CAVA (CAVA) Q3 2025: 17% Unit Growth Offsets Modest 1.9% Same-Store Sales Amid Consumer Pressure

2025-11-04 | By EarningsIQ Research

CAVA’s 17.9% year-over-year restaurant count expansion powered double-digit revenue growth, but consumer headwinds and intense discounting pressured same-store sales and margin trajectory. Management is doubling down on hospitality, menu innovation, and operational upgrades to defend share and sustain growth as macro uncertainty weighs on discretionary spending. The brand’s value positioning and pipeline of new traffic drivers anchor its 2026 outlook despite a choppier near-term demand environment.

Summary

• Unit Expansion Drives Growth: New restaurant openings remain the primary growth engine as traffic and same-store sales decelerate.
• Operational Focus Intensifies: Leadership is prioritizing guest experience and team development over price increases or discounting.
• 2026 Levers in Play: Menu innovation and loyalty program enhancements set the stage for future comp and market share gains.

Performance Analysis

CAVA delivered 20% revenue growth in Q3 2025, propelled by a 17.9% increase in restaurant count to 415 locations, while same-restaurant sales rose a modest 1.9% as consumer headwinds and lapping tough comps weighed on traffic. Adjusted EBITDA rose nearly 20% year-over-year, but margin expansion was limited by higher food, labor, and operating costs, including tariff impacts and increased third-party delivery mix.

Restaurant-level profit margin landed at 24.6%, down 100 basis points from the prior year as cost pressures outpaced sales leverage. Labor investments and higher repair and maintenance expenses contributed to margin compression, while G&A efficiency improved with scale. Free cash flow year-to-date reached $23.3 million, and the balance sheet remains debt-free with ample liquidity for continued expansion.

• Unit Growth Outpaces Traffic: New restaurant productivity remains above 100%, but flat guest traffic signals rising reliance on new units for topline gains.
• Margin Headwinds Persist: Higher food and labor costs, as well as increased repair and maintenance, diluted operating leverage from sales growth.
• Innovation Pipeline Supports Engagement: Chicken shawarma and salmon tests, along with loyalty enhancements, are driving incremental trial and frequency among core guests.

While CAVA’s top-line momentum remains robust on a multi-year basis, the quarter underscores that macro and competitive pressures are challenging the pace of mature store growth and margin expansion.

Executive Commentary

Strategic Positioning

1. Relentless Unit Expansion

CAVA’s core growth lever remains aggressive new unit development, with 17 net openings in Q3 and a full-year target of 68 to 70 new restaurants. New locations are driving outsized productivity, and management highlighted above $3 million AUV (average unit volume) for the 2025 cohort, reinforcing white space potential and the scalability of the Mediterranean fast-casual model.

2. Menu and Experience Innovation

Menu innovation is central to CAVA’s differentiation strategy. The successful chicken shawarma launch and promising salmon test are broadening protein variety and driving incremental occasions. Project Soul, a redesign initiative, aims to enhance in-store ambiance and guest connection, while technology upgrades (kitchen display systems, Turbo Chef ovens) are improving order accuracy and operational consistency.

3. Loyalty and Guest Engagement

The Rewards Reimagined program grew membership 36% year-over-year, with new tiered status levels and status matching aimed at deepening engagement and frequency. First-party data from loyalty is enabling targeted innovation launches, as seen with chicken shawarma, which drove increased visit frequency among loyalty members.

4. Operational Excellence and Talent Pipeline

Leadership is prioritizing operational consistency and people development, launching the Flavor Your Future initiative and a new Assistant General Manager (AGM) role to strengthen restaurant leadership depth. Investments in training and internal promotion are intended to support sustainable scaling and maintain CAVA’s hospitality standards as the footprint grows.

5. Value Proposition and Pricing Discipline

CAVA continues to underprice inflation and peers, taking less than half the aggregate price increases of competitors since 2019. Management is resisting deep discounting, doubling down on holistic value and experience rather than short-term price promotions, even as industry-wide discounting intensifies.

Key Considerations

This quarter’s results highlight both the durability of CAVA’s growth engine and the emerging challenges of sustaining mature comp growth and margins in a tougher consumer landscape. The company’s ability to balance rapid unit growth, operational rigor, and innovation will determine its trajectory as macro conditions remain volatile.

Key Considerations:

• Comp Growth Headwinds: Same-restaurant sales gains slowed to 1.9%, with flat traffic and macro pressure most acute among younger guests.
• Margin Management: Restaurant-level margins compressed as labor, food, and repair costs outpaced sales leverage; investments in people and tech are prioritized over short-term margin expansion.
• Innovation as a Traffic Driver: Menu tests (salmon, new pita chips) and loyalty program enhancements are critical to defending share and stimulating frequency.
• Pricing Power and Value Narrative: CAVA’s sub-inflationary pricing and brand health surveys support a strong value perception, but the ability to maintain this stance as costs rise will be tested.

Risks

Consumer demand volatility, especially among younger and value-sensitive cohorts, remains the primary risk, as evidenced by flat traffic and moderation in same-store sales. Margin pressure from rising labor, food, and repair costs could persist, particularly if macro headwinds intensify or if new unit productivity normalizes. Execution risk in rapid expansion and innovation rollout could challenge operational consistency and brand experience as the footprint grows.

Forward Outlook

For Q4 2025, CAVA guided to:

• Same-restaurant sales growth to moderate further, reflecting tough comps and macro uncertainty
• Continued margin pressure from higher repair and maintenance and operating expenses

For full-year 2025, management maintained guidance:

• 68 to 70 net new restaurant openings
• Same-restaurant sales growth of 3% to 4%
• Restaurant-level profit margin between 24.4% and 24.8%
• Adjusted EBITDA of $148 to $152 million

Management highlighted several factors that will shape 2026:

• Menu innovation pipeline (salmon, pita chips, expanded catering test) as key traffic levers
• Modest price increases, below 2025 levels, to preserve value positioning
• At least 16% unit count growth, supported by a robust real estate pipeline

Takeaways

CAVA’s Q3 underscores its ability to drive outsized growth through new units and strong brand resonance, even as mature store comps and margin expansion face cyclical pressure. The company’s disciplined pricing, operational investments, and innovation focus are designed to defend share and set up a durable growth runway.

• Unit Growth Remains the Core Engine: With new restaurant productivity above 100% and a robust pipeline, CAVA is positioned to sustain double-digit topline growth even as consumer demand softens.
• Margin Expansion Will Be Hard-Fought: Ongoing cost inflation and operational investments are likely to cap near-term profit leverage, but management’s focus on long-term brand health over short-term margin is clear.
• Future Watchpoint—Menu and Loyalty Levers: The impact of salmon, pita chip innovation, and loyalty program enhancements on traffic and frequency will be critical for reaccelerating comps in 2026.

Conclusion

CAVA’s growth narrative is intact, with new units and brand strength offsetting near-term comp and margin headwinds. The company’s commitment to operational excellence, disciplined pricing, and innovation positions it well, but execution and consumer resilience will be tested as macro uncertainty persists into 2026.

Industry Read-Through

CAVA’s results and commentary reflect a broader industry shift toward unit-driven growth as same-store sales gains moderate across fast-casual and quick-service peers. The emphasis on menu innovation, loyalty program sophistication, and technology upgrades mirrors sector-wide trends, while CAVA’s resistance to deep discounting and focus on holistic value may set a template for premium fast-casual operators navigating similar headwinds. Investors should watch for margin management tactics, menu experimentation, and loyalty-driven engagement as key differentiators across the restaurant landscape.

CAVA Consumer Discretionary Restaurants Fast Casual Unit Growth Menu Innovation Loyalty Margin Pressure