First Watch's Q1 2025: Navigating Contradictions in Marketing, Costs, and Traffic Strategies

Marketing strategy and impact on traffic, inflation and commodity cost management, cost pressures and EBITDA guidance adjustment, labor cost management and efficiency, traffic improvement and marketing efforts are the key contradictions discussed in First Watch Restaurant Group's latest 2025Q1 earnings call.



Revenue Growth and Traffic Trends:
- First Watch Restaurant Group reported total first quarter revenues of $282.2 million, an increase of 16.4% year-on-year.
- This growth was driven by a 16% total revenue increase, positive same-restaurant sales, and the opening of 13 new locations.
- The company realized a lift in traffic, particularly in April, with the first quarter showing sequential improvement in same-restaurant traffic.

Commodity Inflation and Cost Management:
- Food and beverage expenses rose to 23.8% of sales compared to 21.8% in the previous year, mainly due to 7.7% commodity inflation.
- Key commodities affected include eggs, bacon, coffee, and avocados, which are trading at high prices.
- The company is managing cost pressures by implementing strategies such as adjusting surcharge adjustments and enhancing customer value initiatives.

Marketing and Strategic Growth:
- New marketing campaigns launched in March have shown positive results in targeted markets.
- The company is expanding its strategic marketing efforts to increase reach, retention, and frequency across multiple channels.
- These campaigns are part of a broader strategy to drive sustained same-restaurant traffic growth.

New Restaurant Development and Expansion:
- First Watch opened 13 new locations in the first quarter, bringing the total to 584 system-wide restaurants.
- The company continues to expand into new markets, with recent entries into New England and Memphis, Tennessee.
- Growth plans are supported by strong performance of new restaurants, which are meeting sales expectations and bolstering the company's market presence.