Dive Brief:

• Cava Group, which went public in June, expects to open 65 to 70 net new restaurants this year, Cava CEO and President Brett Schulman said on Tuesday during an earnings call. 
• The chain, which only has company-owned units, is building its 2024 and 2025 pipeline to support an annual unit growth rate of roughly 15%, Schulman said. 
• During the second quarter, the company opened 16 net new restaurants. It ended the period with 279 units, a 43.1% increase year-over-year, he said.

Dive Insight:

Cava’s development pipeline will bring it into new markets, including Chicago, where it will open for the first time next year. During the most recent quarter, it expanded into Missouri and Rhode Island and added more restaurants in Massachusetts, Texas, Georgia and Colorado, Schulman said. Its current expectation of new units will also push it past 300 units by the end of the year.

The brand is starting to move away from unit conversions, which stemmed from its 2018 buyout of Zoës Kitchen. During the quarter, it opened 10 new restaurants and six conversions, Schulman said. It has two conversions set to open during the third quarter, and the rest of the openings will be new units, he added.

Cava’s ongoing development has bolstered same-store sales growth of 18.2% during the quarter, and total restaurant-level profits of $44.6 million, up 91.9% compared to the year-ago-quarter. Restaurant-level margins increased 400 basis points over the prior-year quarter, reaching 26.1%, according to the company’s earnings release. Average unit volume reached $2.6 million.

Cava reported positive net income of $6.5 million, compared to a net loss of $2.1 million during the first quarter and a net loss of $8.2 million during the year-ago quarter. It’s unclear if this profitability will be sustainable, as the company has operated at a loss since 2016, but its current trajectory shows at least near-term profitability. 

Brand awareness following its IPO helped contribute to strong traffic growth, which was up 10.3%, CFO Tricia Tolivar said, adding that the company has seen see strong traffic trends early in the third quarter as well. 

To prepare for new openings, Cava created its Academy GM Network, which use a pool of its highest-performing general managers to support new restaurant openings. These GMs are certified to “develop and train new GMS and lead training restaurants,” Schulman said.

This leadership system is helping minimize pre-opening costs by creating training hubs in growth areas, he said. The company currently has 39 Academy GMs, including seven who were promoted to multi-unit leader positions. It expects to have 50 Academy GMs by the end of the year.  

Despite coming to the end of its Zoes conversions, which take less capital to complete than new development, Cava is seeing strong sales and profitability in its newest restaurants. 

“Our new restaurants are exceeding our expectations as we deliver against our underwriting models that we have for those restaurants themselves,” Tolivar said. “We're not anticipating a significant negative impact on overall restaurant-level profit margins as a result of the new openings either this year or going forward.”

The company has over 20 digital pickup lanes across its system and expects to add more of these lanes as part of its portfolio in the future, Tolivar said. These units tend to have 10% to 15% higher AUVs compared to other locations in the same markets, she said.