First Watch grows sales as comparable visits decline

First Watch Restaurant Group reported May 5 that first-quarter comparable sales rose 2.8% despite a 2.0% traffic decline, while restaurant profit margins improved and the company’s net loss widened.

The results for the 13 weeks ended March 29 show total revenue of $331.0 million, up 17.3%. That broader growth includes changes in the restaurant network. It is not a measure of visits at established stores.

The comparable base comprised 454 company-owned restaurants open at least 18 months at the fiscal year’s start. Franchise restaurants and younger company locations therefore fall outside the sales-and-traffic comparison.

Restaurant-level operating profit margin rose to 18.5% from 16.5%. That non-GAAP measure excludes corporate-level expenses and certain other items. Companywide GAAP operating margin was just 0.3%, and the net loss increased to $2.7 million from $0.8 million.

The distinction is central to this quarter: stronger restaurant economics can coexist with weaker consolidated profitability. The restaurant margin does not describe what remains for shareholders after the company’s full expense structure.

Pricing and ingredient costs changed the restaurant equation#

The quarterly filing’s expense analysis supplies the operating explanation. Food and beverage costs fell to 22.6% of restaurant sales from 23.8%. Management attributed the improvement to menu price increases and lower egg, avocado and bacon costs, partly offset by higher coffee costs.

Labor costs dropped to 33.7% of restaurant sales from 34.6%, with pricing helping absorb wage increases. Neither ratio means the company spent fewer dollars. Food expense rose to $74.3 million and labor to $110.6 million as the company-operated business expanded.

First Watch cited 58 company restaurant openings and 19 acquisitions from franchisees over the preceding 12 months in explaining higher food spending. Buying franchise restaurants also changes which stores’ sales and expenses appear in company revenue.

Above the restaurant level, general and administrative expense increased by $9.7 million. Drivers included increases of $4.0 million for a leadership conference, $3.5 million in compensation and $1.7 million in marketing. Depreciation and amortization also rose as new and acquired restaurant assets entered the expense base. Interest expense rose to $4.8 million from $3.3 million.

A short service day carries a broad menu#

First Watch’s supplemental presentation describes its daytime model as a single 7.5-hour shift, from 7 a.m. to 2:30 p.m. Breakfast, brunch and lunch share that service window. There is no dinner period in this stated format to supply a separate evening sales opportunity.

The presentation also shows the winter-and-spring menu scheduled for January 6 through May 25. It spans a bacon, egg and cheddar sandwich; chimichurri steak and eggs hash; strawberry tres leches French toast; and blueberry lemon cornbread.

The dishes illustrate several ways to sell within the same dayparts: a handheld breakfast, an egg-and-potato entrée, a sweet plated meal and a baked side. Shared ingredients also appear across the builds, including eggs, pickled peppers and roasted garlic aioli in the sandwich and hash.

Those menu details describe what the kitchens were being asked to execute. The presentation does not assign traffic, sales mix or incremental profit to the individual products. Their presence gives operating context without establishing a product-level explanation for the quarter’s performance.