Does First Watch Franchise?

First Watch Franchise

Written By Brooks Gammill

Last Updated: September 24, 2021

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Is First Watch a franchise?

First Watch is a breakfast and lunch restaurant franchise serving made-to-order breakfast, brunch and lunch using fresh ingredients. First Watch offers traditional favorites, such as omelets, pancakes, sandwiches and salads, and unique specialty items like quinoa power bowls, and avocado toast. First Watch also sells alcoholic beverages.

First Watch, Inc., opened the original First Watch Restaurant in Pacific Grove, California in 1983. First Watch, Inc. was dissolved on April 18, 2008. Then on April 30, 2008 First Watch Restaurants began to offer franchises. At the end of 2020 there were 88 franchised locations and 321 company-owned locations across 29 states in the United States.

Christopher A. Tomasso is the Chief Executive Officer and President and has been the Chief Executive Officer since June 2018 and the President since November 2015. The First Watch restaurant concept is majority owned by Advent International, one of the world’s largest private-equity firms. In 2018 2018 it was voted as one of the  “Best Places to Work” by Business Intelligence Group.


How Much is a First Watch Restaurant Franchise?

First Watch Restaurant Franchise Fee


The initial license fee for a First Watch franchise is $40,000. This is the upfront fee that must be paid when opening a First Watch franchise.

During fiscal year 2020, to address certain business situations, First Watch charged a lower initial franchise fees ranging from $15,000 to $35,000.


First Watch Franchise Cost

The estimated total investment necessary to begin operation of a First Watch restaurant ranges from $899,800 to $1,522,000.


First Watch Franchise


Additional Cost Breakdown

The following costs are part of the upfront costs included in the initial investment. Many of these are one-time fees that are needed to launch the franchise.

Additional Cost Breakdown

Leasehold Improvements$475,000 – $680,000
Leasehold Expense$0 – $30,000
Furniture, Fixtures and Equipment$230,000 – $325,000
Initial Inventory$7,000 – $10,000
Small Wares$30,000 – $35,000
Point of Sale Computer Hardware & Software$30,000 – $35,000
Travel and Living Expenses During Training$1,000 – $20,000
Initial Training Fee$0 – $15,000
Opening Crew Costs$5,000 – $25,000
Business Permits$7,000 – $12,000
Insurance Deposits and Premiums (for first year)$2,000 – $10,000
Architect Fees$20,000 – $25,000
Utility Deposits$0 – $5,000
Grand Opening Advertising and Promotion$5,000 – $35,000
Liquor Licensing$2,800 – $80,000
Signage and Graphics$15,000 – $40,000
Additional Funds (3 months)$30,000 – $100,000
Total$899,800 – $1,522,000

Ongoing Costs and Fees

Royalty Fee: 4% of Gross Sales once a month

System Fund Contributions: Maximum – 3% of Gross Sales monthly; currently 1.5% of Gross Sales monthly.


How Much Do Franchise Owners Make?

First Watch Franchise Sales Figures

First Watch does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or affiliate-owned or franchised outlets. The company also does not  authorize employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, First Watch  may provide you with the actual records of that outlet.

However, using the Franchisor income statement we can deduce from look at the income statement line item “Franchise Revenue”:

Currently First Watch has a Royalty Fee of: 4% of Gross Sales and 1.5% of gross sales for the system fund contributions.

In 2020 franchise revenues were $4.955 million, therefore we know this is 5.5% of the total franchise sales of 88 franchise locations.

Estimated Total Franchise Sales: $90.09 million

Estimated Average Franchise Sales: $1.024 million

This is just an estimated sales based on the franchisor’s income statement and can vary greatly depending on the length that the particular franchise location has been open.


First Watch Franchisor Income Statement

First Watch Restaurant Consolidated Statements of Operations and Comprehensive Loss (In Thousands)

 FY 2020 FY 2019
Restaurant sales$ 337,433$ 429,300
Franchise revenues$ 4,955$ 7,064
Total revenues$ 342,388$ 436,373
Operating costs and expenses:   
Restaurant operating expenses (exclusive of depreciation and amortization shown below):  
Cost of sales$ 76,975$ 100,689
Labor and other related expenses$ 120,380$ 148,537
Other restaurant operating expenses$ 63,776$ 59,402
Occupancy expenses$ 51,375$ 46,151
General and administrative expenses$ 46,322$ 55,818
Depreciation and amortization$ 30,725$ 28,027
Impairments and loss on disposal of assets$ 315$ 33,596
Transaction (income) expenses, net$ (258)$ 1,709
Total operating costs and expenses$ 389,610$ 473,929
Loss from operations$ (47,222)$ (37,556)
Interest expense$ (22,815)$ (20,080)
Other income (expense), net$ 483$ (255)
Loss before income tax benefit$ (69,554)$ (57,891)
Income tax benefit$ 19,873$ 12,419
Net loss and total comprehensive loss $ (49,681)$ (45,472)
Less: Net loss attributable to non-controlling interest$ (33)
Net loss and comprehensive loss attributable to First Watch Restaurant Group, Inc. $ (49,681)$ (45,439)
Net loss per common share attributable to Fist Watch Restaurant Group, In. – basic and diluted$ (13.07)$ (11.95)
Weighted average number of common shares outstanding – basic and diluted$ 3,802,481$ 3,802,481

First Watch Income Statement Key Insights

Overall, First Watch is not a profitable business, with a net loss of $49.6 million in 2020. First Watch also saw a revenue decrease of 21% in 2020 with revenues of $337 million. Franchise Revenues also saw a decline of nearly 30% in 2020 to $4.95 million compared to $7 million the year prior.

The biggest expense on the income statement for First Watch Restaurant Group is labor and other related expenses accounting for $120 million.


First Watch Franchisor Cash Flow Statement

First Watch Restaurant Consolidated Statements of Cash Flows (In Thousands)

 FY 2020 FY 2019
Cash flows from operating activities:  
Net loss$ (49,681)$ (45,472)
Adjustment o reconcile net loss to net cash (used in) proved by operating actives:  
Depreciation and amortization$ 30,725$ 28,027
Deferred income taxes$ (19,991)$ (12,558)
Non-cash operating lease costs$ 11,727$ 10,772
Amortization of debt discount and deferred issuance costs$ 1,282$ 1,128
Impairments and loss on disposal of assets$ 315$ 33,596
Stock-based compensation$ 750$ 1,160
Settlement gains from acquisitions$ (160)
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable$ 1,826$ (3,192)
Inventory$ (203)$ (439)
Prepaid expenses$ 619$ (439)
Deferred offering costs$ 1,307
Other assets, current and tong term$ (446)$ (1,094)
Accounts payable$ (886)$ (740)
Accrued liabilities$ (3,670)$ 5,566
Accrued compensation and deferred payroll taxes, current and long-term$ 2,929$ 643
Deferred revenues, current and long term$ (3,060)$ 2,024
Operating lease liabilities$ 8,073$ 3,101
Other liabilities$ (458)
Net cash (used in) provided by operating activities$ (18,364)$ 21,465
Cash flows from investing activities:  
Capital expenditures$ (26,974)$ (59,169)
Purchase of intangible assets$ (225)
Acquisitions net of cash acquired$ (22,770)
Acquisition of non-controlling interest$ (450)
Net cash used in investing activities$ (26,974)$ (82,389)
Cash flows from financing activities:  
Proceeds from preferred stock issuance$ 40,000
Proceeds from issuance of long-term debt$ 54,600$ 50,000
Repayments of long-term debt$ (3,947)$ (2,099)
Proceeds from borrowings on revolving credit facility$ 22,000$ 42,000
Repayments from borrowings on revolving credit facility$ (39,000)$ (32,500)
Payment of debt issuance costs$ (915)
Finance lease payments$ (339)$ (500)
Contingent consideration payment$ (225)
Net cash provided by financing activities$ 73,314$ 55,761
Net increase (decrease) in cash and cash equivalents and restricted cash$ 27,976$ (5,163)
Cash and cash equivalents and restricted cash:   
Beginning of year$ 11,121$ 16,284
End of year$ 39,097$ 11,121


First Watch  Cash Flow Statement Key Insights

In 2020, First Watch had a net income of ($49.6) million, but their cash, cash equivalents and restricted cash was $39 million at the end of 2020 an almost 40% increase from the cash they started with at the end of the year. This extra cash flow can also be seen from their financing activities as First Watch received $40 million in proceeds from preferred stock issuance.


 How many First Watch units have opened and closed?

Steak n Shake Consolidated Statements of Comprehensive Income (Dollars in thousands)

Outlet TypeYearOutlets at Start of YearOutlets at End of YearNet Change
Total outlets    

As seen in the table above both First Watch franchise locations and company-operated locations have increased over the past two years. In 2020 there was an increase of 22 company-operated restaurants and 19  franchise locations. These numbers indicate the business overall is expanding.


First Watch Franchise



While First Watch Restaurants did see losses of almost $50 million in 2020, the company had to react and adjust to the limited demand caused by COVID-19 for three quarters of 2020. Franchise locations during this time did grow by 19 in 2020. First Watch has the potential for a promising future as the company recently filed for an Initial Public Offering (IPO) which would raise large amounts of additional capital to expand and increase their market share in the daytime restaurant industry. Read more on the news of the company’s potential IPO.

First Watch is already in a well-established market. The restaurant business is highly competitive, and competition among businesses serving food is rapidly increasing. First Watch’s competitors include Broken Egg Cafe, IHOP, and Waffle House.

We strongly recommend you speak to at least 5 First Watch  franchisees to better understand the financials (see questions to ask).

Think First Watch is the right franchise for you, or are you interested in other franchise opportunities in the food and beverage industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.


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