Cava Group Q3 2026 Earnings Call Transcript

Cava Group (NYSE:CAVA) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Cava Group reported a 22.1% increase in revenue for the third quarter, with same-restaurant sales up 3.1% and net income of $13.2 million.

The company opened 24 new restaurants in the quarter, reaching a milestone of 500 locations, and is on track to meet its goal of 1,000 restaurants by 2032.

Adjusted EBITDA increased by 5.7% to $42.3 million, while year-to-date free cash flow was $37.1 million.

Cava Group is expanding its Mediterranean concept across the U.S., focusing on creating inviting restaurant environments and introducing new menu items like Pomegranate Glazed Salmon and Roasted Garlic Shrimp.

The company emphasized investments in staff training and restaurant operations, with initiatives like pre-marinated chicken and new produce slicers to streamline processes.

Cava Group is enhancing its loyalty program and digital capabilities to deepen guest relationships and drive frequency.

Cava Group maintains a strong balance sheet with zero debt and $427.9 million in cash, and has authorized a $100 million share repurchase program.

Guidance for full-year 2026 includes 76 to 78 net new restaurant openings, same-restaurant sales growth of 6% to 7%, and adjusted EBITDA between $184 million and $189 million.

Full Transcript

Matt (Investor Relations)

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 measures discussed on today’s call to the most directly comparable financial measures calculated in accordance with GAAP.

To the extent available without unreasonable efforts, these are 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 Group’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 Group 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.

Brett Schulman (Co-Founder and CEO)

Thanks, Matt, and welcome to the call, everyone. During the third quarter, we continued to gain market share and saw strength in new restaurant openings as we brought Cava to more communities across the country. We also reached an important milestone as we celebrated our 500th restaurant in Minnesota and are ahead of schedule on our goal of at least 1,000 restaurants by 2032. As consumers seek real food that tastes as good as it makes them feel, combined with the human connection that brings people together, our flavors, hospitality, and generosity are resonating more than ever.

That combination is at the heart of what makes Cava distinctive and reinforces our belief that Cava is well positioned for this moment. With significant growth opportunities ahead, we remain confident in our ability to earn lasting guest loyalty, define the Mediterranean category, and create value for our shareholders for years to come. Our third quarter financial highlights include a 22.1% increase in Cava revenue; same-restaurant sales of 3.1%; 24 net new restaurants, ending the quarter with 500 restaurants, a 20.5% increase year over year; adjusted EBITDA of $42.3 million, a 5.7% increase over the third quarter of 2025; net income of $13.2 million; and $37.1 million in year-to-date free cash flow. The impact of broader concerns around the consumption of fresh produce at the beginning of the quarter, followed by the reemergence of high gas prices, impacted traffic across the category.

Importantly, these factors do not change the structural strength of our business, the health of our brand, or our ability to execute against the long-term opportunity. While we are not immune to the environment around us, we are focused on what we can control: running great restaurants, delivering differentiated value through high-quality Mediterranean food and hospitality, and continuing to invest with discipline in our teams and guests for long-term growth.

We saw that shine through as we exited the quarter and broader concerns abated. Within this environment, our new restaurant productivity remained approximately 100%, our development pipeline remains strong, and our newest restaurants continue to reinforce the portability and resilience of the Cava concept. We have always focused on building this business for the long term, not just for the next quarter. The same structural advantages that have driven our growth over our history remain intact: a category-defining brand, a powerful unit economic model, significant white space, and a team that executes with focus and consistency. This, coupled with a strong balance sheet and a robust development pipeline, gives us confidence in our ability to navigate different operating environments while continuing to invest in long-term, sustainable growth.

That long-term focus is brought to life through our first pillar: expand our Mediterranean way in communities across the country. During the third quarter, we opened 24 net new restaurants, ending the quarter with 500 locations across 30 states and the District of Columbia. As I mentioned, we opened our highly anticipated 500th restaurant, and my co-founders Ted, Ike, and Dimitri joined me for a ribbon-cutting and celebration in Minneapolis. As we continue our expansion in the Midwest, reaching 500 restaurants ahead of schedule on our commitment of 1,000 restaurants by 2032 is more than a milestone for Cava.

It is evidence of the proven portability of our concept and the strength of the development pipeline we have built. We are also preparing to enter the Las Vegas market later this year, marking another important step in Cava’s national expansion. As we are welcomed into new communities, we remain equally focused on ensuring that each restaurant reflects the warmth, hospitality, and Mediterranean way that defines the Cava experience. Recent openings continue to bring Project Sol to life—our restaurant design initiative focused on creating warm, welcoming places where guests want to spend time. Our location at 56th & 6th in New York City showcases the new Project Sol prototype with warmer tones, greenery, and natural light, creating a more inviting dining room.

As consumers increasingly seek authentic moments and inviting aesthetics, we are building upon Project Sol with the launch of Project Sunkist, which incorporates the core elements from Project Sol into a reimaging for legacy restaurants. We will have more details about these investments in the coming quarters. Just as our environments invite meaningful moments and deepen relationships with our guests, so do our bold Mediterranean flavors. Our Pomegranate Glazed Salmon performed in line with our expectations and demonstrated both our ability to extend into seafood in a way that is authentic to Cava and the trust guests have in us to bring new Mediterranean flavors to their meals. In that spirit, we have completed our Roasted Garlic Shrimp market and operational testing and are looking forward to sharing more next quarter on the projected national rollout timeline.

That same disciplined approach to innovation comes through with our new culinary launches. In October, we introduced our Greek Goddess dressing, a twist on our Greek Green Goddess dip sold in grocery channels, and a pomegranate apple drink that balances slightly sweet and tart flavors in a vibrant red sip that’s made for crisp fall days. We launched our new menu with a larger-than-life Greek Goddess etched in stone in Flatiron Plaza in New York, driving social buzz and consumer engagement.

We know these pulses of seasonal innovation across chips, drinks, and dressings keep the menu fresh and exciting for our guests without overcomplicating operations. We are also excited to announce the launch of new packaging for our dips and spreads at the end of the year for our CPG business. This refreshed packaging is designed to create a stronger link between the Cava experience guests know and love in our restaurants and the food they bring into their homes. As we continue to introduce more people to the Mediterranean way, this CPG business is another opportunity to extend the warmth, flavor, and quality of Cava beyond our restaurants while reinforcing one cohesive brand wherever guests engage with us.

Shifting to our second strategic pillar: deepen personal relationships with guests even as we scale. This past quarter saw the continued growth of our loyalty platform and a focus on in-person authentic moments with our guests. Over the last few months, we hosted Cava Mediterranean Beach Club experiences at UT Austin, SMU, and the Minnesota–Michigan football game. At UT Austin, that engagement translated into an encouraging loyalty signal: loyalty purchases increased 8% in the local market the week after the pop-up compared to the prior week.

Just as importantly, we want every guest to feel welcomed into Cava, whether they are visiting us for the first time or have been part of our community for years. We recently launched a one-day mini bag drop where guests received a miniature version of Cava’s iconic yellow tote bag with purchase. It was a small but meaningful way to surprise and delight guests with something fun and wearable. These moments are made possible through the team members who show up every day to bring care and consistency to the Cava experience, reflecting the focus of our third strategic pillar: run great restaurants—every location, every shift. Running great restaurants starts with our ability to consistently deliver fresh, high-quality food and Mediterranean hospitality that guests expect from Cava. Fresh food made in-house daily is core to who we are, and it requires meaningful prep work, strong supply chain collaboration, and disciplined restaurant leadership.

That is why we continue to invest in tools and processes that make it easier for our teams to deliver consistent, high-quality food every day, from the pre-marinated chicken we are currently rolling out that reduces raw poultry handling in our restaurants, simplifies back-of-house processes, and is designed to strengthen food safety controls while improving operational and flavor consistency, to the produce slicers that simplify preparation of our beloved cucumber and pickle toppings.

In addition, we are rolling out a new operator portal to simplify the GM management of out-of-stock items and their control of digital order throttles. These investments are about reducing complexity for our teams and creating better, more consistent experiences for our guests. Alongside our investments in tools and process simplification, we are learning from our teams delivering the most exceptional guest experiences. This past summer, we launched our Welcome to Our Table hospitality contest with our GMs to identify and recognize best practices across the system as part of a broader effort embedding epic hospitality across Cava. Approximately two-thirds of our restaurants saw an improvement in guest experience during the exercise, giving us a clear view into the behaviors and routines that are driving results.

We are now focused on scaling these practices across the system to give our teams the support they need to deliver hospitality consistently. As our AUVs grow, in addition to year-over-year growth in our AUVs, demand for Cava remains strong in our new restaurant openings where we continue to see new-restaurant productivity of approximately 100%. To support this demand, we have increased our focus on pre-opening leadership readiness and training as well as the support our teams receive after opening. Preliminary results are promising, with new restaurant openings that received investments seeing higher guest satisfaction and lower turnover rates.

Sustaining that energy requires strong leadership and real ownership at the restaurant level. That’s why at Cava, we continue to invest in our general managers and provide them with opportunities to create value for themselves as they create value for our guests and for our shareholders. This past year, we introduced annual long-term incentive equity grants for GMs to truly have ownership in our business. Our Academy GMs, now at 110 locations, receive elevated compensation for their Academy certification.

We also provide additional incentives tied to GM hiring and promotions, recognizing that great leaders do more than run strong restaurants—they build strong teams and develop the next generation of leaders. We will have more in the coming quarters on additional opportunities for our GMs to participate in the value creation they drive. These efforts are all part of Flavor Your Future and our ongoing commitment to making Cava the best GM role in the industry.

The restaurant industry is one of the few industries where anyone can carve a path for themselves. We’ve always said that as a team member, if you have the will and develop the skill, in 24 to 36 months you can be running a multimillion-dollar business making six figures. At Cava, our team members can build a career, not just have employment. We want our GMs to have meaningful opportunities to grow, the tools and capabilities to lead with confidence, and a tangible connection to the success they help create.

In that spirit, we recently rolled out the Cava Command Center, which acts as a single pane of glass for operational insights and provides a centralized way for operators to track the health of their restaurant. It gives GMs real-time visibility into key restaurant vitals with the ability to benchmark performance against peers and across the broader system. The new Command Center helps leaders identify opportunities faster, recognize what is working, coach teams more effectively, and build a strong sense of ownership and accountability for restaurant performance and team member development.

Capabilities like Cava Command Center and the operator portal mentioned earlier are made possible by our new Cava Core Data Foundation. Early results have been encouraging, and we are beginning to leverage next-gen capabilities built upon Cava Core across our organization—whether in our restaurants with operational insights, in our analytics teams with enhanced business intelligence, or through deeper customer insights enabling marketing personalization.

I want to close with a note we received from a guest at our Kenwood restaurant in Cincinnati. The guest has celiac disease and shared how a team member took the time to understand her needs, followed the appropriate food safety steps, helped her navigate the menu, and even prepared a fresh avocado away from the pita bread. She described the experience as some of the best service she had received in a restaurant, and she said she felt safe, welcomed, and eager to return.

That is the kind of care and ownership from our teams that we want every guest to feel at Cava, and a great example of team members bringing Mediterranean hospitality to life. The progress we have made this year is a direct reflection of the commitment of our more than 15,000 team members across the U.S. to our culture, our guests, and our collective ambition. I want to thank each of them for the care, energy, and ownership they bring to Cava every day. With that, I’ll turn it over to Tricia to walk you through our third quarter results and outlook.

Tricia Tolivar (Chief Financial Officer)

Thanks, Brett, and hello everyone. Cava revenue in the third quarter of 2026 grew 22.1% year over year to 353.7 million. During the quarter, we opened 24 net new restaurants, bringing our total Cava restaurant count to 500. Same-restaurant sales increased by 3.1%, primarily from menu price and product mix, with guest traffic slightly positive. The estimated effect on same-restaurant sales from Cyclospora and broader concerns around fresh produce consumption was 150 basis points for the quarter.

As Brett noted, the impact was category-wide, and we continued to gain market share while maintaining positive traffic and strong new-restaurant performance. For the quarter, Cava restaurant-level profit in the third quarter was 82.7 million, or 23.4% of revenue, compared to 71.2 million, or 24.6% of revenue in the prior-year quarter, representing a 16.2% increase. The decrease as a percent of revenue was driven by incremental labor investments, a higher mix of third-party delivery, as well as investments in repairs and maintenance, partially offset by leverage from higher sales. As previously shared, third-party delivery is dilutive to margin rate but has a positive impact on margin dollars due to a higher guest price.

Importantly, these investments are supporting higher guest experience scores, improved new-restaurant readiness, and the continued strength of our development pipeline. We remain focused on converting sales growth into attractive long-term returns while investing ahead of the next phase of Cava’s expansion. Cava’s food, beverage, and packaging costs were 30% of revenue, lower than the third quarter of 2025 by 10 basis points due to expected tariff recoveries in the current-year quarter, the absence of tariffs incurred in the prior-year quarter, and favorable mix, partially offset by higher input costs associated with the second quarter launch of Pomegranate Glazed Salmon and fuel surcharges incurred during the current quarter. We anticipate Cava’s food, beverage, and packaging costs to increase as a percent of revenue for Q4 as a result of fuel surcharges and the continued rollout of pre-marinated chicken.

Labor and related costs were 26% of revenue, up from the third quarter of 2025 by 50 basis points. This was largely driven by an incremental 3% team member wage investment inclusive of the expansion of our AGM role and additional team member hours to support improved guest service and post-open success, which drove higher guest experience scores. Cava occupancy and related expenses were 6.7% of revenue, flat from the third quarter of 2025. Cava other operating expenses were 13.8% of revenue, reflecting an increase of 70 basis points from 3Q25.

This increase was primarily driven by a higher mix of third-party delivery and investments in repairs and maintenance. Shifting to overall performance, our general and administrative expenses for the quarter, excluding equity-based compensation and executive transition costs, remain flat at 9.4% of revenue, primarily due to leverage from higher sales offset by investments to support future growth. Pre-opening expenses were 8.4 million in the current quarter compared with 4.9 million in the prior-year quarter.

The 3.5 million increase includes a higher number of units under construction and additional investments in new-restaurant openings to support increased volumes, such as bringing in GMs and hourly managers earlier so they can train, build confidence, and see an NRO before opening. We are seeing promising early results from these efforts, including improved GM turnover. Adjusted EBITDA for the third quarter was 42.3 million, a 5.7% increase versus the third quarter of 2025.

The increase was driven by same-restaurant sales and strength in new-restaurant openings, partially offset by investments to support future growth, including pre-opening costs. For the third quarter of 2026, equity-based compensation was 4.5 million. We continue to expect equity-based compensation, which includes our new programs to provide equity grants to GMs and performance-based LTI, to be between 22 million and 24 million in aggregate for the full year. In the third quarter, our effective tax rate was 29.3%. For the full year of 2026, we expect our effective tax rate to be between 23% and 25%, with the rate in the second half of the year being higher than the first half of the year due to 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 third quarter, we reported 13.2 million of net income compared to 14.7 million of net income in the third quarter of 2025. Diluted EPS was $0.11 in the third quarter compared with $0.12 in 3Q25. The decrease in net income and EPS was primarily due to higher depreciation and amortization, which includes the impact of capital investments to enhance the guest and team member experience, and higher equity-based compensation, partially offset by improved operating performance.

Turning to liquidity, at the end of the quarter we had zero debt outstanding, 427.9 million in cash and investments, and access to a $150 million undrawn revolver with an option to increase our liquidity if needed. As part of our balanced approach to capital allocation, the Board authorized a share repurchase program of up to $100 million of its outstanding shares of common stock. To date, the company has not purchased any of its shares of common stock under the program.

The buyback authorization is opportunistic, funded from excess cash, but does not take priority over our investment in NROs and our commitment to our people, guests, and technology. Our highest and best use of capital remains opening new restaurants, which have been generating over 40% cash-on-cash returns in year one through the third quarter. Cash flow from operations increased to 181.6 million in 2026 compared to 144.5 million in the prior-year period.

Year-to-date free cash flow was 37.1 million. Now to our outlook for full year 2026, we are updating our guidance to expect the following: 76 to 78 net new Cava restaurant openings; same-restaurant sales of 6% to 7%; Cava restaurant-level profit margin between 23.7% to 24%; pre-opening costs between 28.5 million to 29.5 million; and adjusted EBITDA, including the burden of pre-opening costs, between 184 million and 189 million. I’d like to provide some additional context around our updated guidance.

Our outlook reflects the strength we’re seeing in the business and the trends to date. Looking ahead, we remain confident in the long-term structural health of the business, reaffirmed by our strengthening AUVs and new-restaurant performance. Turning to restaurant-level margin, our guidance reflects dynamics we experienced in the third quarter as well as traditional seasonality of the business. COGS reflects the continued rollout of pre-marinated chicken into Q4. On the labor front, our guidance embeds continued investments in our teams and our guests to deliver epic hospitality at every restaurant, every shift. Additionally, it reflects investments in our AGM program, with around 75% of restaurants now having an AGM, and more robust post-opening support.

Pre-opening expenses reflect the continued expansion of support for new unit volumes, which includes additional training for teams ahead of opening. For G&A, we expect slightly higher spend in Q4 as we look ahead to 2027. We remain confident in the structural foundation of the business and the durability of our long-term algorithm, which calls for low- to mid-single-digit same-restaurant sales growth. In addition, given the health of our 2027 real estate pipeline, we anticipate at least 16% unit count growth.

And with that, I will turn the call back over to the operator to open it up for Q&A.

OPERATOR

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device after your questions. Should you wish to ask more, you can requeue and questions will be taken as time permits.

Please stand by while we compile the Q&A roster. Your first question comes from the line of Chris with Baird. Your line is open. Please go ahead.

Chris (Analyst at Baird)

Thanks. Good afternoon, guys. Brett, the updated full-year guidance implies fourth quarter comps, I think, of roughly 1.5% to 6%. Can you share how the quarter has started, or at least help us understand where within that range current trends would put you?

Brett Schulman (Co-Founder and CEO)

Yeah, Chris, thanks for the question. As we noted, the beginning of Q3 was impacted by the broader concerns around produce consumption. We saw that bounce back. As we noted at our Q2 earnings call, it had rebounded, and then post–Labor Day, we did see some choppiness as gas prices spiked, but that abated as we exited the quarter. We saw comps strengthen, and we’ve seen those trends continue into Q4. And our range reflects what we think is the highest probability for the full year, with the midpoint of the range being the highest probability within the range of what we expect for the full year.

Chris (Analyst at Baird)

Okay, and then just as a follow-up, beyond opening restaurants, can you talk a little bit about the biggest opportunities for bringing new customers into Cava? And specifically, I’m just wondering whether the new CMO has identified maybe new ways to approach marketing or innovation.

Brett Schulman (Co-Founder and CEO)

Well, certainly, Chris. With our NROs opening at 100% productivity, we are getting significant awareness and pent-up demand before we open in markets. I’m very excited to have John Ludeke on board. I think our overall brand awareness and cultural relevance is something that’s a huge opportunity for us. We certainly have great grassroots awareness and word of mouth and excitement and passion from our guests. But excited for John to take the brand to what we think is going to be another level in the sense of being culturally relevant and engaging existing guests as well as new guests, and driving that awareness across the country in a very compelling way.

OPERATOR

Your next question comes from the line of John Ivanko with J.P. Morgan. Your line is open. Please go ahead.

John Ivanko (Analyst at J.P. Morgan)

Hi. Thank you. When I was looking at the promotional calendar, for the lack of a better word, you introduced salmon in April, so you’ve obviously been featuring that for quite some time. So now that we’ve had, you know, salmon really for a good six plus months, what have we kind of learned on that on a, you know, kind of on a post-read basis? Is there anything that you would have done differently with salmon, a product like salmon, in the future relative to what you did this year?

And of course I’m going to ask the question, how does the salmon experience, if at all, influence future, you know, kind of bigger protein focuses outside of what you currently have? And might we actually have an opportunity to take one potentially higher-frequency protein and replace it with a, or actually replace it with a lower-frequency protein? Thank you.

Brett Schulman (Co-Founder and CEO)

Yeah, John, thanks for the question. We’re very pleased with the way salmon’s performed. It’s performed in line with expectations. We think the cadence is still appropriate. I know there’s been an acceleration in the industry of LTOs in general. I think they’ve doubled in recent years. I think we’re up to like 42,000 LTOs annually. And we’re just very mindful, given our dynamic growth of new restaurant openings, growth of AUVs, that we do not push too many changes out onto our operators in a given year.

So we feel very comfortable with the current cadence. And so within that cadence, we always look to say, how do we have the best portfolio of proteins or ingredients on our serving line to meet our guest needs? And changing preferences and seafood was an opportunity. It was our first foray with salmon. I think one of the learnings from salmon that was interesting is it’s a four-ounce filet. It’s the one protein where our guests cannot break into a half-and-half item, which we know our guests love to do.

And so in our shrimp test, we’ve seen accelerated adoption because of the half-and-half opportunity the guests have with shrimp compared to salmon. So salmon will stay on the menu through spring. We had originally said through the end of the year. We’re going to extend it to spring and we will have more next quarter on the official launch date of shrimp. But certainly it’s a protein that our guests will be able to do half-and-half, and we think that that can drive even increased incidence.

The other thing I’d note is in January we’re going to bring back our fan-favorite white sweet potato, which has continued to build its constituency every time we’ve brought it back on the menu and has increased its incidence rate. And of note, a lot of that incidence, to my earlier comment, is driven by half-and-half portions. So it’s a unique item on our menu that guests can pair with steak or chicken as a half-and-half item that serves a unique purpose on the menu that our other proteins don’t. So we’re always analyzing the portfolio in that sense to put forward the best group of offerings for our guests.

OPERATOR

Your next question comes from the line of Danilo Gargiulo with Bernstein. Your line is open. Please go ahead.

Danilo Gargiulo (Analyst at Bernstein)

Great. Thank you. I want to touch base on the restaurant-level margins, specifically on the labor component. So in the past you’ve always framed the labor as a needed investment, you know, to sustain but also to have better experiences for customers as well as for your own team. I’m wondering where you are in the curve of investment here, whether you’re starting to see some diminishing returns on those investments, therefore getting to a point where the labor as a percentage of sales is going to be relatively stable and then potentially over time seeing some leverage coming in as traffic rebounds.

Or if you see that there are still some incremental pockets of investments across your stores and if so, if you can highlight a couple of opportunities from a labor investment that you think could be the top priority in the coming quarters.

Tricia Tolivar (Chief Financial Officer)

Thanks, Milu. So certainly we’re always looking at the business and wanting to make thoughtful investments to drive the business for the long term and create a long-term durable brand that drives value to our shareholders as well. In the quarter, the investments that we delivered on in labor were around increases in wages of about 3% year over year, further expansion of our AGM role, the assistant general manager role that provides bench strength for future openings but also provides the general managers in the restaurant another leader in that four walls that can help them manage these significantly growing businesses that went from 2.4 million in AUV a couple years ago to over 3 million and at 3.1 million today.

And so we’re seeing that that investment in the AGM role is providing bench strength and also helping to reduce GM turnover overall, which will have a long-term benefit. In the third quarter as well, Brett referenced this on the call and I did too a little bit, but we added hours into our restaurants, particularly in our new restaurant openings, to ensure their post-open success. And that is reflected in the labor results that we delivered in the quarter. We like what we’re seeing there and expect to continue to make those investments as we finish the year and go into 2027.

And as it relates to leverage and what we anticipate, we’re, like I said at the beginning, wanting to make sure that we’re doing the right things for the business to drive the momentum that we’re seeing and continue that for the next 12 weeks, 12 years and beyond.

OPERATOR

Your next question comes from the line of Margaret May Binstock with Wolfe Research. Your line is open. Please go ahead.

Margaret May Binstock (Analyst at Wolfe Research)

Hi guys. Thanks for taking my question. I guess a little bit of a follow-up and a little bit of something new. I know you guys have talked about two-thirds of the restaurants with, you know, that top-notch guest experience. I mean, what do you think those restaurants are doing differently? How are you scaling some of those practices across the system and are there any kind of, I guess, low-hanging-fruit levers that you guys can pull for the rest of the system?

Thank you.

Brett Schulman (Co-Founder and CEO)

Yeah, Margaret, thanks for the question. Well, first I’d point to 110 Academy general managers that run exceptional restaurants. Those certainly make up a portion of those two-thirds. And I think the other thing we noted, the hospitality contest was a great way for us to gain the key behaviors and activities that are driving some of those exceptional hospitality results that we can scale across the system. And that’s going to be a focus. As Tricia noted, you know, some of the labor investments we’ve been making, the AGM position, it’s really kind of an all of the above. When you think about pre-marinated chicken or our new produce slicers, these are all different ways that free our team up, take complexity and physical tasks off of their plate to free them up to deliver great hospitality and have those human interactions with our guests. So that’s been a real focus that we believe we can deliver epic hospitality across every location, every shift.

And so we’ve been very intentional about all these different activities coming at it. Whether it’s from an equipment standpoint, whether it’s from a labor investment standpoint or whether it’s from a best practices standpoint to set our teams up for success, to deliver epic hospitality.

OPERATOR

Your next question comes from the line of Sara Senatore with Bank of America. Your line is open. Please go ahead.

Aisling (Analyst at Bank of America)

Hi, this is Aisling on for Sarah. Thanks for taking my question. You know, just in the updated guidance, pre-opening moved roughly 7 million higher, but only one unit was added to the opening guide. And I know you touched on kind of what drove the higher expense in the 3Q time period, but is the heavier spend kind of the new run rate or are you getting a head start on the 2027 class? Just anything you can say on how that informs unit growth next year would be helpful.

Tricia Tolivar (Chief Financial Officer)

Sure. Happy to. So certainly for pre-opening we saw an opportunity to invest in the business. These robust openings that we’ve been delivering across the country wanted and needed the appropriate support to be able to deliver on that guest experience and continue that momentum as we move forward. So what we did, and we talked a little bit about on the call, is we’re bringing in general managers earlier, team leads earlier, traveling to other openings to experience a new restaurant opening ahead of the restaurants that they’re going to open themselves.

And so those investments that we were working with are about $50,000 to $60,000 per restaurant overall. And I would expect that to continue as we move forward from our historical run rates as we’re seeing good returns out of those, seeing unbelievably low GM turnover as a result and then also contributing to the success of the restaurant overall. So what we’re seeing as you go forward, there are a couple other things in the quarter itself that were driving pre-opening costs as well that I want to call out and then I’ll give a little color related to your question on 2027. In the quarter, we also embarked on some remodels, so there are pre-opening costs that are incurred in the quarter as well as expected in the fourth quarter as we’re taking some or all of the elements for Project Sol and doing some significant remodels to understand the opportunity for additional updates as we move forward.

And then there are some urban locations with some longer times of development as well as some higher costs that impacted the overall cost of pre-opening this year, driving that range of 28.5 to 29.5. So as we look into 2027, we will not be as high as we are now currently on a per-restaurant basis, but we do anticipate there’ll be about that $50,000 to $60,000 more per restaurant on top of the historical run rates that we’ve had as we move forward and deliver guests a great experience.

OPERATOR

Your next question comes from the line of Gregory Frankfurt with Guggenheim. Your line is open. Please go ahead.

Gregory Frankfurt (Analyst at Guggenheim)

Hey, thanks for the question. Maybe I just want to go back to the changes you’re making on kind of the GM incentives and I guess what is industry standard and maybe how are you different when you go to these managers and pitch them on joining Cava Group? And then you also made a comment about in the future tying their incentive or their pay more directly to the benefits they drive. I guess I’m curious what you mean by that comment and what you’re contemplating.

Brett Schulman (Co-Founder and CEO)

Yeah, Greg, I can’t speak to others’ compensation models, but what I can speak to is that we have always set out for Cava to be a place where our team members can grow into GMs and build careers for themselves or even come into support center and build a career for themselves. And so we’ve structured GM comp over the years to increasingly give them opportunities to earn greater compensation, whether that’s the equity grants we rolled out this year, whether it is increased compensation for achieving that academy certification, which now 110 of our general managers are achieving, or if there is, you know, development creating future GMs that are promoted that these general managers have developed, they get bonuses for that, and really shifting toward an owner-operator mindset where they have skin in the game and participate in the upside that they’re creating.

So we’ve looked at different adjustments to our current short-term incentive and bonus model and we’ll have more to come on that in the coming quarters as I mentioned earlier. But we are always reviewing—I mean, we’ve done this over the course of our journey—to continue to not have a kind of stated compensation number, but to continue to raise the ceiling for their compensation opportunities every year.

OPERATOR

Your next question comes from the line of Sharon Zakfia with William Blair. Your line is open. Please go ahead.

Sharon Zakfia (Analyst at William Blair)

Hi. Thanks for taking the question. I guess I’m curious, as you’ve made all of these investments both at the managerial and hourly labor level, have you seen—or can you quantify—what kind of impact you’re seeing on turnover at both of those levels? I know you said it’s improved, but it’d be great to get some numbers around that and where you are in that journey towards what you would target.

Brett Schulman (Co-Founder and CEO)

Yeah, Sharon, you know we’re growing, we’ve been growing what you know, 17 to 19% compound annual unit growth rate. We’ve committed to at least 16% next year. Growth is not easy in this business and we want to make sure we are staying in front of the investments that are needed to drive sustainable, durable long-term growth. And that starts with our people. And so we have been very steadfast about this since we’ve been public that we are going to use opportunities to stay in front of this.

And then we need to show that those investments get a return on investments and that they pay off over time. So again, you know what we’re seeing is better guest satisfaction, reduced turnover. If you take our academy GMs, for example, low to mid single-digit turnover in our academy GM population. So we want to develop more people to get into that population because we see the increased compensation, the increased ownership mentality, the opportunities for them to build a career reduces turnover and it creates lower turnover of team members. So we’ve continued to see steady reduction in turnovers in our GM population overall and in our team member population as we continue to make these investments.

And then, for example, Tricia spoke to some of the pre-opening investments we’ve been making. So since we’ve been training GMs three months additional time with these investments versus what we were doing before, turnover has dropped to almost 0 of that population, low single digits of that population versus much higher turnover previously where the intensity of these openings were challenging to folks and they weren’t lasting either through training or were burning out a few weeks after training.

So again, we need to see a return on these investments. We’ve seen that in some of these targeted ones we’ve made or test pilots that we’ve done. So we are leaning in that because we are laser focused on creating long-term sustainable durable growth. And again, we’re not going to do this for the next 12 weeks, we’re doing this for the next 12 years and beyond. And if you that is an investment of 20 basis points or 30 basis points of restaurant-level margin or some pre-opening costs in a given quarter or given year, we’re going to do that because we believe it’s going to create that long-term sustainable growth and restaurant-level margin expansion.

Sharon Zakfia (Analyst at William Blair)

And then I think you mentioned that you’re rolling out a new operator portal that will give the GM different things but also the ability to throttle delivery. Is that something that they have the capability to do now or will that be new? I mean, how do you manage delivery at the unit level right now so that the units aren’t overwhelmed?

Brett Schulman (Co-Founder and CEO)

Yeah, great question. We have throttles set today and we have the ability to out-of-stock ingredients. But previously they had to submit a ticket to tech to be able to do that. Now they have an interface. This is rolled out in over 100 restaurants already and it will be rolled out across the fleet shortly where they have an interface that they can manually control it now themselves and they no longer have to submit a ticket. So you’re getting it in real time.

Again, we want our GMs to be business leaders. They’re running multimillion dollar businesses. We want them to own it the right way and we want to give them the tools and capabilities to own it and not have to necessarily go to another person or go to another department to get things done for them, that they can run their businesses the way they see fit and to create greater opportunities for them, to create value for themselves and for our shareholders and for our guests.

OPERATOR

Your next question comes from the line of Jacob Aiken Phillips with Melius Research. Your line is open. Please go ahead.

Jacob Aiken Phillips (Analyst at Melius Research)

Hey, good afternoon. Thanks for the question. So last quarter you called out some of your strongest comps in lower income markets and with the choppiness around gas prices and improvement you’re seeing headed in 4Q, how has the performance across income cohorts evolved?

Brett Schulman (Co-Founder and CEO)

Thanks, Jacob. We are continuing to see our restaurants in median household income markets that are lower have the strongest and highest same-restaurant sales. So that trend has continued into third quarter and I’m still seeing great trends across all of our platforms and all of our environments.

Jacob Aiken Phillips (Analyst at Melius Research)

And then you mentioned some remodels to test elements of project solutions. What are you looking for to learn from those restaurants about the sales opportunity and investment required? And I guess as you think about a broader Sunkist rollout, how much can fit within a normal rebrush cycle and what would justify an increase in spending across the fleet?

Brett Schulman (Co-Founder and CEO)

Yeah, Jacob, thanks for the question. We see that our cross-channel or multi-channel users have a 3.3x frequency. So we want to make sure that it’s not an either/or, it’s an and — that we have great digital and great physical experiences — because when we present our guests with robust experiences across all channels, we gain more occasions and more frequency from them. And when you think about how we’re applying Project Sol to Project Sunkist, one of the urban locations that Tricia mentioned as a test location post-Project Sunkist remodel, we saw an 18% increase at the dinner daypart, as more guests came more frequently to eat in our physical space.

So again, I’ve been on record for years saying the demise of the dining room is greatly exaggerated. And when many industry participants have been shrinking their dining rooms or going to austere spaces littered with kiosks, we’ve been going the other direction and investing in warm, inviting aesthetics that drive human connection, that give our guests the opportunity and the optionality when they so choose to come and have that human connection and a physical experience.

Complement it by, when they want a quick, convenient experience, where they can go and opt into one of our digital channels. So very pleased with the early returns we’re seeing on the more inviting, experiential aesthetic that Project Sol and now Project Sunkist are delivering.

OPERATOR

Your next question comes from the line of Brian Harbour with Morgan Stanley. Your line is open. Please go ahead.

Brian Harbour (Analyst at Morgan Stanley)

Yeah, thanks. Hi, guys. I had a question about new store productivity and you mentioned it, but as we can kind of measure it, to me it looked like it took a downshift from the first half into the third quarter. What I don’t know is sort of, is that just timing of units, is it mix of markets that you opened more recently? I guess I’d be curious if some of the honeymoon effects have played into this. And I guess maybe the question would be, you’re sort of investing more resources in some of these new openings.

Are you in fact kind of seeing the benefit of that in real time?

Brett Schulman (Co-Founder and CEO)

Yeah. Thanks, Brian. The biggest factor in the new restaurant productivity, the way you’re calculating, is timing and understanding when those restaurants are opening. So if you had a better visibility into the timing of their openings in the quarter, I think you’d see an outcome that was right at 100% from a new restaurant productivity standpoint. I will say that one of the things we’ve done, in addition to investing in more training, bringing team members on sooner to understand the Cava way and prepare them for a successful opening, is we’ve also made some adjustments in the restaurants to help them through that process — meaning turning off third-party delivery in those restaurants, and if a catering restaurant, not having catering capabilities — such that the team members can give an exceptional, epic hospitality experience for the guests as they’re coming into the restaurant without being distracted by third-party delivery drivers waving the phones in their faces while there’s a line out the door of guests in restaurants waiting to be served.

So that is something that we changed a few months ago and are finding that it’s improving our guest experience scores, and so while it has a little bit of an impact on the overall sales results in the short term, we do think it’s the best thing for the long-term success of the brand and the operations in that restaurant.

OPERATOR

Your next question comes from the line of JP Wollom with Roth Capital Partners. Your line is open. Please go ahead.

JP Wollom (Analyst at Roth Capital Partners)

Great, thanks for taking my questions. Just two-part here on kind of some sales initiatives. First, just on the second catering market rollup, can you share kind of what incremental knowledge you’re hoping to gain? And then just the second one, in terms of the loyalty program, could you just kind of tell us, you know, looking back over the last year and the rollout of statuses, where are you seeing the greatest impact? Is it driving the additional visit from your already frequent guests, or bringing kind of lapsed customers back?

And where’s the program still falling short as we think about next year?

Brett Schulman (Co-Founder and CEO)

Yeah. So to your first question on catering. The goal of the second market test is to really codify our strategy moving forward on whether it would be a more broad-based, chain-wide approach like we have in our current Houston market, where every restaurant produces catering to a certain magnitude, or in our second market test, which we just launched about a week or two ago, a more hub-and-satellite model where not every restaurant produces catering.

And so that is designed to have a go-forward final strategy early next year for the larger rollout of catering in the future. Regarding the loyalty question, we’re very pleased with the evolution of the program. If you think about it, we launched the reimagined program at the end of 24, phase one with the earn-and-bank points model. At the end of 25, we launched phase two, which was the tiered status level. And what we’ve seen is the opportunity to really influence behavior to encourage folks to trade up from the sea status to the sand status and then subsequently sand to sun to improve frequency.

And, you know, now with Cava Core and Cava Current, which is our customer data platform on top of Cava Core, that gives us the tools for phase three. And phase three will kick off next year. We are shifting to a new loyalty platform next month, which will unlock ability and give us the flexibility, enable the capabilities for us to roll out phase three in the next 12 to 18 months. That will allow for much greater personalization and be able to truly drive and influence deeper behavior to get people to move up in those tiered status levels, thereby driving greater frequency.

So very happy with the evolution of loyalty and very excited at the promise for the next phase to come.

OPERATOR

Your next question comes from the line of Jim Sanderson with North Coast Research. Your line is open. Please, please go ahead.

Jim Sanderson (Analyst at North Coast Research)

Hey, thanks for the question. I wanted to go back to commentary on low and high income consumers. I’m wondering if you notice any difference in the way each group manages the menu, meaning if their average check is different, how that comp performance is so much stronger — if that’s primarily transaction growth or a mix of both. Just any feedback on those differences?

Brett Schulman (Co-Founder and CEO)

It’s certainly transaction growth. And ironically, we’re also seeing in the lower income cohorts of our restaurants that they’re indexing higher on premium protein attachments, which is a little counterintuitive, but we’re seeing that that gives them opportunities and that’s really a function of that barbell menu option that we have. So our entry price point across many restaurants across the country is $10.65, which gives you chicken, falafel, or roasted vegetables, unlimited toppings, three dips and spreads, and two dressings.

And that’s a great way to make our food accessible. But at the same time, if you want to experience more premium protein, there’s the opportunity to do that as well on our menu. And we think that’s an attractive choice for many across the country. No, we don’t foresee any incremental labor related to marketing in particular. And we already have, and we have had even since our Zoe’s acquisition, an internal catering sales team that manages B2B sales. So that is a great marketing engine that’s already built into our business.

OPERATOR

Your next question comes from the line of Brian Vaccaro with Raymond James. Your line is open. Please go ahead.

Brian Vaccaro (Analyst at Raymond James)

Hi. Thanks, and good evening. My question is on digital sales, and the last several quarters, you saw some significant outsized growth in that channel, and it looks like it may have moderated a bit this quarter. Can you just elaborate on any trend changes you’re seeing in third-party delivery or order-ahead takeout within that digital sales mix?

Brett Schulman (Co-Founder and CEO)

So a portion of the digital sales shift is related to the new restaurant openings that I mentioned earlier, where we’ve turned off third-party digital—excuse me, third-party ordering—in those restaurants. And that’s creating a bit of a mix shift overall in the entire portfolio. So as we continue to see how that performs, there really isn’t anything about the consumer behavior; it’s more of an intentional approach that we have. But I also believe that Project SOL has an impact because we’re creating an environment for an in-restaurant occasion that allows us to serve those guests in a warm environment that gives them a great experience with our food and amazing hospitality.

Brian Vaccaro (Analyst at Raymond James)

All right, that’s helpful color. And just one quick clarification if I could, Tricia, on G&A: I think you said you expect 4Q to be slightly higher. I just wanted to confirm that that’s being compared to the third-quarter G&A ex stock comp. Thanks again.

Tricia Tolivar (Chief Financial Officer)

It is. So in terms of G&A spend in dollars, we expect fourth quarter to be slightly higher than third quarter. And one thing I’d like to add around G&A is certainly as we identify the opportunity to invest in pre-opening costs, we wanted to reallocate some of the spend that we had originally intended to incur related to G&A and bring it into pre-open. So if you go back to the beginning of the year, we had suggested G&A as a percent of revenue would be flat to 2025.

And as we finish out the year, we anticipate you will see some leverage in that G&A spend as a percent to revenue as we close out 2026.

OPERATOR

Your next question comes from the line of Todd Brooks with StoneX. Your line is open. Please go ahead.

Todd Brooks (Analyst at StoneX)

Hey, thanks for taking my question. Wanted to ask about the marinated chicken rollout, knowing that that’s not a labor saver, but it allows you to reinvest labor dollars to more kind of front-of-house hospitality activities. Can you talk through how we should be thinking about food cost pressure from that? And then, given the early reads on the initiative, as you’re looking at other ingredients in the restaurant or high-make items that tax your crews, are there opportunities to push more of kind of ingredient prep out to the vendor level and take it off the plates of your back-of-house employees?

Tricia Tolivar (Chief Financial Officer)

Yeah. So as we look at COGS as a percent of revenue in the third quarter, we did experience some benefit as it relates to T. And so during the quarter we were successful in identifying opportunities to recover some of those tariffs, and the third quarter reflects some of that benefit in the quarter itself. And so when you go from third quarter to fourth quarter, you will see an increase in COGS as a percent of revenue associated with the continued rollout of pre-marinated chicken, which does create incremental cost on the food, beverage, and packaging line while then giving us the opportunity to reinvest that labor on the labor line.

Overall, and as it relates to overall, what opportunities might we have to simplify the operations and the preparation? We’re always looking for different opportunities to do that. Brett mentioned the cucumber slicers. There’s been a number of different iterations and looking at our falafel and having that made in advance. We make it all in-house today and we’ll continue to explore those and bring them to our restaurants if and only if they’re able to deliver the quality that we do today or better.

OPERATOR

We have reached the end of the Q&A session. I will now turn the call back to Brett Schulman, CEO, for closing remarks.