Is First Watch a Franchise? Can You Buy One In 2022?

Written by: Brooks Gammill
Last Updated: August 4, 2022
Free Download Our Exclusive Food and Beverage Industry Guide
Download Now

Is First Watch a franchise?

First Watch franchise is a breakfast and lunch restaurant franchise serving made-to-order breakfast, brunch and lunch using fresh ingredients. So, First Watch offers traditional favorites, such as omelets, pancakes, sandwiches and salads, and unique specialty items like quinoa power bowls, and avocado toast. 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. So, at the end of 2020, there were 88 franchised locations and 321 company-owned locations across 29 states in the United States.

Listen to this article

Apple Podcast    Spotify    Google Podcast 

Contents

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. Additionally, in 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

$40,000

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

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

First Watch Franchise Cost

The estimated total investment necessary to begin the 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. And 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, let’s look at the performance of their corporate locations.

Performance

In 2020, Total restaurant sales were $337 million on 321 company-owned stores. And taking the 2019 year end company store count of 299 (as the new restaurants were in ramp-up mode), we can guestimate average sales of a First Watch restaurant of $1.12M. Assuming a profit margin of 10%, it is expected that the average First Watch restaurant made $112,000 in profit in 2020.

In 2019, Total restaurant sales were $429 million on 299 company-owned stores. So, taking the 2018 year end company store count of 240 (as the new restaurants were in ramp-up mode), we can guestimate average sales of a First Watch restaurant of $1.78M. Assuming a profit margin of 15%, it is also expected that the average First Watch restaurant made $268,000 in profit in 2019.

Based on a midpoint investment of $1.3M on $250k of profit and time to scale up, it is expected to take 5-6+ years to recoup your initial capital investment in a First Watch restaurant. 

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
Revenues:  
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.

franchise specialist

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 were $39 million at the end of 2020 an almost 40% increase from the cash they started with at the end of the year. And 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
Franchised    
 FY184755+8
 FY195569+14
 FY206988+19
Company-owned    
 FY18193240+47
 FY19240299+59
 FY20299321+22
     
Total outlets    
 FY18240295+55
 FY19295368+73
 FY20368409+41

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

First Watch Franchise

Conclusion

While First Watch Restaurants did see losses of almost $50 million in 2020, the company also 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. And 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.

Recommendation

In conclusion, 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? Then, check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.

franchise specialist

Latest Articles

Goddard School Franchise Cost Worth Profit Potential? (2022)

Goddard School Franchise Cost Worth Profit Potential? (2022)

Jimmy John’s Franchise Cost Worth It? (2022)

Jimmy John’s Franchise Cost Worth It? (2022)

KFC Franchise Cost, Requirements, And More! (2022)

KFC Franchise Cost, Requirements, And More! (2022)

Is it easy to start a Waffle House Franchise in 2022?

Is it easy to start a Waffle House Franchise in 2022?

Wow Wow Hawaiian Lemonades Franchise Left Unresolved (2022)

Wow Wow Hawaiian Lemonades Franchise Left Unresolved (2022)

Domino’s Franchise Cost Low Ticket to Make Millions (2022)  | Vetted Biz

Domino’s Franchise Cost Low Ticket to Make Millions (2022) | Vetted Biz

Planet Fitness Franchise Cost Worth The Profit? (2022)

Planet Fitness Franchise Cost Worth The Profit? (2022)

Raising Cane’s Franchise Cost Pays For Itself (2022)

Raising Cane’s Franchise Cost Pays For Itself (2022)

How Much is a Wingstop Franchise? Wingstop Franchise Cost Detailed (2022)

How Much is a Wingstop Franchise? Wingstop Franchise Cost Detailed (2022)

Shake Shack Franchise Cost Exposed And 3 Alternatives (2022)

Shake Shack Franchise Cost Exposed And 3 Alternatives (2022)

Master Franchise Explained

Master Franchise Explained

Crumbl Cookies Franchise Cost Justifies High Owner Salary In 2022

Crumbl Cookies Franchise Cost Justifies High Owner Salary In 2022

Best Franchise Podcast Episodes (2022)

Best Franchise Podcast Episodes (2022)

Starbucks Franchise Cost Compared To 3 Other Coffee Franchises

Starbucks Franchise Cost Compared To 3 Other Coffee Franchises

Can you open a Chipotle Franchise? Key Takeways (2022)

Can you open a Chipotle Franchise? Key Takeways (2022)

SBA Loan for Franchise Facts

SBA Loan for Franchise Facts

Arby’s Franchise Resale Value Is Low (2022)

Arby’s Franchise Resale Value Is Low (2022)

JAN PRO Franchise Cost Worth Owner Salary? (2022)

JAN PRO Franchise Cost Worth Owner Salary? (2022)

Regis Corporation: The Hair Salon Monopoly of the World?

Regis Corporation: The Hair Salon Monopoly of the World?

Rewarding Business Opportunities for Moms with Disabilities

Rewarding Business Opportunities for Moms with Disabilities

Can Franchise Direct Be Trusted For Buying a Franchise? (2022)

Can Franchise Direct Be Trusted For Buying a Franchise? (2022)

What Does Shaq Own? Franchises, Businesses And More!

What Does Shaq Own? Franchises, Businesses And More!

Orkin Franchise Cost About The Same As Resale Value (2022)

Orkin Franchise Cost About The Same As Resale Value (2022)

Your Suscription has expired!

Looks like your subscription is due. Please renew to keep using our services.

Filters

Year




Name

Share link

Or

Filters

Business Name

Industry

Investment amount




Downgrade subscription

You are going to downgrade your subscription.This action will proceed the difference in cost of plans and reset subscription period after moneyback.

Vetted Member $79/month

Simple Start Free

Upgrade subscription

You are going to upgrade your subscription.This action will proceed the difference in cost of plans and reset subscription period after moneyback.

Simple Start Free

Vetted Member $79/month

Cancel subscription

You’re about to cancel your subscription. Please confirm by clicking on the “Cancel Subscription” button below.

Performing this action will delete your account.

Plan Updated

Your current subscription plan is:

Vetted Member $79/month

Support Form

Please fill out the form below with any technical issues, questions or feedback you might have.