CAVA CEO Brett Schulman isn’t always one to stop and smell the roses. His eyes are typically focused on the road ahead. But he certainly paused to savor the moment before ringing the opening bell on the New York Stock Exchange on July 15, 2023.
Thirteen years earlier, he was pitching the concept to family and friends, hoping to raise enough funds to build a few units and prove there was demand for Mediterranean fare served in a fast-casual format. A broader vision to define a category blossomed as CAVA climbed its way to national prominence. Now, the fast-growing company was notching a major milestone with its public market debut.
“You only get a handful of moments in life that are so memorable,” Schulman says. “But as I said to the team the night before the IPO, that wasn’t the destination. It was the beginning of the next chapter of our journey.”
That chapter started with a sizzle that was only getting hotter. CAVA’s stock price nearly doubled after Schulman rang the opening bell, pushing its valuation to $5 billion and giving it one of the strongest first-day gains in recent memory.
Trading on the stock market is a different animal that comes with high-stakes expectations from investors. It’s not unusual for Wall Street to push so hard for growth that companies lose sight of the fundamentals. CAVA isn’t concerned with day-to-day moves in its stock price, though, and it isn’t letting its status as a public company push it into short-term thinking.
“People can get distracted by changes and fluctuations in the market, but we’re staying focused on what’s right for the business over the long term,” says CFO Tricia Tolivar. “We’ve always thought ahead and tried to understand what we need to be doing now to bring things to life in the future.”
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Case in point: After restaurant margins blew past expectations last year, the company turned around and made a multi-million dollar incremental investment in wages and benefits. Executives told investors the move would have a 100-120-basis-point impact on store-level profitability going forward. That hit was well worth the gain for a chain plotting aggressive expansion in a competitive labor market.
“We said, ‘Listen, don’t take this as the new normal. We’re going to create shareholder value, yes, but we’re going to reinvest in our team and reinvest in our guests,’” Schulman says. “We’re setting the precedent with our public stakeholders that we’re building something not for the next 10 weeks or the next 10 months, but for the next 10 years.”
The chain’s rapid ascension owes to that long-term view. It invested in a vertically integrated production model long before it was primed to grow. It introduced pickup windows and secondary makelines well ahead of the pandemic’s digital tidal wave. And it’s continually upped the game on the employee experience—a key ingredient that goes hand-in-hand with the heightened hospitality that’s as much a part of its DNA as its health-forward fare.
More than a decade of continuous transformation propelled the fast casual to its next chapter. There’s plenty more evolution to come. Beneath it all is the enduring idea of “bringing heart, health, and humanity to food.” It’s a premise that hatched nearly 20 years ago with a menu of small plates served tableside in a quiet East Coast shopping center.
Full Service to Fast Casual
CAVA’s story starts in 2006, when founders Ted Xenohristos, Ike Grigoropoulos, and Dimitri Moshovitis opened a full-service concept called Cava Mezze in Rockville, Maryland. It paid homage to their parents, who were first-generation Greek immigrants and lifelong service industry workers, in a few ways. First was a menu inspired by recipes from their childhood. Second was an internal culture that wasn’t predicated on churn and burn, which in turn fostered a warm and welcoming atmosphere.
They started selling dips and spreads in local grocery stores a few years later. That’s where Schulman enters the picture. He got involved as a consultant for the CPG side of the business in 2009, lending his experience running a snack brand to help the group navigate the retail landscape.
An offer to join as the fourth partner came a year later. It only took a single meal at the restaurant to seal his decision.
“I didn’t tell the guys I was going to dinner there because I wanted to see how they ran their business,” Schulman says. “I was struck by how happy the team was, how broad the appeal of the menu was, and how good I felt after eating the food. So, I went to them the next day and said, ‘I’m in, but have you ever thought about taking what you do in full-service and putting it in a fast format?’”
Riding the crest of fast casual’s exploding popularity, the team saw an opportunity to bring their Mediterranean cuisine to a broader audience. It took some time to figure out how the food would translate from a made-to-order format in a full-service setting to a more convenient quick-service environment. They landed on a walk-the-line model for a few key reasons.
“I’m kind of impatient, so I loved the idea that you have your food when you get to the register no matter how long the line is,” Schulman says.
More importantly, customization was starting to take hold throughout the industry, and this was the perfect format with the perfect pantry for guests to tailor their meals to their preferences. Plus, it supports high volumes with a labor-efficient production format.
“That allows you to take some of that efficiency and invest in higher-quality ingredients, which we could already tell people were gravitating to,” Schulman says. “There’s that struggle of wanting to eat better without necessarily making a bunch of sacrifices. That’s where our food comes in with legumes, Greek yogurt, olive oil, chickpeas, and all of these things that are satisfying and healthy at the same time.”
Armed with $2 million in investments from friends and family, the group set out to open three locations in different types of trade areas throughout the Washington, D.C. metro area. Store number one came online in early 2011. Two and three followed a year later. There were some lessons around sourcing and kitchen processes that helped improve consistency. CAVA introduced Community Days that offer free meals and match donations for local charities to address tepid traffic at one of those initial stores. The tradition has been upheld with each new restaurant since then.
The partners personally guaranteed a loan for the next few units after working through those early kinks. The goal was to get to five units, gain a deeper understanding of what was and wasn’t working, and “really own the model” to potentially scale further.
“I think we realized we had something that could become much bigger when we opened our fifth restaurant,” Schulman says. “Our Community Day had long lines. The other restaurants were really accelerating their growth. We could see it all start to come together and clearly resonate with consumers.”
By 2015, CAVA had eight stores and another three on the way in its home market, plus $16 million in fresh funding to fuel its expansion on the West Coast. It marked the beginning of a “Coastal Smile” strategy aimed at following population migration trends toward the Sunbelt and the suburbs.
Things kicked into hyperdrive a few years later when the company acquired Zoës Kitchen for $300 million. The purchase was financed through a significant equity investment in CAVA led by Act III Holdings, the investment vehicle created by Ron Shaich, founder and former CEO of Panera Bread.
At 261 units, the competing Mediterranean fast casual was much larger than CAVA, with high-quality sites that Schulman says were “way underperforming their potential.” The main thesis was that this real estate could rapidly accelerate CAVAs expansion under its new growth framework.
“We also thought that scale was going to matter more than ever, and that technology was a big driver of that bifurcation into the haves and the have-nots—those that have the necessary resources to invest in delivering relevant, differentiated guest experiences and have the business insights to compete in a modern world, let alone have the resiliency in their business model to withstand COGS and labor inflationary pressures,” he says.
Zoës was a “melting ice cube” with slumping sales and stagnating traffic when the deal closed in November 2018, Schulman adds. His team just needed to make sure it didn’t turn into a puddle before they flipped all of its units into more productive CAVA locations. The scope of that challenge came into full view within a week of operating as a combined entity. Same-store sales at Zoës, which were declining in the low-single-digits during negotiations, suddenly tanked nearly 12 percent.
The team was already formulating how to shore up the business, but it wasn’t anticipating that level of comp deceleration, so its attention immediately turned toward triaging the newly acquired brand.
“We were just holding the line and trying to keep our head above water,” Schulman says.
It was a classic case of menu creep breaking operations. The newly acquired brand had 276 ingredients in its pantry, a third of which weren’t cross-utilized. CAVA spent the better part of a year eliminating some of the complexity and stabilizing Zoës before executing any conversions.
The first test came in late 2019. It cost $600,000 to repurpose the store versus the $1.2 million CAVA was spending on new builds. The result? Weekly sales doubled from $25,000 to $50,000.
Emboldened by the post-conversion performance lift, the company started pushing harder and faster on the project, even amid the pandemic. It flipped eight restaurants into the primary brand in 2020. Another 117 were completed over the next two years.
Going Public
CAVA announced its plan to go public last spring after confidentially filing to do so earlier that year. The idea started percolating during the 2021 IPO boom. Krispy Kreme, Dutch Bros, Portillo’s, First Watch, and sweetgreen all went public that year.
Naturally, CAVA’s board asked Schulman and Tolivar if they thought the company was ready to take the plunge.
“Operationally and organizationally, it just didn’t feel like we were as fine-tuned of a machine as we needed to be,” Schulman says. “The board didn’t put any pressure on us. They just said, ‘OK, got it. But if we were going to operate as a public company, whether we ever go or not, what would you need that you don’t have?’”
Tolivar said she’d upgrade the controller to a chief accounting officer, bring in a financial planning and analysis leader with investor relations experience, and review all of the internal controls. Schulman wanted a line of sight into the end of the Zoës conversions and a clear sense of when the company would get back to a single-brand state. He also wanted to see less variability on the scatterplot tracking store-level performance metrics.
“You’d have restaurants in the same area ordering at the same prices with similar rent and revenue, but there’d be a 400-basis-point delta in performance,” he says. “We needed to be more consistent.”
The question of going public resurfaced at a board meeting in January 2022. That scatter plot was tighter, but the answer was the same—“We’re not quite there yet.”
The company embarked on a non-deal roadshow that summer. Executives met with dozens of public participants to socialize the story around the conversions and gain feedback on the business to help shape the strategy going forward. Those conversations, coupled with ongoing improvements across the business, sparked a change of tune when the question came up again at a board meeting in August.
“Tricia and I looked at each other and said, ‘Actually, we feel really good about it,’” Schulman says. “We felt like we were hitting our stride. We’d achieved that operating consistency we were striving for. We had that line of sight into the last conversion in 2023.”
They mapped out a timeline, looking six to nine months ahead toward the end of a rate hike cycle, and began conducting audits, filling out the finance team, and drafting mock earnings releases and public filings. CAVA even staged a few practice earnings calls to give everyone a sense of what it’s like fielding questions from investors.
“We leveraged our board and other team members to get feedback on how we were distilling information and articulating our strategy,” Tolivar says. “For us, the most important thing was working as a team to communicate the power of the brand and what we have to offer so that when we were doing it for the first time live, it wasn’t nearly as daunting as it might have been otherwise.”
CAVA could’ve achieved its five-year plan without accessing additional funding beyond the credit facility it had in place, but there were a few things that made it worthwhile to go public.
“We thought it would bring tremendous awareness to what we’re doing and the food we’re serving,” Schulman says. “It would really fortress our balance sheet so that if there were any economic challenges on the horizon, we could be steadfast in our strategy of defining the category and building out this national brand, and we could do it the way we wanted to do it.”
The Road Ahead
CAVA netted 153 restaurants from the conversion journey, which came to an end last fall when the last of the remaining 28 Zoës locations reopened under a new banner. It opened 72 stores in 2023, including 28 conversions, and exited its first year as a public company with 309 units in 24 states and Washington, D.C.
CapEx requirements for new builds are now substantially higher for the solo-minded growth brand as it searches for its own properties. But it has an expanded capital base to fund its expansion and a goal of putting 20 percent of its pipeline each year in greenfield markets. There’s plenty of whitespace to plant flags in new territories, including the Midwest. Growth in that region commenced this spring with the first of many planned restaurants for the Chicago market.
A few infrastructure points are working behind the expansion curtain. There’s a new dips and spreads manufacturing facility in Virginia that came online earlier this year. Tolivar says the site, combined with an existing facility in Maryland, will support 750 restaurants alongside the brand‘s CPG arm.
Most importantly, from her perspective, CAVA is cultivating an internal pipeline of leaders it can deploy across new openings. The idea is to sprinkle “cream of the crop” GMs across the country—one per each cluster of eight restaurants—who train and develop new GMs.
“This program is critical to the future success and growth of the company overall,” Tolivar says. “You have to find the right real estate, but if you don’t have the right GM, it doesn’t matter. We anticipate growing at least 15 percent per year, and we want to make sure we’ve got that pipeline of new GMs so that we’re ready to grow and open those restaurants in a very powerful and meaningful way.”
CAVA is targeting 15 percent annual growth as part of a broader goal to reach the 1,000-unit threshold by 2032. Much like the endless customizations presented in the walk-the-line model, it’s going to get there with diversified formats and a playbook written on the customer’s terms.
Prototype innovation in the fast-casual segment has leaned heavily toward shrinking footprints and fewer, if any, seats for in-store dining as more resources shift toward growing off-premises sales. In-store dining still accounts for roughly two-thirds of CAVA’s sales, though, and Schulman sees a chance to win over guests seeking alternatives to pricier casual-dining experiences in a post-pandemic, post-inflationary environment.
“The traditional full-service chain model is challenged to deliver a relevant value proposition to modern consumers, and quick-service is moving away from dining rooms,” he says. “I think that’s creating an opportunity and space in between.”
CAVA is reimagining how it shows up in the dining room with its new 3.0 store design. The latest prototype features softer seating, a fresh color palette, and other visual updates aimed at driving greater on-premises traffic.
“In a world that’s increasingly permeated with technology, people still crave that human connection,” Schulman says. “So, we think there’s a real opportunity to enhance our physical experience and grab even more of those full-service occasions in our multi-channel format.”
Ultimately, the goal is to increase access to the brand and improve its adaptability across trade areas. That means offering comfortable channels for customers to get their bowls and pita wraps however they choose. So, while it’s tinkering with the ambiance to drive in-restaurant occasions, it’s also continuing to invest in store models that cater to digital channels and off-premises occasions.
About 10 percent of CAVA’s footprint featured digital-order drive-thru lanes heading into 2024. They boast higher AUVs and stronger restaurant-level margins. The company wants to see them make up a larger portion of the portfolio going forward. Since those sites typically come with higher real estate and construction costs, the priority is achieving cash-on-cash returns exceeding 35 percent, instead of chasing a specific quantity.
Group settings offer another opportunity to meet guests on their terms, and new formats geared toward launching a full-scale catering program are entering the fray. There’s a digital kitchen prototype that doesn’t have an in-restaurant serving line. It’s strictly for digital order pickup and delivery courier pickup, plus catering hub production. There’s also a hybrid kitchen model with a serving line, a digital makeline, and a 300-square-foot kitchen to support centralized catering production.
These new formats are just the latest example of CAVA’s constant recalibration amid shifting consumer tides. It recognized the growing adoption of digital tools early on and adapted accordingly, introducing a mobile payment and loyalty app in 2013, followed by dedicated digital order makelines in 2015. By 2017, an in-house digital platform was established, paving the way for those pickup lanes a year later. In 2021, digital menu boards were implemented, and in 2022, CAVA revamped its digital order platform with a scalable microservices architecture.
This 10-year transformation led to 34 percent channel revenue. Building on that foundation, CAVA is now on the precipice of what Schulman believes will be another decade-long transformation. This time, it’s centered around data. And it’s coming into focus on several fronts.
Enhanced operational data and AI insights are rolling out alongside a “restaurant health system” that gathers real-time guest feedback at the store level. Those tools come on the heels of a new real estate platform with deeper analytics and anonymized mobile data for quicker site analysis.
CAVA is in the early innings of its Connected Kitchen initiative, a multi-year project geared toward making restaurants easier to run. It will focus on exploring and implementing data-driven and generative AI technologies to automate inventory, manage scheduling, and provide guidance on how much food should be prepared or cooked by the day or even by the hour.
The company also is looking to grow its audience of first-party data. Schulman says that’s imperative given the advent of third-party privacy regulations. It sees a significant opportunity to use that data to build one-to-one lines of communication and foster deeper, more personal relationships with guests as it scales. To that end, it is reimagining its loyalty program with new types of rewards that it hopes will drive frequency, mix, and check. Tests are underway in a handful of markets and will roll out nationwide by the end of the year.
At first glance, this data-centric push toward automation and AI might seem at odds with the original vision of combining heart and hospitality with healthy food that catalyzed CAVA’s success. Technology has a way of making consumer touchpoints increasingly transactional. But Schulman says it all depends on how you use it.
“Using data to empower our team to deliver that hospitality and personalize the relationship with you—I think there’s tremendous opportunity there,” he says. “It’s about leveraging technology to enhance, not replace, the human experience.”
