00:00Nine percent comp growth. That was great. That was above estimates. Talk to me a little bit about the forecast.
00:05You maintain the forecast. You didn't you didn't cut it, but you didn't raise it either. Why not?
00:09Well, we want to be prudent with our guidance and take into account what we noted to be the impact
00:13of some of the broader concerns around food safety issues, even though our supply chain or ingredients have not been
00:18connected to the issues, as well as some of the inflationary pressures that may persist throughout the year.
00:26And then certainly the volatile geopolitical and macroeconomic environment. So we want to be prudent with that guidance, but very
00:31pleased with the strength we saw in the quarter.
00:34Just to be clear, there's been no link at all to this outbreak to Kava. But I do have to
00:38ask you, as a restaurant CEO, I'm sure you had to take a close look at your supply chain, your
00:45food quality to make sure that there was no concern.
00:49You're confident right now that your supply chain is clean. None of your customers have gotten sick and that going
00:54forward, you can sell with confidence.
00:57That's correct. No, there has been no connection to our supply chain. We have not been contacted by any public
01:01health officials, but we are closely monitoring the situation.
01:05We have an external advisory committee of industry leading experts because food safety is paramount to what we do.
01:11It's foundational to our guest relationship, and we want to make sure that our guests have the confidence that we
01:16are committed to having a food safe environment.
01:18Just one other quick question on that. Have you been in contact at all with any health officials, either at
01:22the federal level or at the state level?
01:24No, no, we have not been contacted, nor have we been involved. And again, we have not had any connection
01:29within our supply chain to any ingredients or farms or facilities that were impacted by the recent issues.
01:35You're also opening restaurants at a pretty aggressive pace, I think 17 this quarter and around nearly 500.
01:41How much of this growth is kava specific or how much of this is really maybe consumers trading down restaurants
01:48for more fast, casual meals like kava?
01:51Yeah, we see people trading into kava from full service restaurants, from other limited service restaurants or as an alternative
01:58to the grocery store.
01:58Our food is very unique, differentiated, not easily recreated at home, and I think people are shifting their diets more
02:05and more to a Mediterranean-style diet.
02:07It's the number one ranked diet for nine years running and delivering on all the needs that the modern consumer
02:12is looking for, protein-dense, fiber-rich, nutrient-dense cuisine that is flavorful but also healthful for you.
02:20Well, I'm curious. I was looking through the conference call transcript, and this GLP-1 issue was addressed, so it
02:27was a Zempic here.
02:28And you talked about this idea that people are actively reshaping their orders, doubling up protein, adults are ordering kid
02:35-sized portions, et cetera, et cetera.
02:37So give me a sense as to how you're adapting to that.
02:40Are you anticipating that these types of trends are indeed long-term, structural, and not just some fad that we'll
02:46move away from in a couple of weeks?
02:47We think GLPs are kind of just one part of this larger shift to people more interested in longevity, in
02:55health and wellness, but also bolder, more interesting flavors, and that's where our food sits at the intersection of.
03:00So we feel like whether it's GLP or some of these other secular trends, it's moving more people to our
03:05style of eating.
03:06And you also called out, which is interesting to me, the pomegranate-glazed salmon.
03:10Is that part of Kava's new strategy, introducing more higher-end items and hopefully driving sales when it comes to
03:16that?
03:16Because even the extra pita chips, I don't think I've ever paid extra for a pita chip, but it seems
03:21like people are.
03:22Yeah, well, we are seeing people opt into our premium proteins and attachment items.
03:26And salmon was really to have our first seafood item on the menu.
03:30Seafood is a core aspect of the Mediterranean diet, and we wanted to make it available to our guests.
03:34So very excited to have that on the menu and the reception that it's received from our guests.
03:38Another interesting thing, digital sales are now 39% of your revenue, and I'm guilty of ordering.
03:43And, you know, your order is like something like $20, the delivery fee is something like $10.
03:48Is that becoming the new trend now, and is that what you see will be the next leg to push
03:53Kava's growth further?
03:54We see growth in all of our channels, and we don't think it's an either or.
03:58We think it's an and.
03:59We want to have great digital channels and great physical channels.
04:02That's why we've invested recently in Project Soul, which creates even warmer environments and better aesthetics in our dining room.
04:07So if you do choose to have a meal, you feel like you can have it in our dining room
04:12and be comfortable.
04:12Or if you're running errands, you can use the app or even have it delivered to you.
04:15Because we know that most of our guests, depending on the day of the week or where they are in
04:19the world and their need, they cross-channel traffic us.
04:22So we want to be equally as relevant across those different channels.
04:25Talk to me about your marketing strategy.
04:27Because when you were talking earlier about, you know, the GLP-1s and the eating healthy, my first thought was,
04:31okay, how are you selling that to the public?
04:34But I remember looking at your marketing, at least what's in the filing there.
04:38You don't spend a whole lot on advertising and marketing, at least not relative to some of the other fast,
04:42casual, fast food chains.
04:43We've been very able to be very efficient with our marketing.
04:46We've seen great word of mouth, great user-generated content on social media, and our community day program.
04:51And we open a new restaurant in every market that we open, and we invite our new neighbors to our
04:55table for a free meal.
04:57We suggest donations.
04:58We'll match those donations.
05:00They're not required.
05:00But if you do donate, we'll match it.
05:02And that goes to a local philanthropic food partner addressing food insecurity in the market.
05:08But do you think that that might have to change?
05:09I mean, as this company matures and you start to reach saturation points in certain markets, I mean, there is
05:14this idea of making sure people are always aware that you're there.
05:18Because there are a lot of options out there.
05:19There's always opportunities for us to continue to grow our brand awareness beyond just opening restaurants and some of the
05:25activities we do today.
05:26And an example of that is we just did our Mediterranean Summer Supper Series.
05:29So we did three different cities.
05:31We brought people to a communal table together to celebrate food, to celebrate meeting one another in a human connection
05:39form.
05:40So we're big about human connection in our brand.
05:42It's part of the Mediterranean way, the Mediterranean hospitality, the Mediterranean lifestyle.
05:46Not just the food, but the hospitality and the human connection.
05:49So you'll see more in-real-life marketing activities like that that help drive that human connection.
05:54And your restaurant-level margin fell some 60 basis points.
05:57I mean, we know that you've got strong sales growth, but costs are not standing still.
06:00I mean, inflation is all we talk about.
06:02How much more can you absorb before you have to raise prices again?
06:05Well, that's been part of our long-term strategy where we've wanted to underprice inflation.
06:09This year was no different.
06:10We took about a 1.5% menu price adjustment in January with no plans to take further price increase,
06:16where inflation is running north of 3% this year.
06:18So we've, in recent years, underpriced CPI by over 10%, taken less than half the price increase of the average
06:25restaurant company, really to invest in our guests and help grow that value proposition each and every year.
06:31That's making us, giving us the ability to welcome more people to our table.
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