8-K: First Watch Reports Preliminary Q4 and Fiscal Year 2024 Operational Metrics

First Watch Restaurant Group announces preliminary operational metrics for Q4 and fiscal year 2024, highlighting new restaurant openings and same-restaurant sales and traffic growth.

Summary

• First Watch Restaurant Group reported preliminary operational metrics for the fourth quarter and fiscal year ended December 29, 2024.
• The company achieved its target of opening 25 new restaurants in the fourth quarter, including 23 company-owned locations.
• Same-restaurant sales and traffic growth for the fourth quarter were at the upper end of the company's expected range.
• System-wide, First Watch opened 50 new restaurants in 2024 (43 company-owned and 7 franchise-owned) and closed two.
• As of December 29, 2024, First Watch had 572 system-wide restaurants, with 489 company-owned and 83 franchise-owned restaurants across 29 states.
• The company plans to continue its growth strategy in 2025 with a focus on real estate and its team.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company met its new store opening target, same-store sales and traffic declined. The forward-looking statements are positive, but the current results are mixed.

Positives

• The company successfully delivered on its fourth quarter target of 25 new restaurant openings.
• Same-restaurant sales and traffic growth were at the upper end of the expected range.
• First Watch opened a significant number of new restaurants throughout 2024, expanding its footprint.

Negatives

• Same-restaurant sales growth was negative, ranging from -0.3% to -0.5% for the fourth quarter.
• Same-restaurant traffic growth was also negative, ranging from -3.0% to -4.0% for the fourth quarter.
• Select new restaurant openings experienced minor delays, resulting in fewer operating weeks than planned.

Risks

• The company acknowledges vulnerability to changes in economic conditions and consumer preferences.
• There are risks associated with opening new restaurants and managing growth effectively.
• The company faces potential negative impacts on sales due to new restaurant openings.
• The company is exposed to risks related to changes in food costs and supply chain disruptions.
• The company is subject to risks related to information technology system failures and data breaches.
• The company is subject to risks related to labor shortages or increased labor costs or health care costs.
• The company is subject to risks related to natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism.

Future Outlook

First Watch plans to build on its leading position in the Daytime Dining category through a robust real estate pipeline and with its talented team committed to driving its long-term growth strategy in 2025.

Management Comments

• Chris Tomasso, First Watch CEO and President, stated that fourth quarter same restaurant sales and traffic growth were at the upper end of the company's expected range.
• Chris Tomasso stated that in 2025, the company plans to build on its leading position in the Daytime Dining category through a robust real estate pipeline and with its talented team committed to driving its long-term growth strategy.

Industry Context

First Watch operates in the competitive daytime dining segment, facing competition from other breakfast, brunch, and lunch restaurants. The company's focus on fresh ingredients and a rotating menu aims to differentiate it from competitors.

Comparison to Industry Standards

• It is difficult to compare First Watch directly to industry standards without knowing the specific performance of its direct competitors like IHOP, Denny's, or Cracker Barrel in the same period.
• However, negative same-store sales and traffic growth can be compared to industry averages to assess relative performance.
• For example, if the industry average for same-store sales growth was positive during the same period, First Watch's performance would be considered below average.

Stakeholder Impact

• Shareholders may be concerned about the negative same-restaurant sales and traffic growth.
• Employees may be affected by the company's growth plans and potential changes in operations.
• Customers may experience changes in the restaurant experience due to new menu offerings or operational adjustments.

Next Steps

• Chris Tomasso, CEO, and Mel Hope, CFO, will host a fireside chat at the 27th Annual ICR Conference on January 14, 2025.
• The leadership team will host meetings with institutional investors at the Jefferies Restaurants, Foodservice, Gaming, Lodging and Leisure Summit on January 28, 2025.

Key Dates