How does Cava do it?
While most of the restaurant industry grapples with traffic declines while swimming through a flood of competitive discounts, Cava remains seemingly above it all. Traffic grew nearly 13% in the third quarter, which was even more than the 9.5% increase in the quarter just prior.
And the fourth quarter is likely to carry on that upward trend, given the company has raised its guidance for the year, saying same-store sales are expected to range between 12% and 13%.
Among publicly traded restaurant companies, that’s second only to Wingstop, which reported same-store sales up 21% for the third quarter, almost entirely driven by chicken-sandwich-loving traffic. Wingstop expects same-store sales to reach 20% for the year.
Fast casual, in general, is faring much better in this value-focused macroeconomic climate, compared to quick-service and casual-dining players. Chipotle had a strong quarter, with same-store sales up 6% including traffic up 3.3%. Sweetgreen also up 6%, with 2% of that from traffic and menu mix.
But Cava has outpaced the fast-casual segment throughout this year, according to Placer.ai, which this week reported visits to the Mediterranean chain grew during the third quarter by 27.5%, while visits within fast casual more broadly increased only 2.2%.
Year over year, visits per location to Cava grew 9.9%, Placer.ai said. And those visitors represented an ever-widening customer base, from younger singles with lower incomes to “ultra-wealthy families.”
In reporting third-quarter results on Tuesday, Cava CEO Brett Schulman said, “Mediterranean is meeting the moment.”
Fundamentally, guests are coming to Cava because the food is delicious, healthful and convenient, and they feel it’s a good value for their money, he contends. And in the world of hummus, falafel and addictive pita chips, Cava is riding a wave as the clear category leader.
Cava ended the third quarter with 352 units. The next largest Mediterranean concept is the (franchised) Taziki’s Mediterranean Café, which is scheduled to open its 100th unit next week in Texas.
“I feel very good about our position as the category defining brand and clear leader,” said Schulman, in an interview with Restaurant Business on Wednesday. “Most people are now going to have to adapt to what we’re doing and what we’re defining, because we are defining the category.”
Chipotle recently invested in a six-unit Mediterranean chain out of Ohio called Brassica, which could bring a new player into the sandbox. But Schulman dismissed the move with a shrug.
“It’s a great validation of Mediterranean as the next major cultural cuisine category,” he said.
It will be some time before any other Mediterranean player comes close in unit count, which is a benefit Cava will likely enjoy for some time.
“What we’ve seen over history is a pattern of winner-take-all dynamics,” Schulman said. “That the best in breed tends to create outsized performance and ownership of the category.”
He points to the more than 3,600-unit Chipotle, for example, with nearly $10 billion in annual revenue, while secondary Mexican-inspired fast-casual players Moe’s Southwest Grill and Qdoba have not reached $1 billion in revenue.
Likewise, he pointed to Panera Bread, back in the day when Ron Shaich was running the company. At the time, the next closest competitor was Corner Bakery, which ended up filing for bankruptcy. (Shaich, it should be noted, is chairman of Cava’s board and has been a considerable force in shaping the Mediterranean chain’s growth trajectory.)
And Starbucks, despite its recent challenges, remains by far the largest coffeehouse chain in the U.S., Schulman noted.
But, he added (and watchers of Chipotle, Panera and Starbucks will likely agree): “It is really hard to scale restaurants”—at least without diminishing the quality of food and the economic model that keeps it affordable.
Here’s how Cava expects to maintain its best-in-breed status:
It has plenty of room for (measured) growth: Cava expects to open as many as 58 restaurants this year, and unit growth is expected to continue next year at a rate of about 17%, all company owned. Schulman has a goal of reaching 1,000 units domestically by 2032. That’s not a destination, he notes, but just a milestone.
Units opening in new markets, like Chicago, have exceeded expectations. Cava is moving into south Florida next, and will continue to both fill in existing markets and open in new cities. As the brand grows, so does brand awareness. Schulman estimates that Cava’s brand awareness has grown by 8 percentage points since it went public last year.
And Schulman sees Cava as potentially a global brand, though not any time in the near future.
“It’s easy to chase every opportunity that’s in front of you,” he said. “But often what you say no to is more important than what you say yes to.”
Investments in infrastructure: Over the past 14 years, Cava has made some significant investments to position for growth. A key move was building two manufacturing facilities, where the sauces and dips that spice the menu are produced, both for retail channels (another growth opportunity) and restaurants. Together, they have the capacity to supply up to 750 restaurants.
That ensures that the taziki will continue to be made with real cucumbers and dill, for example, maintaining consistency and quality. And it removes significant complexity from restaurant kitchens.
Balancing technology with hospitality. While other chains are looking for efficiencies with kiosks and automated makelines, Schulman bemoans how many players in the industry have become increasingly “transactional.” He drills the phrase “heart, health and humanity” into every brand communication, saying consumers today want human engagement.
More than 60% of revenue is generated in restaurants at Cava, and the brand is adding more elements of warmth into units, like softer seating and plants. Workers are encouraged to “hit the Love Button” to give out free meals when they feel it might lift someone’s spirits.
That’s not to say Schulman is anti-technology, but he tends to keep it back of house. Cava has rolled out a new AI-fueled labor deployment model, for example, and the chain is testing a Connected Kitchen initiative that helps restaurants better predict how they should prep, batch cook and schedule.
Schulman said he’s even open to exploring the use of an automated makeline—like competitors Sweetgreen and Chipotle—but only for the secondary digital makeline behind the scenes. The front line is for human engagement.
It’s all about giving the guest options, Schulman said. Sometimes people want to meet a friend, build their meal and sit, and other times they want to order online, pick up quickly and go. At Cava, they can do both.
“We have the opportunity tens of thousands of times a day to touch people’s lives, and hopefully in a positive way,” he said. “It’s not about consumption. It’s about connection.”
Commitment to culture. Schulman said, early on, he used to worry about maintaining a culture of hospitality as they grew the fast-casual chain. He said he once asked famed restaurateur Danny Meyer about it over lunch. Meyer, of course, literally wrote the book on hospitality (“Setting the Table: The Transforming Power of Hospitality in Business”), which is widely read in the industry.
Meyer told Schulman that you don’t maintain culture as you grow.
“He said, 'You’re always evolving it and nurturing it. The culture you have at 50 units is different from 500 units,'” said Schulman. “It always stuck with me, that culture isn’t static.”
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