First Watch's traffic slides in Q1, but don't expect price-off specials to follow

Management at the daytime dining chain said it will focus instead on bringing back strong customer lures from the past.
Most of the decline in traffic was due to a drop in dine-in visits. | Photo courtesy of First Watch

First Watch wasn’t immune to the traffic drop-off that stung the restaurant business during the first three months of 2024, with a 4.5% slide in guest counts holding the leader of the so-called daytime dining segment to a 0.5% gain in same-store sales.

Although executives said they saw guest counts improve as the quarter progressed, they acknowledged to Wall Street analysts that traffic has yet to rebound in the second quarter and will likely be flat at best for the remainder of the year.

“There appears to be clear signs of a slowdown,” CEO Chris Tomasso told the analysts during the company’s review of Q1 financial results.

He pointed out that First Watch is already tweaking its menu to counter the erosion in guest visits, though with the counter-intuitive approach of touting higher-valued rather than lower-priced options. The strategy calls for bringing back limited-time premium hits like shrimp and grits, a dish currently being spotlighted by the chain. The selection has been a customer favorite in the past, “de-risking” the choice for regulars who don’t want to gamble on an unfamiliar dish, he explained. Yet “it’s a high-margin dish, so that’s good for us.”

“We draw a hard line at reacting hastily to short-term dynamics,” Tomasso continued. “We’re focused on the everyday-value piece. We’re not a discounting brand.”

But it is somewhat Florida-centric, with 123 stores operating in the Sunshine State. The market was hit in January by bad weather, and “traffic in Florida is now normalizing post-pandemic,” said Tomasso.

The brand’s reliance on that market was tempered in Q1 by the opening of nine restaurants across eight states. First Watch ended the quarter with 531 restaurants in operation, 432 of them company-operated.

The franchisor posted a net income for Q1 of $7.2 million, down 22.9% from the year-ago period, on revenues of $242.4 million, up 14.7%.

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