Cava’s $318 Million IPO Haul Shows Industry’s Turn Toward Fast-Casual

Cava’s blockbuster initial public offering (IPO) comes as restaurant customers look to strike a balance between convenience and quality — the sweet spot for the fast-casual segment.

The Mediterranean fast-casual brand shared in a news release Wednesday (June 14) that it brought in about $318 million in its IPO, with 14.4 million shares at $22 each. The chain intends to use this money to fuel its expansion. This pricing marks a significant increase over Cava’s earlier estimated range of $17 to $19 per share.

The restaurant chain detailed, in its Form S-1 filed with the Securities and Exchange Commission (SEC) leading up to its IPO the advantage of operating in the fast-casual space, noting the “Emphasis on Combined Quality and Convenience” in consumers’ dining choices today.

“Modern consumers expect to be able to customize where, when and how they enjoy their food, without compromising the quality of their food or experience,” the form stated. “Whether it is an in-restaurant order, an order picked up in-restaurant, a drive-thru pickup order or a delivery order, Cava’s easy and quick access has been key to our success and is expected to strengthen as we further enhance channels of access for our guests.”

This IPO is the sixth-largest seen in 2023 so far, Bloomberg reported Wednesday.

According to data from PYMNTS’ study, “The Digital Divide: The Key Factors That Drive Restaurant Choice,” which drew from a survey of more than 2,600 U.S. consumers, the taste of food and convenience are the two top factors influencing consumers’ choice of restaurant.

In a conversation with PYMNTS discussing casual dining brand Hooters’ 40-year anniversary, Sal Melilli, CEO of Hooters of America, said the biggest change in the industry in that time has been the rise, in recent years, of fast-casual dining.

“I would say that the biggest change has been the consumer shift, with the advent of fast-casual dining,” Melilli said in March. “The consumer’s more on the go. The consumer’s more on demand. So, hence the ability to get food delivered.”

Cava’s success in its IPO bodes well for Panera Brands, the group encompassing fast-casual bakery-café chain Panera Bread, Einstein Bros. Bagels and Caribou Coffee, which announced last month that it was making changes to its leadership “in preparation” for the company’s “eventual IPO.” The announcement stated that current CEO Niren Chaudhary will become chairman as the bagel brand’s CEO José Alberto Dueñas takes over as CEO of the whole group.

Not all fast-casual chains are as well suited to take advantage of the demand for both quality and convenience. IHOP, for instance, is shutting down its test of fast-casual concept Flip’d, suggesting that, when it comes to breakfast, consumers are not necessarily looking for higher-quality options than quick-service restaurants (QSRs) or than throwing something together at home.

“After evaluating the results of our Flip’d by IHOP pilot program, IHOP will no longer be opening additional Flip’d by IHOP locations,” an IHOP spokesperson told PYMNTS in an email this month. “The Flip’d by IHOP concept was piloted to test and learn how to make the guest experience for off-premises dining more enjoyable and featured a menu inspired by IHOP classics, designed to be enjoyed on the go. Our learnings from this pilot will inform how we iterate going forward.”