The rising breakfast chain is working to take care of managers.
Like many restaurant chains battling unprecedented conditions, First Watch gave to-go-only service a shot, despite it running counter to the brand’s personality for the past 37 years—rooted in experience, service, and the connective promise of dining out.
But Monday, the emerging concept decided to temporarily shutter all of its corporate restaurants, CEO and president Chris Tomasso wrote in a social post. The brand has 309 company-owned units and 382 systemwide. Of those 73 franchised restaurants, 39 remain open.“Throughout these past few weeks of trials and tragedy, through sleepless nights worrying about our people and their families, through daily calls with our leadership team to discuss countless scenarios and make nearly impossible decisions, I’ve seen the best in people,” he said.
Tomasso called it a “difficult” decision and said First Watch would remain committed to employees during the COVID-19 crisis. It plans to continue restaurant managers’ existing healthcare benefits and will cover 100 percent of out-of-pocket costs, co-pays, and deductibles for any medical visits related to the coronavirus. Additionally, First Watch invested in telemedicine benefits for every employee and their family members, offered at no cost. The service gives workers access to medical professionals who can diagnose, authorize testing, and even prescribe medications.
First Watch crowned America's favorite casual-dining chain
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Tomasso said First Watch wants to make its restaurant managers financially whole, and will provide a bonus upon their return to work to close the gap between the federal and state benefits they received and their First Watch salary.
The benefits are being funded, he said, in part by “significant cost reductions,” as well as senior leadership pay cuts through 2020, “to ensure the security and longevity of our restaurant teams.”
“I’m grateful,” Tomasso wrote. “Grateful for each one of our people who wears the First Watch brand logo proudly on a polo, chef coat, hat or jacket. Grateful for every person who’s called, ordered brunch on our website or through one of our delivery partners, showed love and support for our incredible teams on social media, purchased a cookbook or a gift card. … Grateful for our home office team who has worked tirelessly to support our restaurants and the people within them.”
He said the decision was prompted by the physical safety and health of employees.
Among the dayparts affected by COVID-19’s spread, breakfast has absorbed an especially disruptive blow. It shattered routines, and with it, a sector historically linked to habitual dining. And it also rerouted a promising trend.
Back in January, The NPD Group reported that Americans consumed nearly 102 billion breakfasts in 2019, with another 50 billion morning snack occasions. The future of breakfast appeared rosy, too, as NPD reported forecasted growth of breakfast foods that meet consumers’ primary needs of function, convenience, and enjoyment
This was driven mainly by a consumer becoming less concerned with the food itself and more interested in solutions that could bridge meals, NPD said. In other terms, people were flocking to functional, convenient, and enjoyable options. Easy access to food influenced the decision process of what to eat. And you could see the behavior playing out at breakfast in particular thanks to the rise of mobile ordering and increased use of fast, grab-and-go items and morning snacks.
It wasn’t a saturated idea, either. The year before, NPD illustrated how much breakfast whitespace was still for the taking, noting that 78 percent of breakfasts are prepared and eaten in-home or carried from home—more than any other meal. In addition, in-home breakfast declined eight meals per capita between 2015 and 2018 and foodservice gained two breakfast meals per capita. Also, only 13 percent of breakfast opportunities were being satisfied by foodservice, and 9 percent of breakfasts missed or skipped, “all of which means that breakfast is a significant growth opportunity for the foodservice industry,” NPD said.
“While breakfast as an institution is deeply rooted, the what, how, and why surrounding our food and beverage choices, and where we get them, is changing,” David Portalatin, NPD food industry adviser, said at the time. “Busy schedules mixed with good intentions and the need for fuel, shape what we eat and drink in the morning.”
This was unfolding fiercely in quick service, with Panera Bread stepping up its suite of offerings (including adding a coffee subscription service) and Wendy’s pushing back into the daypart after a series of failed efforts. In the National Restaurant Association’s 2020 State of the Industry report, it said more than half of adults were more likely to pick up a breakfast item or beverage from quick-serve on their way to work than they were a couple of years ago. Close to 50 percent of snack and coffee brands’ traffic comes during the morning hours, the report added.
Yet, even with this breakfast dive into convenience, the segment continued to drive full-service restaurant sales. Across all segments, it was the only foodservice daypart with year-over-year growth heading into 2020. (Foot traffic rose 1 percent for morning and snack spend, while the overall restaurant transaction picture was flat in 2019).
Sit-down chains, like First Watch, strike a key note of differentiation by capitalizing on experiential occasions, like brunch, with alcohol sales tossed into the mix. Black Box Intelligence previously reported that breakfast cuisine itself had enjoyed positive same-store sales growth in recent quarters—not just the morning daypart.
First Watch was named America’s favorite casual-dining brand by Market Force Information in this year’s study of more than 6,500 consumers—a measure that looks at eating habits, brand preference, visit frequency, brand engagement, customer experience, meal delivery, and social media usage.
First Watch scored a 68 on the company’s Composite Loyalty Index (the average of percentage recommended plus percentage of satisfaction at the brand level), which was four points ahead of Pappadeaux and seven in front of Texas Roadhouse. See the full list at the link above.
Interestingly, only two of the seven food categories studied (breakfast, buffet, general menu, Italian, pizza, seafood, and steakhouse) by Market Force favored casual-dining restaurants over locally owned spots for the question, “If given the opportunity, which type of casual-dining restaurant would you choose?”
Breakfast was one: 58 percent said they’d go chain over locally owned. General menu was the other at 61 versus 39 percent.
You can credit this, again, to a clear point of differentiation that isn’t always so well drawn in other dayparts. For example, frequenting Dunkin’ on the way to work and grabbing a meal at IHOP on Sunday are two very different events. Additionally, as many upstarts, like First Watch, are leveraging, to the earlier point, there’s a beverage attachment opportunity that promotes social gatherings in a way few counter-service competitors can. And it fits snuggly into that millennial mindset so many full-service chains are chasing.
Here’s a way to look at that, from Market Force’s study. The company found that 41 percent of the customers it polled said they’ve eaten at a breakfast casual-dining chain in the past 90 days.
- General family meal: 69 percent
- Brought children (under 18 years old): 28 percent
- General social gathering with friends: 20 percent
- Celebrated a special occasion: 7 percent
- Romantic dinner or date night: 3 percent
- Made a reservation ahead of time: 3 percent
- Business meal with colleagues: 3 percent
You can see clearly the space breakfast can thrive in: Social gatherings and family. Both were powerful targets in today’s full-service, market-share grab pre COVID-19 because they represent destinations. It was becoming harder than ever to chase spontaneous traffic given the convenience options at hand. And it didn’t help that malls were struggling to generate consistent crowds below the A-plus level, too. So, being able to cater to very specific needs—feeling comfortable dining out with your children and meeting friends—were great places to be. And, in this case, they worked together with young families hoping for a social break with other young families.
At its core, it explains why the segment has grown in recent years as millennials age.
First Watch, in particular, was writing one of America’s full-service success stories. The Advent International-owned brand was founded 1983 in Pacific Grove, California. But roughly 15 years ago there were just 60 locations, making it one of the fastest-growing daytime-only concepts in the country. First Watch hired Greg Barber as its first chief transformation officer in mid-January. He spent nine years working for PepsiCo, Inc. and clocked time with Mrs. Fields Famous Brands as president of TCBY. His role with First Watch is to lead strategy development.
Tomasso joined First Watch in 2016 as its first CMO and was promoted to president in 2015, then CEO in 2018. In just 12 years, he watched First Watch balloon from a 60-unit brand to more than 250 restaurants. Tomasso previously served as vice president of marketing for Cracker Barrel Old Country Store. He also worked at Hard Rock Café International as vice president of worldwide marketing.
In 2017, despite being open only weekdays for breakfast and lunch and weekends for brunch (units close at 2:30 p.m.), the chain generated $231 million in revenue.
COVID-19 has taken a painful toll on breakfast, according to recent data. In the week ending March 27, breakfast same-store sales declined 80 percent, Black Box Intelligence reported. That represented a 19-percentage point point drop from the previous week. McDonald’s even decided to suspend its All-Day Breakfast program to help cut back on complexity.
According to insights platform Sense360, which gathers data from millions of customers, breakfast saw a 33 percent drop in family dining, year-over-year (from March 9 to March 22).
Breakfast is just not turning out to be an occasion customers are accessing during COVID-19 quarantine life. They’re not ordering takeout in the morning, and it’s generally an underserved segment for delivery. In the case of full-service chains, the experiential-driven world of breakfast and brunch has, naturally, ground to a halt by the lack of dining-room service.
And with it, some of the country’s most successful concepts are electing to wait out mandates and restart when the crisis passes.