Cava in ‘nexus’ between fast food and full-service restaurants: CEO

The fast-casual sector is becoming a hotbed for the restaurant industry, with shares of Cava (CAVA) up nearly 110% year-to-date after the chain debuted in June. Cava CEO Brett Schulman joins the Morning Brief to discuss Cava’s growth and the overall state of the restaurant industry.

Schulman explains that Cava’s latest results showed “consistent strength across all revenue segments,” which he attributes to the company’s value proposition: “We’re able to offer this unique Mediterranean cuisine where flavor and health come together, and at a reasonable price.” He explains that Cava provides value to customers not only through price, but also through quality.

Cava is looking to relaunch its loyalty program by the end of the year as consumers increasingly seek out deals. Schulman notes that the program will serve as “a way to really build our audience first-hand and be able to interact one-on-one with our customers, how they engage with our brand, how they behave, and be able to deliver relevant content to them.” The program will use a points-based system that consumers can redeem for a variety of rewards.

Looking at the industry as a whole, Schulman says, “we’re at an interesting intersection between a traditional fast food restaurant below us and a traditional full-service restaurant chain above us.” He notes that full-service dining has increased in price and time commitment, while customers might come to Cava for a reasonable time commitment and value. Similarly, fast food prices have increased, which has amplified Cava’s value proposition.

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This article was written by Melanie Riehl

Video Transcript

Fast casual dining is becoming a sector of choice for growth in the restaurant and food service industries.

Rather among the biggest names in this catering sector.

You have kava that stands out.

Stocks are on a roll this year, up 10% year to date.

I’m here to give my opinion.

We have Brett Schulman.

Who is kava?

CEO.

Brett, great to have you here in the studio with us today.

Thank you for.

Absolutely.

Alright, so you’re in New York to do some checkouts on some of the local spots here?

I mean, what do you find in terms of experience?

Do you tell them you’re the CEO when you walk in?

No, no, some of them recognize me.

We have some long-time general managers who are with us and are delighted that I can visit them in person.

Given the growth we have experienced, we now operate in 25 states in the District of Columbia across the country.

The story continues

Wow.

What do you see?

Just for us, we’ve been talking a lot, more recently, about some of the cooling trends that we’ve noticed outside of cava in the industry.

I’m curious to know what trends you’ve seen, whether they’ve changed or not, given that consumers have remained under some pressure.

Yes, we talked about that, on our last quarterly earnings call, and we saw consistent strength across all revenue segments, whether it’s at the high end or the low end of the strata.

And I think that’s a reflection of the value proposition.

We are able to offer this unique Mediterranean cuisine where taste and health come together and at a reasonable price.

But also, so, uh, when you think about value, we think about it not necessarily in terms of price, which is cost, but a combination of quality factors, the quality of our cuisine, the relevance of that cuisine being fashionable.

The number one Mediterranean diet, the Reg diet seven years in a row.

The convenience with which you access that cuisine, the experience, the hospitality that we offer when you interact with our brand.

So you haven’t seen an economic slowdown, we haven’t seen any change in our consumer behavior.

As we noted, uh, at the end of the last, uh, quarter.

You know, one of the things you also talked about on the call is the timing of a loyalty program rollout, something that many consumers turn to when they’re trying to get around some of the high prices elsewhere trying to take advantage of some of these rewards.

Do you have any more details on when this loyalty program might roll out in Massachusetts?

Yes, we remain on track, as we talked about at the end of this year, we plan to relaunch the program.

We’re currently testing it in two markets, Houston and the Carolinas, and we’re excited to see what our customers’ response and engagement is.

And it’s a way to really build our first audience and be able to interact one-on-one with our guests for their base, how they operate through our brand, how they behave and be able to deliver relevant content to them.

So we’re excited to be able to relaunch this and deliver more value to our customers.

I mean, how many bowls do I have to buy before I get one free?

Well, it’s really a matter of points.

It’s a points based system, so you earn bank points and then you can redeem those points for a variety of rewards in the test market.

So it could be anything from those crazy pita chips to possibly a free bowl, depending on how much time you want to spend.

These points concern the value aspects.

Since you brought that up, I think a lot of people have focused on some of the value launches that have happened, most of them within the fast food chain.

But I’m curious.

Does this put any pressure on your business?

Or have you all seen, maybe more so among your loyal customers, this need or desire to have some of these more affordable options?

Yeah, I think we’re at a kind of interesting nexus between, uh, traditional fast food below us and, uh, legacy.

A full-service restaurant chain above us, where you know, you can think of, uh, a family of four going out, uh, to dinner and a chain.

Um, the full-service restaurant experience has become expensive, as has the time commitment, the relevance of the cuisine that I talked about earlier.

Seeing that trade go down, they can get a great cava meal for a reasonable time commitment, reasonable value.

And then, uh, fast food prices increased, according to the Department of Labor, by 30% to more than 30% between the end of 2019 and the end of 2023.

This compares to CP I at 18%.

And at Cava, during this period, we are increasing prices by 12 percent.

It’s just amplified or amplified our value proposition where you can get this big bowl of fresh Mediterranean food, uh, for the same price often, or a dollar or two more than a traditional freezer fry or fast food meal.

Yeah.

I mean, look, it’s hard to say you’re going to compete in the value meal wars, especially when you’re offering things like steak on the menu and in the bowls here.

I mean, and you’ve talked about this, uh, over the last few quarters, too, what that would do to the business.

A margin rate should be anticipated.

Headwind.

What is the purpose of attribution?

In a way, the company’s performance is at least being driven by the steak right now.

Yes, we are really excited about the launch of our steak.

We tested it for about seven months and it was very well received by our gas base.

And that, uh, as we talked about, would be a headwind from a rate perspective, but from a protein perspective, it’s more expensive.

Um, but from a profit perspective, uh, it was going to be neutral the way we had valued it.

And then, uh, ultimately, increase the frequency.

See bigger top-line sales in the long run because this is another way to pitch a compelling dinner party day.

So, 46% of our guests come to share a meal with us at dinner.

Um, and it’s a great balance across the country.

And so that’s another way of, uh, uh, of, meeting their needs at dinner.

I went through some analyst notes, uh, before the show, and a number of them talked about the excitement surrounding this new offering.

But I also have to ask you about this Tik Tok phenomenon that’s happening at one of your competitors. Right now, a lot of people who go to Chipotle are upset, accusing them of serving smaller portions.

I’m curious.

What is your reaction to this and how you view the role of CEO of Kava?

How do you see some of the reactions we’re getting on social media and what exactly that means here.

Ultimately, for some of these business decisions that are being made behind the scenes, I think what you’re hearing from customers is that they’re pretty inflation fatigued.

We’ve had significant inflation in recent years, and people are willing to pay more, but they want to be sure they’re getting value for their money.

They get what they pay for.

And one of our values ​​at Cava is generosity above all and always.

So we’re really working with our teams to make sure that when we have this subjective walk, the line format and people are choosing what they want to put in their bowl, they’re getting adequate portions and we’re training.

We work on that every day and make sure that people take that spoon and they don’t shake it and they put it in the bowl and make sure that people feel that spirit of generosity that is part of the essence of our brand, of our Mediterranean way.

And we work every day to make sure that we are consistent with that across the country.

That’s what I’m going to shout the next time I’m online.

Feel the spirit of generosity.

My God, maybe this will help you.

We never know Bridgeman, as always.

Thank you very much for coming here.

It’s great to have you in the Kava CEO studio.

Thank you for.