First Watch Restaurant Group, Inc. Q3 FY2025 earnings call

• Strong financial results with same-restaurant traffic and sales growth for the fourth consecutive quarter.
• Total revenue increased 25.6% fueled by new restaurant openings, same-restaurant sales, and strategic franchise acquisitions.
• 21 system-wide restaurants opened in the third quarter, on track to meet the year-end target of 63 to 64 new restaurant openings.
• Restaurant-level operating profit margins expanded due to solid operational execution across the organization.
• Newly opened restaurants had strong sales, with some setting first week sales records.
• Employee turnover improved for 10 consecutive quarters, and First Watch was named America's #1 Most Loved Workplace for 2025.
• Enhanced marketing investments with integrated campaigns across connected TV, paid search, social media, etc., driving brand awareness.
• Relaunched digital platform with positive customer response, including a 5-star ranked app.
• New core menu in test with plans to roll out system-wide early next year.

Total revenue for the third quarter was $316 million, an increase of 25.6% compared to the third quarter of the previous year. This growth was driven by three key factors: strong new restaurant opening performance, a 7.1% increase in same-restaurant sales (with traffic growth of 2.6%), and accretive strategic franchise acquisitions. During the third quarter, 21 system-wide restaurants were opened across 14 states. Restaurant-level operating profit margins expanded due to solid operational execution. Same-restaurant sales growth of 7.1% included positive traffic growth of 2.6%, and the contribution of 167 non-comp restaurants (66 company-owned new openings and 19 franchise acquisitions since Q2 2024).

• Updated same-restaurant sales growth to approximately 4% from prior low single digits.
• Same-restaurant traffic expected to be approximately 1% (previously flat to slightly positive).
• Total revenue growth projected in the range of 20% to 21% with a net 400 basis point impact from completed acquisitions.
• Expect 63 to 64 new system-wide restaurants, including 55 company-owned and 8 to 9 franchise-owned, with three company-owned closures.
• Fiscal year 2025 commodity cost inflation guided to approximately 6% (previously 5% to 7%), labor cost inflation to approximately 4% (previously 3% to 4%).
• Annual adjusted EBITDA projection now approximately $123 million, the high end of the prior guidance range of $119 million to $123 million.

Q: Jim Salera asked about deconstructing traffic results and what's helping new openings.

A: Mel Hope and Chris Tomasso discussed in-restaurant dining improvement and third-party traffic contributions, with Christopher Tomasso highlighting real estate site selection, facility evolution, and marketing buzz for new openings.

Q: Anisha Datt asked about marketing expansion plans for 2026.

A: Chris Tomasso and Matt Eisenacher mentioned leveraging learnings from 2025 marketing efforts, targeting more geographies, and confidence in the playbook built.

Q: Andrew Barish asked about Q4 marketing spend and operations.

A: Christopher Tomasso and Mel Hope discussed marketing spend consistency and operations including KDS, app, and customer value investments.

Q: Todd Brooks asked about second-generation sites and marketing efficacy.

A: Christopher Tomasso and Matt Eisenacher talked about second-generation site mix, landlord relationships, and successful media targeting within the category.

Q: Brian Vaccaro asked about marketing impact on sales trends and commodity inflation.

A: Matt Eisenacher and Mel Hope discussed marketing consistency across geographies and commodity cost trends.

Q: Jon Tower asked about marketing impact on customer behavior and new store operations.

A: Christopher Tomasso and Matt Eisenacher talked about marketing driving awareness without mix change and new store kitchen capabilities.

Q: Isaiah Austin asked about breakfast daypart and trade-down trends.

A: Christopher Tomasso and Mel Hope discussed strong weekday breakfast traffic and no current trade-down evidence.

Q: Ari Razai asked about delivery channel growth and labor/commodity inflation guidance.

A: Christopher Tomasso and Mel Hope talked about delivery demand growth and upcoming labor/commodity cost discussions.

Q: Andrew Charles asked about pricing decisions and third-party delivery profitability.

A: Christopher Tomasso and Mel Hope discussed pricing timing with seasonal menu and third-party delivery profitability as incremental transactions.