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Inflation-weary restaurant diners are trading down, up and over. And apparently ending up at Cava.
The Washington, D.C.-based chain on Thursday reported same-store sales up 14.4% for the July 14-ended second quarter, including a 9.5% increase in traffic. That comparable sales result laps an 18.2% increase a year ago, for a two-year sales increase of more than 32%.
The introduction of steak as a protein in June helped boost those results. Filling a perceived beef-sized hole in the menu, the new Mediterranean-spiced steak far exceeded the company’s expectations, driving traffic at both lunch and dinner.
But CEO Brett Schulman said fundamentally Cava is “meeting the moment for the modern consumer,” capturing guests that are trading down from casual dining, trading up from fast food, and trading over from legacy fast-casual players.
Schulman pointed to the wave of discounting in the industry that has been called the “value wars.”
“We believe that’s a misnomer,” he said. “Price is the cost of a meal, while value is its worth and driven by a combination of attributes beyond the headline price, including quality, relevance, convenience and experience.”
With those attributes in play, Cava is perceived as a great value, he said.
But Cava also has kept a lid on pricing.
He pointed to Labor Department data indicating that fast food prices increased about 30% between 2019 and 2023, while the Consumer Price Index grew about 18% in that time. Meanwhile, Cava’s prices increased about 12%.
“So now you’ve got a situation where for a dollar or two more, or often at parity, you can get a bowl of fresh Mediterranean food for the same price as a traditional fast-food freezer-to-fryer meal,” said Schulman.
Cava’s prices increased less than 3% in January, and there are no other plans for pricing this year, he said.
Even in California, where the state raised wages for fast-food workers to $20 in April, Cava has not increased menu prices to accommodate the increased labor costs. Other chains have reported dips in traffic in California as a result of menu price increases, but Cava has seen sustained momentum in the Golden State, he said.
The chain’s average unit volume saw an uptick during the second quarter to $2.7 million, compared with $2.6 million a year ago. Restaurant-level margins also grew to 26.5%, up from 26.1% in the second quarter last year.
Revenues increased 35.2% to $231.4 million, and the company reported net income of $19.7 million for the quarter, up from $6.5 million a year ago.
And despite macroeconomic headwinds, Cava is expecting momentum to continue for the rest of the year. The company raised its guidance for a second time this year, this time significantly.
For the year, Cava expects same-store sales to range between 8.5% to 9.5%, up from previous estimates of 4.5% to 6.5%.
The company is expected to roll out its new-and-improved loyalty program in October, which has been in test in Texas and North Carolina. Members will be able to earn points with multiple redemption options.
And there are other efforts to improve speed of service and ease the pressure on busy restaurants.
The company has been testing an AI-driven video technology called Connected Kitchen that monitors ingredients on the makeline to help teams better prepare and have ingredients ready before they are depleted. The initiative is expected to be piloted in restaurants this fall.
Also coming is a test in 75 restaurants of a new labor model that will focus on putting the right team members in place at the right times. Schulman said the effort could help boost revenue in lower-volume restaurants. The plan is to continue the test with a company-wide rollout in early 2025.
And coming to fruition is the chain’s Project Soul, which is an upgrade of dining rooms to make them a bit more welcoming for dine-in guests, with softer seating, greenery and warmer colors. Schulman said a finalized design will be completed later this year.
“With automation and technology increasingly infiltrating the front lines of many concepts, we believe consumers are seeking human connection more than ever,” said Schulman. “Project Soul provides an environment to foster that connection.”
Cava opened 18 restaurants during the quarter, including moves into Chicagoland for the first time, which Schulman said was the strongest new market entry ever for the brand.
The chain ended the quarter with 341 units, but also increased guidance on openings for the year, saying 54 to 57 new Cava units are expected this year, up from 50 to 54 projected earlier.
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