CAVA in early February confidentially filed an IPO, a move that could shift a recent tide in foodservice. If the fast casual goes public, it would be the first to do so since 2021—a year when five brands hit the market. It’s been a volatile arena since, with the majority of M&A owing more to struggling brands looking to recapitalize and restructure. Rising interest rates have kept outside equity interest tepid as well. Simply, not many brands have wanted to sell when performance was down and the return uncertain, or on the doorstep of what hopes to be a more lucrative stretch.
“I think [the IPO market] is a little bit of a different dynamic,” Nick Cole, head of restaurant and hospitality finance at Mitsubishi UFJ Financial Group told FSR. “I would say CAVA is early in the IPO cycle. Normally, capital pours into early stage recovery industry investments when we start to feel the economic recovery starting. That's when equity owners buy opportunistically into industries like restaurants. And so capital coming into equity, evaluations picking up, I would think that's more of a 2024–2025 phenomenon than it is the second half of this year.”
The thing about CAVA, however, is the brand’s history—both recent and origin—has been anything but routine. In 2022, CAVA posted 83 openings (a figure that includes conversions of Zoës Kitchen venues), entered seven new states and 10 markets, and debuted seven of its digital drive-thru pickup lanes, bringing the total to 17. CAVA is just about finished flipping Zoës over, a move that began in 2018 when CAVA acquired the publicly traded brand in a $300 million deal funded by Panera Bread founder Ron Shaich’s ACT III Holdings. CAVA next revealed a $40 million funding round in December 2019 and announced a $190 million investment, led by T. Rowe Price Group, in April 2021; it reportedly increased CAVA's value to almost $1.3 billion.
For a brand (then known as Cava Mezze) that began in 2006 as a 1,700-square-foot, full-service Mediterranean restaurant in Rockville, Maryland, evolution has arrived at a rapid clip. Ike Grigoropoulos, Chef Dimitri Moshovitis, and Ted Xenohristos joined cofounder Brett Schulman in 2010 to open CAVA as a fast-casual, assembly line brand. And nothing about what’s happened over the years could be characterized as stagnant.
Let’s start with the drive-thrus. CAVA began constructing them in 2018 and opened its first in 2019. The goal being to offer suburban customers broader access to the brand.
Schulman, a father of three, also understood the challenges (impossibilities) parents face when it came to picking up food with kids in car seats. Yet like countless other plans born initially from convenience, COVID changed the rules. Drive-thru went from an access point to the only entry for thousands of sites across America. “Certainly, it amplified the need for that type of channel offering,” Schulman says. “And we leaned into expansion of that format.” All 17 today also have dining rooms, but with dedicated second digital makelines for the pickup window. This flexibility has become a theme for CAVA and one of the reasons it’s positioned to rally from current challenges.
“We find that our guests love the optionality of both those channels, depending on what their need is on a given occasion, or a given time of day, whether lunch or dinner,” Schulman says.
“We always felt the demise of the dining room was greatly exaggerated,” he continues. “It wasn’t an either or, it was an ‘and.’”
The playbook for CAVA as it explores going public is one written on guests’ terms and defined by choice; just as customization catapulted the assembly line category from its inception, so today is the omnichannel experience for those brands built to do so, Schulman says. Customers are asking restaurants for the ability to order where and when they want, from whatever avenue. If they want to procure food like they do products on Amazon, from a mobile device with a confirmation screen, CAVA developed an in-house app that follows the flow of its in-store experience (this recently was reskinned with updated branding. CAVA, last November, also launched a unified website to improve ease of ordering and brought together CAVA.com and order.CAVA.com). If consumers want to dine inside, the brand continues to keep its frontline separate so there’s no bottleneck.
“People want to traffic through our brand and engage with us both digitally and physically,” Schulman says. “So how do we give them that optionality to get CAVA on their terms?”
CAVA has been bracing for this landscape, on some level, for years. Back in 2015, Schulman says, the chain started retrofitting second dedicated digital makelines into units. Every new store got one and existing ones began adding them. CAVA recognized it could run into trouble otherwise.
It was a dynamic taking place at fast casual's top level. As digital poured into the picture, Chipotle raced to add these throughout its business to solve what ultimately became its biggest unlock to revenue expansion—speed across both channels. Customers who ordered ahead weren’t sure where to stand when they arrived in-store. And, behind the scenes, employees were equally struggling to prioritize which meals to make, in what order, to keep the line moving. How to balance and throttle business was mission critical. Adding second makelines essentially segmented Chipotle’s business into two parts, and efficiency followed.
CAVA walked the same line. In both cases, they were moves ahead of COVID's digital tidal wave. “There’s nothing more frustrating than being in our assembly line format and waiting for your order to be built and having a team member build a digital order in front of you and have to wait,” Schulman says. “That’s not what we wanted. So we focused on not just setting up our guest for success, but also setting up our operators for success with those second digital makelines.”
It signaled a shift in the operator mindset. CAVA began rewiring restaurants from a digital ecosystem standpoint, building infrastructure in order to manage order flow. The company developed fixes in-house, such as throttling capabilities “so that [employees were] not just drinking from a firehouse.”
“And also,” Schulman says, “so we’re able to deliver on that promise time for our guests.”
All of CAVA’s channels have grown “significantly” over 2019, he adds. Comps are up. As a percentage, digital might be off its peak as dine-in rebounds (the same is true of nearly every chain these days), but the dollars have grown. In-restaurant sales currently mix more 63 percent of the business.
Before COVID, CAVA's digital platforms represented 20 percent and as high as 50 percent in some urban locales. At apex, it reached 70 percent.
The present reality is two-pronged, where CAVA’s dine-in traffic has flooded back and its digital remains elevated. But the key, Schulman says, to any of that holding up is operationally executing against both without detracting from either. Customers who walk in can’t get stuck behind digital; and those order-ahead times have to be accurate or guests won’t trust the experience.