Can Cava Become the Chipotle of Mediterranean Food? | WSJ The Economics Of

Mediterranean fast-casual food (0s)

• Fast casual chain Cava has grown into a nearly $4 billion business.
• Cava acquired a competitor four times larger and converted its locations.
• The goal is to be the largest Mediterranean chain in the US, similar to Chipotle's position a decade ago.
• Success relies on the lasting popularity of the Mediterranean diet.
• Cava uses customer data to strategize new location openings, moving beyond acquisition-driven growth.

Growing through conversions (58s)

• Cava favors suburban expansion where Mediterranean options may be limited.
• A robust real estate model incorporating demographics helps identify optimal locations.
• In 2018, Cava acquired Zoe's Kitchen, which was financially struggling.
• Zoe's lack of focus and menu clarity became a warning for Cava's brand focus on modern Mediterranean flavors.
• Most new Cava restaurants between 2019 and 2023 were converted Zoe's Kitchen locations, allowing for cost-effective expansion.
• Converting existing Zoe's locations helped Cava grow quickly in new regions.
• After converting the last Zoe's Kitchen in October 2023, Cava will now have to build new restaurants from scratch.

Business model (3m5s)

• Cava operates in 24 states plus Washington, D.C., and went public in June 2023.
• Seeks to benefit from the Mediterranean diet's popularity to attract a wide customer base.
• Mediterranean cuisine makes up only 1.4% of US restaurants.
• Cava reported a net income of $6.8 million with a 25.1% profit margin at the restaurant level.
• As the largest Mediterranean restaurant chain in the US, Cava is compared to Chipotle.
• Chipotle was a pioneer in fast casual dining with less competition, whereas Cava faces more competitors.
• Success may depend on customers' sustained interest in Mediterranean food, which is still seen as new in many areas.