IPO details
Company intro
First Watch Restaurant Group is a leader in the daytime dining restaurant segment, which differs from legacy segments as it operates only during daytime hours. First Watch’s restaurants follow one shift, from 7:00 am to 2:30 pm, and one main menu and have a “No Night Shifts Ever” approach.
The company was founded in 1983 and has 9,000 employees. As of June 27, 2021, First Watch had 423 system-wide restaurants across 28 states, of which 335 were company-owned and 88 were operated by franchisees.
Financials
Over the five-year period from 2015 to 2019, before the onset of the COVID-19 pandemic, First Watch consistently increased its average unit volume by 25.7% and opened new company-owned restaurants with an average cash-on-cash return of 50.8%.
Amid the pandemic, First Watch had to close all its dining rooms and temporarily suspend operations at its company-owned restaurants. During this time, the company developed and launched a new mobile app to allow customers to order takeout and delivery. It also continued to invest in new company-owned restaurants and develop its future new restaurant openings (NRO) pipeline, leading to a 7.4% increase in its company-owned restaurants from 299 in 2019 to 321 in 2020.
First Watch’s total revenue dropped 21% year-over-year to $342.3 million in 2020. Net loss amounted to $49.6 million for the year. For the first six months of 2021, total revenue doubled to $281 million versus the same period in 2020. The company reported a net income of $1.8 million in 1H21 compared to a net loss of $31.4 million in 1H20. Same-restaurant sales grew around 96% in 1H21 versus 1H20.
Market opportunity
According to RKMA, the morning meal, which comprises breakfast and morning snack, has been the only foodservice daypart with consistent year-over-year growth for the last several years. With 102 billion breakfast occasions and 50 billion morning snack occasions in 2019, as per a January 2020 NPD Breakfast Insights report, morning restaurant traffic provides a compelling long-term opportunity for future growth.