Price and promotion might be the key proteins of retail operations, but make no mistake, there’s a lot to be learned from what’s inside a $13 pita wrap. The fast-casual chain Cava Group offers proof.
The Washington, D.C.-based Mediterranean restaurant company exceeded performance expectations in 2023, its first year as a public company, and earned a few double-takes with its ambitious growth plans. Sales at Cava locations open at least a year – a critical retail measure – rose 17.9% in 2023. By 2032, the 309-location chain aims to operate 1,000 locations, the Motley Fool reports. It opened 72 stores in 2023. (Note: Cava got a big boost in 2018, when it acquired Zoës Kitchen, a chain of 268 locations that have since been integrated.)
Still, the restaurant group’s ambitious growth goal has drawn skepticism, as well. Cava is in the early stages of building brand awareness and is unknown in many markets – a successful rollout will require sound real estate development capabilities, Seeking Alpha pointed out. There won’t be much room for error.
On top of that, it must balance the responsibility, overheard and scrutiny of operating as a publicly traded company.
8 Retail Takeaways
Cava managed encouraging growth in an industry that, like the retail business, faced stiff economic headwinds in 2023. It may have had luck in its favor, but it also employed a measured approach. Here are a few of the operational staples Cava used that others can learn from – and watch out for.
- It’s not passing on price pressures. Despite “everybody’s doing it” inflation price hikes, Cava in January 2023 increased menu prices by nearly 3%, then held off on further increases. It has said it plans to return to 2.5% to 3% price increases in 2024, Restaurant Business reported. But as recently as Feb. 28, Schulman told Bloomberg News that it would not raise prices in California – a telling indicator because minimum wages recently increased in the state. This is a key loyalty-building approach, because consumers are well aware they are paying too much for groceries. The watch out: As any national retailer will point out, Cava will need to achieve scale to maintain healthy operating margins.
- It is investing in workers to reduce turnover. In the third quarter of 2023, Cava raised wages and extended healthcare benefits to part-time workers. This was a choice investment; turnover can cost 1.5 to two times a retail workers’ annual earnings, Culture Money reports. And in the retail sector, the average employee turnover rate was 60% in 2023, according to the U.S. Bureau of Labor Statistics. Cava aims to keep its employees by offering them a clear path to career advancement via an in-house “Academy” training program. The company’s goal is to promote 75% of its general managers from within. Companies that formalize similar features are more likely to be seen as offering more than a mere job, but a career.
- Knowing what customers want to know. Nearly two-thirds of consumers would switch brands for more in-depth information about their products, according to a report in Business.com. Cava offers transparency through detailed nutritional information available on a downloadable guide that includes calories, fats, carbs, sugars, proteins and allergens for all menu items down to the fire-roasted corn. While this feature isn’t new in fast-casual, Chipotle goes a step further with a neat nutrition calculator tool. Retailers should provide transparency in the areas most valued to their customer bases, from labor practices to waste reduction.
- Catering to new ideas – and it needs to. In addition to the traditional restaurant model, Cava is testing two catering restaurant formats to help gauge demand. One format consists of 10 locations that offer only digital order pickup and courier (delivery) pickup, as well as centralized catering. These locations support surrounding restaurants, according to an interview in Restaurant Dive. The second format includes 10 locations that combine regular Cava restaurants with larger kitchens that serve as production hubs. This approach enables Cava to serve core customers while testing new growth areas. Ideally, it will use these tests to expand its limited menu of bowls and pita wraps, which likely do not appeal to everyone.
- Building near fatter wallets. Typically, fast-casual chains target trade areas with household incomes slightly higher than the median, but Cava’s market area in 2023 was “significantly higher” than the fast-casual category, according to Placer.ai. These households were less likely to be set back by the economic downturns of 2023, which could benefit Cava as it marches ahead with its 2024 growth plans. However, high-income trade areas could come with higher costs, and Cava is in the relative early stages of a national build out, meaning there is much to learn. Retailers, many of which have decades of real estate experience testing various-sized formats and venues, might be able to predict, and learn from, Cava’s trade-area choices.
- Targeting high-profile word-of-mouth. As any retailer or brand that uses celebrity influencers will tell ya, positive word-of-mouth can be more effective than paid advertising. Cava has pursued this strategy, having provided catering services to almost every Major League Baseball team in the summer of 2023, including the Texas Rangers during their World Series run, as well as college teams and the Los Angeles Lakers during the playoffs last spring, Restaurant Dive reports. Cava also markets its catering to corporate headquarters and celebrities, including Harry Styles’ crew in 2022. The high-profile risk, of course, is achieving total customer satisfaction. Cava wouldn’t want unhappy customers talking when their mouths are full of negative reviews.
- Getting smarter about data targeting. Cava in the first quarter of 2024 launched the Connected Kitchen Initiative, which combines customer data and artificial intelligence modeling to forecast what different locations should prep, batch cook and schedule, reports Restaurant Business. These tools include real-time sales tracking from both restaurant and digital channels, its camera vision, and insights from weather and event data. These insights are combined to “automate suggested prep” by the day or by the hour, CEO Schulman has said. Most retailers are schooled in using customer data, but the analytical models require constant attention and tweaking to remain effective. Retailers might learn, along with Cava, which insights best inform its growth.
- Continuing to tinker – a must. Cava is in the midst of revamping its loyalty platform with new types of rewards and ways to engage. It did this in part because its original rewards structure was “pretty transactional” – great for high-frequency guests, but not for lower- and middle-tier customers who felt the rewards weren’t as attainable. This elementary finding suggests Cava has much to learn in terms of leveraging its loyalty initiative potential, possibly because it is doing so much at once. A rewards program is typically the most direct link between a brand and customer, and therefore, the most immediate measure of value. A test in Houston offering a selection of rewards and challenges will expand to the Carolinas some time in 2024, according to Food On Demand. Retailers might gather some tips from the test.
Getting Full Health Benefits From The Mediterranean Diet
Cava, like any young company pursuing ambitious growth, must make delicate choices. Retailers, by unwrapping what’s inside Cava’s growth strategy, could benefit from knowing the opportunities and risks. Heck, based on its rollout schedule, retailers could choose to build in its trade areas.
They can start by testing the goods themselves. Because when it comes down to it, there’s a lot more than protein and hummus in a $13 pita wrap.
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