First Watch's Q4 2024: Contradictions in Marketing Spend, Traffic Trends, and Pricing Strategies

These are the key contradictions discussed in First Watch Restaurant Group's latest 2024Q4 earnings call, specifically including: Marketing Strategy and Investment, Daypart Traffic Trends, Traffic Trends and Marketing Strategy, and Pricing Strategy:



Strong Financial Performance Amid Adverse Conditions:
- First Watch reported total revenue of over $1 billion and adjusted EBITDA of over $100 million for the first time in its history in 2024.
- Despite adverse conditions faced by consumers, the company increased labor efficiency, improved restaurant level operating profit margins, reduced ticket times, improved employee turnover, and raised customer experience scores.
- The growth was driven by focusing on controllable factors and differentiated marketing strategies despite industry-wide sales pressure.

New Restaurant Development and Growth:
- The company opened 50 new restaurants in 2024, including 25 in the fourth quarter, and plans to open 59 to 64 restaurants in 2025.
- On average, these new restaurants are projected to generate third-year sales of $2.6 million, about 20% above the current system average unit volumes.
- The strong growth is supported by a robust pipeline and proven site selection principles, contributing to its long-term annual revenue and adjusted EBITDA goals.

Marketing Investment and Strategic Shift:
- First Watch plans to significantly scale its marketing spend in 2025, focusing on targeted customer frequency and attracting new consumers.
- The company aims to drive a return to positive guest counts, leveraging technology investments and data collection for more informed results.
- This strategic move is part of the company's brand evolution and sees marketing investment as a lever to support long-term growth targets.

Inflation and Commodity Pricing Challenges:
- The company is facing high single-digit percentage increases in commodity inflation for 2025, driven by factors such as avian influenza impacting egg costs and tariffs.
- Despite these challenges, First Watch maintains a disciplined pricing approach, taking only a 1.3% price increase in January, focusing on permanent inflation rather than transitory spikes.
- This strategy is aimed at preserving long-term business health, despite the recognition of consumer pressure.