CAVA, with Dreams of 1,000 locations, Decides to Go Public

CAVA confirmed Friday that it will go will public after confidentially filing plans to do so back in February. The Mediterranean fast casual is aiming for 1,000 locations nationwide by 2032.

The company earned $564.1 million in revenue last year, up from $500 million in 2021. Same-store sales grew 14.2 percent in 2022 year-over-year and 23.6 percent versus 2019. In Q1, comps lifted 28.4 percent against last year—marking the company's ninth straight quarter of positive growth. CAVA posted average-unit volumes of $2.4 million in 2022 and grew restaurant-level profit margin to 20.3 percent, while increasing in-restaurant menu prices by fewer than 5 percent. It swung a net loss of $59 million in 2022 versus $37.4 million in 2021.

"Over the past 12 years, we have established ourselves as the only national player at scale in the fast-growing Mediterranean category, with more than twice the number of restaurants compared to our next largest competitor in the category," the chain said in a filing. "Our brand and our opportunity transcend the Mediterranean category to compete in the large and growing limited-service restaurant sector as well as the health and wellness food category."

As of April 16, the chain had 263 stores in 22 states and Washington, D.C. That's growth from 22 restaurants in 2016, a CAGR of 49 percent. More than 80 percent of restaurants are suburban-based, with the remainder in urban markets and specialty locations. The brand projects 34–44 net new openings for the remainder of its fiscal year. CAVA has a pipeline of 100 new sites, which exceeds its planned openings for 2023 and 2024.

Here's how unit count has trended since 2016:

2016: 22
2017: 43
2018: 72
2019: 89
2020: 104
2021: 164
2022: 237
Q1 2023: 263

A large number of stores opened in the past few years have been conversions of Zoes Kitchen, which CAVA purchased for $300 million in 2018. Since that acquisition, the company converted 145 Zoes Kitchen locations and opened 51 new CAVA units. In 2022 alone, the brand debuted a net of 73 restaurants, including 63 Zoes Kitchen conversions. There are eight more Zoes Kitchen revamps expected this year, which will conclude that program.

CAVA believes it can increase density in DMAs while still growing AUV. Historically, stores coming after the fourth opening in a certain market achieve higher starting AUV compared to initial units.

"We believe the whitespace for CAVA extends nationwide, underpinned by our brand strength, well-developed pipeline of talent across key functional and operating areas, corporate infrastructure, new restaurant opening playbook, and attractive unit economic model supporting the execution of our new market growth strategy," the company said in an SEC filing. "Before entering new markets, we develop a comprehensive market plan that plots a clear path for future development. In addition, when determining new locations, we use a data-driven approach to heat-map demographic and psychographic data and identify trends that historically correlate with a trade area’s revenue potential to meet our unit-level returns criteria."

Amid this growth, CAVA is introducing a variety of formats, like digital kitchens, hybrid kitchens, and drive-thru pickup lanes to evolve with changing consumer demands. The fast casual is piloting digital kitchens in some markets to serve as centralized production hubs and testing hybrid kitchens in certain areas where catering (a channel in its early stages) is strongly desired. The drive-thru prototype, which launched in 2019, typically achieves higher sales. CAVA expects most restaurant openings in 2023 and beyond to have a drive-thru.

The brand is moving forward with these designs as digital sales become a larger part of financial success. The chain has roughly 3.7 million loyalty members in Q1, which represented 25 percent of sales. That figure marked a 56 percent year-over-year increase, with roughly 14,000 members per restaurant.

Digital overall mixed 35 percent in fiscal 2022, good for 51 percent growth year-over-year. This is a preferred transaction for CAVA, as these orders come with a 27 percent higher average check.

CAVA also sent an email to rewards members on Friday in regard to the news, announcing it would offer a “Directed Shares Program” for users. CAVA intends to reserve of portion of shares for eligible rewards members to purchase at the IPO price at the time of its proposed offering. “This is a potential option for interested, eligible CAVA Rewards members—it’s not a solicitation or obligation to participate and does not impact your rewards status with CAVA,” the email read.

Interested members were given a link to a form to pre-register by May 26. Once the period expires, the company said, no additional submissions would be accepted. There will be a shares limit for those who do qualify.

The chain's consumer base is 55 percent female. Twenty-eight percent are 25-34 years old, followed by 55 and older (23 percent), 35-44 (21 percent), 45-54 (19 percent), and 19-24 (9 percent). In terms of household income levels, $150,000-plus leads the way at 37 percent, followed by $100,000-$150,000 (22 percent), less than $50,000 (16 percent), $75,000-$100,000 (13 percent), and $50,000-$75,000 (12 percent).

"CAVA serves guests across gender lines, age groups, and income levels and benefits from generational tailwinds created by consumer demand for healthy living and a demographic shift towards greater ethnic diversity," the company said.

CAVA said it particularly resonates with Gen Z and Millennials. The chain's aided brand awareness, it said, scaled from 41 percent in the first half of fiscal 2021 to 44 percent in the second half of fiscal 2022. "We believe there is significant runway to further increase brand awareness and guest engagement among both new and existing guests, and across markets, and demographics," the company said.

In 2021, the IPO market was hot with five major companies going public Krispy Kreme, Dutch Bros Coffee, Portillo's, First Watch, and Sweetgreen. Fogo de Chão and MOD Pizza filed for IPOs, but haven't moved forward yet.