First Watch Restaurant Group (NASDAQ:FWRG) outlined record restaurant openings, continued sales growth, and an expanded marketing and menu strategy during its fourth-quarter earnings call on Feb. 24, while also announcing Chief Financial Officer Mel Hope’s planned retirement later in 2026.
2025 highlights: revenue growth, positive comp sales, and record openings
CEO Chris Tomasso said fiscal 2025 was “noteworthy” for the company, citing total revenue growth of more than 20% and same-restaurant sales growth of 3.6% with positive same-restaurant traffic for the full year. He added that the company opened 64 new restaurants system-wide in 2025, calling it the most openings in the company’s more than 40-year history.
Q4 results: sales up 20%, margins improved, and tax benefit supported net income
CFO Mel Hope reported fourth-quarter revenue of $316.4 million, up 20.2% year over year, with same-restaurant sales up 3.1%. Same-restaurant traffic declined 1.9% in the quarter. Hope attributed revenue growth to positive same-restaurant sales and the contribution from 179 non-comp restaurants, including new company-owned openings and 19 franchise locations acquired since the third quarter of 2024.
On costs, food and beverage expense was 22.9% of sales versus 22.7% a year ago. Hope said carried pricing of about 5% helped offset commodity inflation of 1.1%, and he noted that excluding vendor contributions related to the company’s 2024 leadership conference (which were in the prior-year period), food and beverage expense would have been lower year over year.
Labor and related expenses were 33.5% of sales, improving 20 basis points from 33.7% in the prior year. Hope said carried pricing offset 3.1% labor inflation and labor efficiency was essentially flat year over year.
Restaurant-level operating profit margin was 19% in Q4, up 20 basis points year over year. Operating income margin was 2.9%. General and administrative expense totaled $31.8 million, or 10.1% of revenue, a 160 basis point improvement, which Hope attributed largely to the timing shift of the leadership conference and leverage on certain home office expenses.
Adjusted EBITDA increased 38.7% to $33.7 million, and adjusted EBITDA margin rose to 10.6% from 9.2% in the prior-year quarter. The company reported a 2025 income tax benefit of $10.7 million, which Hope said included a sizable non-cash benefit related to a more favorable year-end assessment of the future realization of accumulating FICA tip credits and related deferred tax assets. Net income was $15.2 million, representing a 4.8% net income margin.
First Watch opened 13 new system-wide restaurants in Q4 (12 company-owned and one franchise-owned) and ended 2025 with 633 restaurants across 32 states. Hope said acquisitions over the last 12 months contributed about $9 million of Q4 revenue and about $1.5 million of adjusted EBITDA, and about $35 million of full-year revenue and $6 million of adjusted EBITDA.
Menu refresh, marketing expansion, and delivery focus
Tomasso highlighted a new core menu rollout earlier in February, calling it the first significant redesign and reengineering of the menu in nearly 10 years. He said the changes are intended to “meaningfully elevate the experience” for teams and customers and reflect several years of feedback. Additions to the core menu include items previously featured seasonally, such as Barbacoa Breakfast Tacos, Barbacoa Chilaquiles Breakfast Bowl, Strawberry Tres Leches French Toast, and “Holey Donuts.” Management also said it improved menu navigation, added requested add-ons, removed slow-moving items, eliminated single-use SKUs, and reduced back-of-house complexity.
On marketing, Tomasso said the company launched a digital marketing initiative to roughly one-third of the comparable base in 2025 and generated a positive return, and he expects broader rollout in 2026. The company described a data-driven strategy using market segmentation and channels including Connected TV, online video, paid search, and programmatic digital.
Chief Brand Officer Matt Eisenacher told analysts the test produced “a several hundred basis point lift in traffic” in test versus control markets. He said the company began expanding into additional markets and expects spend to track seasonality, with more emphasis in the first half and tapering later in the year.
Management also discussed delivery. Tomasso said the company enhanced third-party delivery partnerships in 2025 with goals to drive traffic and do so profitably, and said it achieved both. Responding to a question about free delivery promotions, Tomasso said the company “didn’t fund free delivery,” describing the effort instead as deeper alignment with vendor partners around transactions and margin.
2026 outlook: modest comp growth, no initial price increase, and continued unit expansion
For 2026, Hope guided to same-restaurant sales growth of 1% to 3% and total revenue growth of 12% to 14%, including around a 100 basis point contribution from acquisitions. He said the company elected not to take pricing at the outset of 2026, and guidance assumes carried pricing of about 4% in the first half, blending to about 2% for the full year. Management said it evaluates pricing at the beginning of the year and again around mid-year, with decisions informed by inflation and brand considerations.
The company expects 59 to 63 new system-wide restaurants in 2026, including 53 to 55 company-owned and 9 to 11 franchise-owned locations, and also plans three company-owned closures. Hope later clarified that the 53 to 55 figure is net of the planned closures. Development is expected to be weighted to the second half, particularly the fourth quarter.
Hope forecast commodity inflation of 1% to 3% for the year, driven by increases in coffee and bacon, partially offset by expected deflation in eggs and avocados. Labor inflation is expected to be 3% to 5%. Adjusted EBITDA guidance was $132 million to $140 million, including an expected $2 million contribution from the 19 restaurants acquired in April of the prior year. Capital expenditures are expected to be $150 million to $160 million.
While the company does not provide quarterly guidance, Hope said management expects positive same-restaurant sales growth in each quarter, including Q3, when the company will face its “most robust” comparison. He said first-quarter results were affected by weather-related disruptions that reduced operating days in the comp base and noted that the 2026 leadership conference was held in January, which will make G&A materially higher in Q1 than other quarters.
Leadership transition: CFO retirement and expanded equity compensation
Tomasso said Hope plans to retire later in 2026, with an executive search to begin immediately. Hope will remain CFO until a successor is hired and onboarded and is expected to stay on as an advisor through the end of 2026.
Hope also said the company enhanced equity-based compensation for senior leadership and expanded eligibility to divisional operators, describing the changes as intended to strengthen alignment with shareholders and improve retention. He noted the program does not affect adjusted EBITDA, but incremental non-cash accounting charges will be recognized in G&A and could limit G&A leverage in 2026.
About First Watch Restaurant Group (NASDAQ:FWRG)
First Watch Restaurant Group, Inc (NASDAQ: FWRG) operates a specialty daytime dining concept focused on breakfast, brunch and lunch. The company’s casual, full-service cafés emphasize fresh ingredients, made-to-order entrées and a seasonally driven menu that ranges from omelets and Benedicts to salads, skillets and afternoon sandwiches. First Watch positions itself as a daytime-only destination, with most locations opening early morning and closing by mid-afternoon.
Founded in 1983 by Ken Pendery and John Sullivan in Pacific Grove, California, First Watch began as a single café and gradually expanded through company-owned and select franchised locations.
