First Watch executives said on Thursday that the family-dining restaurant chain is starting to use targeted marketing and demand generation to bring in new and returning customers.
Reporting for the third quarter ended Sept. 29, the company, which went public three years ago, said Thursday morning that same-store sales were down 1.9%, while same-store traffic was down 4.4% year-over-year.
“We are pleased with our performance in Q3 as it reflects our teams’ superb restaurant-level operations, especially considering an uneven consumer backdrop,” said First Watch president and CEO Chris Tomasso in a statement. “Traffic picked up through the quarter, our employee turnover once again improved and remains favorable relative to the industry as a whole, and adjusted EBITDA grew 18%. We are committed to ensuring our people and real estate pipelines are in place to support our growth to 2,200 locations.”
The company also updated its full fiscal year outlook on Thursday, estimating a same-store sales decline around 1%, traffic growth around -4% to -4.5%, and 47 net new restaurants.
Tomasso said in an earnings call that traffic momentum built over the course of the quarter, with on-premises traffic turning positive and direct off-premises traffic stabilizing in September.
Talking about the company’s new targeted marketing campaigns, Tomasso said they “aim to develop strategies to efficiently attract new customers, as well as remain top-of-mind for current category users.”
The company is using platforms including social media and streaming services to reach specific audiences, including lapsed consumers, recent consumers, and consumers who recently visited a competitor.
“We put a number of initiatives into test in Q3,” Tomasso said. “We’re pleased with the results that we saw.”
In terms of operations, Tomasso reported an improvement in employee turnover in the third quarter. He said the company hopes to maintain that momentum by prioritizing internal promotions, scheduling tools, and a training program for new managers.
First Watch continues to pursue ambitious development goals. The chain added nine new restaurants in eight states in Q3, bringing its total to 547 (466 company-owned and 80 franchised) in 29 states. The company wants to eventually have 2,200 units.
Development hit a bump early in the fourth quarter as Hurricane Milton “caused some construction-related disruptions across the Southeast and beyond, impacting many of our restaurants under near-term development,” Tomasso said. As a result, five targeted December openings have been rescheduled for January.
The storm is not expected to have a material impact on same-store sales in the fourth quarter.
First Watch third quarter by the numbers
- Total revenues increased 14.8% to $251.6 million
- Systemwide sales increased 8.0% to $291.8 million
- Same-store sales growth decreased 1.9%
- Same-store traffic decreased 4.4%
- Income from operations margin decreased to 2.5% from 3.6%
- Restaurant level operating profit margin increased to 18.9% from 18.7%
- Net income decreased to $2.1 million, or $0.03 per diluted share from $5.4 million, or $0.09 per diluted share
- Adjusted EBITDA increased to $25.6 million from $21.6 million
