Total revenues increased 14.7%; same-restaurant sales growth of 0.5%*Income from operations margin of 5.1% and restaurant level operating profit margin of 20.8%Net income of $7.2 million and Adjusted EBITDA of $28.6 million9 system-wide restaurants opened across 8 states BRADENTON, Fla., May 07, 2024 (GLOBE NEWSWIRE) -- First Watch Restaurant Group, Inc. (NASDAQ:FWRG) ("First Watch" or the "Company"), the leading Daytime Dining concept serving breakfast, brunch and lunch, today reported financial results fo ...

First Watch Restaurant Group, Inc. (FWRG) has sealed a significant deal, acquiring 21 franchise-owned restaurants in North Carolina for $75 million. This marks FWRG's largest franchise acquisition to date, reinforcing its commitment to expansion and value creation. The acquisition aligns with the company’s long-term strategy, bringing in establishments expected to match the performance of its company-owned counterparts.Chris Tomasso, CEO and president of First Watch Restaurant, emphasizes the strategic impo ...

BRADENTON, Fla., April 15, 2024 (GLOBE NEWSWIRE) -- First Watch Restaurant Group, Inc. (NASDAQ:FWRG) (together with its subsidiaries "First Watch" or the "Company"), the leading Daytime Dining concept serving breakfast, brunch and lunch, today announced the completion of its previously-announced acquisition of 21 of its franchise-owned restaurants and corresponding development rights in North Carolina for an aggregate purchase price of $75 million on a cash-free, debt-free basis. "This acquisition, which re ...

BRADENTON, Fla., March 07, 2024 (GLOBE NEWSWIRE) -- First Watch Restaurant Group, Inc. ("FWRG" or the "Company") (NASDAQ:FWRG), a leading Daytime Dining concept serving breakfast, brunch and lunch, today announced the launch of an underwritten secondary offering (the "Offering") by certain funds managed by Advent International, L.P. (the "Selling Stockholders") of 6,000,000 shares of the Company's common stock ("Common Stock"). The underwriter has a 30-day option to purchase up to an additional 900,000 shar ...

Financial Data and Key Metrics Changes - In 2023, total revenues grew by 22% compared to 2022, and more than 100% compared to 2019, with systemwide sales surpassing $1 billion and adjusted EBITDA nearing $100 million [66][67] - Fourth quarter revenues reached $244.6 million, a 32% increase year-over-year, driven by 5% same-restaurant sales growth and the opening of 37 new restaurants [80][81] - Restaurant-level operating profit margin improved to 19.4% in the fourth quarter, up from 16.7% in the same period last year [84] Business Line Data and Key Metrics Changes - The company opened 51 systemwide restaurants in 2023, including 23 franchise conversions to company-owned, resulting in a total of 524 restaurants by year-end, an 11% increase from the previous year [65][66] - Same-restaurant sales grew by 7.6% for the year, with positive traffic recorded [66][67] Market Data and Key Metrics Changes - The company is expanding into new markets, specifically Las Vegas and New England, with significant long-term unit potential identified in these areas [71][78] - The company has completed the rollout of pay-at-the-table technology, enhancing customer experience and operational efficiency [72][73] Company Strategy and Development Direction - The company aims for low double-digit unit growth, targeting 2,200 domestic restaurants in the long term, leveraging its first-mover advantage in daytime dining [70][71] - The focus remains on maintaining operational excellence and enhancing customer experience through technology and strategic growth initiatives [76][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth prospects despite a slow start to 2024 due to harsh weather and tough comparisons from the previous year [92][95] - The company anticipates total revenue growth of 18% to 20% in 2024, with same-restaurant sales growth expected between 1% to 3% [89][90] Other Important Information - The company reported a decline in same-restaurant traffic of 1.3% in the fourth quarter, attributed to a decrease in off-premises traffic, while dining room traffic showed improvement [82][84] - Adjusted EBITDA for the fourth quarter was $24.6 million, reflecting a margin of 10.1%, an increase from the previous year [87] Q&A Session Summary Question: Can you provide context on key metrics and labor efficiencies? - Management highlighted improvements in labor scheduling and turnover metrics, with management turnover dropping below 40% [99][110] Question: What is the current mix and strategy for the alcohol initiative? - The alcohol mix is between 5% and 6%, with plans to further innovate and optimize this platform [103][104] Question: How does the pay-at-the-table technology impact operations? - The technology is designed to reduce friction for both customers and employees, improving overall experience and potentially leading to repeat visits [123]

First Watch Restaurant Group, Inc. (FWRG) reported $244.63 million in revenue for the quarter ended December 2023, representing a year-over-year increase of 31.7%. EPS of $0.04 for the same period compares to -$0.01 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $238.62 million, representing a surprise of +2.52%. The company has not delivered EPS surprise, with the consensus EPS estimate being $0.04.While investors scrutinize revenue and earnings changes year-over-year and how t ...

First Watch Restaurant Group, Inc. (FWRG) came out with quarterly earnings of $0.04 per share, in line with the Zacks Consensus Estimate. This compares to loss of $0.01 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this company would post earnings of $0.04 per share when it actually produced earnings of $0.09, delivering a surprise of 125%.Over the last four quarters, the company has surpassed consensus EPS estimates three times.First Watch Rest ...

Total revenues of $891.6 million, up 22.1% and System-wide sales of $1.1 billion, up 20.6%Same-restaurant sales growth of 7.6%* with positive same-restaurant traffic growthIncome from operations margin of 4.7% and Restaurant level operating profit margin of 20.0%Net income of $25.4 million and Adjusted EBITDA of $99.5 million51 system-wide restaurants opened across 19 states BRADENTON, Fla., March 05, 2024 (GLOBE NEWSWIRE) -- First Watch Restaurant Group, Inc. (NASDAQ:FWRG) ("First Watch" or the "Company"), ...

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements based on current expectations and assumptions, which are subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially - This report contains forward-looking statements based on current expectations and assumptions, which are subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially[11](index=11&type=chunk) - Key risk factors include changes in consumer preferences, economic conditions (inflation, recession), inability to open new restaurants, supply chain disruptions, food-borne illness, competition, and cybersecurity failures[12](index=12&type=chunk) - The company cautions against relying on forward-looking statements and undertakes no obligation to publicly update or revise them, except as required by law[12](index=12&type=chunk) PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) First Watch operates 524 "Daytime Dining" restaurants across 29 states, offering fresh breakfast, brunch, and lunch, driven by a "You First" culture and strategic growth [Overview](index=5&type=section&id=Overview) - First Watch is a 'Daytime Dining' concept, serving made-to-order breakfast, brunch, and lunch since 1983, emphasizing fresh ingredients and a **'You First' culture**[14](index=14&type=chunk)[16](index=16&type=chunk)[18](index=18&type=chunk) Metric (as of Dec 31, 2023) | Metric | Value | | :-------------------------------- | :------------------------- | | Total Restaurants | 524 | | Company-Owned Restaurants | 425 | | Franchise-Owned Restaurants | 99 | | States of Operation | 29 | | Average Unit Volume (2023) | $2.3 million | | Operating Hours per Day | 7.5 hours | - The **'You First' culture**, prioritizing employees and customers, has earned the company recognition as a **Top 100 Most Loved Workplace® by Newsweek (2022 and 2023)** and the **top restaurant brand in Yelp's 2023 list**[18](index=18&type=chunk)[19](index=19&type=chunk) [Growth Strategies](index=6&type=section&id=Growth%20Strategies) - First Watch aims for accelerating new system-wide restaurant development with a long-term goal of **low double-digit annual percentage growth**, targeting **over 2,200 potential restaurants** in the U.S.[20](index=20&type=chunk) Development Activity (2023) | Development Activity | Count | | :-------------------------------- | :---- | | New System-Wide Restaurants Opened | 51 | | Company-Owned Restaurants Acquired | 23 | - The company's strategy includes acquiring First Watch restaurants from franchisees; an agreement to acquire **21 restaurants** from its largest franchisee was announced shortly after 2023 year-end[22](index=22&type=chunk) [Drive Restaurant Traffic and Build Sales](index=6&type=section&id=Drive%20Restaurant%20Traffic%20and%20Build%20Sales) - Focus on delivering an **excellent on-premise dining experience**, recognized by customers and reinforced by numerous accolades, to increase visit frequency and loyalty[25](index=25&type=chunk) - Technology enhancements include direct ordering for takeout, third-party delivery integrations, kitchen display screens, and pay-at-the-table technology (rolled out in **Feb 2024**) to improve efficiency and customer experience[25](index=25&type=chunk)[28](index=28&type=chunk) Off-Premises Sales | Off-Premises Sales | 2023 | 2022 | 2019 | | :-------------------------------- | :----- | :----- | :----- | | % of Total Restaurant Sales | 18.3% | 20.6% | 6.7% | - Menu innovation, guided by the **'Follow the Sun' philosophy**, features **five seasonal menu changes per year** and successful new platforms like Fresh Juice and an alcohol program (offered in **~90% of system-wide restaurants by Dec 31, 2023**)[28](index=28&type=chunk) - Increased brand awareness through targeted digital channels and customer data acquisition systems, gathering **over 14.6 million unique customer profiles** to understand behaviors and drive visit frequency[28](index=28&type=chunk) [Operations](index=9&type=section&id=Operations) - Maintains high food quality and safety standards through careful training, supervision, rigorous cleaning procedures, and regular unannounced third-party food safety assessments[29](index=29&type=chunk) - As of December 31, 2023, the company had approximately **14,000 employees**, none unionized, fostering favorable relations through its **'You First' culture**[31](index=31&type=chunk) - Training programs include the F.A.R.M. (First Watch Academy of Restaurant Management) for managers and C.A.F.E. (Culture and Food Experience) for in-restaurant training, supplemented by a Virtual Learning Academy for hourly employees[34](index=34&type=chunk) - Supply Chain department manages and negotiates with national suppliers and distributors to secure high-quality, fresh products and control costs, with most restaurants receiving deliveries at least **three times per week**[35](index=35&type=chunk) - Digital management information systems are scalable and support operations by processing customer orders, credit card payments, employee time-keeping, scheduling, and providing timely access to financial and marketing data[36](index=36&type=chunk) [Marketing and Advertising](index=10&type=section&id=Marketing%20and%20Advertising) - Utilizes a variety of marketing channels including affiliate partnerships, social media, digital marketing, direct mailers, public relations, and local community sponsorships[37](index=37&type=chunk) - Focuses on increasing social media engagement to generate brand awareness and gather information for future marketing efforts, using first-party data to target attractive customer segments like Millennials and Gen Z[28](index=28&type=chunk)[37](index=37&type=chunk) [Franchise Program](index=10&type=section&id=Franchise%20Program) Metric (as of Dec 31, 2023) | Metric | Value | | :-------------------------------- | :---- | | Number of Franchisees | 11 | | Franchise-Owned Restaurants | 99 | | New Restaurant Development Obligations | 18 | - Franchise agreements typically have an initial term of **10 years** with additional renewal terms totaling **10 years**[38](index=38&type=chunk) Franchise Fees | Franchise Fees | | | :-------------------------------- | :------------------------- | | Initial Franchise Fee (per restaurant) | $35,000 - $40,000 | | Sales-Based Royalties | 4.0% of franchised restaurant sales | | System Fund Contributions | 1.0%-3.0% of franchised restaurant sales | [Human Capital](index=10&type=section&id=Human%20Capital) - The **'You First' culture** is foundational, aiming to **'Make days brighter at every opportunity'** by prioritizing employees, which in turn leads to excellent customer service and higher retention[39](index=39&type=chunk) - The company actively promotes diversity and inclusion, with initiatives like the W.H.Y. (**'We Hear You'**) Tour for employee feedback and the R.I.S.E. (Race Inclusion and Support Exchange) Council, which led to **'The Rising 20' mentor program**[40](index=40&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) Diversity Metrics (as of Feb 19, 2023) | Diversity Metrics | | | :-------------------------------- | :------------------------- | | Non-employee Board Members who are women | 50% | | Non-employee Directors from underrepresented race/ethnicity | 25% | | Executive Leadership Team members who are women | 33% | | Total Workforce who are women | 53% | | Total Workforce from underrepresented race/ethnicity | 57% | - The leadership team is experienced, with executives and key employees averaging **over 15 years of industry experience**, and directors of operations averaging approximately **ten years at First Watch**[45](index=45&type=chunk) [Government Regulation](index=11&type=section&id=Government%20Regulation) - The company is subject to extensive federal, state, and local laws and regulations, including those related to public health and safety, zoning, fire codes, alcoholic beverage control, and franchising[46](index=46&type=chunk) - Compliance with labor laws such as the Fair Labor Standards Act, Immigration Reform and Control Act, and Americans with Disabilities Act, covering minimum wages, overtime, and working conditions, is also required[47](index=47&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) - First Watch protects its brand through registered trademarks and service marks with the USPTO, including **'First Watch the Daytime Cafe,' 'You First,' and 'Yeah, It's Fresh!'**[48](index=48&type=chunk) - The company maintains certain recipes, standards, specifications, and operating procedures as trade secrets or confidential information[48](index=48&type=chunk) [Competition](index=11&type=section&id=Competition) - The restaurant industry is highly competitive and fragmented, with competition based on dining experience, food quality, service, price, and location[49](index=49&type=chunk) - First Watch competes with national, regional, and local limited-service and full-service restaurants, as well as non-traditional market participants like grocery stores and meal subscription services[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The company believes it is **well-positioned** in the breakfast, brunch, and lunch segment due to its scale and unique offering, viewing primary competition as independent restaurants[50](index=50&type=chunk)[51](index=51&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) - Quarterly results are subject to seasonal fluctuations, with sales volumes affected by the timing of holidays, weather conditions, and new restaurant openings[52](index=52&type=chunk) [Corporate Information](index=12&type=section&id=Corporate%20Information) - First Watch Restaurant Group, Inc. was incorporated in Delaware in **2017**, changed its name in **2019**, and completed its IPO in **October 2021**, listing on Nasdaq under the symbol **'FWRG'**[54](index=54&type=chunk) - The company's principal executive offices are located at **8725 Pendery Place, Suite 201, Bradenton, FL 34201**[54](index=54&type=chunk) - Additional information, including SEC filings, is available free of charge on its investor relations website: **https://investors.firstwatch.com**[55](index=55&type=chunk)[56](index=56&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) First Watch faces diverse risks across business, operations, technology, and legal areas, which could materially impact its financial performance and stock price - The business is vulnerable to changes in economic conditions (inflation, recession) and consumer preferences, including work-from-home trends and the rising popularity of weight loss drugs[63](index=63&type=chunk) - Inability to successfully open new restaurants, manage growth effectively, or compete with other breakfast and lunch restaurants could harm the business[67](index=67&type=chunk)[71](index=71&type=chunk)[83](index=83&type=chunk) - Risks include shortages or disruptions in food supply, increases in food costs (e.g., eggs, pork, coffee), food safety concerns, and negative publicity, especially due to reliance on fresh ingredients and limited suppliers[76](index=76&type=chunk)[85](index=85&type=chunk)[89](index=89&type=chunk)[95](index=95&type=chunk) - Information technology system failures, network security breaches, or non-compliance with data privacy laws (like CCPA) could interrupt operations, lead to data theft, and incur significant costs and legal liabilities[102](index=102&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk) - Challenges in attracting and retaining qualified employees, wage inflation, potential unionization, and failure to maintain corporate culture could adversely impact operations and growth[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - Legal and regulatory risks include compliance with extensive labor, environmental, food safety, and alcoholic beverage laws, potential litigation (e.g., class actions, dram shop statutes), and increased costs associated with being a public company[124](index=124&type=chunk)[125](index=125&type=chunk)[127](index=127&type=chunk)[131](index=131&type=chunk)[136](index=136&type=chunk)[139](index=139&type=chunk) - Financial risks include potential impairment of goodwill and intangible assets, volatility in tax obligations, and the company's level of indebtedness, which could limit borrowing capacity and cash flow[143](index=143&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Advent International L.P.'s controlling ownership (**56.9%**) may lead to conflicts of interest with public stockholders and could impede takeovers. The company does not anticipate paying dividends in the foreseeable future[153](index=153&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported that there were no unresolved staff comments [Item 1C. Cybersecurity](index=36&type=section&id=Item%201C.%20Cybersecurity) First Watch maintains a cybersecurity program based on CIS Critical Security Controls, with annual external assessments and Audit Committee oversight, reporting no material incidents to date - The company's cybersecurity program is modeled on Center for Internet Security (**CIS**) Critical Security Controls, focusing on immediate protection and scalability[181](index=181&type=chunk) - Key components include continual user training, evaluation of privacy and data security compliance, and continuous monitoring and alerting across IT systems via a security operations center[181](index=181&type=chunk) - External consultants are engaged annually to evaluate program effectiveness and recommend improvements, and critical vendors are assessed for cybersecurity, incident readiness, and cyber insurance[182](index=182&type=chunk) - The Audit Committee of the Board oversees cybersecurity risk, receiving at least annual reports from the SVP, Information Technology, who has **over 25 years of experience**[184](index=184&type=chunk) - As of the report date, no cybersecurity threats or incidents have materially affected the company, though past incidents have occurred and future ones may[183](index=183&type=chunk) [Item 2. Properties](index=37&type=section&id=Item%202.%20Properties) First Watch operates 524 system-wide restaurants across 29 states, with all 425 company-owned facilities being leased, and a strong presence in key states - All **425 company-owned restaurant facilities** are leased[185](index=185&type=chunk) Restaurant Count | State | Company-owned | Franchise-owned | Total | | :---------------- | :-------------- | :-------------- | :---- | | Florida | 123 | — | 123 | | Texas | 42 | 21 | 63 | | Ohio | 40 | — | 40 | | Arizona | 31 | — | 31 | | **TOTAL (all states)** | **425** | **99** | **524** | [Item 3. Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) First Watch is involved in various claims and legal actions that arise in the ordinary course of business. However, the company does not believe that the ultimate resolution of these matters, individually or in aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources - The company is involved in various claims and legal actions in the ordinary course of business[186](index=186&type=chunk) - Management does not believe the ultimate resolution of these actions will have a material adverse effect on the company's financial position, results of operations, liquidity, or capital resources[186](index=186&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) First Watch common stock trades on Nasdaq (FWRG), with no anticipated cash dividends due to growth prioritization and credit agreement restrictions, and no issuer equity purchases - First Watch's common stock is traded on Nasdaq under the symbol **'FWRG'**[189](index=189&type=chunk) - As of **March 1, 2024**, there were **25 stockholders of record**[189](index=189&type=chunk) - The company does not currently intend to pay cash dividends on its common stock in the foreseeable future, as cash flow will be used to grow the business[190](index=190&type=chunk) - The ability to pay dividends is restricted by the terms of the Credit Agreement and Delaware law, which limits dividends to surplus or net profits[190](index=190&type=chunk)[192](index=192&type=chunk) - There were no issuer purchases of equity securities[193](index=193&type=chunk) [Item 6. Reserved](index=39&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses First Watch's financial condition and results, emphasizing 2023 growth, key performance indicators, non-GAAP measures, revenue, expenses, liquidity, and critical accounting policies [Overview](index=40&type=section&id=Overview) - First Watch is an award-winning **'Daytime Dining' concept**, serving made-to-order breakfast, brunch, and lunch using fresh ingredients, with **425 company-owned and 99 franchise-owned restaurants** across **29 states** as of **December 31, 2023**[198](index=198&type=chunk) - The company's fiscal year **2023 contained 53 weeks**, while **2022 and 2021 contained 52 weeks**[199](index=199&type=chunk) [Key Performance Indicators](index=40&type=section&id=Key%20Performance%20Indicators) - Key operating metrics include New Restaurant Openings (NROs), Franchise-owned NROs, Same-Restaurant Sales Growth, Same-Restaurant Traffic Growth, Average Unit Volume (AUV), System-wide restaurants, and System-wide sales[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - Same-Restaurant Sales Growth and Same-Restaurant Traffic Growth are measured for company-owned restaurants open for **18 months or longer**[203](index=203&type=chunk)[204](index=204&type=chunk) - AUV is calculated as total restaurant sales from the Comparable Restaurant Base divided by the number of restaurants in that base[205](index=205&type=chunk) [Non-GAAP Financial Measures](index=41&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses non-GAAP measures such as Adjusted EBITDA, Adjusted EBITDA margin, Restaurant level operating profit, and Restaurant level operating profit margin to provide additional visibility into operations and facilitate performance analysis[207](index=207&type=chunk) - Adjusted EBITDA represents Net income (loss) before depreciation and amortization, interest expense, income taxes, and items not considered in ongoing core operating performance[210](index=210&type=chunk) - Restaurant level operating profit represents restaurant sales less restaurant operating expenses, excluding corporate-level expenses and other non-core items[212](index=212&type=chunk) [Financial Highlights](index=42&type=section&id=Financial%20Highlights) Financial Highlights | Metric | 2023 (53 weeks) | 2022 (52 weeks) | Change | | :-------------------------------- | :---------------- | :---------------- | :------- | | Total revenues | $891.6 million | $730.2 million | +22.1% | | System-wide sales | $1.1 billion | $914.8 million | +20.6% | | Same-restaurant sales growth | 7.6% | 14.5% | -6.9 pp | | Same-restaurant traffic growth | 0.2% | 7.7% | -7.5 pp | | Average Unit Volume (AUV) | $2.3 million | $2.0 million | +10.7% | | Income from operations | $41.3 million | $16.9 million | +144.0% | | Net income | $25.4 million | $6.9 million | +268.1% | | Adjusted EBITDA | $99.5 million | $69.3 million | +43.6% | | Restaurant level operating profit | $175.7 million | $128.9 million | +36.2% | | Restaurant level operating profit margin | 20.0% | 17.9% | +2.1 pp | | System-wide restaurants opened | 51 | N/A | N/A | | Company-owned restaurants acquired | 23 | N/A | N/A | [Business Trends](index=43&type=section&id=Business%20Trends) - In **2023**, dining room traffic continued to grow, while off-premises occasions, including higher-cost third-party delivery, declined[217](index=217&type=chunk) - Same-restaurant sales grew **7.6% in 2023**, driven by modest **7% menu price increases** and overall traffic growth[217](index=217&type=chunk) Cost Trend | Cost Trend | 2023 | 2024 Expectation | | :-------------------------------- | :----- | :--------------- | | Average commodity costs | -0.5% (deflation) | 2% to 4% inflation | | Overall restaurant-level labor cost inflation | 8% | 5% to 7% inflation | - New restaurant openings experienced delays in commercial space delivery and increased capital investment due to inflation and a strategy of leasing larger dining and kitchen spaces[220](index=220&type=chunk) - In late **January 2024**, in-restaurant menu prices were increased by approximately **2%** to offset inflationary costs[221](index=221&type=chunk) [Development Highlights](index=43&type=section&id=Development%20Highlights) Restaurant Count (2023) | Restaurant Count | Company-owned | Franchise-owned | Total | | :-------------------------------- | :-------------- | :-------------- | :---- | | Beginning of period | 366 | 108 | 474 | | New restaurants | 37 | 14 | 51 | | Acquisitions of franchise-owned restaurants | 23 | (23) | — | | Closures | (1) | — | (1) | | End of period (Dec 31, 2023) | 425 | 99 | 524 | - For **2024**, the company expects to open **43-47 company-owned and 9-11 franchise-owned restaurants**, with one planned company-owned closure, resulting in **51-57 net new system-wide restaurants**[223](index=223&type=chunk) [Selected Operating Data](index=44&type=section&id=Selected%20Operating%20Data) Selected Operating Data | Metric | 2023 | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | :--------- | | Operating weeks in fiscal year | 53 | 52 | 52 | | System-wide restaurants | 524 | 474 | 435 | | Company-owned | 425 | 366 | 341 | | Franchise-owned | 99 | 108 | 94 | | System-wide sales (in thousands) | $1,103,089 | $914,816 | $750,674 | | Same-restaurant sales growth | 7.6 % | 14.5 % | 63.0 % | | Same-restaurant traffic growth | 0.2 % | 7.7 % | 52.6 % | | AUV (in thousands) | $2,250 | $2,032 | $1,786 | | Income from operations (in thousands) | $41,267 | $16,913 | $22,243 | | Income from operations margin | 4.7 % | 2.4 % | 3.8 % | | Restaurant level operating profit (in thousands) | $175,658 | $128,936 | $115,404 | | Restaurant level operating profit margin | 20.0 % | 17.9 % | 19.5 % | | Net income (loss) (in thousands) | $25,385 | $6,907 | $(2,107) | | Net income (loss) margin | 2.8 % | 0.9 % | (0.4)% | | Adjusted EBITDA (in thousands) | $99,483 | $69,278 | $66,301 | | Adjusted EBITDA margin | 11.2 % | 9.5 % | 11.0 % | [Results of Operations](index=45&type=section&id=Results%20of%20Operations) Revenue (in thousands) | Revenue | 2023 | 2022 | Change | | :-------------------------------- | :--------- | :--------- | :------- | | Restaurant sales | $877,092 | $719,181 | +22.0% | | Franchise revenues | $14,459 | $10,981 | +31.7% | | Total revenues | $891,551 | $730,162 | +22.1% | - The increase in total restaurant sales was primarily due to **$53.5 million from same-restaurant sales growth (7.6%)**, **$85.1 million from new restaurants and acquisitions**, and **$19.2 million from the 53rd week in 2023**[232](index=232&type=chunk) Operating Costs (% of restaurant sales) | Operating Costs | 2023 | 2022 | Change (pp) | | :-------------------------------- | :----- | :----- | :---------- | | Food and beverage costs | 22.5% | 24.0% | -1.5 | | Labor and other related expenses | 33.5% | 33.1% | +0.4 | | Other restaurant operating expenses | 15.3% | 15.9% | -0.6 | | Occupancy expenses | 7.8% | 8.3% | -0.5 | | Pre-opening expenses (% of total revenues) | 0.8% | 0.8% | 0.0 | | General and administrative expenses (% of total revenues) | 11.6% | 11.6% | 0.0 | | Depreciation and amortization (% of total revenues) | 4.6% | 4.7% | -0.1 | - Food and beverage costs as a percentage of restaurant sales decreased due to lower commodity costs (pork, avocado) and leveraging menu price increases[236](index=236&type=chunk) - Labor and other related expenses as a percentage of restaurant sales increased due to higher wages and staffing to serve growing dining room traffic and strategic growth, partially offset by lower health insurance costs[239](index=239&type=chunk) - Income from operations increased by **144.0% to $41.3 million**, and net income increased by **268.1% to $25.4 million**, primarily due to increased restaurant sales, franchise revenues, and lower commodity costs, partially offset by higher labor and operating expenses[216](index=216&type=chunk)[260](index=260&type=chunk)[262](index=262&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) - Interest expense increased by **54.1% to $8.1 million** due to higher interest rates and increased outstanding debt[264](index=264&type=chunk) [Non-GAAP Financial Measure Reconciliations](index=52&type=section&id=Non-GAAP%20Financial%20Measure%20Reconciliations) Adjusted EBITDA Reconciliation (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net income (loss) | $25,385 | $6,907 | $(2,107) | | Depreciation and amortization | 41,223 | 34,230 | 32,379 | | Interest expense | 8,063 | 5,232 | 20,099 | | Income taxes | 10,690 | 5,684 | 2,477 | | **EBITDA** | **85,361** | **52,053** | **52,848** | | Stock-based compensation | 7,604 | 10,374 | 8,596 | | Transaction expenses (income), net | 3,147 | 2,513 | (1,156) | | Strategic transition costs | 892 | 2,318 | 2,402 | | Impairments and loss on disposal of assets | 1,359 | 920 | 381 | | Delaware Voluntary Disclosure Agreement Program | 1,250 | 149 | — | | Recruiting and relocation costs | 465 | 681 | 351 | | Severance costs | 26 | 155 | 265 | | Insurance proceeds in connection with natural disasters, net | (621) | 115 | — | | Loss on extinguishment of debt | — | — | 2,403 | | COVID-19 related charges | — | — | 211 | | **Adjusted EBITDA** | **$99,483** | **$69,278** | **$66,301** | | Adjusted EBITDA margin | 11.2 % | 9.5 % | 11.0 % | Restaurant Level Operating Profit Reconciliation (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Income from operations | $41,267 | $16,913 | $22,243 | | Less: Franchise revenues | (14,459) | (10,981) | (8,850) | | Add: General and administrative expenses | 103,121 | 84,959 | 70,388 | | Depreciation and amortization | 41,223 | 34,230 | 32,379 | | Transaction expenses (income), net | 3,147 | 2,513 | (1,156) | | Impairments and loss on disposal of assets | 1,359 | 920 | 381 | | Costs in connection with natural disasters | — | 382 | — | | COVID-19 related charges | — | — | 19 | | **Restaurant level operating profit** | **$175,658** | **$128,936** | **$115,404** | | Restaurant level operating profit margin | 20.0 % | 17.9 % | 19.5 % | [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) Metric (as of Dec 31, 2023) | Metric | Value (in millions) | | :-------------------------------- | :------------------ | | Cash and cash equivalents | $49.6 | | Term Facility outstanding | $92.5 | | Revolving Credit Facility drawn | $30.0 | - The company believes its cash flows from operations, availability under its Credit Agreement, and available cash will be sufficient to meet liquidity needs for at least the **next 12 months**[283](index=283&type=chunk) - In **January 2024**, the Credit Agreement was amended to establish a new **$125.0 million incremental delayed draw term loan facility** and increase the revolving credit facility to **$125.0 million**, with all new facilities maturing on **January 5, 2029**[282](index=282&type=chunk)[514](index=514&type=chunk)[515](index=515&type=chunk) - Estimated capital expenditures for **2024** are **$125.0 million to $135.0 million**, primarily for new restaurant projects and remodels, funded by operating cash flows and borrowings[284](index=284&type=chunk) [Summary of Cash Flows](index=54&type=section&id=Summary%20of%20Cash%20Flows) Cash Flow Activity (in thousands) | Cash Flow Activity | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Cash provided by operating activities | $95,338 | $62,937 | | Cash used in investing activities | $(123,370) | $(63,111) | | Cash provided by (used in) financing activities | $28,070 | $(2,018) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $38 | $(2,192) | - Operating cash flows increased due to higher net income and non-cash charges. Investing cash flows increased significantly due to capital expenditures for restaurant growth and acquisitions. Financing cash flows shifted to positive due to revolving credit facility borrowings[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) [Contractual Obligations](index=55&type=section&id=Contractual%20Obligations) - Material contractual obligations include operating and finance lease obligations, long-term debt, and purchase obligations[289](index=289&type=chunk) - Purchase obligations are generally short-term, but firm minimum commitments include a **$7.7 million product purchase agreement** as of **December 31, 2023**, extending through **2028**[290](index=290&type=chunk)[496](index=496&type=chunk) [Critical Accounting Policies and Estimates](index=55&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies involve significant management judgment and include business combinations, goodwill and indefinite-lived intangibles impairment, long-lived assets and definite-lived intangible assets impairment, leases, income taxes, and stock-based compensation[292](index=292&type=chunk) - Goodwill and indefinite-lived intangibles are tested annually for impairment; a qualitative assessment was performed in **2023 and 2022**, concluding no impairment was likely[143](index=143&type=chunk)[297](index=297&type=chunk)[301](index=301&type=chunk)[373](index=373&type=chunk) - Lease accounting involves estimating lease terms and incremental borrowing rates, which are based on market yields and the company's synthetic credit rating[306](index=306&type=chunk)[362](index=362&type=chunk) - Income tax accounting uses the asset and liability method, with deferred tax assets subject to a valuation allowance if realization is not probable[308](index=308&type=chunk)[310](index=310&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) - Stock-based compensation expense is estimated using the Black-Scholes valuation model, requiring assumptions for expected term, volatility, risk-free interest rate, and expected dividend yield[312](index=312&type=chunk)[313](index=313&type=chunk)[394](index=394&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) First Watch faces commodity and interest rate risks, managing costs through menu pricing and operational adjustments, and hedging $90.0 million of floating-rate debt with an interest rate swap - Profitability is dependent on the ability to anticipate and react to changes in costs of key operating resources, including food and beverage, energy, and fuel[318](index=318&type=chunk) - The company's market basket experienced cost deflation of **50 basis points in 2023** but expects **2% to 4% inflation in 2024**[319](index=319&type=chunk) - First Watch does not currently use financial instruments to hedge its commodity risk[318](index=318&type=chunk) - As of **December 31, 2023**, the company had **$92.5 million in outstanding floating-rate debt**[320](index=320&type=chunk) - In **June 2023**, the company entered into a variable-to-fixed interest rate swap agreement to hedge **$90.0 million** of its outstanding variable rate debt at a weighted average fixed rate of **4.16%**, maturing on **October 6, 2026**[320](index=320&type=chunk)[437](index=437&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item presents First Watch's audited consolidated financial statements for 2021-2023, including balance sheets, income statements, equity, cash flows, and detailed notes on accounting policies and financial items [Report of Independent Registered Public Accounting Firm](index=61&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - PricewaterhouseCoopers LLP, the independent registered public accounting firm, issued an **unqualified opinion** on the consolidated financial statements for the periods ended **December 31, 2023, December 25, 2022, and December 26, 2021**[325](index=325&type=chunk) - The firm did not perform an audit of the company's internal control over financial reporting, as the company is not required to have one[327](index=327&type=chunk) [Consolidated Balance Sheets](index=62&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (in thousands) | Item | Dec 31, 2023 | Dec 25, 2022 | | :------------------------------------------ | :----------- | :----------- | | **Assets** | | | | Total current assets | $71,190 | $67,288 | | Goodwill | $359,883 | $345,219 | | Intangible assets, net | $151,186 | $143,151 | | Operating lease right-of-use assets | $420,001 | $352,373 | | Property, fixtures and equipment, net | $263,082 | $195,117 | | Total assets | $1,267,045 | $1,104,446 | | **Liabilities and Equity** | | | | Total current liabilities | $115,073 | $99,980 | | Operating lease liabilities | $441,290 | $366,113 | | Long-term debt, net | $119,767 | $94,668 | | Deferred income taxes | $25,331 | $17,166 | | Total liabilities | $705,761 | $581,311 | | Total equity | $561,284 | $523,135 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=63&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Total revenues | $891,551 | $730,162 | $601,193 | | Total operating costs and expenses | $850,284 | $713,249 | $578,950 | | Income from operations | $41,267 | $16,913 | $22,243 | | Interest expense | $(8,063) | $(5,232) | $(20,099) | | Income before income taxes | $36,075 | $12,591 | $370 | | Income tax expense | $(10,690) | $(5,684) | $(2,477) | | Net income (loss) | $25,385 | $6,907 | $(2,107) | | Comprehensive income (loss) | $24,718 | $6,907 | $(2,107) | | Net income (loss) per common share - basic | $0.43 | $0.12 | $(0.04) | | Net income (loss) per common share - diluted | $0.41 | $0.11 | $(0.04) | [Consolidated Statements of Equity](index=64&type=section&id=Consolidated%20Statements%20of%20Equity) Consolidated Statements of Equity (in thousands) | Item | Dec 31, 2023 | Dec 25, 2022 | Dec 26, 2021 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Common Stock | $599 | $592 | $590 | | Additional Paid-In Capital | $634,099 | $620,675 | $608,878 | | Accumulated Deficit | $(72,747) | $(98,132) | $(105,039) | | Accumulated Other Comprehensive Loss | $(667) | — | — | | Total Equity | $561,284 | $523,135 | $504,429 | [Consolidated Statements of Cash Flows](index=65&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $95,338 | $62,937 | $62,971 | | Net cash used in investing activities | $(123,370) | $(63,111) | $(35,682) | | Net cash provided by (used in) financing activities | $28,070 | $(2,018) | $(14,271) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $38 | $(2,192) | $13,018 | | Cash and cash equivalents and restricted cash, end of period | $49,961 | $49,923 | $52,115 | [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company acquired **23 franchise-operated restaurants** in Fiscal **2023** for a total cash purchase price of **$40.5 million**, resulting in **$14.7 million in goodwill**[403](index=403&type=chunk)[411](index=411&type=chunk) Revenue Breakdown (in thousands) - 2023 | Revenue Type | Amount | | :-------------------------------- | :--------- | | In-restaurant dining sales | $716,960 | | Third-party delivery sales | $91,433 | | Take-out sales | $68,699 | | **Total restaurant sales** | **$877,092** | | Royalty and system fund contributions | $13,464 | | Initial franchise fees | $388 | | Business combinations - revenues recognized | $607 | | **Total franchise revenues** | **$14,459** | Debt Summary (in thousands, as of Dec 31, 2023) | Debt Type | Balance | Interest Rate | | :-------------------------------- | :-------- | :------------ | | Term Facility | $92,500 | 7.70% | | Revolving Credit Facility | $30,000 | 7.72% | - In **June 2023**, the company entered into variable-to-fixed interest rate swaps with an aggregate notional amount of **$90.0 million**, paying a weighted average fixed rate of **4.16%** and receiving payments based on the three-month SOFR rate, maturing **October 6, 2026**[437](index=437&type=chunk) Income Tax Expense (in thousands) | Item | 2023 | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | :--------- | | Total income tax expense | $(10,690) | $(5,684) | $(2,477) | | Effective income tax rate | 29.6% | 45.1% | 669.5% | - Stock-based compensation expense was **$7.6 million in Fiscal 2023**, **$10.4 million in Fiscal 2022**, and **$8.6 million in Fiscal 2021**[490](index=490&type=chunk) - As subsequent events in **January 2024**, the company agreed to acquire **21 restaurants** from a franchisee for **$75.0 million** and acquired one additional restaurant for **$3.0 million**. The Credit Agreement was also amended to establish new facilities maturing **January 5, 2029**, including a new **$125.0 million incremental delayed draw term loan facility**[511](index=511&type=chunk)[512](index=512&type=chunk)[513](index=513&type=chunk)[514](index=514&type=chunk)[515](index=515&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=95&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported that there were no changes in or disagreements with accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded First Watch's disclosure controls were ineffective as of December 31, 2023, due to material weaknesses in internal control over financial reporting, with ongoing remediation efforts - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **not effective** as of **December 31, 2023**, due to material weaknesses in internal control over financial reporting[520](index=520&type=chunk) - Identified material weaknesses include an **ineffective internal control environment** (lack of sufficient personnel, formal delegation, segregation of duties), **ineffective controls over the period-end financial reporting process**, and **ineffective controls over the accounting for income taxes**[522](index=522&type=chunk)[523](index=523&type=chunk)[524](index=524&type=chunk) - Despite the material weaknesses, management concluded that the consolidated financial statements for the periods covered **fairly present the financial position, results of operations, and cash flows in conformity with GAAP**[520](index=520&type=chunk) - Remediation efforts are ongoing, including hiring new financial reporting, accounting, and IT leadership, augmenting capabilities, establishing policies, formalizing roles, and enhancing controls over financial reporting and income taxes[526](index=526&type=chunk) - A previously identified material weakness related to information technology general controls was **remediated** as of **December 31, 2023**, through implemented user access, change management, testing, and computer operation controls[529](index=529&type=chunk) [Item 9B. Other Information](index=101&type=section&id=Item%209B.%20Other%20Information) The company reported no other information [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=101&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company reported no disclosures regarding foreign jurisdictions that prevent inspections PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This item incorporates proxy statement information on directors, executive officers, and corporate governance, including First Watch's Code of Ethics and Business Conduct - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the Definitive Proxy Statement for the **2024 Annual Meeting of Stockholders**[535](index=535&type=chunk) - The company has adopted a **Code of Ethics and Business Conduct**, applicable to its CEO, CFO, and other finance and accounting leaders, which is publicly available on its website[534](index=534&type=chunk) [Item 11. Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) This item incorporates by reference information from the company's Proxy Statement regarding executive compensation, outstanding equity awards at fiscal year-end, and director compensation - Information on executive compensation, outstanding equity awards at fiscal year-end, and director compensation is incorporated by reference from the Proxy Statement[537](index=537&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This item incorporates by reference information from the company's Proxy Statement regarding security ownership of certain beneficial owners and management - Information on security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement[538](index=538&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This item incorporates by reference information from the company's Proxy Statement regarding certain relationships and related transactions, and director independence - Information on certain relationships and related transactions, and director independence is incorporated by reference from the Proxy Statement[539](index=539&type=chunk) [Item 14. Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This item incorporates by reference information from the company's Proxy Statement regarding principal accountant fees and services, and the policy for approval of audit and permitted non-audit services - Information on principal accountant fees and services and the policy for approval of audit and permitted non-audit services is incorporated by reference from the Proxy Statement[540](index=540&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This item lists financial statements filed under Item 8 and provides a comprehensive list of exhibits, including corporate governance documents, debt agreements, and equity plans - Consolidated financial statements are filed as part of this report under Item 8[542](index=542&type=chunk) - No financial statement schedules are required as the information is either not present in sufficient amounts or is included in the consolidated financial statements or notes[542](index=542&type=chunk) - A comprehensive list of exhibits is provided, including corporate governance documents, debt agreements, employment agreements, and equity incentive plans[543](index=543&type=chunk)[544](index=544&type=chunk) [Item 16. Form 10-K Summary](index=104&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reported no Form 10-K Summary [Signatures](index=105&type=section&id=Signatures) This section contains the signatures of the registrant's authorized representatives, including the President, Chief Executive Officer, Chief Financial Officer, and members of the Board of Directors, certifying the filing of the report on March 5, 2024 - The report was duly signed on behalf of First Watch Restaurant Group, Inc. by its President, Chief Executive Officer, Chief Financial Officer, and members of the Board of Directors on **March 5, 2024**[547](index=547&type=chunk)[548](index=548&type=chunk)[549](index=549&type=chunk)[550](index=550&type=chunk)

Wall Street analysts expect First Watch Restaurant Group, Inc. (FWRG) to post quarterly earnings of $0.04 per share in its upcoming report, which indicates a year-over-year increase of 500%. Revenues are expected to be $238.62 million, up 28.5% from the year-ago quarter.Over the past 30 days, the consensus EPS estimate for the quarter has remained unchanged. This demonstrates the covering analysts' collective reassessment of their initial projections during this period.Ahead of a company's earnings disclosu ...