First Watch long-range goal: grow from 550 to 2,200 locations

First Watch is opening nearly two dozen restaurants in the fourth quarter, according to CEO and President Chris Tomasso. It would have opened five more, but he cites Hurricane Milton as the reason those locations will open for business instead in 2025. 

The east Manatee County-based breakfast-lunch-brunch company shared these details and more about its growth strategy on a Nov. 7 third-quarter earnings call.

In the third quarter, First Watch opened nine restaurants, including seven that are company-owned and two that are franchise-owned. It now operates 547 restaurants across 29 states, including 466 company-owned and 81 franchise-owned eateries.

By the end of the year, First Watch looks to have 570 restaurants, barring any closures or further changes in plan.

“In the fourth quarter, we expect to open 23 new restaurants, ” Tomasso says on the Nov. 7 call. “With the expectation of increasing the size of the system by 10% or more annually, we’re currently shepherding more than 120 projects in our development pipeline, many of which are slated to open in 2025 and 2026.”

The company’s goal over time is to grow to 2,200 locations, according to Tomasso.

Because First Watch is a leader in the daytime dining segment, he says, developers have been increasingly giving his company a “first look” when spaces become available at new planned centers and in prominent locations.

While First Watch operates restaurants across a variety of footprints, one type is starting to stand out, according to Tomasso.

“We opened 13 formerly occupied freestanding restaurant locations in the last 24 months and they are among the highest performers in our system,” Tomasso says. “Our current pipeline now includes more than 25 of these prominent locations, which are slated to open over the next few years.”

Third-quarter revenues, meanwhile, were up year-over-year and are projected in the fourth quarter to remain above 2023 levels — but below previous guidance, company officials say, due to the hurricane.

Total revenues in the third quarter increased 14.8% to $251.6 million compared with the third quarter in 2023, when the company had $219.2 million in total revenue.

While Hurricane Milton, which made landfall in Sarasota County Oct. 9, provided an “immaterial sales impact” companywide, Tomasso says that it did “cause some construction-related disruptions across the Southeast and beyond, impacting many of our new restaurants under near-term development.” 

As a result, a handful of restaurants will open in early 2025, he says.

“We know that strong restaurant openings are key to ensuring strong long-term restaurant performance,” Tomasso says.

The opening of a restaurant is so vital that the company analyzes each location within 60 days of opening to ensure it is optimizing its operations, according to Tomasso, who says the company has “gotten better at locating sites, being near the epicenter, outpositioning competitors, [and] the layouts of the restaurants,” in its quest to dominate daytime dining.

“As such, we never compromise on any aspect of a new restaurant opening, which is why we’ve decided to reschedule five previously anticipated December openings into January 2025,” Tomasso says.

The company still has many openings coming up at the end of the year.

“Our 2024 development pipeline is heavily weighted in the fourth quarter, with 10 [First Watch restaurants] already open thus far and we’re confident in our team’s ability to execute those that are remaining,” CFO Mel Hope says on the Nov. 7 call.

The company updated its total revenue growth for 2024 in the range of 16.5 to 17%, which is down slightly from its previous guidance of 17 to 19%.

This was “in part due to the hurricane-related delays and [the] decision to push a handful of openings to 2025,” Hope says. In addition, Hope says: “We had to push more [openings] to December than we’d prefer.”