Cava CFO Bets on Distinct Menu to Attract Consumers

Even as consumers are facing pressure on their wallets, Mediterranean-style restaurant chain Cava Group is betting that its ingredient mix and the challenge that comes with re-creating its menu offerings at home will keep its locations busy.  

Consumers are continuing to spend even as they are grappling with inflation on everything from gasoline to groceries, and staring down the resumption of student-loan repayments after a more than three-year pause. But they are starting to make more judicious decisions about where they take their dollars, buying cheaper and fewer items at supermarkets and cutting back on eating out at restaurants, or ordering less when they do visit. 

Cava’s menu items, which include spicy falafel, tzatziki and harissa honey chicken, are tough to replicate at home, Chief Financial Officer Tricia Tolivar said. That, she said, is a key to consumers continuing to spend at Cava locations. 

“This is certainly not something you can whip up at home when you’re trying to be quick and efficient,” Tolivar said. The restaurant chain imports feta from Greece for one menu item and pickles onions in house for another, she offered as examples. Cava’s bowls can be purchased for around $11, Tolivar noted.

Since opening its first fast-casual restaurant in 2011, Washington-based Cava has expanded to 279 restaurants across 24 states and the District of Columbia. The company acquired then-publicly traded Zoës Kitchen in 2018 and has converted its restaurants into Cava locations to help with its expansion. The company plans to have at least 1,000 restaurants in the U.S. by 2032. 

Cava recently went public, posting a profitable quarter this month in its first earnings report since its initial public offering in June. Same-store sales rose 18.2% for the quarter ended July 9. Traffic grew 10.3% and revenue rose more than 62%, to around $171 million compared with the prior-year period.

Still, same-store sales growth has moderated recently, Tolivar told analysts this month. And more diners have shifted from delivery orders, which tend to be pricier because of added fees, to picking up their pitas, bowls and salads.  

Cava is sensitive to the potential stresses on consumers’ budgets and is planning to hold prices steady through the remainder of 2023. The decision comes after Cava lifted menu prices about 4% at the beginning of the year and as other chains, such as McDonald’s and Denny’s, have told investors that they don’t expect to keep raising prices as steeply in coming months as their U.S. costs have started to stabilize.

“We just want to be mindful of the uncertainty around the macroeconomic environment and what impact that may have on our guests, whether it’s the rising gas prices or the student-loan repayments that are going to be coming here shortly,” Tolivar said. 

Analysts are watching to see how demand for Cava’s menu items holds up and whether the company can hold the competitive corner on its offerings. Some are optimistic. “There’s going to be competition; there always is in this industry,” said Andy Barish, a senior restaurant equity research analyst at Jefferies. “But I think the way they do it, and the consistency with which they do it, is the differentiator,” he said of Cava.

Write to Jennifer Williams-Alvarez at [email protected]