Cava vs. Dutch Bros.: The Best Stock to Buy Right Away

A new restaurant brand is one of Wall Street's most exciting things. Cava Group (NYSE: CAVA) and Dutch Bros (NYSE: BROS) regularly see massive revenue increases via geographic expansion. There's more to consider when choosing a new cuisine concept than money. Cava appears to be better positioned than Dutch Bros to succeed.  

In 2023, Cava's Mediterranean meals had approximately 60% revenue growth. The addition of 73 stores brought the total to 309 by year's end. The store count increased 30% in one year. Management realizes that rate of shop openings is unsustainable, hence the 2024 store expansion plan is 48–52 new locations.

In 2023, Dutch Bros. coffee sales rose 30%. The business added 159 stores to its 831. Nearly 24% more stores for the chain. The objective for 2024 is 150–165 locations, similar to 2023's pace.  

These two restaurant chains are developing quickly, but Cava grew faster in 2023. However, if Cava's store count grows, such outstanding numbers may become harder to achieve. Though it has a growth advantage now, don't expect it to last.  

Restaurants attract consumers from a greater area than coffee shops, which attract clients from a smaller region. In conclusion, more Dutch Bros coffee shops can be placed in one region than Cava can Mediterranean-themed restaurants. Dutch Bros' strategy involves "fortressing," or saturating a region. Dutch Bros may open more stores overall.  

The story goes beyond store numbers. Dutch Bros seems more appealing. However, there are two other intriguing data beyond shop count. Same-store sales growth, excluding new restaurant sales, was approximately 18% for Cava in 2023 versus 2.8% for Dutch Bros. That shows Cava's concept is more popular than Dutch Bros'.

Cava has an advantage, but Dutch Bros' fortressing strategy is hurting same-store sales growth. Despite the purpose of starting additional sites with a client base, Cava's food is remains popular.  

Interesting differences exist on each company's balance sheet. Dutch Bros owed $93 million in long-term debt in 2023. Cava had about $332 million in cash and no long-term debt in 2023. Using leverage doesn't mean Dutch Bros is taking a significant financial risk, but Cava looks better positioned to invest in new store growth. This is another Cava advantage.  

Cava has more leverage. Both companies are focused on growth, thus near-term profitability may be secondary. Young restaurant chains often do that. Thus, Dutch Bros' $0.02 loss per share in the fourth quarter of 2023 while Cava earned $0.02 is likely unimportant. Cava has to invest money and same-store sales show high food demand. Dutch Bros may have a longer-term chance to establish coffee shops, but Cava is better positioned to achieve its expansion goals.  

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