First Watch Restaurant Group, Inc.

What they do

First Watch serves made-to-order breakfast, brunch and lunch from a rotating seasonal menu that changes four to five times per year, with no microwaves, heat lamps or deep fryers in its kitchens. The concept operates one daytime shift of roughly 7.5 hours per day and generated average unit volume of $2.3 million per restaurant in 2025. As of June 28, 2026, the company had 586 company-owned and 79 franchise-owned restaurants and employed more than 18,000 people.

Revenue drivers

• Company-owned restaurant sales — The dominant revenue source; company-owned restaurants numbered 586 as of June 28, 2026, versus 79 franchise-owned. Total revenues were $354.7 million in the second quarter of 2026, up 15.2% year over year.
• Franchise operations — Franchise-owned restaurants contributed to system-wide sales of $397.0 million in the second quarter of 2026, but the company does not recognize franchise restaurant sales as revenue, so this is a small revenue line relative to company-owned sales.
• New restaurant openings — Growth is driven by unit expansion; the company opened 18 system-wide restaurants in 15 states in the second quarter of 2026, with one planned closure, ending at 665 system-wide restaurants.
• Same-restaurant sales — Sales at the comparable restaurant base of 454 restaurants open 18 months or longer grew 3.4% in the second quarter of 2026, while same-restaurant traffic was negative 0.4%.

Recent performance

For the second quarter ended June 28, 2026, total revenues rose 15.2% to $354.7 million from $307.9 million, and system-wide sales rose 14.7% to $397.0 million. Same-restaurant sales grew 3.4% but same-restaurant traffic declined 0.4%. Income from operations margin slipped to 2.3% from 2.4%, while restaurant-level operating profit margin improved to 18.8% from 18.6%. Net income was $2.3 million, or $0.04 per diluted share, compared with $2.1 million, or $0.03 per diluted share, and Adjusted EBITDA rose to $34.5 million from $30.4 million.

Strategy

The company continues to grow through new company-owned restaurant openings, opening 18 system-wide units in 15 states in the second quarter of 2026. It differentiates on fresh, made-to-order food and a seasonal menu that changes four to five times per year, supported by sourcing programs such as Project Sunrise coffee from women-owned farms in Colombia. It leans on its "You First" culture and "No Night Shifts Ever" model to attract and retain staff, and has been named a Top 100 Most Loved Workplace for four consecutive years. Management also ties charitable giving to operations, including about $2.0 million donated to the V Foundation for pediatric cancer research as of December 28, 2025.

Risks

• Consumer and economic sensitivity — The company identifies vulnerability to changes in economic conditions and consumer preferences, including inflation and recession, as a risk to results.
• New restaurant execution — It cites inability to open new restaurants in new and existing markets, failure to operate them as profitably as past units, and sales cannibalization of existing restaurants.
• Same-restaurant sales and traffic — Lower than expected same-restaurant sales or traffic growth, and unsuccessful marketing or limited-time offerings, are listed risks; second-quarter 2026 traffic was already negative 0.4%.
• Food cost and supply — The company flags shortages or disruptions in supply or delivery of frequently used ingredients and increases in their cost, noting commodity deflation of 1.6% in the second quarter of 2026 driven by eggs, avocados and bacon, partly offset by higher beef and coffee costs.

Outlook

Management expects annual same-restaurant sales growth of 1.5% to 3.0%. It expects full-year commodity inflation of approximately zero to 1.5%, after second-quarter commodity deflation of 1.6%. Restaurant-level wage inflation is expected at approximately 3.5% to 4.5% for the full year, following 4.1% in the second quarter of 2026.