Breakfast-brunch-lunch chain operator First Watch Restaurant Group readies IPO

After refinancing, chain will focus on menu innovation, lunch daypart, alcohol sales, marketing analytics

Breakfast-brunch-lunch chain operator First Watch Restaurant Group filed for a possible IPO of up to $100M, according to its S-1 registration with the US Securities and Exchange Commission (SEC). Proceeds from the IPO will be used to mainly pay down debt related to its credit facility, triggering a refinancing process. The company listed total debt outstanding of $294M.

First Watch, with sales of $423M in 2019 and EBITDA of $(5.7M), has big plans for expansion. The company has grown from 148 restaurants in 2014 to 423 restaurants as of the second quarter of 2021, with a runway for as many as 2,200 locations, according to an analysis it commissioned. Its penetration is light in the Mountain States, Pacific Northwest and in Alaska.

Breakfast is a big opportunity in the restaurant space, it noted, as consumers still enjoy 78% of breakfast occasions at home, per data from The NPD Group. First Watch intends to drive home menu innovation, serving up excitement in its successful seasonal offerings, while continuing to focus on its “fresh, healthy” menu, clean ingredients and farm-fresh messaging.

In addition, it plans to expand its adult beverage program, which it has in place in 244 out of 423 restaurants. According to its analysis, alcohol is a profit-heavy initiative that so far has increased average check at alcohol-serving restaurants by $0.30.

[Related article: First Watch relocates HQ]

The Bradenton, Fla.-based chain is also going after the weekday lunch daypart, which it sees as another vehicle for growth. Only 6% of its customers had purchased a weekly lunch at its restaurants. It will seek to build sales in this daypart with a focused lunch offering and through targeted marketing. First Watch notes that the COVID-related migration of consumers from urban dwellings to suburban areas will play into an increased demand for its daytime offerings in the markets it serves.

First Watch also plans to expand its digital presence with off-premises capabilities. All restaurants are now enable for direct ordering and third-party delivery services. In the second quarter of 2021, total average weekly sales of off-premises increased to $8,079 per restaurant, compared to $1,879 during the fourth quarter of 2019.

Through new investments in marketing, the chain will also be able to increase brand awareness. In fiscal 2019 and 2020, advertising expenses accounted for about 1% of revenues. Through enhancements to its digital ordering platforms and connecting Wi-Fi with remote waitlist, remote orders, and tokenized credit card data, First Watch also plans to own and optimize much of its customer data for marketing purposes and now has 2.9M online customer profiles.


Comparable restaurant sales have been rebounding nicely with the last three months of sales, April through June 2021, posting growth of 13.4%, 14.8% and 19.7%, respectively, compared to the same months of 2019. Through fiscal December 2019, First Watch posted average comparable sales growth of 6.8% over the past five years. In the second quarter of 2021, it posted a 16.3% increase in comparable sales, compared to the same period of 2019.

June 2021 year-to-date performance has First Watch reporting $277.1M in restaurant sales, $4.1M in franchises revenue and $1.8M in profit. The breakfast-brunch-lunch chain is well on its way to reporting more than $0.5B in sales this year.

Competition will come from independent restaurants, and also from casual-dining chains focused on the breakfast-brunch business, including Another Broken Egg Cafe, and breakfast-focused chains, like IHOP and Denny’s.


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