Cava shares opened at $42 on Thursday after pricing at $22 on Wednesday. Cava CEO Brett Schulman spoke with Yahoo Finance's Brooke DiPalma at the New York Stock Exchange after shares started trading.
Video Transcript
RACHELLE AKUFFO: Taking a look at Cava shares now. Currently, trading at about $43 as it started its IPO today. Open trading at $42. That's 91% above its IPO price. That's after making its public debut this morning as we mentioned that originally pricing at $22 a share.
Let's get to "Yahoo Finance's" Brooke DiPalma on the floor of the New York Stock Exchange for more on this. Hey Brooke.
BROOKE DIPALMA: Good morning, Rachelle. I'm here with Brett Schulman, Cava co-founder and CEO. Such an exciting day for you. Congratulations on the IPO. First, break down what this day means for you personally. And has it surpassed your expectations, so far?
BRETT SCHULMAN: Thanks, Brooke. Thanks for having me. It's been an amazing day. It's an incredible validation of all the hard work our team has put into the business the last 12 years to help get us to this point. And that this is the next beginning of the next chapter in our journey.
BROOKE DIPALMA: And right now, we're trading at $43 a share. Are you concerned that the valuation here is a bit too high and that expectations are now way too high for the company?
BRETT SCHULMAN: Well, I told the team last night, we're not going to focus on the daily stock price. Markets go up. Markets go down. We're focused on the same thing we've been since we started, which is our long-term vision of defining the Mediterranean category and bringing the Mediterranean way to communities across the country.
BROOKE DIPALMA: Now, let's talk about the way that you started. Back in 2011, you opened up that first fast casual concept. I think one of your co-founders called it a chef casual concept. What was one of the biggest challenges that you face to get to this point you are right now?
BRETT SCHULMAN: I like to say scaling restaurants is hard. It's not like scaling SaaS software. It takes a lot of great people and great talent. And so really developing our restaurant team leaders and building our team out to scale this business, we focused on our culture and our mission to bring heart, health, and humanity to food. And when we do that, we get great people on board that deliver that great food and great hospitality. And help us get to where we are today.
BROOKE DIPALMA: Now, Brett, I read through your S-1. When do you think that Cava will turn profitable?
BRETT SCHULMAN: So we're focused on our long-term growth. We've got a tremendous unit economic profit engine. We saw in Q1 alone, we generated $50 million at the restaurant level. That's compared to $91 million all of last year. So very healthy margins at the restaurant level. And that's the lifeblood, the oxygen of our business. And we've invested in significant infrastructure over the years, whether that's our manufacturing infrastructure or digital infrastructure, or all the new restaurants we've opened over the last few years. And all of that is now flowing into the business and really creating great tailwinds on that path.
BROOKE DIPALMA: Let's talk about that growth plan. Right now, you're at 263 You plan to open or have 1,000 locations in less than a decade. How do you get there?
BRETT SCHULMAN: So we get there with the great team I talked about, the infrastructure I talked about. We operate in 22 states in the District of Columbia today. That means there's 26 states in the Continental US we're not operating in today. So there's tremendous growth opportunity within our existing footprint. And all those new markets were not in like Chicago, where we're going to open next year, and start our entry into the Midwest.
BROOKE DIPALMA: Now, speaking of Chicago, one of your competitors, Sweetgreen, just open up an automation inside. They're using robots. We've also heard from Wendy's, from McDonald's using voice ordering technology. Can we expect Cava to have AI and automation in a future restaurant design?
BRETT SCHULMAN: Well, we think there's a lot of opportunity within AI specifically. When you think about predictive labor scheduling, predictive ordering, prep that can really do the trick of making it easier for our team members to run a great Cava, and deliver that great food and that great hospitality. That's when things are working well for us.
BROOKE DIPALMA: And you're investing heavily in digital. I believe more than 50% growth in digital sales last year. How does that customer change in terms of how much they're purchasing, and just how much potential there is in a digital consumer?
BRETT SCHULMAN: We do see a 27% higher check average in the digital channel. But what we try to do is create basically a multichannel platform, where you can choose the channel you want to engage with us on. Because if it's an urban consumer or a suburban consumer, a young single or a family that needs that may be very different, so we want to basically put the control in your hands to say, I want to engage. And I want a digital order and pick up off the shelf of Cava. Or I want to come in with my family and sit down in the dining room and eat a meal. Or I want to come in my car and pick up my order out of one of our drive-thru pickup lanes, which we now have 20 oven growing.
BROOKE DIPALMA: And addition to that, right now, inflation is the name of the game, especially when it comes to not just Cava, your food products, but also when it comes to American consumers choosing where they're going to go. What customer do you attract? And how do you get maybe that McDonald's customer that's looking for value to try out Cava?
BRETT SCHULMAN: Well, there's two things, Brooke. There's the fact that our food has an incredibly broad appeal and diverse appeal. When you look at our gender mix, 55% female, 45% male, great generational mix, and great income mix. We're able to compete down income brackets because of our value proposition.
And one thing we did to lean in to that value proposition, I talked about that infrastructure we've invested in over the years. That now allows us to really leverage into in the business and not have to raise price as much as maybe some of our peers have. So last year, less than 5% in restaurant pricing, even as we expanded restaurant level margins. so really trying to put our best foot forward to our guests and make sure we can invite everyone to our table.
BROOKE DIPALMA: And can customers expect another price increase to happen later on this year, perhaps next year?
BRETT SCHULMAN: We have no planned price increases for the remainder of the year.
BROOKE DIPALMA: And in addition to that, we're also seeing companies go in terms of drive-thru concepts, engage with customers a different way. When you think about your feature store footprint and you think about the size, of course, that's a bigger footprint. Does it come at a higher cost? And are you worried about that?
BRETT SCHULMAN: We have seen some developmental inflationary costs the last few years. But that's embedded in our model. We have a core format that we create derivations of, again, to meet the needs of the guests in that specific trade area, whether it's one of our drive-thru lanes, whether it's a unit here in Manhattan that has no seats in the dining room, and multiple digital order make lines, or a restaurant in the suburb that has 80 seats in the restaurant.
BROOKE DIPALMA: And lastly, CPG is something that you guys started with. You had your dips and your spreads available at 650 locations, including Whole Foods. How big is that business today? And do you plan to scale it after this IPO?
BRETT SCHULMAN: It's a very small piece of the business today. A lot of our manufacturing capacity goes to support the growth of our restaurants. But there is that option in the future that if we think that there's opportunity there to lean into it, and we have the bandwidth as an organization, we have a lot of restaurants open, that's there for us to go after in the long term.
BROOKE DIPALMA: And Brett, I have to ask. Is roasted red pepper hummus and crazy feta are still your go-to sides?
BRETT SCHULMAN: You've got to get a scoop of crazy feta no matter what bowl you order at Cava.
BROOKE DIPALMA: Wonderful. Crazy feta is my favorite too. Brett Schulman, Cava co-founder and CEO. Thank you so much. Back to you, Rachelle.
BRETT SCHULMAN: Thanks, Brooke.
RACHELLE AKUFFO: All right. A big thank you to our very own Brooke DiPalma there who was joined there by Cava CEO Brett Schulman on the floor of the New York Stock Exchange. Thank you to you both.
