CAVA Raises the range
Cava Group (CAVA) has raised the price range for its 14.44M share IPO to $19 - $20 from a prior estimated range of $17 - $19. The underwriters' over-allotment is an additional 2.166M shares of common stock. Capital Group and Cornerstone investors T. Rowe Price have indicated an interest in purchasing up to $100M of shares in the offering. The company anticipates opening 34 to 44 Net New CAVA Restaurants in fiscal 2023.
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Will AI make it the restaurant industry?
The risks of alienating customers it's too great at this stage of the A.I. revolution.
A compelling use case exists for A.I. to take more orders at fast-food drive-thru lanes as the technology continues to mature and companies need to save on labor costs. Presto Automation creates productivity technologies for restaurants, including a generative voice A.I. product solution that automates drive-thrus for some of the nation's largest chains. The company was founded by Rajat Suri in 2008 and is headquartered in San Carlos, CA. Jack in the Box (JACK) chain Del Taco plans to roll out Voice A.I. at the drive-thru with PRST. CKE Restaurants (operator of Carl's Jr & Hardee's) is expanding Voice A.I. deployment at participating drive-thru locations nationwide. Wendy's (WEN) is also in the A.I. game, partnering with GoogleCloud to pilot Wendy's FreshAI at a restaurant in Columbus, Ohio, in June.
Meanwhile, MCD is in the early stages of testing A.I. in the ordering process in stores and drive-thru lanes. Presto Automation (PRST) has been very volatile over the last week after CEO Krishna Gupta said on CNBC that he is taking calls from restaurant companies, franchisees, and board members about integrating A.I. technology in operations. "We think we've stumbled upon this amazing convergence of the technology being ready just at this time and the market being ready with labor costs going up and people realizing, 'Wow, we should be doing this." PRST provides enterprise-grade A.I. solutions for the nation's largest hospitality brands. The company has stated its industry-leading automation and voice A.I. technology improves order accuracy, reduces labor costs, and increases revenue for drive-thru and dine-in experiences.
S.G. is doubling down on Automation.
SG has a big problem; in 2022, G&A represent 270% of store-level profits, likely on the back of its investments in automation. It has no choice but to justify its investment in an unproven process.
In early May, SG announced a pilot program at its Naperville, Illinois, location to provide automated service to customers. The company said the rollout would be powered by its 2021 Spyce acquisition and will offer automated salad-making via a conveyor belt process. While customers can order via a host that will guide them through selection, they can also utilize a fully automated process via order-placing at self-service kiosks. Additionally, a Tasting Counter, which will provide "brand-storytelling digital screens and a revamped merchandising strategy," will be rolled out at the store. "We believe that automation will enable us to elevate the quality and integrity of our food while also providing a faster and more convenient experience for our customers and a better, more dynamic job for our team members," CEO Jonathan Neman said. "With the integration of the Sweetgreens Infinite Kitchen in our restaurants, we can unlock efficiencies enabling us to grow more quickly as we scale." At a recent conference, the company said it plans for all of its new restaurants within the next five years to be automated through its Infinite Kitchen system, and existing units will eventually be retrofitted with the automated makeline. "The focus for us will be much more on new restaurants just because of the capital-intensive nature of retrofitting floors. We will test a retrofit soon to understand what that does."
The Infinite Kitchen does not automate prep (the most labor-intensive element) or the final assembly of the salads, leaving the beginning and end of production in human hands. The Infinite Kitchen dispenses salad ingredients into a bowl, but workers still add final toppings. According to Co-Founder and CEO Jonathan Neman, about half of Sweetgreen's existing store labor is dedicated to assembly, most of which could be offloaded to automation. Given what I have seen online about the Naperville store, it will be costly to retrofit the existing store base, so the company is focused only on new builds. Saying the entire system will have an infinite kitchen in five years is an aggressive target and unlikely to happen.
