Can Cava Become the Chipotle of Mediterranean Food? | WSJ The Economics Of

Can Cava Become the Chipotle of Mediterranean Food? | WSJ The Economics Of

Mediterranean fast-casual food (00:00:00)

  • Fast casual chain Cava has grown into a nearly $4 billion business.
  • Cava acquired a competitor four times larger and converted its locations.
  • The goal is to be the largest Mediterranean chain in the US, similar to Chipotle's position a decade ago.
  • Success relies on the lasting popularity of the Mediterranean diet.
  • Cava uses customer data to strategize new location openings, moving beyond acquisition-driven growth.

Growing through conversions (00:00:58)

  • Cava favors suburban expansion where Mediterranean options may be limited.
  • A robust real estate model incorporating demographics helps identify optimal locations.
  • In 2018, Cava acquired Zoe's Kitchen, which was financially struggling.
  • Zoe's lack of focus and menu clarity became a warning for Cava's brand focus on modern Mediterranean flavors.
  • Most new Cava restaurants between 2019 and 2023 were converted Zoe's Kitchen locations, allowing for cost-effective expansion.
  • Converting existing Zoe's locations helped Cava grow quickly in new regions.
  • After converting the last Zoe's Kitchen in October 2023, Cava will now have to build new restaurants from scratch.

Business model (00:03:05)

  • Cava operates in 24 states plus Washington, D.C., and went public in June 2023.
  • Seeks to benefit from the Mediterranean diet's popularity to attract a wide customer base.
  • Mediterranean cuisine makes up only 1.4% of US restaurants.
  • Cava reported a net income of $6.8 million with a 25.1% profit margin at the restaurant level.
  • As the largest Mediterranean restaurant chain in the US, Cava is compared to Chipotle.
  • Chipotle was a pioneer in fast casual dining with less competition, whereas Cava faces more competitors.
  • Success may depend on customers' sustained interest in Mediterranean food, which is still seen as new in many areas.

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