0001789940-26-000014
SEC filingRevenue grew 20.3% to $1.2B driven by 64 new restaurants and 3.6% same-restaurant sales growth, while operating margin contracted to 2.3% due to cost inflation.
First Watch Restaurant Group, Inc. is a Delaware holding company and a pioneer in the Daytime Dining segment, serving made-to-order breakfast, brunch, and lunch. As of December 28, 2025, the company operated 633 restaurants across 32 states, with 560 company-owned and 73 franchise-owned locations. The company’s average unit volume reached $2.3 million per restaurant in 2025, achieved in only 7.5 hours of daily operation. First Watch emphasizes freshness through its "Follow the Sun" philosophy, with seasonal menus rotating four to five times per year, and does not use microwave ovens, heat lamps, or deep fryers.
The filing does not break out separate reporting segments; the business operates as a single segment focused on daytime dining through company-owned and franchised restaurants.
Key menu items include the Breakfast Quinoa Bowl, Chickichanga, Avocado Toast, and seasonal offerings such as Parmesan and Prosciutto Toast, Chimichurri Steak and Eggs Hash, and Brooklyn Breakfast Sandwich. The company also features fresh juices (Morning Meditation, Kale Tonic), Shareables, an alcohol program, and premium iced coffees. Technology platforms include pay-at-the-table via QR code, a mobile app with waitlist and ordering features, and customer data systems for personalized marketing.
First Watch serves customers through on-premise dining and off-premises channels including direct takeout ordering and third-party delivery integrations. Off-premises sales represented 19.0% of total restaurant sales in 2025. The company also operates a franchise program with 9 franchisees and 73 franchised restaurants. No significant customer concentration is disclosed.
The restaurant industry is highly competitive and fragmented. First Watch competes with national, regional, and local establishments, as well as grocery store chains and meal subscription services. The company views its primary competition as independent restaurants serving breakfast and lunch, and believes no comparable offering operates at its scale within the segment.
First Watch’s growth strategy comprises three pillars: (1) new restaurant openings, with a potential of over 2,200 units in the continental U.S.; (2) acquisitions of franchise-owned restaurants, having acquired 19 units in 2025; and (3) driving restaurant traffic and sales through excellent on-premise dining, technology enhancements, continuous menu innovation, increased brand awareness via digital channels, and leveraging customer data to increase visit frequency.
As of December 28, 2025, First Watch employed more than 17,500 restaurant employees, none of whom are covered by collective bargaining agreements. The company’s "You First" culture emphasizes no night shifts, employee benefits including healthcare, 401(k), tuition reimbursement, and family leave. Turnover is well below industry average, with average tenures of directors of operations at 8 years, regional vice presidents at 12 years, and field operations vice presidents at 13 years. The company promotes from within, with a majority of general managers promoted internally.
Fiscal 2025 revenue increased 20.3% to $1.222 billion, primarily driven by 64 new system-wide restaurant openings (55 company-owned, 9 franchise-owned) and the acquisition of 19 franchise-owned restaurants, which together added scale and contributed to a 3.6% same-restaurant sales growth. Same-restaurant traffic turned positive at 0.5% after a 4.0% decline in 2024, indicating improved customer demand. However, operating income fell 29.3% to $27.5 million as operating expenses outpaced revenue growth. Operating margin contracted 160 basis points to 2.3%. Key cost pressures included food and beverage costs rising 25.5% (5.0% commodity inflation, particularly eggs, coffee, avocado, and bacon), labor costs increasing 21.0% (3.7% labor inflation, wage increases, and higher health insurance), and other restaurant operating expenses up 24.2% (driven by third-party delivery fees and supplies). Depreciation and amortization surged 30.0% due to new restaurant assets and acquisitions. Net income improved 2.7% to $19.4 million, bolstered by a $7.3 million income tax benefit from FICA tip credits and valuation allowance adjustments, partially offsetting lower operating income.
The company operates as a single segment. Within that, restaurant sales—which accounted for 99.2% of total revenue—grew 20.7% to $1.212 billion. In-restaurant dining sales rose 18.5%, third-party delivery jumped 46.0%, and take-out increased 12.5%. Franchise revenues decreased 10.6% to $10.3 million due to the acquisition of 19 franchise-owned restaurants, partially offset by nine new franchise openings. Restaurant level operating profit rose 11.1% to $224.1 million, but margin declined 160 bps to 18.5% as cost inflation and higher operating expenses outpaced sales growth. Adjusted EBITDA increased 6.2% to $120.9 million, but margin fell 130 bps to 9.9%.
Management provided specific guidance for fiscal 2026: same-restaurant sales growth of 1-3%, commodity inflation of 1-3% (primarily coffee), and labor inflation of 3-5%. The company plans to open 59-63 net new system-wide restaurants (53-55 company-owned, 9-11 franchise-owned) and close three company-owned restaurants. Capital expenditures are expected to be $150-$160 million, funded by operating cash flow and borrowings. The company believes its liquidity (cash of $21.2 million and $66.9 million availability under its $125 million credit facility) is sufficient for at least the next 12 months. Strategic priorities remain focused on unit growth and operational efficiency to offset inflationary pressures.
As of December 28, 2025, total debt net stood at $282.4M, comprising $211.6M Term Facilities at 6.54% and $56.0M Revolving Credit Facility at 7.17%. Shareholders' equity was $626.3M, reflecting a net income of $19.4M for the fiscal year. Deferred revenue totaled $8.0M, primarily from gift cards and franchise fees. No cash or marketable securities balances are disclosed in the Notes.
Unconditional purchase obligations amounted to $14.4M, with the majority due within two years and commitments extending through 2029. These include subscriptions, technology services, and a vendor product purchase commitment of approximately $3.0M. The Company also has $2.1M in standby letters of credit and $267.6M in aggregate principal payments on debt due through 2029. Operating lease liabilities totaled $726.3M on a present value basis, with future minimum lease payments of $1.17B.
No share repurchases or dividends were executed during the fiscal year. The Company drew $83.5M on its credit facilities: $27.5M on the delayed draw facility and $56.0M on the revolving credit facility to fund acquisitions and capital expenditures. Principal payments on debt for the next twelve months are $11.3M. Capital expenditures are not broken out within the Notes but are referenced as a measure used by the CODM.
The Company operates as a single segment, with the Chief Executive Officer using consolidated net income for resource allocation. All revenues are derived from the United States.
First Watch's risk factors emphasize vulnerability to macroeconomic conditions and consumer discretionary spending. Economic downturns, inflation, or changes in dining preferences (e.g., weight loss drugs) could reduce traffic. The company's growth strategy relies on opening new restaurants; delays or underperformance in new markets could hamper expansion. Commodity cost volatility is a near-term concern: 2025 saw significant increases in egg and coffee costs due to avian influenza and climate conditions. Supply concentration is notable—one broad-line distributor handles virtually all US distribution (experienced a strike in 2024), and few suppliers provide pork, eggs, and coffee. Geographic concentration in the Southeast (41% of system-wide restaurants, with 22% in Florida) exposes the company to regional economic or weather shocks.
Cybersecurity breaches of point-of-sale, customer data, or corporate systems could disrupt operations and lead to liability. Compliance with evolving data privacy laws (e.g., CCPA, CPRA, state laws) adds compliance costs and risk of penalties. Intellectual property protection is critical to brand value; failure to enforce trademarks could harm brand recognition.
Labor shortages and minimum wage increases are ongoing pressures. The restaurant industry faces competition for talent, and unionization activities could increase costs. The company's corporate culture is important for growth; failure to maintain it could harm operations.
Extensive federal, state, and local regulations govern food safety, employment, alcohol service, and zoning. Menu labeling laws and potential HACCP requirements increase compliance costs. Litigation, including class actions on wage and hour matters, could be costly.
Goodwill ($420.2M) and indefinite-lived intangibles ($140.1M) are subject to impairment testing. Future impairment charges could materially affect earnings. Previously disclosed material weaknesses in internal controls have been remediated, but recurrence remains a risk.
The company carries $267.6M in variable-rate term loans, exposing it to interest rate increases. Covenants in the credit agreement limit financial flexibility and could restrict growth. Failure to comply could accelerate debt repayment.
As a holding company, First Watch depends on subsidiary distributions; debt agreements restrict dividends. Anti-takeover provisions in Delaware law and corporate documents may impede shareholder value. The company does not expect to pay dividends in the foreseeable future.
No cash flow data is present in the provided document excerpt. The text consists of an audit report and a table of contents referencing the cash flow statement on page 62, but the actual statement is not included. Therefore, analysis of CFO vs net income, capex intensity, free cash flow coverage, or working capital swings is impossible. To proceed, the full cash flow statement for fiscal years 2025, 2024, and 2023 must be provided.