Chipotle Mexican Grill (CMG 2.12%) brought innovation to the restaurant sector, pioneering the fast-casual dining concept and scaling it across the U.S. and beyond. The Tex-Mex chain is a leader in the industry, with strong growth and impressive profitability. Its success has spawned copycats.
Cava (CAVA 2.04%) is a Mediterranean-inspired fast-casual restaurant chain that's expanding rapidly itself. But it's much smaller today. That hasn't prevented investors from asking what the business might look like down the road.
Does Cava have what it takes to one day become the next Chipotle? Here's what investors must know.
Image source: Cava.
Opening new stores rapidly
Cava is finding success thanks to some key factors. It's betting on consumers' rising interest in healthy food choices. The Mediterranean diet is considered one of the healthiest in the world.
What's more, Cava is trying to copy what has worked so well for Chipotle: The fast-casual dining concept. This combines the speed, convenience, and accessibility people appreciate with fast-food restaurants, but it does so with higher-quality ingredients.
By benefiting from these two trends, Cava has seen tremendous growth. The company opened 15 net new stores in the fiscal 2025 first quarter (ended April 20), bringing the total to 382. This supported a 28.2% year-over-year gain in revenue, which was boosted by impressive same-store sales (SSS) growth of 10.8%. That figure is noteworthy because it happened during a time when consumer sentiment has been under pressure.
Cava's profitability is getting better. Last fiscal quarter, the operating margin came in at 4.7%. This was a meaningful improvement from the 3.6% operating margin from the year-ago period.
Looking ahead, the leadership team has plans to get to 1,000 stores by 2032. Expanding the physical footprint by about three-fold would unquestionably lead to much higher revenue and earnings down the road. Cava's biggest bulls hope this happens, and it would get the business closer to Chipotle's size.
Don't question Chipotle's dominance
To be clear, Chipotle is experiencing a slowdown, as people prioritize getting more value from the money they spend. The company's same-store sales dipped in each of the last two quarters, a very unusual occurrence for the industry leader. Nonetheless, Chipotle is still a top-notch performer in the restaurant market.
The business has developed durable competitive advantages, thanks to its scale. Chipotle has 3,839 stores right now, and it raked in $3.1 billion in revenue in the second quarter, both numbers that are light years ahead of Cava. Chipotle has a more visible brand, and its huge sales base allows it to better leverage marketing, product, and technological investments.
At its current size, it's easy to argue that Cava hasn't built an economic moat. Its brand is becoming more well-known, and as it scales, there could be some cost advantages. However, I don't see there being any strengths today.
I believe there's a very low probability that Cava will get to Chipotle's store count or market cap. Chipotle isn't sitting still. It might be approaching 4,000 stores soon. But over the long term, the company wants to have 7,000 locations open in North America. I don't see Cava ever reaching that level. Chipotle plans to open 330 stores just this year, which is nearly as many as Cava has in total.
Investors who are hoping that the Mediterranean chain can catch up to the purveyor of burritos and bowls must seriously temper their expectations. Chipotle has a commanding lead that Cava likely won't chip away at.
Cava's valuation is also very expensive. Shares currently trade at a price-to-earnings ratio of 71.9, a whopping 78% more expensive than Chipotle. Cava isn't worthy of investment consideration.
