Who They Are

One Insight: Cava serves Mediterranean-inspired made-to-order bowls from 235 company-owned locations and has a private market valuation of $1B+.

Cava is a fast casual restaurant that serves bowls - think Chipotle or sweetgreen - with Mediterranean themed ingredients. The brand has over 230 open or coming soon locations - all company owned - up from around 170 at the end of 2021 and 105 in 2020.

Cava Group - Cava’s parent company - also owns Zoës Kitchen, another Mediterranean restaurant, which it acquired in 2018 (~260 restaurants at the time of purchase). Core to Cava’s growth strategy has been converting Zoës Kitchen locations to the Cava brand.

~125 current Cava locations (>50%) are converted from Zoës

The company is privately held and valued at over $1B as of their most recent fundraising in 2021.

Who They Target

One Insight: Cava targets upper-middle income households in high-population, high-workforce urban and suburban areas.

Key metrics within a 10-minute drive of a typical Cava location include:

• 115,000: Residential population

• 88,000+: Workers (as of 2018)

• $93,000: Typical income (US Benchmark = $65K)

• 55%: Percent of adult population with a Bachelors+ degree (US Benchmark = 33%)

Cava’s location profile suggests that they target upper middle-income areas in urban-suburban markets with high worker and residential populations. They have strong location overlap with Chipotle, Chick-Fil-A, and Panera.

Let’s take Charlotte, NC as a representative target market for the dual urban—suburban, above-average income focus and highlight two specific locations.

In the location profiles above, look specifically at the differences between (1) Total Workers (2) Percentage of Households with Children and (3) Pct. Population 25-39. Location 1 is surrounded by a younger, educated, city-living residential population and ample businesses. Location 2 is targeted more toward suburban high-income families with high income.

Strategic store placement and conversion of Zoës Kitchen locations has driven strong market coverage across both the downtown worker and suburban family in Charlotte. Location 1 above is a native Cava location and Location 2 is a Zoës Kitchen conversion, showing how Cava has used the acquisition to strategically expand outward in key markets.

The Strategy & What Comes Next

One Insight: Conversion of Zoës Kitchen has rapidly accelerated Cava’s store openings; Expansion to new Midwest and West geographies and continued conversion are attainable growth levers.

Two key growth opportunities for Cava are:

• Continued conversion of Zoës Kitchen locations

• Expansion into the Midwest and West

Conversion of Zoës Kitchen locations:

We’ve identified 125 stores that have been converted from Zoës Kitchen to Cava. Conversions take ~5-6 weeks compared to 14-16 weeks for a traditional open.

The greater value of these conversions than fast turnaround is access to the underlying real estate - the time to (1) Find the right area; (2) Have a location available with the right characteristics (size, visibility, layout, etc.) and (3) Negotiate a lease - is well above and beyond the 14-16 weeks to prepare a store to open.

The team at Cava has used the acquisition and accelerated store opening opportunity to:

1. Drive growth in new markets

2. Extend the service area of current markets (think Charlotte).

Conversions have enabled rapid scaling in new states like Florida, Georgia, South Carolina, and Oklahoma (low/no previous Cava locations) while accelerating growth in Texas, the DMV, North Carolina, and greater Philadelphia.

Cava has expressed that conversion of Zoës locations enables suburban growth, and this shows in the differing store profile between a native Cava location and a converted Zoës. Locations that were converted have:

All of these directional differences are representative of a more suburban market profile.

Consider two brief examples - Raleigh, NC and Philadelphia, PA. Native Cava locations (blue dots) tend to be closer to the urban city core, while Zoës conversions (red x marks) tend to be suburban extensions.

Of the ~260 stores at the time of acquisition we estimate that:

• ~125 have been converted to Cava brand

• 42 remain active with Zoës branding

• ~90 stores have been closed without conversion or are in the process of being converted

The 42 locations that remain to be converted or closed will generally create further density in existing markets. Texas has the most remaining Zoës locations (9), followed by Georgia, North Carolina, and Florida (5). All of these are existing states where Cava operates.

Expansion into the Midwest and West

This leaves expansion to new markets as an organic growth play or another concentrated real estate driven acquisition (ideally for a West coast restaurant chain). The company has stated that it wants to reach 500 locations by 2025 and this will likely require (fast) new market growth.

Based on current markets and targeting, it stands to reason that there’s opportunity for growth in and around large markets like:

• Chicago

• San Francisco

• Portland

• Denver

• Seattle

Other urban areas with smaller-but-still-big enough market opportunities would be areas like Minneapolis, Indianapolis, and Salt Lake City, among others.

If the company has ambitions to grow in these new areas, we may see them either

1. Raise additional capital to fund an acquisition;

2. Begin looking for acquisition targets as the Zoës conversion opportunity winds down; and/or

3. Start sourcing organic locations over the coming years.

Given that the Zoës acquisition was less about developing a portfolio of brands and more about access to the properties, an acquisition doesn’t even necessarily have to be in the Mediterranean category. It could be any restaurant brand that serves a similar demographic, has a similar size, and is located in the target growth regions.

Cava’s development team is fast-moving and strategic. It’s a bold move to a 9-figure acquisition price for - essentially - the value of the underlying properties and leases. When a company purchases and later winds down a brand it’s usually due to a brand failure. Here, it’s due to the strategic value of Zoës being a location acquisition play to grow and develop the Cava brand, not a move to grow Zoës itself.

Demonstrated growth through the pandemic, along with adapting to its associated challenges (lower urban foot traffic, accelerated shift to digital ordering, rise of delivery), shows the long-term staying power of the brand. It’s acting faster, nimbler, and more creatively than larger and slower competitors, which should continue to enable growth moving forward.