CAVA Group, Inc. (CAVA) Earnings Call Transcript & Summary

Good morning guys. I'm Brian Harbour. I cover restaurants and food distributors at Morgan Stanley. And now we're going to talk CAVA. Brett Schulman, Co-Founder and CEO; Tricia Tolivar, CFO. Thank you, guys, for joining us. Appreciate it.

Brett, maybe to start, clearly, a lot of things have gone well for CAVA since you've gone public, I think it's fair to say. What are you most proud of over the past year or maybe since your IPO, what do you think you've made the most progress on since then?

Yes. Well, thanks for having us, Brian. I think what I'm most proud of is the elite execution of our team and our ability to deliver on our commitments and our strategic initiatives. I mean if you think back, it seems like a lifetime ago, but at the beginning of the year, we delivered our largest capital investment ever in our new production facility, state-of-the-art production facility in Verona, Virginia. We opened our new major metro market in our first new region in a long time in Chicago in the upper Midwest. We launched a new main significant protein and steak. We launched a reimagined loyalty program. We launched Garlic Ranch Pita Chips and a new labor deployment model, right? So just so proud of the team's ability to innovate and execute at pace while still prioritizing and delivering on our commitments every day to fulfill our mission to bring heart, health and humanity to food.

Okay, great. Obviously, you're bucking some of the macro softness in the industry, right? And I guess just from observing your own business, what do you think -- you've talked about sort of trade down and trade up. Obviously, you talked a lot about health, although there's also companies I cover doing very well that are not healthy, right? So I guess, how do you sort of view that trend? And I mean, how do you view that into next year as well? Do you think we continue to see that benefiting you?

Yes. I think it's a couple of macro trends certainly specific to CAVA. We talked about a little bit around the IPO, the changing pallets of the country, the increasing diversity of the country, folks seeking bolder, more adventurous flavors, combine that with increasing interest in health and wellness, modern health and wellness trends, but people want to eat better, but they don't want that to come at the sacrifice of taste and flavor and fulfillment. And that's where our unique Mediterranean cuisine is meeting the moment for them. And then you pair that with the way we're able to deliver that cuisine and the value proposition. And I think that's something that's been playing out in our industry over the last 20, 25 years, where you've seen the emergence of the fast casual segment and the continued growth of that segment, while other segments have started to contract. And when you look at our multichannel format and the way we're able to deliver highly convenient digital channels as well as highly experiential physical channels. And that value proposition is resonating with consumers above us or with consumers trading down from above us, trading up from below us and trading over from legacy players in our space because I've talked about this. I think the value wars is a bit of a misnomer, where that's really price and discount wars. And I think the consumers are looking at it and consumers are very savvy and they're very sensitive to the bang for the buck and the value they're getting. And we frame value as a combination of attributes. It's the quality of the food we serve and the ingredients we source. It's the relevance of that on-trend Mediterranean cuisine, #1 ranked diet 7 years running, the convenience in which you can access it, right, whether it's our digital drive-thru pickup lanes, pick up off the shelf, delivery and even the convenience of our format with the walk the line production line format, or the experience you have when you engage with our brand in that Mediterranean hospitality and those bold new adventurous flavors all that's coming together to continue to build momentum as we create what we believe to be the next -- and define the next large-scale cultural cuisine category in the country.

Clearly, I think rising awareness has also benefited you, right? Just in the last 1.5 years. I mean, can you quantify that to some extent? How has that shifted? How do you think that's helped you?

Yes. So brand awareness has increased 8 points since the IPO, and it was one of the benefits we thought we would see, as a result of the IPO is really getting CAVA out into more markets and into people's mind share. And so the investments we've made and the effectiveness of our social media campaigns, the continued expansion into other white spaces in the country have really helped enable that awareness and continue to see it grow. So in our most mature markets, our brand awareness in the District, Maryland and Virginia is in the 60s. So there's still tremendous opportunity and room for that to grow as we mature and continue to expand. And so we really further reinforces the continued growth and expansion as we really leverage that white space ahead of us.

And that's a nationwide increase.

It was a nationwide increase, yes.

Maybe let's talk about store development a bit. So you did say you expect 17% plus store growth next year. Maybe just talk about your confidence in that, how you see sort of the timing through the year new markets and just sort of your visibility on sites and whatnot?

Yes. We feel really good about our store growth in the 17% target for next year. We've got great visibility into the real estate pipeline. The team has done a tremendous job executing those leases, working with our developers and our partners and to bring those to life. And in addition to that, we've got good visibility into the pipeline of general managers, which is really the main focus and contributing factor for our ability to grow as we move forward. So the real estate pipeline is great. The general manager pipeline is good, and we feel really good about how we go in. We're anticipating that growth to be fairly ratable throughout the year next year. And as we mentioned on the call, we're also anticipating into going into a handful of new markets moving into South Florida and 2 other Midwest markets. So....

Okay. And I mean, it sounds like you have good visibility on managers. And the development team can sort of support maybe not just next year, but you feel like you have sort of the manager pipeline and the development team to support that level, perhaps longer term.

So as a team, we're always looking ahead 2 to 3 years out and saying, what is it that we want or need now to make sure that we can accomplish what we want to do in the future. So feel great about the teams, both real estate, design and construction and the operations team and how they're thinking about what is it that will be required for openings in '25, '26 and beyond, and that's just part of our everyday conversation.

New store economics, it sounds like you're going to maybe update us at some point soon. I assume that sort of sales and margins, what we've seen in your results is kind of true of new stores as well. But has anything else been key to sort of -- have the stores ramped faster just because of that awareness you mentioned? Or what else has been key to driving new store economics?

So when we went out in the IPO, we anticipated our year 1 new restaurant openings to deliver $2.1 million in AUV. What we're experiencing in both the 2023 and the 2024 cohort is that those AUVs are well above that $2.1 million mark. And we're seeing that in all parts of the country, all types of formats, urban, suburban, no matter how you cut it, we're seeing strong success. So it gives us great confidence in how we're moving forward. What we're keeping a close eye on and refining our communication around is, so what does that mean in year 2. So the restaurants opening stronger in year 1. So how does that change or does it change, how we think about year 2. And so again, going back to the IPO, we talked about $2.1 million in AUV in year 1, growing 10% the next year, 6% to 8% the following year and then leveling off to more balanced same-restaurant sales growth. We're seeing good strength and momentum in that second year, and we're just going to continue to monitor it and refine and communicate in early '25, as you said, Brian, on how we're viewing it. The great news is there's lots of strength, we're getting to those cash on cash return numbers of at least 35%, well ahead of our expectations. So both the top line AUV as well as the restaurant level margin and those restaurants are both outperforming.

Do you have any updated thinking on digital kitchens and also maybe licensing at some point besides the 1 airport location you have today?

I think we grew up to 4 airport locations. But digital kitchens, hybrid kitchens, they're a test that we have going on to support a catering channel that we're developing. So it will continue to test in 2025. We'll move it through the stage gate process to a major metro market test. And the idea is, we know that there's a great opportunity out there for us in catering, but we don't want to come at the expense of the other channel experiences because catering is a different production muscle. We saw when we acquired Zoe's Kitchen back in 2018, 17% of their revenue is catering but it often came at the expense of the other channels. And so we've used centralized hub production in those 2 different formats, digital kitchens as well as hybrid kitchens to support adjacent restaurants around them, and we've expanded the test to regular CAVA restaurants to understand how much capacity these restaurants have at these different AUVs, especially ones with significant AUVs to support catering. And then how do we take all that production capacity and orient it in a major metro market to support the overall catering demand of that market so that when we do go to launch nationally, we can do it successfully and deliver on our commitment. So excited to expand that test in '25, and we'll continue to use those 2 formats strategically to support the overall production of catering.

Okay. You're also, I think, pretty explicit in kind of talking about dine-in, right? And so Project Soul focuses on kind of the in-store experience and maintain -- it's interesting, right, because I think some restaurants have actually become like very unpleasant to actually go into and sit in. And of course, there's a large chain that said that about itself and wants to sort of like improve that in-store experience, right? But talk about your thinking there and how that project will play out?

Yes, I've been pretty vocal about it. I think it's a really interesting debate. And I think it's a big kind of moment for our industry where I think the demise of the dining room is greatly exaggerated. I think we all see it in our everyday life as screens and technology and automation infiltrate our everyday life in the front lines of many concepts. Brands that are able to deliver human connection humanity are filling that void and attracting more occasions and more consumers, 65% of our guests want to come in and have that physical walk the line experience. It doesn't mean they don't want digital convenience as well, but we don't think it's an either or, we think it's an and. And so we have great restaurant level margins. We have a highly productive operating model without all that automation. And so then we say, okay, how do we use automation technology to enhance the human experience, not replace it. So we have our digital ecosystem, but then we're testing something called Connected Kitchen, where we use camera vision and generative AI, it's in test in 4 restaurants over the serving line to detect how much food is being depleted from the serving ports, cross-reference it with data, including historical sales, weather and event data, to do predictive cook batching and time sequencing for our grill cook or prep for specific ingredients to the team before and after shifts, taking all that complexity out of their mind share, freeing them up for great food and great service because at the end of the day, we're a restaurant and food -- sharing a meal is the oldest social act known to human kind. Food is still a social visceral eating experience. And I think, look, that's why you're seeing some trade down from legacy casual dining because we're able to deliver an experience and a value proposition that's resonating with folks, especially in suburban and exurban markets to say, "Hey, let's go to CAVA for dinner on Wednesday night versus traditional casual dining meal. So we believe in it. We're investing against it, more comfortable seating, more greenery, warmer dining rooms because that same guest wants the cross-channel engage with us. One day, they might be running errands and they want to order on the app or pick it up out the digital drive-thru window. Another day, they may want it delivered to their office or their doorstep. And then another day, they want to come in and share a meal in our dining rooms whether by themselves or with their friends and family because as we see with hybrid and remote work, people don't want to be in their bedroom or their apartment all day or their house. They want to be around other people, even if they're by themselves having their meal.

Makes sense. So if there was -- if there were production automation, I assume that would be sort of back of the house thing. Have you actually tested that at all?

We are looking into -- always we're looking into ways to leverage automation. I mean, our new manufacturing facility is highly automated, includes robotics. Our production facility in Verona, we do envision the opportunity to incorporate automation on our second digital make lines, right? Because the need state of our guests is different when they're engaging with us digitally versus physically. Digitally, they're looking for convenience, speed and accuracy, and that's where automation can come in and deliver that for us and help us on those second make-lines. On our in-restaurant serving line, we want that human connection. People come in, they want the 5 senses. They want to hear the chicken sizzling on the grill. They want to smell it. They want to see the food in front of them. And they want to engage with our team members and have that conversation, that interactive experience as they build their meal and then share it in the warmth of our dining room.

Okay. Makes sense. Question, I certainly get is just fast casual competition broadly. You're the biggest in your category, right? But I think I'm talking about sort of the overall fast-casual segment. When you locate in your other hot, fast casual chains. Is that -- does that enhance your performance? Are you finding some of these areas are actually becoming kind of more competitive? Everyone sort of has big growth targets and wants to go to many different cities across the country. But what kind of determines who gets there, right?

Yes. I think the early advent of fast casual back in the day was just the emergence of the category. I think the next generation of fast casual is it breaking out into cuisine categories within fast casual and dominant players within each cuisine category, best in breed, which is what we believe we're defining and creating in Mediterranean. So we find when we locate with other best-in-breed players in different cuisine categories, it can be an amplifier to us because you create kind of a critical mass in a trade area or a center of energy that conditions the consumer behavior to kind of go over to that area and then determine which cuisine they want. And if you're the expert in that cuisine, that's who they're choosing and opting into, and that's what we're seeing with Mediterranean.

Okay. Maybe talk about some of just the top line drivers specifically. And I guess a quick one first. I mean, maybe just talk about your kind of view on pricing into 2025 and how that will shape up?

So historically, at CAVA, we've tried to be very modest in our price increases. And then even if you look at from 2019 to 2023, we raised price around 12%. And CPI during that same time frame went up 18% and fast food was up almost 30%. So always trying to be very mindful of the guests, and you'll hear us talk about as we think about the business, making investments in team members and making investments in guests that we believe will drive long-term sustainable growth for the brand overall. So when we think about pricing in 2024, we raised price a little under 3% at the beginning of 2024, and we're anticipating in 2025 to have a more modest price increase compared to that, and we expect that to be in the early part of the year.

Okay. Sounds good. Maybe talk about loyalty, right, because you just revamped that. What are you seeing there so far? How do you kind of lean into that as a traffic driver in '25?

Yes. So 2 months in, still kind of early days, but very, very excited about the results that we've seen that have been validating what we saw in the stage gate process and testing, where we noted that we're already seeing over 200% increase in the percentage -- 200 basis point increase in the percentage of revenue coming through the loyalty program. And another encouraging stat that we're seeing is that we talked about the shift from a spend X get Y to a points -- bank and earn points-based model is that our lower-frequency users in the old program were not highly engaged because they felt like the reward was out of their reach. It was unattainable. So the new catalog of reward redemption options gives a number of options that are a low amount of points that they can opt into pretty quickly, and they don't have to have an insurmountable number of visits to get the reward. And we're seeing those lower reward redemption options be the most highly redeemed. So we're seeing people more engaged and redeeming those options more quickly. And then to double click on that, we did a limited time offer, where we're -- our pita chips are 400 points to redeem and then we took our Garlic Ranch Pita Chips, our new flavor innovation, our first flavor innovation on our fan favorite pita chips. And we offer them at 200 points for a limited time, and that was the single highest redeemed item we've seen since the launch of the program. So we're seeing the ability to really influence behavior, create excitement and drive further engagement through our loyalty program. And so we have seen some improvements on the frequency side. We haven't quantified it yet, but excited about the early returns in the program.

Okay. This year, you launched steak. In the coming year, would you expect sort of any major product introductions or shifts or sort of like a normal LTO type of year perhaps?

Yes, we haven't spoken to any specific innovation, but what I would say is my Partner, my Co-Founder, Ted Xenohristos, is our Chief Concept Officer. He leads our very talented culinary team who is building out a multiyear pipeline of innovation and that we typically think about the sequence of -- sequencing of that innovation, 1 or 2 tentpole moments a year. So this year's steak is a great example, bracketed by a few seasonal moments, so for example, our Garlic Ranch Pita Chips. And so I think you'll see a similar cadence next year and the years to come.

Okay. How about maybe just channel drivers, it would -- could catering sort of start to expand a bit next year? Do you think that with loyalty, maybe digital will or mobile ordering will grow faster maybe, how's delivery doing as well?

Yes. So what we've seen is that all of our channels have continued to increase at about the same rate. So there hasn't been a change in mix over the past few years, and I'm not anticipating that loyalty or any of the other activities will have a disproportionate impact on any of the channels individually. We're opening digital drive-thru pickup lanes, about 1/3 of the pipeline in '24. We'll have those capabilities. Could be a similar amount in 2025, but it shouldn't have a material impact on the shift overall. And as you think about catering, as Brett mentioned, really working on the test for catering and will be more of a driver in the future and not necessarily in 2025.

Okay. Makes sense. Maybe shifting just to operations costs a little bit. To what extent is speed of service and unlock for you? Like obviously, we talk about this a lot in the industry. You do have -- my CAVA is very crowded and has quite a long line sometimes. So I mean, it sounds like kind of the new labor tool could help here. But is this -- is this a sales move? Are you doing anything different in new stores to try to unlock speed of service?

Yes. Listen, it's a good problem to have, but it's something we want to continue to address nonetheless. Certainly, here in New York City, we've experienced and seen the lines out the door to our restaurants and a few people walk away. So we never want anyone walking away. But at the same time, we recognize that it's many guests across the country, first time interacting with our brand. For many people, first time eating Mediterranean cuisine. So we don't want them to feel hurried or rushed through the experience. And our team members, we don't want to put too much pressure on them and say, get 5 more people through the line. So we're at a different stage of our journey than some of our peers that have been very focused on that speed of service. But we step back and say, okay, what can we do to naturally improve that and help that. And so our new labor deployment scheduling model that we launched about a month ago is in that spirit. And we launched actually a quarter ahead of schedule because of the positive quantitative and qualitative results we were seeing and the team was ready for it. And what we saw in the 9, 10 months of test is quantitatively, we did see improved speed of service, and we saw improved guest satisfaction. So speed of service, but also speed and service. We don't want one to come at the expense of another. Qualitatively, our team members told us the shifts are less frenetic. They feel like they're in the right places in the right moments in the right roles customer-facing. And most importantly, our GMs told us they're able to manage and coach versus having to jump in the line because somebody had to run in the back to prep. So we took the same amount of labor hours and reallocated them much more effectively and efficiently in the way we stagger bringing people in, the timing that we do prep. And so we think this will continue to have a positive impact as it's now deployed and the team ramps up and continues to get in rhythm with these new deployment models. So that's just one example. Connected Kitchen is a longer-term example on how to continue to improve speed of service behind our team members to put them in a position where it's naturally flowing better. It is a metric we track internally the number of guests that we're moving through, but we're not putting added pressure on our team to meet a certain guest count metric every 15 minutes because we want to make sure we're putting a great brand experience forward in this critical brand building phase.

Well, in that spirit, do you need more labor hours in some cases, might that be an answer?

What we found is, at our higher-volume restaurants, no, we have the right complement of hours, and we track it. We track forecasted to schedule and then what the numbers actually came in, what they earned and what they did schedule to make sure they're actually scheduling the full amount that they're being allocated. But the interesting thing we found is that there's an opportunity at a set of our restaurants, not a huge set, but some of our lower-volume restaurants where you think about 8:00 at night, where there might be 2 people on the line serving, but there's 4 or 5 people, 4 or 5 customers in line, and it takes them 10 or 12 minutes to get through the line. And that there's an opportunity to take that. So we do it by guest count band to get it to the next level. It's a bit of a chicken and egg problem, where the leaders are hesitant to add more incremental hours over where their protocols are. But then by not adding those hours, they can't drive further guest count. And so we've identified where those opportunities are, to give them those incremental hours that wind up paying for themselves when you drive that further guest count. So we've taken a targeted approach in some of the lower-volume restaurants that have opportunities to drive ultimately traffic overall and get to that next level of guest count and revenue.

Right. Okay. Could you talk about the Connected Kitchen thing a little bit more? Just -- is that -- is it still going to be sort of testing this year? Or like what's roughly the timing? And how does that sort of help?

Yes. So our stage gate process, whether it's culinary, whether it's operational innovation, we start in one restaurant. We expanded to a group of restaurants like it's in now 4. We'll expand it to a market test, then a dual market test and once it's greenlit, it would go across the fleet. So it's still early days in that. And it's actually just the first phase of what Connected Kitchen, this technology can do because you can even imagine it's got the capability to integrate with our POS, recognized premium attachment or double protein, so it's no longer called down the line or hand the car down to identify. So you have very accurate ringing, where it automatically populates from the POS. So there's other features and capabilities we'll layer on as we bring this through the developmental process.

Okay. Got it. You sort of said flattish store margins next year. Could you talk about just, I guess, some of the basic assumptions there? I mean, I assume it's sort of on algo same-store sales, we talked about pricing. I don't know if there's more sort of normal course wage increases, so it's just sort of normal inflation. But could you kind of walk us through that a bit?

Sure. So when we gave guidance for this year, we articulated 24.5% to 25% restaurant level margin in 2024. So I'll start with that and say it's a very strong restaurant level margin, particularly at our stage of growth. So when we mentioned flattish margins for 2025, you think about it in terms of what we're anticipating over the long term. I mentioned earlier, we want to make investments in team members, guests and all of that is to drive long-term sustainable value for this brand. So when you pull back and peel back and look at our restaurants, our top decile of our restaurants based on revenue, drive restaurant level margins over 30%. So this model works and it can do it. But where we are, that doesn't mean that we should do that now. We're not here to drive margins just in 2025. We're here to drive this business for that long-term sustainable growth that I was talking about. So when you think about 2025, in particular, a couple of things to keep in mind. First is we launched steak as we talked about in June of 2024. We priced steak at a level that we thought would be attractive to our guests to drive excitement around this new culinary offering for us, but it also has a very premium product in it. So the way we designed it was really to create momentum for the business, but it was going to be a headwind to margin because of the premium product that we were including in those bowls and in that steak offering that we had. So there will be an impact in the first half of the year related to steak because we didn't launch it until June of '24. So that you have to keep in mind. You mentioned input costs in the basket. So if you look at our basket, we're anticipating some inflation in the basket, be offset a little bit by those modest price increases that we're talking about. But what we want is continued flexibility to make investments in high-quality ingredients, other enhancements that we can make to reduce complexity out of the restaurants for our general managers and team members to make their lives easier. When you think about the labor line, yes, there'll be some wage inflation that's built in. But the other thing that we want to consider is, every quarter, we look at every single restaurant by DMA and compare the wages in those restaurants to others in the market to make sure that we are the employer of choice in that market. So we want that flexibility to invest in wages if we need to or other benefits. So over the years, we've always invested in wages but other benefits like mental health services for all employees, whether they're on our programs or not, recently launching part-time medical benefits for our employees. But then you also think about what are other things that we can do to lean in for our team members to make their lives easier, so it takes you to other lines on the P&L like the Connected Kitchen initiative. So the other tools and enhancement that -- enhancements that, again, we think we'll simplify things, but it's another investment that we'll make. And then last, in the restaurant level margin is thinking about the physical integrity of our spaces. So repairs and maintenance. We've got high volumes coming through these restaurants. We want to keep them looking fresh because 65% of our guests come inside and want to join with us. So that's paint, that's regrouting, it's keeping up with the maintenance in it so that we're creating that positive guest experience. So when we think about it, we know this model can deliver really strong margins. And if all we cared about was 2025, they'd grow more. But what we want to do is continue to invest in team members and guests invest -- invest in our guests and think about this business for the long term and delivering long-term sustainable growth.

Right. Yes. I think you've been very clear about that. Well, interestingly, actually, in '24, the biggest margin delta was occupancy, I think. And then also, if we go below G&A leverage, right? I mean -- could that still -- that would still be the case, I guess, right, even if you're sort of investing in labor and food, is that a fair assumption?

With increases in AUVs, occupancy should continue to leverage. Most of our occupancy is fixed. So as AUVs go up, you'll see improvement there. The strong top line growth in 2024 created a lot of leverage in G&A in '24. So as we think into 2025, I'd expect some, but not to the same extent because going back to what we talked about earlier, we're always looking ahead and saying, what is it that we want to lean into now. So think about we spent a decade of digital transformation, and now we're investing in data transformation. And so how are we creating the right tools and technologies to be able to support that and support our growth going forward.

Right. To that point, is there any notable step change in G&A? Or is it -- should we kind of continue to expect modest leverage? Or is there any kind of specific area you need to invest in over the next year or 2?

We're not anticipating a significant step function. We do see that there'll be some modest G&A leverage. It's our intention to, as sales grow, to grow G&A at a lower rate, but not to the same extent we did have that benefit in '24.

What do you think about leaning into the CPG business, I guess? You have capacity, I guess, and you have capital. And it's, I guess, probably good for brand image, right? Is that kind of interest?

Yes. Go back, CPG actually predated fast casual. So CPG has been a core of what we do. You're right, Verona and the increase in the production there not only eliminates complexity and improves efficiency, our quality and cost effectiveness in our restaurants with our Chef-curated dips and spreads made in Verona, but it does allow us to have some opportunity in CPG. And so we're exploring those options. But we've got great momentum and opportunity in the restaurants themselves, and we're going to continue to focus on that and leverage other components as we deem appropriate.

Well, you're now cash generative. You have no debt, I guess. Where else do you -- you can just build more restaurants. It's your heart's desire, right? But you've talked about wanting to be -- keep a reasonable unit growth pace as well, what do you sort of do with the capital?

We'll continue to explore and be opportunistic that the highest and best use of our capital is opening restaurants, the way we've been opening them, highly productive sales and driving great returns.

Okay. Any other supply chain investments that you think are needed or...

We feel good about our supply chain, but it's important to always think about scalable supply chain strategies. So our team has done an amazing job navigating our growth and the challenges and complexities in supply chain over the past few years. And what we're now focused on is how do we create strategic partnerships, explore opportunities and really think about what are ways that we can do things differently to be able to support and continue that growth as we move forward. We've got a great distribution network as well. So the team has done a nice job there, making sure that we've got centers across the country that cover the vast majority of the population out there. And so just other ways to continue to enhance with those grower range of partners that we have that we've been doing business with since we started.

Is much of your food basket imported at all?

There's a small portion of our food basket that is imported.

Olive oil, as I recall, but maybe.....

Yes. And there are -- you mentioned food basket. There are some packaging items that are sourced domestically and internationally as well.

Right. Yes. Are there any other policy issues that you're paying attention to in particular?

So we're certainly keeping an eye out on changes perhaps in tariffs and potential immigration changes that might have impacts on supply chain, working with our suppliers in the anticipation of what those might be. Modeling, don't think we're going to have significant impacts, but want to stay ahead of it. So again, always thinking out and what that looks like. And those impacts could also carry over into real estate design and construction. So it could have an impact on construction workers and products and bringing them in and their creation. So yes, we've had a lot of conversations around it and we'll continue to do so and react if we need to.

Okay. I was going to finish with my lightning round questions. We do have a few minutes if there's any questions in the audience. I'm happy to take them. If not, we can wrap up. So usually, people are shy, right? My leading run questions I had for everyone. Just first, thinking about demand backdrop for the year ahead relative to recent trends, would you think it would accelerate, holds, decelerate?

Yes. I mean, I don't have a crystal ball, but it's tough to say what -- going back to the policy question, what's going to happen with interest rate environment and what's going to happen with any policies that do get passed as legislation. But what I can say is that we've seen very consistent trends in the CAVA business. And I think our unique differentiated cuisine and the way we're able to deliver the value proposition is clearly meeting the moment for the modern consumer and resonating. And I think you're seeing consumers in general just being very discerning about where they're spending their dollars. They're out spending their dollars. I mean you all are here in New York City, it's packed. And restaurants are packed. I was at a restaurant last night, it's packed. And so I know it's a small microcosm of the country, but I do travel the country, and I do see people traveling, airports crowded, restaurants crowded, but they're being very judicious and discerning about where they are spending their dollars to brands that are delivering great value to them and differentiated products. And that's what we've been able to do, and we think that continues into 2025.

On the margin side for the year ahead, planning them -- for them to be -- we talked about this a bit, but up, down, neutral?

So back to the discussion we had earlier, we're anticipating flattish restaurant level margins, and that's really a reflection of our investments that we want to continue to make in our team members and our guests. So when you think about investments in guests, think about the modest price increases that we were talking about. When we -- California raised wages back in April of 2024, we chose not to pass along those increases to our guests, and we didn't raise prices in the restaurants. And we saw that translate into higher traffic in that market. So we could compare on black box to our traffic trends to others in that state and saw great results. And so that's one example. And then the continued investments in our team members that we talked about, too. So really, lots of times we'll say happy team members make happy guests, which lead to a happy P&L, and we think we'll deliver that.

Capital allocation, we can probably skip because you invest in stores. Okay. We'll end it there. Thank you, guys. I appreciate you being here.

Thanks, Brian.

Thank you.