Dive Brief:
- Cava’s same-store sales grew by 14.4% in Q2 2024 and traffic was up by 9.5% year-over-year, placing the fast-casual chain squarely in the winners column for the quarter, according to the chain’s earnings release emailed to Restaurant Dive.
- Brett Schulman, CEO of Cava, said the company is seeing consumers trade down from casual dining, trade up from QSRs and come in from other fast casual chains, drawn by its value proposition and menu variety.
- Unlike many other chains that raised menu prices in California, Cava did not take incremental pricing in the state as a result of the state’s $20 fast food minimum wage, which took effect in April.
Dive Insight:
Schulman said Cava’s refusal to raise prices in response to AB 1228 helped Cava outperform competitors. Its wages were already closer to California’s minimum wage so any wage hikes were not a shock to the company’s costs, he said.
“We've driven great traffic momentum in California. Others have commented about seeing decelerating trends, we have not,” Schulman said. “We have this philosophy of continuing to reinvest in the business, reinvest in our guests, that creates long term, sustainable restaurant-level, margin expansion.”
Cava's same-store sales growth
The chain’s restaurant-level margins rose from 25.2% in Q1 to 26.5% in Q2, driven primarily by sales leverage.
Schulman attributed the chain’s success to its value proposition, which he said was strengthened by a variety of factors. But at base, he said, is the divergence between Cava’s menu pricing and inflation.
“If you look at the end of ‘19 to the end of 2023, we raised prices about 12% during that time period. [The Consumer Price Index] grew 18%. [The] Department of Labor has noted fast food prices [rose] upwards of 30%. That's magnified our relative value proposition,” Schulman said.
The chain undertook several major initiatives in the quarter. Notably, Cava added grilled steak to its core menu in June. While the protein was somewhat of a headwind on margin, Schulman said, it was neutral in terms of its impact on absolute profit. Aside from that, steak outperformed Cava’s expectations — based on market testing — by about 20%.
The chain also entered the upper Midwest in Q2 with two stores in the Chicago area and has seen considerable sales success at its first new units.
“It is our best new market opening ever,” Schulman said.
The primary challenge facing Cava, Schulman said, is the difficulty of opening new restaurants and training sufficient leaders to keep pace with the chain’s projected 54 to 57 new openings in the year.
“Restaurants do not scale like software-as-a-service,” Schulman said. “It takes a lot of people, a lot of process, building physical restaurants and a lot of training. And so we're focused on training our future leaders.”