The approach for First Watch held steady through months of headwinds, and in a category historically challenged when consumers pull back spending. It’s going to control the controllables, CEO Chris Tomasso said.
As macro hurdles persisted in 2024, the daytime brand built a stronger base to insulate itself, but also to position for growth. It increased labor efficiency, boosted restaurant-level operating profit margins, decreased ticket times, bolstered employee turnover, and raised customer experience scores.
Also, Tomasso added, 2024 was characterized by what First Watch didn’t do. The brand refrained from aggressive price promotions widespread across all dayparts. “Above all,” Tomasso said, “we stayed true to who we are, which is a trait that has served us well through every environment.”
In turn, First Watch views 2025 as a year it can vault from a position of strength. The company grew its revenues 13.9 percent, year-over-year, to $1 billion in 2024—the first time it’s eclipsed that figure in its 40-plus-year history. Adjusted EBITDA also lifted to a record $113.8 million from $99.5 million, and First Watch opened 50 restaurants, including 25 in Q4 alone (also a high mark).
Same-store sales declined 0.3 percent as traffic fell 3 percent in the period. Restaurant-level operating profit upped to $49 million from $46.8 million last year and store-level operating profit margin decreased to 18.8 percent from 19.4 percent.
Beyond Q4 and 2024 results, however, a wider picture materialized for First Watch en reoute to a long-term view of 2,200 U.S. locations. The brand exited the year with 572 restaurants across 29 states (489 corporate owned and 83 franchised).
First Watch units opened in 2024 are pacing, on average, to generate third-year sales of $2.6 million, or about 20 percent higher than the company’s system AUV, with a projected cash-on-cash return north of 35 percent.
Yet for more than four decades, First Watch has largely been a word-of-mouth growth brand. It acquired The Egg & I in 2015—a deal that gave it 267 units in 26 states (it had 114 in 20 markets before) and another 18 under development. The year before, it purchased The Good Egg and Bread & Company. Three years prior, it bought two J. Christopher’s family-dining spots.
First Watch converted Egg & I units smoother than most given its daytime shifts. It could remodel without closing, focusing on phases each day. Notably, though, the deal essentially doubled First Watch’s footprint and hold on the category overnight, combining the largest breakfast-and-lunch concepts in America.
So if that was Chapter 1 of First Watch’s push toward a larger audience, the second was simply having loyal customers talk about it, Tomasso said. What’s next owes to a combination of growth and ongoing improvements, and the person steering the ship.
Tomasso, who spent 12 years as CMO before being named CEO in June 2018, came to the brand from Cracker Barrel, where he was VP of marketing. Before, Tomasso rose to VP of worldwide marketing at Hard Rock—the youngest VP in company history.
All to say, when he told investors Tuesday First Watch recognizes “our opportunity to raise brand awareness via smart targeted marketing efforts,” it stemmed from a wide playbook of experience. Moreover, First Watch believes it has powder to ignite, with scale no direct competitor rivals. “After several years of technology investments and associated data collection aimed at improving our marketing efficiency, combined with learnings from tests conducted in 2024, we are meaningfully scaling our marketing spend in 2025,” Tomasso said. “This effort represents the next step in the continued evolution of our marketing capabilities, which has been years in the making and was not a reaction to the more recent, challenging industry traffic.”
First Watch was building toward this moment rather than reacting to current conditions.
Tomasso called what’s ahead, or Chapter 3, if you will, a “broad-based iterative approach,” which will use various media strategies that target customer frequency of diners as well as attract new ones.
Traditionally for the company, marketing campaigns to raise First Watch’s awareness were anchored by a “significant” investment in national media dollars, he said.
For perspective, if you go back to 2021, First Watch ranked 10th in net promoter score among the country’s 74 largest restaurant brands, per a national study. However, brand awareness, as indicated by another national survey, showed just 11 percent of respondents were aware of First Watch. This combination of high guest satisfaction and whitespace to inform was part of the potential outlined in the company’s public filings ahead of its 2021 IPO. Advertising costs represented about 1 percent of total revenues in 2019 and 2020.
Tomasso didn’t reveal how much the “meaningful” upstep would lift spend to but explained you should not expect to see First Watch commercials hit traditional broadcast TV. Instead, a variety of channels will connect with diners at various stages of the funnel to nurture a relationship to a first-party connection.
The brand’s tech investments led to greater tracking, measurement and targeting, “resulting in more informed results,” Tomasso said. “And we believe the potential for greater per-dollar return than previously achieved.”
First Watch will fund the cost of its 2025 “customer targeting strategy” with the reallocation of existing dollars and increased investment. Together, Tomasso said, the chain expects to return to positive guest counts in 2025 (flat to slightly positive) alongside same-store sales in the positive low-single-digits. It also guided to 59–64 restaurant openings, net of three corporate closures due to lease expirations. The growth is slated toward the second half of 2025, Q4 in particular.
Tomasso said higher marketing, which, as noted, the company didn’t break out to a dollar figure, would remain below industry average. “We view this as a natural part of our brand’s evolution and see it as a lever to support our long-term growth targets,” Tomasso said.
Also to highlight, he added, First Watch isn’t looking to launch campaigns to jolt traffic to peaks thanks to price promotions. Rather, it’s going to be “an ongoing drumbeat to scale awareness alongside our new restaurant growth.”
That steady message will center on everyday value, which First Watch last year tested messages around. The creative it deployed on the core menu and top sellers resonated with consumers. “So that’s what we’ve leveraged going forward,” Tommaso said.
Campaigns will focus on markets where First Watch enjoys its greatest density and penetration. The more outlets for engagement, the more efficient the spend, Tomasso said. Pilots in 2024 targeted current customers and guests of competitors. Tomasso noted it was based on frequency and trying “to get one more visit out of customers and also getting in the rotation for customers of competitors in our dayparts.”
Additionally, later in 2025, First Watch plans to launch enhanced customer-facing technologies as part of its efforts to improve customer and employee experience.
That’s going to feature, but not be limited to, a custom-built waitlist experience; a new menu experience with dynamic nutrition and allergen tools; new ordering capabilities; and a personalized offer wallet. “We will build on these levers for continued growth over the next several years,” Tomasso said.
Other innovations and core traits
Tomasso said the restaurant consumer continues to weather pressure from myriad fronts. First Watch’s instinctive response has been to reinvest in guest experience through innovation, hospitality, and value. So less survival tactics and more entrenching and clarifying the “why” of its proposition.
That’s meant leaning into seasonal menus, like the current Jumpstart lineup that features Parmesan Prosciutto Toast, and an upcoming expansion of beverages. First Watch increased meat and potato portions for top-selling items and replaced honeydew with more premium options such as strawberries, pineapple, and blueberries in fruit bowls.
It brought back complimentary coffee while customers wait—something First Watch offered for more than 30 years before discontinuing during COVID. “This invest-in-the-guest philosophy is nothing new for us,” Tommaso said. “It’s yet another way in which we extend hospitality and a key factor in how we’ve remained relevant and driven a high value perception with our customers for many years.”
And going back to scale and First Watch’s prior strategy to acquire competitors and solidify breakfast and lunch share, Tommaso said leverage is the difference between new restaurant openings at A locations in the epicenter of a trade center, and second-rate B or C pieces of real estate. It’s the difference between accelerating unit growth and expanding as other restaurant brands pull back or shutter underperforming units. It’s also the separator between an elevated menu offering with dynamic seasonal menus, highlighting fresh-in-season ingredients, versus highly commoditized breakfast items.
Lastly, scale holds the supply chain intact so First Watch doesn’t have to scramble for ingredients when outside factors weigh down. “Quite simply, in good times and not so good times, our scale positions us to power through challenges better than anybody else in our space, especially those that are highly franchised, which inherently have less control over menu pricing,” Tomasso said.
Through the past couple of years, First Watch has priced to long-term inflationary trends and not “transitory commodity spikes.” That’s going to be true in 2025 as well. Similar to the avian flu in 2022, where First Watch took no price the year before and modest hikes when egg costs spiked 13 percent, the brand saw the moment in time as a window that opened and would eventually close. Holding fort allowed it to spur market gains. That’s how Tomasso feels about the current dynamic, where some chains are offering surcharges on eggs to combat soaring prices.
CFO Mel Hope said the present impact of avian flu necessitated First Watch’s egg supply be supplemented with purchases subject to spot-market pricing. That, naturally, will increase overall egg costs. Avocados, bacon, and coffee beans are elevated as well. Year-to-date, he said, commodity inflation is tracking at high single-digit percent figures and the company projects much of the highest pricing to be sustained throughout the year.
First Watch took 1.3 percent of price in January and will carry about 2.8 percent in Q1 and 2 percent for the full year. Again, Hope reiterated, First Watch lifts prices to offset what it feels will be permanent inflation versus passing spikes.
Unit growth is taking First Watch to new markets as well: New England (recently) and Las Vegas (second half of the year). As that unfolds, it will continue to build out core and emerging areas.
Overall, the chain spent several years focusing on serving more demand as its AUV raised from $1.6 million in 2019 to $2.2 million today.
And, to Tomasso’s earlier point, the page is turning to creating more demand through expansion and marketing efforts to widen First Watch’s presence, increase awareness, and drive its comp restaurant base. “Every year inevitably presents unique challenges, whether it be a pandemic, supply shortages, traffic malaise, national and global crises or outsized inflation,” he said. “We approach them all the same way—with a long view. We control the controllables year in and year out and along the way take share and expand scale to set up a stronger tomorrow.”
