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Breakfast is still the most important meal of the day for First Watch

The chain, which doesn't serve dinner, says it's not suffered the a.m. sales freefall that QSRs are lamenting.
First Watch Restaurants
Photograph: Shutterstock

It’s an article of faith that restaurants’ breakfast sales have tanked during the pandemic, a result of consumers hunkering down at home instead of scurrying off to work or chauffeuring the kids to school. But that’s not what Chris Tomasso is seeing as CEO of First Watch, a largely suburban chain that serves only breakfast, lunch and brunch.

“That data is dominated by QSRs [quick-service restaurants], because there are so many of them,” says Tomasso, who says his charge’s sales are approaching 90% of what they were before the world heard of COVID-19. Those operations are all about eating on the run, and now there’s no reason to dash, particularly with fully plated breakfasts available nearby or via delivery.  

“We benefitted from the fact that we are mostly a suburban concept. So with more people being home, we’ve held up well there,” says Tomasso. “Breakfast is still our most dominant to-go daypart,” and reflects the breakdown by daypart of what restaurants were seeing pre-pandemic.

Nor have customers’ a.m. preferences changed much since nearly all of First Watch’s breakfasts were consumed on-premise.  Coffee sales are down, since customers can easily brew a few cups at home, but otherwise the sales mix mirrors what patrons tended to order in the concept’s dining rooms.  Despite the conventional wisdom that breakfast items travel poorly to customers’ homes, First Watch hasn’t seen a shift to a.m. sandwiches or other items that promise to hold up better during the journey.

“I would say it this way: Crave-abiliy became more important than portability,” says Tomasso. “Made-to-order breakfast doesn’t travel very well. We invested in all new packaging to protect the integrity of our food.”

That initiative was part of a wartime effort to do in three weeks what First Watch had planned at the start of the year to accomplish in three months. “We had started all the preliminary work for to-go, something we were looking to launch this year, but in Q3 or Q4 of this year,” says Tomasso. “Back then, if you wanted something to go, you had to call the store and order it.” Off-premise sales accounted for only 5% of business.

It dropped to zero, at least at company-operated First Watch restaurants, in mid-April. After states started closing restaurant dining rooms, limiting service to takeout and delivery, the franchisor decided to shut down all corporate stores for 45 days. Only 15% of the chain’s 399 branches are franchised.

“The day we had to furlough 8,000 people, it was gut-wrenching,” Tomasso remembers, adding that he made over-communicating with the employees a personal mission. They were told of such new benefits as a tele-healthcare service, and managers were informed of a “make-whole” bonus program that would compensate them for the difference between what they could collect in unemployment and other benefits and what they would have earned without the disruption in operations.

“So all they lost was the time away, not their compensation,” Tomaso says.

The leadership team started working on what felt to Tomasso like a 24/7 schedule. “I used to joke that we were working much harder than we did when we had restaurants open,” he recalled. “It wasn’t unusual to call a phone meeting at 10 or 11 at night because of some announcement.”

The menu was trimmed, delivery and takeout service were figured out, and a line of family sized meals called Brunch Bundles were developed. The company started reopening stores on May 18 and had 100% back in operation by June 29. Because of earlier development commitments, 18 new stores would fire up their grills for the first time during the pandemic—ironically, at least one on the day that all company stores were closed.

“If they were 75% or more committed, we decided to go ahead with their opening,” Tomasso says.

“We’re down a little bit still--I’d say we’re within the mid-teens of where we were,” he continues. “It’s literally improving every day. Last week we got close to 10%.”

Off-premise business has risen to 30% of sales. “It’s been a big help to us,” he says.

 Franchisees were helped with “royalty holidays” and deferrals, but are now back in sound shape, Tomasso says.

He fears that another resurgence in coronavirus infections would be even more devastating than the first wave of the pandemic, “both psychologically and financially.”

He said he wouldn’t rule out an “opportunistic” acquisition or development opportunity. “We’ve already been contacted by a number of different concepts—I think this rattled them,” he says. But, he adds, “We do have our hands filled right now.”

Among those tasks on hand are opening more restaurants. “We plan to return to a high growth company,” he says, noting that breakfast will be key to that strategy.

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