As well as sales are progressing now, First Watch believes there’s capacity to do more, especially with its kitchen display systems. Every new company-owned restaurant opens with one installed, and the chain is continuing to incorporate the system into existing stores. More than 65 locations have the technology, up from 20 about six weeks ago. The goal is to have kitchen display systems in more than half of corporate units by the end of 2022.
The top two selling restaurants on Mother’s Day—First Watch’s biggest event of the year—each had kitchen display systems.
“The benefits where we have it in the restaurant—so we're already realizing [benefits]—are just in terms of simplifying the back of the house, operations,” CFO Mel Hope said. “And the teams just enjoy some efficiencies of having a more predictable flow of food prep and stuff and what the KDS systems are really used for in terms of helping them get things served hot and timely. So, we're already benefiting from those. But as the cohort grows, we should be able to tease out some statistics.”
First Watch began the year by taking 3.4 percent pricing after not doing so in 2021. The brand believes it has more pricing power in case another hike is necessary later in the year.
The company is seeing continued cost increases in its market basket and fuel surcharges associated with its deliveries; as a result, commodity inflation is projected to be 10-13 percent in 2022. Labor, which was at 32.3 percent in Q1, is expected to land at 34 percent by the end of the year.
“There's no really one metric that's a trigger point for us,” said Tomasso, describing how the company balances pricing and value. “Probably every restaurant company evaluates pricing, constantly based on margin, and we certainly look at it very closely. So, as we go through the year and we look closely at what our actual experience is and where we have pricing needs or inflation that we're not offsetting, then we'll constantly take a look at it and reevaluate it. But we did have a very good first quarter, and I can just tell you that we constantly look at this.”
Total revenues increased 36.1 percent to $173.1 million in Q1, versus $127.2 million last year. Adjusted EBITDA grew to $19.4 million, up from 13 million in the year-ago period.
For fiscal 2022 overall, First Watch expects same-store sales in the high-single digits, positive traffic, adjusted EBITDA between $67 million and $71 million, revenue growth of more than 15 percent, and capital expenditures of $60 million to $70 million, spent on new restaurant projects, planned remodels and new in-restaurant technology.