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

Hello, everyone. Thank you for joining us, and welcome to Cava's Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] I will now hand the conference over to Matt Milanovich, Head of Investor Relations. Matt, please go ahead.

Welcome to Cava's third quarter 2026 financial results conference call. Before we begin, if you do not already have a copy of the earnings release and related 8-K furnished to the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress. You will find reconciliations of any non-GAAP financial measure discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website. Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail on CAVA's most recent annual report on Form 10-K as may be updated by its reports on Form 10-Q and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements. whether as a result of new information, future developments or otherwise. And now I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. During the third quarter, we continued to gain market share and saw strength in new restaurant openings as we brought Cava to more communities across the country. We also reached an important milestone as we celebrated 500 restaurants in Minnesota ahead of schedule on our goal of at least 1,000 restaurants by 2032. As consumers seek real food that tastes as good as it makes them feel, combined with the human connection that brings people together, our flavors, hospitality and generosity are resonating more than ever. That combination is at the heart of what makes Cava distinctive and reinforces our belief that Cava is well positioned for this moment. With significant growth opportunities ahead, we remain confident in our ability to earn lasting guest loyalty, define the Mediterranean category and create value for our shareholders for years to come. Our third quarter financial highlights include a 22.1% increase in Cava revenue, same-restaurant sales of 3.1%, 24 net new restaurants, ending the quarter with 500 restaurants, a 20.5% increase year-over-year. Adjusted EBITDA of $42.3 million a 5.7% increase over the third quarter of 2025, net income of $13.2 million and $37.1 million in year-to-date free cash flow. The impact of broader concerns around the consumption of fresh produce at the beginning of the quarter, followed by the reemergence of high gas prices impacted traffic across the category. Importantly, these factors do not change the structural strength of our business, the health of our brand or our ability to execute against the long-term opportunity. While we are not immune to the environment around us, we are focused on what we can control, running great restaurants, delivering differentiated value through high-quality Mediterranean food and hospitality and continuing to invest with discipline in our teams and guests for the long-term growth. We saw that shine through as we exited the quarter and brought our concerns abated. Within this environment, our new restaurant productivity remained approximately 100%. Our development pipeline remains strong, and our newest restaurants continue to reinforce the portability and resilience of the Cava concept. We have always focused on building this business for the long term, not just for the next quarter. The same structural advantages that have driven our growth over our history remain intact, a category-defining brand, a powerful unit economic model, significant white space and a team that executes with focus and consistency. This, coupled with a strong balance sheet and a robust development pipeline gives us confidence in our ability to navigate different operating environments while continuing to invest in long-term sustainable growth. That long-term focus is brought to life through our first pillar, expand our Mediterranean [ weighing ] communities across the country. During the third quarter, we opened 24 net new restaurants, ending the quarter with 500 locations across 30 states in the District of Columbia. As I mentioned, we opened our highly anticipated 500th restaurant and my co-founders, Ted [indiscernible], join me for a ribbon cutting and celebration in Minneapolis as we continue our expansion in the Midwest. -- reaching 500 restaurants ahead of schedule on our commitment of 1,000 restaurants by 2032 and is more than a milestone for CAVA. It is evidence of the proven portability of our concept and the strength of the development pipeline we have built. We are also preparing to enter the Las Vegas market later this year marking another important step in CAVA's national expansion. As we are welcomed into new communities, we remain equally focused on ensuring that each restaurant reflects the warmth, hospitality and Mediterranean way that defines the CAVA experience. Recent openings continue to bring projects sold to life, our restaurant design initiative focused on creating warm, welcoming places where guests want to spend time. Our location at 56 and 6 in New York City showcases the new project sold prototype with warmer tones, greenery and natural light creating a more inviting dining room. As consumers increasingly seek authentic moments and inviting aesthetics, we are building upon projects sold with the launch of [ Project Sunkist ], which incorporates the core elements from Project Soul into a reimaging for legacy restaurants. We will have more details about these investments in the coming quarters. Just as our environments invite meaningful moments and deepen relationships with our guests, so do our bold Mediterranean flavors. Our [ palmagranic ] glaze salmon performed in line with our expectations and demonstrated both our ability to extend into seafood in a way that is authentic to CAVA and the trust guests have in us to bring new Mediterranean flavors to their meals. In that spirit, we have completed our roasted garlic shrimp market and operational testing and are looking forward to sharing more next quarter on the projected national rollout time line. That same disciplined approach to innovation comes through with our new culinary launches. In October, we introduced our Greek Goddess dressing, a twist on our Greek Green Goddess sold in grocery channels and a pomegranate apple drink that balances slightly sweet and tart flavors in a vibrant red [ SIP ] that's made for crisp fall days. We launched our new menu with a larger than life Greek goddess [ etched on stone ] in Flatiron Plaza in New York, driving social buzz and consumer engagement. We know these pulses of seasonal innovation across chips, drinks and dressings keeps the menu fresh and exciting for our guests without overcomplicating operations. We are also excited to announce the launch of new packaging for our dips and spreads at the end of the year for our CPG business. This refreshed packaging is designed to create a stronger link between the CAVA experience guests know and love in our restaurants and the food they bring to their homes. As we continue to introduce more people to the Mediterranean Way, this CPG business is another opportunity to extend the warm flavor and quality of CAVA beyond our restaurants while reinforcing 1 cohesive brand wherever guests engage with us. Shifting to our second strategic pillar, deepened personal relationships with guests even as we scale. This past quarter saw the continued growth of our loyalty platform and a focus on in-person authentic moments with our guests. Over the last few months, we hosted CAVA Mediterranean Beach Club experiences at UT Austin, SMU and the Minnesota, Michigan football game. At UT Austin, that engagement translated into an encouraging loyalty signal. Loyalty purchases increased 8% in the local market, the week after the pop-up compared to the prior week. Just as importantly, we want every guest to feel welcomed into CAVA, whether they are visiting us for the first time or have been part of our community for years. We recently launched a 1-day mini bag drop where guests received a miniature version of CAVA's iconic yellow [ tote ] bag with purchase. It was a small but meaningful way to surprise and delight guests with something fun and wearable. These moments are made possible through the team members who show up every day to bring care and consistency to the CAVA experience, reflecting the focus of our third strategic pillar, run great restaurants every location, every shift. Running great restaurants starts with our ability to consistently deliver fresh, high-quality food and Mediterranean hospitality that guests expect from CAVA. Fresh food made in-house daily is core to who we are, and it requires meaningful prep work, strong supply chain collaboration and disciplined restaurant leadership. That is why we continue to invest in tools and processes that make it easier for our teams to deliver consistent, high-quality food every day, from the premarinated chicken we are currently rolling out that reduces raw poultry handling in our restaurants, simplifies back-of-house processes and is designed to strengthen food safety controls while improving operational and flavor consistency to the produce slices that simplify preparation of our beloved cucumber and pickle toppings. In addition, we are rolling out a new operator portal to simplify the GM management of out-of-stock items and their control of digital order throttles. These investments are about reducing complexity for our teams and creating better, more consistent experiences for our guests. Alongside our investments in tools and process simplification we are learning from our teams delivering the most exceptional guest experiences. This past summer, we launched our Welcome to Our Table hospitality concept with our GMs to identify and recognize best practices across the system as part of a broader effort embedding Epic hospitality across CAVA. Approximately 2/3 of our restaurants saw an improvement in guest experience during the exercise giving us a clearer view into the behaviors and routines that are driving results. We are now focused on scaling these practices across the system to give our teams the support they need to deliver hospitality consistently as our AUVs grow. In addition to year-over-year growth in our AUVs, demand for CAVA remains strong in our new restaurant openings, where we continue to see new restaurant productivity of approximately 100%. To support this demand, we have increased our focus on preopening leadership readiness and training as well as the support our teams receive after opening. Preliminary results are promising, with new restaurant openings that received investments, seeing higher guest satisfaction and lower turnover rates. Sustaining that energy requires strong leadership and real ownership at the restaurant level. That's why at CAVA, we continue to invest in our general managers and provide them with opportunities to create value for themselves as they create value for our guests and for our shareholders. This past year, we introduced annual long-term incentive equity grants for GMs to truly have ownership in our business. Our Academy GMs now at 110 locations receive elevated compensation for their Academy certification. We also provide additional incentives tied to GM hiring and promotions, recognizing that great leaders do more than run strong restaurants. They build strong teams and develop the next generation of leaders. We will have more in the coming quarters on additional opportunities for our GMs to participate in the value creation they drive. These efforts are all part of Flavor Your Future and our ongoing commitment to making CAVA the best GM role in the industry. The restaurant industry is one of the few industries where anyone can carve a path for themselves. We've always said that as a team member, if you have the will and develop the skill in 24 to 36 months, you can be running a multimillion dollar business making 6 figures, that at CAVA, our team members can build a career, not just have employment. We want our GMs to have meaningful opportunities to grow the tools and capabilities to lead with confidence and a tangible connection to the success they help create. In that spirit, we recently rolled out the CAVA Command Center, which acts as a single pane of glass for operational insights and provides a centralized way for operators to track the health of their restaurant. It gives GM's real-time visibility into key restaurant vitals with the ability to benchmark performance against peers and across the broader system. The new command center helps leaders identify opportunities faster, recognize what is working, coach teams more effectively and build a strong sense of ownership and accountability for restaurant performance and team member development. Capabilities like CAVA Command Center and the Operator Portal mentioned earlier are made possible by our new CAVA core data foundation. Early results have been encouraging, and we are beginning to leverage next-gen capabilities built upon CAVA core across our organization, whether in our restaurants with operational insights and our analytics teams with enhanced business intelligence, or through deeper customer insights, enabling marketing personalization. I want to close with a note we received from a guest at our Kenwood restaurant in Cincinnati, the guest has celiac disease and shared how a team member took the time to understand her needs, follow the appropriate food safety steps, help her navigate the menu and even prepare to fresh avocado away from the peta bread. She described the experience of some of the best service she had received in a restaurant, and she said she felt safe, welcomed and eager to return. That is the kind of care and ownership from our teams we want every guest to feel at CAVA, and a great example of team members, bringing Mediterranean hospitality to life. The progress we have made this year is a direct reflection of the commitment of our more than 15,000 team members across the U.S. to our culture, our guests and our collective ambition. I want to thank each of them for the care, energy and ownership they bring to CAVA every day. With that, I'll turn it over to Tricia to walk you through our third quarter results and outlook.

Thanks, Brett, and hello, everyone. CAVA revenue in the third quarter of 2026 grew 22.1% year-over-year to $353.7 million. During the quarter, we opened 24 net new restaurants, bringing our total CAVA restaurant count to 500. Same-restaurant sales increased by 3.1%, primarily from menu price and product mix with guest traffic slightly positive. The estimated effect on same-restaurant sales from [indiscernible] and broader concerns around fresh produce consumption was 150 basis points for the quarter. As Brett noted, the impact was category-wide, and we continue to gain market share while maintaining positive traffic and strong new restaurant performance for the quarter. CAVA restaurant-level profit in the third quarter was $82.7 million or 23.4% of revenue compared to $71.2 million or 24.6% of revenue in the prior year quarter, representing a 16.2% increase. The decrease as a percent of revenue was driven by incremental labor investments, a higher mix of third-party delivery as well as investments in repairs and maintenance, partially offset by leverage from higher sales. As previously shared, third-party delivery is dilutive to margin rate, but has a positive impact on margin dollars due to a higher guest price. Importantly, these investments are supporting higher guest experience scores, improve the restaurant readiness, and the continued strength of our development pipeline. We remain focused on converting sales growth into attractive long-term returns while investing ahead of the next phase of CAVA's expansion. CAVA's food, beverage and packaging costs were 30% of revenue, lower than the third quarter of 2025 by 10 basis points due to expected tariff recoveries in the current year quarter, the absence of tariffs incurred in the prior year quarter and favorable mix partially offset by higher input costs associated with the second quarter launch of [indiscernible] Glaze salmon and fuel surcharges incurred during the current quarter. We anticipate CAVA's food, beverage and packaging costs to increase as a percent of revenue for Q4 as a result of fuel surcharges and the continued rollout of premarinated chicken. Covered labor and related costs were 26% of revenue, up from the third quarter of 2025 by 50 basis points. This was largely driven by an incremental 3% team member wage investment, inclusive of the expansion of our AGM role, and additional team member hours to support improved guest service and post open success, which drove higher guest experience scores. CAVA occupancy and related expenses were 6.7% of revenue, flat from the third quarter of 2025. CAVA Other operating expenses were 13.8% of revenue, reflecting an increase of 70 basis points from the third quarter of 2025. This increase was primarily driven by a higher mix of third-party delivery and investments in repairs and maintenance. Shifting to overall performance. Our general and administrative expenses for the quarter equity-based compensation and executive transition costs remained flat at 9.4% of revenue, primarily due to leverage from higher sales, offset by investments to support future growth. Preopening expenses were $8.4 million in the current quarter compared with $4.9 million in the prior year quarter. The $3.5 million increase includes a higher number of units under construction and additional investments in new restaurant openings to support increased volumes such as bringing in GMs and hourly managers in earlier so they can train, build confidence and see an NRO before opening. We are seeing promising early results from these efforts, including improved GM turnover. Adjusted EBITDA for the third quarter was $42.3 million, a 5.7% increase versus the third quarter of 2025. The increase was driven by same-restaurant sales and strength in new restaurant openings, partially offset by investments to support future growth, including preopening costs. For the third quarter of 2026, equity-based compensation was $4.5 million. We continue to expect equity-based compensation, which includes our new programs to provide equity grants to GMs and performance-based LTI to be between $22 million and $24 million in aggregate for the full year. In the third quarter, our effective tax rate was 29.3%. For the full year of 2026, we expect our effective tax rate to be between 23% and 25%, with the rate in the second half of the year being higher than the first half of the year due to the timing of equity-based vesting. As a reminder, the increase in our tax rate in 2026 versus the prior year is due to the lower permanent benefit from equity-based compensation. Our cash taxes will continue to be immaterial until we fully utilize our net operating losses. During the third quarter, we reported $13.2 million of net income compared to $14.7 million of net income in the third quarter of 2025. Diluted EPS was $0.11 in the third quarter compared with $0.12 in the third quarter of 2025. The decrease in net income and EPS was primarily due to higher depreciation and amortization, which includes the impact of capital investments to enhance the guest and team member experience and higher equity-based compensation, partially offset by improved operating performance. Turning to liquidity. At the end of the quarter, we had 0 debt outstanding, $427.9 million in cash and investments and access to $150 million undrawn revolver with an option to increase our liquidity if needed. As part of our balanced approach to capital allocation, the Board authorized a share repurchase program of up to $100 million of its outstanding shares of common stock. To date, the company has not purchased any of its shares of common stock under the program. The buyback authorization is opportunistic, funded from excess cash but does not take priority over our investment in NROs and our commitment to our people, guests and technology. Our highest and best use of capital remains opening new restaurants, which have been generating over 40% cash-on-cash returns in year 1. Through the third quarter, cash flow from operations increased to $181.6 million in 2026 compared to $144.5 million in the prior year period. Year-to-date free cash flow was $37.1 million. Now to our outlook for full year 2026. We are updating our guidance to expect the following: 76 to 78 net new CAVA restaurant openings, same-restaurant sales of 6% to 7%, cover restaurant level profit margin between 23.7% to 24%, preopening costs between $28.5 million to $29.5 million and adjusted EBITDA, including the burden of preopening costs between $184 million and $189 million. I'd like to provide some additional context around our updated guidance. Our outlook reflects the strength we're seeing in the business and the trends to date. Looking ahead, we remain confident in the long-term structural health of the business, reaffirmed by our strengthening AUVs and new restaurant performance. Turning to restaurant level margin. Our guidance reflects dynamics we experienced in the third quarter as well as traditional seasonality of the business. COGS reflects the continued rollout of premarinated chicken into Q4. On the labor front, our guidance embeds continued investments in our teams and our guests to deliver epic hospitality at every restaurant, every shift. Additionally, it reflects investments in our AGM program with around 75% of restaurants now having an AGM and more robust post opening support. Preopening expenses reflect the continued expansion of support for new unit volumes, which includes additional training for our teams ahead of opening. For G&A, we expect slightly higher spend in Q4. As we look ahead to 2027, we remain confident in the structural foundation of the business and the durability of our long-term algorithm, which calls for low to mid-single-digit same-restaurant sales growth. In addition, given the health of our 2027 real estate pipeline, we anticipate at least 16% unit count growth. And with that, I will turn the call back over to the operator to open it up for Q&A.

[Operator Instructions] Your first question comes from the line of Chris O'Cull with Baird.

Brett, the updated full year guidance implies fourth quarter comps, I think, or roughly [ 1.5% ] to 6%. Can you share how the quarter has started or at least help us understand where within that range, current trends would put you?

Yes, Chris, thanks for the question. As we noted, beginning of Q3 was impacted by the broader concerns around produce consumption. We saw that bounce back as we noted at our Q2 earnings call, it had rebounded. And then post Labor Day, we did see some choppiness as gas prices spiked, but that abated as we exited the quarter, we saw comps strengthen and we've seen those trends continue into Q4. And our range reflects what we think is the highest probability for the full year with the midpoint of the range being the highest probability within the range of what we expect for the full year.

Okay. And then just as a follow-up. Beyond opening restaurants, can you talk a little bit about the biggest opportunities for bringing new customers in to CAVA? And specifically, I'm just wondering whether the new CMO has identified maybe new ways to approach marketing or innovation?

Well, certainly, Chris, with our NROs opening at 100% productivity, we are getting significant awareness and pent-up demand before we open in markets. I'm very excited to have John [indiscernible] on board. I think our overall brand awareness and cultural relevance is something that's a huge opportunity for us. We certainly have great grassroots awareness and word of mouth and excitement and passion from our guests, but excited for John to take the brand to what we think is going to be another level in the sense of being culturally relevant and engaging existing guests as well as new guests and driving awareness across the country in a very compelling way.

Your next question comes from the line of Johnny Ivankoe with JPMorgan.

When I was looking at the promotional calendar for the lack of the better word, you introduced salmon, in April. So you've obviously been featuring that for quite some time. So now that we've had salmon really for good 6-plus months, what have we kind of learned on that on a -- kind of on a post [indiscernible] basis. Is there anything that you would have done differently with salmon, a product like salmon in the future relative to what you did this year? And of course, I'm going to ask the question, how does the salmon experience, if at all, influence future kind of bigger protein focuses outside of what you currently have. We might we actually have an opportunity to take on potentially higher frequency protein and replace it with a -- or actually replace it with a lower frequency protein?

Yes, John, thanks for the question. We're very pleased with the way salmon's performed. It's performed in line with expectations. We think the cadence is still appropriate. I know there's been an acceleration in the industry of LTO's in general. I think they've doubled in recent years. I think we're up to like 42,000 LTOs annually. And we're just very mindful given our dynamic growth of new restaurant openings, growth of AUVs that we do not push too many changes out on to our operators in a given year. So we feel very comfortable with the current cadence. And within that cadence, we always look to say, how do we have the best portfolio of proteins or ingredients on our serving line to meet our guest needs and changing preferences. And seafood was an opportunity. It was our first foray with Salmon. I think one of the learnings from Salmon that was interesting is it's a 4-ounce fillay. It's the 1 protein where our guests cannot break into a half and half item, which we know our guests love to do. And so in our shrimp test, we've seen accelerated adoption because of the half-and-half opportunity that guests have with shrimp compared to Salmon. So Salmon will stay on the menu through spring. We had originally said through the end of the year. We're going to extend it to spring, and we will have more next quarter on the official launch date of Shrimp. But certainly, it's a protein that our guests will be able to do half and half, and we think that, that can drive even increased incidence. And the other thing I'd note is in January, we're going to bring back our fan favorite white sweet patato, which has continued to build its constituency every time we brought it back on the menu and has increased its incidence rate. And of note, a lot of that incidence to my earlier comment, is driven by half and half portion. So it's a unique item on our menu that guests can pair with stake or chicken as a half and half item that serves a unique purpose on the menu that our other proteins done. So we're always analyzing the portfolio in that sense to put forward the best group of offerings for our guests.

Your next question comes from the line of Danilo Gargiulo with Bernstein.

I want to touch base on the restaurant level margin, specifically on the labor component. So in the past, you've always framed the labor as a needed investment to sustain comps but also to have better experiences for customers as well as for your own team. I'm wondering where you are in the curve of investment here, whether you're starting to see some diminishing returns on those investments. Therefore, you're getting to a point where the labor as a percentage of sales is going to be relatively stable and then potentially over time, seeing some leverage coming in as traffic rebound? Or if you see that there are still some incremental pockets of investments across your stores? And if so, if you can highlight a couple of opportunities from a labor investment that you think could be the top priority in the coming quarters?

Thanks, milo. So certainly, we're always looking at the business and wanting to make thoughtful investments to drive the business for the long term and create a long-term durable brand that drives value to our shareholders as well. In the quarter, the investments that we delivered on in labor were around increases in wages of about 3% year-over-year. Further expansion of our AGM role, the Assistant General Manager role that provides been strength for future openings, but also provides the general managers in the restaurant, another leader in that 4 walls that can help them manage these significantly growing businesses that went from $2.4 million AUV a couple of years ago to over $3 million -- at $3.1 million today. And so we're seeing that, that investment in the AGM rule is providing better strength and also helping to general manager turnover overall, which will have a long-term benefit. In the third quarter as well, Brett referenced this on the call and I did see a little bit -- but we added hours into our restaurants, particularly in our new restaurant openings to ensure they're post open success, and that is reflected in the labor results that we delivered in the quarter. We like what we're seeing there and expect to continue to make those investments as we finish the year and go into 2027. And as it relates to leverage and what we anticipate, we're -- like I said at the beginning, we want to make sure that we're doing the right things for the business to drive the momentum that we're seeing and continue that for the next 12 weeks, 12 years and beyond.

Your next question comes from the line of Margaret-May Binshtok with Wolfe Research.

I guess a little bit of a follow-up and a little bit of something new. I know you guys have talked about 2/3 of the restaurants with that top-notch guest experience. I mean, where -- what do you think those restaurants are doing differently? How are you scaling some of those [indiscernible] system? And are there any kind of, I guess, low-hanging fruit levers that you guys can pull for the rest of the system?

Yes, Margaret, thanks for the question. Well, first, I'd point to 110 Academy general managers that run exceptional restaurants. Those certainly make up a portion of those 2/3. And I think the other thing we noted of the hospitality contest was a great way for us to gain the key behaviors and activities that are driving some of those exceptional hospitality results that we can scale across the system. And that's going to be a focus. As Tricia noted, some of the labor investments we've been making, the AGM position it's really kind of an all of the above when you think about premarinated chicken, our new produce slicers. These are all different ways that free our team up, take complexity and physical tests off of their plate to free them up to deliver great hospitality and have those human interactions with our teams -- or sorry, with our guests. So that's been a real focus that we believe we can deliver epic hospitality across every location, every shift. And so we've been very intentional about all these different activities coming at it, whether it's from an equipment standpoint, whether it's from a labor investment standpoint or whether it's from a best practices standpoint to set our teams up for success to deliver epic hospitality.

Your next question comes from the line of Sara Senatore with Bank of America.

This is [ Ashwin ] on for Sarah. Just in the updated guidance, preopening moved roughly $7 million higher, but only 1 unit was added to the [indiscernible]. And I know you touched on kind of what drove the higher expense in the 3Q time period. But is the heavier spend kind of the new runrate or are you getting a head start on the 2027 class? Just anything you can say on how that informs unit growth next year would be helpful.

Sure, happy to. So certainly, for preopening, we saw an opportunity to invest in the business. These robust openings that we've been delivering across the country wanted and needed the appropriate support to be able to deliver on that guest experience and continue that momentum as we move forward. So what we did, and we talked a little bit about on the call, is we're bringing in general managers earlier, team leads earlier traveling to other openings to experience a new restaurant opening ahead of what the restaurants that they're going to open themselves. And so those investments that we were working with are about $50,000 to $60,000 per restaurant overall, and I would expect that to continue as we move forward from our historical run rate because we're seeing good returns out of those seeing unbelievably low GM turnover as a result and then also contributing to the success of the restaurant overall. So what we're seeing as you go forward, there are a couple of other things in the quarter itself that were driving preeminent costs as well that I want to call out. And then I'll give a little more color related to your question on 2027. In the quarter, we also embarked on some remodels. So their preopening costs that are incurred in the quarter as well as expected in the fourth quarter as we're taking some of the or all of the elements for projects sold and doing some significant remodels to understand opportunity for additional updates as we move forward. And then there are some urban locations with some longer times of development as well as some higher costs that impacted the overall cost of remodel -- excuse me, of preopening this year, driving that range of $28.5 to $29.5 million. So as we look into 2027, we will not be as high as we are now currently on a per restaurant basis. But we do anticipate there'll be about that $50,000 to $60,000 more per restaurant on top of the historical run rates that we've had as we move forward and deliver a great experience.

Your next question comes from the line of Gregory Francfort with Guggenheim.

Maybe I just want to go back to the changes you're making on kind of the GM incentives. And I guess what is industry standard? And maybe how are you different when you go to these managers and pitch them on joining CAVA? And then you also made a comment about in the future tying their incentive or their pay more directly to the benefits they drive. I guess I'm curious what you mean by that comment and what you're contemplating?

Yes, Greg, I can't speak to others' compensation models. But what I can speak to is that we have always set out for CAVA to be a place where our teamers can grow into GMs and build careers for themselves or even come into sports center and build a career for themselves. And so we've structured GM comp over the years to increasingly give them opportunities to earn greater compensation, whether that's the equity grants we rolled out this year, whether it is increased compensation for achieving that academy certification which now 110 of our general managers are achieving or if there is development in creating future GMs that are promoted that these general managers have developed, they get bonuses for that. and really shifting toward an owner-operator mindset where they have skin in the game and participate in the upside that they're creating. So we've looked at different adjustments to our current short-term incentive and bonus model. And we'll have more to come on that in the coming quarters, as I mentioned earlier. But we are always reviewing. I mean we've done this over the course of our journey to continue to not have a kind of stated compensation number, but to continue to raise the ceiling for their compensation opportunities every year.

Your next question comes from the line of Sharon Zackfia with William Blair.

I guess I'm curious, as you've made all of these investments both at the managerial and hourly labor level. Have you seen kind of when you quantify what kind of impact you're seeing on turnover at both of those levels? I know you said it's improved, but it'd be great to get some numbers around that? And whether kind of where you are in that journey towards what you would target?

Yes, Sharon, we're growing -- we've been growing, what, 17% to 19% compound annual unit growth rate. We've committed to at least 16% next year. Growth is not easy in this business. And we want to make sure we are staying in front of the investments that are needed to drive sustainable, durable long-term growth, and that starts with our people. And so we have been very steadfast about this since we've been public that we are going to use opportunities to stay in front of this. And then we need to show that those investments get a return on investments and that they pay off over time. So again, what we're seeing is better cut guest satisfaction, reduce turnover, if you take our Academy GMs, for example, low to mid-single-digit turnover in our Academy GM population. So we want to develop more people to get into that population because we see the increased compensation, the increased ownership mentality, the opportunities for them to build a career reduces turnover and it creates lower turnover of team members. So we've continued to see steady reduction in turnovers in our GM population overall and in our team member population as we continue to make these investments. And then for example, Tricia spoke to some of the preopening investments we've been making. So since we've been training GM's 3 months additional time with these investments versus what we were doing before, turnover has dropped to almost 0 of that population, low single digits of that population versus much higher turnover previously, where the intensity of these openings were challenging to folks and they weren't lasting either through training or we're burning out a few weeks after training. So again, we need to see a return on these investments. We've seen that in some of these targeted ones we've made or test pilots that we've done. So we are leaning in that because we are laser focused on creating long-term sustainable durable growth. And again, we're not going to do this for the next 12 weeks. We're doing this for the next 12 years and beyond. And if that is an investment of 20 basis points or 30 basis points of restaurant-level margin or some preopening costs in a given quarter or given year, we're going to do that because we believe it's going to create that long-term sustainable growth and restaurant level margin expansion.

And then I think you mentioned that you're rolling out a new operator portal that we'll give the GM different things, but also the ability to throttle delivery. Is that something that they have the capability to do now? Or will that be new? I mean how do you manage delivery at the unit level right now so that the units aren't overwhelmed?