First Watch holds steady amid ‘challenging’ environment

First Watch opened 16 restaurants in the quarter. Photo courtesy of First Watch

First Watch turned in a solid third quarter, generating 1% same-store sales growth amid what it called a “challenging” consumer environment.

The growth came on top of 7.1% same-store sales growth a year ago. It included a 1.9% traffic decline, 3.6% higher prices, and 0.7% lower mix.

Executives said the lower traffic was a result of “planned sales transfer” as First Watch opens more locations in existing markets.

During the quarter ended Sept. 27, Bradenton, Florida-based First Watch opened 16 restaurants in 11 states and has now added about 50 locations this year for a total of 681.

Revenues rose 10.7% year over year, to $349.9 million.

“We believe that our top-line results effectively demonstrate the long-term resilience of our business model,” said CEO Chris Tomasso during an earnings call Tuesday, adding that same-store sales growth was in line with expectations.

Restaurant-level profit margins fell by 30 basis points, to 19.4%. That was largely a result of higher food costs, which ticked up by about 10 basis points, led by higher prices for turkey sausage as well as a steak limited-time offer that ran through mid-August. Labor and other related expenses remained flat at 32.6% of sales.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 16%, to $39.7 million. Executives credited disciplined expense management and greater productivity.

The results led First Watch to narrow its guidance heading into the home stretch of 2026. It’s now expecting same-store sales growth of about 2% for the year, from a range of 1.5% to 3% previously, and revenue growth of 13.5%, in the middle of its previous range of 12.5% to 14%.

On the development front, First Watch is planning to slow the pace of new-unit openings a bit. It’s expecting to add 55 new locations in 2027, down from 62 this year, in an effort to lower costs, boost cash flow, and redeploy labor to existing new stores.

Fewer openings should also ease some of the sales cannibalization First Watch has been experiencing, Tomasso said.

The company is also testing two new marketing strategies to help drive demand. Earlier this year, it launched linear TV ads in a market where it has historically struggled to grow awareness. Results were encouraging, and it has since expanded the pilot to a second market, with similar results.

“We believe linear television could provide another efficient way to build awareness and support traffic in select markets,” Tomasso said.

First Watch is also testing TikTok Go, a new feature within TikTok that allows users to discover and book restaurants and other experiences. First Watch is one of the first restaurants to pilot TikTok Go and believes it will help introduce the brand to a new audience.

Those efforts are in addition to First Watch’s existing data-driven digital marketing strategy.