CAVA has undoubtedly been one of the breakout stories in the restaurant industry since its IPO last summer (which we covered in depth here and here). While the company’s strong visitation trends are grabbing the headlines following the chain’s Q2 2024 update–same restaurant sales increased 14.4% year-over-year, driven by an eye-popping 9.5% increase in traffic–the more relevant takeaway might be the performance of its new store openings that solidify CAVA’s position as one of the more impressive growth stories in the restaurant space today.
We’ve spent a lot of time recently discussing how consumers are flocking to restaurants and other food retailers that offer value. The story of the summer has really been how restaurants–both QSR and casual-dining–have relied on discounting to drive visitation trends. However, there is a class of restaurant chains that have been able to drive strong visitation trends due to menu innovation, which appears to have a more profound impact on repeat visits than deep discounting. Two weeks ago, we looked at the importance of Chipotle’s Chicken al Pastor relaunch for Q2 2024 sales trends. Sweetgreen also posted a 4% increase in comparable traffic, helped by the launch of Caramelized Garlic Steak as a protein option. However, CAVA’s Q2 2024 visit trends may have been the most impressive out of any publicly-traded restaurant chain. Our data shows strong improvement in visits per location trends during Q2 2024 versus Q1 2024 (where the company reported a comparable traffic decline of 1.2%). June trends appear exceptionally strong, helped by the launch of grilled steak at the beginning of June, and while July has been slightly weaker, it’s in part due to strong visit trends stemming from last summer's IPO buzz.
We’ve also been impressed by the performance of CAVA’s new stores. Below, we’ve plotted visits per location for roughly three-quarters of the 32 CAVA stores opened during 2024 so far. For much of the year, visit per location trends were in line with the chain average so far, but we saw a strong acceleration in July. Admittedly, the July results might reflect a “honeymoon phase” for the 10 new CAVA stores opened in June and July, but still impressive results.
More importantly, CAVA is showing the ability to successfully enter new markets, which is a key indicator of the chain’s ability to continue its expansion plans. Our visitation data indicates that visits to CAVA's Wicker Park location in Chicago--its first location in the upper Midwest--outperformed chain visit per location averages since May. The strong visitation trend reinforces CAVA's longer-term unit opportunity in the Midwest and across the county in general.
In the past, management has said that there is potential for more than 1,000 CAVA restaurants in the United States by 2032, up from 341 at the end of Q2 2024 and approximately 365 by year end. This implies an acceleration in restaurant openings in the years to come, somewhere in the 80-90 units per year range over the next several years. We expect new restaurant openings to be in both existing and new markets, with continued focus on high-growth Southeast markets and well as several new Midwest markets. Ultimately, CAVA’s success will attract more competition in the Mediterranean category (something we recently looked at), but with its success moving to new markets, focus on suburban stores, and potential in smaller markets, we believe CAVA’s potential store target is much greater than the previous 1,000 restaurant goal.
