0001789940-26-000060
SEC filingRevenue grew 17.3% to $331.0M but net loss widened to $2.7M; restaurant-level margin improved 200bps to 18.5%.
In the first quarter of 2026 (13 weeks ended March 29, 2026), First Watch reported total revenues of $331.0 million, a 17.3% increase from $282.2 million in the prior-year quarter. This growth was driven by a higher restaurant count (16 system-wide openings net of one closure) and same-restaurant sales growth of 2.8%. Restaurant sales rose 17.4% to $328.1 million, while franchise revenues grew 6.1% to $2.8 million.
Despite robust top-line growth, income from operations declined 10.2% to $1.0 million (0.3% margin vs. 0.4% prior year), as operating expenses increased faster than revenue. Key expense drivers included a 32.2% jump in general and administrative expenses ($39.9 million) due to a leadership conference, higher stock compensation, and marketing costs; depreciation and amortization rose 29.2% to $21.4 million from new and acquired restaurants; and interest expense increased 43.3% to $4.8 million due to higher borrowings for franchise acquisitions. Net loss widened to $2.7 million (or $(0.04) per diluted share) from a net loss of $0.8 million (or $(0.01) per diluted share).
On a non-GAAP basis, restaurant-level operating profit improved 32.0% to $60.9 million, with margin expanding 200 bps to 18.5%, reflecting favorable food and beverage costs (down 1.2 percentage points to 22.6% of restaurant sales) and labor costs (down 0.9 points to 33.7%). Adjusted EBITDA grew 22.2% to $27.8 million, with margin up 30 bps to 8.4%.
First Watch operates through two segments: company-owned restaurants and franchise operations. The company-owned segment generated 99.2% of total revenues and saw restaurant sales rise 17.4% YoY, supported by 13 new company-owned openings and 19 acquired franchise restaurants since March 2025. Franchise revenues contributed $2.8 million, up 6.1%, driven by an increased system fund contribution rate, partially offset by a decline in franchise restaurant count from 86 to 76. No segment-level operating income is provided, but the restaurant-level metric (excluding corporate costs) shows strong margin improvement at the unit level.
Management provided the following full-year 2026 expectations: same-restaurant sales growth of 1% to 3%, commodity inflation of approximately 1% to 3%, and restaurant-level wage inflation of 3% to 5%. Capital expenditures are planned in the range of $150 million to $160 million, primarily for new restaurant development and remodels. The company believes its cash flow from operations, combined with $66.0 million available under its $125.0 million revolving credit facility and $23.6 million cash on hand, is sufficient to meet liquidity needs for at least 12 months. Strategic priorities remain focused on unit growth, margin expansion through menu pricing and cost management, and franchise acquisitions.
The Notes reveal a solid balance sheet. Total debt as of March 29, 2026, was $282.1M net of unamortized discount and issuance costs (Note 6). The debt consists of Term Facilities ($208.8M, 6.56% rate), Revolving Credit Facility ($56.5M, 7.02%), finance lease liabilities ($14.8M), and a financing obligation ($3.1M). The company utilizes interest rate swaps to hedge variable-rate exposure (Note 7): two swaps with notional $90M at 4.16% maturing October 2026, and two with $60M at 4.42% maturing June 2027. Lease liabilities (Note 8) total $763.4M, including operating leases ($748.6M) and finance leases ($14.8M).
Legal proceedings (Note 11) are not material. No other purchase commitments or contractual obligations are disclosed in the Notes.
There are no share buybacks or dividends mentioned. The company’s capital allocation is primarily through capital expenditures (not detailed in Notes, but referenced in segment information as a metric used by the CODM). Stock-based compensation expense totaled $3.4M for the quarter (Note 9). Debt activity shows slight changes: Term Facilities decreased by $2.8M while the Revolver increased by $0.5M (balances from Note 6), but no explicit issuance or repayment figures are given in the Notes.
The company operates a single segment (Note 12): breakfast, brunch, and lunch restaurants under the "First Watch" brand. As of March 29, 2026, there were 572 company-owned and 76 franchise-owned restaurants across 32 U.S. states. The CODM uses consolidated net loss to evaluate performance. Revenue details are provided for the first quarter: $330.96M total, with restaurant sales of $328.1M (in-restaurant $265.7M, third-party delivery $39.7M, take-out $22.7M) and franchise revenues of $2.8M. No geographic breakdown is given.