Even with off-premises having taken the quick-service industry by storm, CAVA never stopped believing in the power of dining rooms.

Its finalized 3.0 store design proves as much. The latest prototype will “create a more inviting physical space for the in-restaurant occasion,” according to CEO Brett Schulman. The shift won’t come with a change in square footage or significant costs.

“This is really about warming up, using some of our fresher palette, colors, and environmental aspects, and softer seating. We think we have a great opportunity,” the executive said during CAVA’s Q4 earnings call.

In-store dining mixes 64 percent. Restaurants are typically 2,000 to 3,000 square feet and sit about 35 to 55 guests indoors. Like Chipotle, CAVA uses an assembly line model in which in-store customers pick out their ingredients and watch employees put their meals together.

Schulman said the new layout is part of CAVA’s desire to deliver on its value proposition, which the chain defines as quality, relevance, convenience, and experience. The first two are taken care of by the Mediterranean menu; the cuisine has been ranked as the No. 1 diet seven years in a row by U.S. News & World Report. In terms of convenience, CAVA’s digital channels account for 36 percent of sales. The brand has responded by using pickup shelves inside restaurants and opening 31 units with pickup lanes.

When it comes to delivering a valuable experience, in-store ambiance becomes a priority.

“We think we can deliver great experience in an enhanced dining room aesthetic to drive even greater physical occasions as we drive greater digital occasions,” Schulman said. “So we’re just kind of reimagining how we show up in our dining rooms to make it more inviting and drive greater in-restaurant occasions and occasions across all channels.”

READ MORE:

CAVA CEO: Restaurants Will Return to ‘Human-Based Hospitality’

CAVA Looks to Lead ‘the Next Major Cultural Cuisine Category’

CAVA’s Life as Public Company Off to Sizzling Start

The announcement comes on the heels of continued sales and traffic momentum. Comps grew 11.4 percent in Q4, including a 6.2 percent bump in traffic. In full-year 2023, same-store sales lifted 17.9 percent, including a 10.4 percent rise in traffic. CAVA’s restaurant-level profit margin was 22.4 percent in the fourth quarter, an increase of 240 basis points compared to the year-ago period. The increase was caused by sales leverage and lower food, beverage, and packaging expenses. The margin growth was partially offset by incremental wage investments. Net income was $2 million, versus net loss of $18.8 million in Q4 2022. AUV was 2.6 million in 2023, up from $2.4 million in 2022.

Schulman told QSR in December that CAVA leadership “always felt the demise of the dining room was greatly exaggerated.”

“I think what we all learned through the pandemic was we are social beings. We’re humans,” the CEO said at the time. “We love connection. We long for that connection.”

He feels the incorporation of digital features doesn’t have to make customer dining habits an “either-or” situation. The chain believes that digital and physical can co-exist, and it wants to offer comfortable channels for customers to get food however they please. So while CAVA tinkers with its dining room, the brand is also launching a new loyalty program aimed at developing deeper connections with customers and establishing more frequent visits. Toward the end of 2023, the fast casual transitioned loyalty guests in the Houston market to a new construct that allowed them to earn and bank points. It began testing new types of rewards to redeem and ways to engage customers. That pilot will expand into the Carolinas market and roll out nationwide by the end of 2024.

CAVA has found that digital and dining rooms work well together in units with pickup lanes. These restaurants have a higher AUV and slightly better restaurant-level margin.

“Our focus is driving that cash return that we possibly and making sure that we’re exceeding the 35 percent target for cash-on-cash return and really delivering a lot of value,” said CFO Tricia Tolivar. “What we don’t want to do is feel a lot of pressure to really go into a site and compete with a Raising Cane’s or a Chick-fil-A on something that we really can’t underwrite in the same way and get us in a spot that doesn’t drive those returns in the attempt of the immediate goal to have as many pickup lanes as possible. Great news is we perform really well, whether we’re in-line, freestanding, or have a pickup lane. And so we’re just making sure we can optimize those returns in the best way possible.”

The enhanced store configurations will be rolled out as CAVA works through its Connected Kitchen initiative, which promises to make restaurants easier to operate. Schulman described it as a multi-year journey toward taking complexity off of employees’ plates. This means adding another layer of sophistication, like predictive scheduling, prep, and cook batching using data and AI models.

CAVA also believes it has opportunities to streamline labor deployments and recalibrate throughput.

“From an operations metrics, we have our proprietary scorecard where we have seven key operating and financial metrics that we track that incorporates customer experience scores to management of COGs and labor, ensuring accuracy, consistent portions, as well as food safety adherence, and accountability,” Schulman said. “We are looking at throughput opportunities as well. We think that they exist, but we want to make sure we’re not pushing on the gas pedal too far, too fast. And so we are testing some different labor deployments to take advantage of that opportunity as the year progresses.”

Another way CAVA is reducing complications in the back of house is by opening a new 55,000-square-foot manufacturing facility in Virginia. The factory produces dips and spreads and can support at least 750 restaurants and growth of the CPG business, along with the existing facility in Maryland.

The chain finished 2023 with 309 restaurants after opening 73 stores and closing just one. CAVA accelerated its growth by purchasing Zoes Kitchen in 2018 and spending the past few years converting those units into CAVA restaurants. The final conversion opened on October 20.

This year, CAVA expects to open 48 to 52 net new stores, experience same-store sales growth between 3 and 5 percent, and swing a restaurant-level profit margin of between 22.7 percent to 23.3 percent.