Good afternoon, ladies and gentlemen, and welcome to the CAVA Second Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, August 22, 2024. I would now like to turn the conference over to Mr. Matt Milanovich. Please go ahead.

Good afternoon, and welcome to CAVA's second 2024 financial results conference call. Before we begin, if you do not already have a copy, the earnings release and related 8-K furnished with the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results as well as a general update on the company's progress. You will find reconciliations of any non-GAAP financial measure discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website. Before we begin, let me remind everyone that this call will contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in CAVA's most recent annual report on Form 10-K and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, CAVA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. And now, I'll turn the call over to the company's Co-Founder and CEO, Brett Schulman.

Thanks, Matt, and welcome to the call, everyone. In the second quarter, we, once again, delivered exceptional results, demonstrating the strength of our category-defining brand, our clear leadership position in Mediterranean, our powerful unit economic engine and the return on investments we continue to make in our business and our people. CAVA was one of just a handful of publicly-traded restaurant brands with positive traffic growth in the second quarter, and we believe our performance is a reflection of our unique and compelling value proposition. At a time when consumers are increasingly feeling the pressure of an uncertain economy and are more discerning about where and how they spend their money, they are choosing to dine at CAVA. Consumers have been frustrated and fatigued by higher prices over the past few years. In this post high inflationary environment, traditional full-service chains are struggling to deliver a compelling value proposition, while conventional fast food chains have raised prices at a faster rate, driving the perception that they have become too expensive. The wave of price discounting in response to these trends is now being referred to as the value wars. We believe that's a misnomer. Price is the cost of a meal while value is its worth and driven by a combination of attributes beyond the headline price, including quality, relevance, convenience and experience. Our value proposition lies in the quality of our food, the relevance of our differentiated Mediterranean cuisine where taste and health unite, the convenience with which our guests can access that cuisine in our multichannel format and the experience they have when they engage with our brand and our hospitality. It's meeting the moment for the modern consumer and positions us at the nexus of consumer convergence where we see guests trade down from traditional full-service chain…

Thanks, Brett, and good afternoon, everyone. CAVA revenue in the second quarter of 2024 grew 35.2% year-over-year to $231.4 million. During the quarter, we opened 18 net new CAVA restaurants or 78 net new CAVA restaurants during or subsequent to the second quarter of 2023, bringing our total CAVA restaurant count to 341. We are pleased with our new restaurant openings, which are continuing to exceed expectations. CAVA's same restaurant sales increased 14.4%, driven by a 9.5% increase from guest traffic and a 4.9% increase from menu price and product mix. Our steak launch at the beginning of June benefited from a highly-productive social media and PR campaign, driving incidents well above test results and original expectations. CAVA restaurant-level profit in the second quarter was $61.3 million or 26.5% of revenue versus $44.6 million or 26.1% of revenue in the prior year, representing a 37.3% increase. This increase was due to leverage from higher sales, partially offset by incremental wage investments and the launch of steak on June 3. CAVA food, beverage and packaging costs were 29.4% of revenue, consistent with the second quarter of 2023, as the increase in input costs related to the launch of steak was offset by other lower input costs compared to the same period of the prior year. We anticipate CAVA's food, beverage and packaging costs to increase as a percent of revenue for the rest of the year as a result of our steak launch in June. CAVA labor and related costs were 25.2%, up 40 basis points from the second quarter of 2023. The increase reflects investment in our team member wages of 9% year-over-year, including the impact from AB 1228, which we chose not to offset with many price increases to the guests that we discussed on prior calls, partially offset…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of David Tarantino from Baird. Your line is now open.

Hi, good afternoon, and congratulations on delivering such strong results. My question is about the second quarter and the strength you saw in the sales. There was quite a big acceleration that seemed from the first quarter. And I just wanted to get your thoughts on the factors that drove that large acceleration. I know you mentioned steak outperforming your expectation, but maybe you could piece together some of the key drivers. And then, the second part of the question, Tricia, is it looks like the second half, you're not quite assuming -- or assuming quite the same strength to continue. So, just wondering how you're thinking about the second half related to what you just delivered for the second quarter. Thanks.

Thanks, David. So, certainly, as you look at our second quarter same restaurant sales growth of 14.4% and compare that to first quarter, there is an acceleration. But really looking at on a two-year same restaurant sales basis, two-year same restaurant sales in Q1 of '24 were 30.8% and two-year same restaurant sales in Q2 of 2024 grew to 32.6%. So, there certainly is an increase, and you're seeing that in what we were able to deliver in Q2 with a very strong 9.5% traffic growth. When you look at what are the drivers impacting the same restaurant sales, I kind of think of it like a CAVA bowl. There are lots of combinations that blend together to create something truly amazing. And it's things like new culinary innovation like steak that you mentioned, it's the strong value perception that we have in the marketplace, increased brand awareness and certainly our team member execution. And so, all of that combined together is delivering an outstanding result in the period and the quarter that we're proud of. And then, on your second question about the second half and how it's not assuming the same strength, we talked about this in our guidance, while we don't give period-to-period or into the quarter -- following quarter results, we are seeing strength in the business itself, but also wanted to be thoughtful around the uncertain macroeconomic environment and the upcoming election and factor that into our guidance. So, those two things together influencing what we've communicated today.

Great. Thank you for that. And Tricia, is there any way to isolate the impact of steak on the comp in the second quarter? Is there -- I guess, however you look at it from a traffic and mix perspective?

Yeah, there was a favorable impact on mix and certainly some benefit in traffic, but what we're seeing is strength in traffic across in general, and so, it's much broader than steak by itself and is really pleased with the traffic and same restaurant sales strength across all regions of the country, in all of our formats as well as in suburban and urban environment. So, just isn't really one thing driving that traffic strength, it's a combination of factors.

Great. Thank you very much.

Your next question comes from the line of Brian Harbour from Morgan Stanley. Your line is now open.

Yeah. Thank you. Good afternoon, guys. One question, I guess, I was just curious about on the margin side was, is there anything else -- aside from kind of the steak impact, is there anything else you're doing on food the rest of the year? And then, also, do you plan to make a similar kind of labor investment once we get into the end of the year? How will that kind of play into restaurant margins?

Yeah. Outside of steak, we're not anticipating significant changes in input costs on the food, beverage and packaging cost side for the remainder of the year. And then, when you turn and look at labor investments, we mentioned that average wage is up 9% year-over-year. We started making fairly significant investments in wages in the fourth quarter of 2023. And that's what you're seeing the benefit of in the increase in average wage as well as the decline in turnover that Brett talked about in the prepared remarks. At this point, while we're always looking at ways to reinvest into our team members as well as our guests, there are no major plans for incremental labor investment for the rest of 2024.

Okay. Sounds good. Thank you. And the new labor model that you mentioned, could you tell us more about that kind of what some of the details are? What's kind of been most favorable within that so far?

Hey, Brian. It's Brett. I'll speak to that. It's basically taking the same net hours, labor hours and reallocating them in a much more effective, efficient way so that we put our team members in the right places at the right moments during their shift, so they're prepping during downtimes, they're customer-facing during peak times to help with speed of service, to help with quality of guest experience. And we're seeing quantitative improvements in the pilot restaurants as well as qualitative improvements, especially for our general managers or our shift leaders saying now we can really coach our teams and be in a position to manage versus having to jump into a position on the line to fill a gap at peak hours. So, very pleased. We'll be at 75 restaurants this fall with the goal to launch it across all restaurants in early 2025.

Your next question comes from the line of Andrew Charles from TD Cowen. Please go ahead.

Great. Thank you. You talked about the revamped loyalty program, guests visiting and spending more than non-loyalty guests. Is it fair to say the loyalty pilot markets are seeing same-store sales materially outperform the overall system? What I'm really looking to understand is that is the loyalty program same-store sales impact factored into the back half guidance for same-store sales?

Yeah. So loyalty, we mentioned is going to launch in October ahead of schedule, and we are seeing benefits to the program in our test markets, but we haven't factored anything incremental into our guidance for the rest of the year.

Okay. Very helpful. And then, Brett, just wanted to get an update on catering. Last time we caught up, I believe you talked about 10 production facilities. Is this something you expect to lean more into in 2025? Is this more of a 2026 opportunity for the system of catering?

It's really more looking towards 2026 on a larger scale. 2025 will be a continuation of progression of our test. Very excited about the catering opportunity, but I want to be very mindful about how it impacts production in our restaurants. And so, we do have 10 digital kitchen hubs and 10 hybrid kitchen hubs in various locations across the country, as well as a cluster of regular CAVA restaurants that we're testing catering in now. We will move in 2025 to a full market test of a major metro market to really inform how we would want to go across the country in 2026 from a more national perspective. But very excited about the catering opportunity. Certainly seeing a lot of demand. We want to make sure we set our operators up for success to deliver on that guest promise.

Your next question comes from the line of Chris O'Cull from Stifel. Please go ahead.

Thanks. Good afternoon, guys. Brett, you mentioned new units are exceeding expectations. What factors do you believe are causing the better-than-expected performance? And then, Tricia, what's been the average investment for new units opened this year? And maybe what's been the trend? What has the inflation trend look like recently relative to your all's target?

Hey, Chris, thanks for the question. I think it's certainly the execution of our team and the increasing awareness of our brand. One of the things we talked about when going public was that this was an opportunity to put our brand and the category we're creating in the public sphere. And that's certainly amplified awareness around the country. And when we do our community days, we've been able to generate great earned media and organic viral word of mouth in these communities that's driven very strong sales out of the gate. So, it's been a bit of a kind of snowball rolling downhill as we open these restaurants and seeing the momentum of the openings.

And Chris, as it relates to cost for those new restaurants, we are experiencing cost of around $1.3 million net, which is in line with what we've expected. Really pleased with the team's performance in managing those costs. And when you ask about inflation, there's been very modest inflation that we've been experiencing. That's a lot to do with how our real estate design and construction team address the market, work with our general contractor base to expand and strengthen it and conduct RFPs to really make us more effective in our spend. And then overall, when you combine that, with the strong returns in sales and operating performance that Brett talked about, it really drives a strong cash-on-cash return that's exceeding our expectations as we go into the first and second year and beyond openings.

Great. Congratulations, guys.

Thank you.

Next question is from the line of Andy Barish from Jefferies. Please go ahead.

Hey, guys. Just dovetailing on that last question and answer, just on Project Soul, are there any incremental costs, I mean, we should be thinking about? And then, also, the other side of that is kind of digital pickup lanes, do you expect any material increase in those as a percentage of kind of the new builds as we look out to '25, '26?

Yeah. At this point, we're not anticipating significant incremental costs, but we're still evaluating the components that we like in Project Soul, and we'll give updates as appropriate as we move forward. And when you think about digital pickup lanes, we're up to 45 lanes today, and those incremental costs are not significant as we bring those pickup lanes to life. And as a percentage of new builds, it's been an increasing percentage. Again, we're not going to establish a target that's suggesting maybe a certain percentage of our openings. We're being very opportunistic about finding the right sites and making sure -- making the right economic decisions around that site selection process.

Got you. And then just one follow-up on the input costs. Where did you -- I'm assuming there was some deflation in other areas just given the kind of rolling in for part of the quarter. Is there anything you would choose to share in terms of the basket that was deflationary? And looking out to the second half, anything of note there?

Yeah, we're not -- a lot of the improvement was versus prior years, not a lot of change in input costs from Q1 to Q2, necessarily, we're not expecting outside of steak significant changes as we go into Q3 and Q4.

Your next question comes from the line of Sharon Zackfia from William Blair. Please go ahead.

Hi, good afternoon. I know that CAVA has such a wide bandwidth of appeal across different demographics and household incomes, and I'm curious kind of how you did in the quarter across those different income bandwidth, and whether you think you're getting trade up as well as trade down.

Yeah. Hey, Sharon, I hope you're continuing to recover well. I appreciate the question around...

Thank you.

...performance. So, we look at our restaurants based on median household incomes in their areas and we stratify them. And what we're very pleased to see is that there's strong performance in same restaurant sales across all income strata. And in fact, the lowest income strata has the highest level of sales. So, double-digit same restaurant sales strength across all strata. And then, when you drill in and look at the top decile of restaurants, there's representation from every income strata within the top decile. So, really underscoring -- thus far, we've seen a lot of resilience in our guests and what they've been able to deliver and come to CAVA. And we think a lot of that has to do with the strong value proposition that we are presenting for them, and really just pleased with the results overall.

Yeah, Sharon, it's something I noted in my prepared remarks, and I've talked about where you hear a lot about these value wars, and I think it's a bit of a misnomer. And that people are focused on price, which is the cost of what they're paying versus the value which is truly worth and the worth of their meal or their experience. And it was those attributes I talked about, quality relevance, convenience and experience put together. And so, when you think about some of the challenges of the traditional full-service model in many markets to deliver on a proposition like that, we're seeing that trade down, and we're seeing trade up below us from traditional fast food where -- if you look at the Department of Labor Statistics, from the end of '19 to the end of '23, fast food prices have increased upwards of 30%, CPI 18% during that timeframe, we only took price about 12% during that timeframe. So, now, you've got a situation where for [$1 or $2 more] (ph) often at parity, you can get a bowl of fresh Mediterranean food for the same price as a traditional fast food freezer to fryer meal. And we see that trade up and that positions us at the nexus of this with our differentiated Mediterranean cuisine, which is really helping to fuel that traffic growth.

Thanks for that. And a question on [needed] (ph) productivity. If my math is right, and we kind of always try to back into this, it looks like you're hitting your two targets in the first year of operation, at least for the trailing 12 months. And you talked about, Brett, a little bit about the kind of brand and the cycle you're on. I guess, at what point do you start to think about changing those new unit hurdles when you think internally about what sites to take and what you're willing to pay for rent, and then externally, of course, with us and how you think about that needed productivity?

Yeah. Thanks, Sharon. So, our new restaurants have been performing very well. And we factored that into our internal assessments of sites as we look at them every two weeks as a cross-functional team to make sure we're making the right decisions as we go forward. We do think there is likely an opportunity for us to more broadly communicate how we view new restaurant performance, both the opening year as well as subsequent years, and we'll likely have that to be something to communicate in 2025.

Your next question comes from the line of Brian Mullan from Piper Sandler. Please go ahead.

Hey, thank you. Just a question on the Connected Kitchen initiative. Brett, you referred to this as a multiyear journey. As you think about it internally, how do you decide how to sequence all the initiatives you have in mind? Is it just the anticipated impact of the business? Or are there maybe -- for practical reasons, certain orders that you need to go on what you have in mind? So, just any kind of color on how you expect this journey to evolve?

Yeah, thanks, Brian, for the question. I think it's the latter. It's definitely from a practical standpoint. You think about our labor deployment test getting down those foundational labor deployments and getting that rolled out. We've talked about new KDS, which has been in test pilot, getting that equipment capability and base capability out there and then bringing behind some of the more sophisticated long-term generative AI-type technologies that we think are at the early stage, but could prove very beneficial over the long term. So, it's kind of crawl walk around, but starting with very base foundation initiatives and then layering on some of the more sophisticated initiatives that we think can ultimately make our restaurants easier to run and set our team members up to deliver on that great guest experience.

Okay. And then, a follow-up on development. I believe you just recently, within the last few months, maybe hired a new Chief Development Officer role. So, could you just comment any early insights maybe he's brought to the organization thus far? Anything worth calling out...

Yeah, Jeff Gaul joined us. He was formerly the Global Head of Store Development at Nike. He's been just a great addition to our team. He's hit the ground running. It's like he's been here for years with our ELT. And Jeff certainly has deep experience in scaling large pipelines of growth, and has already brought to the table, whether it's on the landlord side, whether it's on the strategic sourcing side, great value add to make sure that we're set up as we ramp up that 15% annual compound unit growth rate translating into more and more units every year.

Your next question comes from the line of Jon Tower from Citi. Please go ahead.

Great. Thanks for taking the questions. Just a couple, if I may. First, I am curious, just following up on the new unit performance, that's been obviously well ahead of expectations. And second time this year that the company has taken up its new restaurant opening expectations. I'm curious, as you're looking beyond '25 or into '25, is that at least 15% target that you're speaking to, does that appear just a bit too conservative given what you're seeing in terms of consumer response and new store productivity and profits that you're generating plus the balance sheet that you have today? I mean, why can't that be closer to 20%?

Hey, Jon, it's Brett. It's really predicated upon developing future leaders. There's certainly the demand out there. Clearly, we kind of talk internally, Chicago has been our best new market opening ever. We need to get more restaurants open in Chicago. But we also don't want to open those restaurants and have bad operations. So, we want to make sure we've got the proper leaders trained, which is why we've invested in our Academy GM network. You heard, we're up to 62 Academy -- certified Academy GMs, and make sure we've got that feeder system of pipeline talent that is properly trained and ready to serve our guests and run our teams in those restaurants. And we also just want to have commitments that we can deliver on that we feel comfortable with and not overheat the engine, so to speak. And if we see the opportunity to push growth a little bit faster like we have this year, this quarter in particular, then we'll take advantage of that opportunity, but we do not want to get over top our skis on restaurant growth. We are students of history and have seen that has undermined a lot of great growth brands over time.

Fair enough. Maybe just kind of speaking with you, Brett, I noticed you guys are doing a connected TV test. I'm curious how many markets it's in today and maybe what your early results have told you about testing this platform for building brand awareness in the markets that you rolled it out to.

Yeah. We've only tested in about eight markets today, and it really is just a test. We're testing and learning. I talked about in my prepared remarks about the efficiency and effectiveness of our social media and our earned media marketing to-date. It's very powerful. We get tremendous user-generated content that the team helps amplify or our own content on social media and collaborations, like we noted with Lindsey Horan, that have proven to be incredibly effective, especially with our Gen Z audience. But as we scale across the country and we elevate to a more national stage, we are testing tactics and strategies to understand what really is most effective when we are ready to do a little bit more of that upper funnel activity and out-of-home activity.

Your next question comes from the line of Rahul Kro from JPMorgan. Please go ahead.

Good afternoon, guys. How much of this comp performance was driven by the peak or throughput versus the non-peak dayparts or shoulder periods? And also, is there any way we can look at how much of this performance was attributed to existing customers coming more frequently versus the new customers? And I have a follow-up.

Okay. Thanks, Rahul. So, I think your question was around daypart and what we were seeing from performance peak versus non-peak. We certainly thought steak would be a driver of an increase in dinner performance, which it was, but we saw a tremendous response at lunch as well. So, consumers are finding it's just a wonderful option for both times of the day and really creating an opportunity to deliver strong traffic results. As you look at existing and new customers, there's certainly a balance. And so because of the impressions that we've gotten, we've brought in new customers into the restaurants, but because of the perceived gap in the menu around the lack of a beef item, it certainly has resonated with our existing customers as well.

Understood. And Brett, as we look at the impressive margin growth trajectory, how do you internally think about the philosophy of reinvesting these margins into what you just defined as the value work or the quality of experience? And where is the limit for -- or threshold for this brand at which you can directly reinvest into the price through in pricing, I mean? Thank you.

Yeah, Rahul, thanks for the question. That's kind of -- that's our job, right, is to figure out where to make smart investments, and a couple of examples that we've done in the past years, as Tricia noted, 9% year-over-year wage increase to our team, making sure we're positioned to be very competitive in the markets we compete in on wages for our team members, making sure we support them in delivering that great Mediterranean hospitality. And then, another example is on behalf of our guests in California with AB 1228 and absorbing the incremental cost of the legislated wage increases there. And so, we are looking all the time at different areas of the business whether it's an ingredient spec, whether it's team member benefits, whether it is mitigating price increases. We only took less than 3% in January, which is the only price increase we've taken this year. I noted earlier, from the end of '19 to the end of '23, we only took 12%. And we think that, that's all coming together. All of these investments we make to drive that 9.5% traffic in the quarter. So, we'll continue to look across the business to understand as we grow restaurant-level margin, where we can share some of that wealth across our team members, our guests and, ultimately, create long-term sustainable restaurant-level margin growth and shareholder value.

Your next question comes from the line of Jeffrey Bernstein from Barclays. Your line is now open.

Great. Thank you very much. Two questions. The first one just on, I guess, sales drivers more broadly. As you mentioned, steak was better than expected, and obviously, a huge protein enhancement. As I look at the menu, it seems like there's less glaring holes for a significant new protein, for example. But wondering if you can maybe prioritize what you think are the two or three biggest sales drivers over the next 12 months, whether it is product or promotion or technology, advertising, social media, you've got so many different levers? I'm just wondering how you prioritize what you think is the next exciting opportunity and whether the system can handle that potential increased traffic. And then, I had one follow-up.

Yeah. So, as it relates to the first question, we are launching loyalty in October. That certainly, we think, can be an enhancement to our guest experience and the overall value to the business. We talked about in the longer-term catering can certainly be a driver. And then my co-founder, partner, Ted Xenohristos, our Chief Concept Officer, leads our culinary innovation team. They are working on a multiyear deep pipeline of innovation to bring new and exciting products to our guests. We think there's still some gaps in the menu that we can address and certainly create greater value for our guests. So, there's a number of ways we feel like over the long term can continue to drive value for the business. And lastly, that you think about awareness and just we are still a newer cuisine and a newer brand. In many markets, we're at a 40% awareness versus many more mature brands in our space that are in the 90%s that as word-of-mouth spreads, as people become more aware of the benefits of eating the Mediterranean way, that's a natural tailwind in and of itself. We think we also have speed of service opportunities, as we've noted in the past. And to the operational piece, we certainly believe we can handle it. I think that's the beauty of our simple operational model, 38 ingredients on the line, offering our guests over 17 billion combination, that walk the line, assembly line, kind of old Henry Ford production line that allows us to do high volumes and do it efficiently. We see it. We have some restaurants doing very significant revenue volumes, so there's no question that the existing fleet as well as the robust infrastructure we built across the business can handle and scale that growth. We talked about this in the past, whether it's our production facilities that can support upwards of at least 750 restaurants today or our technology infrastructure with our digital order ecosystem and the new microservices architecture that we deployed in 2022 to be highly scalable. We've made investments over time to be positioned to have this growth that we're now embarking upon.

Well, that is sure a lot of levers and a lot of combinations, billions of combinations. I just wanted to follow up, Tricia, on the restaurant margin. I think you've previously talked about long-term guidance for 20% and kind of don't look at the current run rate as sustainable necessarily. It looks like this year's guidance is now for the mid-20% -- 24% range. I'm guessing it's sales leverage. That's the biggest driver of the upside. But the AUVs continue to be growing. I'm just wondering if there's opportunity for further leverage or ability to sustain this best-in-class margin, or do you still believe that over the next couple of years, you should see a maybe a more significant pullback in that margin from current levels. Thank you.

You're welcome. Certainly, we believe there's the opportunity to sustain this level of margins giving the AUVs that we've been able to deliver out of our restaurants today, but we'll always be looking for the proper investments to make in team members and guests, whether that's in terms of benefits and wages that we're offering to them or investments in price and how we're managing that with the consumers. So, a lot will depend on what we're experiencing in the market and the economy and how we impact that going forward, but we feel good about what we've been able to deliver over the past few quarters.

Our last question comes from the line of Brian Vaccaro from Raymond James. Please go ahead.

Hi, thanks and good evening. So, it sounds like you're seeing some pretty broad comp strength. And I think it's been a few quarters, but I was wondering if you might be able to provide maybe a midyear update on where your regional AUVs are. I'm curious to the degree to which you might be seeing the gaps in the Southeast and the Southwest narrow versus other regions, and if the brand might be hitting sort of a higher gear in terms of awareness, et cetera, where those markets could be seeing really an outsized comp lift.

Yeah. So, we have been experiencing strength in all regions across the country and improving performance. And so, when you look at the Southeast and the Southwest, those are our youngest markets. And so, their AUVs are naturally going to be lower than all of the other regions across the country. And so, really pleased with what we're seeing and the performance that we're delivering and the strength of it throughout the country and every type of format as well. So, really underscores the proven portability that we've been able to demonstrate and the opportunity for us to bring that across the massive white space that's ahead of us and bring CAVA to more and more guests around the country.

Okay. And if I could just, one quick follow-up on the margins. Obviously, very impressive store margins. But Tricia, I just wanted to ask about the other operating cost line, where we haven't really seen leverage on some pretty big comps. Could you just remind us what types of investments you're making in that line? And if that's expected to sustain the rest of this year? Thank you.

Yeah. It is likely that we'll continue to see other operating expenses on a dollar per period, it'd be fairly consistent through the remainder of the year, and that reflects investments in our restaurants, largely around repairs and maintenance and really keeping up with the demand in the restaurants and the impact it's having on the facility itself and making sure it's meeting our standards from a guest experience perspective. There's also a little bit of marketing associated with the restaurants that's included in other operating expenses, much lower than many others in the space because we've got such powerful results on the social investments and the other PR initiatives that we have. But outside of that, it's got the typical utilities, which you'll tend to see higher and warm summer months and other items like that.

There are no further questions at this time. I'd like to turn the call over back to Brett Schulman for closing remarks. Please go ahead, sir.

Thanks, everyone, for joining the call today. As we approach the celebration of Labor Day, I want to once again acknowledge and thank our more than 10,000 CAVA team members who executed our strategies, took care of our guests and delivered another exceptional quarter. With traffic growth of 9.5%, 18 net new restaurant openings and second quarter net income higher than all of 2023, we demonstrated the strength of our category-defining Mediterranean brand and the power of our mission to bring heart, health and humanity to food. Thanks again for joining us. Have a happy Labor Day weekend, and I look forward to speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.