Cava (CAVA) CEO Brett Schulman joins Yahoo Finance Live to discuss the Mediterranean fast-casual chain's extensive growth plans, including 48 to 52 new locations in 2024 on the way to 1,000 by 2032.
Schulman says Cava's "unique cuisine where taste and health unite" shows the "white space potential" to keep expanding nationwide. The 2024 target is a "moderation" versus 2023, giving him confidence in Cava's ability to execute.
Beyond physical stores, Schulman wants to grow digital channels, saying it's not "either or, but an 'and'", while both in-person and online channels are successful today. He aims to create a "multi-channel business" catering to all consumer needs.
On rising wages, Schulman says investing in employees and guests "creates long-term shareholder value." Cava won't offset pressures via consumer prices, but will keep investing in its team, Schulman states.
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Editor's note: This article was written by Angel Smith
Video Transcript
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- Well, shares of Cava hitting a new high today, the fast casual chain doubling down on growth. Now planning to open another 48 to 52 locations this year. That would bring its total footprint to 309 stores. Cava showing strong customer traffic in its latest report, with same-store sales climbing more than 11%.
For more on the company, we're joined by Cava CEO Brett Schulman along with our very own Brooke DiPalma joining in on the conversation.
Brett, it's good to talk to you today. We're talking about a bump in the stock today. But overall, year to date, your stock is up about 38%. What do you think investors are liking about this growth story?
- Yeah, well, it's great to be with you. And I think what people are seeing is that our results are reflective of how we're able to demonstrate the power of our category-defining brand, that unique Mediterranean cuisine where taste and health unite, the extraordinary potential, the white space potential, in front of us, and the way our team was able to deliver outstanding results and deliver on our strategy as we expand across the country.
- Good morning, Brett. You are working towards a long-term goal of opening 1,000 restaurants by 2032. What is the right cadence of openings here? And with that projection of 48 to 52, do you anticipate that you'll ramp up in 2025?
- Well, we've stated that we are projecting 15% compound annual unit growth with a goal of 1,000 restaurants by 2032. So it's actually a bit of a moderation from our 72 net new restaurants we opened in 2023, which is why we feel really comfortable about our pipeline and our ability to maintain this growth rate.
- And people ordering in person at these restaurants is actually more than the people ordering online. You don't hear that too much these days as well. But as you think about the restaurant design moving forward, what is that optimal mix of people ordering online and in person, and do you anticipate maybe a shift here or an increase on either part?
- We've seen it be pretty consistent, where 64% of our guests choose to come into our physical space to interact with us, and then 36% of the time they want to opt in to one of our digital channels, whether that's having our great Mediterranean cuisine brought to their house or their doorstep or coming around to one of our 31 digital drive-thru pickup lanes or simply walking in and picking it up off the shelf after they've ordered on our digital app.
So we don't think it's an either/or. We think it's an and. We can have great digital channels as well as great physical channels because our cuisine works at lunch, it works at dinner, it works for singles, it works for families. So what we find is our guests, we want to give them a multi-channel environment where they can opt in to their channel of choice depending on what their need is and what day of the week it is or day part it is that they want to engage with us on.
- Brett, here in California where I am, we are expecting that big bump in wages for fast food workers come April going from $15.50 an hour to $20 an hour. I mean, that's a significant bump. What does that mean for Cava bottom line? And are you concerned that this could trickle down into other states who are looking at California, the organization among the workers to see if the wages could get pushed higher in other states as well?
- Yeah, well, we've always taken the philosophy of investing in our team members, investing in our guests, and that creates long-term shareholder value. We can go all the way back to our early days and back to 2016 when we took our starting national wage to $13 an hour, which is when many of our peers were paying $9 and $10 an hour in the markets we were operating in.
We've obviously taken significant wage increases since, and so as it pertains to Southern California and AB1228, whose predecessor was the FAST Act, we've talked about we're going to absorb that 30 basis point impact, not pass that expense along to our guests. We view it as an investment in our team that will create restaurant-level growth-- restaurant-level margin growth over the long haul.