CAVA Group, Inc. ($CAVA)

Good morning, everybody. Thank you very much for joining. We are thrilled to have again, CAVA at the Strategic Decision Conference. My name is Danilo Gargiulo. I'm the senior analyst covering restaurants and food distribution here at Bernstein. And I have the pleasure of having Brett and Tricia here with me on stage, respectively, Co-Founder, CEO of CAVA and CFO. CAVA operates 439 fast casual restaurants in 28 states and Washington, D.C. The company is authentic Mediterranean cuisine in United Taste & Health with a menu that features chef curated and customizable bows and pizzas. They centrally produce deep spreads, certain dressing bases for use in restaurants, while also selling them into grocery stores. And before we go deeper into the core of the conference, maybe, Brett, for those who are less familiar with your story, can you give us a quick overview of the business today and what you see the most important messages from your latest earnings call and what you want to leave investors with at the end of this conference?

Yes. Well, thanks, Dan, for having us again. This brand was founded -- actually out of a single full-service restaurant back in 2006 by my co-founders, Ted and Dimitri, all sons of Greek immigrants. I was fortunate enough to get connected with them in 2009 when they were opening their second full-service restaurant and had begun selling the dips and spreads they served in those full-service restaurants in a couple of local Whole Foods. That's how I came to meet them, help them with that business. We hit it off. They said, Brett, let's be our fourth partner. And I broached the idea of taking what we were doing in those local Whole Foods and the full service and saying, this is amazing unique cuisine we're tasting out tonight. How do we bring this to the world in a fast health-based format. So we spent about a year figuring out how it would translate, scraped together some friends and family money and opened our first in January of 2011. So it's our 15th anniversary year. And here we are today in 29 states in the District of Columbia as of last month and over 460 locations. And I think what we'd love investors to take away is -- and I think the environment is kind of showing this to be even more true is that it's not so much about a category or a bowl or a sandwich. It's about how is your cuisine differentiated? And what are you doing different that people are walking by the three or four options next to you? And for us, it's our Mediterranean cuisine. We truly believe we are building the next large-scale cultural cuisine category that's fueled by some pretty significant secular trends, the growing diversity of the country, the increasing interest in modern health and wellness. And that's at the nexus of where our food sits, that unique Mediterranean cuisine and then how we deliver it at a very reasonable value with the hospitality and the experience that we deliver it with in a very convenient multichannel format.

And Tricia, similar for you. You talk to investors very frequently. CAVA is having extraordinary results. What do you think investors are still misunderstanding or maybe under-appreciating about your business today?

I think it's really interesting is how we operate and the model that we have, how robust it is and how it can generate significant returns. And one of the things that we're doing, though, is also making sure that we're building this brand to be a durable long-term brand. We're not driving this for the next quarter or the next year. We're driving it for 10 years and beyond. And what I mean by that is as we deliver very robust restaurant level margins of 25%, we're often asked, well, how much will those margins expand? And they can expand, but we want to make sure that we're making investments in the business that's going to keep this traffic momentum going and doing that in a number of different ways. So being very thoughtful on menu price increases and not passing along cost to the consumer. So we absorb that in those robust margins that we have. And we've underpriced CPI significantly over the past few years and certainly underpriced others in the restaurant space in a very meaningful way, and that's resonating with consumers and speaking with very strong positive traffic trends themselves. Other investments that we also make are in team member wages and making sure that we've got the right resources and team members in the restaurants to deliver on a great guest experience. So the combination of investments in our guests and investment in our team members deliver those long-term returns for the business itself and create that durable brand for the long term as well.

And Brett, what have you learned about the volatility of demand that CAVA witnessed in 2025? And how structural is for CAVA and maybe other growth concepts to be experiencing moderating demand followed by growth first moment? I mean I remember you and I had this conversation a few weeks back when you were saying, look, it's structural that you have some moment of moderation of demand followed by growth first. So I want to understand how much has your thesis changed? And what have you learned from 2025?

Yes. When you look back at our growth, we have had some pretty dynamic comp in recent years. And when we went public, we were around a $2.3 million AUV. We're now just north of $3 million. And so that can create some volatility on a 1-year basis. But as we noted last year, on a 2-year basis, our comps are actually accelerating every quarter, even though the 1 year was decelerating. And I've seen this throughout our journey, probably four or five times where I joke, we have three children, two daughters in college and a son who's going into eight grade, he is 14, and he is growing like a weed. He grew 6 inches last year. And I said, CAVA is a little bit like that where we go through these growth spurts and then we digest that growth and then grow again. And I think that can sometimes have the 1 year a little misleading, and that's why we pointed last year to the underlying structural demand of record-setting new restaurant openings, which has continued again this year as well as that 2-year accelerating every quarter throughout the year, and that momentum carried into this year. And obviously, on a 1-year basis, turn back up.

And so you had a lot of confidence last year as well that the demand was going to go back into mid-single digit, you clearly exceeded that so far. But at what point would you say that the deceleration becomes more worrisome to you and to an investor? So at what point of the deceleration journey you start to say, hang on a second, this is not just a natural slowdown and it's not like just a stalling phase following up growth spurt. It's actually a little bit more structural.

Yes. And I know it's the nature of the public markets, everybody is focused on the next quarter. But as Tricia said, we're not in this for the next quarter. We're in this for the next decade and beyond. And so we're not going to get too reactionary to a single quarter undulation or a couple of quarters of maybe more moderate comps and really focus on building sustainable long-term traffic growth. It would have been very easy for us to discount our way to the quarter last year. And actually, we had raised expectations before the tariff policy implementation, and we actually delivered on the EBITDA we had set out at the beginning of the year. So it's trying to step back and stay focused on the long term and not get too overly influenced by a quarter-to-quarter duration that might influence you into a short-term financial decision that could have really undermining long-term brand consequences.

Tricia, you were mentioning earlier, you delivered 9.7% same-store sales in the first quarter, almost 7% traffic driven, while many other peers are seeing some softening trends. So what do you think is driving this outperformance? And how much of it feels structural versus more timing related?

Yes. Certainly, our traffic at 6.8% was very robust in the quarter, and it's a combination of a number of different factors. So we talked about being very thoughtful on price. And really, price and value is not just price. We see value as a combination of factors, the quality of the cuisine, the relevance of Mediterranean, the experience that you have and the convenience that you can have at CAVA. And so that is one piece of the whole puzzle that was contributing to our traffic growth. But it's also a function of how we deliver on our guest experience as well as the impacts of our loyalty programs, the amazing culinary offerings that we have. So our white sweet potatoes, our fan favorite that we brought back at the beginning of the year this year, and that certainly resonates with our guests and is an example of the culinary offerings that we can provide and continue to provide throughout the year. So I often say that our traffic trends are really much like a CAVA Bowl. It's a lot of individual ingredients that work very well together to deliver an amazing outcome.

And you described the strength -- in the earnings call, you described the strength as being broad-based, right? You said it's coming across all different regions, across all different vintages, across all income cohorts. At the same time, your guidance is assuming some level of worsening macroeconomic conditions. So which areas of the consumer demographic are you watching most closely for sign of softening?

Yes, we're watching all areas. And certainly, as we communicated our guidance, we had very strong results and our same-restaurant sales trends were consistent with those that we delivered in the quarter itself in Q1. But what we reflected in our guidance is the uncertain macroeconomic environment and consumer environment that's out there. And so we wanted to make sure that we're being very thoughtful about that. It wasn't a reflection of the momentum that we were seeing or any change in that momentum. It's purely a reflection of what's going on around us and might impact us as we move forward.

Okay. So more prudent as opposed to reflection of yours?

Absolutely.

Regarding low-income consumer, the cohort is continuing to outperform for you, while it's certainly showing some decaying trends in some other parts of the industry. So what do you think CAVA is doing recently that is resonating so well with low-income consumers despite the average price for CAVA being certainly a little bit higher compared to a QSR peer?

Yes. Well, I think certainly, the price of the pump is impacting low-income consumers. But they're still outspending. I mean I've traveled the last few weeks. airports are packed. People are out there, but they want to make sure they're getting great bang for the buck. And especially, we see this in some of the smaller markets where we operate in, where they don't have an option like CAVA. And the option is increasingly a better relative value proposition. Tricia, we took less than half the price of our competitors in recent years. So traditional QSR has gotten relatively more expensive compared to CAVA. I mean our base bowl in some markets is $10.65 for a chicken or falafel roast vegetables with all the top things you want. That's a very healthy bowl for $10.65. So it is very competitive and a good relative value for those folks who are looking to eat better, looking for higher quality food and willing to spend a little bit more, but at a reasonable price. And also, I think there was a bit of a discount to [ G ] coming out of last year where people want value as a choice, not value as I have to go buy this as a discount. And so again, there's discretionary spending out there, but people are just being very discerning and judicious about where they're spending it. And so it's incumbent upon us to deliver them a differentiated unique value proposition at a reasonable price. And I think that's clearly resonating.

And given that it's resonating more with low-income consumers, how are you shifting, if you are, your real estate strategy? In other words, are you contemplating different formats, different regions, different parts of the United States where before maybe with the price point that you had relative to others was not accessible to you and now is your stand for stores shifting?

I think what we're seeing is exactly what we've seen over the 15-year history of our brand and what we noted in the S-1 in our roadshow 3 years ago when we went public, you're just seeing it on a larger and larger and larger scale. And what that does is just continue to extend the runway for the white space opportunity the country, and it allows us to cast a very wide net geographically to source our real estate. We have a very healthy real estate pipeline. And even when you look at our top decile of restaurants, there's not one specific way we win or succeed with guests. There's four different types of trade areas, and they're all across different regions. So you have everything from a traditional grocery-anchored surface lot center in the suburbs with an end cap. You have an urban site with some residential component. You have a college adjacent site or you have an exurban freestanding location with a pickup by car drive-thru lane. So that allows us again to go into all of these different markets. I mean we're operating today in Back Bay in Boston, Bryant Park in Manhattan, but then we're in places like Topeka, Kansas. I mentioned Mobile, Alabama, Jacksonville, North Carolina, if you know where that is. So that gets us so excited the fact that we can welcome so many different people to our table and appeal to such a wide audience, whether it's from a balanced gender perspective, a generational perspective or an income perspective.

You mentioned one of the key components of your growth has been pricing below inflation and being able to do so at a significantly higher scale. As the value competition is intensifying, maybe more than discounting competition is intensifying across restaurants, how are you protecting the traffic without training the consumers to be expecting those discounts for you?

We've just remained steadfast on our focus on continuing to deliver that value every day. So we did a few tweaks to how we communicate that late last year and how do we present digitally to the consumer. So prior to the changes that we made, we were presenting our curated bowls, which often include premium items, and we merely shifted and presented the base bowl first so that you could see that $10.65 price that Brett talked about so that we were speaking to the value that we deliver and also then creating the optionality if you wanted to have a more premium experience, you could do that. We also leaned into speaking to unlimited toppings talked about this, amazing bowl that you get three dips and spreads, grains and grains and then all the toppings that you want really helps contribute to that. So it was leaning into those messaging, doing a little bit of placement differentiation. And there was a little bit of a concern, well, if we change placement, is that going to change premium attachment, and we didn't see that. The premium attachment stayed strong and continues to increase. And so we believe we're addressing all types of consumers with choices that deliver great value for them and for us.

And the new restaurants are continuing to be very strong, 100% productivity. System AUVs are reaching about $3 million. So what do you think is driving the strong net new unit performance?

Yes. Back to what Brett was talking about, we haven't yet found a market that doesn't love CAVA. And so we open these restaurants, and they're delivering over 100% productivity. We have the entire chain delivering AUVs at $3 million. And these restaurants continue to outperform both on the top line and the bottom line. And what we're finding is it doesn't matter what part of the country, whether it's urban or suburban, what type of format, as Brett mentioned earlier, but really seeing tremendous growth and opportunity. The real estate team does a great job in evaluating sites and bringing those to the market and then our operators do an outstanding job in creating hospitality for the guests. One of the things we have realized is that we want to make continued investments in those opening experiences and lean into our preopening costs to ensure that we're delivering an amazing experience on top of the amazing culinary offerings that we have. So things like making sure our general managers are experiencing very high volumes of openings and having them come to markets like New York and experiencing peak demand rushes of guests in the restaurant and hiring those general managers earlier in the so they can experience an opening ahead of their own, so they understand what that's going to look and feel like so they can deliver on that amazing guest experience. But the restaurants as we open them are continuing to perform very well and gives us an even greater confidence in that white space opportunity that we have ahead of us.

Brett, as investors are looking for the next leg of growth from a development standpoint, what prevents you from increasing the net unit growth from here on? In other words, if you were to think about how you can sustain the development going forward, what are you most -- I wouldn't say concerned, but what are you most focused on? Is it real estate availability, leadership bench, operational consistency? So kind of what is going to be unlocking even faster unit growth or even faster TAM?

Leadership bench. Our growth is really governed by the depth and breadth of our pipeline of role-ready leaders to open those with operational integrity, which is why we've invested in our flavor -- your future platform, if you've heard us talk about this on some recent earnings calls. And part of that flavor -- your future platform is the introduction of our new Assistant General Manager role. So this was an upgrade of our general manager and training role. So higher compensation, higher more hours. It serves a dual purpose. One, it gives us better management, seasoned management complement in our restaurants across all 14 dayparts, seven lunch, seven dinners, so nights and weekends. We knew we had an opportunity to level up our service. And when you think about the AUV growth from $2.3 million to $3 million, those restaurants are a lot busier. So having stronger strength of leadership across all shifts. But then that gives us a deeper, broader pipeline of role-ready leaders to open those new we have also a high potential training program coming out this fall. So it's really a platform architected to cultivate and develop high potential team members through this program so that they can go open those restaurants with operational integrity. And that's really going to be the biggest kind of throttle to our growth in the coming years.

And historically, you were promoting mostly from within the system. Do you think that you can keep doing that with the same kind of ratio between internal hires versus external search for GM specifically? Or given your scale and your ambition to be scaling faster, you need to be looking outside as well?

I think as we develop this program, we will be hiring more external in the short term. But I think over the long term, we can maintain high internal promotion development rates because when you just think about it, as we open new restaurants, that's creating an even broader pool of talent for us to pull from, right? We're 15,000 team members strong. We were somewhere around [ 13,500 ] last year. So we're growing that pool of talent every year that we can identify high potential team members and get them in the program.

How is the talent shifting or the talent model shifting with your new COO. So can you talk about a little bit more how you're empowering your local stores to have a little bit more freedom? And how is that going to be impacting same-store sales eventually?

Yes. We talk about -- we use the metaphor like the federal government, the local government. And we don't want too much federal overreach at the local level because you can really start to make your leaders too robotic and too mechanical. And then it becomes less emotional and being able to deliver that Mediterranean hospitality and that true owner-operator mentality. So we want our leaders who are running multimillion-dollar businesses to truly feel like owner operators and hire and train and really deliver that great Mediterranean hospitality and guest experience. So we need the metrics, we need the guardrails and to hold us accountable, but how do we make sure we give them the agency to have that ownership mentality. And I think Doug's got a proven track record. He's got decades in the industry of really developing that kind of owner-operator mindset and leadership mentality. And so Doug's priorities are really that people development, the flavor of your Future platform and helping us then deliver next level hospitality. And then Tricia talked about new restaurant opening excellence. Those are priorities.

Excellent. Tricia, you had about 400 -- CAVA head, so that is about $400 million in the balance sheet. So I was wondering, can you lean into your balance sheet to potentially accelerate the development through acquisitions? I mean you've done it before with Zoe's. I know, Brett, you mentioned that this is something that gave you the great hair at the time for the complexity. But given your scale today, what you learned, you've done it before. And we've seen other peers use that lever to potentially accelerate the unit growth. Do you see pockets of opportunities where you can be entering in new states, new white space in an accelerated way by leaning into M&A?

Yes. So we certainly leveraged Zoe's to develop pockets that we were evaluating for real estate that we weren't finding exactly what we were looking for. So think about Atlanta and Dallas and Houston and had great locations there that we were able to take and convert and really create the scale for our brand that was necessary for us to continue this momentous growth that we have. Now when we think about acquisitions, we do look at potential opportunities for pockets of the country where we are no longer -- or we aren't yet in for the opportunity to consider. But what we found having done Zoe's, operating multiple brands, the gray hair that Brett experienced, and I've covered up is certainly something that we learn a lot about. And we believe that focusing on a single brand is critical for us. And so we weigh the benefits and the risks very carefully and won't say "never say, never", but certainly don't see another Zoe's like as we move forward. The other piece, too, some of the opportunities that we have evaluated have ultimately translated into our ability to procure those sites from landlords directly. And so to gain the real estate opportunity without having to take on the burden or the challenge of M&A activity overall.

More like a build-to-suit type of activity or?

Well, no, you can take over the leases from the landlords, from the prior entity and convert those. So it's not necessarily a build-to-suit second-generation restaurant and then convert it into a CAVA.

Shifting gears on to the margin. Margin was very resilient at about 25.1% despite the wage investment that you were discussing before and a higher digital mix and delivery mix as well. So how should investors think about the long-term margin structure for CAVA as you scale digitally with more labor investment potentially many innovation and potentially rewarding also consumers with pricing below inflation?

Yes. So our model is very robust. And so as AUVs grow, there is natural expansion in restaurant level margin. And when you look at our restaurants and stratify them into quartiles based on AUVs, the top quartile is above $4 million in AUV and above 30% in restaurant level margin. So there is expansion opportunity there. But back to what you were saying, we want to make sure that we're making the right investments to build CAVA's long-term durable brand with traffic growth that's sustainable over time. So we'll continue to take the opportunity to invest in the guest in terms of modest pricing -- menu price increases, invest in the team members and deliver an amazing guest experience overall that will drive traffic. So not -- we're not going to be in a place where we're going to set a margin target because we think that, that could to unintended consequences. So as something is out there, you might make adjustments in the short term to deliver on those expectations that have a long-term negative impact to the brand. So last year, when there was pressure out there and many others were discounting and I'm being a bit reactionary, we wanted to stay steadfast to our long-term commitment to the business and to the consumer and really focused on what mattered over the long term, and that certainly will play out in margin and traffic in the future.

Can we talk to the margin flow-through of the incremental marginal dollars? So what -- where does it stand today? Where do you think it's going to be in the next 5 years as you're scaling? And more importantly, what is the breakeven point after which you say, well, we covered enough the fixed costs, so now we start to see the flow-through materialize?

Yes. Being very mindful of putting targets out there, I'd say margin flow-through generally is about 40% on incremental activity and sales. And then over time, we'll continue to update and give ranges and input around that. But don't want to get into a corner to where we're committing to something that might prohibit us from doing what we know is right for the business over the long term and how we want to get there.

Brett, on to the digital mix. Right now, it's approaching about 40% of for CAVA, this is about 4% higher than last year. How do you see the right steady-state channel mix? And what does the higher digital penetration mean for your throughput, guest frequency and profitability?

Yes. We like to say we want to create a multichannel experience for our guests and then give them the remote control to pick the channel of their choice. So we don't set a specific digital target. We want to avail ourselves across all channels because what we do know is our guests typically are cross-channel trafficking us. And the more guests that are cross-channel trafficking us, the more frequency they drive. So we just want to meet them where they are and where they want to be, whether that's sharing a meal in our dining room or if they're running Aaron's and they want to order digitally and pick up at one of our 75 drive-thru pickup windows or off the shelf in any restaurant or if they're really short on time, they want us to have it delivered to them. So that's how we view it, and we just want to make sure that each of those channels are delivering great experiences and then let our guests decide where they want to opt into. But we do know that it's not an either/or for us. It's an and great digital and great physical channels. And when we have both of those, we're able to drive greater frequency and CLV on our guest.

So let's stay on the consumer side of technological adoption before we go into opportunities for your stores operationally. You've taken a counter consensus view here on emphasizing the human connection, the service level in-store where others have been pushing toward more kiosk, a little bit more digital channels, a little bit less interaction within the stores. Why do you think that is the right strategy? And also, if you can touch on the project Soul and how you're shifting the real estate as well to allow for more human interaction in the store as well?

We've been talking about this for a number of years now, even during the pandemic, I was quoted that the demise of the dining room is greatly exaggerated. I remember even during the pandemic, everybody -- no one was going to go to health clubs anymore, gyms. Everybody is going to work out on connected fitness at. Listen, we're all still humans. Our robots and AI over alerts haven't taken over yet. Food is a very social visceral experience. Yes, there is transactional convenience-driven food. There will be a market for that. But that's not our reason for being, and that's not why guests come to us. And I think as you get into an increasingly technologically driven world, especially with the anxiety around the advent of AI, you're seeing this in all different data points. People are craving human connection. And I see it -- I said I have three children. I see it with them going and buying film cameras now and wanting to have actual analog film cameras or vinyl record sales crossing $1 billion for the first time in over a decade. You see people looking to get offline now. And -- but you have to give them a reason and you have to give them an aesthetic and a space that's evocative of that. And I see it with friends, with family. People want to go out and eat still. Even if it's a quick meal because sometimes that's what they want to do. And if you're not a place that avails yourself to that, you're going to miss out on that. And we believe below us, traditional QSR is going to very austere spaces, stripping out their dining rooms, putting in kiosks. And we think that creates a real gap between us and, say, legacy casual dining, which the value proposition is very challenging to consumers today in the most part. I mean that category has been shrinking, and we think we can deliver, again, not an either/or but an and, a great digital experience if you're in a hurry or you're running ons and you want to engage with us that way. But then if you want to come in and share a meal, deliver that human connection and hospitality on our front lines. I waited tables, I [indiscernible] restaurants to help pay my way through college. And that used to be table stakes, great hospitality. I actually think it's a differentiation in our industry now. I go to many places and it's in different service. And we want to invest in our team, support our team members, give them a career path at CAVA and have them really empowered to deliver incredible human connection and hospitality because we think it is a powerful differentiator in our industry. And frankly, it's core to our brand essence, our Mediterranean hospitality. I was fortunate to travel in Greece with my co-founders and villages where their families grew up and like just the commensality, the communal aspect that you get there. It's like that's kind of what we're trying to deliver in our limited service format, which can often get stereotyped as being very frictionless or transactional. And I think if you just remove the friction out of everything, you remove the joy. And I think people still are craving that joy, and that's what we're trying to deliver.

On the loyalty, you recently revamped your loyalty program. You said that the loyalty program is driving higher frequency. I was wondering if you can help us quantify the sales uplift or what incrementally you're seeing specifically for the introduction of the tiers?

Yes. So as we've introduced tiers, we are seeing improvements in frequency, and it's modest. It's meeting our expectations, and we're pleased with what it's doing and really creating deeper connections with our guests so that we can communicate better with them over time. We want to make sure, Danilo, you're a vegetarian, we're not sending you Spicy Lam meatball e-mails to encourage you to try those. And so very pleased with the data foundation that we're building and how we can continue to expand. But when you look at loyalty and what it's doing from driving same-restaurant sales perspective, it is certainly a contributor, and I mentioned that earlier, but it's not a very large component of the overall sales lift.

How early are you in your journey to monetize this ecosystem that you're talking about? I mean you're saying we are having some initial -- it's modest contribution so far. Is the modest contribution because that's how much you can achieve? Or are your early stages into potentially monetizing all the insights from the data that you have been gathering from the platform? And maybe you can -- I don't know, Brett, you can touch on CAVA Connect.

I think first and foremost, we view it as a way to build one -to-one lines of communication with our guests. With the deterioration of the efficacy of third-party data, with the Apple privacy rules that went into effect a couple of years ago, with the fragmentation of where people are discovering and engaging with brands, you think about the shift from SEO to AEO and GEO, how do we grow our first-party audience and have those one-to-one lines of direct communication with our guests. As we become bigger and more ubiquitous that, that ubiquity doesn't breed content and that we make you feel like we opened, Danilo, to cook you, lunch or dinner. And we communicate with you that you feel seen and heard for who you are as a guest and your behaviors and really driving and building that deeper emotional connection and then using that communication channel to understand your behaviors and surface you more relevant content, more personalized content that can create better value for you as a guest and in turn, create better value for the business. So Tricia talked about like if you're a vegetarian leader, we're not going to be communicating to you meat proteins to you or making it effective even if it's raining out, we know you have a high propensity then to order delivery or order digital order pickup and incentivize you that way. And that goes to what we're building with our data foundation. We talked about this on the earnings call, our CAVA Core data foundation and then our CAVA Current data platform, which is basically like a CDP, a Customer Data Platform that's ingesting all of our real-time order flow. But CAVA Core as a foundation, it is a single source of truth now of all of our data feeds, both internal data feeds, whether it's POS, FSQA data, inventory data or external data, even like Accuweather weather data. And then we can now layer in the coming months and years, the LLMs on top of that and the generative AI tools to create the intelligence layer that allows us very sophisticated personalization. It allows us certainly great operational efficiencies in the coming quarters and the coming years. So very excited about what we're able to do to harness the power of that and then ultimately free up our team members to deliver that heart, health and humanity and that human connection.

And so now broadening the scope of technological use for you, including maybe your operations in the stores, including the headquarter support. What is the biggest use of AI that you see for CAVA over the next 3 to 5 years?

Yes. I think it's three -- kind of three buckets, how we think about it. One, on the corporate, the business intelligence side, we're already seeing productivity gains from this, whether it's our engineering teams using Claude code. It's really accelerating our feature enhancements on our digital platform, the productivity of our sprints, accelerating all that or using things like Databricks Genie that uses Claude code to layer over our data environment to get operational insights, analytical insights. So our teams that typically would have to synthesize the data on spreadsheets, they're able to now ask any question of the data and synthesize that within seconds and chart it. I mean it's so powerful to see how it equips our teams and one of our values is constant curiosity. So having that curiosity and our data used to be structured to answer very specific questions. Now our data is structured to answer any question the team has of it. So we just recently launched Salmon. And hey, 2/3 of our fleet have digital menu boards, 1/3 about 1/3 now doesn't. Well, do we see a different incidence rate between non-digital menu board restaurants versus digital menu board restaurants. You asked the question, it charts it, it breaks it all down by region, everything within seconds. I mean this used to take hours or days for the team. So you see the productivity immediately on the corporate side and the business intelligence side. I think what the foundation allows us to do in the other two buckets in the coming quarters and years is what I talked about with the personalization and the marketing to really create one-to-one relationships, enhance the value of the experience for the guests and in turn, enhance the value of the experience for the business. And then big bucket, operational efficiency. So you start to think about the CAVA Current platform and ingesting all the real-time order flow, layered over top of that foundation of all the historical data and the other data sets, you can start to really get into predictive cook, predictive prep, inventory ordering, labor scheduling. Now you've seen some folks get tripped up on that recently. It is, again, a crawl, walk, run. I think that is in the coming years, and we want to be very thoughtful about how we do that. But there is clear that potential. I've written about this in our shareholder letter the last couple of years. I think we're on the precipice. We're now in the early stages of a decade plus of data transformation. Very analogous to, I think, the impact digital transformation had on our business the 10 to 15 years of our journey, where when we first opened our first restaurant, humble little online order website, it was 1% of sales. Fast forward today, it's almost 40%, as you noted, probably $600 million business. And that was a decade-long journey of white label app, bringing the app in-house, building our own app, rebuilding the app in a microservices architecture for scalability, second make lines in every restaurant, the drive-thru pickup windows, digital menu boards now. So I see data taking a similar decade-long journey of impacting our business from a productivity standpoint, right? Not replacing all of our people, not replacing our team members, but really amplifying and empowering them to be incredibly more productive for the business that ultimately creates great value for our guests and great value for our shareholders.

Great. You're still a fraction of the size of your full potential. And we see -- you have other peers who have been scaled or already scaled, and they're unlocking a lot of the opportunities that for you might be a little bit further down the line. So I'm thinking about leaning in more into group occasions, leaning in a little bit more on to different menu items, more dayparts and so on and so forth. So I was wondering if you can map out the journey for CAVA between now and the next 10 years. When you think you're going to be unlocking national advertising, when you think you're going to be unlocking group occasions a little bit more. You're starting with catering today. When are you going to see delivery coming in as well? So help us understand what the journey for CAVA looks like between now and 2036?

Yes. I'll speak to a couple of those points and hand it off to Tricia on the advertising part. Catering is certainly a significant opportunity for us. But again, we want to be patient. We know -- we kind of felt this in our early years. We've had catering requested from our very earliest days. But with our AUVs, we know that there's not a lot of excess capacity -- production capacity in our restaurants for catering. Because catering is a very different production muscle. Our digital and our in-restaurant production lines are very similar, very similar rhythm production. You think about these as little food manufacturing. Catering is very high volume, very concentrated, very short period of time. You need extra hot holding, cold holding prep space, the lead times on the ordering, right? So we have embarked on a journey. It's been 2 years now of tests. We now expanded to a market test in Houston. We'll do a second market later this year, really understanding the critical question we're trying to answer is load balancing or capacity management. So we know the demand is out there. We've catered most major League Baseball teams, NBA, NFL, let alone office and schools. But how do you take all that demand and load balance it successfully against your production capacity in the market? So we have roughly 20-plus hub type locations now. So we call them hybrid kitchens and digital kitchens. We have one here at 40th in Madison. So the subterranean level is a whole catering kitchen there, regular restaurant on the street level. And so these are purpose-built where we can do centralized production. And how do you then potentially complement that with the regular CAVA restaurants around them? Or do those restaurants not have the capacity and that gets offloaded to a hub. So that's the question we're really trying to answer before we push forward full board across the country with catering because we saw this when we bought Zoe's. Zoe's was a low AUV business, but they wanted to optimize the four walls. They went heavy into catering. 17% of sales was from catering, but you walk into a Zoe's at noon and all the tables will be covered with catering bags. Team would be fully focused on that, and it deteriorated the in-restaurant and the digital experiences and came at the expense of that. So again, we want to be really thoughtful to do this for the long term. We know it's the opportunity out there for but we want to make sure that when we do launch it, that we set our operators up for success to ultimately deliver -- be able to deliver on our guest commitments. And then I'd say the other real opportunity is just growing new restaurants across the country. We have a massive white space opportunity, continuing to mature all of our different channels, catering being the most kind of nascent channel. And then from a marketing standpoint, we're 1.2% of revenue today. Typical peers are around 3%. So I'll let kind of Tricia tell you about how we think about when we would add up.

And our brand awareness has increased recently based on our brand health survey from 62% to 66% with just that 1.2% of revenue investment. So creating a lot of momentum around the brand, driving strong traffic trends with limited investment today. So we're just going to be very mindful of our investments, and we evaluate the returns we're getting from them from a marketing standpoint. But given that we still have a ton of white space, I think there's a bit of time before we would lean more heavily into marketing in a scalable way to ensure that we're not creating demand that we don't have enough restaurants to support it in general. So lots of upside and runway and opportunity, but want to be very thoughtful as we do with any of our investments that we're getting the right return and delivering on the business.

Can you touch on the balancing between greenfield white space opportunity versus densification and potentially also the knock-on impact of your comps as you were to intensify your densification strategy?

Yes. So each year, we look at our pipeline from a real estate standpoint, and we like to have it distributed across four different buckets. Our established markets, which are the most established that we have, we open about 10% of our restaurants annually in those locations. On the other end of the spectrum, greenfield markets where there are no CAVA, about 30% of our openings on an annual basis come from those markets themselves. And then the rest, about 60% is our growth in emerging markets, think of a Phoenix or something like that, where we've got a number of restaurants, but still a lot more runway. And so we do that to create a balance across the business so that we're being very thoughtful around potential cannibalization impacts and how that materializes. But what we do find is in when we do open a restaurant near another restaurant and it may have some impact on it, that guest comes to CAVA 3x more often because we've now created a location that's more convenient for them, whether it's at work or at home or whatever they might be doing on the weekend. And so we've been able to balance the potential impact from a same-restaurant sales perspective without seeing a significant deterioration. Our new restaurant openings themselves have been very robust. We talked about them being over $3 million. And what we found is that does create a lot of excitement. So going back to the brand awareness in the marketing. When we go into a new market like South Florida, for example, where we went last year, saw very robust sales, people driving 45 minutes to come and experience CAVA. And then when another restaurant opened closer to them, you saw some natural transfer of sales from one restaurant to the other. But over time, over an 18-month period, those restaurants that opened very strong continue to deliver on a positive same-restaurant sales trajectory. So it changed the dynamic and the optics of how our sales were performing. So historically, a new restaurant would open strong, grow 10% in the first year after opening and then 6% to 8% thereafter. With these robust openings that we're experiencing, there is a bit of a negative sales impact in the early periods, but then after 18 periods, see that trajectory change and see that sales inflection that we've experienced in the past.

Which means higher cash-on-cash returns for you because you start with loading the cash ahead of time.

That's the beauty of it. So really delivering greater economic value and return for the business much sooner. So experiencing AUVs that you were expecting in year 2 and year 1 and delivering that very strong cash-on-cash return.

So given the cash-on-cash returns are still very healthy, and Brett, you were talking about the pipeline of people that you still need to -- that you are hoping to strengthen even more under Doug. How are you considering the evolution of your capital allocation strategy going forward? Again, sitting at $400 million on the balance sheet, when do you expect that one to be shifting from pure reinvestment into development on to alternative deployments of cash for shareholders.

Yes, certainly, very fortunate to have a strong balance sheet with the $400 million in cash. And the highest and best use from a return standpoint is opening more restaurants. We want to continue to make -- to ensure that we open them with integrity, as Brett mentioned. But we're always evaluating different strategic investments that we can make. One of those would be the investment in Hyphen that we did last year to evaluate the opportunity to create an automated system that may work in a catering environment or a digital environment, and we'll continue to test that. But really leveraging that balance sheet and ensuring that we're driving the overall return.

Excellent. So this is the strategic decision conference at the end of the day. So I want to kind of wrap with three questions. The first one, more fireside chat, rapid answer. In one word, Brett, how would you describe where CAVA is today compared to its journey?

Maturing.

Okay. How do you think CAVA will be maturing 5 years from now?

Scaled national brand.

And now you can kind of prolong a little bit more if you want to, but what is the hardest strategic choice that you think CAVA will face over the next 5 years? What is the hardest decisions that you will face?

There are so many hard decisions. everything is a trade-off decision. In the next 5 years, how could be when to go international? We have so much great domestic growth. We don't want to be distracted by international, but we do recognize this is a real global cuisine. It's a great opportunity. But that's a challenge for us. How do you stay disciplined? You can only make so many smart bets every year and do so many things as an organization, and you can't get distracted. And so that's a tough decision when you know that opportunity is there, but you also don't want to undermine the growth and success that you're focused on at the current time.

So when you say international, are you thinking like Canada first, North America first and then moving to other parts of the world? Or how replicable is your success story in the United States dependent also on your -- the supply chain that you have here as well as the production facility that you've built?

Yes, I think we've looked at all options. Certainly, we've had a lot of folks approach us agreeing with us that they believe it's a global cuisine and that it would do well in their regions of the world. And whether -- how we partner, how we would do that development, whether we would take it on ourselves, I think those are all questions that remain to be answered that we would look at when we got more intentional about international strategy. But we don't believe that the supply chain would be an issue. And again, when we do it, we want to make sure that we do it and put the best CAVA experience forward no matter where we go.

And same question for you. Obviously, without giving information like new long-term targets that you haven't done before, but at least like strategically, if you were to think about the next 5 years from a disclosure standpoint, where do you think -- what kind of new metrics do you think that CAVA will be addressing, sharing with shareholders? And as well as how do you think your capital allocation strategy is going to be evolving in the next 5 years?

Yes. I think our new -- we disclosed in our proxy, our new performance shares program includes return on invested capital as one of the metrics that we are evaluating our performance on. And I would imagine that, that would be something that we would continue to communicate and lean into.

Okay. Excellent. And then one question that we got on the stream test. So the [ roast garlic ] stream has advanced into broader market set. What does that product need to prove before it's launched nationally?

[ A ], that our team can execute successfully and deliver a high-quality product that our guests love. And that would, in turn, prove out a certain incidence rate that justifies its place in the menu.

Yes. Great. A few more. I know that we have only 1 minute. I'm going to go rapidly here. So as you may know, there is a competitor here in New York, but also other states called NAYA, which is expanding quickly, [ similar ] cuisine. Do you have to change your growth plans to get ahead of them or any of the other competitors that you're watching at?

That -- we have competitors that trying to open next to us. We don't see any sales we're very focused on our growth. We're operating in 29 states today. And in many of those states in those top-tier shopping centers, we have Mediterranean and Middle Eastern exclusivity that creates one sense of a moat around our business. But then all of our infrastructure, our vertically integrated infrastructure, our people infrastructure. Restaurants are really hard to scale. I think more folks coming into the space is only a validation of the demand for Mediterranean cuisine, our style of cuisine. And I think when you look over history in our industry, the best-in-breed, the category leader has a kind of winner-take-all dynamic. And so we're just focused on continuing to be the leader and the definer of the category. That's what we have done over our history. And it's great to see more people validating what we're doing and just excited to continue to bring CAVA to more communities across the country.

Excellent. And then final one. If the performance were to disappoint this year or maybe even in the future, what will be the key driver outside of the, obviously, macroeconomic reasons?

That's not executing. I think often, it's underappreciated in this business. This does not scale like software. It is hard. It is people, it is process. And when you're trying to deliver, we'll serve roughly 100 million meals this year, right? And we're not the biggest restaurant company out there. So you think about getting every one of those right consistently and supporting your teams and having great experiences in every restaurant. Operations and hospitality, I think, are underappreciated. And if our results were to wane, I think those would be the first things I'd look at we're not delivering on those commitments.

Thank you very much for joining us today, and thank you, everybody, for being here.

Thank you.