Will Cava’s Mediterranean recipe for success ensure long-term growth?

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After going public in June 2023 at $22 per share, CAVA Group, Inc. (NYSE:CAVA) stock closed at higher than $38 the day it started trading. It has been gaining since then and the purveyor of Mediterranean food saw its stock touch $150 last December after it reported strong third quarter 2024 results in November. Since then the stock has seen a pullback, closing at about $112 on January 14. The Washington, D.C.-based company, which opened its first restaurant in 2011 in Bethesda, Md., has adopted an assembly line service format to serve up quality food at reasonable prices at its chain restaurants. This is the format favored by Chipotle Mexican Grill, another “fast casual” restaurant chain success story that Cava is being compared to by analysts. Cava is also looking to cash in on growing consumer awareness about the salubrious Mediterranean diet. The company produces Mediterranean dips, spreads and dressings at its manufacturing facilities, in Maryland and Virginia, that are also sold at groceries.

The company’s CEO Brett Schulman sees Cava as being in the hospitality business and not just the restaurant business. On the company’s third quarter earnings call with analysts, he noted, “Our business is built on the idea of welcoming everyone to our table, and we are focused on creating the authentic human connections consumers are hungry for. This is core to our brand essence and our mission of bringing heart, health and humanity to food, and it uniquely positions us to deliver genuine hospitality to our guests.”

The company is basing its growth plan on strategic “business pillars” that include growing its Mediterranean restaurants in communities nationwide; developing personal relationships with customers even as it scales up its restaurant count; using technology, including automation, and training to consistently deliver quality fare and make restaurants easier to run; and operating as a “high-performing team” by building a culture that emphasizes growth and accountability (using data to derive insights as well as programs that help engage, retain and connect personnel). Will the restaurant chain also continue to deliver growth for shareholders?