Breakfast-and-lunch chain First Watch is going public

The 423-unit chain has seen a quick recovery from the pandemic and would be the industry’s third offering of 2021.
First Watch IPO
Photo courtesy of First Watch

First Watch, the largest of the burgeoning sector of breakfast-and-lunch chains, on Tuesday said it plans to raise $100 million in an upcoming initial public offering.

The 423-unit family-dining chain, whose restaurants are open only from 7 a.m. to 2:30 p.m., would trade on the Nasdaq Stock Exchange under the ticker symbol FWRG. The $100 million is likely to be a placeholder as the company determines its IPO terms, including the total size of its fundraise.

The company plans to use the funds to pay off debt. First Watch has $294 million in total debt.

First Watch would be the third restaurant offering this year following the July IPO of Krispy Kreme and the upcoming offering of Dutch Bros Coffee.

It would also be the first offering of a breakfast-only concept—one of the lesser appreciated trends in the restaurant industry in recent years. First Watch, owned by the private equity firm Advent International, has more than doubled its unit count since 2014 through a combination of acquisitions and organic growth.

Revenues, meanwhile, have more than doubled between 2015 and 2019. The pandemic interrupted that growth, but its recovery has been swift. Same-store sales in the second quarter of this year were up 16.3% over the same period in 2019. Traffic, meanwhile, was up 1%.

The company owns and operates all but 88 of its 423 locations.

First Watch believes that its operating system is a competitive advantage. Despite being open for just 7.5 hours a day, it generated $1.6 million in average unit volumes before the pandemic. That’s only slightly lower than Denny’s, which is open 24 hours.

The company believes its “no night shifts ever” approach helps it recruit employees and managers. “This differentiation has driven high employee satisfaction and retention and strong customer demand and operating performance,” First Watch said in its IPO prospectus.

First Watch said that it worked hard to realign its business during the pandemic, accelerating its alcohol service—which has increased overall beverage incidence by 230 basis points—while integrating technology into its restaurants, with things like digital waitlists.

The company itself has also turned a profit. First Watch generated $35.2 million in adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, in the second quarter—or 12.5% of revenues. That’s a reversal of the $11.8 million loss in the same period last year.

Several restaurants have either filed or are planning to file for IPOs this year—including Portillo’s and Sweetgreen, both of which have privately filed.

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