Cava CEO talks full-year guidance, menu innovation, and AI

Cava (CAVA) stock is soaring after reporting second quarter earnings that beat expectations. The Mediterranean fast-casual chain saw robust sales growth of 9.5% year-over-year and raised its full-year guidance.

Cava Co-Founder and CEO Brett Schulman joins Morning Brief alongside senior reporter Brooke DiPalma to discuss the company's success and future plans.

Schulman emphasizes Cava's "compelling value proposition" as a healthier Mediterranean chain that meets "the needs of the modern consumer who wants to eat better but doesn't want to sacrifice flavor or fulfillment."

He distinguishes between price and value: "price is what you pay for something, but value is the worth of what you get," noting that Cava strives to deliver on all fronts including quality, convenience, and experience.

Regarding new menu offerings, Schulman highlights the addition of steak and states that a "deep pipeline of innovation" is core to the food chain's goals of enhancing the guest experience.

While implementing AI to improve operations productivity, Schulman underlines the fact that "technology is to enhance human experience, not replace it." He describes Cava's "connected kitchen" technology, which uses generative AI to detect food depletion on the service line. This system then projects to prep cooks on what they should be preparing, "to take all that complexity of the mindshare off our team members so they can be forward-facing, focused on that great Mediterranean hospitality."

"Our mission is to bring heart, health, and humanity to food, and if we lost that humanity piece, I don't think we'd be living up to our mission," Schulman tells Yahoo Finance.

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This post was written by Angel Smith

Video Transcript

Cava shares surging this morning up more than 13% the stock hitting an all time high after its second quarter results signal consumers are still spending at the restaurant chain here to break down those results.

We've got Brett Shulman who is the Cava co founder and CEO Plus Young Finance's very own Brooke Depalma joining us for the conversation here.

Great to see you.

Brett.

Congratulations on closing the books on another quarter here.

I mean, what is the main catalyst that you're show up for Kava right now?

That's something for investors to marvel at as of this juncture.

Yeah.

Well, thanks for having me again.

And uh it's really our compelling value proposition and I think that's driven by our differentiated, unique Mediterranean cuisine that cuisine where taste and health unites meeting the needs of the uh the modern consumer who wants to eat better but doesn't want to sacrifice flavor of fulfillment and then how we deliver that cuisine in our multi channel format um and our experiential format.

So you think about value proposition and you know, we hear a lot about the value wars, which we think is a bit of a misnomer we think that those are price wars and price is the the cost.

It's what you pay for something, but value is the worth of what you get.

And we, we frame value as a combination of the quality of our food, our fresh ingredients, the relevance of our differentiated Mediterranean cuisine, the convenience in which you can access that.

Whether you wanna order on the app, pick up off the shelf or pull around to one of our 45 drive through pickup lanes or the experience you have when you engage with our brand and come into our restaurants and eat a meal in our dining room and experience that Mediterranean Hospitality, our team delivers Brett you guys did gain income cohorts across the board this past quarter, especially low income cohorts.

How is Q three shaping up now that these QR restaurants have introduced and really double down on those value deal bundles.

What are you seeing in Q three so far that gives you to raise your outlook this quarter?

Yeah, we raised our guidance significantly and it's a reflection of the strength we continue to see in the business.

So it implies low double digit comps for the remainder of the year.

And I think going back to that, that value proposition, when you think about uh price increases from the end of 2019 to the end of 23 we raised price about 12% during that time period.

CP I grew at 18%.

The Department of Labor has noted that fast food raise prices upwards of 30%.

So for a dollar or two more often at parity, you can get a bowl of fresh Mediterranean food at Kabba versus a traditional fast food freezer to fryer meal.

And we're seeing people trade over and trade up to us.

Steak was really a big hit.

This quarter, Wall Street is really focusing in on that.

What are your plans to launch additional LTO offerings or perhaps permanent protein in the near quarters?

Yeah.

Well, a credit to our culinary team led by my co founder and chief concept officer, Ted Zino Christos really put our Mediterranean flavors on a tried and true fan favorite and it was a gap in our in our uh menu, a beef option.

So customers looking for that heartier uh steak option and they're working on a deep pipeline of innovation that we look to bring uh to our guests over the next few years and bring them some new excitement and new ways to experience Mediterranean flavors steak, bringing in a different customer.

I think it's bringing in new customers and it's having existing customers visiting and more often, what do you make of?

Uh and you guys talked about the, the social media success that you've seen on the call last night.

What do you make of the bowl culture that's really taking over emanating throughout Tik Tok and Instagram.

How do you lean into that.

Well, I think it's a couple of things specific to us.

One within the 38 items on our line, we have over 17 billion combinations.

So you can really build your meal to your personal tastes and preferences and really have food.

That's just an expression of the way you wanna eat the flavors you wanna have.

And then secondarily it's, um, you know, you think about um how uh the um uh options you have like it, it just becomes a uh food is culture and self expression.

And I think people are really gravitating to that.

And it's a newer, more adventurous cuisine.

Mediterranean is, you know, we think we're creating the next large scale cultural cuisine category.

And so we do it in an accessible way where people can feel like an adventurous aspirational version of themselves.

And they're excited to kind of communicate that to their friends.

I have to say I go crazy.

I end up putting too many toppings.

I need to stick to the curator from now often.

Um But employees and not robots is always the go to for KVAS business model.

But you are introducing this connected kitchen that has automation.

Has A I.

How will this increase throughput?

And do you expect less labor in the restaurants with this technology?

Yeah, we always talk about the term technology to enhance the human experience, not replace it when we see technology kind of disintermediated and human connection in our daily lives.

We want a place that's able to fill that gap free up our team members through the use of technology so they can deliver that great hospitality.

So connected kitchen specifically utilizes camera vision and generative A I to uh see the uh detect the food being depleted on our serving line and cross reference it with real time sales information, uh historical sales data, weather data, event data to then project to our grill cook or our uh team in the back prepping food.

Uh What they should be prepping, what they should be batching to mitigate food waste, mitigate any out of stocks on the line and take all that complexity off the mind share of our members.

So again, they can be forward facing focused on that Great Mediterranean hospitality.

So no less employees the same amount.

No, we see, you know, our mission is to bring heart health and humanity to food.

And if we lost that humanity piece, I don't think we'd be living up to our mission.

We got to go, Brett, what's the next big protein?

I just got to know what, what is coming to the Coba bowls here.

We've got some great surprises and secrets that we're, we're excited to bring to market.

We'll come back and talk about it when we launch it.

Brett Shulman Co CEO joining us on set here at Yahoo Finance.

Great to see you, Brett.

Thanks so much.