Booming Mediterranean-focused fast-casual restaurant chain Cava Group plans to enter South Florida and expand in the Midwest next year, riding the momentum from its recent sales climb while some other U.S. restaurant chains struggle.
The Washington, D.C.-based company, which has 352 restaurants, reported this week that its third-quarter revenue increased 39%, to $241.5 million, compared with $173.8 million in the prior-year period. Same-restaurant sales increased 18.1%, with guest traffic growth of 12.9%. The company expects to increase its restaurant portfolio by 17% in 2025.
"Cava was one of just a few publicly traded restaurant brands with strong growth in the third quarter," Brett Schulman, the chain's co-founder and CEO, said during an earnings call Tuesday. "It is clear that our value proposition, quality Mediterranean cuisine where taste and healthy unite, the convenience of our multichannel format, and the experiences we provide across our physical and digital channels is resonating with consumers."
He touted Mediterranean food as "America's next major cultural cuisine category," with new Cava restaurants exceeding sales expectations. But while Schulman and Cava Chief Financial Officer Tricia Tolivar said the company is eagerly growing its brick-and-mortar footprint, it is doing so cautiously.
A number of restaurant chains — with a few notable exceptions such as Chipotle Mexican Grill and Shake Shack — have been reporting lackluster or lower results for the third quarter in the face of higher expenses due to inflation and rising labor costs and consumers pulling back on discretionary spending. The year has been marked by restaurant owners closing locations and, in several cases, filing for bankruptcy protection.
By contrast, Cava has been a success story, even as a fellow Mediterranean restaurant operator, Chicago-based Roti sought Chapter 11 protection in August, providing evidence that the Mediterranean concept isn't foolproof.
Growing in Chicago
According to Schulman, Cava ended the third quarter with 11 net new restaurants.
"We are growing in new markets like Chicago and existing markets including Texas, California, Virginia, South Carolina, Tennessee and Oklahoma," he said.
He added that "our 2024 new restaurant classes are (our) strongest yet, outperforming our expectations and giving us even more confidence in the proven portability of our category-defining brand."
Schulman also updated Wall Street analysts about Cava's expansion plans for next year.
"We have significant white space in front of us and our 2025 restaurant pipeline is strong and growing," he said. "On the heels of our successful market entry into Chicago, we are excited to announce that we expect to enter South Florida early next year and expand our Midwest presence with at least two additional new markets in 2025."
Balanced pipeline
Cava registered 73 net new restaurants during or subsequent to the third quarter last year, according to Tolivar. The company anticipates new-unit growth of at least 17% over 2024, with "tremendous white space ahead of us," she said.
"We also want to make sure that we've got a good balance of growth in new and existing markets and our new markets are performing really, really well," Tolivar said. "So when you're talking about new restaurant openings, we've often shared our approach to have a very balanced pipeline — so with 10% to 20% in established markets and 20% to 30% in greenfield or brand new markets and the bulk of our openings in our growth and emerging markets. As you pointed out, our new restaurants have been performing really well, and so that gives us the opportunity to lean into those greenfield markets."
The company also raised its full-year guidance for 2024, expecting to open 56 to 58 net new restaurants, up from 54 to 57.
Unlike other restaurant chains that are pivoting to focus on take-out and drive-through, Cava said offering space for dining is a key differentiator. It seeks to provide "softer seating, more greenery, and a warmer brand palette," according to Schulman.
"For some time, we've been at the forefront of a contrarian point of view, but the demise of the dining room is greatly exaggerated," he said. "In addition to convenience, consumers are looking for warm, welcoming places to dine with family and friends... For the modern consumer who craves bold, adventurous flavors, is increasingly mindful of their well-being, and sees food as cultural currency and a form of self-expression, Mediterranean is meeting the moment. We believe the category is at a tipping point and as evidenced by our accelerating growth in each market we enter and with every restaurant we open."