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RetailFood and drink

Cava is gobbling up fast-food competition as it lures finance bros and suburbanites with extra pita chips, steak, and promises of no price hikes

Sasha Rogelberg
By
Sasha Rogelberg
Sasha Rogelberg
Reporter
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Sasha Rogelberg
By
Sasha Rogelberg
Sasha Rogelberg
Reporter
Down Arrow Button Icon
May 30, 2024, 3:18 PM ET
A women with a baby strapped to her chest walks past a window with the "Cava" logo across it.
Cava reported strong first-quarter earnings, following the trend of fast-casual spots getting a leg up on traditional fast food.Scott Olson—Getty Images
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Cava isn’t just feeding salads and bowls to its loyal consumers of finance bros and suburbanites, it’s getting plenty full itself. The fast-casual chain, known for Mediterranean-inspired bowls and salads and better-for-you-branding, raised its annual sales outlook after beating first-quarter earning expectations. 

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The company reported Wednesday a 30.3% year-over-year revenue growth to $256.3 million, compared to $196.8 million the quarter before and despite faltering store traffic. Same restaurant sales grew 2.3% to 30.7% in the past two years, and the chain opened 14 more locations last quarter as customers clamored for falafel and lamb bowls with scoops of its “crazy” whipped feta topping. Cava now expects same-store sales to grow 4.5%-6.5%, up from the 3%-5% it initially projected.

CEO Brett Schulman said customers have shown great interest in pricier menu items, such as harissa honey chicken, and not shied away from adding on items like beverages and extra pita chips to their orders. As a result, Cava has bucked the trend of customers losing their appetite for fast food over higher prices.

“We’re seeing a very resilient consumer consistent across the country and across all income brackets,” he told Bloomberg. “We’re not seeing check management,” he added.

Cava has increased the spendier foods on its menu introducing grass-fed, pasture-raised steak—in a move following competitor Sweetgreen—to bolster sales and attract more dinner-time diners, who now make up 46% of the company’s sales.

But more premium menu items haven’t meant the company is passing down costs to the customer, Schulman insisted. Though the company raised prices by less than 3% in January, Cava has “no plans to take any further price increases.”

Beyond fast food

But beyond promising dinner foods and pita chips, Schulman attributes Cava’s success to its sweet spot in the restaurant industry, arguing that diners in sit-down restaurants are looking for affordable food—and so are fast-food customers, who feel like they can’t find a cheap or healthy meal at the traditional drive-thru.

“Consumers are really gravitating to our value proposition, where the traditional full-service dining model has been struggling to deliver that value proposition to a modern consumer,” he said. “As prices have increased at a faster pace in traditional fast-food, it’s improved the relative value proposition of our helpful Mediterranean cuisine.”

Indeed, nearly 80% of American consumers now consider fast food a luxury because of its high prices, according to a May LendingTree survey, and that’s been hurting sales—witness McDonald’s sales falling earlier this year after the price of a Big Mac meal hit $18. Schulman believes that with, the growing perception of fast food as no longer cheap, consumers are willing to spend a dollar or two more on foods they consider healthier or higher quality.

The success of Sweetgreen and Chipotle, which also tout themselves as better-for-you fast-food alternatives, support Schulman’s argument. Sweetgreen posted a 26% catapult in revenue earlier this month by, like Cava, leaning into healthier oils and dinner options, while Chipotle likewise saw an over 14% first-quarter revenue bump. The success of these fast-casual spots is in part because they operate with higher profit margins—around 18% to 26% compared to 18% and 15% for McDonald’s and Wendy’s.

Cava is already looking for its next course: The company has plans to open 50 to 54 more locations in 2024.

“Right now, we’re at 323, so a lot of capacity to continue to grow,” CFO Tricia Tolivar told Fortune this week.

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About the Author
Sasha Rogelberg
By Sasha RogelbergReporter
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Sasha Rogelberg is a reporter and former editorial fellow on the news desk at Fortune, covering retail and the intersection of business and popular culture.

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