First Watch gets a lift from new menu and marketing

A revamped menu and new marketing strategy are working wonders for First Watch.

Same-store sales rose 2.8% year over year at the breakfast-and-lunch chain in the quarter ended March 29. Traffic was down 2%, partially due to bad weather, which had a 100-basis-point negative impact on traffic.

Menu and sales growth

But sales were also buoyed by the arrival of a new core menu in February, the chain’s first such update in nearly 10 years. The menu spotlights beverages and seasonal items and includes upgrades, such as the option for customers to add salmon to their avocado toast.

Customers increasingly are taking First Watch up on those offers. After launching the menu, the chain saw customers ordering more items and upgrades, translating to higher check averages in the quarter. The menu also produced the chain’s best-selling seasonal entree ever, Chimichurri Steak and Eggs Hash.

“That dynamic indicates that customers are not only responding well to the updated menu, but also that the new design is encouraging them to explore deeper into our offering,” CEO Chris Tomasso said during an earnings call Tuesday.

It was also a sign that First Watch customers are feeling good, despite ongoing macroeconomic turmoil. Executives said they have not seen much impact from rising gas prices, even in the current quarter, and continue to expect same-store sales growth of 1% to 3% for the full year.

They noted that First Watch visitors tend to have higher incomes and may be more insulated from inflation.

“We've actually been very pleased with how our consumer has interacted with us despite what's going on in the macro,” Tomasso said.

Still, the company is maintaining its conservative approach to pricing lest it put too much pressure on customers. It did not raise prices in the first quarter and will evaluate whether to make any moves in the coming weeks. Prices were about 4% higher in the quarter than a year ago and will blend to a 2% difference in the second half of the year, barring any changes.

Marketing strategy impact

The new menu was paired with the wider rollout of a new digital marketing strategy that uses targeted ads across social media, the web and TV to introduce First Watch to new customers. The program now covers 75% of the system, and First Watch put more money behind it in the quarter.

The marketing is working as planned, attracting both first-time and lapsed customers while also boosting frequency among existing customers, executives said. The chain has also seen improvements in both unaided brand awareness and future purchase intent. The program has generated positive ROI at both restaurants that just started using it and those that are now in their second year.

It is working so well in fact that First Watch is moving “several million dollars” worth of marketing spend from the back half of the year into the second quarter.

Costs and expansion

The Bradenton, Florida-based chain also benefited from lower costs in the quarter. It reported commodity deflation of about 1.6% as the price of eggs, avocados and bacon declined. Labor costs as a percentage of sales were about a point lower than last year at 33.7%, thanks to higher menu prices.

Overall, restaurant-level margins expanded to 18.5%, a 200-basis-point improvement compared to a year ago.

The chain also opened 16 new restaurants in the quarter, continuing its rapid expansion. It ended the period with 648 restaurants in 32 states and expects to finish the year with 59 to 63 net-new locations.

First Watches that opened in 2025 continue to overperform their targets, and stores opened so far this year are doing even better, executives said.

Systemwide revenues increased 17.3%, to $331 million, in the quarter. The company reported a net loss of $2.7 million.

First Watch stock was up nearly 7% as of midday Tuesday.