Cava's winning recipe? "The most reasonable price and the greatest hospitality"

CASE STUDY – Increased foot traffic, double-digit sales growth, and raised annual forecasts: the American chain Cava, specializing in Mediterranean cuisine, is defying the industry's slowdown. Let's take a closer look at how the management team is doing it.

© CAVA

In the first quarter, the Cava Group recorded a 32% increase in revenue, a 9.7% rise in like-for-like sales, and a 6.8% jump in foot traffic. "Despite the uncertainty of the macroeconomic and geopolitical environment, we are maintaining strong momentum and delivering exceptional results," said Brett Schulman, co-founder and CEO of the Washington-based Mediterranean fast-casual chain.

Restaurants worldwide are experiencing a unique period: consumers, faced with inflation, are still looking for bargains and are prioritizing restraint in their spending. The conflict in the Middle East has intensified this pressure, with rising gasoline prices putting an even greater strain on customers' budgets.

So what do the $434 million in revenue for the first three months of the year demonstrate for this chain with 459 restaurants, which is completely unknown in our region? How did this brand, which was founded fifteen years ago on a simple idea—that good food brings people together—manage to generate a quarterly profit of $23.6 million?

Speaking to financial analysts, as Cava has been a company listed on the New York Stock Exchange since June 2023, Brett Schulman stated that these results were the fruit of an unwavering long-term strategy in this category of Mediterranean cuisine that the chain's management believes it initiated and defined.

The deliberate role of an anti-inflation bumper

“While many competitors have responded to short-term cyclical pressures with discounts and promotional activities, last January we implemented a price increase of approximately 1.4% while keeping the base prices of our bowls and pitas unchanged. In the longer term, we have set prices well below inflation, with our price adjustments representing just over half of the cumulative CPI (Consumer Price Index) since the end of 2019,” the CEO argued.

These "deliberate and consistent" decisions have thus had the effect, over time, of strengthening customer trust and consolidating the brand. Whether a customer is looking for an affordable everyday meal or chooses one of the more upscale offerings, Cava believes it provides "the flexibility to interact on their own terms, in a way that corresponds to their needs and life moments."

This would stimulate long-term customer traffic. The co-founder also assured that the company was working "very hard" to avoid passing on inflationary pressures to its customers, by offering prices more than half those of competitors or by implementing price increases of less than half the CPI. But Cava's management team is quick to point out that they don't consider value solely from a price perspective.

"No food that goes directly from the freezer to the deep fryer"

“We see our value proposition as a combination of factors,” explained Brett Schulman, while denying any intention of setting rock-bottom prices. “It’s the quality of the ingredients we serve. It’s the relevance of our Mediterranean cuisine, the convenience with which our customers can access it, and the experience we offer when they visit us and share a meal with us. It’s truly excellent value for money.”

The co-founder asserts that customers don't come to Cava for bargain prices but because the restaurants serve fresh food. "We don't serve food that goes straight from the freezer to the fryer. We serve fresh Mediterranean cuisine, and we have to offer it at the most reasonable price possible while ensuring fantastic hospitality," added Brett Schulman.

Even though consumers are becoming more demanding about how they spend their money, the figures show that they choose to spend it at Cava.

And it doesn't appear that a single factor was driving the overall same-store sales performance. "When we look at same-store sales in the first quarter, we believe it was a combination of our incredible spring culinary offering," added Tricia Tolivar, Cava's Chief Financial Officer (CFO). "Cuisine where taste and health come together for customers across the country, at a time when it meets the needs and desires of the modern consumer for an experiential dining experience."

"A unique and differentiated offer"

Long-term strategy inevitably involves menu engineering, achieved through constant and methodical innovation, according to Cava, with the aim of generating customer enthusiasm without creating operational complexity. This is the delicate balance the fast-casual chain strives to strike, remaining attentive to the sheer volume of new offerings and the logistical challenges they present to its operators, while simultaneously stimulating its customers.

“This is the very essence of our brand. It’s not just about our Mediterranean cuisine that we offer, but our warm Mediterranean hospitality,” insisted Cava CEO Brett Schulman. So much so that the Washington-based company has seen no change in the remarkably consistent behavior of its consumers.

Notably, and perhaps somewhat counterintuitively compared to what is observed among other competitors in the sector, at Cava, it is the lower end of the revenue scale that has recorded the strongest performance.

Furthermore, regardless of the war in Iran, the management of Mediterranean restaurants has observed no decline in customer penetration or loyalty to its premium products. All the more reason not to raise prices.

“We are aware of the pressures that everyone is under. You know, when we consider the choice of our brand compared to our competitors, we conduct internal studies on brand health. We carry out semi-annual brand health surveys. We have just completed another session of this survey, and we are getting excellent results on the notion of value,” said Brett Schulman.

In this regard, Cava is even surveying the public about the possibility of recreating its signature cuisine at home. And restaurants stand out in this respect. "We represent a unique and differentiated opportunity for them, essentially acting as their outsourced chef," the co-founder concluded.