CAVA Group Aktie

Good morning, everybody. Thank you very much for joining. We are thrilled to have again, CAVA at the Strategic Decision Conference. My name is Danilo Gargiulo. I'm the senior analyst covering restaurants and food distribution here at Bernstein. And I have the pleasure of having Brett and Tricia here with me on stage, respectively, Co-Founder, CEO of CAVA and CFO. CAVA operates 439 fast casual restaurants in 28 states and Washington, D.C.

The company is authentic Mediterranean cuisine in United Taste & Health with a menu that features chef curated and customizable bows and pizzas. They centrally produce deep spreads, certain dressing bases for use in restaurants, while also selling them into grocery stores.

And before we go deeper into the core of the conference, maybe, Brett, for those who are less familiar with your story, can you give us a quick overview of the business today and what you see the most important messages from your latest earnings call and what you want to leave investors with at the end of this conference?

Yes. Well, thanks, Dan, for having us again. This brand was founded -- actually out of a single full-service restaurant back in 2006 by my co-founders, Ted and Dimitri, all sons of Greek immigrants. I was fortunate enough to get connected with them in 2009 when they were opening their second full-service restaurant and had begun selling the dips and spreads they served in those full-service restaurants in a couple of local Whole Foods. That's how I came to meet them, help them with that business.

We hit it off. They said, Brett, let's be our fourth partner. And I broached the idea of taking what we were doing in those local Whole Foods and the full service and saying, this is amazing unique cuisine we're tasting out tonight. How do we bring this to the world in a fast health-based format. So we spent about a year figuring out how it would translate, scraped together some friends and family money and opened our first in January of 2011. So it's our 15th anniversary year. And here we are today in 29 states in the District of Columbia as of last month and over 460 locations.

And I think what we'd love investors to take away is -- and I think the environment is kind of showing this to be even more true is that it's not so much about a category or a bowl or a sandwich. It's about how is your cuisine differentiated? And what are you doing different that people are walking by the three or four options next to you? And for us, it's our Mediterranean cuisine. We truly believe we are building the next large-scale cultural cuisine category that's fueled by some pretty significant secular trends, the growing diversity of the country, the increasing interest in modern health and wellness. And that's at the nexus of where our food sits, that unique Mediterranean cuisine and then how we deliver it at a very reasonable value with the hospitality and the experience that we deliver it with in a very convenient multichannel format.

And Tricia, similar for you. You talk to investors very frequently. CAVA is having extraordinary results. What do you think investors are still misunderstanding or maybe under-appreciating about your business today?

I think it's really interesting is how we operate and the model that we have, how robust it is and how it can generate significant returns. And one of the things that we're doing, though, is also making sure that we're building this brand to be a durable long-term brand. We're not driving this for the next quarter or the next year. We're driving it for 10 years and beyond.

And what I mean by that is as we deliver very robust restaurant level margins of 25%, we're often asked, well, how much will those margins expand? And they can expand, but we want to make sure that we're making investments in the business that's going to keep this traffic momentum going and doing that in a number of different ways.

So being very thoughtful on menu price increases and not passing along cost to the consumer. So we absorb that in those robust margins that we have. And we've underpriced CPI significantly over the past few years and certainly underpriced others in the restaurant space in a very meaningful way, and that's resonating with consumers and speaking with very strong positive traffic trends themselves.

Other investments that we also make are in team member wages and making sure that we've got the right resources and team members in the restaurants to deliver on a great guest experience. So the combination of investments in our guests and investment in our team members deliver those long-term returns for the business itself and create that durable brand for the long term as well.

And Brett, what have you learned about the volatility of demand that CAVA witnessed in 2025? And how structural is for CAVA and maybe other growth concepts to be experiencing moderating demand followed by growth first moment?

I mean I remember you and I had this conversation a few weeks back when you were saying, look, it's structural that you have some moment of moderation of demand followed by growth first. So I want to understand how much has your thesis changed? And what have you learned from 2025?

Yes. When you look back at our growth, we have had some pretty dynamic comp in recent years. And when we went public, we were around a $2.3 million AUV. We're now just north of $3 million. And so that can create some volatility on a 1-year basis. But as we noted last year, on a 2-year basis, our comps are actually accelerating every quarter, even though the 1 year was decelerating.

And I've seen this throughout our journey, probably four or five times where I joke, we have three children, two daughters in college and a son who's going into eight grade, he is 14, and he is growing like a weed. He grew 6 inches last year. And I said, CAVA is a little bit like that where we go through these growth spurts and then we digest that growth and then grow again. And I think that can sometimes have the 1 year a little misleading, and that's why we pointed last year to the underlying structural demand of record-setting new restaurant openings, which has continued again this year as well as that 2-year accelerating every quarter throughout the year, and that momentum carried into this year. And obviously, on a 1-year basis, turn back up.

And so you had a lot of confidence last year as well that the demand was going to go back into mid-single digit, you clearly exceeded that so far. But at what point would you say that the deceleration becomes more worrisome to you and to an investor? So at what point of the deceleration journey you start to say, hang on a second, this is not just a natural slowdown and it's not like just a stalling phase following up growth spurt. It's actually a little bit more structural.

Yes. And I know it's the nature of the public markets, everybody is focused on the next quarter. But as Tricia said, we're not in this for the next quarter. We're in this for the next decade and beyond. And so we're not going to get too reactionary to a single quarter undulation or a couple of quarters of maybe more moderate comps and really focus on building sustainable long-term traffic growth.

It would have been very easy for us to discount our way to the quarter last year. And actually, we had raised expectations before the tariff policy implementation, and we actually delivered on the EBITDA we had set out at the beginning of the year. So it's trying to step back and stay focused on the long term and not get too overly influenced by a quarter-to-quarter duration that might influence you into a short-term financial decision that could have really undermining long-term brand consequences.

Tricia, you were mentioning earlier, you delivered 9.7% same-store sales in the first quarter, almost 7% traffic driven, while many other peers are seeing some softening trends. So what do you think is driving this outperformance? And how much of it feels structural versus more timing related?

Yes. Certainly, our traffic at 6.8% was very robust in the quarter, and it's a combination of a number of different factors. So we talked about being very thoughtful on price. And really, price and value is not just price. We see value as a combination of factors, the quality of the cuisine, the relevance of Mediterranean, the experience that you have and the convenience that you can have at CAVA. And so that is one piece of the whole puzzle that was contributing to our traffic growth.

But it's also a function of how we deliver on our guest experience as well as the impacts of our loyalty programs, the amazing culinary offerings that we have. So our white sweet potatoes, our fan favorite that we brought back at the beginning of the year this year, and that certainly resonates with our guests and is an example of the culinary offerings that we can provide and continue to provide throughout the year. So I often say that our traffic trends are really much like a CAVA Bowl. It's a lot of individual ingredients that work very well together to deliver an amazing outcome.

And you described the strength -- in the earnings call, you described the strength as being broad-based, right? You said it's coming across all different regions, across all different vintages, across all income cohorts. At the same time, your guidance is assuming some level of worsening macroeconomic conditions. So which areas of the consumer demographic are you watching most closely for sign of softening?

Yes, we're watching all areas. And certainly, as we communicated our guidance, we had very strong results and our same-restaurant sales trends were consistent with those that we delivered in the quarter itself in Q1. But what we reflected in our guidance is the uncertain macroeconomic environment and consumer environment that's out there. And so we wanted to make sure that we're being very thoughtful about that. It wasn't a reflection of the momentum that we were seeing or any change in that momentum. It's purely a reflection of what's going on around us and might impact us as we move forward.

Okay. So more prudent as opposed to reflection of yours?

Absolutely.

Regarding low-income consumer, the cohort is continuing to outperform for you, while it's certainly showing some decaying trends in some other parts of the industry. So what do you think CAVA is doing recently that is resonating so well with low-income consumers despite the average price for CAVA being certainly a little bit higher compared to a QSR peer?

Yes. Well, I think certainly, the price of the pump is impacting low-income consumers. But they're still outspending. I mean I've traveled the last few weeks. airports are packed. People are out there, but they want to make sure they're getting great bang for the buck. And especially, we see this in some of the smaller markets where we operate in, where they don't have an option like CAVA. And the option is increasingly a better relative value proposition.

Tricia, we took less than half the price of our competitors in recent years. So traditional QSR has gotten relatively more expensive compared to CAVA. I mean our base bowl in some markets is $10.65 for a chicken or falafel roast vegetables with all the top things you want. That's a very healthy bowl for $10.65. So it is very competitive and a good relative value for those folks who are looking to eat better, looking for higher quality food and willing to spend a little bit more, but at a reasonable price.

And also, I think there was a bit of a discount to [ G ] coming out of last year where people want value as a choice, not value as I have to go buy this as a discount. And so again, there's discretionary spending out there, but people are just being very discerning and judicious about where they're spending it. And so it's incumbent upon us to deliver them a differentiated unique value proposition at a reasonable price. And I think that's clearly resonating.

And given that it's resonating more with low-income consumers, how are you shifting, if you are, your real estate strategy? In other words, are you contemplating different formats, different regions, different parts of the United States where before maybe with the price point that you had relative to others was not accessible to you and now is your stand for stores shifting?

I think what we're seeing is exactly what we've seen over the 15-year history of our brand and what we noted in the S-1 in our roadshow 3 years ago when we went public, you're just seeing it on a larger and larger and larger scale. And what that does is just continue to extend the runway for the white space opportunity the country, and it allows us to cast a very wide net geographically to source our real estate. We have a very healthy real estate pipeline.

And even when you look at our top decile of restaurants, there's not one specific way we win or succeed with guests. There's four different types of trade areas, and they're all across different regions. So you have everything from a traditional grocery-anchored surface lot center in the suburbs with an end cap. You have an urban site with some residential component. You have a college adjacent site or you have an exurban freestanding location with a pickup by car drive-thru lane. So that allows us again to go into all of these different markets.

I mean we're operating today in Back Bay in Boston, Bryant Park in Manhattan, but then we're in places like Topeka, Kansas. I mentioned Mobile, Alabama, Jacksonville, North Carolina, if you know where that is. So that gets us so excited the fact that we can welcome so many different people to our table and appeal to such a wide audience, whether it's from a balanced gender perspective, a generational perspective or an income perspective.

You mentioned one of the key components of your growth has been pricing below inflation and being able to do so at a significantly higher scale. As the value competition is intensifying, maybe more than discounting competition is intensifying across restaurants, how are you protecting the traffic without training the consumers to be expecting those discounts for you?

We've just remained steadfast on our focus on continuing to deliver that value every day. So we did a few tweaks to how we communicate that late last year and how do we present digitally to the consumer. So prior to the changes that we made, we were presenting our curated bowls, which often include premium items, and we merely shifted and presented the base bowl first so that you could see that $10.65 price that Brett talked about so that we were speaking to the value that we deliver and also then creating the optionality if you wanted to have a more premium experience, you could do that.

We also leaned into speaking to unlimited toppings talked about this, amazing bowl that you get three dips and spreads, grains and grains and then all the toppings that you want really helps contribute to that. So it was leaning into those messaging, doing a little bit of placement differentiation. And there was a little bit of a concern, well, if we change placement, is that going to change premium attachment, and we didn't see that. The premium attachment stayed strong and continues to increase. And so we believe we're addressing all types of consumers with choices that deliver great value for them and for us.

And the new restaurants are continuing to be very strong, 100% productivity. System AUVs are reaching about $3 million. So what do you think is driving the strong net new unit performance?

Yes. Back to what Brett was talking about, we haven't yet found a market that doesn't love CAVA. And so we open these restaurants, and they're delivering over 100% productivity. We have the entire chain delivering AUVs at $3 million. And these restaurants continue to outperform both on the top line and the bottom line. And what we're finding is it doesn't matter what part of the country, whether it's urban or suburban, what type of format, as Brett mentioned earlier, but really seeing tremendous growth and opportunity. The real estate team does a great job in evaluating sites and bringing those to the market and then our operators do an outstanding job in creating hospitality for the guests.

One of the things we have realized is that we want to make continued investments in those opening experiences and lean into our preopening costs to ensure that we're delivering an amazing experience on top of the amazing culinary offerings that we have.

So things like making sure our general managers are experiencing very high volumes of openings and having them come to markets like New York and experiencing peak demand rushes of guests in the restaurant and hiring those general managers earlier in the so they can experience an opening ahead of their own, so they understand what that's going to look and feel like so they can deliver on that amazing guest experience.

But the restaurants as we open them are continuing to perform very well and gives us an even greater confidence in that white space opportunity that we have ahead of us.

Brett, as investors are looking for the next leg of growth from a development standpoint, what prevents you from increasing the net unit growth from here on? In other words, if you were to think about how you can sustain the development going forward, what are you most -- I wouldn't say concerned, but what are you most focused on? Is it real estate availability, leadership bench, operational consistency? So kind of what is going to be unlocking even faster unit growth or even faster TAM?

Leadership bench. Our growth is really governed by the depth and breadth of our pipeline of role-ready leaders to open those with operational integrity, which is why we've invested in our flavor -- your future platform, if you've heard us talk about this on some recent earnings calls. And part of that flavor -- your future platform is the introduction of our new Assistant General Manager role. So this was an upgrade of our general manager and training role. So higher compensation, higher more hours.

It serves a dual purpose. One, it gives us better management, seasoned management complement in our restaurants across all 14 dayparts, seven lunch, seven dinners, so nights and weekends. We knew we had an opportunity to level up our service. And when you think about the AUV growth from $2.3 million to $3 million, those restaurants are a lot busier. So having stronger strength of leadership across all shifts.

But then that gives us a deeper, broader pipeline of role-ready leaders to open those new we have also a high potential training program coming out this fall. So it's really a platform architected to cultivate and develop high potential team members through this program so that they can go open those restaurants with operational integrity. And that's really going to be the biggest kind of throttle to our growth in the coming years.

And historically, you were promoting mostly from within the system. Do you think that you can keep doing that with the same kind of ratio between internal hires versus external search for GM specifically? Or given your scale and your ambition to be scaling faster, you need to be looking outside as well?

I think as we develop this program, we will be hiring more external in the short term. But I think over the long term, we can maintain high internal promotion development rates because when you just think about it, as we open new restaurants, that's creating an even broader pool of talent for us to pull from, right? We're 15,000 team members strong. We were somewhere around [ 13,500 ] last year. So we're growing that pool of talent every year that we can identify high potential team members and get them in the program.

How is the talent shifting or the talent model shifting with your new COO. So can you talk about a little bit more how you're empowering your local stores to have a little bit more freedom? And how is that going to be impacting same-store sales eventually?

Yes. We talk about -- we use the metaphor like the federal government, the local government. And we don't want too much federal overreach at the local level because you can really start to make your leaders too robotic and too mechanical. And then it becomes less emotional and being able to deliver that Mediterranean hospitality and that true owner-operator mentality.

So we want our leaders who are running multimillion-dollar businesses to truly feel like owner operators and hire and train and really deliver that great Mediterranean hospitality and guest experience. So we need the metrics, we need the guardrails and to hold us accountable, but how do we make sure we give them the agency to have that ownership mentality.

And I think Doug's got a proven track record. He's got decades in the industry of really developing that kind of owner-operator mindset and leadership mentality. And so Doug's priorities are really that people development, the flavor of your Future platform and helping us then deliver next level hospitality. And then Tricia talked about new restaurant opening excellence. Those are priorities.

Excellent. Tricia, you had about 400 -- CAVA head, so that is about $400 million in the balance sheet. So I was wondering, can you lean into your balance sheet to potentially accelerate the development through acquisitions? I mean you've done it before with Zoe's.

I know, Brett, you mentioned that this is something that gave you the great hair at the time for the complexity. But given your scale today, what you learned, you've done it before. And we've seen other peers use that lever to potentially accelerate the unit growth. Do you see pockets of opportunities where you can be entering in new states, new white space in an accelerated way by leaning into M&A?

Yes. So we certainly leveraged Zoe's to develop pockets that we were evaluating for real estate that we weren't finding exactly what we were looking for. So think about Atlanta and Dallas and Houston and had great locations there that we were able to take and convert and really create the scale for our brand that was necessary for us to continue this momentous growth that we have.

Now when we think about acquisitions, we do look at potential opportunities for pockets of the country where we are no longer -- or we aren't yet in for the opportunity to consider. But what we found having done Zoe's, operating multiple brands, the gray hair that Brett experienced, and I've covered up is certainly something that we learn a lot about. And we believe that focusing on a single brand is critical for us.

And so we weigh the benefits and the risks very carefully and won't say "never say, never", but certainly don't see another Zoe's like as we move forward.

The other piece, too, some of the opportunities that we have evaluated have ultimately translated into our ability to procure those sites from landlords directly. And so to gain the real estate opportunity without having to take on the burden or the challenge of M&A activity overall.

More like a build-to-suit type of activity or?

Well, no, you can take over the leases from the landlords, from the prior entity and convert those. So it's not necessarily a build-to-suit second-generation restaurant and then convert it into a CAVA.

Shifting gears on to the margin. Margin was very resilient at about 25.1% despite the wage investment that you were discussing before and a higher digital mix and delivery mix as well.

So how should investors think about the long-term margin structure for CAVA as you scale digitally with more labor investment potentially many innovation and potentially rewarding also consumers with pricing below inflation?

Yes. So our model is very robust. And so as AUVs grow, there is natural expansion in restaurant level margin. And when you look at our restaurants and stratify them into quartiles based on AUVs, the top quartile is above $4 million in AUV and above 30% in restaurant level margin. So there is expansion opportunity there. But back to what you were saying, we want to make sure that we're making the right investments to build CAVA's long-term durable brand with traffic growth that's sustainable over time. So we'll continue to take the opportunity to invest in the guest in terms of modest pricing -- menu price increases, invest in the team members and deliver an amazing guest experience overall that will drive traffic.

So not -- we're not going to be in a place where we're going to set a margin target because we think that, that could to unintended consequences. So as something is out there, you might make adjustments in the short term to deliver on those expectations that have a long-term negative impact to the brand. So last year, when there was pressure out there and many others were discounting and I'm being a bit reactionary, we wanted to stay steadfast to our long-term commitment to the business and to the consumer and really focused on what mattered over the long term, and that certainly will play out in margin and traffic in the future.

Can we talk to the margin flow-through of the incremental marginal dollars? So what -- where does it stand today? Where do you think it's going to be in the next 5 years as you're scaling? And more importantly, what is the breakeven point after which you say, well, we covered enough the fixed costs, so now we start to see the flow-through materialize?

Yes. Being very mindful of putting targets out there, I'd say margin flow-through generally is about 40% on incremental activity and sales. And then over time, we'll continue to update and give ranges and input around that. But don't want to get into a corner to where we're committing to something that might prohibit us from doing what we know is right for the business over the long term and how we want to get there.

Brett, on to the digital mix. Right now, it's approaching about 40% of for CAVA, this is about 4% higher than last year. How do you see the right steady-state channel mix? And what does the higher digital penetration mean for your throughput, guest frequency and profitability?

Yes. We like to say we want to create a multichannel experience for our guests and then give them the remote control to pick the channel of their choice. So we don't set a specific digital target. We want to avail ourselves across all channels because what we do know is our guests typically are cross-channel trafficking us. And the more guests that are cross-channel trafficking us, the more frequency they drive.

So we just want to meet them where they are and where they want to be, whether that's sharing a meal in our dining room or if they're running Aaron's and they want to order digitally and pick up at one of our 75 drive-thru pickup windows or off the shelf in any restaurant or if they're really short on time, they want us to have it delivered to them.

So that's how we view it, and we just want to make sure that each of those channels are delivering great experiences and then let our guests decide where they want to opt into. But we do know that it's not an either/or for us. It's an and great digital and great physical channels. And when we have both of those, we're able to drive greater frequency and CLV on our guest.

So let's stay on the consumer side of technological adoption before we go into opportunities for your stores operationally. You've taken a counter consensus view here on emphasizing the human connection, the service level in-store where others have been pushing toward more kiosk, a little bit more digital channels, a little bit less interaction within the stores.

Why do you think that is the right strategy? And also, if you can touch on the project Soul and how you're shifting the real estate as well to allow for more human interaction in the store as well?

We've been talking about this for a number of years now, even during the pandemic, I was quoted that the demise of the dining room is greatly exaggerated. I remember even during the pandemic, everybody -- no one was going to go to health clubs anymore, gyms. Everybody is going to work out on connected fitness at.

Listen, we're all still humans. Our robots and AI over alerts haven't taken over yet. Food is a very social visceral experience. Yes, there is transactional convenience-driven food. There will be a market for that. But that's not our reason for being, and that's not why guests come to us.

And I think as you get into an increasingly technologically driven world, especially with the anxiety around the advent of AI, you're seeing this in all different data points. People are craving human connection. And I see it -- I said I have three children. I see it with them going and buying film cameras now and wanting to have actual analog film cameras or vinyl record sales crossing $1 billion for the first time in over a decade.

You see people looking to get offline now. And -- but you have to give them a reason and you have to give them an aesthetic and a space that's evocative of that. And I see it with friends, with family. People want to go out and eat still. Even if it's a quick meal because sometimes that's what they want to do. And if you're not a place that avails yourself to that, you're going to miss out on that. And we believe below us, traditional QSR is going to very austere spaces, stripping out their dining rooms, putting in kiosks. And we think that creates a real gap between us and, say, legacy casual dining, which the value proposition is very challenging to consumers today in the most part. I mean that category has been shrinking, and we think we can deliver, again, not an either/or but an and, a great digital experience if you're in a hurry or you're running ons and you want to engage with us that way. But then if you want to come in and share a meal, deliver that human connection and hospitality on our front lines.

I waited tables, I [indiscernible] restaurants to help pay my way through college. And that used to be table stakes, great hospitality. I actually think it's a differentiation in our industry now. I go to many places and it's in different service. And we want to invest in our team, support our team members, give them a career path at CAVA and have them really empowered to deliver incredible human connection and hospitality because we think it is a powerful differentiator in our industry.

And frankly, it's core to our brand essence, our Mediterranean hospitality. I was fortunate to travel in Greece with my co-founders and villages where their families grew up and like just the commensality, the communal aspect that you get there. It's like that's kind of what we're trying to deliver in our limited service format, which can often get stereotyped as being very frictionless or transactional. And I think if you just remove the friction out of everything, you remove the joy. And I think people still are craving that joy, and that's what we're trying to deliver.

On the loyalty, you recently revamped your loyalty program. You said that the loyalty program is driving higher frequency. I was wondering if you can help us quantify the sales uplift or what incrementally you're seeing specifically for the introduction of the tiers?

Yes. So as we've introduced tiers, we are seeing improvements in frequency, and it's modest. It's meeting our expectations, and we're pleased with what it's doing and really creating deeper connections with our guests so that we can communicate better with them over time. We want to make sure, Danilo, you're a vegetarian, we're not sending you Spicy Lam meatball e-mails to encourage you to try those. And so very pleased with the data foundation that we're building and how we can continue to expand. But when you look at loyalty and what it's doing from driving same-restaurant sales perspective, it is certainly a contributor, and I mentioned that earlier, but it's not a very large component of the overall sales lift.

How early are you in your journey to monetize this ecosystem that you're talking about? I mean you're saying we are having some initial -- it's modest contribution so far. Is the modest contribution because that's how much you can achieve? Or are your early stages into potentially monetizing all the insights from the data that you have been gathering from the platform? And maybe you can -- I don't know, Brett, you can touch on CAVA Connect.

I think first and foremost, we view it as a way to build one -to-one lines of communication with our guests. With the deterioration of the efficacy of third-party data, with the Apple privacy rules that went into effect a couple of years ago, with the fragmentation of where people are discovering and engaging with brands, you think about the shift from SEO to AEO and GEO, how do we grow our first-party audience and have those one-to-one lines of direct communication with our guests.

As we become bigger and more ubiquitous that, that ubiquity doesn't breed content and that we make you feel like we opened, Danilo, to cook you, lunch or dinner. And we communicate with you that you feel seen and heard for who you are as a guest and your behaviors and really driving and building that deeper emotional connection and then using that communication channel to understand your behaviors and surface you more relevant content, more personalized content that can create better value for you as a guest and in turn, create better value for the business.

So Tricia talked about like if you're a vegetarian leader, we're not going to be communicating to you meat proteins to you or making it effective even if it's raining out, we know you have a high propensity then to order delivery or order digital order pickup and incentivize you that way. And that goes to what we're building with our data foundation.

We talked about this on the earnings call, our CAVA Core data foundation and then our CAVA Current data platform, which is basically like a CDP, a Customer Data Platform that's ingesting all of our real-time order flow. But CAVA Core as a foundation, it is a single source of truth now of all of our data feeds, both internal data feeds, whether it's POS, FSQA data, inventory data or external data, even like Accuweather weather data. And then we can now layer in the coming months and years, the LLMs on top of that and the generative AI tools to create the intelligence layer that allows us very sophisticated personalization. It allows us certainly great operational efficiencies in the coming quarters and the coming years. So very excited about what we're able to do to harness the power of that and then ultimately free up our team members to deliver that heart, health and humanity and that human connection.

And so now broadening the scope of technological use for you, including maybe your operations in the stores, including the headquarter support. What is the biggest use of AI that you see for CAVA over the next 3 to 5 years?

Yes. I think it's three -- kind of three buckets, how we think about it. One, on the corporate, the business intelligence side, we're already seeing productivity gains from this, whether it's our engineering teams using Claude code. It's really accelerating our feature enhancements on our digital platform, the productivity of our sprints, accelerating all that or using things like Databricks Genie that uses Claude code to layer over our data environment to get operational insights, analytical insights.

So our teams that typically would have to synthesize the data on spreadsheets, they're able to now ask any question of the data and synthesize that within seconds and chart it. I mean it's so powerful to see how it equips our teams and one of our values is constant curiosity. So having that curiosity and our data used to be structured to answer very specific questions. Now our data is structured to answer any question the team has of it.

So we just recently launched Salmon. And hey, 2/3 of our fleet have digital menu boards, 1/3 about 1/3 now doesn't. Well, do we see a different incidence rate between non-digital menu board restaurants versus digital menu board restaurants. You asked the question, it charts it, it breaks it all down by region, everything within seconds. I mean this used to take hours or days for the team. So you see the productivity immediately on the corporate side and the business intelligence side.

I think what the foundation allows us to do in the other two buckets in the coming quarters and years is what I talked about with the personalization and the marketing to really create one-to-one relationships, enhance the value of the experience for the guests and in turn, enhance the value of the experience for the business.

And then big bucket, operational efficiency. So you start to think about the CAVA Current platform and ingesting all the real-time order flow, layered over top of that foundation of all the historical data and the other data sets, you can start to really get into predictive cook, predictive prep, inventory ordering, labor scheduling.

Now you've seen some folks get tripped up on that recently. It is, again, a crawl, walk, run. I think that is in the coming years, and we want to be very thoughtful about how we do that. But there is clear that potential. I've written about this in our shareholder letter the last couple of years. I think we're on the precipice. We're now in the early stages of a decade plus of data transformation.

Very analogous to, I think, the impact digital transformation had on our business the 10 to 15 years of our journey, where when we first opened our first restaurant, humble little online order website, it was 1% of sales. Fast forward today, it's almost 40%, as you noted, probably $600 million business. And that was a decade-long journey of white label app, bringing the app in-house, building our own app, rebuilding the app in a microservices architecture for scalability, second make lines in every restaurant, the drive-thru pickup windows, digital menu boards now. So I see data taking a similar decade-long journey of impacting our business from a productivity standpoint, right?

Not replacing all of our people, not replacing our team members, but really amplifying and empowering them to be incredibly more productive for the business that ultimately creates great value for our guests and great value for our shareholders.

Great. You're still a fraction of the size of your full potential. And we see -- you have other peers who have been scaled or already scaled, and they're unlocking a lot of the opportunities that for you might be a little bit further down the line.

So I'm thinking about leaning in more into group occasions, leaning in a little bit more on to different menu items, more dayparts and so on and so forth.

So I was wondering if you can map out the journey for CAVA between now and the next 10 years. When you think you're going to be unlocking national advertising, when you think you're going to be unlocking group occasions a little bit more. You're starting with catering today. When are you going to see delivery coming in as well? So help us understand what the journey for CAVA looks like between now and 2036?

Yes. I'll speak to a couple of those points and hand it off to Tricia on the advertising part. Catering is certainly a significant opportunity for us. But again, we want to be patient. We know -- we kind of felt this in our early years. We've had catering requested from our very earliest days. But with our AUVs, we know that there's not a lot of excess capacity -- production capacity in our restaurants for catering. Because catering is a very different production muscle.

Our digital and our in-restaurant production lines are very similar, very similar rhythm production. You think about these as little food manufacturing. Catering is very high volume, very concentrated, very short period of time. You need extra hot holding, cold holding prep space, the lead times on the ordering, right? So we have embarked on a journey. It's been 2 years now of tests. We now expanded to a market test in Houston. We'll do a second market later this year, really understanding the critical question we're trying to answer is load balancing or capacity management. So we know the demand is out there. We've catered most major League Baseball teams, NBA, NFL, let alone office and schools. But how do you take all that demand and load balance it successfully against your production capacity in the market?

So we have roughly 20-plus hub type locations now. So we call them hybrid kitchens and digital kitchens. We have one here at 40th in Madison. So the subterranean level is a whole catering kitchen there, regular restaurant on the street level. And so these are purpose-built where we can do centralized production. And how do you then potentially complement that with the regular CAVA restaurants around them? Or do those restaurants not have the capacity and that gets offloaded to a hub.

So that's the question we're really trying to answer before we push forward full board across the country with catering because we saw this when we bought Zoe's. Zoe's was a low AUV business, but they wanted to optimize the four walls. They went heavy into catering. 17% of sales was from catering, but you walk into a Zoe's at noon and all the tables will be covered with catering bags. Team would be fully focused on that, and it deteriorated the in-restaurant and the digital experiences and came at the expense of that.

So again, we want to be really thoughtful to do this for the long term. We know it's the opportunity out there for but we want to make sure that when we do launch it, that we set our operators up for success to ultimately deliver -- be able to deliver on our guest commitments.

And then I'd say the other real opportunity is just growing new restaurants across the country. We have a massive white space opportunity, continuing to mature all of our different channels, catering being the most kind of nascent channel. And then from a marketing standpoint, we're 1.2% of revenue today. Typical peers are around 3%. So I'll let kind of Tricia tell you about how we think about when we would add up.

And our brand awareness has increased recently based on our brand health survey from 62% to 66% with just that 1.2% of revenue investment. So creating a lot of momentum around the brand, driving strong traffic trends with limited investment today. So we're just going to be very mindful of our investments, and we evaluate the returns we're getting from them from a marketing standpoint. But given that we still have a ton of white space, I think there's a bit of time before we would lean more heavily into marketing in a scalable way to ensure that we're not creating demand that we don't have enough restaurants to support it in general. So lots of upside and runway and opportunity, but want to be very thoughtful as we do with any of our investments that we're getting the right return and delivering on the business.

Can you touch on the balancing between greenfield white space opportunity versus densification and potentially also the knock-on impact of your comps as you were to intensify your densification strategy?

Yes. So each year, we look at our pipeline from a real estate standpoint, and we like to have it distributed across four different buckets. Our established markets, which are the most established that we have, we open about 10% of our restaurants annually in those locations.

On the other end of the spectrum, greenfield markets where there are no CAVA, about 30% of our openings on an annual basis come from those markets themselves. And then the rest, about 60% is our growth in emerging markets, think of a Phoenix or something like that, where we've got a number of restaurants, but still a lot more runway.

And so we do that to create a balance across the business so that we're being very thoughtful around potential cannibalization impacts and how that materializes. But what we do find is in when we do open a restaurant near another restaurant and it may have some impact on it, that guest comes to CAVA 3x more often because we've now created a location that's more convenient for them, whether it's at work or at home or whatever they might be doing on the weekend. And so we've been able to balance the potential impact from a same-restaurant sales perspective without seeing a significant deterioration.

Our new restaurant openings themselves have been very robust. We talked about them being over $3 million. And what we found is that does create a lot of excitement. So going back to the brand awareness in the marketing. When we go into a new market like South Florida, for example, where we went last year, saw very robust sales, people driving 45 minutes to come and experience CAVA. And then when another restaurant opened closer to them, you saw some natural transfer of sales from one restaurant to the other. But over time, over an 18-month period, those restaurants that opened very strong continue to deliver on a positive same-restaurant sales trajectory.

So it changed the dynamic and the optics of how our sales were performing. So historically, a new restaurant would open strong, grow 10% in the first year after opening and then 6% to 8% thereafter. With these robust openings that we're experiencing, there is a bit of a negative sales impact in the early periods, but then after 18 periods, see that trajectory change and see that sales inflection that we've experienced in the past.

Which means higher cash-on-cash returns for you because you start with loading the cash ahead of time.

That's the beauty of it. So really delivering greater economic value and return for the business much sooner. So experiencing AUVs that you were expecting in year 2 and year 1 and delivering that very strong cash-on-cash return.

So given the cash-on-cash returns are still very healthy, and Brett, you were talking about the pipeline of people that you still need to -- that you are hoping to strengthen even more under Doug. How are you considering the evolution of your capital allocation strategy going forward? Again, sitting at $400 million on the balance sheet, when do you expect that one to be shifting from pure reinvestment into development on to alternative deployments of cash for shareholders.

Yes, certainly, very fortunate to have a strong balance sheet with the $400 million in cash. And the highest and best use from a return standpoint is opening more restaurants. We want to continue to make -- to ensure that we open them with integrity, as Brett mentioned. But we're always evaluating different strategic investments that we can make.

One of those would be the investment in Hyphen that we did last year to evaluate the opportunity to create an automated system that may work in a catering environment or a digital environment, and we'll continue to test that. But really leveraging that balance sheet and ensuring that we're driving the overall return.

Excellent. So this is the strategic decision conference at the end of the day. So I want to kind of wrap with three questions. The first one, more fireside chat, rapid answer. In one word, Brett, how would you describe where CAVA is today compared to its journey?

Maturing.

Okay. How do you think CAVA will be maturing 5 years from now?

Scaled national brand.

And now you can kind of prolong a little bit more if you want to, but what is the hardest strategic choice that you think CAVA will face over the next 5 years? What is the hardest decisions that you will face?

There are so many hard decisions. everything is a trade-off decision. In the next 5 years, how could be when to go international? We have so much great domestic growth. We don't want to be distracted by international, but we do recognize this is a real global cuisine. It's a great opportunity. But that's a challenge for us. How do you stay disciplined? You can only make so many smart bets every year and do so many things as an organization, and you can't get distracted. And so that's a tough decision when you know that opportunity is there, but you also don't want to undermine the growth and success that you're focused on at the current time.

So when you say international, are you thinking like Canada first, North America first and then moving to other parts of the world? Or how replicable is your success story in the United States dependent also on your -- the supply chain that you have here as well as the production facility that you've built?

Yes, I think we've looked at all options. Certainly, we've had a lot of folks approach us agreeing with us that they believe it's a global cuisine and that it would do well in their regions of the world. And whether -- how we partner, how we would do that development, whether we would take it on ourselves, I think those are all questions that remain to be answered that we would look at when we got more intentional about international strategy. But we don't believe that the supply chain would be an issue. And again, when we do it, we want to make sure that we do it and put the best CAVA experience forward no matter where we go.

And same question for you. Obviously, without giving information like new long-term targets that you haven't done before, but at least like strategically, if you were to think about the next 5 years from a disclosure standpoint, where do you think -- what kind of new metrics do you think that CAVA will be addressing, sharing with shareholders? And as well as how do you think your capital allocation strategy is going to be evolving in the next 5 years?

Yes. I think our new -- we disclosed in our proxy, our new performance shares program includes return on invested capital as one of the metrics that we are evaluating our performance on. And I would imagine that, that would be something that we would continue to communicate and lean into.

Okay. Excellent. And then one question that we got on the stream test. So the [ roast garlic ] stream has advanced into broader market set. What does that product need to prove before it's launched nationally?

[ A ], that our team can execute successfully and deliver a high-quality product that our guests love. And that would, in turn, prove out a certain incidence rate that justifies its place in the menu.

Yes. Great. A few more. I know that we have only 1 minute. I'm going to go rapidly here.

So as you may know, there is a competitor here in New York, but also other states called NAYA, which is expanding quickly, [ similar ] cuisine. Do you have to change your growth plans to get ahead of them or any of the other competitors that you're watching at?

That -- we have competitors that trying to open next to us. We don't see any sales we're very focused on our growth. We're operating in 29 states today. And in many of those states in those top-tier shopping centers, we have Mediterranean and Middle Eastern exclusivity that creates one sense of a moat around our business. But then all of our infrastructure, our vertically integrated infrastructure, our people infrastructure.

Restaurants are really hard to scale. I think more folks coming into the space is only a validation of the demand for Mediterranean cuisine, our style of cuisine. And I think when you look over history in our industry, the best-in-breed, the category leader has a kind of winner-take-all dynamic. And so we're just focused on continuing to be the leader and the definer of the category. That's what we have done over our history. And it's great to see more people validating what we're doing and just excited to continue to bring CAVA to more communities across the country.

Excellent. And then final one. If the performance were to disappoint this year or maybe even in the future, what will be the key driver outside of the, obviously, macroeconomic reasons?

That's not executing. I think often, it's underappreciated in this business. This does not scale like software. It is hard. It is people, it is process. And when you're trying to deliver, we'll serve roughly 100 million meals this year, right? And we're not the biggest restaurant company out there. So you think about getting every one of those right consistently and supporting your teams and having great experiences in every restaurant. Operations and hospitality, I think, are underappreciated. And if our results were to wane, I think those would be the first things I'd look at we're not delivering on those commitments.

Thank you very much for joining us today, and thank you, everybody, for being here.

Thank you.

Hello, everyone. Thank you for joining us, and welcome to CAVA Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Matt Milanovich, SVP of Finance. Please go ahead.

Good afternoon, and welcome to CAVA's First Quarter 2026 Financial Results Conference Call. Before we begin, if you do not already have a copy, the earnings release and related 8-K furnished to the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress. You will find reconciliations of any non-GAAP financial measure discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website.

Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in CAVA's most recent annual report on Form 10-K, as may be updated by its reports on Form 10-Q and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

And now I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. In the first quarter of 2026 we further solidified our position as the clear leader in the Mediterranean cuisine category, while executing against our long-term strategy with discipline and conviction. Despite today's broader macroeconomic environment and geopolitical uncertainty, we sustained strong momentum and delivered exceptional results, including positive traffic of 6.8%. Guided by the same steady focus that has shaped our business for the past 15 years, we will continue building for the long term as we gain market share with significant white space ahead while deepening our relationships with guests through a value proposition that clearly resonates.

Our first quarter highlights include a 32.2% increase in CAVA revenue, same-restaurant sales of 9.7% driven by 6.8% traffic, 20 net new restaurants, ending the quarter with 459 restaurants, a 20.2% increase year-over-year, adjusted EBITDA of $61.7 million a 37.6% increase over the first quarter of 2025, net income of $23.6 million and $15.5 million in free cash flow. These results are a direct byproduct of the structural strength of our business and the dominant position we hold as the industry leader in Mediterranean, a cuisine category we have pioneered, defined and continue to shape.

Central to that leadership is a value proposition rooted first and foremost, in doing what is right by our team members and our guests. While many peers have responded to short-term cyclical pressures with discounting and promotional activity we have remained unwavering on our long-term strategy. This past January, we took an approximate 1.4% price increase while holding [ baseball ] and pita pricing flat. Over the longer term, we have priced well below inflation with price adjustments representing only slightly more than half of cumulative CPI since the end of 2019. These decisions, deliberate and consistent have compounded over time, reinforcing the trust we have built with our guests and strengthening the foundation of our brand.

And importantly, that value is not one dimensional. Whether a guest is looking for an accessible everyday meal or choosing to lean into one of our more premium offerings, we have created the flexibility for them to engage with CAVA on their terms in a way that fits their needs and moments. Ultimately, this all ties back to our concept essence, making Mediterranean cuisine accessible to communities across the country while delivering it with warm hospitality. Hospitality that is delivered by our outstanding team members who we support with investments like our Flavor Your Future platform, which I will speak to in more detail later. The strength of our category, the competitive positioning of our brand and the power of our concept have enabled the success we saw this past quarter and that we continue to build on for the future.

Is that foundation and focus on execution that guides our work across our 4 strategic pillars, beginning where, first, expand our Mediterranean way and communities across the country. During the first quarter, we opened 20 net new restaurants, ending the quarter with 459 locations across 29 states in the District of Columbia. Our expansion continues with both intention and credible momentum reflected by recent new market openings at Cincinnati, St. Louis and Columbus and our upcoming entry into Minneapolis, Minnesota later this year further deepening our presence across the new West. We are encouraged by the early performance of our 2026 cohort, which is tracking in line with or ahead of the strength of our 2025 class with first quarter new restaurant productivity trending above 100%.

As we expand our reach across the country, our culinary innovation remains at the heart of what draws guests to our brand. This past January, we brought back our fan favorite roasted white sweet potato to a warm reception with guests embracing it as a complementary mean and using it as a cannabis to craft their own CAVA experience. The launch resonated beyond our existing customer base as well, driving increased visit frequency among returning guests while introducing the brand to new ones. We are pleased with the performance of the seasonal favorite, and we look forward to welcoming it back to our menu again in the future.

And from beloved returning favorites to new culinary first, our pipeline of innovation continues to move forward with discipline and purpose. I'm excited to share that we've officially launched our first ever seafood offering, Pomegranate [indiscernible] salmon across all restaurants nationwide. Our roasted flaky fillet is marinated in a suddenly sweet blend of pomegranate [indiscernible], [ ores ], red wine vinegar and old spices. A protein-rich option with omega-3s and essential vitamins like B12 and vitamin D, delivering both bold flavor and genuine nourishment in everybody. Salmon is a natural extension of our menu, fitting seamlessly within the Mediterranean diet while increasing the variety of choices we can offer our guests. This is an important culinary milestone for us and when we approached with care ensuring it stayed true to our concept essence. We have seen promising early results as guests experienced salmon for the first time at their local CAVA.

Shifting to our second pillar. Deepen personal relationships with guests even as we scale. We are encouraged by the strength of our loyalty program and the increasingly creative and engaging ways we are bringing it to life for our guests. This past quarter, through our digital experience, we leaned into the cultural touch points that bring our guests together, finding intersections of joy, connection and food that feel organic to who we are. Our flavor bracket in app game and recent partnerships with WNBA #1 [ PIC, ZF ] and NCAA men's basketball champion [ Axle Lindenberg ], each with their own digital exclusive bull brought the energy of March badness to life in the way that fell both timely and uniquely CAVA. Together, these became one of our most highly engaged digital experiences to date and we will continue to broaden our array of engagement tools and tactics like these to further leverage the loyalty program and first-party audience we are growing.

From the beginning, it has always been about showing up authentically and becoming a genuine part of what our guests already love. And it is through this kind of presence that we continue to deepen the relationships that keep our guests delighted and coming back. Bringing these relationships to life starts at a fundamental level with our people and our restaurants, which is reflected in the progress across our third and fourth pillars, run great restaurants every location, every shift and operate as a high-performing team. Operating as a high-performing team requires making foundational investments today that position us for the next decade and beyond.

We've spoken before about being on the precipice of a decade of data transformation, a multiyear transformation where data, technology and AI will reshape how we run our business. I want to take a moment to share the recent progress we have made. Earlier this year, we reached a meaningful milestone with the launch of [ Cavacor ], our modern data platform. It establishes a unified, scalable foundation for how we manage and use data across the business. enabling fast execution today while positioning us to leverage emerging AI capabilities. Building on that, we are in the early stages of delivering our new edge-enabled operating platform [ CAVA current ], a modular real-time commerce platform. [ CAVA current ] is live today, actively processing orders across our restaurants and as it scales, it will drive more consistent execution with improved visibility and faster, more localized actions.

Together, [ Cavacor ] and [ Cava current ] create a connected real-time system bringing data, applications and intelligence together to power our business. This enables us to deliver more meaningful personalized experiences for our guests, tailored to their preferences and behaviors while also advancing more predictive operations that help our teams anticipate demand and better align [indiscernible] and preparation in real time. By building this platform internally, we gain greater control flexibility and the ability to scale more efficiently over time. And while this is an important advancement, it is not a discrete initiative. It is a deliberate structural evolution, creating the conditions for us to operate as a real-time AI-enabled business and move faster and intelligently across every part of our organization. The work we are doing today will allow us to continue delivering value for our guests, our team members and our business for years to come.

And finally, even the most sophisticated infrastructure only creates value when it is in service of the team members running great restaurants every location, every shift. A core tenet of the strategic pillar is investing in our team members and talent and we remain deeply committed to building the next generation of leaders across our system. Our Flavor Your Future initiative continues to show promise, focusing on attracting, developing and retaining talent across the organization. A recent key action under this platform was the launch of our new Assistant General [indiscernible] position, with the critical goal of developing a deeper bench of grow-ready leaders to support our growth as we scale. Early indicators from the AGM rollout are promising. Restaurants with AGM coverage are outperforming those without as AGMs provide additional leadership support during peak dinner and weekend shifts, strengthening operations deepening the development of future team members and building more sustainable restaurant teams over time. We look forward to sharing more on the broader Flavor Your Future platform in the quarters ahead.

And while the early results of the AGM rollout are encouraging, stories like [ Adriana Cervantes ] reflect the broader opportunity we are building toward through Flavor Your Future. [ Adriana ] joined CAVA as a guest experience manager [ Sherman ] Oaks and through her leadership, operational impact and commitment to our values quickly progressed into the [ Edison ] General Manager role before being promoted to General Manager earlier this year. Today, she is already working toward becoming an academy manager, helping develop future leaders across the organization. Her journey is a powerful reminder that when we invest in our team members and create opportunities for growth, we are able to build not just stronger restaurants, but meaningful and lasting careers for our people.

Before I turn the call over, I want to thank our teams across the country for delivering a strong quarter and for staying true to our mission. It's the consistency, intentionality and discipline with which we operate that have allowed us to establish ourselves as a clear leader in Mediterranean, the next large-scale cultural cuisine category. As we look ahead, we remain committed to bringing heart health and [indiscernible] food.

And with that, I will hand it over to Tricia to walk you through the financials.

Thanks, Brett, and hello, everyone. CAVA revenue in the first quarter of 2026 grew 32.2% year-over-year to $434.4 million. Same restaurant sales increased 9.7%, driven by traffic growth of 6.8%. During the quarter, we opened 20 net new restaurants bringing our total CAVA restaurant count to 459. As Brett noted, we are very pleased with our new restaurant openings, which are tracking a head up or in line with the strength of our 2025 class.

New restaurant openings continue to exceed expectations in both top line and margin performance with new restaurant productivity above 100%. Our overall systemwide average unit volumes are now $3 million. CAVA restaurant level profit in the first quarter was $108.9 million or 25.1% of revenue compared to $82.3 million or 25.1% of revenue in the prior year period, representing a 32.3% increase. CAVA's food, beverage and packaging costs were 29.1% of revenue, lower than the first quarter of 2025 by 20 basis points, largely driven by favorable mix.

As a reminder, we anticipate CAVA's food, beverage and packaging costs to increase as a percent of revenue for the rest of the year as a result of the recent salmon launch. CAVA labor and related costs were 25.7% of revenue, approximately flat to the first quarter of 2025. This was driven by sales leverage, offset by a 2% investment in team member wages which includes the expansion of our AGM role. CAVA occupancy and related expenses were 6.9% of revenue, an improvement of 50 basis points from the first quarter of 2025 due to sales leverage. Common other operating expenses were 13.3% of revenue, reflecting an increase of 80 basis points from the first quarter of 2025. This increase was primarily driven by a higher mix of third-party delivery and other individually significant items.

Shifting to overall performance. Our general and administrative expenses for the quarter, excluding equity-based compensation and executive transition costs were 9.9% of revenue compared with 10.5% of revenue in Q1 of 2025. This 60 basis point improvement was driven by leverage from higher sales, partially offset by investments to drive future growth and higher performance base incentive compensation. Preopening expenses were $6.2 million in the current quarter compared with $4.5 million in the prior year quarter. The $1.7 million increase includes a higher number of units under construction. Adjusted EBITDA for the first quarter was $61.7 million, a 37.6% increase versus Q1 of 2025. The increase in adjusted EBITDA was driven by 9.7% same-restaurant sales growth, the number and continued strength of new restaurant openings partially offset by investment to support growth, including higher preopening costs.

For the first quarter of 2026, equity-based compensation was $7.7 million. We continue to expect equity-based compensation, which includes our new programs to provide equity grants to GM and performance-based LTI to be between $22 million and $24 million in aggregate for the full year. In the first quarter, our effective tax rate was 21.5%. For the full year fiscal 2026 we expect our effective tax rate to be between 23% and 28% with the rate in Q2 being consistent with Q1 based on the timing of equity-based vesting. As a reminder, the increase in our tax rate in 2026 versus the prior year is due to the lower permanent benefit from equity-based compensation. Our cash taxes will continue to be immaterial until we fully utilize our net operating losses.

During the first quarter, we reported $23.6 million of net income compared to $25.7 million of net income in Q1 of 2025. Diluted EPS was $0.20 in the first quarter compared with $0.22 in the first quarter of 2025. The decrease in net income and diluted EPS is due to the previously mentioned higher permanent benefit from equity-based compensation within income tax in the prior year, partially offset by nearly 50% higher earnings before taxes.

Turning to liquidity. At the end of the quarter, we had 0 debt outstanding, $403 million in cash and investments and access to a $150 million revolver with an option to increase our liquidity if needed. Cash flow from operations for the first quarter of 2026 was $64.1 million compared to $38.6 million during Q1 of 2025. Free cash flow during the quarter was $15.5 million.

Now to our outlook for full year 2026 we are raising our guidance to expect the following: 75 to 77 net new CAVA restaurant openings, same-restaurant sales of 4.5% to 6.5%. CAVA common restaurant level profit margin between 23.7% and 24.3%, preopening costs between $22 million and $22.5 million and adjusted EBITDA, including the burden of preopening costs between $181 million and $191 million.

I'd like to provide some additional thoughts on our outlook. Turning to same-restaurant sales. We increased our full year outlook to 4.5% to 6.5% growth. Our updated guidance reflects the continued strength we are seeing across the business while remaining appropriately balanced against the current macroeconomic and consumer backdrop. We remain confident in the underlying health of the business, supported by the strength of our unit economic model. While same-restaurant sales trends in the second quarter are in line with the first quarter and tracking above our revised full year guidance. Our updated outlook contemplates a more moderate mid-single-digit comp assumption for the balance of the year. Overall, we believe our guidance appropriately balances the momentum we're seeing in the business today with a prudent view of the external environment.

Shifting to restaurant level margins. Our outlook reflects the strength of our business and incorporates a 20 to 40 basis point headwind to capture a more cautious view on elevated energy cost impacts given ongoing geopolitical uncertainty. On the labor front, our guidance embeds further investments in team member wages and other opportunities to deliver on an exceptional guest experience. As a reminder, beginning in the second quarter, we introduced Salmon nationally, which we expect to be a margin rate headwind of approximately 100 basis points. Reopening expenses reflect increased investments in operator readiness, including onboarding general managers earlier to allow for more comprehensive training ahead of opening. We believe these investments help position our teams to execute consistently at a high level.

Finally, shifting to general and administrative expenses, while we experienced leverage in the quarter driven by outsized sales performance our general and administrative outlet for 2026 remains unchanged, and we continue to expect G&A as a percentage of revenue to be relatively flat year-over-year as we remain committed to making targeted investments to support the long-term growth of the business.

Before we open the line for questions, I want to thank our team members across the organization for their continued hard work and commitment to delivering for our guests every day. It is because of their passion and dedication that we are able to fulfill our mission as bringing [indiscernible], help and humanize food and create meaningful experiences for our guests.

With that, we'll open the line for questions.

[Operator Instructions] Your first question comes from the line of Sara Senatore from BOA.

Just I guess a question about the new store productivity. Obviously, very impressive. I think in the past, we've talked about a honeymoon period. It's been a relatively modest drag. I don't want to overstate it, I think, maybe 100 basis points. But I guess anything you can share about the new stores? Any commonalities across which markets have the highest MSP based on a 2025 cohort, are those highest volume stores, the ones that have the honey periods? Or are the 2 things, I guess, not correlated? Just trying to think through as we think as they enter the comp base?

And then just a quick clarification. You said, I think, CAVA's food beverage and packaging costs will increase for the rest of the year because of salmon. So does that mean you plan to keep it on the menu through the end of the year? I guess I thought that initially is targeted through 3Q.

Sara, thank you for the question. So we're talking about new store productivity first. We are very pleased with the opening of our new restaurants. Again in 2026, our new restaurant openings are exceeding our expectations with AUVs $3 million and performing at 100% or greater productivity. We are finding that across all geographies, all types of formats, all markets and can't find any commonalities in terms of tying them to particular behavior overall other than we haven't done a market yet that doesn't love CAVA, and we're very happy with their performance.

What we are seeing with those 24 openings as they come into 2026, while we talked about the honeymoon last year, what we're seeing with the 24 and entering into the comp base or in the comp base in 2026 and then they're outpacing our expectations. And then they are performing better than we expected and after 18 months continue to show positive momentum and are contributing significantly to overall same-restaurant sales performance. The '25 vintage in '26 is performing very similar to 2024. So no significant difference there, and we would expect them to perform like '24 as we move forward, and that's how we reflected it in our guidance.

Your second question was regarding COGS and the impact of salmon. So yes, we launched salmon at the beginning of the second quarter. It's anticipated to run in the second quarter and third quarter, and our guidance reflects that impact in the fourth quarter as well.

Your next question comes from the line of David Tarantino from Baird.

Great. My question is on the margin outlook, Tricia. You raised the comp guidance, which is encouraging but didn't really touch the restaurant level margin guidance very much. And I think you called out energy costs. But I guess are there other factors that are limiting the flow-through on the additional revenue that are worth calling out? Or is this all about an assumption that energy costs will be higher for the balance of the year?

And then secondly, I wonder if you could just comment specifically on the other operating cost line because I think that line surprised at least some of us this quarter. And maybe just you can unpack the fairly big variance in that line versus maybe where we had it modeled.

Yes. I appreciate that, David. So regarding the margin outlook, our model is incredibly robust and has tremendous through. And we're seeing that continue to perform. But there are a number of factors that we included in our guidance that we want to specifically touch on, one is salmon. So that's certainly going to have an impact overall on margin rate. But remember that salmon is priced to be penny profit neutral, so the dollars will be the same.

The other piece is the energy cost impact. And it hits a couple of different line items. And as we called out in the prepared remarks, we're contemplating an additional 20 to 40 basis points of an impact related to those, that would likely more -- be more significant in the third and fourth quarter as fuel surcharges will kick in. We're starting to see early signs of that, but that persists continue to escalate as you go into the remainder of the year? And then you're also going to see some potential utility impacts on the other operating expense line. And then within input costs related to food, beverage and packaging, you've got polyethylene costs that are anticipated to also be impacted, and we built all that into our guidance which does have an impact on the overall flow through flow-through.

To a lesser extent, we did layer in some additional average wage investments and some flexibility to make some investments in our guest experience in terms of labor that will be less impactful, but is included in our guidance overall. And keep in mind that we did increase the top end of our restaurant level margin guidance range by 10 basis points, going back to the robustness of the model itself, but contemplating the uncertainties that are out there and how they might impact our performance overall.

The other OpEx lines as we called out, digital mix is impacting that. And so you're seeing some increase in overall fees on that line. Digital is designed to drive profit neutrality. So it's a little bit of an optics impact as you look at that. And then other fairly immaterial amounts across a number of different categories between other operating expenses. And those are fairly onetime in nature. However, as we think about other OpEx as we go through the remainder of the year, it will be a little bit above where we were on a full year basis as a percentage of revenue versus 2025, and that's largely due to the digital mix that I mentioned earlier.

Your next question comes from the line of Danilo Gargiulo from Bernstein.

Thank you. First of all a clarification on Tricia on your statement that April or the recent data is tracking on track with the first quarter actual. So I was wondering whether you were referring to the others that you have achieved in the first quarter or whether you were referring to the exit. And then stepping back, maybe this is more for Brett. Like if you were to think about the swinging factors that you have at your disposal for this year, what do you think is going to be driving you to get to the high end of the guidance versus the low end given that you have significant opportunities ahead of you and you've already demonstrated that in the first quarter.

So regarding your question about our same-restaurant sales assumptions and what we're experiencing, our same-restaurant sales trends in the second quarter are in line with our overall same-restaurant sales in the first quarter and tracking above our revised full year guidance.

And Danilo, the second question. We're going to [indiscernible] our long-term strategy with consistent radical menu innovation to excite our guests that doesn't create operational complexity. Tricia talked about some of the potential investments that we've accounted for in restaurant level margin to continue to lean in and elevate warm Mediterranean hospitality and continuing our operational execution while mitigating menu price increases. We are very focused on making sure we don't have to pass through any inflationary pressures to our guests. And that has been something we've worked very hard on in recent years that whether it's underpricing peers by more than half, whether it's taking less than half the price increase CPI. That has delivered great value every day that we think drives that traffic over the long haul. So we'll continue to focus on those.

And again, also, we've talked in the past about the opportunity to continue to lean in and pull our marketing lever. It has been a smaller portion as a spend of our percentage of revenue versus our peers, and we see opportunities to continue to be very cost effective with our marketing, but elevate the awareness. We've grown our awareness now from 62% to 66% across the country. So that certainly helps drive more people to try CAVA and when they try it, they like it and they come back more frequently.

Your next question comes from the line of Andrew Charles from TD Cowen.

This is Zach Ogden on for Andrew. So the acceleration you saw in same-store sales to start the year is contrary to what most of your peers saw. Do you stack rank the drivers of that acceleration between [indiscernible] potatoes, any marketing investments, any improvement in your consumer or maybe some other factors as well?

So certainly, when we look at same restaurant sales in Q1, we believe it's a combination of our amazing culinary bring a cuisine where [ Jameson ] Health United guests across the country at a time where it's meeting the needs the modern consumer and meeting their desires from an experience standpoint, also bundling that with foreign hospitality and delivering on what Brett talked about, is a great value every day. And those things together are a significant contributor to the overall performance. You mentioned white sweet potatoes. We brought back a fan favorite of white sweet potatoes and our guests just love it. It drove frequency, brought in new guests and created a unique option for our guests as a complementary main item. It doesn't appear to be a single factor that was driving the overall same-restaurant sales performance.

When you look at the comps across the country, you saw great strength in every region of the country. Saw great strength across all of our vintages. And in fact, when you look at our restaurants based on their median household income in their market, all of those cohorts are performing very well, and our lower income cohorts continue to outperform as we bridge this K-shaped economy.

Your next question comes from the line of [ Gregory Francfort ] from Guggenheim Securities.

Thanks for the question. I just wanted to maybe unpack the digital sales, and I think you hit almost 40% this quarter. And just a few years ago, that was maybe 35% and -- how much of that is being driven by 3D delivery versus your 1P digital channels? And I guess what's the strategy of goal for that breakdown over time?

Yes, Greg. When we look at our digital mix, we are seeing improvements and going back to what I said earlier, we designed our channels to drive the same level of profitability on a dollars basis across the board regardless of how they choose to dine with us. And when we look at the quarter itself, we are seeing improvement in third-party delivery mix overall and we're seeing improvement in other channels as well with digital that are driving to that increase from the 36% level in prior years, closer to 40% today.

Your next question comes from the line of Brian Harbour from Morgan Stanley.

I guess could you comment on what you've seen from salmon so far? I guess the quarter-to-date comments suggests it's doing well. But anything about new customers about frequency, are you sort of happy with the consistency of the product when you look across your store base? And then I guess, it sounds like you expect it to sort of remain there through the balance of the year. So is the assumption that this is kind of the permanent seafood offering at this point?

Brian, we are pleased with the performance of salmon, and it is in line with what we saw in our market tests and to our expectations. I'm very proud of the team. They did -- they were stage gate process to test and ensure that we could execute a delicate protein at a high level for our guests. And so we've been very pleased with the execution across the fleet. And have not committed to salmon being an everyday item but do expect it to run through the fourth quarter at minimum.

Your next question comes from the line of Chris O'Cull from Stifel.

This is Patrick on for Chris. Brett, I know you talked about testing roasted garlic shrimp last quarter. And I was curious if you could give an update on where that is in the stage-gate process and to we've seen some e-mails here in our local market, but I'm not sure if that's indicative of the fact that you rolled it out nationally yet or if we're in the test. And just more broadly in -- on the LTOs in general, how are you guys thinking about the pace and sequencing of LTOs maybe relative to past years when a lot of peers have seemed to accelerate the pace of innovation. And clearly, you have a lot of momentum, but curious to get your thoughts on what your customer is telling you what the business is telling you in regards to what that right pace is for CAVA?

Yes, I'm guessing you might be in Northern New Jersey. That is where -- or I'm sorry, or Nashville, where our market tests are going on, on roast garlic shrimp. So that has moved to the next stage of the stage gate process. originally was a market test -- or sorry, an operations test. We are now in a market test, which is a broader test, which would be the last stage of proof points before we would take it to a more national launch.

So again, it's following the same disciplined process we've been doing for a number of years now and what our culinary road map has and a tent-pole moment each year bracketed by some seasonal moments, and we think that is still the right pace for us. That is the, I think, the balance we're trying to strike to have the right amount of newness and excitement for our guests without overcomplicating operations. We are focused on delivering exceptional operations every restaurant, every shift with warm hospitality. And so we want to be mindful of how much newness we drive in and operational complexity on our operators while balancing the excitement our guests have when we bring them new culinary.

So I would continue to expect a tent-pole moment each year, bracketed by a few seasonal moments like you saw with [indiscernible] White Sweet Potatoes. We have a few fun things coming this summer or even collaborations like we did with [ AZ and Axle ] around the NCAA tournament time.

Your next question comes from the line of Brian Mullan from Piper Sandler.

Brett, you just mentioned operations. My question is on operations. With Doug Thompson having a bit more time in the role, can you just talk about what he's been the most focused on so far? What are the most important priorities for that role as you see it for the balance of the year? And if you just want to layer on your very strong growth in traffic and how that might influence timing or order of priorities? Anything would be great.

Yes. 3 main priorities. First and foremost for Doug is people development. Doug is an experienced leader of people, a developer of future leaders, very excited to have him on board. So building out our pipeline, which that AGM investment is part of future leaders, not only to help maintain operational integrity across all shifts, both lunch and dinner and weekends, but as well as building a deeper pipeline of future leaders to open those new restaurants with operational integrity. And then new restaurant opening excellence is another given the intense volumes we're seeing and new restaurant productivity. We want to make sure that we protect those guests experiences when they come in and experience the best version of CAVA and put our best foot forward. Very excited at some of the additions we've made in our recent Ohio openings that have really helped deliver better experiences on these NROs.

And then lastly but not least is hospitality. It's been core to our brand essence. It's not just our Mediterranean cuisine or taste hey night, but it's our warm Mediterranean hospitality. And I think we're good at delivering that across the country, but we want to be great and exceptional at it. And I think we have some opportunities to do that consistently again across every restaurant, every shift. And this is something Doug has great decades of experience in delivering and excited for him to bring that experience to CAVA and help us elevate from good to great.

Our next question comes from the line of John Ivankoe from JPMorgan.

First, and I'm sorry if I missed this, it's an operations-related question first. On catering, Brett, can you talk about your experience of catering, particularly in some of the busier, more urban stores, if you do want to do it out of existing CAVA outlets or if maybe some purpose-built assets would kind of make sense to better achieve the catering day part. That's the first question.

And then secondly, you guys have long talked about, I guess, human resources, developing talent is probably the #1 gating factor to the speed of growth which I think makes a lot of sense. But Tricia, you did mention on the balance sheet, you do have $400 million of cash. You have $150 million undrawn revolver. You're generating cash. I mean it seems like you might be in a pretty good position to maybe think about some asset types of deals that could potentially be converted to CAVA at some later date. So just as an idea. So where are we in terms of potentially using the balance sheet and your overall cash flexibility to maybe accelerate development, obviously, not this year, but over the next couple of years as opportunities arise?

Yes. John, I'll address catering and then let Tricia address the balance sheet question. We are -- we have a market test going on in Houston that we've spoken to in the past. We plan to expand that to a second city, a second market later this year. And one of the goals of the test and really, we think is a critical aspect of it is understanding capacity management and load balancing. We have tremendous demand in catering. We know there's a lot of demand that's out there, but we want to make sure we position our operators to successfully meet that demand and meet our commitment to experience on the catering front.

And so to your point, we do have 20-plus purpose-built locations that include -- we've spoken about our hybrid kitchens and our digital kitchens that have extra capacity, hub central production capacity. And we are testing in regular CAVA restaurants to understand strategically, how do we want to move forward? Is it more purpose-built centralized production complemented with the regular CAVA restaurants? Or is it just that centralized production? And we want to be very patient and methodical and disciplined because we know that, that revenue potential is out there for us, but we want to make sure when we do open the spigot or roll out catering that we need it with operational integrity and more to come. But again, we will expand it later this year to a second market test to make sure we're understanding how we want to move forward with our load balancing and capacity management.

And John, as it relates to our balance sheet, we are in a very strong position there that we called out and certainly at the highest and best use of our cash are investing in new restaurant openings. And as you rightfully acknowledged, the biggest governor that growth is ensuring we have a right pipeline of roll ready leaders sort to open those restaurants successfully. So we will consider and evaluate asset deals and understanding how to earn or augment our very robust real estate pipeline that we have.

But I want to be thoughtful and not go after assets that we weren't able to support. And at the same time, as we've looked at opportunities to invest in real estate through different acquisitions, the we find that it's often better to just wait and acquire those assets on their own through different means, and it's a more effective deployment of capital in the end and less of a distraction to the business.

So what our balance sheet provides is lots of flexibility and optionality. We're always evaluating different investments that we can make in cash to drive incremental returns for the business. But at this time, the highest and best use of capital is in New York new restaurant openings.

Your next question comes from the line of Brian Vaccaro from Raymond James.

You noted the strength in the third-party delivery channel and just curious what you'd attribute that to? Are there tangible improvements in execution, order accuracy, et cetera, or any changes in the agreement with third-party delivery partners that are worth noting? And then just a follow-up on the AGM program. Could you just remind us what percentage of the store base today has an AGM in place?

Brian, if you remember last year, we spoke about our kitchen display screen investment rollout, and that is absolutely driving better productivity, better order accuracy, better digital order management. So that's driving both growth in our 3P channels as well as our 1P channel and digital ordering pick up and pick up by car. So that, again, has helped equip our team with the tools to be more successful and deliver on our guest commitments, which is driving overall growth in the digital chats.

And with regards to AGMs in our restaurants, we are focused at those restaurants with higher volumes and placing AGMs in those locations. So haven't yet disclosed the actual number, I would say, is approaching above 50% of the locations, it's a progressive process.

Your next question comes from the line of Jacob Aiken-Phillips from Melius.

Great. This is Sam on for Jacob. I just want to focus in on the CAVA core in the data infrastructure that you guys mentioned in the prepared remarks, as that rolled out, where do you expect the earliest [indiscernible] benefits to show up? Is it demand forecasting, labor deployment something else? And is the bigger opportunity near-term restaurant execution or more longer-term guest engagement?

Yes. I think it's both of those and [indiscernible], which is you've got restaurant operational efficiency you've got guest engagement and you've got business intelligence insights at the corporate level. And what we're seeing already is some significant productivity enhancements across our enterprise from when you think about automating a lot of manual and spreadsheet type tasks, whether it's in the finance function or other functions. And then at the restaurant, what this does is it gives us a foundation to now leverage for predictive cook, labor scheduling and inventory management. So this sets the foundation for us to be able to pull those levers, take that complexity out of our team members' mind share and help position them to deliver, again, pressure food, mitigate waste and deliver on our operational commitments without having to do a lot of the manual computations and tasks themselves. So very excited for what this lays the groundwork for.

I've talked about in our shareholder letter over the last couple of years. This is the early stages, I think, of a decade-plus of transformation and what it will do is enhance our team members' experience across both our support centers and the restaurants. We always talk about using tech value to enhance the human experience, not replace it. and this will empower our team members to be more productive, be more powerful and be more successful. And ultimately, if the restaurants free them up to deliver that hard health and humanity through hospitality.

Your next question comes from the line of Margaret-May Binshtok from Wolfe Research.

I first wanted to just ask, Brett, you said that national awareness has built. I just wanted to understand how are you guys scaling your marketing investments in newer markets to build awareness ahead of unit growth? And then I just also wanted to follow up, Brett, I think a couple of quarters ago, you said that the 25- to 35-year-old cohort had lost some frequency. Would it be fair to say you're seeing that recover?

Yes. From a marketing standpoint, last year, we increased about 1% of revenue to 1.2% of revenue. So we continue to lean into it. It's not specific to new markets. It's just general across the country. We have so much pent-up demand when we open in these new markets. We haven't needed to add any additional or incremental marketing other than the general awareness and [indiscernible] in preparation for our openings.

At this point, though, we're focused on driving broader general brand awareness, and you saw that salmon launch campaign and a couple of activations we did or some of the collaboration. So we think this is something we can continue to lean into from a brand-building aspect, but opening new restaurants has certainly helped bring that awareness as we proliferate across the country. Yes, and you said 35 to 45, I think what I referenced in the past was the 25- to 34-year-old cohort back late last summer, early fall, where we said coming out of our last quarterly earnings that we were seeing that cohort to firm up at the end of the year, and that carried into this year, and we've seen that momentum seen year-to-date.

Your next question comes from the line of Logan Reich from RBC Capital.

This is [ Amira Dogan ] on for Logan. You mentioned continued strong momentum despite the current geopolitical and macro backdrop. I was just hoping if you could provide any color on changes, if any at all, that you might have seen in consumer behavior post this part of the Middle East conflict relative to before the start of the conflict?

We have not seen any shift in our consumer behavior. We talked about we've seen it very consistent across regions, across age cohorts and across income cohorts. And even noted, which may be a bit counterintuitive to what we've seen across some of industry peers is that the lower end of the income strata actually perform the strongest. We've seen strength across all income cohorts, but the best performance across that bottom half of the income strata. And that gets us excited to be able to welcome more people to our table. That's what we're trying to do every day, make our food more accessible, more affordable and the ability also in a sense to bridge that K-shape economy where we have that premium offering and experience for folks maybe at the higher end of the income strategy that want to lean into our new [indiscernible] salmon or the grilled steak, but have that accessible everyday value for folks that are a bit more price-sensitive potentially.

And the other thing I would say is we have not seen any deterioration in our premium incidents or attachment rate. That has held very steady. So again, we're very mindful and we try to incorporate in the guidance of the challenges that consumers are facing around them and the uncertainty from the geopolitical conflicts and the increase of the price of the pump. So we've tried to incorporate that in our guidance but have not seen a deterioration or impact so far in the current year.

Your next question comes from the line of JP Wollam from ROTH Capital Partners.

If I could just ask on unit cadence, it looks like about 20 -- a little more than 25% of the full year guide came in 1Q. Just curious if that was kind of some pull forward of 2Q units that snuck in there? Or just how you're thinking about kind of unit opening cadence for the rest of the year?

Keep in mind that we had 16 weeks in the first quarter. So there was outsized number of weeks in the quarter, the rest of the year has 12 weak quarters in them. And I would expect the cadence of openings to be fairly ratable over the remainder of the year.

Your next question comes from the line of Jon Tower from Citigroup.

Maybe, Brett, you had mentioned earlier that the brand has taken a lot less pricing versus the industry versus the pre-COVID levels. And I'm curious, one, it does seem like your guests are recognizing in the form of traffic to your stores, but I'm curious if you actually have the data behind that suggests they're choosing you over going to competitors because of that price point. And then I guess the other question I have on top of it is seeing the strength in traffic that you have on a relative and absolute basis and the pressures on the business that are picking up, it sounds like more recently on energy prices, would you consider taking some price in the balance of the year to offset some of that?

Yes, Jon, we would not look to take price. I mean, I think we've tried to reflect in our restaurant level margin guidance that we look to absorb some of those fuel surcharges that we're expecting and some other inflationary pressures and not pass along to our guests. I think it's incredibly important. We're mindful of the pressures everyone is facing. And I think -- when you think about choosing versus peers, we've done -- we do internal brand health surveys. We do buy annual [indiscernible] surveys. We just did another run of the health survey recently. And we score very well on value, and we score very well on -- we even asked a question about recreating this food at home, and we are very unique and distinct in that and so it's a good comparison to someone who's looking to make food at home. We are a differentiated unique opportunity for them to basically us be their outsourced cook.

And so we've seen that comparison in a sense, be very strong, whether it's our peers, whether it's food at home and strong value scores, and that's what we want to continue to focus on and make sure that we can invite more people to our table.

[indiscernible] too, when we go back and look over time, what we have chosen not to take price for example, a couple of years ago when [ AP122 ] went into effect out of California, and we chose not to increase price as many others did at the time. Our traffic based on looking at black box data out west in California was much stronger as a result of that change. So there are data points out there that would suggest that things thoughtful around it is translating into traffic performance.

Your next question comes from the line of Matt Curtis from D.A. Davidson.

Just circling back on the lower income cohort that outperformed. I was just wondering if you could explain why your value proposition is attractive to them, given that they are just so price sensitive. And then secondly on development. I was just wondering if you're seeing any pressure from higher energy leading into your construction costs at this stage?

Yes, I'll take the first question and hand it to Tricia for the second question. It is -- we don't view value as just price. We view it as a combination of factors. It's the quality of the ingredients we serve. It's the relevance of our unique mentoring cuisine and the convenience in which our guests can access it and the experience that we deliver when they visit us and share a meal with us. And so it's really bang for the buck. We are not going to be the lowest price out there. That is not why guests come to us. We are not serving freezer to fire. We're serving fresh Mediterranean cuisine, but we need to serve it at the most reasonable price that we can deliver it with great hospitality. And that's what we've been focused on, and that's what's been resonating with guests. And so while they may be more discerning with where they're spending their dollars, our numbers reflect that they're choosing to spend their dollars at CAVA.

And as it relates to development at this point, we haven't seen any pressure from -- as a result of the energy surcharges, but the team is very active and always staying ahead of challenges that they're facing and doing the best, but they can to make sure that we're mitigating those challenges in the best way possible and continue to drive outsized cash on cash returns that they've done effectively over time.

Your last question comes from the line of Sarang Vora from Telsey Group.

Great. Great quarter guidance. Just connecting to the prior question about traffic trends. I was curious to know how loyalty is connected to traffic. Like you revamped the program about 18 months back, the last few quarters have been very strong. Curious to know that you are seeing increased engagement in the loyalty program that is getting converted to traffic because it seems like that can be a sustainable trend. Any color you can share on like member growth outperformance of loyalty contribution compared to the total company? And are members like tearing up from like [indiscernible] Oasis. Just curious, any color you can share in connected to the traffic trend as well?

Yes. Our loyalty programs have been affected. They have increased our loyalty pool. We are seeing improved frequency as a result and seeing progression in tiers that's meeting our expectations. So really happy with what we're seeing there. And we can see that the loyalty program can drive engagement and offers that we're creating can build excitement. And it's an opportunity for us to continue to leverage that data to build and deepen those connections with those guests to track improved performance over time as well.

There are no further questions at this time. I will now turn the call back to Brett Schulman, Co-Founder and CEO, for closing remarks.

Thanks, everyone, for joining us today and for your continued support. As we look ahead, we remain focused on building this business the same long-term mindset and discipline that has guided us from the beginning, staying true to our mission, investing in our people and continuing to make Mediterranean cuisine, more accessible to communities across the country.

Before we wrap, I want to again thank our nearly 15,000 team members whose passion, care and commitment make it possible for us to deliver on our mission to bring heart, health and community to food every day. Their dedication is what makes CAVA special and we're incredibly grateful for all they do for our guests and one another. With Memorial Day weekend approaching, we wish everyone a safe and meaningful holiday weekend, and we look forward to speaking with you again next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the CAVA Q4 and Full Year 2025 Earnings Conference Call.

[Operator Instructions]

This call is being recorded on Tuesday, February 24, 2026. I would now like to turn the conference over to Matt Milanovich, SVP Finance. Please go ahead.

Good afternoon, and welcome to CAVA's Fourth Quarter and Full Year 2025 Financial Results Conference Call. Before we begin, if you do not already have a copy, the earnings release and related 8-K furnished to the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress.

You will find reconciliations of any non-GAAP financial measure discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website.

Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in CAVA's most recent annual report on Form 10-K as may be updated by its reports on Form 10-Q and other filings with the SEC.

Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

And now I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. 2025 was a milestone year for CAVA, made possible by more than 13,000 team members who deliver on our mission of bringing heart, health and humanity to food every day. Before diving into the quarter and fiscal year, I want to thank our teams for their commitment to our guests and to one another. Their dedication is what continues to fuel our growth and made this another successful year at CAVA. In 2025, we continue to build with intention, strengthening our position as the clear leader of the Mediterranean category, guided by an unwavering long-term strategic focus. It was a record-setting year marked by our first full fiscal year, surpassing $1 billion in revenue and our strongest new restaurant opening class to date.

The year also marked a transition point, shifting from a newly public company to a large-scale sustainable growth enterprise as the model we've been building began to grow more broadly with strong new restaurant performance translating into meaningful market share gains. We believe our momentum reflects more than just expansion. It signals that our value proposition is resonating with today's increasingly discerning consumer. As guests become more intentional with their spend, they are choosing brands like CAVA that deliver real differentiation through bold flavors, helpful food and hospitality that creates meaningful human connection.

Our fourth quarter highlights include a 21.2% increase in CAVA revenue and a 55.5% increase over the last 2 years, same-restaurant sales of 0.5%, restaurant-level profit margin of 21.4%, 24 net new restaurants, adjusted EBITDA of $25.8 million and net income of $4.9 million. And full year highlights include a 22.5% increase in CAVA revenue and a 63.1% increase over the last 2 years, same-restaurant sales of 4%, 72 net new restaurants, ending the year with 439 restaurants, a 19.6% increase year-over-year; adjusted EBITDA of $152.8 million, a 21% increase over the full year 2024, net income of $63.7 million and $26.1 million in free cash flow. Just last month, we celebrated our 15-year anniversary. And when my co-founders and I started this business, our ambitions were simple: to make Mediterranean cuisine accessible to communities across the country, deliver it with genuine hospitality and create a platform where our team members could build a career, not just have employment.

That simple but powerful idea continues to shape our culture and how we serve our guests and support our teams every day. As we enter this next chapter of growth, I'm excited to welcome Doug Thompson as our new Chief Operations Officer, whose operational leadership will help us scale thoughtfully and sustainably. With our growth comes an even greater focus on the choices we make for our guests.

Today's industry environment is dominated by price discounting, a reflection of many brands who aggressively raised prices in recent years. We believe it's more important than ever to deliver real value every day and exceptional experiences. In recent years, we've taken less than half the price increases of industry peers while underpricing CPI by over 10%. It's these intentional decisions made consistently over time that reinforce trust with our guests and strengthen the long-term foundation of our brand. And that foundation comes to life through our 4 strategic pillars, starting with our first pillar, expand our Mediterranean Way in communities across the country. During the fourth quarter, we opened 24 net new restaurants, ending the year with 439 locations across 28 states and the District of Columbia.

2025 was a strong year for expansion, and we're excited to continue that momentum in 2026 with upcoming new market entries across the Midwest, including Cincinnati, St. Louis, Columbus and Minneapolis. All new restaurants will open with the full Project Soul design as we remain on track toward our next milestone of at least 1,000 restaurants by 2032. As we bring our Mediterranean Way to more communities, our food remains at the heart of how our guests experience our brand. With the new year just beginning and many guests leaning into healthier choices, we're meeting that moment with menu innovation rooted in both flavor and purpose. Our most recent culinary launch, our largest update yet, brings back the fan favorite and deliciously creamy roasted white sweet potato and introduces new offerings such as Sumac Slaw, Power Greens, Tangerine Aleppo Juice and Sumac Sour Cream and Onion Pita chips. By leaning into spices like Coriander, Paprika, Sumac and Aleppo Sour Pepper, we're delivering bold, satisfying high-quality food that feels both authentic and deeply craveable.

That same focus on health and balance carries directly into our next major culinary moment. I'm excited to share that towards the end of the first quarter, we'll be launching Pomegranate-glazed Salmon, our first-ever seafood offering and a natural extension of our menu. Salmon fits seamlessly into the Mediterranean diet and naturally expands the variety of choices we can offer our guests, inviting even more people to our CAVA table. Our roasted flakey filet is marinated in a subtly sweet blend of pomegranate, harissa, red wine vinegar and bold spices. As we prepare for this upcoming launch, we've taken a thoughtful and disciplined approach to testing to ensure a great guest and team member experience. We're excited to bring this to life in the coming months and can't wait for our guests to experience it.

Shifting to our second pillar, deepen personal relationships with guests even as we scale. This past fall, we rolled out tiered status levels as the next phase of our loyalty program. Through this evolution, we've been able to deliver differentiated benefits, surprise and delight moments and recognition through our Sea, Sand and Sun tiers. While still early, the introduction of these tiers has already strengthened engagement and created new personalized ways for guests to connect with our brand. Building on that foundation, we recently introduced Oasis, our invite-only tier designed to recognize our most loyal guests and strengthen long-term relationships. Oasis gives our most engaged members access to enhanced earning opportunities, additional perks, exclusive merchandise and special events throughout the year. This tier is another example of how we will utilize our new loyalty architecture to lean into more tailored and personalized guest experiences over time.

As we deepen our relationships with our guests, delivering on that promise requires a clear focus on our third pillar, running great restaurants every location, every shift. Our team members remain at the core of our business and enabling them with the right tools and technology is essential to delivering great guest experiences every day. A strong operational foundation allows us to consistently elevate hospitality, improve order accuracy and enhance speed and service across our restaurants.

Over the past year, we've continued to invest in technology that simplifies execution and makes our restaurants easier to run, including the rollout of our kitchen display screen system. In 2025, we completed all scheduled retrofits and opened every new restaurant with the new system, ending the year with our KDS live in 370 locations with the remaining 69 retrofits to be completed this year. This is a meaningful cross-functional effort driven by a shared focus on supporting operators and improving the day-to-day restaurant experience.

In that same spirit, we've completed the rollout of TurboChef ovens across our entire restaurant base, giving team members the equipment they need to execute consistently as our menu continues to evolve. These ovens have already played an important role in delivering the quality and consistency guests expect, including our recent white sweet potato launch, and they will be a key enabler of our upcoming salmon launch.

By simplifying execution and delivering faster, more consistent cook quality, these ovens help ensure our culinary innovation shows up in restaurants with the same integrity and care we design it with. As we continue to focus on running great restaurants every location, every shift, leadership in our restaurants matters more than ever. As I noted earlier, Doug Thompson will be joining CAVA as our Chief Operations Officer this March. Doug brings deep experience developing and mentoring restaurant leaders, building durable talent pipelines and creating environments where people can grow careers, not just sold roles. His leadership philosophy is closely aligned with our belief that great restaurants are built by great people, and we couldn't be more excited for him to partner with our teams as we enter our next phase of growth.

Doug's arrival builds upon the foundation that we started last October when we launched our Flavor Your Future initiative, a holistic team member development program designed to attract, develop and retain CAVA's next generation of leaders. One of our first actions under this program was the introduction of the Assistant General Manager role created to build a deeper bench of role-ready leaders as we continue to scale. Today, we are on schedule with 60% of AGM roles filled and a majority of them coming from internal promotions. While still early, we're seeing encouraging signs that this approach is having a positive impact. Restaurants with AGM coverage are outperforming those without as AGMs provide additional leadership support during peak dinner and weekend shifts, helping to strengthen execution across every shift, develop future team members and create more sustainable restaurant teams.

In addition to the AGM role, given our dynamic new restaurant growth, we are making deliberate changes to our field leadership model to support operator development and elevate standards as we scale. First, we introduced 2 zone leaders who will be reporting directly to Doug, splitting the country to increase focus, accountability and leadership proximity to restaurants. Second, we narrowed spans of control for our regional leaders, enabling deeper restaurant engagement and more consistent coaching in the field. And finally, we added a new market leader role to create a clear span breaker between regional and area leaders, strengthening day-to-day support and execution at the local level.

Together, these changes increase in-restaurant leadership presence, reinforce hospitality and build the leadership pipeline needed to support long-term sustainable growth. As we look ahead, we'll continue to scale with purpose, staying grounded in our mission while building a business designed to endure for the long term. The strength of what we've put in place gives us confidence in the path forward, and none of this would be possible without the dedication and trust of our team members across the field and support centers. Thank you to our teams and to all of you who continue to believe in our mission and the growth we're creating together.

And with that, I'll turn it over to Tricia to walk you through the financials.

Thanks, Brett, and hello, everyone. CAVA revenue in the fourth quarter of 2025 grew 21.2% year-over-year to $272.8 million. During the quarter, we opened 24 net new restaurants, bringing our total CAVA restaurant count to 439. Same-restaurant sales increased 0.5%. On a 2-year basis, same-restaurant sales accelerated 170 basis points to 21.7%. On a 3-year basis, same-restaurant sales remained relatively stable at 33.1%. Our unit economic model continues to be strong, and we remain confident in the underlying structural strength of the business. We had a record-setting year with our new restaurant productivity remaining above 100% and our 2025 NRO AUVs trending above $3 million, underscoring the resonance of our brand. CAVA restaurant level profit in the fourth quarter was $58.3 million versus $50.4 million in the fourth quarter of 2024, representing 15.7% growth.

CAVA's food, beverage and packaging costs were 30.4% of revenue, a 50 basis point increase from the fourth quarter of 2024. This increase reflects tariffs and our limited time-only Chicken Shawarma offering. CAVA labor and related costs were 27.1% of revenue, a decrease of approximately 20 basis points from the fourth quarter of 2024. This decrease reflects leverage from increased sales, partially offset by an investment in team member wages of 1.5%. CAVA occupancy and related expenses were 7.6% of revenue, flat with the fourth quarter of 2024. CAVA other operating expenses were 13.4% of revenue, reflecting an increase of 60 basis points from the fourth quarter of 2024. This increase was due to a higher mix of third-party delivery and ongoing technology costs associated with our kitchen display system rollout.

Shifting to overall performance. Our general and administrative expenses for the quarter, excluding stock-based compensation, was 10.5% of revenue compared with 10.4% of revenue in Q4 of 2024. This 10 basis point increase was primarily due to investments to support future growth, partially offset by leverage from higher sales. Preopening expenses were $4.6 million in the current quarter compared with $2.7 million in the prior year quarter. The $1.9 million increase includes a higher number of units under construction and increased costs on a per unit basis. Adjusted EBITDA for the fourth quarter was $25.8 million, a 2.6% increase versus Q4 of 2024. The increase in adjusted EBITDA was primarily driven by the number and continued strength of new restaurant openings, partially offset by investments to support growth, including higher preopening costs.

For full year 2025, equity-based compensation was $18.1 million. In 2026, we expect stock-based compensation to be between $22 million and $24 million, which includes our new program to provide equity grants to general managers. In 2026, we plan to adopt a performance-based LTI program, which would transition from a 4- to 3-year vesting period, accelerating expense recognition without changing total equity granted. Approximately 55% of this expense will be recognized in the first half of the year, given the timing of payroll taxes associated with RSU vesting and the extra period in Q1. In 2025, our effective tax rate was 10%. For the full fiscal year 2026, we expect our effective tax rate to be between 25% and 30% with a slightly lower rate in the first half of the year versus the back half due to the timing of equity-based vesting.

This increase for the year is due to the anticipated lower permanent benefit from equity-based compensation. As a reminder, our cash taxes will continue to be immaterial until we fully utilize our net operating losses. For the full fiscal year, we reported GAAP net income of $63.7 million compared to adjusted net income of $50.2 million in the prior year, an increase of 26.9% due to higher operating performance and lower taxes, partially offset by higher depreciation and amortization. Diluted EPS for fiscal 2025 was $0.54 per share compared with adjusted diluted EPS of $0.42 in the prior year.

Turning to liquidity. At the end of the quarter, we had 0 debt outstanding, $393 million in cash and investments and access to a $75 million undrawn revolver with an option to increase our liquidity if needed. Note, we expect to increase the size of the revolving facility and extend its maturity date in the first quarter. When looking at full year 2025, cash flow from operations was $184.8 million compared to $161 million during the full year 2024. This increase was primarily driven by improved operating performance. Free cash flow in 2025 was $26.1 million, a decrease of $26.8 million compared to full year 2024 due to capital expenditures.

Now our outlook for full year 2026, we expect the following: 74 to 76 net new CAVA restaurant openings; CAVA same-restaurant sales of 3% to 5%; CAVA restaurant-level profit margin between 23.7% and 24.2% preopening costs between $19.5 million and $20 million; and adjusted EBITDA, including the burden of preopening costs between $176 million and $184 million. I'd like to provide some additional thoughts on our outlook.

Turning to same-restaurant sales. We expect 3% to 5% growth this year. As we exited last year, we began to see momentum in same-restaurant sales with first quarter comp trends tracking above full year guidance. Having said that, given the dynamic consumer backdrop in 2025 and uncertainty across today's macroeconomic landscape, our guidance for the rest of the year assumes a low to mid-single-digit same-restaurant sales, which is in line with our long-term algorithm. Additionally, in January 2026, we implemented an approximate 1.4% in-restaurant menu price adjustment, and we do not plan to take any additional price in 2026. Importantly, this adjustment did not include price increases to our base bowl, allowing us to maintain strong everyday value for our guests.

On the cost side, we expect low single-digit inflation across food, beverage and packaging and low to mid-single-digit labor inflation, inclusive of modest incremental investment to support our AGM program. Keep in mind, beginning in the second quarter, we expect salmon to be a margin rate headwind of approximately 100 basis points, while pricing will drive penny profit neutrality. Shifting to general and administrative expenses, as Brett outlined, we are making targeted investments in our field leadership model to support operations and elevate standards as we scale, including the addition of 2 zone leaders, a new market leader role and narrower spans of control. As a result, we expect G&A as a percent of revenue in 2026 to remain relatively flat year-over-year. These investments are well timed for our next phase of growth to ensure operational integrity and will support Doug as he comes on board and begin partnering with our teams.

Before we move to Q&A, I want to acknowledge our restaurant, manufacturing and support center teams. Our momentum reflects the strength of our model, and we're grateful to the teams who make that possible. Thank you all for bringing heart, health and humanity to food every day.

And with that, I'll turn it over to the operator for Q&A.

[Operator Instructions]

Your first question comes from the line of John Ivankoe from JPMorgan.

So I'm going to ask the question about same-store sales and maybe a little bit differently. New unit volumes continue to be strong in the fourth quarter of '25. Quite frankly, they've been strong the last couple of years. I think there was at least some conversation that maybe these strong new units that were entering the comp base would actually be a negative throughout parts of '25 and certainly into '26. So I wanted to comment if that was still happening. And if that's the case where new units are coming into the comp base negative, can you describe the other pockets of strength in your more mature units that are leading to such outsized comps, particularly in the first quarter?

John, thanks for the question. So as you know, our same-restaurant sales are calculated on a full year basis. So after about 12 months of performance, they come into the comp base. And as you called out, those restaurants have been performing very well and provided some headwinds. So as they came into the base in 2025. Those were not significant overall to the same-restaurant sales in general. And in fact, we're seeing strength across all of our vintages of restaurants, all of our geographies across the country, the income cohorts of our restaurants based on median household incomes in those markets that's really supporting the same-restaurant sales results that we've delivered and what we're seeing as we go into 2026 overall.

Your next question comes from the line of Sharon Zackfia from William Blair.

I guess just a follow-up on John's question. Can you talk about what your assumptions are for new unit productivity in '26 kind of embedded in your guidance? And then Tricia, on the comps, is there any inherent reason other than just general macro uncertainty that you would expect comps to decelerate for the rest of the year? It seems like salmon would also give you some extra ticket there.

Thanks, Sharon. So our new restaurant productivity assumption included in our guidance is about 90%. As you know, our '25 cohort delivered over 100% productivity, but we wanted to be very thoughtful in our assumptions as we went into 2026. And we're seeing good results so far, but our guidance reflects a 90% new restaurant productivity assumption. And then as you think about comps, you would naturally expect that introductions of new menu items would drive performance and lifts in traffic overall. But our guidance reflects our long-term algorithm, which is low to mid-single-digit assumptions from here on out, again, and wanting to be very thoughtful, understanding and anticipating the broader consumer environment, any macro pressures that might be out there, volatility in the restaurant industry in general.

While we're not seeing that or experiencing that in our quarter results to date, we wanted to reflect that in our assumptions. So as we guide, we're thinking same-restaurant sales will be fairly even throughout the quarters of the year despite the fact that we have a very robust pipeline of opportunities ahead of us.

Your next question comes from the line of Jake Bartlett from Truist Securities.

Mine was on your restaurant level margin outlook and actually also the pressure you had in '25 relative to your long-term guidance. So the question is, how much of the pressures that you're seeing -- you expect to see in '26 are temporary, things like bringing on the salmon and that will go away on their own. And then the other question is how -- what actions are you going to take or do you plan to take to get back to that 25% long-term target?

Yes. So as we think about going forward, we're always focused on making investments. So investments in team members, investments in the guests. And sometimes those have impacts on our restaurant level margins. But the power of our model is very strong. And with robust AUVs at $2.9 million, we're able to pass things along into our business without passing costs on to the guests. So when I talk about investments, think about modest price increases. So our base bowls, for example, we did not increase at all when we raised prices at the beginning of this year, making investment in the guests and making ourselves even more accessible than we've ever been.

And as you're thinking about restaurant level margins overall, 25% is not our target. That is something that we have been able to deliver, but we've been also very thoughtful about making reinvestments to build this brand for the long term. So as it relates to 2026, Yes, we're going to introduce salmon, and it will be a premium item, much like steak was, and it will have a headwind to overall restaurant level margins of about 100 basis points when we launch it, but it will drive penny profit neutrality overall. Additionally, we'll continue to make investments in labor. We started with additional investments with our AGM program in December of 2025. There'll be some modest investments there on the labor line and then always looking to make sure that we're paying our team members a fair wage and evaluating that against our competitors so that we're a top payer in the market so that we can create opportunities for our team members so they can deliver on an amazing guest experience.

Your next question comes from the line of Sara Senatore from Bank of America.

I guess maybe as I think about the -- to your point about the same-store sales growth kind of accelerating, I think you identified a few drivers. And I was wondering if maybe you could, I don't know, order of magnitude or help me think through what the sort of -- what really turned the dial because I think the rest of the industry hasn't seen this kind of inflection. But I think you mentioned you -- obviously, the AGM, you had some innovation, I think, and then the tiered loyalty. I don't know if you could sort of disaggregate, I know that's hard, but trying to think through kind of what of these maybe was the sort of hallmark of the improvement? And then as you think through kind of that AGM rollout, is there anything that we could look at that says like throughput gets better or I know they're performing better, but sort of anything to quantify as we think about getting to maybe 100%.

Sara, so as we look at the 2-year stack of same-restaurant sales, as you indicated, we saw a sequential improvement throughout 2025 from first quarter to second quarter to third quarter and into fourth quarter. There really isn't one thing that was driving that. You mentioned a lot of the initiatives that we put into place, and that there isn't any one single thing that was driving the overall results. I've sometimes talked in the past about how the drivers of same-restaurant sales are a little bit like a CAVA bowl, a lot of amazing individual items that come together to produce something that's pretty impactful. And that's what we're seeing.

So encouraged by what we're seeing with AGMs. That launched started launching in December of 2025, wanting to be thoughtful about throughput, but not wanting to compromise on the guest experience. So we didn't pull any significant levers in there. Marketing is a lever that we are modestly leaning into and leveraging our media mix modeling work to make -- be thoughtful in how we're communicating the guests to drive traffic. But again, wanting to make sure that we are delivering amazing culinary that is helpful, makes us feel good while we're e it and after with a great guest experience in hospitality. And we're going to continue to focus on that to build a long-term durable brand that delivers traffic momentum into the future.

Your next question comes from the line of Chris O'Cull from Stifel.

Tricia, I had a follow-up on the conversation about media mix. I think the company has been leaning more towards -- or more heavily toward paid advertising. Just hoping maybe you can elaborate on what you've been evaluating, whether you believe the ROI on these investments have been attractive and whether there's any appetite to expand the effort?

So we're learning every time we update our media mix modeling work, and we tweak our investments as we learn more from that and monitor the ROAS and to make shifts accordingly. We haven't significantly changed our overall marketing investment, but we want to optimize that. One of the beauties of our model and the power of the appeal of the brand is it doesn't require a lot of media to drive the growth into the future, but we want to make sure that we're optimizing it. We did drive a significant impact or a significant increase in overall brand awareness over the past year. So from about 55% a year ago to 62% today, and that has something to do with more restaurants opening across the country and the way we're able to optimize our investments in media.

Your next question comes from the line of Andrew Charles from TD Cowen.

Trish, I want to come back to the new store maturation. If you go back to the time of the IPO, you guys talked about how when stores enter the comp base, they comp around 10% in year 1 and around 8% in year 2. And the output of that is usually around, call it, 250 or 300 basis points benefit to same-store sales. So I'm curious what's embedded within the impact from new store maturation within the 3% to 5% guidance. a question for you. Can you talk about the test of salmon and what you observed there? And how do you compare and contrast it versus what you saw with Chicken Shawarma?

Thanks, Andrew. So yes, our -- what we shared when we were on the IPO roadshow was that a new restaurant start at about $2.3 million in AUV and grow about 10% in year 1. And in fact, over the past 2 years, we've seen those restaurants open much higher than that and experienced in some markets, a bit of a halo around those openings. We find that over time, those restaurants at about month 18 start to perform more like what we would have seen historically. It's a reflection of that increase in brand awareness, the excitement around the brand and the momentum that we're actually seeing. But at the end of the day, the cash-on-cash returns are much stronger because we're pulling forward those revenues such that in year 2, we're exceeding what our expectations were both on the top line and the bottom line perspective.

And so when we think about guidance, we know what we saw in 2024 with that cohort of openings, and we've modeled '25 impact of openings on '26 to be slightly larger of a negative impact in guidance than what we experienced in 2025 because those 25 openings were stronger than the '24 cohort themselves, and that has been built into the guidance overall.

You asked also about the salmon test versus Chicken Shawarma, bringing in salmon at the end of the quarter, it's amazing pomegranate-glazed and in test results performed a little bit better than Chicken Shawarma, but we've also been very thoughtful in how we're building that into our guidance assumptions and going back to -- we looked at trends quarter-to-date, layered on a low to mid-single-digit long-term algorithm assumption for the rest of the year. So we've been very thoughtful in how we're applying any new culinary initiatives that are going to roll out.

Your next question comes from the line of Danilo Gargiulo from Bernstein.

Okay. I'll give a little breather to Tricia and ask the question to Brett this time. So Brett, I wonder if you can elaborate on Project Soul more, how many stores now have the new design, early learnings that you're seeing or different experiences from consumers? And if there is any financial metric that you're willing to share regarding the outperformance or underperformance or equal performance of the stores versus the control group, that would be helpful as well.

Danilo, thanks for the question and giving Tricia a breather. We have Project Soul -- elements of Project Soul in roughly 100 locations to date. Every new restaurant gets the full Project Soul design. And we have seen improved aesthetic scores from our guests. They certainly feel the warmer environment, the more vibrant environment and an environment that's more evocative of dwelling for a bit and sharing a meal in our physical space. So it certainly is communicating our brand essence in a compelling way, and we're excited to roll it out in all new restaurants.

And then as older restaurants age, we'll go back and remodel and apply the Project Soul design to those aging restaurants. As far as the quantifiable impact, we have not disclosed that to date on what we've seen from a Project Soul perspective.

Your next question comes from the line of David Tarantino from Baird.

Brett, I'll keep you involved in the conversation here. I wanted to ask, I guess, 2026, according to your guidance, will be the year where you cross over the 500-unit mark. And I know you and I have talked about that being a critical point where you need the right infrastructure and right systems to support growth for the next 500 or so units. So I wanted you to maybe give an update on where you think you are in terms of what ideally you need in terms of systems, infrastructure, people. I know you mentioned the field leadership model that you recently rolled out. But I guess, any other changes do you think you need to accomplish the growth you want to beyond this year?

Yes. Thanks, David. I mean I feel good about where we stand from a manufacturing infrastructure, technology infrastructure, our digital ecosystem, we've invested heavily in our data infrastructure, we made a lot of progress in the past year on our new data foundation to be able to leverage modern data technologies and LLMs and really unlock productivity improvements in the business, both in our restaurants on marketing and insights across corporate.

Certainly, the priority from an infrastructure standpoint beyond what we've already built is deepening and broadening our people development pipeline. And I referenced it in the prepared remarks as Doug comes on board and the new flavor, Your Future Platform, we launched this past fall. So very excited to create real clear explicit development path and have a developmental system that takes our team members from entering our door as a team member on the line to growing into a multimillion-dollar restaurant leader. That is the biggest governor, as I've said, to our growth.

And I feel good about where we stand today, but this is really to ensure that we have the foundation in place that our guidance is for 74 to 76 restaurants next year. But as we continue to grow our compound annual unit growth rate, we'll be staring down the barrel of 100-plus restaurants a year that we've got that role-ready bench of leaders and career paths for them.

And then lastly, I'll say, we also referenced in the prepared remarks some of the infrastructure we put in the kitchen to make sure not only from simplicity of operations, but flexibility from an innovation standpoint, our TurboChef ovens as well as from an execution standpoint on digital order accuracy, our new KDS system. So I feel good about where we stand. And as Tricia talked about, we continue to reinvest in our teams and in our guests for long-term sustainable growth and long-term sustainable restaurant level margin expansion.

Your next question comes from the line of Brian Harbour from Morgan Stanley.

Maybe just now that you have a new COO in place, what -- you talked a lot about people, but I guess what are some of the other kind of operations priorities? Or what are some things that you think can really make the difference as we think about this year and next on the operations side?

Yes, Brian, thanks for the question. Certainly, #1 priority is that people development pipeline. Number two, I'd say, is elevating our hospitality to truly be reflective of our Mediterranean brand essence in every interaction that every guest has across our restaurants. And lastly, I'd say to just elevate the consistency of how we deliver our operational execution every location, every shift, whether that's Sunday night, not just peak lunch on a Wednesday.

Your next question comes from the line of Brian Mullan from Piper Sandler.

Just wanted to ask about catering. Can you update us on what you're learning or testing for in the Houston market? Is the plan still to test in a new market at some point this year? And then just related to that, I'm not trying to get ahead of ourselves with this, but when you do decide the business is ready for catering more broadly, do you envision kind of a region by region? Or would it be something you'd look to turn on everywhere? And does that require dedicated sales? Or are there other ways to grow awareness? I know you believe there's demand. So just your take on all that.

Yes. Thanks, Brian. We certainly are excited about the potential of catering and the demand we see. And we are also very sensitive to making sure that we do this thoughtfully to set our operators up for success and to be able to deliver the guest experience we're committing to. So we do expect a second market test in addition to our ongoing Houston market test later this year and would see a potential expansion in '27 to additional markets. I don't think you'd see us go from a standing start to a national launch, but I do think we would get to a certain point of markets with catering that we felt confident enough that we have perfected and refined our catering channel that we would then move to a national launch progressing through our stage gate process.

So we've had tremendous learnings to date. We have progressed and formalized our packaging. We are working on the final technology that will roll out into that second market test from a self-service model. We have an internal sales team that harkens back to our Zoe's Kitchen days. So we've got a great B2B sales team in place already. So a lot of the elements there. We're just trying to be very thoughtful and very methodical because the production rhythm of catering is very different than our traditional channels of in-restaurant and digital. It's highly concentrated, high volume. So we want to make sure that we have the load balancing thought through and correct and that we have our operators positioned and our guests user experience up to the par of our other channels.

And once we feel like we've got that in the position we feel very confident in, we'll be very excited to take advantage of the demand that's out there and launch the catering channel.

Your next question comes from the line of Logan Reich from RBC Capital Markets.

Congrats on the really solid quarter. My question was on the Q1 to date performance. It seems like you guys have had a pretty material improvement from Q4 relative to some other players in the industry. Where do you guys think the outperformance is coming from? And what are the key drivers of the improvement you guys are seeing year-to-date? And then if you could just quantify the impact of anything you're seeing on the weather in January, that would be helpful.

Yes, Logan, it's Brett. I'll take this one. As Tricia noted earlier, sequentially, we had a 2-year improvement every quarter last year. And we tried to stress after Q2 and Q3, the idiosyncratic nature of some of the high hurdles we were lapping, including the launch of steak as well as you had things like government shutdown and some other things I know other brands are dealing with. But I felt like at the time, it was obfuscating and we noted the underlying strength we were seeing in the brand. And we talked about this as it relates to our new restaurant openings, our best class ever.

So we were seeing that strength underneath. And as we cycled through some of those short-term cyclical headwinds, we've seen those comps reaccelerate and reemerge. And I also think we focused on delivering great value every day. And there was a very intense promotional discount environment in Q2, Q3 and somewhat Q4. And I feel like there's a sense that there may have been some buying of transactions in other places where consumers were gravitating back to where they find great bang for the buck as they're becoming increasingly discerning about where they're spending those dollars.

And we look at value from a holistic standpoint, the quality of the ingredients we're serving, the relevance of our Mediterranean cuisine, especially when you look at trends, including GLP behavioral eating shifts, like our unique cuisine where taste and healthy night and then delivered with convenience in a multichannel format with the experience we're delivering operationally and from a brand perspective, that is long term, a secular trend as we celebrated our 15th anniversary last month that hasn't changed over those 15 years and continues to build momentum. And I think you're seeing that momentum reaccelerate as we came out of last year and started this year.

And from a weather standpoint, I'd like to say, winter comes every year. Came a little harder this year, but our guidance and our quarter-to-date context includes all of the storms, including the recent blizzard here in the Northeast.

Your next question comes from the line of Nick Setyan from Mizuho Securities.

The digital mix is up like 200 basis points plus for 3 quarters in a row now. And that obviously predates the October revamp of loyalty. So maybe just give us a peek of what's going on under the hood, the third-party versus first-party average check of digital versus nondigital, anything would be very helpful.

Yes. Nick, I won't get into the details of the check on delivery. What I will say is that we've gotten better at execution on our digital channels. We always felt we had opportunity there. The KDS investment has helped as we improve our accuracy scores, as we improve our timeliness scores. So whether it's online order, whether it's first-party or third-party delivery, we've improved operationally, and that has led to increased transaction growth on those channels.

Your next question comes from the line of Jeffrey Bernstein from Barclays.

Great. Brett, I just wanted to follow up on the AGM discussion. I mean it seems like that's core to your focus on improving operations. I think you mentioned you're now 60% complete in terms of filling those roles. Just wondering if you can give a little bit more color in terms of what you think are the primary benefits there and maybe the time frame to complete what seems like a pretty key rollout. And I think you mentioned -- I mean, that's the biggest constraint to unit growth. Just wondering if you feel like you have the pipeline of managers to stay at these new units as you especially ramp up to that 100-unit number per year.

Yes. Thank you. We do feel like we've got the pipeline in place and the reinforced focus on it is to make sure we stay in front of that and stay ahead of it given our accelerated growth. I think the 2 big things the AGM role is meant to address and is addressing is, one, that broadening and deepening of role-ready leaders to fill that pipeline and open those new restaurants with operational integrity. And two, it goes to our third pillar is title. It's running great restaurants every location, every shift. So having a more seasoned manager complement across all 14 dayparts, 7 lunch and 7 dinners every day of the week. And that really is the focus of that role, and we're very pleased with the early results we've seen with restaurants that have that role. And the timing of completion of having those roles filled, we expect to have that complete by the middle of the year.

Your next question comes from the line of Christine Cho from Goldman Sachs.

So great to see the loyalty program continuing to evolve. And now with the tiered loyalty program being live for a few months, wondering if you're seeing any shift in the guest behavior, specifically any early evidence that the tiered structure is moving guests up the frequency curve and that the loyalty is helping alleviate some of the pressures coming from the younger consumers you've highlighted previously.

We are seeing encouraging results as a result of the introduction of tiers. And we're seeing modest increases in frequency, and it's driving the behaviors that we were hoping for and that being engaging with guests earlier in their loyalty journey. So we had a lot of high-frequency users in the past before we introduced tiers that didn't even really understand or value the benefits they were receiving and the engagement was not that significant. And so the introduction of the tiers has brought our guests into the brand sooner and driving up frequency and experiencing new items, whether it might be a pita chip promotion or a drink promotion that will drive greater attachment over the long term as well.

Your next question comes from the line of Dennis Geiger from UBS.

I was curious if you could talk a little bit more at a high level about menu innovation looking ahead. Obviously, salmon, the big one and not to get too far ahead of ourselves. But just as it relates to menu innovation going forward, you have the tent-pole moments and then some other innovation around that. Can you just talk about the philosophy going forward, what the pipeline maybe looks like at a high level? Anything to add on thinking about that menu innovation looking ahead?

Yes. Dennis, it's Brett. Similar philosophy as what we've spoken to the last few years, that tent-pole moment bracketed by a few seasonal moments. You saw us in this most recent quarter in Q1 launch or bring back our roasted white sweet potatoes, which is a fan favorite. We launched a new greens mix, our Power Greens blend, which has been very popular, our Tangerine Aleppo juice and our new Sumac Sour Cream and Onion Pita Chips, which are delicious. I encourage all of you on the call. If you haven't tried it yet, you got to try them. So really building out our pita chip platform as a flavor innovation platform, which has helped drive incremental attachment of our pita chips and snacking and side occasions.

As far as innovation in the protein category, salmon, as we've talked about, is launching at the end -- before the end of Q1. We have other proteins in the stage gate process. We've had a market test of shrimp, our roasted garlic shrimp. So that is something we're also excited about as well as a number of other proteins that are in development. So there's a good pipeline of just the protein section, but we have many other opportunities from a category perspective, whether it's desserts, whether it's a complementary beverage platform, whether it is -- we have our pita sandwiches, there's opportunities to innovate and elevate around our sandwich platform as well as our base vehicle platform. You look at the grains category, I talked about the power greens and the greens category.

So all this comes together, toppings, dips and spreads to create a powerful holistic energy around innovation when you've got the ability to make 17.4-plus billion combinations and have unique ways through all these different categories to continue to drive excitement and interest and frequency.

Your next question comes from the line of Chris Carroll from KeyBanc Capital Markets.

Maybe just following up on the topic of new restaurant performance and productivity. Can you maybe comment on what you're seeing from new restaurant performance in existing markets versus new markets? And curious if there's anything you're seeing in new versus existing market openings that's impacting how you're thinking about development strategy over the coming years?

We're seeing strength across our categories of openings. So we look at existing growth, emerging and greenfield markets, and we're seeing lift in those restaurant openings across those categories. So again, really just a reflection of the power of the brand and the momentum behind CAVA and Mediterranean and a reflection of the increase in brand awareness. And as we continue to open more restaurants, I would expect that, that would continue to build on that development and opportunity. So when we're thinking about the real estate strategy, we're always working with our real estate team. Jeff Gaul leads that for us. And we don't have any significant changes, just keep focusing on doing -- finding great sites and giving us an opportunity to welcome CAVA to more and more people across the country.

Your next question comes from the line of Jacob Aiken-Phillips from Melius Research.

So just on throughput, as you've improved digital execution, you got salmon coming, are you starting to bump up against peak capacity in any of the mature stores? Or do you still think there's meaningful headroom to drive transactions without compromising speed and hospitality?

Yes. Thanks, Jacob, for the question. No, we think we have meaningful room to grow transaction growth at peak hour. And I've talked a lot in the past that we're not going to push that gas pedal too hard, too fast and overheat the engine, especially when it's many of our guests first time experiencing CAVA, let alone Mediterranean cuisine, and we want to give them the space to be able to have a great experience and not feel rushed. Now having said that, we know in many of our locations and urban locations in particular, we can get very long lines at lunch, and we don't want people intimidated and walking away.

So we continue to work on ways, whether it's our new labor deployment model we launched a year ago that we continue to refine deployments, whether it's new equipment, our new Project Soul design has a new layout on the line where they no longer turn around to get the greens and the greens are in front of them on the line, saving steps in motion to naturally help those lines flow better at POS checkout, redesigning the POS area so that we're not pushing our teams to rush people through in an unnatural way. But we think over time, there is a good amount of opportunity to drive transaction growth by improving speed, but not at the expense of service.

Your next question comes from the line of Todd Brooks from Benchmark.

Just wondering on KDS. Now that we're about 80% rolled out, what's the curve of a restaurant getting the platform and really getting to those efficiencies around digital order accuracy that start to bend the needle with the consumer and driving digital mix higher? And then I guess, what percent of the base has kind of reached that tipping point?

So I'd say we're still evaluating that performance, but we do find that it's a fairly quick transition to the KDS system where you can see improvements overall. One of the other features of KDS is that guests have more visibility into the status of the order. So if they opt in for text notifications, we send that information on to the guests and then -- and create opportunities to have a better guest experience overall. The other thing it allows us to do is get better from an accuracy standpoint.

So over time, the combination of those 2 things should drive continued improvement in guest experience and overall results. And so I would say with the slope that's impacting it, but not an outsized driver of overall traffic driving, and it's certainly not something that we've layered in significantly in our guidance as we think about it going forward.

Our last question comes from the line of Brian Vaccaro from Raymond James.

Just a quick one on loyalty for me. And sorry if I missed it, but how many active users were in the program, either current or exiting '25? And could you frame the percent of sales that are being driven by the program and how that might compare to prior year?

It drives about 1/3 of our overall sales through the loyalty program, and we haven't given a number on active users in the program. We're pleased with the progress we're making, and we'll continue to enhance the program itself and keep moving forward from there.

There are no further questions at this time. I will now turn the call over to our Co-Founder and CEO, Brett Schulman. Sir, please continue.

Thanks for joining today. Before we wrap, I want to take a moment to thank our entire team for their dedication and commitment. 2025 was a milestone year for CAVA, and it was only possible because of the team members who bring our mission of heart, health and humanity to food to life every day. As we look ahead, we're energized by the opportunity in front of us and confident in the foundation we've built for the next phase of growth. We look forward to sharing our progress and speaking with you again in the spring.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the CAVA Q3 2025 Earnings Call.

[Operator Instructions]

This call is being recorded on Tuesday, November 4, 2025. I would now like to turn the conference over to Matt Milanovich, Head of Investor Relations. Please go ahead.

Good afternoon, and welcome to CAVA's Third Quarter 2025 Financial Results Conference Call. Before we begin, if you do not already have a copy, the earnings release and related 8-K furnished to the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress. You will find reconciliations between non-GAAP financial measures discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without any reasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website.

Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in CAVA's most recent annual report on Form 10-K as may be updated by its reports on Form 10-Q and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. And now I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. During the third quarter of 2025, we continue to strengthen our leadership in Mediterranean, a category we have pioneered and are rapidly growing while staying true to our mission of bringing heart, health and humanity to food. As consumers today face a challenging environment, the relevance of Mediterranean cuisine and the way we deliver to CAVA continues to resonate deeply. This differentiation enables strong average unit volumes, consistent value creation and the structural strength of our model, with growing market share and significant white space ahead, we remain confident and steadfast in our ability to create lasting value, build enduring guest loyalty and reinforce our position as the clear leader of the Mediterranean category.

Our third quarter highlights include a 20% increase in CAVA revenue and a 66.8% increase over the last 2 years. CAVA same restaurant sales growth of 1.9% and restaurant level profit margin of 24.6%, 17 net new restaurants, ending the quarter with 415 restaurants, a 17.9% increase year-over-year. Adjusted EBITDA of $40 million, a 19.6% increase over the third quarter of 2024, net income of $14.7 million and $23.3 million in year-to-date free cash flow. As I've shared in prior quarters, our brand proposition is strong and continues to strengthen as reflected in our expanding market share. Since 2019, while overall restaurant industry sales have grown, industry transactions have declined, yet CAVA has not only maintained but increased our market share significantly by delivering on our promise of high-quality food, brand relevance, curated guest experiences and seamless convenience.

During that same time frame, we have worked relentlessly to make our food more accessible to guests, underpricing CPI by almost 10%, while taking less than half the aggregate, 34% price increases of industry peers. At the same time, we recognize that today's environment is creating real pressures for consumers especially younger guests who are making more deliberate choices about where they spent. It's incumbent upon restaurants to deliver exceptional experiences and differentiated value to guests. That's why the foundation my co-founders and I built 15 years ago is more important than ever. From day 1, our aspiration was simple to make our Mediterranean cuisine accessible to communities across the country, delivering it with welcoming hospitality while serving as a platform for our team members to build a career, not just have employment. This concept essence continues to guide everything we do to this day. As we capture the white space opportunity ahead of us, our growing market share is driven by the intention rooted in our first strategic pillar, expand our Mediterranean Way in communities across the country.

During the third quarter, we opened 17 net new restaurants, bringing our total restaurant count to 415 locations across 28 states and the District of Columbia. Amongst them was our highly anticipated Brickell opening in Miami where the energy and enthusiasm from our guests was palpable. A powerful reminder that with every new CAVA, we're not just growing our footprint, but also deepening connection and fostering community.

Recent openings also highlight projects sold, our restaurant redesign initiative that brings the Mediterranean Way to life through warm tones, greenery, natural light and softer seating, design elements that turn our restaurants into welcoming places to dine. The project sold prototype is now finished and the complete design will roll out in new openings next year. And just as our environments invite connection so do our bold Mediterranean flavors.

Earlier this quarter, we introduced our latest protein innovation to consume juicy roasted chicken breasts marinated in a signature spice blood and hand [indiscernible] back on a bit. The launch performed to our market test expectations with incidence levels that showed strong guest responsiveness and healthy engagement across our restaurants. Another example of how distinctive, innovative and satisfying flavors rooted in health continue to resonate with our guests.

That same spirit of innovation comes through with our recent salmon market test, which has shown encouraging results. Salmon is a natural fit for our menu and represents an exciting milestone as our first ever seafood offering. Our roasted flaky fillet marinade in a subtly sweet [indiscernible], red wine vinegar and bold spices not only complements our Mediterranean flavors beautifully, but also broadens the variety we can offer guests. Early results reaffirm the strong potential we see and if performance continues, we will plan to expand salmon more broadly across our restaurants in late spring of 2026. While proteins like salmon and chicken shwarma remain a critical focus of our culinary innovation pipeline, we also know that smaller touches can carry just as much weight in keeping our guests excited.

Our Peter Chip are a perfect example. Last month, we introduced cinnamon sugar Peter Chip, dusted with cinnamon sugar and the hint of cardamom paired with honey for dipping. The sweet twists on a fan favorite that brings both snacking and dessert occasions to life.

Shifting to our second pillar, deepen personal relationships with guests even as we scale. This past October marked the 1-year anniversary of our rewards reimagined relaunch. And since then, the program has grown by approximately 36% and has become a key platform for connecting with guests in a more personal, meaningful and creative ways. Building on that momentum, we recently introduced tiered status levels as the next phase of the program. Through our new sea, sand and sun structure, members now enjoy differentiated benefits and surprise and delight experiences designed to celebrate their loyalty and strengthen long-term engagements. As an extension of our brand spirit of generosity, we also launched status matching to welcome new members and encourage deeper participation. While status matching is a first of its kind offering in our industry, we see it simply as another way to express our concept essence. The latest evolution of our program also includes an expanded rewards catalog with seasonal offerings and fresh new ways to engage.

With every enhancement, our goal is to create a deeper sense of belonging and continuity for our guests, whether it's elevating hospitality, improving order accuracy or better speed of service at our core is our commitment to building a strong operational foundation. And regardless of near-term cyclical pressures on the consumer, we're doubling down and focusing now more than ever on delivering for the long term with exceptional guest experiences and ensuring that our restaurants are staffed with team members that are equipped, empowered and trained to run great restaurants every location, every shift, our third strategic pillar. The world technology plays in our restaurants is important and providing our team members with the tools to deliver consistently great experiences as a key focus area.

An initiative in that spirit is our new kitchen display system which we are now on track to roll out to at least 350 locations by year-end with over 200 restaurants live today. We are continuing to see encouraging results as restaurants with the new KDS are experiencing higher guest satisfaction scores, driven by improved digital accuracy and proactive guest order status notification capabilities. In addition to improvements across technology, we're also investing in equipment that makes our restaurants easier to run, such as our TurboChef ovens. All CAVA restaurants are now equipped with a TurboChef oven. These ovens allow for faster, more consistent cook times, enabling simpler execution in our restaurants while elevating food quality.

Both the TurboChef and KDS investments helped reinforce execution in our kitchens while allowing our teams to focus on what matters looks, delivering a great guest experience. We are at a meaningful moment in our growth journey, and we know it is crucial to invest in training and developing our team members. Today, I'm excited to introduce our new flavor your feature initiative a holistic team member development program designed to attract, develop and retain CAVA's feature leaders. One of the first actions under this initiative is the launch of our new Assistant General Manager program, an evolution of our current general manager and training role. This role provides more experienced leadership in our restaurants on more shifts throughout the week, ensuring a clear #2 leader is always in place. will also create a stronger pipeline of roll-ready leaders to take on the GM role as we scale and open more restaurants. Today, about 20% of our leaders are ready for immediate elevation will be roll ready with additional training over the next quarter and the remaining 30% likely sourced externally. The AGM role is just 1 component of a broader leadership initiative that we are excited to share more about in the quarters ahead.

Our commitment to developing team members into restaurant managers remains a core near-term focus, and we're excited about the opportunity to build the next generation of cabo leaders. You can see the power of that commitment in stories like that, Angelo Miranda at our Millennium location. Angelo started as a team member, eager to learn and grow, under the guidance of his then General Manager, Rubin Holguin. He learned the business from the ground up. He developed his leadership skills through consistent coaching and feedback and belief in its potential.

Over the years, that investment has paid off. Today, Angelo leads the same restaurant where he began his journey now as a General Manager, inspiring the next generation of team members to do the same. When I visited Millennia earlier this month, I saw firsthand the culture of growth and pride that Angelo and his team have built. Angelo was quick to introduce me to his high potential team members he is developing as future CAVA restaurant leaders. It's a true reflection of what happens when we invest in people and create pathways for them to lead. In Angelos Original GM, Ruben, he is now an area leader overseeing 9 restaurants. Our mission is to bring heart, health and humanity to food, and it continues to drive our strategy shape our culture and inspire the work of more than 13,000 team members each day to our teams and to all of you who share in this journey. Thank you. And with that, I'll pass the call off to Tricia to walk you through the financials.

Thanks, Brett, and hello, everyone. CAVA revenue in the third quarter of 2025 grew 20% year-over-year to $289.8 million and 66.8% compared to the third quarter of 2023. During the quarter, we opened 17 net new restaurants, bringing our total CAVA restaurant count to 415 restaurants. CAVA's same-restaurant sales increased 1.9%, primarily from menu price and product mix with guest traffic approximately flat. On a 2-year basis, same-restaurant sales accelerated 350 basis points to 20%. On a 3-year basis, same-restaurant sales remained relatively stable at 34.1%. Despite lapping strong prior year results and navigating macroeconomic pressures, we continue to grow our market share and are confident in the underlying structural strength of the business.

Our new restaurant productivity remains above 100%, underscoring the resonance of our brand. CAVA restaurant level profit in the third quarter was $71.2 million or 24.6% of revenue versus $61.8 million or 25.6% of revenue in the third quarter of 2024, representing a 15.1% increase. CAVA Food, beverage and packaging costs were 30.1% of revenue, higher than the third quarter of 2024 by 20 basis points. This slight increase reflects the impact of tariffs and our limited time-only chicken shawarma offering. CAVA labor and related costs were 25.5% of revenue, an increase of approximately 10 basis points from the third quarter of 2024. This increase in labor and related costs reflects investments in our team member wages of approximately 2%, partially offset by leverage from higher sales. CAVA occupancy and related expenses were 6.7% of revenue, an improvement of 10 basis points from the third quarter of 2024, driven primarily by increased sales leverage. Other operating expenses were 13.1% of revenue, reflecting an increase of 80 basis points from the third quarter of 2024. This increase was due to a higher mix of third-party delivery, insurance costs and other individually insignificant items.

Shifting to overall performance. Our general and administrative expenses for the quarter, excluding stock-based compensation and executive transition costs were 9.4% of revenue compared with 10.8% of revenue in the third quarter of 2024. This 140 basis point improvement was primarily due to lower performance-based incentive compensation, leverage from higher sales lower legal costs, partially offset by investments to support our future growth. Preopening expenses were $4.9 million in the current quarter compared with $2.8 million in the prior year quarter. The $2.1 million increase includes a higher number of units under construction and increased costs on a per unit basis. Adjusted EBITDA for the third quarter was $40 million, a 19.6% increase versus the third quarter of 2024. The increase in adjusted EBITDA was primarily driven by the number of and continued strength in new restaurant openings and leverage in general and administrative expenses. Equity-based compensation was $3.3 million in the third quarter compared with $3.5 million in the prior year quarter. We anticipate full year equity-based compensation to be between $18 million and $20 million, which includes the 2025 grants as well as the impact of forfeitures.

In the third quarter, our effective tax rate was 28.6%. For the full year fiscal 2025, we expect our effective tax rate to be between 10% and 12%. As a reminder, our cash taxes will continue to be immaterial until we fully utilize our net operating losses. During the third quarter, we reported $14.7 million of GAAP net income compared to $15 million of adjusted net income in Q3 of 2024. Diluted EPS was $0.12 in the third quarter compared with adjusted diluted EPS of $0.13 in the third quarter of 2024. The slight decrease was due to the allocation of income taxes in the prior year, excluding the release of the valuation allowance, partially offset by higher earnings before taxes.

Turning to liquidity. At the end of the quarter, we had 0 debt outstanding $387.7 million in cash and investments and access to a $75 million undrawn revolver with an option to increase our liquidity as needed. Year-to-date Q3 cash flow from operations was $144.5 million compared to $131.2 million during the year-to-date period in 2024. Year-to-date, Q3 free cash flow was $23.3 million.

Now to our outlook for full year 2025, we expect the following: 68 to 70 net new CAVA restaurant openings on the same restaurant sales growth of 3% to 4%, CAVA restaurant level profit margin between 24.4% and 24.8%, preopening costs between $18 million and $19 million and adjusted EBITDA, including the burden of preopening costs between $148 million and $152 million. I'd like to provide some additional context around our updated guidance. As we exited the second quarter, we saw same restaurant sales reaccelerate and we're encouraged by the sequential improvement.

However, as the third quarter progressed, we experienced a moderation in trends reflecting broader macroeconomic pressures. Entering the fourth quarter, we're seeing further moderation as we continue to lap stronger same restaurant sales from the prior year. As such, we have incorporated these trends into our outlook for the remainder of 2025. Our same-restaurant sales guidance reflects both the benefit of our recent chicken shwarma launch, which performed in line with market test expectations and the ongoing macro headwinds impacting the industry. Despite these macro pressures, our 2-year same-restaurant sales stack accelerated by 350 basis points to 20% underscoring the resilience of our brand and the strength of our guest engagement.

Looking ahead, we remain confident in the long-term structural health of the business reaffirmed by our strong AUVs and new restaurant performance. Our most recent 2025 cohort is trending above $3 million in AUV, with new unit productivity continuing to exceed 100%.

Turning to restaurant level margins. Our guidance reflects dynamics we experienced in the third quarter and the anticipated impact of seasonality on margins. As we look ahead to next year, we remain confident in the structural foundation of the business while being mindful of ongoing macroeconomic pressures. Our long-term algorithm targets low to mid-single-digit same-restaurant sales growth and we will approach our 2026 outlook with appropriate discipline, taking into consideration our strong pipeline of traffic-driving initiatives. In addition, given the health of our 2026 real estate pipeline, we anticipate at least 16% unit count growth. As we navigate today's dynamic environment, our mission to bring heart, health and humanity to food continues to resonate with guests across the country and is more important than ever. We remain the clear leader of our category, supported by a powerful concept and competitive positioning that are both differentiated and durable. None of this would be possible without our exceptional teams across our restaurants and support centers.

This dedication brings our mission to life every day to drive meaningful experiences for our guests. With that, I will turn the call back over to the operator to open it up for Q&A.

[Operator Instructions]

We will now take our first question from Andy Barish with Jefferies.

Last quarter, you kind of stack rank some of the choppiness in same-store sales from the steak lab to a little bit of consumer balances to the honeymoon. Can you -- can you kind of just let us know on the honeymoon side of things, if that's changed materially? And I'm assuming most of the choppiness you're seeing now is is macro-related, but anything geographically you want to point out would be helpful.

Andy, thanks for the question. So certainly, the honeymoon impact is very similar to what we experienced last quarter, no change there. We're not seeing anything geographically to call out. So it's more around the macro environment and the pressure on the consumer and certainly lapping the strong same-restaurant sales results that we had in the third quarter of the prior year. So as we noted it on the call, but on 2-year stack basis, we, in fact, accelerated our same-restaurant sales by 350 basis points to 20%.

Our next question comes from Brian Mullan with Piper Sandler.

Just a question on the [indiscernible] test. Brett, in the prepared remarks, it sounds like it's going well. Just wondering if you could elaborate a bit on what you're seeing in test. Anything interesting from a daypart perspective between lunch and dinner or maybe just a guest perspective, age, gender, income just -- and also how it's going with the operations.

Thanks, Brian, for the question. we did know we have turboshaft oven into every restaurant now, which is the equipment we use to roast the salmon. So it's a very easy cook procedure and prep and whole procedure. And we've been very encouraged by the results we have seen it drive incremental occasions and its appeal has been broad-based from a consumer standpoint as well as a daypart standpoint. So it is a unique new menu items to add to the variety of our proteins. It's our first seafood item and excited at its potential. And if things continue to progress on the current track, as we noted, and as I noted in the prepared remarks, we expect to launch it in late spring in 2026.

Our next question comes from David Tarantino with Baird.

Brett, I had a question about the operations. So I know you made a change in leadership there during the third quarter. And I was wondering if you could just address that change and why that happened? And then I guess you mentioned also tonight doubling down on guest experience and operations. So wondering if you could elaborate on whether you're addressing specific issues or whether that's more of an opportunistic statement as you think about where the business is today.

Yes, David, over the course of our 15-year journey, 1 of the things that's been instrumental in meeting our success is always being proactive and staying in front of the business and making sure we're bringing on the capabilities that we need for the next chapter of our journey and where we're going, not just where we've been and where we are. And so that transition was in that spirit. And as it relates to the operational opportunities, this is the most intense discount environment since the Great Recession.

And our value proposition, we believe, is much more holistic than a price point. And one of the best things that we can do is deliver exceptional guest experiences. That's foundational to driving traffic over the long term and driving a competitive advantage in concert with our unique differentiated bantering cuisine. And so we're just doubling down on that. It's been core to who we are throughout our journey, and we want to make sure that we're putting our best foot forward in a time when consumers are becoming increasingly discerning about where they're spending their dollars and that -- we also have the breadth and depth of pipeline to continue to support the new restaurant openings that are opening at record levels and opening them with operational integrity.

Our next question comes from Eric Gonzalez with KeyBanc.

You talked about having a strong pipeline of traffic-driving initiatives for the next year. Maybe you could expand on that a bit. It sounds like you've got at least 1 protein on deck with salmon in the spring, but I'm curious if you have anything else to studying to call out so maybe Peter Chip size, beverages or desserts that might be interesting and worth noting.

Yes. Thanks for the question. I think the Peter Chip piece would certainly be relevant next year sooner than beverages and desserts. Those are definitely category opportunities for us over the long term. but our Peter Chip platform for innovation has been very successful, and we continue to see opportunities to make site just through that platform as well as the salmon launch, and then we will be expanding our catering test later in '26 to a second market. We're currently testing catering in Houston. I wouldn't expect the chain-wide launch, but later in '26, we plan to expand it to a second market in concert with Houston to continue to test and learn and position ourselves for a broader launch.

And then lastly, I'd say, on the marketing front, we have been very efficient and lean in our marketing spend over time, and we continue to test and learn and understand how we can show up in those channels effectively, especially as we communicate our value proposition and our message in a heavily discounting environment. And so next year, whether through collaborations or some of the other marketing partnerships that we have opportunities to support, that's another area that we have not -- or another lever that we haven't pulled in a meaningful way to date.

Our next question comes from Andrew Charles with TD Cowen.

Brett, I appreciate all the context for the upcoming drivers, two in particular, just in the current backdrop, the opportunities to sort of start investments in the near term and marketing, are there opportunities with the growing scale of the brand to really just create more brand awareness, now you've seen some nice gains last year as well as improving speed of service. And I would be very curious to know what the clearest action items are going to be for the incoming COO.

Yes. Certainly, speed of service, we've noted in the past, we know it's an opportunity. We're mindful of striking the right balance where we're not rushing people through the line too fast when it's their first time experiencing Mediterranean food or is their first time interacting with CAVA let alone you eat Mediterranean food. But we see clear opportunities to continue to improve on that front. There will always be operational opportunities. We hold ourselves to a high standard. And we want to make sure that we're delivering CAVA hospitality to the level and degree that we aspire to across every restaurant and having that speed of service consistently across the country.

So we think there's opportunities there. And then on the marketing front, as we gain scale in these markets, we'll continue to test more upper funnel activity that we have the ability to amortize and leverage it across a wider restaurant base. But from a new COO perspective, it's continuing to deepen and broaden out the people development pipeline. I noted we talked about the AGM role. That's in that spirit of not only helping give a stronger management complement across all shifts during the week across all 7 days, but also having more roll ready leaders in place.

Again, being proactive, staying in front and thinking about what do we need to put in place for just not for today but for tomorrow to make sure that as we scale to 1,000 restaurants by 2032, that all those things are already in place at that time, and we will be working on other things as we go beyond that milestone goal. So the focus will be on the people development side as well as continuing to elevate our speed of service without having people feel to rush through that line.

Our next question comes from Sharon Zackfia with William Blair.

Brett, you mentioned younger guests kind of in the prepared comments, and I don't know if that was a broader statement of the industry or if you're seeing something in particular with younger cohorts. And I'm also interested in kind of what you're learning about how you can lean into loyalty just given kind of this more volatile consumer climate.

Yes, Sharon, really, for us, we're a bit idiosyncratic in that our costs accelerated in the back half of last year when many industry comps were decelerating. So we're lapping tougher hurdles when most are having easier compares. So we don't want to overstate the challenges of the consumer, but you can look at the data. They're clearly out there, whether it's student loan repayment, consumer sentiment, just the inflationary pressures all around them, whether it's health care cost, housing costs, right? Gen Z unemployment twice the national average. When we look at the data, it's more that the younger cohort that 25 to 35 that Tricia noted in comments is that they don't have the steam that they had last year in the way that they were visiting or their frequency of visiting.

It's not necessarily that they're so challenged with us. It's just that they don't have the bigger or the frequency of occasions that they did last year. And that's why it's incumbent upon us to continue to double down on our experience and our value proposition and make sure we're communicating that effectively. We're not oblivious to the commentary about the $20 launch. Well, the reality is you can get a chicken [indiscernible] with all the toppings included, three different spreads, greens and grains for $10.65 to our highest price of $12.95 in New York City. So that's a sub-$13 below the most expensive market, not a $20 launch. And that's an opportunity for us to continue to communicate that, but it's fresh food. It's not freeze on a fryer food or ultra processed food. And when you step back and you look at the the 2-year comp of 20%, and you look at the almost 67% revenue growth on a 2-year basis, we continue to gain significant market share.

And again, I know the Technomic data. It's very interesting. The industry has lost 7% in transactions since 2019. We've grown transactions in the mid-20s since 2019. We've taken half the price of industry peers got away from 34%, we've taken in aggregate, less than 17% in price. So we are focused on the long term. We say it's a marathon, not a sprint. And we want to continue and enhance our value proposition each and every year make our food more accessible to guests.

Now on the loyalty front, we are very excited about what we've seen in our loyalty program. We noted we've seen an increase of 36% in levers in our loyalty program. We added this new tier status. And we've seen the ability to really create greater value for our guests and influence behavior in a positive way for their visits and for the business and expose them to new items. So for example, on chicken shwarma, their loyalty pool, people who have tried chicken shwarma are coming more frequently than users who have not tried it. So the ability to have that one-to-one line of communication drive that innovation, drive that newness, drive excitement, drive trial is a powerful first-party data tool that we look to continue to leverage in the coming quarters.

Our next question comes from Jacob Aiken-Phillips with Melius Research.

I just wanted to ask again on the honeymoon dynamic. So the last quarter, you described -- at least some of it as coming from maybe people driving further distance or just initial trial and new trade areas. But is that dynamic like something that lasted longer than the 3 months, 6 months or the initial stores that were affecting you last period doing better on a year-over-year basis? Just trying to understand the dynamic a bit better.

Yes. So we are seeing the initial stores impacted are doing better on a year-over-year basis. And in fact, in looking at the restaurants in 2024 that have been opened for a period of time beyond 18 periods or 18 months, we're seeing a return to positive same-restaurant sales. So we don't believe this is reflective of a structural challenge. We don't find a concentrate in a certain geography or in a certain format or type of restaurant. We're continuing to monitor and we'll give you updates as we move forward. likely given the performance of our 2025 vintage, we'll likely see a similar pattern in 2026.

Our next question comes from John Ivankoe with JPMorgan.

You -- thank you for opening the new Brickell. It's absolutely beautiful [indiscernible] so thank you for that. So the question -- I'm going to make a question out of this. So this is a market where we know there's going to be a lot of demand growth, but the buildings haven't been built yet a lot of them. There's absolutely a lot of supply growth in the market and there's a lot of markets that are kind of like that around the country. New York City certainly is one, and I think there's a number of others as well where the supply growth is pretty obvious, just see walking down the street or the see on the app or to see on various promotions, what have you.

So the question, Brett, we spent a lot of time talking on the demand side, but can you talk about kind of the effect of supply growth that you've kind of seen in various markets. Now I'm not asking you to is like, hey, are they going to last? It's just whether they've opened and maybe competed with you on the margin, and it's just something that we just kind of have to wait out as the market will inevitably settle.

Yes, John, thanks for the [indiscernible] comment. It's a beautiful restaurant, super phenomenal. Excited to have more open. We just opened Aventura in South Florida. It's interesting. I feel like it's less supply intense than in our younger earlier days, if you remember, kind of 2013 to 2016, there were a lot of fast casual concepts emerging and fighting for real estate. So it's more challenging. I mean, I think real estate is easier for us to get. And then from a competition standpoint, Look, the restaurant industry, as I noted, has transactions down 7% since 2019, which means it's a share shift gain, which means you've got to be a better competitive alternative to the 3 or 4 or however many restaurants around you and be differentiated.

And to us, that's our Mediterranean cuisine. This on-trend cuisine that is unique and that it meets the moment of a moderate consumers increasingly diverse palette seeking bolder, more adventurous flavors while not wanting to sacrifice on health and wellness. And then delivering that, as I noted earlier, are doubling down on operational integrity with exceptional hospitality, not just average operations, exceptional hospitality, we have seen over our 15-year journey is a recipe for success. When we do that, and we do it consistently. These comps go up. It doesn't matter who opens next door to us. We continue to grow market share and that's what we're focused on.

Our next question comes from Chris O'Cull with Stifel.

I was wondering if the company has done any work to assess the value perception among non Cava users in more mature markets. I'm just wondering what the perception of the brand might be and what's keeping them from visiting the restaurants.

Yes, our value perception is strong. We do biannual brand health surveys. Many of the analysts on this call have put out value surveys where I don't want to play favorites or name names, but there is a lot of good research that you all put out that is ranked us very strong in our value proposition, if not towards the top of the publicly traded industry set. So we see that cooperated, whether it's anecdotally, whether it's qualitative or quantitative. We see our value proposition continue to be recognized by consumers, whether they come to CAVA or whether they're not as aware of CAVA, whether it's our internal studies or some of these third-party org analyst studies. So I think it's also a reflection of the way we think about value.

The relevance of our cuisine and measuring diet, the criticality of the ingredients we're serving, the fresh food -- fresh fuel proteins, fresh produce, not freeze and in the fryer, ultra process food, the convenience in which you can access it. And most importantly, at the end of the talk about the experience we deliver when you engage with the brand, and then you match that with the fact that over the long term, our long-term perspective and how we work every year to mitigate price less than 17% compared to 34% in industry aggregate average. We have underpriced inflation. We have underpriced peers that have enhanced that relative value proposition each and every year.

Our next question comes from Sara Senatore with Bank of America.

I wanted to ask about -- you mentioned technology and KDS -- and you'll be rolling out more broadly. What are you seeing in terms of, again, perception -- consumer perception? Are you seeing increased frequency or speed of service that's translating into higher frequency. I know experience matters a lot, but sometimes it can be hard to detect throughput when demand slows. So just as I think about technology as a potential driver, any kind of reads on what that means for throughput and guest frequency.

Yes, certainly, Sara, on the off-premise channels, whether it's delivery, third-party delivery or native delivery or digital order pickup. Technology plays a key role. The integrations, the time our times on the third-party marketplace, how quickly we can get our food to consumers, making sure those integrations are are aligned and then the team has the labor deployment and set up, so we can open our throttles. We manage, we build our own digital order platform. So we can control those rattles and we can open up those throttles as the team enhances and improves their productivity to deliver greater throughput and then the new kitchen screen system really help improve order accuracy. We know it's our single biggest opportunity area for customer experience is making sure every digital order is accurate and that it has ample amount of food in the bowl.

And that is something that the kitchen display stream system has really been a tool to help improve that. can help ease of production for our operators and help deliver greater accuracy for guests. And we see that voice of the guest score improve, and we see comps follow that. Like that has been true in since our very early days, whether it's the digital order line or the in-restaurant line, when the customer experience scores improve, the comps follow. And so we want to continue to make sure we're putting our best foot forward in that light and then using technology to enhance the human experience, not replace it. You take some of that complexity out of our team members' mind share or equip them with the tools and capabilities to deliver that exceptional guest experience. Even another thing, just having that order status update notification and making sure the algorithm is updating our guests if we're running a little late or if we're running a few minutes early, so that they're walking in ideally when their goal is being put on the shelf or at the window and one of our pickup by card locations.

Our next question comes from Danilo Gargiulo with Bernstein.

Yes. But when you talk about hospitalities, you seem to suggest a broader opportunity than speed of service alone. So what do you think operations are fully short of your expectations relative to where you are going, not necessarily where you have been and where you are today? And what are some of the specific levers that you expect in the new CEO to deploy? And if I may, Chris, you're expecting some of these investment in people to maybe translating into similar present level margins compared to today? Or with sales leverage can we still expect a growing restaurant level margin under the new operations.

Yes. Thanks, Danilo. We have strong restaurant operations today. We have always been in a forward-looking posture, and we have aspirations to be thought of in an elite group of restaurant operators delivering exceptional service, not just average service, not just good service, exceptional service because it is like all my co-founders, tons of great immigrants. When you go to that part of the world, the hospitality, you feel the welcoming nature you feel, we want you to feel that every time you walk into every restaurant, no matter how big we get. And so that is our aspiration, and that is the work we are committed to every day to elevate to that level. And we have it in restaurants.

We have opportunities in other restaurants. And I think in moments where there's cyclical pressures on the consumer, it matters more than ever to make sure that it's consistent across all restaurants and take good to great. And that is something that we think is just another opportunity to drive additional traffic and drive additional market share growth from the significant gains we've had in recent years.

What that means from the restaurant level margin standpoint and how we're thinking about it. It's certainly a same-restaurant sales increase, restaurant-level margins will expand. But we're also very mindful of where we are in our journey and the investments that we think are necessary to put back in the business to make sure we're continuing to build a long-term durable brand that's going to consistently deliver on that guest experience and hospitality that Brett talked about.

Yes. We see opportunities to invest further in labor, we will. It's just a belief that -- a philosophical belief we have that has gotten us to where we are today that we are going to continue to look at opportunities to make sure that any restaurant level margin expansion is sustainable and durable over the long term. And in the short term, that might mean targeted investments, if that's what we think is the right thing to do for the business.

Our next question comes from Dennis Geiger with UBS.

Just another one on the newer stores and the performance in year 2, if I could. Tricia, specifically, you gave some good color a couple of minutes ago, I think, and I want to make sure I heard it right. Just as far as you're still seeing those new stores enter the base, I assume as a negative, just like last quarter, but that 24 class, those stores open 18 months, they're flipping to positive. I assume not as strong as what you've seen in prior classes, but positive after 18 months. So just wanted to confirm that. And the question really is, if look ahead, any better sense on what '26 may look like with this new store dynamic as you've now seen a couple of quarters of the Honeymoon dynamic and other levers maybe you can pull to sort of maintain that growth even after big year opens.

Yes, I appreciate it, Dan. So if you had it right, we're seeing the trends as you articulated them. And certainly, there are restaurants that perform above those expectations. So we're not -- but in general, yes, that is correct. And then in '26, we believe the '25 cohort of restaurants will perform similarly to what we saw with the '24 cohort in 2025. And things to do to try to make sure that we can open these restaurants as successfully as possible and capture as much of the honeymoon [ pillow ] as we can is really taking our general managers and exposing them to high volumes as well and bringing them into other markets like New York to experience what these peaks are like, which is atypical and something that we hadn't experienced prior to this year, so that they're better able to manage the demand and then actually maintain more of those consumers as we go forward.

Our next question comes from Jeffrey Bernstein with Barclays.

Great. Just looking at the most recent third quarter results. I'm just curious how much of the comp shortfall maybe versus your internal expectation heading into 3Q, do you attribute to the escalating macro headwinds versus perhaps some internal missteps or challenges and kind of thinking about as you look back, anything you would do differently if the challenging environment persists as we look into 2026.

Yes. The macro environment is certainly what put pressure on the results in Q3. I wouldn't -- there isn't anything that's structural about the business or any missteps that are significant that we would have adjusted for which we have done differently. It's really about how we look at how we performed in light of the 2-year stack that we were facing. So when you're coming up on a comp in the quarter last year coming out just under 2 is not an unreasonable expectation, given that tough compare and the macro environment that we're in.

We talked about 2 years stack and how they accelerated. And the 3-year stack at the beginning of the year, we thought would be in the mid-30s and we're just under that at 34%. And in this type of environment, that was not unexpected.

And again, Jeffrey, when we're in this heavy discounting environment, we're not going to get into that heavy discounting to combat any cyclical headwinds. That's why we talked about doubling down on exceptional operations and great guest experiences. That's where restaurant traffic starts. And that's always an opportunity for us and always will be, but it's incumbent upon us in these more challenging macro environments to double down on it because we're not fast food. We're not QSR. That's not our value proposition to our guests. Our value proposition as I spoke to before, the quality of our food, the relevance of the cuisine, the experience you get when you engage with us and you come into our dining rooms and you order on our digital channels and the accuracy we deliver. So we want to make sure we're doing everything we had in that spirit to deliver for our guests in this time when they're feeling pressures all around you.

Your next question comes from Jon Tower with Citigroup.

Great. Two, if I may. First, Brett, you've mentioned multiple times on the call, the brand's pricing versus CPI over time since 2019. So I guess my impression is that as we're looking at 2026, you guys are probably not going to do much by way of taking price for next year. And I'm just curious if that's the right assumption to make for the brand? And then my next question is just on the last year discussion and specifically the builds for 2026.

To avoid maybe the same issue hitting the store base with respect to honeymoon. Are you guys doing anything specifically where you're opening the stores in 2026, such that 2027, you're not going to running into the same issues with Honeymoons or is that not even part of the discussion.

So I'll start with price. So you're right, John, as we think about it, we've always been very thoughtful but I talked about this earlier on not passing a significant price on to our guests, so we don't plan to do that in 2026. So our expectation is our price increase will be very modest and less than what we did in 2025. And then as you're thinking about opening new restaurants in 2026, there's not a significant change contemplated and how we're opening them, just being thoughtful around -- what that means to the business and keep in mind our comp trends in Q1 of 2025 with a strong comp at 10.8%.

That will factor in the cadence of comps next year. But when we look at our real estate strategy, just wanting to make sure that we're being balanced and thoughtful in how we're bringing new restaurants in, particularly in new markets and how we're pacing those openings to perhaps try to balance out that honeymoon phenomenon that we've been experiencing. But I'll tell you, we're seeing it all over. So it's not just in new markets. We're just -- the brand is resonating very well and driving strong demand that's bringing many more guests than than we originally expected, which drives a stronger cash on cash return sooner, which is great for the business overall.

Our next question comes from Brian Harbour with Morgan Stanley.

The change to store margin guidance is that really just reflective of the sales environment? Or is there anything that's different about inflation, anything that we should factor in as we go to '26. And then I guess just also what's pressuring preopening expense?

Yes. When we look at restaurant level margin, it really reflects the experience we had in Q3. And frankly, -- in the quarter itself, we have continued to have higher repair and maintenance expense than what we were anticipating. We have been talking to everyone and seeing that over the past year and had thought that it would come down a little bit. And so what the guidance reflects is the actual results in Q3 and a continuation of that from another operating expense perspective into Q4 as we identify opportunities to look at those repair and maintenance expenses and optimize them.

So being more thoughtful around equipment and how do we make adjustments, but wanting to maintain the integrity in the physical spaces and making sure we're providing a great experience at the same time. There isn't anything significant around input costs or labor costs. It's more of that under operating expense line. And then when you talked about preopening costs, what we're planning with preopening is they were in the quarter itself.

There were many more restaurants under construction than what was in the prior year. But overall, we are seeing an increase in preopening costs restaurant driven by a number of factors, and it's largely due to us investing in a better opening experience. So when I mentioned earlier, taking general managers out of the market where the restaurant is going to open and bring them into higher volume markets, that has extra costs associated with it, which we think is important to make investment in. So the general managers are better prepared and there's a better guest experience overall.

Our next question comes from Logan Reich with RBC Capital Markets.

Just on the Q4 comp, I recognize you guys did the full year guide implies a relatively wide range on Q4. So just any sort of directional commentary you could provide on Q4 same-store sales outlook.

Yes. So certainly, given the higher laps going up against the 21.2% same restaurant sales in the prior year, coupled with the consumer headwinds, we wanted to take a very judicious approach in setting guidance, and it's been a bit choppy. And so what we're seeing today is a bit better than the midpoint of the range, but we wanted to be thoughtful and create a wide range because of the uncertainty that being faced with consumers today. And so how long will the shutdown continue? And what will that mean? And it's certainly a factor of one that's difficult to predict.

Our next question comes from [ Nick Sakon ] with Mizuho.

Historically, you've talked about the diversity of your COGS basket has been a little bit of a moat that allows you to under price inflation. What beef now in the equation, would you mind just updating us in terms of the composition of the COGS basket? And then two, just on the AGM investment, should we think about that as an incremental cost in labor in 2026. Any comment there would be helpful.

Yes. So on the diversity of the cost basket, there isn't a material change in that mix overall. So 25% typically in proteins, 25% [ produce ], 25% grocery and 25%, everything else. Those adding beef has not changed it materially in the overall cost. -- from an input cost standpoint. And then when we're looking at AGMs, I appreciate you bringing that up. We've reimagined as the General Manager and training role and elevated it for those who are ready to an assistant general manager role. So it's not an incremental head count per se, but it is at a higher overall compensation rates. And so there'll be some modest impact to overall labor as we go into 2026.

Our next question comes from Brian Vaccaro with Raymond James.

Most of might have been asked, but I thought I'd follow up on recent trends. And just given your footprint in the DMV market, I'm curious if you're seeing any outsized softness in that region during the government shutdown or more broadly to what degree you think that could be having an impact on your business?

Brian, we did not initially see any impact. And in the most recent weeks as paycheck at going out to government workers, we have seen some softness creep in, but I wouldn't say it's acute or anything severe at this point.

That appears to be our last question. I will now turn the conference back to Brett Schulman, Co-Founder and CEO, for any additional remarks.

Thanks for joining us today. Before we wrap, I want to take a moment to share my gratitude for our entire team. Last month, I spent time in the field visiting our restaurants in the Midwest and Southeast. Seeing the energy of our teams, the pride they take in delivering great food and hospitality and the excitement of our guests is a powerful reminder of what fuels our success. This fall has been a period of continued growth welcoming new guests, strengthening our operations and investing in the people who bring our mission to life every day.

As we head to another holiday season, we're grateful for the dedication of our team members and the loyalty of our guests. We remain energized by the opportunities ahead. Thank you for your time and support. We look forward to connecting again in the new year.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the CAVA Second Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 12, 2025. I would now like to turn the conference over to Matt Milanovich. Please go ahead.

Good afternoon, and welcome to CAVA'S Second Quarter 2025 Financial Results Conference Call. Before we begin, if you do not already have a copy, the earnings release and related 8-K furnished with the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress.

You will find reconciliations of any non-GAAP financial measures discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website.

Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail on CAVA's most recent annual report on Form 10-K and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. And now I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. In the second quarter of 2025, we continue to cement Mediterranean as the next major cultural cuisine category, bringing together bold, flavorful food with the modern consumers' desire for health and human connection. It's a category we've pioneered and one we continue to have dominant leadership and grow market share. With significant white space still ahead, the strength of our model and the passion of our guests give us confidence in the growth yet to come.

Our second quarter highlights include a 20.3% increase in CAVA revenue and a 62.6% increase over the last 2 years, CAVA same-restaurant sales growth of 2.1%. Restaurant-level profit margin of 26.3%. 16 net new restaurants, ending the quarter with 398 restaurants, a 16.7% increase year-over-year, adjusted EBITDA of $42.1 million, a 22.6% increase over the second quarter of 2024, net income of $18.4 million and $21.9 million in year-to-date free cash flow.

While strong prior year results, including the launch of steak, our most significant protein launch in a number of years, impacted the quarterly same-restaurant sales comparison, we remain deeply confident in the long-term trajectory and the structural strength of our business. surpassing $1 billion in revenue on a trailing 12-month basis last quarter was a meaningful milestone. But as we noted then, it was just the beginning of the next chapter of our journey and ambitions. Our confidence is reinforced by the strength we're seeing in our 2025 new restaurant class which is on track to deliver average unit volumes above $3 million and is opening higher than 2024s record-setting cohort.

We're defining a category with powerful long-term tailwinds in Mediterranean, a concept and brand built on strong culinary credibility that resonates with guests and delivers high AUVs and a competitive leadership position that is difficult to replicate with over 400 restaurants and no scaled competition. We remain focused on the road ahead guided by the proven portability and profitability of our model and the clear demand for Mediterranean across the country.

This demand comes to life through our first strategic pillar expand our Mediterranean way in communities across the country. In the quarter, we opened 16 net new restaurants, bringing our total restaurant count to 398 locations across 27 states in the District of Columbia. This summer, we also celebrated 2 new market entries, Pittsburgh and our 28th state, Michigan, where our teams were met with long lines and warm welcome from excited guests.

As we expand our footprint into new regions like the Midwest and Southern Florida, while broadening our presence in more established markets, we're inspired by the enthusiasm we're seeing from guests who are embracing CAVA as part of their daily lives. The strength of this demand and the performance of our recent new openings give us even greater confidence in reaching our next major milestone of at least 1,000 restaurants by 2032, and we look forward to sharing more about our restaurant expansion in the quarters ahead.

We are anchored in our belief that the human experience in our restaurants is essential, and we continue to remain focused on our Project Soul initiative which brings our Mediterranean way to life through warm, inviting spaces designed for connection. Our Project Soul prototype will be finished by this fall and the complete set of design features is expected to roll out across all 2026 new restaurant openings. In addition to our inviting spaces and warm hospitality, we know that what keeps our guests coming back to us is what's in their [indiscernible] pita, bold, flavorful and satisfying food that reflects the vibrancy of the Mediterranean.

As part of our disciplined innovation process, we're thrilled to share that we've been testing chicken shawarma in our Dallas and Tampa markets since late April, and we're very encouraged by the results. This protein is our modern take on a Mediterranean classic, Juicy, roasted chicken breasts marinated in the signature spice blend, hand stacked on a spit and shape in to deliver one of the region's most iconic flavors.

With consumers increasingly seeking new protein options, this [ main ] offers an all-white meat chicken option that satisfies both healthy and flavorful cravings. We're pleased with the market test results to date, and we expect to roll out Chicken Shawarma as a limited time offering company-wide in early fall. And while Chicken Shawarma strengthens the core of our menu, we're also leaning into the growing success of our fan favorite pita chips as a platform for flavor innovation. This fall, we'll introduce Cinnamon Sugar pita chips, our sprouted grain chips dusted with a perfect blend of cinnamon, sugar and a hint of cardamom accompanied by a side of honey for dipping, bringing a Mediterranean inspired twist to both snacking and dessert occasions.

Our culinary innovation pipeline is robust, showcasing both our ability to reimagine Mediterranean classics like chicken Shawarma and to introduce new proteins like salmon, an ingredient that aligns naturally with our concept essence. Salmon has just entered its market testing phase as part of the stage gate process, and we're excited about its potential to complement our existing menu in a way that feels authentic to CAVA. This disciplined, methodical approach to introducing new menu items is key to our goal of delivering the bold, vibrant flavors our guests know and love every time they visit while keeping them excited about what's next.

We look forward to sharing more in the coming quarters as salmon progresses through our testing process. And as we continue to innovate on the culinary front, while expanding our geographic presence, we know it's more important than ever to stay true to the heart of our brand and continue to lean into our second strategic pillar, deepened personal relationships with guests even as we scale. This past quarter, we welcomed back our beloved team member, pita chip, as part of our summer [ solstice ] celebration. On our last call, we shared how we intentionally align pita chip's birthday with National Pita today, offering complementary Pita Chips to all CAVA Rewards members.

This summer, we brought that same spirit of generosity to life once again, inviting rewards members to celebrate the solstice with free pita chips. The result was our second highest day ever for app downloads and digital revenue. By building on Pita chip's journey, we're creating narrative continuity that deepens guest relationships and reinforces the emotional connection at the heart of our brand.

In fact, just yesterday, we dropped our latest pita chip promotion, featuring 4 different flavors of blind bag pita chip plushies as part of a limited edition hot Harissa meal. This playful extension of the story gives fans a tangible way to bring a little piece of CAVA home with them. Our reimagined loyalty program serves as the platform that enables these efforts, allowing us to engage with guests in more customized, impactful and creative ways.

Later this year, we'll introduce the next phase of our rewards program, a tiered structure designed to recognize our most passionate guests while enhancing long-term engagement by aligning rewards more closely with guest preferences. Heart health and humanity are at our core, and we're committed to ensuring that every interaction, whether in our restaurants or through our digital channels, reflects that same sense of care and connection. We know that as we grow our ability to innovate and build personal connections with guests is underpinned by a strong operational foundation.

Our third strategic pillar, run great restaurants every location, every shift is central to delivering the consistency, efficiency, quality and hospitality that defines us. As part of this pillar, our connected kitchen initiative shows how we're leveraging technology to empower our teams and elevate the guest experience. We are on track to expand the rollout of our new kitchen display screen system to 270 locations by the end of the year with the new system now live in 95 locations. The new KDS continues to deliver improvements in guest satisfaction scores driven by better digital accuracy and more proactive guest communications.

Alongside our KDS expansion, we're rolling out our new TurboChef ovens in every restaurant further enhancing speed, consistency and quality in our kitchens. Together, these innovations represent our commitment to operational excellence that provides the foundation for future innovations and makes our restaurants easier to operate. Another advancement under the connected kitchen platform is our AI camera vision technology.

After several quarters in a test-and-learn phase, we're encouraged by the results and plan to expand to 21 additional locations by the end of the year. By leveraging historical and real-time depletion data, the technology helps guide our teams toward more accurate food production, reducing waste and ensuring freshness. Finally, I'm also pleased to announce that we've recently made an investment in [ [indiscernible] Hysan ], a leader in developing automated make lines designed to improve the speed and efficiency of food production.

In addition, we plan to begin a pilot test of [indiscernible] equipment in the coming quarters. The focus of this test is on our second digital make line, not our in-restaurant serving lines. As with all of our operational initiatives, this investment is rooted in our belief that technology should enhance, not replace the human experience. At the heart of our success are our people. From our restaurants to our support center, our ability to innovate and scale is grounded in our fourth strategic pillar, operate as a high-performing team.

The team members in our restaurants embody heart health and humanity every day and we remain deeply committed to fostering a workplace where they can grow and thrive in their careers. Building on what we shared last quarter, we're advancing work on a comprehensive talent development strategy aimed at strengthening every stage of the employee life cycle. This effort is grounded in our belief that growing and running great restaurants at scale starts with attracting, developing and retaining the leaders who bring CAVA to life every day.

As part of this work, we've begun rolling out 2 programs designed to elevate leadership and growth within our restaurants. First, beginning in 2026, general managers will be eligible annually for equity compensation, inspiring an owner-operator mindset in deepening their connection to the business. This approach reflects the critical role GM's play in driving operational excellence and shaping the culture in every restaurant.

Second, we are expanding a test of our new Assistant General Manager role across many of our restaurants. This role will provide a seasoned leader that not only strengthens the GM pipeline but also equips our teams with more hands-on leadership support, ensuring they can deliver exceptional hospitality and consistent performance shift after shift by providing a clear intentional path for advancement we're setting up our future leaders and our brand for sustained success.

We look forward to sharing more about how these new programs roll up under our holistic development program next quarter. These efforts are all about investing in our people, giving them the tools, opportunities and support they need to grow as leaders and deliver the kind of hospitality that defines our brand.

And it's that same spirit of care and connection we see throughout CAVA in both big and small moments. Before we wrap, I want to leave you with the story from a restaurant in Palm Harbor, Florida, that brings this idea to life. Shortly after our CAVA connect Conference earlier this summer, a guest held the door open for another guest on a motorized scooter. It was a small, simple act of kindness but one that sparks something extraordinary. Moved by what he witnessed, our General Manager used the Love button to celebrate the gesture setting the tone for what happened next.

For the following 1.5 hours every person line [ paid it forward ], covering the meal for the guests behind them, no matter the cost. It all started with that one moment and grew into a wave of generosity that moved our entire team to tears. Moments like these are why we do what we do and are a powerful reminder that heart health and humanity isn't just our mission, it's what happens in our restaurants every day brought to life by our thousands of team members. To them and all of you who believe in our purpose in our journey, thank you.

And with that, I'll pass the call over to Tricia to walk you through the financials.

Thanks, Brett, and hello, everyone. CAVA revenue in the second quarter of 2025 grew 20.3% year-over-year to $278.2 million and 62.6% compared to the second quarter of 2023. The CAVA same-restaurant sales increased 2.1%, primarily from menu price and product mix, with guest traffic approximately flat. On a 2-year and 3-year stack basis, same-restaurant sales increased 16.5% and 34.7%, respectively. During the quarter, we opened 16 net new CAVA restaurants, bringing our total CAVA restaurant count to 398.

Despite the macroeconomic pressures impacting the broader industry, pressures to which we are not immune, we entered the second quarter with strong same-restaurant sales momentum in line with the guidance we provided in the first quarter. However, as we moved through June, we saw a deceleration in same-restaurant sales driven in part by the timing of our steak launch last year, a protein that filled a meaningful gap on our menu.

At the same time, we saw a honeymoon effect from our 2024 new restaurant class, a dynamic we have not experienced before, which significantly outperformed expectations opening at higher-than-anticipated sales volumes. In fact, the strength of this class has driven year 1 cash-on-cash returns above 40%, already meeting our year 2 expectations. Same-restaurant sales regained momentum in the latter part of the quarter, reaccelerating as we exited Q2 and continued into Q3, and we are encouraged by the sequential improvement.

As Brett mentioned, our 2025 openings are also exceeding expectations, trending above $3 million in first year average unit volumes compared to our $2.3 million target. With new restaurant productivity of roughly 109%, further demonstrating the strength and proven portability of our operating model. Despite a more modest same-restaurant sales increase, CAVA-restaurant level profit in the second quarter was $73.3 million or 26.3% of revenue versus $61.3 million or 26.5% of revenue in the second quarter of 2024, representing a 19.6% increase.

This outcome reflects the power of our operating model and its ability to consistently generate attractive returns regardless of near-term sales variability. CAVA'S food, beverage and packaging costs were 29.5% of revenue, higher than the second quarter of 2024 by 10 basis points. This slight increase reflects the impact of steak, which launched mid-second quarter last year, partially offset by other lower input costs compared to the same period of the prior year.

CAVA labor and related costs were 25% of revenue, an improvement of approximately 20 basis points from the second quarter of 2024. This improvement in labor and related costs reflects leverage from higher sales, partially offset by investments in our team member wages of approximately 2%. CAVA occupancy and related expenses were 6.8% of revenue, an improvement of 10 basis points from the second quarter of 2024, driven primarily by increased sales leverage.

CAVA Other operating expenses were 12.4% of revenue, reflecting an increase of 40 basis points from the second quarter of 2024. This increase was primarily due to individually insignificant items, partially offset by increased sales leverage. Shifting to overall performance. Our general and administrative expenses for the quarter, excluding stock-based compensation were 9.8% of revenue compared with 10.6% of revenue in Q2 of 2024.

This 80 basis point improvement was primarily due to lower performance-based incentive compensation, leverage from higher sales and timing of legal costs in the prior year quarter, partially offset by investments to support our future growth, including our CAVA Connect Conference.

Preopening expenses were $5.1 million in the current quarter compared with $3.3 million in the prior year quarter. The $1.8 million increase includes a higher number of units under construction and the timing of opening. Adjusted EBITDA for the second quarter was $42.1 million, a 22.6% increase versus Q2 of 2024. The increase in adjusted EBITDA was primarily driven by the number of and continued strength in new restaurant openings, improved operations across the system and leverage in general and administrative expenses.

Equity-based compensation was $4.6 million in the second quarter, which includes 2025 grants compared with $3.6 million in the prior year quarter. We continue to anticipate full year equity-based compensation to be between $20 million and $22 million, with the remaining portion of equity expense to be spread evenly over the remainder of the year.

In the second quarter, our effective tax rate was 22.5%, which includes the impact of a discrete benefit from equity-based compensation of approximately $1.7 million. We do not anticipate any further benefits for the remainder of the year. For the full year fiscal 2025, we expect our effective tax rate to be between 12% and 15%, which implies an effective tax rate of approximately 30% in Q3 and Q4.

As a reminder, our cash taxes will continue to be immaterial until we fully utilize our net operating losses. During the second quarter, we reported $18.4 million of GAAP net income compared to $16.8 million of adjusted net income in Q2 of 2024. Diluted EPS was $0.16 in the second quarter compared with adjusted diluted EPS of $0.14 in the second quarter of 2024.

Turning to liquidity. At the end of the quarter, we had 0 debt outstanding, $385.8 million in cash and investments and access to a $75 million undrawn revolver with an option to increase our liquidity, if needed. Year-to-date Q2 cash flow from operations was $98.9 million compared to $87.3 million during the year-to-date period in 2024.

Year-to-date, Q2 free cash flow was $21.9 million. Now to our outlook for full year 2025, we expect the following: 68 to 70 net new CAVA restaurant openings, CAVA same-restaurant sales growth of 4% to 6%, CAVA restaurant level profit margin between 24.8% and 25.2%. Preopening costs between $15.5 million and $16.5 million and adjusted EBITDA, including the burden of preopening costs between $152 million and $159 million.

Our guidance for same-restaurant sales embeds our Q2 results the reacceleration we saw exiting the second quarter and the changing dynamics amid the current macroeconomic landscape. Our conviction in the long-term trajectory and structural strength of our business remains unwavering, grounded in the momentum of our category, the power of our concept and the durability of our competitive positioning.

The Mediterranean category continues to show strength reflected in our 3-year traffic growth of 19.7% in our growing market share. Our concept is deeply resonating with a robust culinary innovation pipeline, a differentiated in-restaurant and digital experience and a value proposition that delivers compelling unit economics and attractive cash-on-cash returns.

Finally, our competitive position continues to strengthen, giving us confidence in our path to at least 1,000 restaurants by 2032. Together, these elements reinforce a business built for the long term, one that's anchored in our mission to bring heart health and humanity to food and that continues to create meaningful experiences for the guests we serve every day.

Now I will turn the call back over to the operator and open it up for Q&A.

[Operator Instructions] Your first question comes from the line of Brian Harbour from Morgan Stanley.

Could you elaborate just on the same-store sales side. Do you think some of the kind of the macro pressures or what explained how you did in the 2Q, do you think that was pretty broad across restaurants? And then -- or I guess, the honeymoon dynamic you described, do you think that, in fact, was a greater influence on that number and perhaps some of the older stores were delivering a better same-store sales number. Could you kind of parse out what drove that in the second quarter?

Yes. Sure, Brian. Good to hear from you. So certainly, we're operating in a fluid macroeconomic environment, and it's one that sort of creates a fog for consumers where things are changing constantly. It's hard to see the clear. And during those times, they tend to step up of the gas. We didn't see changes in our premium attachments or incident rates or other items driving the business overall. But certainly, it's present in there, and it's something that we're not immune to in this space.

As we think about the [ Heiman ] effect, what we're experiencing is incredible results from our 2024 class as well as our '25 class. With the '24 class coming into the base, and having an impact on sales from a same-restaurant sales perspective, but outperforming all of our expectations. So think about that restaurant class, delivering their year 2 cash-on-cash returns in year 1.

So well above the revenue expectations that we had and delivering strong cash on cash returns while having a modest impact overall on same-restaurant sales in the period itself. I think when you look at Q2, where we really started to see the deceleration is when we were lapping the launch of steak during the quarter, and that was a new menu item on our -- on the menu offering itself, one that was a perceived gap and resonated very well.

And so it was the lapping of the steak during that period and what we saw as we exited the quarter and then entered into Q3, we're seeing a reacceleration in same-restaurant sales. What we're excited about is that we are participating in a category that has tremendous strength in Mediterranean, driving tailwinds from a same-restaurant sales perspective and traffic overall with a concept that's resonating with consumers and a strong brand.

And then going back and delivering great cash on cash returns with a competitive position with no scale competitor in the space overall.

Your next question is from the line of Chris O'Cull from Stifel.

Tricia, just a follow-up on your comments. Can you help level set where you're trending in the third quarter today, just given how far we are into the quarter at this point?

Yes. So when you look at our numbers, you look from Q1 to Q2, there was an acceleration in our 2-year same-restaurant sales stack, and we're seeing that trend continue into Q3, a continued acceleration of that 2-year trend.

And then, Brett, has the company evaluated its marketing media mix now that you've achieved higher awareness in a lot of these new markets. Obviously, new stores are opening up really well. I'm just wondering if there's an opportunity to reallocate the spend or even just increase it maybe as a percentage of sales?

Yes, Chris, thanks for the question. There's certainly that opportunity. I mean we are -- as you can see, we do not have a high marketing spend as a percentage of revenue. And we have continued to do a lot of testing around the media mix modeling, and we've seen some very positive results. So that's something we can certainly lean into if we see these kind of macroeconomic headwinds persist.

And as Tricia noted, I mean, when you look at the 2-year quarter-over-quarter, we actually accelerated. And that's -- the dynamic nature of our comp the last few years has been significant. So we guided on a 3-year basis last quarter to try and filter out the noise. But then underneath when you look at a 2-year, it's actually strengthening. So we're trying to be mindful of that and then look what we can do in the near term and certainly, media mix modeling is a part of that and leaning into it versus also staying steadfast on our long-term strategy and our initiatives.

And we've talked about this at length since the IPO that this is a marathon, not a sprint for us, that we are in this for the next 10 years, not the next 10 weeks and that we want to be positioned to deliver on our long-term strategic plan, which we are positioned to do and then be mindful in these cyclical instances of some macroeconomic headwinds learning at these levers as we test them, what we can lean into to drive increased awareness and adoption in the short term.

Your next question is from the line of Sarah Senatore from Bank of America.

A clarification then a question. Just in terms of the honeymoon period, does that mean the first year comps are negative or flat or just not giving you that 10% lift? I'm just trying to understand the magnitude of the shift. The question is about the Harissa meal. I know you talked about the branding component of it. Was there like sort of a value component, too. It doesn't sound like you're seeing value seeking based on what they -- what you said about attach and premiumization. But just trying to understand the kind of shift that you might be seeing and if that was what motivated the meal.

Yes . Thanks, Sara. I'll take the latter part of your question and then hand it back to Tricia to speak to the new restaurant comp complexion. So the meal is not really geared to be a value meal, more so to really tap into the emotional connection of our guests and to celebrate their excitement over our pita chips and give them a little piece of CAVA to take home with them and certainly play off some of the cultural trends that we're seeing in regards to pluses. And again, this is a long-term brand building exercise and something that people can get excited about and drive conversation and drive awareness, and we've seen that. We sold out at a number of our restaurants in the first day, and have been very pleased with the response.

So again, this is how we think about it in the long term and was not geared specifically to be a value meal per se.

Regarding the 2024 class, there's certainly restaurants in that class, delivering on our economic model expectations with $2.3 million in AUVs and generating 10% cash-on-cash returns. But due to the robust nature of some of the results in that class, those locations are experiencing some negative overall comps and impacting same-restaurant sales for us. And all of that was -- is a new dynamic from a honeymoon experience for us.

And so one that we're going to keep a close eye on. But coming back to the restaurants in general, are just really demonstrating the power and the demand behind CAVA and the interest that consumers have with the brand.

Your next question is from the line of David Tarantino from Baird.

I guess another question on the comp trend you're seeing recently or maybe 2 questions. One is if I look at the guidance for the full year, the midpoint would assume something in the neighborhood of 3% or a little bit better than that in the second half.

And Tricia, could you just maybe comment on whether your current trend line is tracking to achieve that kind of number or not? And then, I guess, my other question as you diagnose some of the slowdown that occurred, you talked a lot about macro issues and perhaps cycling stake and a small impact from the honeymoon. But are you looking at any brand metrics or operating metrics that might have changed over the last 3 to 6 months that might indicate there's something in the operations or consumer experience that may have changed?

Yes. Thanks, David. Our current trend line is in line with your expectations. So we saw strength as we exited the quarter above the 2.1 that we delivered, and we're continuing to see that accelerate as we move through Q3. I'll let Brett answer the second part of your question.

Yes, David, we haven't seen any atypical nature in a region, in an income cohort urban versus suburban, the fleet has been moving very consistently. And then we recently did another run of our brand health scores. Our NPS actually went up. Again, we're #2 in the entire limited service space. We've seen our value scores continue to improve. And every external survey that we've looked into, we've seen that data strong as well from a value proposition standpoint.

And then as Tricia spoke to earlier, no trade down, no check management. So again, thinking more in the terms of the dynamic of the challenging hurdles, the launch of steak, as well as what you've seen across the industry in consumer discretionary of the headwinds that consumers are facing in general. So nothing that we've seen structural. And if anything, more confidence in the structural strength and long-term trajectory of the business, with the health of our NROs and the consistency no matter if it's Nashua, New Hampshire; Burlington, North Carolina, Plantation, Florida recently opened in Pittsburgh, only gets us more excited for the white space opportunity in front of us .

Next question is from the line of Danilo Gargiulo from Bernstein.

2-part question really. First of all, Tricia, as you're thinking about your guidance for the second half, I mean you were saying in the second quarter, same-store sales were impacted by the steak lapping. So as you're looking in the second half of the year, how much of the guidance is actually derisked? Or are you expecting to see another potential revision in terms of your expectations on the steak lapping?

And then the other question I have is a little bit more general and looking in 2026 and beyond. I mean I'm trying to understand how you're thinking about the potential -- the potential benefit it might be coming from the 1 big Beautiful Bill in terms of accelerated depreciation and interest stability in terms of the accelerated unit growth that you might be seeing in 2026 and beyond.

Yes. So to your first question regarding the lapping of steak and how we think about the rest of the year, Certainly, what we are -- what we saw in the second quarter was the trial period for the introduction of steak, of which we have passed. So as we go into Q3 and Q4, we're excited about our robust culinary innovation pipeline with Chicken Shawarma coming in the next few weeks as well as the introduction of cinnamon sugar pita chips, pita chips are becoming a very strong platform for us for flavor innovation, coupled with other enhancements to our loyalty program.

So lots of things in the pipeline that drive same-restaurant sales, and that's what gives us confidence in how we think about the business going forward and the trends we're seeing today. Regarding your question regarding the big Beautiful Bill implications. One of the biggest things is ironically around income taxes. And certainly, there's some benefits that we will experience that will push out our use of NOLs for another 2 years.

So that's certainly something that's very helpful from a cash perspective. But really navigating changes in -- and this isn't really [indiscernible] specific question, but changes in the tariff situation are very fluid. They're happening all the time. So as we think about going into Q3 and Q4, there are some very modest tariff impact as some of our products are sourced from countries that have been impacted.

All of that has been captured based on what we know today. It's been captured in our guidance. But there isn't anything other significant items. We are very excited about our ability to continue to invest in new restaurants. The team has done an outstanding job navigating tariffs both on the supply chain side as well as the design, development and construction side so that we're not anticipating material changes [indiscernible] our ability to grow and continue to leverage those robust new restaurant openings that we've been experiencing.

Your next question is from the line of Andrew Charles from TD Cowen.

Great. Just 1 clarification in the near term. What do you attribute to the July improvement? You spoke about 2-year trends improving, but I'm curious if this is just easy comparisons? Or did you see the 3-year trend also improve? And the bigger picture question, though, is that this dynamic of strong year 1 sales volumes in '24 and '25. That leads to a lower [ new store ] maturation tailwind does that believe -- is that you to think that long-term same-store sales will be closer to low single digit as you'll be facing this [indiscernible] riches really. I mean it's a good problem to have.

But or do you believe in the next few years with the playbook that you outlined that you can execute closer to your mid-single-digit track record.

Yes, regarding your first question, what do you attribute the improvement in July to. It's really the lap of steak. Steak was launched at the beginning of June. And so after we get through that lap, that helps accelerate the business, but also coupled with making sure we're delivering and enhancing our guest experience, being very relevant in the cultural conversation itself.

And as Brett talked about a little while ago, continuing to test and optimize from a media mix modeling perspective. And so those are the factors that helps contribute to the acceleration after the lap of steak and then bring us into Q3 as we move forward.

Now regarding long-term same restaurant sales growth, I appreciate your color on being very fortunate to be in this place and driving outsized returns early on. We're going to keep a very close eye on it and continue to update. There isn't anything about the business that causes us any concern and we'll continue to focus on those restaurants in the upcoming quarters, give you updates.

Next question is from the line of Sharon Zackfia from William Blair.

I guess I wanted to ask about the Assistant Manager additions. So Brett, can you talk about how that's planned to be rolled out? And is that more of a human resources pipeline building initiative? Or is there something you're seeing in the restaurants that you really want the assistant managers to focus on to elevate operations?

Yes. Thanks, Sharon. It's a little bit of both. We will start the rollout in November and through the course of the following 6 months. ramp up to staff roughly 2/3 of our restaurants with the AGM position. And what we're seeing is you talk about the 3-year comp, you talked about when we went public -- right before we went public, I think our year 1 AUV model was [ 1.9 million ], then it went to [ 2.1 million ]. We recalibrated [ 2.3 million ]. We have restaurants, the whole class is now trending above [ $3 million ]. These restaurants are doing significant high volumes, and we want to make sure as we always have, that we continue to invest in our team, invest in the business and the guest experience and put that support in the restaurants so that we now have more seasoned leadership and a second manager. We have GM ITs in many restaurants, but this is a more experienced position that helps support not only the general manager and the leader, but to create more balance shifts and greater support on nights and weekends and has the -- also the double impact of building and deepening our pipeline to have role ready leaders to support our new restaurant openings. So we're very excited about this. And again, we always are looking operationally to stay in front of the business and how we can continue to invest in our guests and in our team.

And this just gives a stronger leadership complement, especially in our high-volume restaurants.

Your next question Is from the line of Andy Barish from Jefferies.

Can you talk to the 2Q mix part of the comp component looked a little bit lower, maybe a little more promotional activity or something going on during the quarter. And then looking forward with chicken Shawarma, do you expect that to be at a premium price versus chicken items on the menu, so maybe a little bit of a mix driver there?

So as we looked at mix, we didn't see significant changes overall. So we talked a little bit earlier premium attachments are consistent with what we've seen before, also seeing increases in pita chip attachment overall. As we think about chicken Shawarma, that will have a premium price, not at the same level as steak, but it will be a premium price and does come with a little bit of a higher cost as well because of hand stacked and marinated and processed for our restaurants overall.

And then you asked about promos, really warrant highly promotional. We saw others trying to buy sales in the quarter, and that isn't something that we're going to do. We don't want to discount our brand. What we're focused on is the long term continuing to do the things Brett talked about and investing in team members and guests and bringing CAVA to more and more people across the country.

Next question is from the line of John Ivankoe from JPMorgan.

I wanted to revisit the question on marketing, if I could. Now that you've crossed the $1 billion of trailing system sales, congratulations on that. what kind of marketing opportunities could potentially open for you? In other words, I mean, are there platforms or services or other types of reach that you can now have or at least have more frequently now that you're getting to be and have the visibility to be an even bigger company.

That's part A of the question. And part B, it's competition in a market like New York, but I'll just choose that one, is notably evolving and changing, I would even argue increasing in a lot of trade areas who clearly want your customer base, your customer occasion. Could you comment on competition of whether there are pockets where you've seen short-term impact and how you've typically done with that impact over some series of months or quarters?

Yes, John. In regards to competition, it's no different today than it's always been in the restaurant industry. What are you doing to have the people, the guests walk by the 3 restaurants next to you to come in and share a meal with you as opposed to your competition. And that ebbs and flows, but it's always been there, and it's always our job to make a more compelling relevant experience for our guests and value proposition for them.

And we haven't seen anything in the New York market, in particular.that's different from any other market across the country, we have not seen any specific pockets of weakness, certainly related to competition. On the marketing point, that is a lever we absolutely have to be able to pull that we have not pulled to date in a meaningful way.

We certainly have culinary innovation. We have the long secular tailwinds of Mediterranean in the category that we dominate and define. So we have had these great tailwinds on fueling us for the last few years, and marketing is another lever to pull at the appropriate time. And as you said, crossing $1 billion in revenue, we are starting to get scale in certain markets where we have a scaled enough restaurant base that it can start to make sense to amortize and leverage those investments across those markets.

And certainly, things like we've tested CCTV over the top certainly outdoor and some upper funnel activity. We still see pay being highly efficient, effective, lower funnel, and we've done some tests in the quarter to lean into that a little bit and understand the efficacy of it. So that's absolutely a lever we'll look to pull at the appropriate time and something that hasn't been embedded in our comps to date.

Your next question is from the line of Brian Mullan from piper sandler.

I wanted to ask what what you said in the prepaid remarks about [ Hayfin ]. Maybe just talk a little bit about how that came together what. Makes you think that technology could be an attractive option for CAVA? And just kind of related to that, as you move to the pilot that you mentioned, what are the key things you'll be watching? Just talk about what success looks like short term and long term there.

Yes. We've been speaking with the team for a few years now. We've looked at a lot of different automation companies. We are familiar with the space. We have a lot of automated equipment in our manufacturing facilities, our pneumatic fillers. And what -- we like the approach of the [indiscernible] team and the progress that they've made. And we look at it again is how do we make our restaurants easier run, how do we free up our team members to deliver human connection. And when you look at our channel, our multichannel experience, one of the biggest opportunities we have is digital order accuracy. And we know that on the digital channel, our guest priorities are convenience, speed and accuracy.

And this is where automation can come and deliver that on behalf of our team members and help our team members and alleviate some of the labor requirements on those second make lines to free that labor component up to be able to interact with our guests be in the dining room, be on the main serving line in the restaurant and delivering that human connection. So we see it with a couple of benefits and second order benefits of making our restaurants easier to run, delivering better, more accurate, consistent guest experiences and allowing us to reallocate labor to deliver that great Mediterranean hospitality.

Your next question is from the line of John Tower from Citi.

Maybe just kind of following that same thread in terms of the tech investments you had mentioned, Brad earlier in the call with respect to KDS or the AI camera. I'm just curious if you could -- I still -- I understand it's still in test for many of them, but is there any chance you could quantify what you're seeing with respect to store profit improvements with those technology in the stores? And then as you're thinking through using those or rolling those out to the store base, do you expect to take some of the savings that you'll generate and use that to fund the AGM investments in the stores over the next 12 months or so?

John, the kitchen, this latest screen system is in 95 restaurants today. It will be in 270 by the end of the year. And we are seeing improvement in accuracy and productivity in some of these restaurants. We haven't quantified it to date. But when you think about the kitchen display screen system, the TurboChef ovens which are now in 188 restaurants, it will be in all restaurants by the end of the year.

Again, this makes our operations easier to use. We are seeing guest improvement scores. And then the AGM position in the test pilot we've seen this role in a sense, be self-funded with some transaction growth we've seen, having that stronger manager complement across all shifts throughout the 14-day part 7 lunch and 7 dinner.

Next question is from the line of Jeffrey Bernstein from Barclays.

Great. Just a question on the margin and earnings flow-through. The 2Q upside, despite the comp shortfall. I assume that shortfall probably caught you by surprise in June, but the fact that you were still able to beat those expectations pretty handily. Just hoping to get your kind of bigger picture thoughts on over-earning. Maybe there's an opportunity to reinvest in the system. -- maybe there are some areas that could help drive sales long term, whether it's in value or labor hours, just seems like an operator's dream to have the upside that you're seeing to margin earnings to potentially reinvest or whether you feel like these are levels that you want to stay at?

And therefore, there isn't as much incremental opportunity to reinvest in the system

Certainly, in the quarter, the strong [ NRO ] performance contributed to our ability to manage the lower-than-expected same-restaurant sales. I will also call out that at these AUVs, it's easier to manage disruptions or less than expectations from a sales perspective. And the team does a remarkable job in acting with agility and really adjusting the business as they keep a close eye on it each and every day and each and every week.

So those things combined certainly contribute to it. And then regarding reinvestments, we're always looking at the business to make reinvestments and back in the team member or in the guest. And in this quarter, we didn't have outside investments that we made, but we're still able to deliver on our expectations from from a restaurant level margin perspective and adjusted EBITDA that we contributed

Next question is from the line of Dennis Geiger from UBS.

Just another one on the strong new store opens as Andrew, if I could. Any additional commentary on kind of what year 2 could look like, how the algorithm could change? Or is it just too early given the strength you're seeing across these recent cohorts. I guess more importantly, as you think about this dynamic, which is a strong issue or whatever the right word is to have, do you contemplate what you do to support that year 2 performance, whether it's marketing or something else? Or again, is it really just a function of that really strong year 1 and then you don't worry too much about how to support that year or 2 on these stronger cohorts.

Yes. So when we look at the 2023 cohort and how they're performing in year 2, they're outpacing our expectations from a cash-on-cash return perspective and delivering at a 50% cash-on-cash return. And as I mentioned, the 2024 cohort is delivering at about 40% cash-on-cash returns, which was what we thought they would do a year from now. And so looking at those restaurants, it's a combination of higher sales performance as well as better-than-expected restaurant level margins in those restaurants with a very stable CapEx investment.

So I don't see that, that changing very significantly. And the dynamic is we're just accelerating and pulling forward those good -- that good value and that investment return for us. Do I want -- I will continue to look at it and we'll work and share more information at this point. We're not going to revise anything. We believe that opening year 1 at 2.3 and growing 10% makes sense. And then when you perform above that, we naturally would have to think that, that might be a pull forward that you'd have to reflect appropriately

Your next question is from the line of Brian Vaccaro from Raymond James.

Just back to the Q2 comps, I think you said no regional differences. But curious if you're seeing any differences from a day part or day of the week perspective, And as it relates to sales transfer and as you build out existing markets, I'm curious to what degree that might have increased and maybe having a greater impact on comps.

We are not seeing any shifts in daypart, seeing consistent performance between urban, suburban and specialty markets. saw a slight increase in our digital mix, partially driven by delivery, but more so by in-restaurant pickup. -- there really isn't anything that stands out overall. And when we think about sales transfer, that's a natural part of our growth and development. And what we find is that when we do open restaurants and there's some sales transfer One plus one ends up being 3, which is what drives continued value and the strength we're seeing gives us the confidence in that white space opportunity and for us to be at least 1,000 restaurants by 2032.

Your last question is from the line of Eric Gonzalez from KeyBanc.

I wanted to ask about throughput, maybe perhaps you could speak to any metrics you're willing to share? And do you think there's an opportunity to capture more of the excess demand as your stores develop that in muscle memory over time.

Yes. Thanks for the question. We've talked about in the past, we want to be mindful of not pushing our team and our guests too hard, too fast. This is many guests first time experiencing Mediterranean, certainly experiencing the CAVA brand. And we've seen some of that negative impact in some of our peers that have overly focused on it. Having said that, we want to make sure guests aren't frustrated getting through the line and that the long lines we have in our restaurants don't intimidate folks from coming in and getting their CAVA meal.

So we are working to support our team to help them naturally do that, whether that's our kitchen display screen system, whether it was under the new labor deployment model we rolled out late last year. And we do track it internally, and we do track at peak. Are they using the proper labor deployments and complement of hours. And we are seeing improvements where the teams are adhering to those disciplines. So we continue to work with them. And then as I talked about the AGM test, the Assistant General Manager test, having more seasoned leadership across all shifts is also an opportunity to drive improved speed of service and transaction growth as we roll that program out.

So very focused on striking the right balance as we are in brand building mode in growth mode and many guests first time experiencing us, but also mindful of not having the lines be too long and frustrating other guests.

Thank you very much. There are no further questions at this time. I'd like to turn the call over to CEO and Co-Founder, Mr. Brett Schulman for closing comments. Sir, please go ahead.

I want to thank everyone for joining us today. Before we wrap, I want to take a moment to share my gratitude for our entire team. Just days ago, we celebrated our 400th restaurant, a milestone that reflects how far we've come and how deeply we remain rooted in our mission to bring heart health and community to food.

As summer draws to a close, we're also mindful of the recent floods in Texas and the many lives impacted. Our thoughts are with those affected, and we remain committed to supporting our communities. Through meal donations, the first responders and local residents were reminded that nourishing our communities and showing care are at the heart of who we are.

Thank you for your time and support, and we look forward to continuing this journey together and speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.