Okay. Well, thanks everyone for joining us today. I'm Sharon Zackfia of William Blair. Really excited to have Brett Schulman, who's the co-founder and CEO of CAVA, with us today. For those of you who haven't been to a CAVA, there are a few within walking distance of here, so go check it out. We're really excited on CAVA. It's clearly a brand with a lot of momentum. We're seeing rising brand awareness, really healthy same-store sales growth, rising unit productivity, and ultimately, we think this is a story that will have thousands of locations versus less than 500 today. A lot of goodness here in the story that we'll talk about. Brett's going to go over a few slides, and then we're going to do a fireside chat. Of course, you should check out our complete list of research disclosures and potential conflicts of interest at williamblair.com.
Thank you.
Thanks, Sharon, and welcome. Thank you all for joining this morning. As Sharon said, I'm the Co-Founder and CEO of CAVA, and if you're not familiar with the story, those are my co-founders, Ted, Ike, and Dimitri, all sons of Greek immigrants. Really, the heritage and culinary of their upbringing is what was the impetus for the CAVA brand. Founded out of a single full-service restaurant 20 years ago, and then I met up with the guys, and we co-founded the fast casual 15 years ago, celebrating our 15th anniversary this year. Our mission is to bring heart, health, and humanity to food, really that Mediterranean way. Our Mediterranean cuisine matched with our Mediterranean hospitality, and it is a unique cuisine where taste and health unites that we believe is meeting the moment for the modern consumer.
When you look at the secular trends in our country, whether it's the growing diversity of our country and shifting palate seeking bolder, more adventurous flavors, matched with the increasing interest in modern health and wellness and longevity, that's where our food sits at the nexus of that unique cuisine where taste and health unite. We deliver it in a multi-channel format. For us, it's not an either/or, it's an and. We have great digital channels and great physical channels. We have everything from 75-plus digital pickup lanes where you don't even have to get out of your car to pick up your digital order, to digital pickup off the shelf in every location to delivery, but also physical experience. We believe the demise of the dining room is greatly exaggerated, and we think it's important because we think human connection is more important than ever.
Especially at the advent of AI and all of the modern technologies in the world, people are craving human connection, especially when they're sharing a meal. That is often a social, visceral experience. Again, we think we want to give you the remote control to have the channel of your choice and meet you in your needs, whether that's digitally or physically in one of our dining rooms that we've invested in something called Project Soul in recent years to warm up our dining rooms, a more inviting aesthetic for you to share a meal, whether with us or with your family or friends. Just to touch on our 2026 strategic pillars, we have four pillars. The first one, expand our Mediterranean way of cooking in communities across the country. That's first and foremost expanding new restaurant growth, but it's also the test of a new catering channel.
We know there's high demand for our product in a catered channel, but we want to make sure that we set up our operators for success from a load balancing and a capacity management standpoint. We're testing different formats and production capabilities to ultimately launch a catering channel in the future. Second, develop personal relationships with guests even as we scale. This is really building out our first-party audience. We've talked, if you've heard us on our earnings calls, about our new CAVA Rewards that we relaunched two years ago. We launched new tiered status last fall. We'll have more phases of CAVA Rewards. Really, again, creating those one-to-one connections with our guests from a communication standpoint and a motivation standpoint. Third, run great restaurants every location, every shift.
We're always thinking about how do we make it easier for our operators to run our restaurants, whether it was our new kitchen display screen systems that we rolled out across the fleet last year to improve order accuracy and digital order production, or our TurboChef ovens to drive better consistency, quality, and ease of production on some of our items like our roasted vegetables or our new pomegranate glazed salmon that we recently launched. Last, operate as a high-performing team. If you listen to our recent earnings call, we talked about our new unified data platform, our CAVA CORE platform, and our new edge-enabled customer data platform, CAVA CURRENT, which is now ingesting all of our order flow that we think really positions us to set the stage to take advantage of modern generative AI technologies and build an intelligence layer in the coming quarters and years.
Just a few Q1 business highlights. Revenue up over 32%, same restaurant sales 9.7% driven by 6.8% traffic. Really proud of what the team was able to deliver from a traffic standpoint. A little bit north of 20% unit growth quarter to quarter over last year. Last, just some general highlights. $3 million system-wide AUVs for the first time in our history. 25.1% restaurant level margins in the quarter, and then 100%-plus new restaurant productivity. This is two years in a row now our new restaurants across the country are opening at very significant elevated levels. Very driven also by awareness increase. Around the IPO, we had about 40% national awareness. Our most recent brand health survey, that increased to 66%, over 62% from our last survey.
Again, we operate in 29 states in the District of Columbia, as we've grown across the country, as people have become more aware of our brand since we've been public, as well as the benefits of Mediterranean eating, you've seen that new restaurant productivity increase to 100%. With that, I'll hand it over to Sharon, we can have a little conversation.
I think you had the slide with the same-store sales. I think what you can't really see in that slide is that you had accelerated two-year trends for the past five quarters. That's been arguably in what's been one of the most promotional restaurant environments that we've seen in probably since the Great Recession, honestly. You don't do a lot of promotions. Can you talk about why you think the brand has been so resilient and why you've seen that acceleration and how durable those underlying factors might be?
I think it's a testament to our long-term strategy. We've talked about this since we went public is, in the public markets, there can be a lot of focus on the short-term, quarter-to-quarter movements. We've tried to stay steadfast in our long-term strategy. Part of that certainly is underpinned by our differentiated Mediterranean cuisine and the hospitality and operational excellence we deliver it with. It's also things like underpricing inflation. We've underpriced CPI by over 10% in recent years. We've taken less than half the price increases of the average restaurant company. We think that's improved our relative everyday value proposition each and every year. This year, as an example, you look at the recent CPI report, 3.8% food away from home, 3.6% food at home, 2.9%, CAVA 1.4%. That 1.4% was distributed this year across premium and attachment items.
We held the base grilled chicken, falafel, and roasted vegetable bowls and pitas to the same price as they were last year, so the cost of admission hasn't changed. We worked very hard to drive traffic, have that flow through on some of our fixed costs, creating that operating leverage, but not just pocketing that operating leverage. We do not have restaurant-level margin targets. We believe that we want to reserve the right to reinvest in our team and reinvest in our guests, and that will drive sustainable long-term restaurant-level margin productivity over the long haul. I point to people that when you look at our top quartile, they're $4 million-plus AUVs with 30%-plus restaurant-level margins. We know the power of the model. We just don't want to over-earn in the short term at the expense of the long-term brand.
Often we want to invest in all of our stakeholders, guests, team members, and our shareholders.
We were talking a little bit about Chipotle when we were outside before we came in. I think since you went public in 2023, there's been that constant comparison between CAVA and Chipotle. I guess, where do you think that analogy is accurate, and where does that break down, and what do you think the more accurate framework is for investors to think about CAVA at your price points?
I think it's a very good frame of reference from an operating model standpoint, because it's a very similar operating model, similar unit economic model. As a framework. Certainly, our cuisine is very different, and I think from a lifecycle standpoint, that business is 10x our unit count. They're at a different stage of life, and the decisions that they may be making for their business, I think, are very different than how we're thinking about our business in a brand-building phase at a much younger phase. Sometimes I think people want to extrapolate what a peer may be doing versus what we're doing and project it on us when that peer is at a very different stage and scale of where we are that our decision-making calculus is very different.
Yeah. The new unit productivity you talked about a little bit in your presentation. Have you done anything differently over the past few years that's driven up that new unit performance? I know you talked about brand awareness, but site selection changes, the way that you seed the units with labor changed?
We haven't done a lot, to be candid. It has been driven a lot by awareness, social media has been very effective. It's almost this kind of metaphor of flowers blossoming in the spring. It's like we're in 29 states in the District of Columbia now, and during COVID, a lot of people, the metaphor of a snow globe being shaken up and sprinkled around. A lot of people have carried their CAVA passions with them, whether they've experienced us traveling or having eaten, living in another city, and now they've moved to another city. We see a lot of pent-up demand.
I think one thing we have done in the last year, as we've seen these restaurant openings accelerate to record levels is, and we noted this on the most recent quarterly earnings call, is we've invested, again, in some pre-opening costs to make sure that any GMs that aren't internally promoted that we're hiring externally, we're actually bringing them on board even earlier, and we're taking them to markets like New York City peak lunch rush so they can experience the intensity with the intensity of what they're experiencing now in the openings. We're leaving trainers behind even longer to make sure that these restaurants are stabilized because the volumes are fairly intense at these new locations, and we want to put our best foot forward.
I think, going back to Chipotle, one of the differences between you at a little under 500 locations and them at the same point in time is just the amount of investment you have to do in a tech stack these days versus the early 2000s where you would just build a new location and hope people would come.
Yeah.
Can you talk about how you built your tech stack? It is relatively unique, and also maybe explain in more layman's terms what Core and Current really do for you going forward.
We think these investments are going to pay a return for all of our stakeholders. I've written about this in our shareholder letter the last couple of years where I think it's very analogous to, we were on the precipice. We're in the early stages now of a decade plus of data transformation, very similar to the decade plus of digital transformation that we experienced in the first 10 to 15 years of our journey. If you think about when we first opened in 2011, we had a humble website with about 1% online ordering. Over time, we did a white label app. We brought it in-house. We built our own digital order ecosystem. We added second make lines to every restaurant back in 2015, digital menu boards. We re-platformed the app to be a microservices scaled architecture.
Fast-forward to today, it's about 38% of our business, and it'll be roughly a $600 million business this year. It's been a big impact in a positive way. We're investing similarly in data where we think it can have a step function change in the productivity of our business. I like my metaphors. I'll give a metaphor of the data house. CAVA CORE, we poured the foundation of the house. This is a unified data platform. If you think about all of our data feeds, whether it's our POS feed, our HRIS system, our inventory management system, our FSQA tracking system, or external data feeds like we have our AccuWeather data feed coming in now. Now you have all that with a single source of truth, unified data, all the same characters, clean data.
Layering out, building the walls of the house, we have our edge-enabled CAVA CURRENT platform. If you're familiar with any kind of customer data platforms that you would get, like an Amperity or some of these other platforms, we basically built that in-house where it's ingesting all of the order flows. Now you have all the main data feeds from all of our ERP systems, external data feeds. You have the real-time order flow and the walls going up. What that allows us to do is now fit out the interior of the house or the intelligence layer. We can do that and leverage these capabilities with CAVA CORE and CAVA CURRENT in what we view kind of three main buckets. One is corporate business intelligence, two is personalized marketing, and three would be operational efficiencies. We're already seeing this on the corporate side. It's fascinating.
You can see the productivity improvements and the power it's unlocking for our team members where we use a Databricks Genie, which is powered by cloud, and layered over that CAVA CORE. For example, we just launched our new pomegranate Glazed Salmon, and we started launching digital menu boards in 2022. So we have about 100 restaurants that still don't have digital menu boards yet. I can just ask it and say, "Okay, what's the instance rate of salmon in restaurants that have digital menu boards versus ones that don't?" I can immediately, it'll chart it. I can see the difference. That would've taken spreadsheet work and hours or days of analyst work in the past, and that's just one little question that we can ask. My CTO will tell you that our data used to be structured to answer specific questions.
It's structured that our team can ask any questions it has of the data. One of our values is constant curiosity, we want our team to be curious and say, "How can I learn or understand what's happening in the business, or where there's opportunities, or where there might be challenges to immediately address in real time and be a more efficient, effective business?" The other two buckets, certainly personalized marketing, which goes back to our second pillar in our strategic plan, building out our first-party audience to have those one-to-one lines of communication. Sharon, if we know that you might be a vegetarian eater, we're not going to send you spicy lamb meatballs communications.
We also can understand your purchasing behaviors and match you against lookalike guests and understand there might be an ingredient or 2 you might not be trying that has a high probability of success, increasing the efficacy of you as a guest, also increasing guest value. There's a lot of other ways that we can use that from a personalization standpoint. The third certainly lays the groundwork to do more predictive cook, predictive prep, labor scheduling, things like that in the coming quarters and years. Very excited, but I think it's, again, we've just embarked on the beginning of what I think.
Yeah
is going to be a decade-long journey in data transformation.
Do you think ultimately it's a bigger impact to customer frequency or the way that you communicate with the customer or on the efficiency side of the restaurant?
I think there's productivity gains on the G&A side. I think there's productivity gains on the RLM piece. I think there's revenue growth opportunity on the personalization piece. Even at the restaurant level, it takes all that computational complexity out our team members' minds, Sharon, frees them up to deliver that human connection I talked about in the opening.
Yeah. On the RLM, it's been really healthy in the mid 20s even though you've been growing very quickly. How do you think about the long-term target? You talked about the top quartile being in the 30s. We haven't really seen a restaurant go that high in the public realm that's not a beverage concept.
Yeah.
Is there a continual reinvestment there back to the consumer? Would you rather reinvest and get those sales kind of spinning at a faster velocity?
Certainly right now. I think the world will tell us when we have permission for more to expand it. I think right now consumers are feeling a lot of headwinds, a lot of challenges. We're mindful of that. We want to be a bit of a port in that storm. When they're feeling pain at the pump and all these other pressures, we want to continue to make ourselves more accessible to more people across the country, want to be able to pay our team members more and invest. As things get maybe more front-footed economically and we have the ability to flow some of that through, we'll reserve the right to do that. We think right now, we even talked about it as we had that strong comp in Q1, we didn't really raise our restaurant level margin guidance that much.
We wanted to account for potential fuel surcharge increases in the back half of the year and not have to pass that on to the guests.
Yeah.
Really kind of using that mentality when these other inflationary pressures or headwinds are coming our way, that we can absorb it on behalf of our guests.
You are, though, I think one of very few restaurant concepts that's really defying the whole K-shaped economy theory. I think you talked about in your first quarter that lower income cohorts actually grew very quickly, or one of the fastest growing for you, which is counterintuitive.
Yeah.
Historically, that would be the segment that would be the most impacted by gas prices. You've said that before, I think a couple of years ago that was also happening in 2024, if I'm not mistaken. What is happening with the brand where you can get that lower income consumer to kind of trade up in an environment like today?
I think it's a couple things. I think, again, first it goes back to having this differentiated Mediterranean cuisine that's meeting their needs, and it's allowing them to eat better without having to make sacrifices or compromises. Everybody wants to eat better. They don't want to have to give up flavor for being satiated. That's where our food comes in. Then when you pair that on the kind of trade up end from traditional QSR, as I mentioned, we've underpriced that segment by over half. Our relative value proposition from a trade-up perspective has become more within reach relative to their other options on that end.
On the higher end, I think in a lot of these markets, especially small town markets, we've become a very optimal trade-down option from, say, a casual dining experience where, for a better cost, a more affordable cost, less of a time commitment, and then a good aesthetic, if you lean into Project Soul on a Wednesday night for a family, we're a good, affordable option for a dinner out.
Yeah. You crossed $1 billion in revenue last year. As we think forward and we look to $5 billion in revenue over time, what does CAVA need to do culturally and operationally to get there? What is different in the business?
I think one of the things we've done in the past that we've been successful is staying in front of the business. We need to keep investing in that infrastructure, in our people, to stay in front of that growth. Things like our AGM position that we've talked about in recent months, where as our AUVs were $2.6 million to $3 million, those are very busy restaurants. As we stare down the barrel of potentially opening 100 restaurants a year plus, how do we make sure we have the breadth and depth of role-ready leadership to go open those restaurants? The AGM position is an upgrade of our historical GMIT position, and it provides more seasoned, experienced leadership across all 14 day parts , especially on weekends during our seven-month peak season . It serves a dual purpose of broadening and deepening that pipeline of future restaurant leaders.
It's continuing to do that and instilling a true owner-operator mentality. We think it's very important to deliver the elite hospitality that we want to deliver on top of our flavorful food, that we really want to develop, train, nurture leaders in our restaurants who truly act as an owner-operator in those restaurants.
I think I have this number right from the IPO, but I think it's 1,000 units by 2032.
Yes.
You're right? Okay.
Yep.
That's more than a double over the next six years. You're well on pace to do that. How do you think about ultimately the TAM for CAVA? Since the time of the IPO with these new unit openings, you must be reassessing where the brand can go and at what density.
Yeah, we've always said that that was just a point in time. It wasn't the destination. It was a stop along the journey. We've seen that runway extend further and further every year we've been doing this. If you had asked me five years ago, would we be in Topeka, Kansas, or have three restaurants in Chattanooga, Tennessee? I'd have said, "Eh, I don't know if they're quite ready for hummus and tzatziki." Clearly, they are. People want this cuisine. It's not a matter of if we get to a market. When you look at our proven portability and the consistency of performance, whether it's any region across the country, whether it's the urban markets, the suburbs, or the exurbs, we have tremendous consistency in performance. That gives us a lot of confidence in the white space of this works everywhere.
The question is just how deep does that runway extend over time? Is Chattanooga a three-restaurant market? Is it a six-restaurant market? Is Chicago, is it 60 restaurants? Is it 100 restaurants? What we've seen is that runway continues to extend as Mediterranean becomes more familiar. People recognize the benefits. Mediterranean diet, number one ranked diet nine years running. That it becomes the next large-scale cultural cuisine category.
You have a new COO who started in March, so two months into the job, roughly.
Yeah.
A little bit up. Can you talk about why you made a COO switch and what the key priorities will be of Doug as he's getting his feet wet in the business?
Yeah. Excited to have Doug Thompson on board. Doug is a lifelong operator, decades in the business. 23 years at Texas Roadhouse. Most recently, he was CEO of a small growth chicken chain in Texas called Tumble 22. It was small, and he wanted to get back to a big impact, as Doug is a phenomenal people leader and leader of teams and wanted to make an impact. That's what this industry is about. It's one of the few industries, especially with the advent of AI, where anyone from any background can come and build a livelihood for themselves and build a career for themselves and their family. Doug understands what it's like to build leaders and develop people pipelines. I think we were doing a really good job. We had gotten very consistent discipline in our operations.
About 18 months ago, as I was digging into the business, felt like we had over-indexed a little bit on being overly prescriptive on the metric side. You need the metrics for the discipline and the guardrails, but you can only shine a light on so many things when you're running these large organizations. What you shine a light on sends a real message to your teams. If it becomes overly emphasizing the metrics, you can lose the people. Ultimately, the great people are going to deliver great metrics. How do you strike that balance? My partners and I, we always talk about how I waited tables and expo'd to help pay my way through college. My partner's families grew up in the restaurant industry.
Ted will tell you, his mom was a lifelong waitress, and all she really had to show for it was a couple bad hips. We really wanted to make this a place where our team could build careers. What we were seeing at the GM level was a big counter to that. We were seeing turnover start to creep up and like, "All right, well, our GMs are saying, well, what you're saying isn't really what we're feeling." I wanted to double down and make sure that our team understands and that the actions we're taking and what we're shining the light on truly created that people pipeline development.
Really proud of the progress we've made, and I think what the team delivered in the first quarter is a real reflection of that energy, and excited for Doug to really amplify that energy as he focuses really on three things. One is people development, two is next-level elite hospitality, and three is new restaurant opening excellence.
There are a few more things I wanted to touch on. You've got five more minutes.
Yeah.
Marketing. You've had an underspend as a percent of sales relative to the industry. When do you start to test more on marketing? What do you think ultimately when we talk about that $5 billion brand a few years from now?
Yeah.
Where do you expect marketing to settle as a % of revenue over time?
Well, if you look, last year we went from 1% to 1.2% of revenue. A lot of our peers are around 3%. I don't think that's unrealistic over time, but we want to, again, be good stewards of capital and we've had tremendous organic momentum with our restaurant growth and the IPO and awareness. We've been very efficient and effective on social media, driving some virality and awareness. I think you'll see us start to test even more upper funnel activities as we establish who CAVA is as a brand, who we are as a personality, and really building and deepening that emotional connection at scale as we become a more national brand.
Because I think it's very important as people build relationships with brands to deepen that emotional connection and make a clear external vision of who we are to our guests in that world, in the external world. We did a fun little thing in New York when we launched salmon. We did these bears carrying CAVA bags all around the city. It was just a fun way, again, to express who we are or our NIL partnership with Azzi Fudd, the number 1 pick in the WNBA draft, and Armando Bacot , men's national champion. We did it during the tournament with them. Again, a couple amazing student athletes who are incredibly accomplished that have just shown up in the world in a great way and are very welcoming to all of their fans.
That's the reflection we want to exhibit in the world.
Yeah. Last thing I wanted to talk about was catering.
Yeah.
You're not the only brand talking about catering these days. First, I'd be interested in hearing what your learnings are. I believe it's Houston where you have the most meaningful test. What your learnings are, what you need to see to roll it out more broadly, and why now? Why has 2025 and 2026 been the year of brands talking about catering?
We've been talking about it for 15 years. Our guests have always wanted catering from us, but we're very mindful with our AUVs how much production capacity we have, because catering is a very different production muscle. When you think about our restaurants manufacturing food, in a sense, our regular in-restaurant line, our digital serving lines are very similar production rhythm. Catering is very concentrated, very intense, high volume in a short period of time, so it's a very different rhythm. How does that work with our other production? When we bought Zoës Kitchen and we had some locations that we felt we could test a hub model in rather than making just a regular restaurant, we wanted to understand is there a way to complement restaurants that may not have capacity with more centralized hub production?
We've evolved that test over time, and now we've done a market test to understand the critical question, which is really take all the demand we know is out there. We've catered every Major League Baseball team, most professional sports teams, college teams, those in offices and schools. We know the demand's there, but how do we make sure we appropriately load balance the capacity management against the production capacity in the market so we set our operators up for success and ultimately deliver on our commitments? What we're working to test and understand is it all-purpose built hub capacity or is it complemented by regular restaurants that do a certain limited amount of production? How do we distribute that?
That ultimately, as a guest, when you're opening up and ordering from CAVA, it's in a sense if you're going on OpenTable or Resy and you put in your variables and it tells you where there's availability. That availability is driven by the logic on the back end that's understanding how we're setting up capacity management. We want to be very thoughtful. We think there's a great growth channel opportunity, but we don't want to rush it. That sets our operators up in a bad position, ultimately delivers a bad guest experience.
What inning do you think you are in in figuring out Houston?
Fifth.
I'll take it. All right. I'm glad there's a Cubs game tonight.
There you go.
All right. Thank you, everyone. We're going to be in the Mayer room for the breakout.