{"id":31831,"date":"2025-06-30T23:56:00","date_gmt":"2025-06-30T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=31831"},"modified":"2025-07-01T10:21:08","modified_gmt":"2025-07-01T02:21:08","slug":"cavas-keep-soar","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/","title":{"rendered":"Why did the Mediterranean-style restaurant chain Cava\u2019s keep soaring after its listing? Pros, Cons and Risks of Investing in Cava"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Company_profile\" >Company profile<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Founding_of_the_company\" >Founding of the company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Introduction\" >Introduction<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Business_scale\" >Business scale<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Acquisition_of_Zoes_Kitchen\" >Acquisition of Zo\u00ebs Kitchen<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Number_of_stores_and_plans\" >Number of stores and plans<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Operation\" >Operation<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Q3_2024_Result\" >Q3 2024 Result<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#2023_review\" >2023 review<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Success_factors\" >Success factors<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Healthy_trends\" >Healthy trends<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Inflation_and_prices\" >Inflation and prices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Business_model_can_be_easily_expanded\" >Business model can be easily expanded<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Capital_market_performance\" >Capital market performance<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#First_day_of_listing\" >First day of listing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Tripled_in_15_years_after_listing\" >Tripled in 1.5 years after listing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Valuation\" >Valuation<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Pros_Cons_and_Risks_of_Investing_in_Cava\" >Pros, Cons and Risks of Investing in Cava<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Strong_balance_sheet\" >Strong balance sheet<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Amazing_share_price_returns\" >Amazing share price returns<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Impressive_growth_rate\" >Impressive growth rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Profit_margins_has_room_to_improve\" >Profit margins has room to improve<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Valuation_is_too_high\" >Valuation is too high<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Long-term_observation_is_required\" >Long-term observation is required<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#The_next_Chipotle_Mexican_Grill\" >The next Chipotle Mexican Grill?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#What_they_have_in_common\" >What they have in common<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Strong_Restaurant_Level_Margins_RLM\" >Strong Restaurant Level Margins (RLM)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Easy_to_customize\" >Easy to customize<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Reflected_in_business_performance\" >Reflected in business performance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Expansion_plans\" >Expansion plans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Looking_forward_to_it\" >Looking forward to it<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Company_profile\"><\/span>Company profile<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Founding_of_the_company\"><\/span>Founding of the company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In 2006, first-generation Greek Americans Ted Xenohristos, Ike Grigoropoulos and Dimitri Moshovitis opened the full-service Cava Mezze restaurant in Rockville, Maryland, with Moshovitis serving as executive chef. In 2009, Brett Schulman joined as CEO and co-founder of fast-casual chain Cava.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><a href=\"https:\/\/en.wikipedia.org\/wiki\/Cava_(restaurant)\" target=\"_blank\" rel=\"noopener\">Cava Group (ticker: CAVA) <\/a>is a Mediterranean-style fast food restaurant chain with branches across the United States. Cava also produces a line of Mediterranean dips, spreads and dressings sold in grocery stores across the United States.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Business_scale\"><\/span>Business scale<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Acquisition_of_Zoes_Kitchen\"><\/span>Acquisition of Zo\u00ebs Kitchen<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In August 2018, it acquired Zo\u00ebs Kitchen for $300 million. In 2020, Cava converted seven of its Zo\u00ebs Kitchen stores into Cava-branded restaurants, and plans to convert 50 more in 2021 specifically to prepare food for online orders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Number_of_stores_and_plans\"><\/span>Number of stores and plans<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As of the third quarter of 2024, Cava Group has 352 restaurants, an annual increase of 21.4%. The Greek-style fast-casual chain plans to open 50-54 new stores in 2024, with a long-term goal of opening 1,000 stores by 2032.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Operation\"><\/span>Operation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Q3_2024_Result\"><\/span>Q3 2024 Result<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The company released its third quarter financial report on November 12, 2024:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Earnings per share were US$0.15, double last year&#8217;s level and better than market expectations of US$0.11.<\/li>\n\n\n\n<li>Revenue reached US$241.5 million, an annual growth rate of 39%, and rapid growth for two consecutive quarters; compared with revenue in the same quarter of 2023, it was US$173.8 million.<\/li>\n\n\n\n<li>Same-store sales increased by 18.1%, of which customer traffic increased by 12.9%.<\/li>\n\n\n\n<li>AUV was $2.8 million compared to $2.6 million in the year-ago quarter.<\/li>\n\n\n\n<li>Restaurant profit was $61.8 million, up 41.9% from the year-ago period, and restaurant margin was 25.6%.<\/li>\n\n\n\n<li>Digital revenue accounted for 35.8%.<\/li>\n\n\n\n<li>Net profit was $18 million, compared with $6.8 million in the same period last year.<\/li>\n\n\n\n<li>Adjusted EBITDA was $33.5 million, compared with $19.8 million in the year-ago period.<\/li>\n\n\n\n<li>Net cash provided by operating activities was $43.9 million and free cash flow was $23.4 million.<\/li>\n\n\n\n<li>General and administrative expenses: $29.8 million, or 12.2% of revenue, compared to $24.5 million, or 13.9% of revenue, in the third quarter of 2023<\/li>\n<\/ul>\n\n\n\n<p>In addition, the company also raised its profit forecast for 2024, which stimulated the stock price to surge by 16%, attracting great attention from the market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2023_review\"><\/span>2023 review<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cava is scaling efficiently and reporting increasing profits. After a loss of $2 million in 2023, net profit will be $14 million in the first quarter of 2024 and full-year profit in 2023 will be $13 million.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Success_factors\"><\/span>Success factors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Healthy_trends\"><\/span>Healthy trends<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cava&#8217;s business model is similar to Chipotle (ticker: CMG), providing healthy, fast and casual food. Plus the food comes with a variety of toppings, such as harissa, tzatziki sauce and lamb meatballs, making it easy to replicate across locations.<\/p>\n\n\n\n<p>Rising health awareness and changes in Americans&#8217; dietary choices have stimulated the growth of Cava. Competitor Brassica has received financing from the Mexican restaurant chain Chipotle Mexican Grill and has the ability to open more branches in the future, although market expectations are short. The probability of time being a threat is not high, and it may still cause Cava&#8217;s stock price to fluctuate at a high point.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Inflation_and_prices\"><\/span>Inflation and prices<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Recently, affected by high interest rates and high inflation, people&#8217;s willingness to consume has decreased, causing the retail industry to face severe challenges. The catering industry has also experienced manpower shortages, and large-scale chain stores have frequently experienced bankruptcies or closures.<\/p>\n\n\n\n<p>However, the company still reported positive same-store sales during a rather difficult time, which is impressive, even though it&#8217;s slowing down. Same-store sales are likely to accelerate amid improving operating conditions.<\/p>\n\n\n\n<p>The price of Cava is not too expensive and is a price level acceptable to the public. The recent US casual restaurant chain TGI Friday&#8217;s filed for bankruptcy protection, which further shows that Cava&#8217;s success is not easy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Business_model_can_be_easily_expanded\"><\/span>Business model can be easily expanded<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>So far it has only entered the southern part of the United States. With a total of just 352 locations, the company believes it can succeed across the U.S. as it continues to expand, which seems like a no-brainer to increase revenue and scale.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Capital_market_performance\"><\/span>Capital market performance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"First_day_of_listing\"><\/span>First day of listing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The American Mediterranean-style restaurant chain Cava surged 99% on its first day of listing on the New York Stock Exchange on June 16, 2023, with its total market value reaching approximately US$4.9 billion. This performance is even more amazing than that of popular technology stocks. It is simply jaw-dropping.<\/p>\n\n\n\n<p>Please note that when it went public, the company was still losing money, but now it is making a profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tripled_in_15_years_after_listing\"><\/span>Tripled in 1.5 years after listing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As of November 26, 2024, one and a half years after it was listed, the stock price has increased by 276.2%. From the beginning of 2024 to November 26, the stock price has increased by 251.16%, with the total market value reaching approximately US$16.73 billion.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Valuation\"><\/span>Valuation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cava stock is currently valued at a price-to-earnings ratio of 318 times, which is simply an astronomical figure, and it will take some time to reach this level even if everything goes well for the business. Stocks that fail to achieve premium valuations will eventually fall.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pros_Cons_and_Risks_of_Investing_in_Cava\"><\/span>Pros, Cons and Risks of Investing in Cava<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strong_balance_sheet\"><\/span>Strong balance sheet<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cava currently is debt free, which is rare for small businesses, recently listed companies, or growing companies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amazing_share_price_returns\"><\/span>Amazing share price returns<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In 2024 alone, Cava stock delivered stronger returns for investors, with its shares up more than 227%, while Chipotle stock rose just 32%.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impressive_growth_rate\"><\/span>Impressive growth rate<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The key metric for evaluating growth stocks is inevitably the year-over-year revenue growth generated by the business. Cava has been reporting much stronger results in recent quarters, with sales generally growing sharply by more than 20%.<\/p>\n\n\n\n<p>However, it\u2019s worth noting that while Cava is certainly growing much faster, it\u2019s also much smaller than Chipore Mexican Grill. The latter generated $2.8 billion in revenue in the third quarter (ending September 30). That\u2019s more than 11 times Cava\u2019s sales of $244 million last quarter (during the same time frame).<\/p>\n\n\n\n<p>Due to its smaller numbers, Cava is more likely to produce a higher growth rate than Chipotle Mexican Grill. Additionally, because Cava has a smaller footprint (352 restaurants compared to Chipore Mexican Grill\u2019s more than 3,600 restaurants), Cava has a greater opportunity to expand its global presence than Chipore Mexican Grill, especially in Fast growing market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Profit_margins_has_room_to_improve\"><\/span>Profit margins has room to improve<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Although Cava Group&#8217;s sales are growing faster than Chipore Mexican Grill&#8217;s, one important metric where it still lags behind is profitability: Chipore Mexican Grill&#8217;s is 18.37%, while Cava&#8217;s is 7.37%.<\/p>\n\n\n\n<p>Having strong profit margins is key to ensuring that as your business scales and grows, your revenue grows too. As profit numbers rise, the company&#8217;s valuation can be increased. Its price-to-earnings ratio will decline, which will attract not only growth investors but also value investors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Valuation_is_too_high\"><\/span>Valuation is too high<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Chipotle Mexican Grill, a more profitable company, trades at 56 times trailing earnings, while Cava&#8217;s P\/E is over 340 times.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Long-term_observation_is_required\"><\/span>Long-term observation is required<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>My concern is that Cava is too young. Buying in at current valuations may give investors the best chance of maximizing long-term gains, but there is no substantial long-term track record that would allow investors to have full confidence that Cava can achieve its ambitious expansion plans and be profitable. With its high valuation, it cannot afford any missteps!<\/p>\n\n\n\n<p>My suggestion is to keep it on the watch list. If you are also optimistic about it, you can look for a better price entry point to buy it, which is safer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_next_Chipotle_Mexican_Grill\"><\/span>The next Chipotle Mexican Grill?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_they_have_in_common\"><\/span>What they have in common<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are many important common traits between Cava and Chipore Mexican Grill. First, the food itself. Both use a limited number of high-quality ingredients, and people can customize a wide variety of meals to their liking. Then, the meals are prepared through a pipeline process.<\/p>\n\n\n\n<p>This approach has many benefits for restaurant operators. A limited number of ingredients helps improve supply chain efficiency, allowing restaurants to buy from fewer suppliers and ultimately helping them gain pricing power over suppliers as they scale. It also reduces preparation work and saves man-hours. But most importantly, it allows the pipeline to combine orders quickly, thereby speeding up throughput.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strong_Restaurant_Level_Margins_RLM\"><\/span>Strong Restaurant Level Margins (RLM)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Combined, all of these factors tend to result in strong restaurant-level profit margins (RLM), which is the operating income a restaurant generates before company costs are taken into account. That is, in the third quarter of 2024, Cava&#8217;s RLM is 25.6%, while Chipotle Mexican Grill&#8217;s RLM is 25.5%.<\/p>\n\n\n\n<p>Considering Cava\u2019s smaller size (fewer restaurants and fewer sales), this is pretty impressive. If you look back to Q3 2018 and Q3 2019, which was a strong period for Chipotle Mexican Grill between the foodborne illness issues and COVID, their RLM was 18.7% and 20.8%, respectively, so Cava was strong in that period. The indicators are in a very favorable position.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easy_to_customize\"><\/span>Easy to customize<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>All in all, customers can get high-quality, customized meals quickly, which helps to increase the popularity of the restaurant chain. Cava&#8217;s same-store sales growth was very strong, driven by a significant increase in customer traffic and price increases. This combination shows that the restaurant concept is not only popular and attracts new customers, but also has pricing power.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reflected_in_business_performance\"><\/span>Reflected in business performance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the third quarter of 2024, Cava&#8217;s same-store sales soared 18.1% and customer traffic increased 12.9%. Impressively, this figure is higher than the 14.1% increase in the previous year and equates to a two-year cumulative same-store growth rate of 32.2%.<\/p>\n\n\n\n<p>Cava\u2019s strong same-store sales performance over the past two years has increased the company\u2019s average unit sales (AUV, or the average sales its restaurants generate in a year) to $2.8 million. That&#8217;s not far off the $3.2 million in AUV that Chipore Mexican Grill reports each quarter. Looking back at Chipore Mexican Grill\u2019s performance in the third quarter of 2018 and 2019, its average operating income (AUV) rose from $2 million to $2.15 million, so Cava once again took the lead. Even after adjusting for inflation, Cava\u2019s current AUV is higher than Chipore Mexican Grill\u2019s AUV in the third quarter of 2019 \u2014 its inflation-adjusted AUV was $2.65 million in today\u2019s dollars.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Expansion_plans\"><\/span>Expansion plans<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As of the third quarter of 2024, Cava has only 352 stores, while Chipotle Mexican Grill has 3,615 stores. The company currently plans to increase its restaurant count by at least 17% by 2025, and the company has discussed a 15% annual restaurant unit growth rate. This provides long-term support for its future expansion and growth. (The long-term goal is to open 1,000 stores by 2032)<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Looking_forward_to_it\"><\/span>Looking forward to it<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Since RLM and AUV are similar to Chipolet Mexican Grill, it is easy to imagine that in the next 10 to 15 years, when the company reaches a similar level of restaurant volume as Chipolet Mexican Grill, its market cap will be similar to Chipolet Mexican Grill. BBQ&#8217;s current market value is comparable.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"162\" height=\"59\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/11\/Cava-Custom.png\" alt=\"Cava\" class=\"wp-image-31832\"\/><figcaption class=\"wp-element-caption\">credit: Cava<\/figcaption><\/figure>\n\n\n\n<p><strong><em>I am the author of the original text, the essence of this story was originally featured on Smart Magazine<\/em><\/strong>, <strong><em>Issue of March 2025<\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/30\/cavas-keep-soar\/\">Why did the Mediterranean-style restaurant chain Cava\u2019s keep soaring after its listing? Pros, Cons and Risks of Investing in Cava<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/03\/24\/darden-restaurants\/\">How recession resilient Darden Restaurants make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/11\/10\/chipotle-mexican-grill\/\" target=\"_blank\" rel=\"noreferrer noopener\">Chipotle Mexican Grill, a new generation of fast-casual food that performed surprisingly well<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/05\/15\/wingstops-astonishing\/\" target=\"_blank\" rel=\"noreferrer noopener\">Wingstop&#8217;s astonishing growth is unprecedented in the restaurant industry<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/04\/26\/how-mcdonalds-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does McDonald&#8217;s, the world&#8217;s largest fast food leader, make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/22\/how-yum-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does ubiquitous Yum! Brands make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/01\/12\/how-does-dominos-make-money\/\">How does Domino&#8217;s make money? its stock reward beat down Alphabet<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/06\/11\/starbucks-predicament\/\">How does Starbucks make money? and the current predicament<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/16\/civilian-production\/\" target=\"_blank\" rel=\"noreferrer noopener\">Discover the possibility of super growth stocks in the civilian production industry<\/a>&#8221; <\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/02\/coca-cola-has-been-inferior-to-pepsi-in-and-even-return-rate-is-negative-in-past-10-years\/\" target=\"_blank\" rel=\"noreferrer noopener\">Coca-Cola has been inferior to Pepsi in and even return rate is negative in past 10 years!<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/06\/22\/pros-and-cons-of-coca-cola\/\" target=\"_blank\" rel=\"noreferrer noopener\">Pros and cons of investing in Coca-Cola<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/11\/monster-beverages-monster-level-stock-returns\/\">Monster Beverage&#8217;s monster level stock returns<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Cava is similar to Chipotle, providing healthy, fast and casual food. Plus the food comes with a variety of toppings,  making it easy to replicate across locations.<\/p>\n","protected":false},"author":1,"featured_media":31832,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1251],"tags":[1389,932],"class_list":["post-31831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-restaurant","tag-cava","tag-cmg"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=31831"}],"version-history":[{"count":16,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31831\/revisions"}],"predecessor-version":[{"id":37125,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31831\/revisions\/37125"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/31832"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=31831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=31831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=31831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}