The chain chose to shut down to protect employees and customers. But a lot happened behind closed doors.
On Easter Sunday, First Watch made the call to temporarily close its entire company footprint. All 50 states had just simultaneously come under a disaster declaration for the first time in history, and the U.S. surpassed Italy for the most coronavirus fatalities at 20,000.
The White House predicted the worst weeks to be imminent.
And so First Watch did something many chains avoided at all costs—and would in the coming weeks: It scrapped to-go and delivery and shut the doors altogether. Of the brand’s 382 restaurants, 309 are corporate, and fell into this pool. A little more than half of the remaining 73 franchises remained open for off-premises.
CEO and president Chris Tomasso called it a “difficult decision” at the time, referring to “sleepless nights worrying about our people and their families,” and “nearly impossible decisions.”
Like many things in the COVID-19 story, however, reality laughed at projections. The spike and subsequent collapse was not as dramatic as guessed. It’s turned into a more gradual crisis than the eruption America thought was knocking on its doorstep in early April.
Hindsight or not, though, First Watch has no regrets, Tomasso says.
It allowed one of America’s fastest-growing restaurants to step back and evolve the dining experience. And it also put the company’s employee-centric culture to the test. Both things, Tomasso says, will position First Watch to better serve what he believes are long-term consumer changes.
Simply, First Watch plans to reemerge as a stronger chain on the other side.
The amount of changes that took form in recent weeks are staggering for a nearly 400-unit company. And one that, according to FoodserviceResults, was the second-fastest growing full-service restaurant—by percentage—in America last year (for restaurants with domestic sales over $200 million). First Watch, at 24 percent unit growth, trailed only Cooper’s Hawk (35 percent). But the latter is a much smaller brand at 46 restaurants (end of year 2019). First Watch recorded systemwide sales of $501 million leading up to 2020, up 25 percent from the previous year.
Additionally, if you stretch back to 2006, when Tomasso joined as the chain’s first CMO, there were only 60 restaurants in nine states. The former VP of marketing for Cracker Barrel watched First Watch balloon to more than 250 locations before being named CEO in 2018. Advent International made a majority investment the previous year.
So this wasn’t exactly a static company to begin with.
Yet Tomasso shares an example of how quickly First Watch pivoted. Before COVID-19, the only way to get a to-go order was to call the restaurant and have a server take the order via phone. Carryout at First Watch really meant bringing extra food home after a dine-in meal.
At the onset of COVID-19, the company stood up an online ordering platform and third-party delivery in a matter of days. Before deciding to close company locations, off-premises as a relative percent of sales jumped 300 percent for First Watch.
This was only the start, however. “We built that muscle as really an accommodation and survival method back then,” Tomasso says. “But since, we’ve really refined it and we’re ready to flex that muscle now. Whereas it was a combination before [dine-in and off-premises], it’s turned into a full-on strategy for us going forward. … We really pumped it up.”
First Watch partnered with Olo to develop functionality and built a user interface. Expect to see the brand on DoorDash and Uber Eats as its reopens.
The company also advanced and upgraded its wait list management system, where people can put their name on a wait list from their phone. It went deeper into developing its CRM system, too, so it could collect more data during a time when feedback will be essential.
“An unintended benefit of us closing was we were really able to step back and look at some opportunities to better position ourselves,” Tomasso says. “And we worked really hard behind the scenes to do that so we could be in this position to reopen and in a more relevant way.”
He adds First Watch expects the percent of its off-premises business to double or triple pre-COVID-19 levels, even when dining rooms reenter the picture fully.
“There were people who had never ordered third party or to-go before who now were introduced to it because of this,” Tomasso says. “And I think whether it was one time a year that they would have done before or now 12 times a year, that’s going to be a part of our business.”
Speaking of reopenings …
On May 18, First Watch started to reopen dining rooms in two markets—Nashville, Tennessee, and its home base of Sarasota, Florida. In total, the company brought about 18 restaurants back on line.
Nashville was chosen because of its 50 percent capacity order. Tomasso says opening at 25 percent remains difficult from a business perspective. While Sarasota falls into that category, First Watch made an exception so it could oversee the process in its own backyard and take those learnings forward into the coming weeks as other markets follow. Tomasso expects the brand to be 85 to 90 percent open by June 1.
Like the tech upgrades, First Watch tossed the playbook to prepare for a new normal. It installed EMV credit card chip readers so it could accept Apple Pay, Google Pay, and other low-contact payments.
It put Plexiglas in front of cash registers and installed a system to pre-screen employees. When they clock in now, they have to answer three questions loaded in the point-of-sale.
First Watch switched to single-use menus, condiments, put hand sanitizer at the front of each unit, and equipped employees with face coverings and gloves.
It’s made some more nuanced changes, too. All community tables were converted to no-contact pickup stations for online orders where customers can pay ahead and safely grab and go. There’s also marked areas for third-party delivery drivers to do the same.
First Watch put booth dividers up and rearranged dining rooms to achieve 6 feet between tables.
An interesting detail from this came at a cost, but one Tomasso says was needed. Instead of marking off tables where customers can’t sit, with signs or tape, for example, First Watch physically removed tables and chairs from restaurants and placed them into storage. The result being a more open, airy environment where every seating area you see is available to guests.
“I know that’s probably an ethereal thing but it’s very different when you walk into a restaurant and you see tables taped off or signs that say don’t sit here versus open tables and the way it’s supposed to be,” he says. “… but we think it’s the right thing to do because there’s a lot of subconscious cues, on the safety side, but also on the hospitality side that we want to make sure we convey.”
First Watch used its nearly 2 million-member loyalty club to brainstorm some of these decisions. It polled the most engaged users and asked what they wanted to see from First Watch as they returned.
Tomasso says these kind of user-generated practices are going to be critical for restaurants post lockdowns. “Because I do think the consumer is going to be much more discerning about where they spend their dining dollars,” he says. “And I think those factors along with consistency and value are going to be the drivers that really get a consumer to select one restaurant over another.”
Staying connected to employees
When First Watch made the decision to shutter 300-plus units, employee care came under a microscope. The chain committed to continuing all furloughed workers’ existing healthcare benefits and to covering 100 percent of out-of-pocket costs, co-pays, and deductibles for any medical visits related to COVID-19.
It also invested in telemedicine for every employee and their family, at no cost, and provided relief payments to long-tenured furloughed hourly workers to help with immediate expenses.
First Watch previously offered telemedicine to employees on its insurance plan, which was about 1,300 individuals, chief people officer Laura Sorenson says. The coronavirus expansion brought another 7,000 people into the fold.
First Watch most recently created an employee assistance fund, called the You First Fund (a play on the company’s mantra) that offers $1,000 to eligible employees. If workers meet criteria, they can get funds put directly into their account within days. First Watch partnered with America’s Charities, a 501(c)3 nonprofit, on the program, and made sure all grants are tax free.
On the manager side, First Watch promised to make them financially whole by providing a bonus upon their return to work to assist with hardship costs incurred as a result of the pandemic and work to close the gap between the federal and state benefits they received and their First Watch salary. Basically, when they come back, First Watch will pay the difference in their salary versus what they received in UI benefits.
Sorenson says the company looked up every single manager to figure out what the gap was. She says it was probably close to 600 accounts they researched.
The goal, Sorenson adds, was to try to remove as much confusion from an uncertain dynamic as possible. That’s been a theme of First Watch’s employee practices throughout the crisis.
“What we didn’t want to do is go dark,” she says. “And then have four weeks go by, or six weeks go by, and then suddenly call our employees and see if they wanted to come back.”
VPs have spent the past months calling every employee. Sorenson says it started right away. And the early conversations didn’t center on work and coming back. They were simple check-ins. “To let them know they matter,” she says. “And really, just to listen.”
A lot of First Watch’s communication has dealt with helping employees collect unemployment, hand-holding so workers can navigate the process. Talking about what safety measures they want to see. Often times, it’s just a vent session about day-to-day struggles.
“And so now that we’re getting ready to relaunch and we have our test markets in Sarasota and in Tennessee, these calls now are just continuations of the conversation,” Sorenson says.
First Watch also kept its VLA, or “Virtual Learning Academy,” up to date with resources on key topics, like getting financial assistance or accessing UI benefits. The HR team did state-by-state research on everything from partial unemployment to mindful practices. There are free online learning tracks for yoga, Pilates, mediation, math, and language courses. Even virtual museum tours and cooking classes.
Some restaurants also established specific groups on the VLA so they could post photos and stay in touch with each other. Sorenson says First Watch’s store-level teams, historically, tend to be closer than some other restaurants simply because there’s only one shift per day. So people get to know each other.
One of First Watch’s vendors had a chatbot platform the company put into action as well. It sent out information to about 8,000 employees, prompting them to hit 1 if they needed information on unemployment, 2 if they wanted information on financial assistance. But it also allowed employees to ask First Watch a question.
Sorenson didn’t expect much of the option. More than 1,000 responses later, it’s turned into a stop-everything-kind-of priority that’s built connections she believes will last. One employee, who had a mix-up in tenure after being rehired, was able to get relief added into her account within minutes of typing a message into the program.
“We have employees who are just as engaged and connected with us today furloughed as they were coming in every day,” Sorenson says. “And it’s amazing and a little unexpected in some ways.”
Tomasso says First Watch hasn’t struggled getting employees to come back in recent days—a concern of many restaurants given the expanded UI benefits and the reality they could make significantly more from the sidelines. “I think people want to be productive. They want to work. It gives people purpose,” he says. “And we were, even in the toughest unemployment market there was, we were able to attract the best and brightest in our industry. We’ll get them back and have them serve our customers again.”