Issue #39: Just Salad Valued At $1B

This year, I am on a quest to find the next great bowl/salad place, following in the likes of Chipotle and Cava. As long-time readers will be aware of, I recently wrote a full breakdown in Issue #33 covering some of my favorites. In that issue, one of the 10 places I covered in it was Just Salad, a bowl/salad/smoothie place with nearly 100 restaurants in New York, Florida, Illinois, Massachusetts, New Jersey, Connecticut, and Pennsylvania. However, looking back, I didn’t write as much about them as others featured because they were in the middle ground of the list - not an insane amount of locations, but a lot more than most, and not super new. I tend to gravitate toward brand new concepts or entrenched incumbents, maybe a blind spot that I do this. Still, that existing success but not too much success is what makes Just Salad so poised for growth with the right investor. Right now, they are a regional chain, but with additional capital, it can be transformed into a national chain, which makes sense why they just raised a ton of capital.

According to a press release by the company, it raised $200M at a $1B valuation (assuming that is post-money valuation). The raise was led by Wellington Management, D1 Capital Partners, Neuberger Berman, and Stripes. Notably, Stripes has been pouring a lot of capital into the retail space to help companies grow from regional to national. Stripes recently has invested in Erewhon, PopUp Bagels, Levain, Snooze, and 7th Street Burger (news to me - it seems like they quietly just invested in 2024). This raise values Just Salad at $10M per unit, compared to $21M per unit for Chipotle, $29M per unit for Cava, and $10.6M per unit for Sweetgreen. Just because it is valued at $10M per unit doesn’t mean investors are expecting it to do $10M in revenue per location. Instead, investors are betting Just Salad will grow its location count and revenue per location exponentially. With that growth, the valuation will grow even further. And growing they certainly are. Here are some of the exciting moves Just Salad has made recently:

• Expand the menu to include soups, smoothies, warm bowls, wraps, and more

• Opening its first location with a drive-through

• Bulking up its c-suite with the hire of three new executives

• Launching a Salad AI tool to help customers personalize their meal

These are the types of moves that enable a fast casual chain to hit hundreds of locations. Additionally, as illustrated from the valuation per unit, Sweetgreen is faltering compared to Chipotle and Cava, despite once having been grouped together. There is a gap in the market for a national salad/bowl place that can hit 1,000 locations. Given Just Salad’s premium product and growing menu, all from the same core ingredients, it will be exciting to follow along. Maybe they will be the one to rise to the top in the hyper-competitive salad/bowl space? Regardless, growth will be needed to make that happen. Given the capital raised, I am assuming Just Salad will go on an expansion tear, but regardless will be exciting to follow along to see the capital deployed.

Erewhon Announces 3 New Locations

In a big week for Stripes Group portfolio companies, Erewhon announced that it will be opening 3 new locations in 2025, which is the most it has launched in several years. The three locations will be in Manhattan Beach, Glendale, and West Hollywood. After slow and steady growth, Erewhon is now able to pour some fuel on the fire because it raised a lot of capital and upgraded its commissary (the major key). The commissary buildout took three years and took the square footage available at the commissary from ~20,000 to ~65,000 square feet. This square footage growth is a major unlock as about 40% of Erewhon’s revenue comes from prepared food and private-label products. Before growing location counts more, Erewhon needed to sort out its operations to ensure growth could keep up with the demand. A very shrewd move. Next up? Maybe a move to open locations on the East Coast, but from an operational perspective would be difficult and expensive up front. My personal out-there idea - Erewhon should buy Citarella to fuel East Coast expansion.

Forever 21 - Bankruptcy #2?

Forever 21, an iconic retail mall institution to purchase clothing. However, as malls have struggled over the years, so has Forever 21. In 2019, it went through bankruptcy and emerged as owned by Authentic Brands Group. Authentic is not the one running the day to day operations, the company that owns JCPenny is. Over the past few years, the priority has been to reach new, younger consumers with a focus on omnichannel. Still, it does not seem that pitch resonated. In December, long time CEO departed to lead Five Below. Now, at least 200 stores will be closing as it contemplates bankruptcy. Not a great headline for retail. However, this is where it gets interesting. In 2023, Forever 21 entered a joint venture with Chinese fast fashion eCommerce company, Shein. With the recent struggles Shein has seen with the closing of the de minimis loophole, its costs have skyrocketed. Is a potential acquisition/expanded partnership in the works? I could see it making a lot of sense for both sides.

Cava Reports Stellar Earnings; Wall Street Unimpressed

Another quarterly earnings call for Cava, another successful quarter. Albeit, Wall Street was not entirely thrilled as Cava continued to have conservative guidance, not the rapid growth Wall Street loves. Still, here are some of the highlights:

• Q4 same-store sales up 21%, and customer traffic up 15% (finishing the year strong!)

• 2024 revenue up 35% YoY, less than $50M in revenue away from hitting $1B in sales

• Restaurant level margin of 25%

• 2024 same-store sales up 13%, customer traffic up 8%

• 58 new restaurants opened

• Average Unit Volume (AUV) hit $2.9M (up from $2.6M and in line with Chipotle)

Overall, a very strong quarter, and the continued progress is exciting. Cava may be a tad overvalued in the public markets, but the potential is very much there. Still, growth will be needed to satiate the tough public market investors, which is exactly the plan for 2025. On the horizon in 2025 - expansion to new markets like Miami, Indianapolis, Detroit, and Pittsburgh. Cava’s goal is to open 66 new restaurants in 2025, a very doable number.

• Summary: Myodetox is a gym (and more) specializing in physical therapy and fitness development services. You work with physical therapists and other trained people to do myofascial treatment and corrective exercise.

• My Take: Health and wellness as a category has exploded over the past few years. Gone are the days of consumers trying to find the cheapest gym, if any. Now, customers are prioritizing their health and wellness, especially looking for holistic, science-backed methods. All those trends fit perfectly into what Myodetox is doing, which makes sense why it has taken off.

• Founder(s): Scott Marcaccio

• Funding: Equinox

• Number of Locations: 20 Locations across the US and Canada

• Social Media Following: 112k on Instagram

Additional Links:

1. Lucky, a startup that helps bridge digital and physical commerce, announced a partnership with Ulta Beauty to showcase availability on D2C beauty sites (read more here)

2. Urban Outfitters shares metrics (48% YoY revenue growth) on the success of its clothing rental platform that competes with the Rent the Runways of the world (read more here)

3. DoorDash continues to add local grocers (read more here)

4. Brown Foreman follows Sazerac’s lead to switch from a spirits distributor to a beer distributor, Reyes (read more here)

5. Sprouts Farmers Market opens first location in NY on Long Island (read more here)

6. Starbucks announces plan to cut its menu 30% and which items will be cut (read more here)

7. Lindt & Sprüngli opens new flagship store in London (read more here)

8. Grubhub lays off 500 employees post Wonder acquisition (read more here)

9. Del Taco closes 18 locations in Colorado (read more here)

10. Warby Parker opens stores within Target (read more here)

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