Spending unwisely on technology can be a disaster. But an on-target investment can alter the game, as First Watch boasted to Wall Street in releasing the daytime dining brand’s most-recent financial results.
On Tuesday, CEO Chris Tomasso broke from the usual pattern of a financial analysts’ conference call to detail the impact of First Watch’s most recent tech deployment. This was no rollout of robots, AI capabilities or some other cutting-edge advance. The 524-unit chain added a QR code last month to the guest tabs of its 446 corporate stores so patrons can pay via phone from their table.
Last week, 125,000 customers opted to use the function, Tomasso said. “Assuming 30 seconds saved per transaction at the register, we saved over 1,000 customer and employee hours,” he said.
The upshot was an increase in throughput and the corporate stores’ capacity, Tomasso continued, though he didn’t say by how much.
What’s more, he said, the option has averted a bottleneck on weekends at the host’s station, where checks are settled, “which we think then leads to repeat visits.”
The chain has been relatively conservative in its choice of technology, opting for less glitzy advances like a kitchen display system and a mobile waitlist-management program. Both of those digital capabilities have been available for at least a decade.
More advanced forms of digital tech just don’t hold appeal at this time, said Tomasso. For instance, “I don't see loyalty as something that we'd be launching anytime soon,” he said, referring to the affinity programs that many chains now view as table stakes to compete in today’s market.
Tomasso explained, “This whole toolkit we're deploying an element at a time is really meant to allow us to serve more demand in our peak sales hours, and that's what we're focused on.”
Fast growth—and more to come
First Watch opened 51 restaurants during 2023, for a spurt of nearly 11%. Nineteen of the new stores fired up their kitchens in Q4.
Management indicated that it intends to keep growing at a quick clip, with Las Vegas and New England targeted as the brand’s next markets. Executives said they anticipate opening 51 to 57 stores this year.
Contrary to the asset-light approach that’s become common within the restaurant business, the franchisor is eager to keep adding corporate stores. When a previously announced franchisee acquisition is completed, the home office will operate 446 of the system’s 524 branches. It intends to raise the tally by exercising the first-refusal rights it holds on 25 of the 78 licensed stores that are currently in operation.
Despite a 7.6% increase in comps during 2023, as well as a 0.2% gain in traffic, First Watch expects the first quarter of 2024 to be a difficult period. To date, executives said, same-stores for the year are down in the mid-single digits, in part because of difficult comparisons. For January and February of 2023, the brand’s same-store sales rose 15.7%, and traffic grew 8.5%.
In addition, the officials said, severe weather dampened sales in the early weeks of the new year.
For Q4 of 2023, the company posted a net income of $2.6 million, compared with a year-ago loss of $500,000, on revenues of $244.6 million, up 31.7%.