CAVA Group (CAVA) Q3 2025 Earnings Call Transcript

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Date

Tuesday, November 4, 2025 at 5:00 p.m. ET

Call participants

• Chief Executive Officer and Co-Founder — Brett Schulman
• Chief Financial Officer — Tricia Tolivar
• Director, Investor Relations — Matt Milanovich

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Risks

• Tricia Tolivar noted, "as the third quarter progressed, we experienced some moderation in trends reflecting broader macroeconomic pressures," leading to further moderation in same restaurant sales entering the fourth quarter.
• Tricia Tolivar stated that other operating expenses increased by 80 basis points to 13.1% of revenue, due to a higher mix of third-party delivery, insurance costs, and other individually insignificant items.
• CFO Tricia Tolivar said, "we have continued to have higher maintenance expense than what we were to anticipate," driving up other operating expenses and impacting restaurant-level margins.

Takeaways

• Same restaurant sales growth -- 1.9%, with guest traffic approximately flat, primarily driven by menu price and product mix shifts.
• Net new restaurants -- 17 net new openings, bringing the total to 415 locations, a year-over-year growth rate of 17.9%.
• Restaurant-level profit margin -- 24.6% of revenue; total restaurant-level profit was $71.2 million.
• Adjusted EBITDA -- Adjusted EBITDA was $40 million, a 19.6% increase versus 2024.
• Net income -- $14.7 million of net income for the third quarter; diluted EPS was $0.12.
• Free cash flow (year-to-date through the third quarter) -- $23.3 million year-to-date free cash flow.
• Two-year same restaurant sales stack -- On a two-year basis, same restaurant sales accelerated 350 basis points to 20%.
• Guidance for full-year 2025 -- 68-70 net new restaurant openings; same restaurant sales growth of 3%-4%; restaurant-level profit margin of 24.4%-24.8%; adjusted EBITDA of $148 million-$152 million including pre-opening expenses.
• New unit productivity -- Above 100%, with the 2025 cohort trending above $3 million AUV.
• Food, beverage, and packaging costs -- 30.1% of revenue, up 20 basis points due to tariffs and the chicken shawarma introduction.
• Labor and related costs -- 25.5% of revenue, an increase of approximately 10 basis points from 2024, "reflects investments in our team member wages of approximately 2%, partially offset by leverage from higher sales," according to Tricia Tolivar.
• General and administrative expenses (excluding stock-based and executive transition) -- 9.4% of revenue (general and administrative expenses, excluding stock-based compensation and executive transition costs).
• Pre-opening expenses -- Pre-opening expenses were $4.9 million, driven by more units under construction and increased per-unit cost.
• Cash & liquidity -- $387.7 million in cash and investments, zero debt, and access to an undrawn $75 million revolving credit facility.
• Loyalty program growth -- Membership increased by approximately 36% over the past year as of October 2025.
• Kitchen display system (KDS) rollout -- Over 200 restaurants equipped, with a target of 350 by year-end; KDS correlated with higher guest satisfaction driven by improved digital order accuracy and guest notification.
• Menu innovation -- Chicken Shawarma launch performed as expected; salmon market test delivered "encouraging results" with potential 2026 rollout if trends continue.
• Personnel development -- Introduction of a new assistant general manager (AGM) program, with about 20% of AGMs role-ready with additional training over the next quarter; 30% expected to be hired externally, impacting labor costs modestly in 2026.

Summary

CAVA Group (NYSE:CAVA) reported substantial revenue growth and expanded its U.S. restaurant footprint, showing resilience in a challenging consumer environment despite moderating same restaurant sales growth. Management emphasized accelerating investments in operations and technology, citing positive impacts from the KDS rollout and the TurboChef ovens on guest experience and operational efficiency. The company highlighted continued gains in new restaurant productivity, robust free cash flow, and an improved general and administrative cost profile, while warning of increased operating expenses and macroeconomic headwinds affecting consumer spending patterns.

• CEO Brett Schulman stated, "market share is driven by the intention rooted in our first strategic pillar: expand our Mediterranean way in communities across the country," outlining growth priorities despite external pressures.
• CFO Tricia Tolivar provided guidance for modest price increases in 2026, explicitly stating, "our expectation is our price increase will be very modest and less than what we did in 2025."
• Younger guest cohorts, particularly ages 25 to 35, are showing lower frequency and vigor in visits compared to last year, according to management commentary.
• The loyalty program's new tier structure and status matching are actively influencing visit frequency and new menu adoption, supported by increased member engagement metrics.
• Salmon market test results were described as broad-based in daypart and guest appeal, with management expecting a broader rollout in late spring 2026 if positive performance continues.
• Catering remains in limited test phases; expansion to a second market is planned for late 2026, with management guiding no near-term chainwide rollout.
• Other operating expenses are being pressured by higher third-party delivery mix, insurance, and repair and maintenance, prompting operational reviews.

Industry glossary

• AUV (Average Unit Volume): Average annual sales per restaurant, used to measure performance of individual locations.
• KDS (Kitchen Display System): Digital system for managing kitchen order flow, enhancing order accuracy and communication between kitchen and front-of-house.
• AGM (Assistant General Manager): Newly implemented restaurant leadership role designed to support operational excellence and provide a pipeline of future GMs within CAVA Group.
• Pre-opening expenses: Costs associated with opening new restaurants, including training, travel, and related ramp-up activities before revenue generation begins.
• Same restaurant sales: Comparable sales performance metric for restaurant locations open at least 18 months, used to measure organic growth excluding new openings.

Full Conference Call Transcript

Matt Milanovich: Good afternoon, and welcome to CAVA Group, Inc.'s Third Quarter 2025 Financial Results Conference Call. Before we begin, if you do not already have a copy, the earnings release and related 8-Ks furnished to the SEC are available on our website at investors.cava.com. The purpose of this conference call is to give 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 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 in CAVA Group, Inc.'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 Group, Inc. 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.

Brett Schulman: Thanks, Matt, and welcome to the call, everyone. During 2025, we continued to strengthen our leadership in Mediterranean, a category we have pioneered and are rapidly growing while staying true to our mission of bringing heart, health, and humanity to food. As consumers today face a challenging environment, the relevance of Mediterranean cuisine and the way we deliver it at CAVA Group, Inc. continues to resonate deeply. This differentiation enables strong average unit volumes, consistent value creation, and the structural strength of our model.

With growing market share and significant white space ahead, we remain confident and steadfast in our ability to create lasting value, build enduring guest loyalty, and reinforce our position as the clear leader of the Mediterranean category. Our third quarter highlights include a 20% increase in CAVA Group, Inc. revenue and a 66.8% increase over the last two years. CAVA Group, Inc. same restaurant sales growth of 1.9%, restaurant-level profit margin of 24.6%, 17 net new restaurants, ending the quarter with 415 restaurants, a 17.9% increase year over year. Adjusted EBITDA of $40 million, a 19.6% increase over 2024, net income of $14.7 million, and $23.3 million in year-to-date free cash flow.

As I've shared in prior quarters, our brand proposition is strong and continues to strengthen as reflected in our expanding market share. Since 2019, while overall restaurant industry sales have grown, industry transactions have declined, yet CAVA Group, Inc. has not only maintained but increased our market share significantly by delivering on our promise: high-quality food, brand relevance, curated guest experiences, and seamless convenience. During that same time frame, we have worked relentlessly to make our food more accessible to guests, underpricing CPI by almost 10% while taking less than half the aggregate 34% price increases of industry peers.

At the same time, we recognize that today's environment is creating real pressures for consumers, especially younger guests who are making more deliberate choices about where they spend. It's incumbent upon restaurants to deliver exceptional experiences and differentiated value to guests. That's why the foundation my co-founders and I built fifteen years ago is more important than ever. From day one, our aspiration was simple: to make our Mediterranean cuisine accessible to communities across the country, delivering it with welcoming hospitality while serving as a platform for our team members to build a career, not just have employment. This concept essence continues to guide everything we do to this day.

As we capture the white space opportunity ahead of us, our growing market share is driven by the intention rooted in our first strategic pillar: expand our Mediterranean way in communities across the country. During the third quarter, we opened 17 net new restaurants, bringing our total restaurant count to 415 locations across 28 states and the District of Columbia. Amongst them was our highly anticipated Brickell opening in Miami, where the energy and enthusiasm from our guests was palpable. A powerful reminder that with every new CAVA Group, Inc., we're not just growing our footprint, but also deepening connection and fostering community.

Recent openings also highlight Project Sole, a restaurant redesign initiative that brings the Mediterranean Way to life through warm tones, greenery, natural light, and softer seating. Design elements that turn our restaurants into welcoming places to dine. The Project Sole prototype is now finished, and the complete design will roll out in new openings next year. And just as our environments invite connection, so do our bold Mediterranean flavors. Earlier this quarter, we introduced our latest protein innovation, Chicken Shawarma, juicy roasted chicken breast marinated in a signature spice blend and hand-stacked on a spit. The launch performed to our market test expectations with incidence levels that showed strong guest responsiveness and healthy engagement across our restaurants.

Another example of how distinctive, innovative, and satisfying flavors rooted in health continue to resonate with our guests. That same spirit of innovation comes through with our recent salmon market test, which has shown encouraging results. Salmon is a natural fit for our menu and represents an exciting milestone as our first-ever seafood offering. Our roasted flaky fillet marinated in a subtly sweet blend of harissa, red wine vinegar, and bold spices not only complements our Mediterranean flavors beautifully but also broadens the variety we can offer guests. Early results reaffirm the strong potential we see, and if performance continues, we will plan to expand salmon more broadly across our restaurants in 2026.

While proteins like salmon and chicken shawarma remain a critical focus of our culinary innovation pipeline, we also know that smaller touches can carry just as much weight in keeping our guests excited. Our pita chips are a perfect example. Last month, we introduced cinnamon and sugar pita chips, dusted with cinnamon sugar and a hint of cardamom, paired with honey for dipping. A sweet twist on a fan favorite that brings both snacking and dessert occasions to life. Shifting to our second pillar, deepen personal relationships with guests, even as we scale. This past October marked the one-year anniversary of our rewards reimagined relaunch.

Since then, the program has grown by approximately 36% and has become a key platform for connecting with guests in more personal, meaningful, and creative ways. Building on that momentum, we recently introduced tiered status levels as the next phase of the program. Through our new sea, sand, and sun structure, members now enjoy differentiated benefits and surprise and delight experiences designed to celebrate their loyalty and strengthen long-term engagement. As an extension of our brand spirit of generosity, we also launched status matching to welcome new members and encourage deeper participation. While status matching is a first-of-its-kind offering in our industry, we see it simply as another way to express our concept essence.

The latest evolution of our program also includes an expanded rewards catalog with seasonal offerings and fresh new ways to engage. With every enhancement, our goal is to create a deeper sense of belonging and continuity for our guests, whether it's elevating hospitality, improving order accuracy, or better speed of service, at our core is our commitment to building a strong operational foundation. And regardless of near-term cyclical pressures on the consumer, we're doubling down and focusing now more than ever on delivering for the long term with exceptional guest experiences and ensuring that our restaurants are staffed with team members that are equipped, empowered, and trained to run great restaurants every location, every shift, our third strategic pillar.

The role technology plays in our restaurants is important, and providing our team members with the tools to deliver consistently great experiences is a key focus area. An initiative in that spirit is our new kitchen display system, which we are now on track to roll out to at least 350 locations by year-end, with over 200 restaurants live today. We are continuing to see encouraging results as restaurants with the new KDS are experiencing higher guest satisfaction scores driven by improved digital accuracy and proactive guest order status notification capabilities. In addition to improvements across technology, we're also investing in equipment that makes our restaurants easier to run, such as our TurboChef ovens.

All CAVA Group, Inc. restaurants are now equipped with a TurboChef oven. These ovens allow for faster, more consistent cook times, enabling simpler execution in our restaurants while elevating food quality. Both the TurboChef and KDS investments help reinforce execution in our kitchens while allowing our teams to focus on what matters most: delivering a great guest experience. We are at a meaningful moment in our growth journey, and we know it is crucial to invest in training and developing our team members. Today, I'm excited to introduce our new Flavor Your Future initiative, a holistic team member development program designed to attract, develop, and retain CAVA Group, Inc.'s future leaders.

One of the first actions under this initiative is the launch of our new assistant general manager program, an evolution of our current general manager and training role. This role provides more experienced leadership in our restaurants on more shifts throughout the week, ensuring a clear number two leader is always in place. It will also create a stronger pipeline of role-ready leaders to take on the GM role as we scale and open more restaurants. Today, about 20% of our 50% will be role-ready with additional training over the next quarter, and the remaining 30% likely sourced externally.

The AGM role is just one component of a broader leadership initiative we are excited to share more about in the quarters ahead. Our commitment to developing team members into restaurant managers remains a core near-term focus, and we're excited about the opportunity to build the next generation of CAVA Group, Inc. leaders. You can see the power of that commitment in stories like that of Angelo Miranda, our Millennium location. Angelo started as a team member eager to learn and grow. Under the guidance of his then general manager, Ruben Holguin, he learned the business from the ground up. He developed his leadership skills through consistent coaching, feedback, and belief in his potential.

Over the years, that investment has paid off. Today, Angelo leaves the same restaurant where he began his journey now as a general manager, inspiring the next generation of team members to do the same. When I visited Millenia earlier this month, I saw firsthand the culture of growth and pride that Angelo and his team have built. Angelo was quick to introduce me to his high-potential team members he is developing as future CAVA Group, Inc. restaurant leaders. It's a true reflection of what happens when we invest in people and create pathways for them to lead. And Angelo's original GM, Ruben? He is now an area leader overseeing nine restaurants.

Our mission is to bring heart, health, and humanity to food, and it continues to drive our strategy, shape our culture, and inspire the work of more than 13,000 team members each day. To our teams, and to all of you who share in this journey, thank you. And with that, I'll pass the call off to Tricia Tolivar to walk you through the financials.

Tricia Tolivar: Thanks, Brett, and hello, everyone. CAVA Group, Inc. revenue in 2025 grew 20% year over year to $289.8 million and 66.8% compared to 2023. During the quarter, we opened 17 net new restaurants, bringing our total CAVA Group, Inc. restaurant count to 415 restaurants. CAVA Group, Inc. same restaurant sales increased 1.9%, primarily from menu price and product mix, with guest traffic approximately flat. On a two-year basis, same restaurant sales accelerated 350 basis points to 20%. On a three-year basis, same restaurant sales remained relatively stable at 34.1%. Despite lapping strong prior year results and navigating macroeconomic pressures, we continue to grow our market share and are confident in the underlying strength of the business.

Our new restaurant productivity remains above 100%, underscoring the resonance of our brand. CAVA Group, Inc. restaurant-level profit in the third quarter was $71.2 million, or 24.6% of revenue, versus $61.8 million, or 25.6% of revenue in 2024, representing a 15.1% increase. CAVA Group, Inc.'s food, beverage, and packaging costs were 30.1% of revenue, higher than 2024 by 20 basis points. This slight increase reflects the impact of tariffs and our limited-time-only chicken shawarma offering. CAVA Group, Inc. labor and related costs were 25.5% of revenue, an increase of approximately 10 basis points from 2024. This increase in labor and related costs reflects investments in our team member wages of approximately 2%, partially offset by leverage from higher sales.

CAVA Group, Inc. occupancy and related expenses were 6.7% of revenue, an improvement of 10 basis points from 2024, driven primarily by increased sales leverage. Other operating expenses were 13.1% of revenue, reflecting an increase of 80 basis points from 2024. This increase was due to a higher mix of third-party delivery, insurance costs, and other individually insignificant items. Shifting to overall performance, our general and administrative expenses for the quarter, excluding stock-based compensation and executive transition costs, were 9.4% of revenue compared with 10.8% of revenue in 2024. This 140 basis point improvement was primarily due to lower performance-based incentive compensation, leverage from higher sales, and lower legal costs, partially offset by investments to support our future growth.

Pre-opening expenses were $4.9 million in the current quarter, compared with $2.8 million in the prior year quarter. The $2.1 million increase includes a higher number of units under construction and increased costs on a per-unit basis. Adjusted EBITDA for the third quarter was $40 million, a 19.6% increase versus 2024. The increase in adjusted EBITDA was primarily driven by the number of and continued strength in new restaurant openings and leverage in general and administrative expenses. Equity-based compensation was $3.3 million in the third quarter compared with $3.5 million in the prior year quarter. We anticipate full-year equity-based compensation to be $18 million to $20 million, which includes the 2025 grant as well as the impact of forfeitures.

In the third quarter, our effective tax rate was 28.6%. For the full year fiscal 2025, we expect our expected tax rate to be between 10-12%. As a reminder, our cash taxes will continue to be immaterial until we fully utilize our net operating losses. During the third quarter, we reported $14.7 million of GAAP net income, compared to $15 million of adjusted net income in 2024. Diluted EPS was $0.12 in the third quarter compared with adjusted diluted EPS of $0.13 in 2024. The slight decrease was due to the allocation of income taxes in the prior year, excluding the release of the valuation allowance, partially offset by higher earnings before tax.

Turning to liquidity, at the end of the quarter, we had zero debt outstanding, $387.7 million in cash and investments, and access to a $75 million undrawn revolver, with an option to increase our liquidity if needed. Year-to-date, Q3 cash flow from operations was $144.5 million compared to $131.2 million during the year-to-date period in 2024. Year-to-date, Q3 free cash flow was $23.3 million.

Now to our outlook for full-year 2025, we expect the following: 68 to 70 net new CAVA Group, Inc. restaurant openings, CAVA Group, Inc. same restaurant sales growth of 3% to 4%, CAVA Group, Inc. restaurant-level profit margin between 24.4-24.8%, pre-opening costs between $18 million and $19 million, and adjusted EBITDA, including the burden of pre-opening costs, between $148 million and $152 million. I'd like to provide some additional context around our updated guidance. As we exited the second quarter, we saw same restaurant sales reaccelerate and were encouraged by the sequential improvement. However, as the third quarter progressed, we experienced some moderation in trends reflecting broader macroeconomic pressures.

Entering the fourth quarter, we're seeing further moderation as we continue to lap stronger same restaurant sales from the prior year. As such, we have incorporated these trends into our outlook for the remainder of 2025. Our same restaurant sales guidance reflects both the benefit of our recent Chicken Shawarma launch, which performed in line with market test expectations, and the ongoing macro headwinds impacting the industry. Despite these macro pressures, our two-year same restaurant sales stack accelerated by 350 basis points to 20%, underscoring the resilience of our brand and the strength of our guest engagement. Looking ahead, we remain confident in the long-term structural strength of the business, reaffirmed by our strong AUVs and new restaurant performance.

Our most recent 2025 cohort is trending above $3 million in AUV, with new unit productivity continuing to exceed 100%. Turning to restaurant-level margins, our guidance reflects dynamics we experienced in the third quarter and the anticipated impacts of seasonality on margins. As we look ahead to next year, we remain confident in the structural foundation of the business while being mindful of ongoing macroeconomic pressures. Our long-term algorithm targets low to mid-single digits same restaurant sales growth, and we will approach our 2026 outlook with appropriate discipline, taking into consideration our strong pipeline and traffic-driving initiatives. In addition, given the health of our 2026 real estate pipeline, we anticipate at least 16% unit count growth.

As we navigate today's dynamic environment, our mission to bring heart, health, and humanity to food continues to resonate with guests across the country and is more important than ever. We remain the clear leader of our category, supported by a powerful concept and competitive positioning that are differentiated and durable. None of this would be possible without our exceptional teams across our restaurants and support center, whose dedication brings our mission to life every day to drive meaningful experiences for our guests. With that, I will turn the call back over to the operator to open it up for Q&A.

Operator: Thank you. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please also only ask one question at a time. If you have another question, please reenter the queue after your first question has been answered. We will now take our first question from Andrew Barish with Jefferies. You may now begin.

Andrew Barish: Hey, guys. Last quarter, you kind of stacked rank, you know, some of the choppiness in same-store sales from, you know, the steak lab to a little bit of consumer balances to, you know, the honeymoon. Can you kind of just let us know on the honeymoon side of things if that's changed materially? And I'm assuming, you know, most of the choppiness you're seeing now is, you know, is macro related, but anything geographically you want to point out would be helpful.

Brett Schulman: Hey, Andy. Thanks for the question. So, certainly, the honeymoon impact is very similar to what we experienced last quarter, no change there. We're not seeing anything geographically to call out. So it's more around the macro environment and the pressure on the consumer. And lapping the strong same restaurant sales results that we had in the third quarter of the prior year. So we've noted it on the call, but on a two-year stack basis, we, in fact, accelerated our same restaurant sales by 350 basis points to 20%. Thank you.

Operator: Thank you very much. Our next question comes from Brian Mullan with Piper Sandler. You may now begin.

Brian Mullan: Hey. Thank you. Just a question on the salmon test. You know, Brett, in prepared remarks, it sounds like it's going well. Just wondering if you could elaborate a bit on what you're seeing in the test, you know, anything interesting from a daypart perspective between lunch and dinner or maybe just a guest perspective, age, gender, income, just and also how it's going with the operations.

Brett Schulman: Yeah. Thanks, Brian, for the question. You know, we didn't know we have TurboChef ovens in every restaurant now, which is the equipment we use to roast the salmon. So it's a very easy cook procedure and prep and hold procedure. And we've been very encouraged by the results. We have seen it drive incremental occasions, and its appeal is broad-based from a consumer standpoint as well as a daypart standpoint. So it is a unique new menu item to add to the variety of our proteins. It's our first seafood item. And excited at its potential.

And if things continue to progress on the current track, as we noted, or as I noted in the prepared remarks, we expect to launch it in late spring in 2026.

Operator: Thank you very much. Our next question comes from David Tarantino with Baird. You may now begin.

David Tarantino: Hi. Good afternoon. Brett, I had a question about the operation. So I know you made a change in leadership there during the third quarter. And I was wondering if you could, you know, just address that change and why that happened. And then, you know, I guess, mentioned also tonight doubling down on guest and operations. So wondering if you could elaborate on whether you're addressing specific issues or whether that's more of a statement as you think about where the business sits today.

Brett Schulman: Yeah, David. Over the course of our fifteen-year journey, one of the things that's been instrumental in leading to our success is always being proactive and staying in front of the business. And making sure we're bringing on the capabilities that we need for the next chapter of our journey and where we're going, not just where we've been and where we are. And so that sort of transition was in that spirit. And as it relates to the operational opportunities, this is the most intense discount environment since the Great Recession. And, you know, our value proposition, we believe, is much more holistic than a price point.

And one of the best things that we can do is deliver exceptional guest experiences. That's foundational to driving traffic over the long term and driving a competitive advantage in concert with our unique differentiated Mediterranean cuisine. So we're just doubling down on that. It's been core to who we are throughout our journey, and we want to make sure that we're putting our best foot forward in a time when consumers are becoming increasingly discerning about where they're spending their dollars and that we also have the breadth and depth of pipeline to continue to support the new restaurant openings that are opening at record levels. Opening them with operational integrity.

Operator: Makes sense. Thank you. Our next question comes from Eric Gonzalez with KeyBanc. You may now begin.

Eric Gonzalez: Hi. Thanks for the question. You talked about having a strong pipeline of traffic-driving initiatives for the next year. You can expand on that a bit. It sounds like you've got at least one protein on deck with salmon in the spring, but I'm curious if you have anything else exciting to call out, such as maybe pita chips, sides, beverages, or desserts that might be interesting and worth noting.

Brett Schulman: Yeah. Thanks for the question. I think the pita chip piece will certainly be relevant next year, sooner than that, and desserts. Those are definitely category opportunities for us over the long term. But our pita chip platform for innovation has been very successful, and we continue to see opportunities to excite guests through that platform as well as the salmon launch. And then we will be expanding our catering test later in '26 to a second market. We're currently testing catering in Houston. I wouldn't expect the chain-wide launch, but later in '26, we plan to expand it to a second market in concert with Houston to continue to test and learn and position ourselves for a broader launch.

And then lastly, I'd say on the marketing front, we have been very efficient and lean in our marketing spend over time, and we continue to test and learn. And understand how we can show up in those channels effectively, especially as we communicate our value proposition and our message in a heavily discounting environment. And so, next year, whether it be that collab through collaborations, or some of the other marketing partnerships that we have opportunities to forge, that's another area that we have not or another lever that we haven't pulled in a meaningful way to date. Thank you.

Operator: Thank you. Our next question comes from Andrew Charles with TD Cowen. You may now begin.

Andrew Charles: Great. Thanks. Brett, appreciate all the context for the upcoming drivers. Two in particular, just in the current backdrop, the opportunities to accelerate investments in the near term in marketing, you know, are there opportunities with the growing scale of the brand to really just create more brand awareness? You may have seen some nice gains last year. As well as improving speed of service. And would be very curious to know what the clearest items are going to be for the incoming COO.

Brett Schulman: Yes. Certainly, speed of service, we've noted in the past. We know it's an opportunity. We're mindful of striking the right balance where we're not rushing people through the line too fast when it's their first time experiencing Mediterranean food or their first time interacting with CAVA Group, Inc., let alone eating Mediterranean food. But we see clear opportunities to continue to improve on that front. There will always be operational opportunities. We hold ourselves to a high standard, and we want to make sure that we're delivering CAVA Group, Inc. hospitality to the level and degree that we aspire to across every restaurant and having that speed of service consistently across the country. So we think there's opportunities there.

And then on the marketing front, as we gain scale in these markets, we'll continue to test more upper funnel activity that we have the ability to amortize and leverage it across a wider restaurant base. But from a new COO perspective, it's continuing to deepen and broaden out the people development pipeline. I noted, you know, we talked about the AGM role. That's in that spirit of not only helping give a stronger management complement across all shifts during the week, across all seven days, but also having more role-ready leaders in place. Again, being proactive.

Staying in front and thinking about what do we need to put in place not for just not for today, but for tomorrow to make sure that as we scale to a thousand restaurants by 2032, that all those things are already in place at that time, and we'll be working on other things as we go beyond that milestone goal. So the focus will be on the people development side as well as, you know, continuing to elevate our speed of service without having people feel too rushed through that line. Thank you.

Operator: Thank you. Our next question comes from Sharon Zackfia with William Blair. You may now begin.

Sharon Zackfia: Hi. Thanks for taking the question. Brett, you mentioned younger guests kind of in the prepared comments, and I don't know if that was a broader statement of the industry or if you're seeing something in particular with younger cohorts. And I'm also interested in kind of what you're learning about how you can lean into loyalty, just given kind of this more volatile consumer climate.

Brett Schulman: Thanks. Yeah. Sharon, you know, it really for us, we're a bit idiosyncratic in that our comps accelerated in the back half of last year when many industry comps were decelerating. So we're lapping tougher hurdles when most are having easier compares. I don't we don't want to overstate the challenges of the consumer, but you can look at the data. They're clearly out there, whether it's student loan repayment, consumer sentiment, just the inflationary pressures all around them, whether it's health care costs, housing costs, right? Gen Z unemployment twice the national average.

We look at the data, it's more that the younger cohort, that 25 to 35 that Tricia noted in comments, is that you know, they don't have the steam that they had last year in the way that they were visiting or their frequency of visiting. It's not necessarily they're so challenged with us. It's just that they don't have the vigor or the frequency of occasions that they did last year. And you know, that's why it's incumbent upon us to continue to double down on our experience and our value proposition and make sure we're communicating that effectively. You know? We're not oblivious to the commentary about the $20 launch.

Well, the reality is you know, you can get a chicken bowl of CAVA Group, Inc. with all the toppings included, three different spreads, greens and grains for $10.65 to our highest price of $12.95 in New York City. So that's a sub $13 bowl in the expensive market, not a $20 lunch. And that's an opportunity for us to continue to communicate that, that it's fresh food, it's not freezer to fryer food or ultra-processed food. And when you step back and you look at the two-year comp of 20%, you look at the almost 67% revenue growth on a two-year basis, we continue to gain significant market share. And again, noted the economic data.

You know, it's very interesting. The industry has lost 7% in transactions since 2019. We've grown transactions in the mid-20s since 2019. We've taken half the price of industry peers put away from home 34%, we've taken an aggregate less than 17% in price. So we are focused on the long term. We say it's a marathon, not a sprint. We want to continue and enhance our value proposition each and every year and make our food more accessible to guests. Now on the loyalty front, we are very excited about what we've seen in our loyalty program. We noted we've seen an increase of 36% in members in our loyalty program.

We added this new tier status, and we've seen the ability to really create greater value for our guests and influence behavior in a positive way for their visits. And for the business and expose them to new items. So for example, on chicken shawarma, you know, on their loyalty pool, people who have tried chicken shawarma are coming more frequently than users who have not tried it. So the ability to have that one-to-one line of communication drive that innovation, drive that newness, drive excitement, drive trial, a powerful first-party data tool that we look to continue to leverage in the coming quarters. Thank you.

Operator: Thank you. Our next question comes from Jacob Aiken-Phillips with Melius Research. You may now begin.

Jacob Aiken-Phillips: Hi. Good afternoon. I just wanted to ask again on the honeymoon dynamic. So last quarter, you described that at least some of it was coming from, like, maybe people driving further distances or just initial trial and new trade areas. But is that dynamic like something that lasted longer than three months, six months? Are the initial stores that were affecting you last year doing better on a year-over-year basis? Just trying to understand the dynamic a bit better.

Tricia Tolivar: Yes. So we are seeing the initial stores impacted are doing better on a year-over-year basis. And in fact, in looking at the restaurants in 2024 that have been opened for a period of time beyond eighteen periods or eighteen months, we're seeing a return to positive same restaurant sales. So we don't believe this is reflective of a structural challenge. We don't find it in a certain geography or in a certain format or type of restaurant. Continuing to monitor, and we'll give you updates as we move forward. But, likely, given the performance of our 2025 vintage, we'll likely see a similar pattern in 2026.

Jacob Aiken-Phillips: Encouraging. Thank you.

Operator: Thank you. Our next question comes from John Ivankoe with JPMorgan. You may now begin.

John Ivankoe: Hi. Thank you. Thank you for opening the unit in Brickell. It's absolutely beautiful. Brett and team. So thank you for that. So the question I'm going to make a question out of this. You know? So, you know, this is the market where we know there's going to be a lot of demand growth, but the buildings haven't been built yet. A lot of them. There's absolutely a lot of supply growth in the market. And there's a lot of markets that are kind of like that around the country. New York City certainly is one, and I think there's a number of others as well where the supply growth is pretty obvious.

You know, just, you know, to see walking down the street or to see on the app or to see on various promotions, what have you. The question, Brett, we spent a lot of time talking on the demand side, but can you talk about kind of the effect of supply growth that you've kind of seen in various markets? Now not asking you to, you know, it's like, hey. Are they gonna last? It's just whether they've opened and, you know, maybe competed with you on the margin, and it's just something that we just kinda have to wait out. As the market will inevitably settle.

Brett Schulman: Yes, John. Thanks for the Brickell comment. It's a beautiful restaurant, doing phenomenal. Excited to have more open. We just opened Aventura in South Florida. You know, it's interesting. I feel like it's less supply intense than in our younger earlier days. If you remember, in kind of 2013 to 2016, there were a lot of fast-casual concepts emerging and fighting for real estate. So it was more challenging. I mean, real estate is easier for us to get. And then from a competition standpoint, look. The restaurant industry, as I noted, has transactions down seven since 2019, which means it's a share shift gain.

Which means you got to be a better competitive alternative to the three or four or however many restaurants around you and be differentiated. And to us, that's our Mediterranean cuisine. This on-trend cuisine that is unique and that it meets the moment of a modern consumer's increasingly diverse palate seeking bolder, more adventurous flavors, while not wanting to sacrifice on health and wellness. And then delivering that, as I noted earlier, doubling down on operational integrity with exceptional hospitality, not just average operations, exceptional hospitality. We have seen over our year journey is a recipe for success.

When we do that, and we do it consistently, these comps go up, doesn't matter who opens next door to us, we continue to grow market share, that's what we're focused on.

John Ivankoe: Understood. Thank you.

Operator: Thank you. Our next question comes from Chris O'Cull with Stifel. You may now begin.

Chris O'Cull: Yeah. Thanks. Good afternoon, guys. I was wondering if the company has done any work to assess the value perception among non-CAVA Group, Inc. users in more mature markets. Just wondering what their perception of the brand might be and what's keeping them from visiting the restaurants.

Brett Schulman: Yeah. Our value perception is strong. We do biannual brand health surveys. Of the analysts on this call put out value surveys where, you know, I don't want to play favorites or name names, but there is a lot of good research that you all put out that has ranked us very strong in our value proposition if not toward the top of the, publicly traded industry set. So we see that corroborated, whether it's anecdotally, whether it's or quantitative, we see our value proposition continue to be recognized by consumers, whether they come to CAVA Group, Inc. whether they're not as aware of CAVA Group, Inc., whether it's our internal studies or some of these third-party or analyst studies.

So I think it's also a reflection of the way we think about value. The relevance of our cuisine and measuring your diet, the quality of the ingredients we're serving, the fresh food, fresh grilled proteins, fresh produce, not freezer to fry or ultra-processed foods. The convenience in which you can access it. And then most importantly, at the end, I talk about the experience we deliver, when you engage with the brand, and then you match that with the fact that over the long term, our long-term perspective, and how we work every year to mitigate price less than 17% compared to 34% industry aggregate average. We have underpriced inflation.

We have underpriced peers that have enhanced that relative value proposition each and every year.

Operator: Our next question comes from Sara Senatore with Bank of America. You may now begin.

Sara Senatore: Great. Thank you very much. I wanted to ask about, you mentioned technology and KDS. And how you'll be rolling it out more broadly. What are you seeing in terms of again perception, consumer perception? Are seeing increased frequency or speed of service that's translating into higher frequency? I know experience matters a lot, sometimes it can be hard to detect throughput when demand slows. So just as I think about technology as a potential driver, any kind of reads on what that means for and guest frequency.

Brett Schulman: Yes. Certainly, Sara, on the off-premises channels. Whether it's delivery, third-party delivery, or native delivery, or digital order pickup, technology plays a key role, the integrations, the time, you know, our times on the third-party marketplace, how quickly we can get our food to consumers, making sure those integrations are aligned and that the team has the labor deployments and set up we can open our throttles. You know, we manage we build our own digital order platform. We can control those throttles, and we can open up those throttles. As the team enhances and improves their productivity. Deliver greater throughput. And then the new kitchen display screen system really helped improve order accuracy.

We know it's our single biggest opportunity area. For customer experience is making sure every digital order is accurate and that it has ample amount of food in the bowl. And that is something that the kitchen display screen system has really been a tool to help ease of production for our operators and help deliver greater accuracy for our guests. And we see that voice of the guest score improve, and we see comps follow that. Like, that has been, you know, true since our very earliest days, whether it's the digital order line or the in-restaurant line. When the customer experience scores improve, the comps follow.

And so we want to continue to make sure we're putting our best foot forward in that light. And then using technology to enhance the human experience, not replace it, to take some of that complexity out of our team members' mindshare or equip them with the tools and capabilities to deliver that exceptional guest experience. Even another thing, just having that order status update notification. Making sure the algorithm is updating our guests if we're running a little late or if we're running a few minutes early. So that they're walking in ideally when their bowl is being put on the shelf or at the window in one of our pickup by car locations.

Sara Senatore: Thank you. Very helpful.

Operator: Thank you. Our next question comes from Danilo Gargiulo with Bernstein. You may now begin.

Danilo Gargiulo: Yes. Brett, when you talk about hospitality, you seem to suggest a broader opportunity than, you know, speed of service alone. So where do you think corporations are falling short of your expectations? Relative to where you are going? Not necessarily where you have been and where you are today. And what are some of the specific levers that you expect in the new COO to deploy? And if I may, like, Tricia, you're expecting some of this investment in people to maybe translate into similar restaurant-level margins compared to today? Or with sales leverage, should we still expect a growing restaurant-level margin under the new operations? Thank you.

Brett Schulman: Yeah. Thanks, Danilo. We have strong restaurant operations today. We have always been in a forward-looking posture, and we have aspirations to be thought of in an elite group of restaurant operators delivering exceptional service. Not just average service, not just good service, exceptional service. Because look. All my cofounders are sons of Greek immigrants. When you go to that part of the world, the hospitality you feel, the welcoming nature you feel, we want you to feel that every time you walk into every restaurant, no matter how big we get. And so that is our aspiration, and that is the work we are committed to every day to elevate to that level. And we have it in restaurants.

We have opportunities in other restaurants. And I think in moments where there's cyclical pressures on the consumer, it matters more than ever to make sure that consistent across all restaurants and take good to great. And that is something that we think is just another opportunity to drive additional traffic and drive additional market share growth from the significant gains we've had in recent years.

Tricia Tolivar: What that means from a restaurant-level margin standpoint and how we're thinking about it. Certainly, as same restaurant sales increase, restaurant-level margins will expand. But we're also very mindful of where we are in our journey and the investments we think are necessary to put back in the business to make sure we're continuing to build a long-term durable brand that's going to consistently deliver on that guest experience and hospitality that Brett talked about.

Brett Schulman: Yeah. If we see opportunities to invest further in labor, we will. It's just it's just a belief. It's a philosophical belief we have that gotten us to where we are today, that we are going to continue to look at opportunities to make sure that any restaurant-level margin expansion is sustainable and durable over the long term and in the short term, that might mean targeted investments if that's what we think is the right thing to do for the business.

Danilo Gargiulo: Great. Thank you.

Operator: Thank you. Our next question comes from Dennis Geiger with UBS. You may now begin.

Dennis Geiger: Great. Thank you, guys. Just another one on the newer stores and the performance in year two, if I could. Tricia, specifically, gave some good color a couple of minutes ago, I think, and I want to make sure I heard it right. Just as far as you're still seeing those new stores enter the base. I assume as a negative, just like last quarter, but that 24 class, those stores opened eighteen months, flipping to positive. I assume not as strong as what you've seen in prior classes, but positive after eighteen months. So just wanted to confirm that.

And then the question really is if as you look ahead, any better sense on what 2026 may look like with this new store dynamic as you've now seen a couple quarters of the honeymoon dynamic and other levers maybe you can pull to sort of maintain that growth even after big year one opens? Thank you.

Tricia Tolivar: Yes. I appreciate it, Dan. So you have it right. We're seeing the trends as you articulated them. And certainly, there are restaurants that perform above those expectations. So we're not but in general, yes, that is correct. And then in '26, we believe the 25 cohort of restaurants perform similarly to what we saw with the '24 cohort in 2025.

And, you know, things to do to try to make sure that we can open these restaurants as successfully as possible and capture as much of the honeymoon halo as we can is really taking our general managers and exposing them to high volumes as well and bringing them into other markets like New York to experience what these peaks are like, which is atypical and something that we hadn't experienced prior to this year. So that they're better able to manage the demand, and then, you know, hopefully, maintain more of those consumers as we go forward.

Dennis Geiger: Very helpful. Thank you.

Operator: Thank you. Our next question comes from Jeffrey Bernstein with Barclays. You may now begin.

Jeffrey Bernstein: Great. Thank you very much. Just looking at the most recent third quarter results, I'm just curious how much of the comp shortfall maybe versus your internal expectation heading into 3Q do you attribute to the escalating macro headwinds versus perhaps some internal missteps or challenges and kind of thinking about it as you look back. Anything you would do differently if the challenging environment persists as we look into 2026? Thank you.

Tricia Tolivar: Yeah. The macro environment is certainly what put pressure on the results in Q3. I wouldn't there isn't anything structural about the business or any missteps that are significant that we would have adjusted or wish we had done differently. It's really about how do we look at how we performed in light of the tier stack that we were facing. So if you're coming up on a comp, in the quarter last year of 18%, you know, coming out just under two is not an unreasonable expectation, given that tough compare. And the macro environment that we're in. We talked about, you know, two-year stacks and how they accelerated.

And the three-year stack at the beginning of the year, we thought would be in the mid-thirties. And we're just under that 34%. And in this type of environment, that was not unexpected.

Brett Schulman: Yeah. And, again, Jeffrey, it's when you we're in this heavy discounting environment, you know, we're not we're not gonna get into that, you know, heavy discounting to combat any cyclical headwinds. That's why we talked about doubling down on exceptional operations and great guest experiences. That's where Russ traffic starts. And that's always an opportunity for us. Always will be, but it's incumbent upon us in these more challenging macro environments to double down on it, because we're not fast food, we're not QSR. That's not our value proposition to our guests.

Our value proposition, as I spoke to you before, the quality of our food, the relevance of the cuisine, the experience you get when you engage with us and you come into our dining rooms and you order on our digital channels and the accuracy we deliver. So we want to make sure we're doing everything we can in that spirit. To deliver for our guests in this time where they're feeling pressures all around them. Thank you.

Operator: Thank you. Our next question comes from Jon Tower with Citigroup. You may now begin.

Jon Tower: Great. Thanks. Two, if I may. First, Brett, you've mentioned multiple times in the call, the brand's pricing versus CPI. Over time since 2019. So I guess my impression is that as we are looking at 2026, you guys are probably not gonna do much by way of taking price for next year. And I'm just curious if that's the right assumption to make for the brand. And then my next question is just on the last year discussion and specifically the builds for 2026. You know, to avoid maybe the same issue hitting the store base with respect to honeymooning.

Are you guys doing anything specifically where you're opening the stores in 2026 such that you know, 2027, you're not gonna be running into us the same issues with honeymoons or is that not even part of the discussion?

Tricia Tolivar: Yes. So I'll start with price. So right, Jon. As we think about it, we've always been very thoughtful. Brett talked about this earlier on not passing a significant amount of price onto our guests, and we don't plan to do that in 2026. So our expectation is our price increase will be very modest and less than what we did in 2025. And then as you're thinking about opening new restaurants in 2026, is that a significant change contemplated in how we're opening them? Just being thoughtful around what that means to the business, and keep in mind our comp trends in 2025 with a strong comp at 10.8. That will factor in the cadence of comps next year.

But when we look at our real estate strategy, just wanting to make sure that we're being balanced and thoughtful in how we're bringing new restaurants in, particularly in new markets and how we're pacing those openings to perhaps try to balance out that honeymoon phenomenon that we've been experiencing. But I'll tell you, we're seeing it all over. So it's not just in new markets. We're just the brand is resonating very well and driving strong demand that bringing many more guests than we originally expected, which drives a stronger cash on cash return sooner, which is great for the business overall.

Jon Tower: Got it. Thank you for taking the question.

Operator: Thank you. Our next question comes from Brian Harbour with Morgan Stanley. You may now begin.

Brian Harbour: Thanks. Good afternoon. The change to store margin guidance, is that really just reflective of the sales environment? Or is there anything that's different about inflation? Anything that we should factor in, we go to 26? And then I guess just also what's pressuring, preopening expense?

Tricia Tolivar: Yes. So when we're looking at restaurant-level margin, it really reflects the experience we had in Q3. And frankly, in the quarter itself, we have continued to have higher maintenance expense than what we were to anticipate. And we have been talking to everyone and seeing them in over the past year and had thought that it would come down a little bit. And so what the guidance reflects is the actual results in Q3 and a continuation of that from another operating expense perspective into Q4 as we identify opportunities to look at those repair and maintenance expenses and optimize.

So being more thoughtful around equipment and how do we make adjustments, but wanting to maintain the integrity and the physical spaces and making sure we're providing a great guest at the same time. There isn't anything significant around input costs or labor costs. It's more on that other operating expense line. And then when you talked about preopening costs, what we're finding with preopening there were in the quarter itself, there were many more restaurants under construction than what was in the prior year. But overall, we are seeing an increase in preop cost per restaurant driven by a number of factors, and it's largely due to us investing in a better opening experience.

So when I mentioned earlier, you know, taking general managers out of the market where the restaurant is going to open and bringing them into higher volume markets. That has extra cost associated with it, which we think is important to make an investment in. So that general managers are better prepared and there's a better guest experience overall.

Operator: Thank you. Our next question comes from Logan Reich with RBC Capital Markets. You may now go ahead.

Logan Reich: Hey, good evening. Thanks for taking my questions. Just on the Q4 comp, I recognize you guys give the full-year guide implies relatively wide range on Q4. So just any sort of directional commentary, you could provide on Q4 same-store sales outlook?

Tricia Tolivar: So, certainly, given the higher lap going up against the 21.2% same restaurant sales in the prior year, coupled with the consumer headwinds, we wanted to take a very judicious approach in setting guidance and it's been a bit choppy. And so, you know, what we're seeing today is a bit better than the midpoint of the range, we wanted to be thoughtful and create a wide range because of the uncertainty that's being faced with consumers today. And so how long will the shutdown continue and what will that mean? It's certainly a factor and one that's difficult to predict.

Operator: Thank you. Our next question comes from Nick Setyan with Mizuho. You may now begin.

Nick Setyan: Thank you. You know, historically, you've talked about the diversity of COGS best as being a little bit of a moat that allows you to underprice inflation. With beef now in the equation, would you mind just updating us in terms of the composition of the COGS basket? And then two, just on the AGM investment, should we think about that as incremental cost in labor in 2026? Any comment there would be helpful.

Tricia Tolivar: Yeah. So, on the diversity of the cost basket, there isn't a material change in that mix overall. So 25% typically in proteins, 25% produce, 25% grocery, and 25% everything else. So adding beef has not changed it materially in the overall cost from an input cost standpoint. And then when we're looking at AGMs, I appreciate you bringing that up. We've reimagined the general manager in training role and elevated it for those who are ready to an assistant general manager role. So it's not an incremental headcount per se, but it is at a higher overall compensation rate. And so there'll be some modest impact on overall labor as we go into 2026.

Operator: Thank you. Our next question comes from Brian Vaccaro with Raymond James. You may now begin.

Brian Vaccaro: Thanks. Most of mine have been asked, but I thought I'd follow-up on recent trends and just given your footprint in the DMV market, I'm curious if you're seeing any outsized softness in that region during the government shutdown. Or more broadly, to what degree you think that could be having an impact on your business? Thank you.

Brett Schulman: Yeah, Brian. We did not initially see any impact. And in most recent weeks, as paychecks start going out to government workers, we had seen some softness creep in, but I wouldn't say it's acute or anything severe at this point.

Operator: Great. Thank you. That appears to be our last question. I will now turn the conference back to Brett Schulman, Co-Founder and CEO, for any additional remarks.

Brett Schulman: Thanks for joining us today. Before we wrap, I want to take a moment to share my gratitude for our entire team. Last month, I spent time in the field visiting our restaurants in the Midwest and Southeast. Seeing the energy of our teams, the pride they take in delivering great food and hospitality, and the excitement of our guests was a powerful reminder of what fuels our success. This fall has been a period of continued growth, welcoming new guests, strengthening our operations, and investing in the people who bring our mission to life every day. As we head into the holiday season, we're grateful for the dedication of our team members and the loyalty of our guests.

We remain energized by the opportunities ahead. Thank you for your time and support, look forward to connecting again in the New Year.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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