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Financing

What will Cava and Zoes Kitchen look like if $300M acquisition goes through?

“Everything’s on the table,” Cava CEO Brett Schulman told Restaurant Business.
Photograph courtesy of Cava

Freeing Zoes Kitchen from the scrutiny of being a publicly traded company is one of many advantages of the fast-casual chain’s pending acquisition by fellow Mediterranean brand Cava.

That’s according to Cava CEO Brett Schulman, who will become head of the combined restaurant brands if and when the $300 million deal—financed through a “significant equity investment” from former Panera Bread CEO Ron Shaich’s financing group—is finalized.

“That’s what’s exciting for us,” Schulman told Restaurant Business. “We’ve been able to achieve our success with partners that have a long-term perspective.”

He pointed to raising starting wages at Cava to $13 an hour as a move that would’ve been tricky to do under the watch of shareholders.

“It’s just more challenging to do it under the public lens,” Schulman said. “It’s not that you can’t do it. It’s just more challenging.”

Zoes Kitchen is currently about a week into its 35-day “go-shop” period during which it could seek a better acquisition offer. And one large shareholder, PW Partners Atlas Fund, filed a complaint with the Securities and Exchange Commission this week, alleging that the $12.75 per share price for Zoes “undervalued” the company.

Schulman disputes that claim.

“It’s a good value for shareholders,” he said, noting that the deal is on track to be finalized by the end of the year. “We feel like we paid a good premium to where the stock was and a good value for shareholders. It’s a great opportunity for the business.”

Operationally, everything will remain “business as usual” for now, he said, noting, however, that “everything’s on the table” in terms of potential collaborations or operational efficiencies ahead.

There’s talk that Cava, which sells packaged dips and spreads at Whole Foods Markets around the country, might make those items available for sale at Zoes Kitchen.

“We certainly have the production capacity to support whatever growth we would want in whatever way we’d want to do that, whether it’s the ingredients themselves or packaged goods,” Schulman said.

In turn, Cava might benefit from borrowing from the strong catering program currently offered at Zoes, he said.

“That’s something we haven’t really dove into on the Cava side,” he said.

In recent years, Cava has become known for its extensive tech advances, from acting on consumer data to employing food safety sensors and using video learning for new employees.

“We’re super excited to bring our tech capabilities to apply it to both businesses going forward,” he said. “We’re thinking about how to leverage those capabilities across two unique dining experiences.”

Schulman and Shaich have known each other for years, since Cava opened its second restaurant, but the acquisition started to take shape last spring, when the two hatched plans during the Restaurant Leadership Conference, put on by Restaurant Business parent company Winsight.

“When you have somebody like Ron, with his tremendous accomplishments and experience, we’ll certainly lean on the great insight and leadership that he has,” Schulman said. “That’s just invaluable experience he can bring to us.”

If the deal goes through, the Mediterranean fast-casual chains will have a combined 327 units in 24 states.

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