Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Watch Restaurant Group Inc (FWRG, Financial) reported a 37% increase in adjusted EBITDA compared to the previous year.
- The company opened seven new restaurants in six states during the second quarter, expanding its footprint.
- First Watch completed its largest franchisee acquisition, adding 21 restaurants and development rights in the Raleigh-Durham area.
- The company has a robust pipeline with over 130 new restaurant projects, supporting its long-term growth strategy.
- Customer experience scores improved, and employee turnover decreased for the sixth consecutive quarter.
Negative Points
- Same restaurant sales slipped by 30 basis points with a 4% decline in same restaurant traffic.
- The company faces macroeconomic headwinds, particularly affecting weekday breakfast and lunch traffic.
- Lower income consumers and infrequent customers have reduced their visits, impacting overall traffic.
- Third-party off-premise channels remain volatile, contributing to traffic challenges.
- The company anticipates continued challenges in the second half of the year, with same restaurant sales growth expected to range from negative 2% to flat.
Q & A Highlights
Q: How is the performance in Florida compared to other regions, and are there any other regions showing weakness?
A: Christopher Tomasso, CEO, stated that the gap between Florida and the rest of the system has widened slightly, but they view it as a normalization of trends post-COVID. Florida remains a key growth area due to its high net migration and tourist appeal. No other regions were highlighted as weaker, and their site selection process is data-driven, ensuring predictable performance.
Q: What strategies are being used to attract new customers and increase frequency among existing users?
A: Christopher Tomasso, CEO, explained that they segment consumers based on demographics and frequency, focusing on infrequent and lapsed users, as well as competitors' users. They utilize owned channels, social, and digital media to target these groups, emphasizing the "First Watch way" rather than broad-based discounting.
Q: Are return-to-office dynamics affecting weekday sales, and how are weekday versus weekend sales performing?
A: Christopher Tomasso, CEO, noted no data suggests return-to-office dynamics are impacting sales. The softness is primarily in weekday breakfast and lunch, which they attribute to consumers opting to eat at home. Industry data shows similar trends across full-service and QSR sectors.
Q: How are labor costs being managed, and what tools are being used to improve efficiency?
A: Mel Hope, CFO, highlighted tools that provide real-time labor cost insights, aiding in scheduling and staffing. They are also testing a digital scheduling platform to improve efficiency and free up managers for other tasks. These efforts have led to better labor management and throughput during peak hours.
Q: How is the company addressing traffic impact from discounting by competitors in the breakfast category?
A: Christopher Tomasso, CEO, stated that First Watch differentiates itself from competitors through brand positioning and everyday value, avoiding deep discounting. They focus on communicating brand attributes and reminding customers why they love First Watch, rather than engaging in aggressive promotions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
