CAVA Group, Inc. (NYSE:CAVA) Q3 2023 Earnings Call Transcript

Tricia Tolivar: Hey, Brian, thanks for that. And so we don’t view this as a catch-up. It is really an investment in our team members and, going back to what I said earlier, really demonstrates our commitment to them and how we viewed how we run CAVA historically and as we go into the future. And so it’s wages, it’s other benefits and other things. So it’s a minimum 100 to 120. There could be other things we do in 2024 as well. And as it relates to California, we’re not making any changes in price necessarily yet. The wages that we’re reflecting in California will have about a 30 basis point impact overall on restaurant-level margins when they do increase to $20 in April, and that piece should be factored in as you think about ‘24 as well.

Brian Harbour: Okay. And just on new unit openings, that’s obviously come in quite strong this year. So maybe that just alludes to some of the pipeline building that Brett mentioned. But what’s kind of enabling you to run ahead of that target where I think some peers have still seen challenges?

Tricia Tolivar: Yes. Our real estate and design construction teams have done a good job in anticipating the challenges that might lie ahead and really built-in buffers into our time lines as well as into our pipeline. So we raised our buffer from 20% to 30% earlier in the year, creating a robust pipeline that we could leverage, and we’ve been successful in doing so. And so we see the opportunity to open more restaurants this year than we had originally planned.

Brian Harbour: Thanks.

Operator: Thank you. The next question comes from Chris O’Cull from Stifel. Please go ahead.

Christopher O’Cull: Thanks. Good afternoon and congrats on a great quarter. The consumer’s willingness to trade up to more premium items has been a factor you guys have alluded to for a few quarters now. Tricia, can you dig into, on that point, just a little bit more? And help us understand the contribution to the comp you think that, that has had maybe this quarter and whether you see that continuing to benefit you over the next several quarters.

Tricia Tolivar: Yes. So I appreciate the follow-up question, Chris. So as we look at our incidents in the premium attachments, drinks and ships are items that we’ve seen a significant increase year-over-year. So chips, in particular, are up a couple of points. As you look at the third quarter last year and third quarter this year. And then honey harissa chicken, as I mentioned, is also up a few points as well. As it relates to comps, it has a modest impact on overall same-restaurant sales. Really, the strength in our same-restaurant sales goes back to the traffic that we experienced, so a nearly 8% growth in traffic. We saw that across all vintages, across all geographies, in suburban and urban. And really just demonstrates how our food and culinary and hospitality is resonating across the country as we create the next big cultural cuisine category.

Christopher O’Cull: Okay. That’s helpful. And then, Brett, the comp growth has been running ahead of expectations, which I’m sure has made it difficult for the stores to schedule the right amount of hours, which has led to this margin leverage that you’ve seen in the last couple of quarters. I’m just trying to understand, how do you think about addressing that potential? I guess it could be considered an issue in terms of labor scheduling. But how do you get ahead of that and make sure that you have the right number of hours for the right daypart in the right time?

Brett Schulman: Yes. The team has done a lot of work on this, Chris. And what they found is that they have the right complement of hours. It’s just allocating those hours a bit more effectively and efficiently to align with some of the traffic patterns. So we’ve got a number of different labor deployment tests going on in various markets for the various different daypart mixes across the fleet and revenue bands to ensure that we’re setting our team up for the best success and that we can then lean into driving potential additional throughput opportunities down the road. But we want to be focused on what is going to be the right staffing complement at the right times of day and the right prep load balancing at the right time of day to make sure that our team members are front-footed before we open up additional firehouses of revenue on them.