First Watch Reports Strong Growth Amidst Cost Challenges

First Watch Restaurant Group, Inc. ((FWRG)) has held its Q3 earnings call. Read on for the main highlights of the call.

First Watch Restaurant Group, Inc. recently held its earnings call, revealing a generally positive sentiment driven by strong financial growth and successful new restaurant openings. The company also highlighted operational efficiency and employee satisfaction as key positives. However, challenges such as commodity and labor cost pressures, along with a high income tax rate, were noted as areas of concern.

Strong Financial Results

First Watch reported a significant 25.6% increase in total revenue compared to the third quarter of last year. This growth was primarily fueled by new restaurant openings, a positive same-restaurant sales increase of 7.1%, and strategic franchise acquisitions.

Record-Setting New Restaurant Openings

The company achieved a milestone with 21 system-wide restaurant openings, marking one of the most successful periods in its history. Notably, nine out of ten of the highest opening week sales were recorded in the past 12 months, with the Dover, Delaware location standing out by exceeding 185% of the comp base average.

Operational Efficiency and Profitability

First Watch improved its restaurant-level operating profit margin to 19.7%, an 80 basis point increase from the previous year. Adjusted EBITDA also saw a rise, increasing by $8.5 million to reach $34.1 million.

Employee Satisfaction and Recognition

The company was honored as America’s #1 Most Loved Workplace by the Best Practice Institute for 2025, marking the second consecutive year of receiving this accolade, highlighting its commitment to employee satisfaction.

Positive Marketing and Digital Platform Impact

Enhanced marketing efforts have significantly boosted brand awareness and engagement. The introduction of a new 5-star rated app and a targeted digital campaign has doubled response rates and engagement levels.

Commodity and Labor Cost Pressures

The company faces challenges with commodity cost inflation at 3% for the quarter, driven by increases in bacon and coffee prices. Labor costs have also risen by 3.6%, with expectations of further increases due to regulatory wage changes.

High Income Tax Rate

First Watch anticipates a blended income tax rate of approximately 45%, which is relatively high and could potentially impact net income.

Forward-Looking Guidance

Looking ahead, First Watch updated its guidance for fiscal year 2025, forecasting same-restaurant sales growth of around 4% and total revenue growth between 20% and 21%. The company expects adjusted EBITDA to reach approximately $123 million. Continued focus on expanding marketing initiatives, optimizing digital platforms, and strategic site selections for new restaurant openings remains a priority.

In summary, First Watch Restaurant Group, Inc.’s earnings call reflected a positive outlook with strong financial growth and operational successes. While challenges such as cost pressures and a high tax rate persist, the company’s strategic initiatives and forward-looking guidance suggest continued momentum in the coming year.