First Watch Reports 19.1% Revenue Growth but Declines in Net Income in Q2 2025

First Watch Restaurant Group, Inc. reported its financial results for the second quarter of 2025, revealing a total revenue of $307.9 million, a 19.1% increase from $258.6 million in the same quarter of 2024. The growth was primarily driven by a 15.8% rise in system-wide sales, which reached $346.2 million. However, the company experienced a decline in net income, which fell to $2.1 million, or $0.03 per diluted share, compared to $8.9 million, or $0.14 per diluted share, in the prior year. The decrease in profitability was attributed to rising operating costs, including food and beverage expenses, labor costs, and other operational expenditures.

In terms of operational metrics, First Watch opened 17 new restaurants during the quarter, bringing the total to 600 system-wide locations, comprising 531 company-owned and 69 franchise-owned restaurants. The company reported a same-restaurant sales growth of 3.5% and a same-restaurant traffic growth of 2.0%, marking the first quarter of positive traffic growth since early 2023. Despite these positive indicators, the income from operations margin decreased to 2.4% from 6.4% in the previous year, reflecting the impact of increased costs outpacing revenue growth.

The company also made significant strategic moves, acquiring 19 franchise-operated restaurants in two separate transactions during the quarter. The total purchase price for these acquisitions was approximately $56.2 million, which included transaction costs. These acquisitions are expected to enhance First Watch's market presence and operational efficiency. Additionally, the company reported a 29% increase in food and beverage costs, driven by commodity inflation, particularly in eggs, coffee, and bacon, which is projected to moderate in the second half of the year.

First Watch's financial position as of June 29, 2025, showed total assets of $1.68 billion, up from $1.51 billion at the end of the previous fiscal year. The company had cash and cash equivalents of $19.2 million and outstanding borrowings of $252.8 million under its credit facility. The company anticipates capital expenditures of approximately $148 million to $152 million for 2025, primarily for new restaurant projects and remodels, funded through operational cash flow and borrowings.

Looking ahead, First Watch expects to continue its positive traffic trends and manage commodity inflation effectively. The company projects full-year commodity inflation to range between 5% and 7%, with labor cost inflation expected to be around 3% to 4%. Management remains focused on enhancing operational efficiencies and expanding its restaurant footprint, aiming to leverage its growth strategy to improve profitability in the coming quarters.