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First Watch to remain public amid rapid growth, CFO says

First Watch Restaurant Group [NASDAQ:FWRG] seeks to remain a public company as its former sponsor and current majority owner Advent International has moved to reduce its stake, said CFO Mel Hope. 

“First Watch believes that being a public company provides us with the best means to fund our ambitious growth strategy,” the executive told this news service.    

Advent acquired the Bradenton, Florida-based breakfast and lunch chain in 2017 from Freeman Spogli & Co. In September 2021, First Watch was listed on Nasdaq and the Advent stake was reduced to 80%. One year later there was a secondary stock offering and then another in June 2023, reducing the Advent stake to 55%. Asked about additional Advent stock sales or exit plans, Hope said he could not speak for the private equity firm. A spokesperson for Advent declined to discuss those plans.  

On 9 August, the company said it had acquired six of its franchise restaurants in Georgia and South Carolina. No financial details were disclosed.    

In the near term, First Watch will continue to buy back franchised stores with the potential to acquire regional restaurant chains, Hope said. The goal is to get to 2,200 First Watch locations in the US within 10 years or so, up from the current 490 in 29 states, he said. Growth will be achieved primarily through organic openings of both company-owned and franchised units.    

The company is in active talks to acquire more locations from franchisees in 2023, said Hope, adding that the company has 51 options to purchase franchised restaurants and 110 trained managers “ready to staff” new locations.    

The company has a little more than 100 franchisees among its 490-unit portfolio. Buying franchises “brings a lot more profits,” said Hope, because the overall profit margin is higher than the 4%-5% royalties franchisees pay the company.

“We are very good buyers. Years in advance, we pinpoint promising sites,” said the CFO. He and Matt Eisenacher, chief brand officer, described the ideal combination of openings: One-third of new restaurants are in mature markets where First Watch is already well known, one-third in emerging markets such as Atlanta or Nashville where a few restaurants are established, and one-third in new markets, such as Chicago. The clientele is broad and includes sports team members, moms who just dropped their kids at school and prayer groups.  

International expansion will wait until the goal of 2,200 units in the US has been achieved, Hope said.  

Competitors in the regional space are Huddle House, based in Atlanta, and Hash House a Go Go, based in San Diego.