First Watch developing 130 new restaurants

East Manatee County-based First Watch has more than 130 restaurants in development, company officials announced Tuesday, during a second-quarter financial results call.

“Our growth engine continues to hum and is a particular point of strength for us,” First Watch CEO and President Chris Tomasso says. “Our pipeline for future growth is stronger than ever.”

At the end of the second quarter, First Watch, with a headquarters in University Park, encompasses 538 restaurants. Of those, 459 are company-owned, and 79 are franchise-owned establishments.

Part of the company's strategy involves bringing franchise restaurants under corporate ownership.

“Since May 2023, our franchise acquisition strategy has resulted in our conversion of 45 restaurants from franchise-operated to company-owned, including our largest First Watch acquisition,” Tomasso says, noting the acquisition occurred during the second quarter. 

On April 15, First Watch acquired 21 restaurants and the development rights from a franchisee in the Raleigh-Durham area in North Carolina, he says. It was a $75 million deal, the Business Observer previously reported.

Also in the second quarter, “we opened seven new restaurants in six states,” including six company-owned and one franchise-owned establishments, Tomasso says.

Restaurants the company acquired from franchisees in the past 12 months brought in nearly $100 million in sales and expanded First Watch’s reach to 17 new markets for corporate development, according to Tomasso.

“As we continue to expand the system, the pipeline remains a significant driver of long-term value creation and earnings growth,” Tomasso says.

Total revenues increased 19.5% to $258.6 million in the second quarter compared with the same period in 2023, when revenues were $216.3 million, company officials report. 

“Our top-line growth in the second quarter was driven by our new restaurant openings and franchise restaurants we have acquired over the past year,” Chief Financial Officer of First Watch Mel Hope says.

Net income increased to $8.9 million in the second quarter from $8 million during the same period last year.

“Our 2024 development pipeline remains heavily weighted in the second half of the year, the fourth quarter in particular, similar to our cadence in 2023,” Hope says.

By the end of the year, he adds, First Watch expects to add a total of 52 to 56 net new systemwide restaurants updated to reflect 45 to 48 company-owned restaurants, nine to ten franchise-owned restaurants and two systemwide closures.

First Watch posted $891.6 million in revenue for 2023 with net income of $25.4 million.

Other highlights from the second-quarter results call:

• First Watch had a “record Mother’s Day,” according to Tomasso, who says sales were up 5.4% and restaurant traffic was up 1.8%. 
• The company is seeing a dip in weekday breakfast and lunch customers. At the same time, traffic is consistent from repeat customers while visits are declining from those earning less than $70,000 and people who visit once a year. To remedy traffic, First Watch does not plan to offer discount deals to lure customers. “That's not an area that we choose to operate in,” Tomasso says, noting First Watch has not seen check management behaviors. Instead, it appears to be an “occasion issue” with people choosing to dine at home.
• Customer experience scores were up versus the same period last year, according to Tomasso. 
• Nearly 7 million people have opted into contact from First Watch, which plans to reach customers through social and digital channels. The company expects to increase frequency of touches after segmenting its audience.
• “Modest 1% price action we implemented during the last week of the second quarter” is a continuation of the company’s conservative pricing strategy, Tomasso says, adding: “First Watch has always played to win the long game."