First Watch Restaurant Gr Reports Q2 2026 Results: Full Earnings Call Transcript

First Watch Restaurant Gr (NASDAQ: FWRG ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

4% growth in same-restaurant sales and strong performance from new restaurant openings. The company's marketing investments have improved brand awareness, contributing to positive traffic trends and a higher customer return rate for new visitors. First Watch opened 18 new restaurants in Q2, expanding its footprint to 665 locations across 33 states, and plans to continue growing with over 100 projects in development. The company reported a same-restaurant traffic growth improvement of 160 basis points compared to Q1, although overall traffic growth was slightly negative, factoring in planned sales transfers.

New menu items and seasonal offerings contributed to a positive sales mix, with notable success from premium items like the Chimichurri Steak and Eggs Hash. 5 million, despite some margin pressure from higher beef costs. 5%-14% and adjusting EBITDA guidance to $133 million to $136 million. Long-term targets have been revised to focus on 50 new company-operated restaurant openings annually starting in 2027, balancing unit growth with positive free cash flow generation.

Management highlighted the success of targeted marketing strategies, including influencer partnerships and local digital efforts, as a key driver of customer engagement and traffic. m. Eastern Time. Please note that all participants are currently in a listen-only mode.

Following the presentation, the conference will be open for analyst questions, and instructions on how to ask a question will be given at that time. com under the News and Events section. I would now like to turn the call over to Steven Marotta, Vice President of Investor Relations for First Watch, to begin. Steven Marotta, Vice President of Investor Relations Hello everyone.

I am joined by First Watch's Chief Executive Officer and President, Chris Tomasso, and Chief Financial Officer, Ashley Weiser. This morning, First Watch issued its earnings release for the second quarter of fiscal year 2026 on GlobeNewswire and filed its quarterly report on Form 10-Q with the SEC. com. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the Company's actual results to differ materially from these statements.

The statements include, without limitation, statements concerning the conditions of the Company's industry and its operations, performance and financial outlook, growth plans and strategies, and future expenses. Any such statements should be considered in conjunction with cautionary statements in the Company's earnings release and the risk factor disclosures in the Company's filings with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.

Lastly, management's remarks today will include references to various non-GAAP measures, including Restaurant-Level Operating Profit, Restaurant-Level Operating Profit Margin, Adjusted EBITDA, and Adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the Company's earnings release filed this morning. Any references to percentage growth when discussing the second quarter performance are a comparison to the second quarter of 2025, unless otherwise indicated.

The format for today's call will begin with Chris, our Chief Executive Officer, who will provide a review of our operational highlights from the second quarter as well as an overall overview of the business. Ashley, our Chief Financial Officer, will then discuss our financial results for the quarter and provide the outlook for the balance of 2026. Following these remarks, Chris and Ashley will jointly provide an update on our long-term targets before we open the call for questions. And with that, I will turn the call over to Chris.

Chris Tomasso, Chief Executive Officer and President Thanks, Steve. Good morning, and thank you for joining our second quarter earnings call. Before I begin, I'd like to express our gratitude to our team of more than 18,000 employees for bringing our You First culture to each of our 665 restaurants across 33 states. 4% and the continued strong performance from our new restaurant openings.

Our comparable restaurant traffic improved sequentially through the quarter, culminating with positive traffic for the month of June. For the quarter, same-restaurant traffic growth was essentially flat but represented a 160 basis point improvement versus the first quarter. We outperformed both the casual dining segment and the industry overall according to Black Box. Benefits from our marketing investments were a significant contributor to our Q2 performance.

Since implementing an expanded marketing strategy early last year, brand awareness has been building and we believe contributing to our improved same-restaurant traffic trends and overall same-restaurant sales growth. Our marketing objectives are focused on driving at least one more visit from existing customers while also positioning First Watch squarely in the consideration set for new customers. That focus is showing up in customer behavior. In targeted acquisition campaigns run this year, 17% of new customers have already returned for a second visit, which is tracking higher than average.

We're not just reaching new customers; we're bringing them back. To do that effectively, we are leaning into targeted, data-informed marketing tactics that allow us to reach consumers where they are, speak to them with greater relevance, and evaluate the return on that spend with more precision than traditional broad-based marketing alone. We have built a foundational capability that will continue to serve us well as we grow. A key aspect of our brand-building strategy is the expanded use of video, including YouTube and connected television.

These channels enhance our ability to target specific demographic groups within markets, tailoring the message at a more localized level and tracking response with better visibility down to the restaurant level. Utilizing this test, learn, and act model, we have richness of data to analyze, allowing us to evaluate the performance of each tactic. With this knowledge, we're able to shift dollars toward the channels, markets, and messages that are demonstrating the highest levels of performance. Finally, we are continuing to enhance our capabilities when using influencer and social media tactics, allowing us to showcase the brand in a more authentic and customer-centric way.

We view these efforts as important building blocks to create awareness, deepen engagement, and ultimately to convert that into restaurant traffic. Over time, First Watch continues to rank among the top tier of customer favorites, placing in the top decile for future purchase intent among well-recognized national and regional breakfast competitors. These results demonstrate that our marketing investments are not only increasing awareness of the First Watch brand, but also strengthening occasion consideration and supporting conversion of potential customers into regular customers.

We're encouraged by the performance, as indicated by unaided brand awareness increasing more than 50% and aided brand awareness increasing 15% since early last year. This remains a very large opportunity for First Watch as overall awareness of our brand is relatively low from an industry standpoint. We will continue to monitor our suite of metrics, including ROI, to determine the effectiveness of our spend. Our new core menu, launched in February 2026, is contributing to positive sales mix, validating the work we've done to evolve and optimize the menu.

From improving navigation to enhancing offerings, we are giving our customers even more reasons to visit. The new menu delivers precisely the kind of meaningful contribution we anticipated. We find customers engage more broadly across our offerings, with increased participation in add-on items and a higher propensity to select more premium options throughout the meal occasion. As a result, we experienced positive menu mix, with per-person check average growth outpacing carried pricing in the second quarter as it did in the first quarter.

Layered on top of a highly productive and optimized core menu is our seasonal menu strategy, which gives us a fresh platform multiple times per year. This allows us to tell a highly relevant and engaging brand story by highlighting the flavors of the season and presenting compelling limited-time-only offerings that create menu news and excitement while driving mix. Culinary innovation remains a significant competitive advantage at First Watch, and we believe this helps keep the brand fresh and relevant and differentiates us from others in our category.

Our seasonal Jumpstart menu, which ran from early January to late May, featured our best-selling LTO entrée of all time, the Chimichurri Steak and Eggs Hash, and contributed to our positive mix of 50 basis points in the second quarter. We are now in the final weeks of our summer menu, and our data shows that the Chipotle Steak and Queso Hash will be our second best-selling LTO item of all time when this menu concludes in mid-August. It also features our newest shareable, Honey Butter Biscuit Bites, which is trending to be our highest-mixing shareable since Million Dollar Bacon.

These are great examples of our culinary team's ability to create menu excitement that our customers love. It also provides compelling content for our marketing team to leverage across all channels. Looking ahead, and if you follow our social channels, you'll see our customers are eagerly awaiting the return of our fall seasonal hit, Pumpkin Pancakes. Behind the scenes, innovation remains an important driver of growth and differentiation for First Watch.

Our culinary, operations, and marketing teams collaborate to develop, test, and refine ideas that are both compelling for our customers and practical for our restaurants. We are particularly excited about a handful of innovative tests focused on higher-capacity dayparts currently in the works. Now I'd like to shift to new restaurant growth. First Watch remains America's fastest-growing full-service restaurant brand.

Our real estate pipeline is as robust as ever, with more than 100 projects in various stages of development. In the second quarter, we opened a total of 18 new systemwide restaurants across 15 states, reaching new, emerging, and core markets. We also continue to expand our geographic footprint. During the quarter, we opened in Nashua, New Hampshire, which not only marks our initial entry into the Granite State, but also represents our third restaurant in the Boston DMA.

Since we entered the market in January 2025, this restaurant has generated weekly sales volumes materially above our expectations since opening. First Watch's growth and infrastructure remain strong, and I'm particularly pleased with the performance of our newest restaurants. The sales volumes of our 2025 and 2026 restaurant classes continue to outperform both the comp restaurant base and, importantly, their underwriting targets. We have the people pipeline to support our real estate pipeline and the right formula to execute our strategy at the restaurant level to reach our total addressable market of more than 2,200 locations.

We believe First Watch occupies a truly distinctive place in casual dining. We're the leader in daytime dining, a category that has disrupted a large segment within casual dining and is expected to continue to experience substantial growth, according to Technomic, Inc. Our unique position continues to strengthen as more customers discover the brand and we capture additional market share. Importantly, there is no other concept in daytime dining that brings together our level of national scale, innovation, operational consistency, proven unit growth capability, and meaningful long-term development opportunity.

Before I close, I'd like to again thank Mel for his leadership as CFO over the past eight years. His contributions are too numerous to list, and we look forward to leveraging his experience as he continues to serve in an advisory role in the months ahead. I also welcome Ashley to her first quarterly conference call as CFO. Since joining First Watch, Ashley has made a tremendous impact throughout the entire organization through her disciplined financial leadership, sound strategic judgment, and clear focus on execution.

We're delighted to have her lead our value creation strategy during our next phase of growth. Ashlee Weisser, Senior Vice President Financial Planning and Analysis Thank you, Chris, for the warm welcome, and thank you, Mel, for your mentorship, partnership, and friendship. I'm honored to take the baton from Mel, build upon the exceptional foundation he helped create, and partner with our talented teams across the organization to drive the next chapter of this brand.

As I step into this role, I remain focused on disciplined and profitable growth, operational excellence, and allocating capital to the highest return opportunities across the business with the goal of creating sustainable long term shareholder value for all owners of the business, including our investors and employees who share in our success. Our second quarter reflects the strength of that foundation highlighted by strong revenue growth, positive same restaurant sales growth, improving trends in same restaurant traffic and restaurant level profitability, as well as continued momentum across our development pipeline. 4%.

Our top line growth was driven by the positive same restaurant sales growth contributions from 132 non comp restaurants including 57 company owned new restaurant openings since the second quarter of 2025 and the 19 franchise locations acquired in the second quarter of 2025. 4%, it does include the impact of planned sales transfer as we continue to make First Watch Restaurant Gr more accessible and convenient to more customers and increase overall market share. The level of sales transfer we are experiencing is well within our expectations and underwriting standards. 5% of sales and improved 10 basis points when compared to 2Q20.

6%. Commodity deflation was driven primarily by eggs, avocados, and bacon, partially offset by an increase in coffee prices. I want to spend a few more moments providing detail around our food and beverage cost as a percent of sales since the modest improvement we experienced in the quarter masked some notable moving parts. Some good news is that commodity inflation remains below historical trends.

The new news is that beef, which was not part of our core menu in the prior year, has become a more meaningful factor in our food and beverage cost performance this year since the introduction of our Barbacoa Breakfast Tacos and Barbacoa Chilaquiles Breakfast Bowl, along with seasonal offerings which feature premium steak. While our beef costs were in line with our expectations, stronger than anticipated demand for our featured beef offerings increased overall COGS by just under 100 basis points year over year. Our current steak LTO has materially outperformed test results, resulting in a larger mix shift than originally planned.

We view this as evidence of the appeal of our product innovation and the potential pricing power of highly differentiated offerings. This impact is temporary and we expect it to moderate substantially as the current LTO concludes. Our approach, as always, remains a focus on balancing value, innovation, and profitability. 9% of sales in the second quarter, a 30 basis point improvement from the second quarter of 2025.

1% wage inflation. 8% in the second quarter of 2026, a 20 basis point improvement over last year. 3% in the second quarter. 9% of total revenue.

The increase compared to last year was largely due to timing of marketing spend as well as increased headcount to support our growth objectives. 4 million reported last year.