Can CAVA's Strong Cash Flow Fuel Expansion in a Soft Market?

CAVA Group, Inc. (CAVA) is leaning on its robust cash generation to power growth at a time when the restaurant sector faces consumer headwinds. In second-quarter 2025, revenues climbed 20.3% year over year to $278.2 million, while adjusted EBITDA rose 22.6% to $42.1 million. The company reported $98.9 million in year-to-date operating cash flow and $21.9 million in free cash flow, reinforcing its financial flexibility.

With no debt, $386 million in cash and investments, and access to a $75 million revolver, CAVA has the liquidity to continue building its pipeline of new stores. Management is targeting 68-70 net new openings this year, with recent cohorts already producing above $3 million in first-year average unit volumes — well ahead of the company’s $2.3 million benchmark. These outsized returns are helping to offset modest same-restaurant sales growth of just 2.1% in the second quarter, pressured by tough comparisons from last year’s steak launch and a challenging consumer backdrop.

The key question for investors is whether strong cash flow alone can sustain expansion if discretionary spending remains soft. CAVA’s competitive advantage lies in its differentiated Mediterranean concept, growing brand loyalty and disciplined innovation pipeline, from chicken shawarma to pita chip extensions. If unit economics remain resilient, CAVA may be able to expand profitably even in a sluggish environment.

For now, CAVA’s balance sheet strength provides a cushion, but continued momentum in comps will be crucial to justify its ambitious path toward 1,000 restaurants by 2032.

Competitors Navigating Growth in a Tight Spending Climate

While CAVA leans on strong cash flow to expand, competitors like Chipotle Mexican Grill (CMG) and Sweetgreen (SG) highlight the different paths fast-casual players are taking in today’s softer consumer landscape. Chipotle remains a heavyweight with more than 3,500 restaurants and industry-leading margins, using its scale and digital channels to sustain growth. However, its higher average check could make Chipotle more exposed to trade-down behavior if consumer spending weakens further.

Sweetgreen, on the other hand, is in an earlier-stage expansion mode, much like CAVA. The brand has focused on digital-first engagement and tech-enabled kitchens, but profitability remains a hurdle, with narrower cash flow to fund growth. This creates a contrast: where CAVA can rely on internally generated cash to fuel openings, Sweetgreen often leans on external capital.

For investors, the comparison underscores CAVA’s unique strength — financial self-sufficiency — at a time when both scale and liquidity are vital in navigating a soft market.

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This article originally published on Zacks Investment Research (zacks.com).

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