First Watch Restaurant (FWRG) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company has doubled its adjusted EBITDA since going public four years ago, with a current annual unit growth rate of over 10% [15][20] - The average cost to build a restaurant is approximately $1.75 million, with first-year sales projected at $2.2 million, growing to about $2.6 million in the third year, achieving an IRR of 18%-20% [57] Business Line Data and Key Metrics Changes - The sales mix is approximately 45% weekday and 55% weekend, with weekends being critical for revenue generation [11] - Third-party delivery accounts for about 10% of total sales, with an additional 9%-10% from to-go orders, indicating a growing channel for the company [34][38] Market Data and Key Metrics Changes - The company operates in 32 states and has a presence in a fragmented market with many local competitors, but few large national players [29] - The company has seen positive traffic growth, recovering from previous compression, and is nearly back to flat in restaurant traffic by quarter end [34] Company Strategy and Development Direction - The company aims to grow to 2,000 system-wide units, with a focus on new restaurant openings as the primary growth driver [1][20] - The strategy includes acquiring franchise restaurants to enhance market presence and operational control, with 72 franchise units remaining [79][80] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about sustaining the 10% unit growth rate, citing a full pipeline of new restaurant openings [51][52] - The company is well-positioned to meet changing consumer preferences, particularly with protein-forward menu options [18][19] Other Important Information - The company has experienced significant inflation in commodity prices, particularly for eggs, avocados, and coffee, but hopes for normalization in 2026 [71][75] - Marketing efforts are evolving, with a focus on targeted campaigns to increase brand awareness and customer engagement [62][65] Q&A Session Summary Question: Will the company look to capital markets for fundraising as it grows? - The company plans to rely on cash generated from operating restaurants to fund new restaurant development, with limited borrowing for strategic acquisitions [77] Question: What is the strategy behind franchise acquisitions? - The company prefers ownership of profitable franchise restaurants to accelerate growth and enhance brand familiarity in new markets [79][80] Question: Could the number of franchise units decrease to zero in the future? - It is unlikely that the number of franchise units will reach zero, as the company values the influence and operational control it has over its owned units [82]