• Total Revenue: $263.3 million, an increase of 16.8% excluding the impact of the 53rd week in 2023.
• Adjusted EBITDA: $24.3 million, up from $19.6 million in the previous year, excluding the 53rd week impact.
• Net Income: $700,000 with a net income margin of 0.3%.
• Same-Restaurant Sales: Decline of 0.3%, with a same-restaurant traffic decline of 3%.
• Restaurant-Level Operating Profit Margin: 18.8% for the fourth quarter of 2024.
• General and Administrative Expenses: $30.7 million, representing 11.7% of fourth quarter revenue.
• New Restaurant Openings: 50 new restaurants in 2024, with 25 opened in the fourth quarter.
• Total Number of Restaurants: 572 at the end of the fourth quarter.
• Food and Beverage Expense: 22.7% of sales, compared to 22.5% in the same period last year.
• Labor and Other Related Expenses: 33.7% of sales, a 20 basis point improvement from the previous year.
• 2025 Revenue Growth Expectation: Around 20% total revenue growth.
• 2025 Adjusted EBITDA Guidance: $124 million to $130 million.
• 2025 Capital Expenditures: $150 million to $160 million, excluding franchise acquisitions.

• Warning! GuruFocus has detected 2 Warning Sign with FWRG.

Release Date: March 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Watch Restaurant Group Inc (NASDAQ:FWRG) achieved over $1 billion in total revenue and over $100 million in adjusted EBITDA for the first time in its history.
• The company opened 50 new restaurants in 2024, with a record 25 openings in the fourth quarter alone, contributing to a strong growth engine.
• New restaurants are on pace to generate third-year sales of $2.6 million, about 20% above the current system average unit volumes.
• FWRG plans to scale its marketing spend in 2025, leveraging technology investments to improve targeting and efficiency.
• The company has identified significant growth potential in the US, aiming to reach 2,200 locations, supported by a robust real estate and people pipeline.

Negative Points

• Same-restaurant sales were slightly negative at -0.3% in the fourth quarter, with a same-restaurant traffic decline of 3%.
• Commodity inflation, particularly in eggs, avocados, bacon, and coffee beans, is expected to remain high throughout 2025.
• The company anticipates adjusted EBITDA in the first quarter of 2025 to be around $4 million below the first quarter of 2024 due to new restaurant openings and commodity price spikes.
• Marketing spend as a percentage of sales remains below the industry average, which may limit immediate impact on brand awareness.
• FWRG faces challenges from elevated input costs and tariffs, which could pressure margins despite strategic pricing decisions.

Q & A Highlights

Q: Can you provide insights into the current comp trends and any concerns about a slowing macro environment affecting future traffic? A: Mel Hope, CFO: We feel positive about the direction of our business. Our Q4 traffic improved compared to Q3, and Q1 traffic to date is better than Q4, indicating a positive trend.

Q: How will the marketing strategy in 2025 differ from 2024, and what are the expected impacts? A: Mel Hope, CFO: We are excited about the results from our 2024 marketing tests. In 2025, we plan to scale these efforts significantly, which is fully integrated into our financial plans. This step-up in marketing spend is expected to drive our guidance and remains below industry average as a percentage of sales.

Q: What is the impact of egg prices on your commodity inflation, and how are you managing it? A: Mel Hope, CFO: Eggs and potatoes make up about 15% of our commodity basket. We contract egg prices annually, but due to diminished flocks, we are supplementing supply with spot market purchases, leading to additional costs. We expect this situation to persist until flocks mature, assuming no further depopulation.

Q: How do you approach pricing in light of current inflationary pressures, and are you open to revisiting pricing decisions later in the year? A: Christopher Tomasso, CEO: We follow a consistent pricing strategy, taking increases at the start of the year based on expected inflation. We review mid-year to adjust if necessary, but we aim to avoid permanent pricing changes for transitory issues like avian influenza.

Q: How are you emphasizing value without deep discounts, and do customers recognize this strategy? A: Christopher Tomasso, CEO: Our marketing tests showed that focusing on core menu items and top sellers resonated with consumers, highlighting our everyday value. We have results from various creative executions that confirm consumer recognition of our value proposition.

Q: Can you elaborate on the performance of new unit openings and any common factors driving their success? A: Mel Hope, CFO: Recent openings have larger square footage than legacy units, often utilizing second-generation spaces. These locations offer larger dining areas and kitchens, contributing to their success. Our site selection criteria ensure consistent performance across geographies.

Q: What are your expectations for traffic growth in 2025, and how does marketing contribute to this? A: Mel Hope, CFO: We expect flat to slightly positive traffic growth, driven by both increased frequency from existing customers and attracting new guests through our marketing efforts.

Q: How are you leveraging customer data and analytics, and do you need a loyalty program for this? A: Christopher Tomasso, CEO: We don't require a loyalty program to utilize customer data. We collect data from various sources and use it strategically to engage with customers and potential customers, enhancing our marketing effectiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.