounce back.
Cava
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When Cava acquired Zoes Kitchen in 2018, it didn’t know, of course, that it was making a pretty smart post-pandemic deal.

But, in retrospect, that’s just what happened.

Zoes Kitchen locations are 89% suburban, with 70% of the Mediterranean fast-casual restaurants located in Sun Belt cities like Atlanta, Houston and Dallas—all places that have been quicker to re-open than some of the urban centers on the coasts.

“We’ve always had a focus on the suburbs,” Cava CEO Brett Schulman said, adding that Cava’s store base is nearly 80% suburban as well. “I think COVID has served as an accelerant and magnified the trends that were bubbling underneath pre-COVID.”

Cava, which late last month received $190 million in funding, is using some of that money to convert more than 50 Zoes units into Cava locations this year, with more planned for 2022.

Schulman confirmed that the company has no plans to grow its Zoes Kitchen concept.

“We’re continuing to operate our Zoes brand and our growth of new restaurants is on the Cava side,” he said.

Zoes, however, has a “significant” catering channel, he said, while Cava does not offer catering. Catering, which underwent an understandable and significant decline last year, is now back to 80% of its pre-pandemic business, Schulman said.

Cava saw a 10% increase in its dinner business during the height of the pandemic, but is seeing a “slight shift” back to more lunchtime traffic now, he said.

“We’re not just a brand that’s depending on the urban office worker lunch daypart,” he said. “We roast, we grill, we braise. We’re an intuitive choice for the dinner daypart.”

But digital business, which was only about 20% of Cava’s total before COVID, peaked at 70% and now appears to be plateauing near 50% systemwide, Schulman said.

“Digital adoption has been accelerated a few years,” he said.

Cava currently has 18 drive-thru pickup windows, about 10% of its portfolio, with plans to add more as it grows.

With some of that investment funding, Cava is planning to open a second production facility for its line of consumer packaged goods. The new building is slated to open in the spring of 2023 in Virginia or North Carolina, he said.

Cava products are currently sold in Whole Foods markets, but the operator is looking to expand to new grocers and markets as it scales up production.

“There’s a great halo effect between the channels,” Schulman said of the restaurants and packaged products like dressings and dips.

Cava will also use some of its new cash infusion to fund tech initiatives. Currently, the chain is testing a one-tap pay option that merges Apple Pay with its loyalty rewards program, with plans to roll it out systemwide this summer.

The fast casual is also adding new features to its app, while also building out its internal data capabilities to better reach customers, he said.

Schulman didn’t rule out investing in a tech company, as some other restaurant brands have done recently, but he also didn’t say such a deal was imminent.

“We look at all opportunities to meet our guests’ needs,” he said.

 

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