Cava bucks restaurant industry trend with successful no-discount strategy
Cava CEO Brett Schulman explains the restaurant chain's no-discount strategy.
Cava sets itself apart from rivals with a unique strategy: No discounts.
The Mediterranean chain, which has launched hundreds of locations nationwide since its founding nearly a decade ago, is sticking to this strategy, maintaining that it doesn’t need discounts to generate short-term traffic.
Co-founder and CEO Brett Schulman told Gxstocks that companies can get into a "short-term trap" of throwing discounts to drive transaction growth in the short term. Public companies, he said, feel pressure from the market, which can make it tempting to chase quarterly results by offering discounts just to hit a number.
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But Schulman said Cava has consistently made it clear on its earnings calls that this is not the strategy the company intends to follow.
He said that those temporary discounts don't build long-term customer relationships or "communicate the differentiated value of what we're putting out every day and serving to our guests."
Cava bags outside the company's restaurant in the Brooklyn borough of New York. (Gabby Jones/Bloomberg via Getty Images)
"You can’t discount your way to prosperity," Schulman said. "We want to invest in our guests for the long term and continue to provide stronger everyday value."
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It's a significantly different perspective from the industry which has been heavily relying on discounts and aggressive price promotions to boost traffic among budget-conscious consumers.
After McDonald's brought back its Extra Value Meals in September, a slew of its competitors began ramping up their value game, rolling out their versions of an affordable bundle or promotion.
The inside of a refreshed Cava restaurant. Cava is upgrading the interior of its restaurants under a plan called "Project Soul." (Cava)
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The fast-food sector has faced a combination of challenges, from margin pressures due to supply chain issues and higher labor costs with minimum-wage increases to subdued traffic industry-wide. To combat that, many companies began offering deals to attract budget-conscious consumers and stabilize shrinking traffic.
"The restaurant industry is responding to what is effectively a period of some of the lowest measures of consumer sentiment in the last 50 years, and during these times, consumers want to feel like they're getting the best value for their money," Mark Wasilefsky, head of restaurant and franchise finance at TD Bank, previously told Gxstocks.
But Wasilefsky acknowledged that Chipotle and Cava have been performing better than their competitors.
Over the past two years, sales at Cava stores increased every quarter. Schulman also noted that its locations are opening with more than $3 million in revenue, which is a new record for the company.
Schulman said that value isn't a price point but is created by enhancing the entire dining experience. Cava's strategy has been focused on offering high-quality Mediterranean food, meeting the current health needs of the customer and providing convenience with mobile ordering, drive-thru or delivery.
The company has also been focused on cultivating a comfortable dine-in experience. The experience with in-store ordering matters, too. Schulman said this includes friendly service during the interactive "walk the line" ordering process, generous portion sizes and accurate orders.
The outside of a Cava restaurant in Detroit. (Cava)
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In the new year, the company also plans to finish upgrading its spaces with nicer seating, lighting and plants. It is also planning to launch new menu items, including roasted salmon next year.
