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Commission file number 001-40866

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding 61,032,105 shares of common stock as of October 31, 2025.

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to any historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “outlook,” “potential,” “project,” “projection,” “plan,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other similar expressions. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed herein, including under Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A. “Risk Factors”, and in our Annual Report on Form 10-K as of and for the year ended December 29, 2024 (“2024 Form 10-K”), including under Part I. Item 1A. “Risk Factors” and Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following: our vulnerability to changes in consumer preferences and economic conditions such as inflation and recession; uncertainty regarding the Russia and Ukraine war; war and unrest in the Middle East and the related impact on macroeconomic conditions, including inflation, as a result of such conflicts or other related events; our vulnerability to changes in economic conditions and consumer preferences; our inability to successfully open new restaurants or establish new markets; our inability to effectively manage our growth; potential negative impacts on sales at our and our franchisees’ restaurants as a result of our opening new restaurants; a decline in visitors to any of the retail centers, lifestyle centers, or entertainment centers where our restaurants are located; lower than expected same-restaurant sales growth; unsuccessful marketing programs and limited time new offerings; changes in the cost of food; unprofitability or closure of new restaurants or lower than previously experienced performance in existing restaurants; our inability to compete effectively for customers; unsuccessful financial performance of our franchisees; our limited control over our franchisees’ operations; our inability to maintain good relationships with our franchisees; conflicts of interest with our franchisees; the geographic concentration of our system-wide restaurant base in the southeast portion of the United States; damage to our reputation and negative publicity; our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media; our limited number of suppliers and distributors for several of our frequently used ingredients and shortages or disruptions in the supply or delivery of such ingredients; information technology system failures or breaches of our network security; our failure to comply with federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection, advertising and consumer protection; our potential liability with our gift cards under the property laws of some states; our failure to enforce and maintain our trademarks and protect our other intellectual property; litigation with respect to intellectual property assets; our dependence on our executive officers and certain other key employees; our inability to identify, hire, train and retain qualified individuals for our workforce; our failure to obtain or to properly verify the employment eligibility of our employees; our failure to maintain our corporate culture as we grow; unionization activities among our employees; employment and labor law proceedings; labor shortages or increased labor costs or health care costs; risks associated with leasing property subject to long-term and non-cancelable leases; risks related to our sale of alcoholic beverages; costly and complex compliance with federal, state and local laws, including trade and tax policies; changes in accounting principles applicable to us; our vulnerability to natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism; our inability to secure additional capital to support business growth; our level of indebtedness; failure to comply with covenants under our credit facility; and the interests of our largest stockholder may differ from those of public stockholders.

CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(1) Leased assets and liabilities obtained during the thirty-nine weeks ended September 28, 2025 and September 29, 2024 include $23.6 million and $28.1 million from business acquisitions, respectively.

First Watch Restaurant Group, Inc. (collectively with its wholly-owned subsidiaries, “the Company,” or “Management”) is a Delaware holding company. The Company operates and franchises restaurants in 32 states operating under the “First Watch” trade name, which are focused on made-to-order breakfast, brunch and lunch. The Company does not operate outside of the United States and all of its assets are located in the United States. As of September 28, 2025, the Company operated 548 company-owned restaurants and had 72 franchise-owned restaurants.

The Company reports financial information on a 52- or 53-week fiscal year ending on the last Sunday of each calendar year. The quarters ended September 28, 2025 and September 29, 2024 were 13-week periods. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 29, 2024 (“2024 Form 10-K”).

The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements included in the 2024 Form 10-K and include all adjustments necessary for the fair statement of the consolidated financial statements for the quarterly periods presented. The results of operations for quarterly periods are not necessarily indicative of the results to be expected for other quarterly periods or the entire fiscal year.

Preparation of the unaudited interim consolidated financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates and such differences could be material.

Certain assets and liabilities are carried at fair value. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The carrying amounts of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, accrued expenses and other current assets and liabilities approximate their fair values due to their short-term maturities.

As an element of the Company’s interest rate risk management strategy, Management uses interest rate swaps. The intent of these instruments is to reduce cash flow exposure to variability in future interest rates on the Company’s debt. Management has elected to designate and qualify the interest rate swaps as cash flow hedges. As such, the instruments are recorded on the balance sheet at fair value. Thereafter, gains or losses on the instruments are recognized in equity as changes to Other Comprehensive Income (Loss) and subsequently reclassified into earnings at the time of the Company’s debt interest payments.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements including disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income taxes paid. The amendments are effective for fiscal years beginning after December 15, 2024 and should be applied on a prospective basis, however, retrospective application is permitted. Management is currently evaluating the impact of this new standard and anticipates an expansion in the Company’s annual income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which establishes new disclosure requirements related to purchases of inventory, employee compensation, selling expenses, depreciation and intangible amortization. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027 and should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. Management is currently evaluating the impact of this new standard.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software, which updates the accounting for internal-use software by replacing stage-based rules with a principles-based framework, clarifying the criteria for capitalization and merging website development cost guidance. The amendments in this update are effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The update may be applied prospectively, retrospectively, or on a modified transition basis based on the status of the project and whether software costs were capitalized before the date of adoption. Management is currently evaluating the impact of this new standard.

Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company.

During the second quarter of 2025, the Company acquired, in two separate transactions, substantially all the assets associated with 19 franchise-operated First Watch restaurants. For both transactions, the purchase price was allocated to the fair value of the assets acquired and the liabilities assumed. The allocations were based on preliminary valuations and are subject to adjustment as additional information is available. The Company expects to finalize the valuations of these assets no later than one year from the respective acquisition dates.

Goodwill reflects the value of expected synergies and assembled workforce, and was assigned to the Company’s single reporting unit. The Company will treat the transactions as asset acquisitions for income tax purposes, which allows for any goodwill recognized to be tax deductible and amortized over a 15-year statutory life.

The weighted average estimated useful life of the reacquired rights is 6.1 years.

Pro-forma financial information of the acquired restaurants for periods prior to the acquisition dates is not presented due to the immaterial impact on the consolidated financial statements.

Revenues recognized disaggregated by type were as follows:

The following tables include a detail of liabilities from contracts with customers:

Changes in deferred gift card contract liabilities were as follows:

Changes in deferred franchise fee contract liabilities were as follows:

			THIRTEEN WEEKS ENDED												THIRTY-NINE WEEKS ENDED
(in thousands)			SEPTEMBER 28, 2025						SEPTEMBER 29, 2024						SEPTEMBER 28, 2025						SEPTEMBER 29, 2024
Deferred franchise fee revenue:
Balance, beginning of period			$	1,489					$	1,893					$	1,929					$	2,061
Cash received			20						32						95						439
Franchise revenues recognized			(53)						(57)						(170)						(219)
Business combinations - franchise revenues recognized			—						—						(398)						(413)
Balance, end of period			$	1,456					$	1,868					$	1,456					$	1,868

Accounts receivable consisted of the following:

Accrued liabilities consisted of the following:

Long-term debt, net consisted of the following:

FWR Holding Corporation (“FWR”), a subsidiary of the Company, is the borrower under the credit agreement dated October 6, 2021, the terms of which were amended on February 24, 2023 and January 5, 2025, which provides for (i) a $225.0 million term loan A facility and delayed draw facility (the “Term Facilities”) and (ii) a $125.0 million revolving credit facility, (“the Revolving Credit Facility”), and together with the Term Facilities, (the “Credit Facility”). The Credit Facility matures on January 5, 2029.

During the second quarter of 2025, the Company drew $27.5 million on the delayed draw facility and $32.5 million on the Revolving Credit Facility, primarily to fund the business acquisitions referenced in Note 3, Business Acquisitions. As of September 28, 2025, the delayed draw facility was fully drawn with the same servicing and repayment terms as the term loan A facility.

As of September 28, 2025, borrowings under the Credit Facility bear interest at the option of FWR at either (i) the alternate base rate plus a margin of between 150 and 225 basis points depending on the total rent adjusted net leverage ratio of FWR and its restricted subsidiaries on a consolidated basis (the “Total Rent Adjusted Net Leverage Ratio”) or (ii) SOFR plus a credit spread adjustment of 10 basis points plus a margin of between 250 and 325 basis points depending on the Total Rent Adjusted Net Leverage Ratio. Refer to Note 8, Interest Rate Swaps, for information about the Company’s variable-to-fixed interest rate swap agreements.

The estimated fair value of the outstanding debt, excluding finance lease obligations and financing obligations, is classified as Level 3 in the fair value hierarchy and was estimated using discounted cash flow models, market yield and yield volatility. The following table includes the carrying value and fair value of the Company’s debt as of the dates indicated:

The Credit Facility is guaranteed by all of FWR’s wholly-owned subsidiaries and by AI Fresh Parent, Inc., a Delaware corporation and the direct parent company of FWR (“Holdings”), and is secured by associated collateral agreements that pledge a lien on substantially all of FWR’s and each guarantor’s assets, including fixed assets and intangibles, in each case, subject to customary exceptions.

Under the credit agreement, FWR (and in certain circumstances, Holdings) and its subsidiaries are subject to affirmative, negative and financial covenants, maintenance of certain ratios, restrictions on additional indebtedness and events of default for facilities of this type (with customary grace periods, as applicable, and lender remedies). FWR was in compliance with its covenants under the credit agreement as of September 28, 2025.

Interest rate swaps are utilized to hedge a portion of the cash flows of the Company’s variable rate debt.

On June 23, 2023, Management entered into two variable-to-fixed interest rate swaps. These interest rate swaps have an aggregate notional amount of $90.0 million and mature on October 6, 2026. Under the terms of the interest rate swaps, the Company will pay a weighted average fixed rate of 4.16% on the notional amount and will receive payments from, or make payments to, the counterparties based on the three-month SOFR rate.

On May 17, 2024, Management entered into two additional variable-to-fixed interest rate swaps. These interest rate swaps have an aggregate notional amount of $60.0 million and mature on June 30, 2027. Under the terms of the interest rate swaps, the Company will pay a weighted average fixed rate of 4.42% on the notional amount and will receive payments from, or make payments to, the counterparties based on the three-month SOFR rate.

The fair value measurement of the interest rate swaps was based on the contractual terms and market-based inputs. The interest rate swaps were valued using a discounted cash flow analysis on the expected cash flows using observable inputs including interest rate curves and credit spreads. Although the majority of the inputs used to value the instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and the counterparties. The impact of the credit valuation adjustments was not determined to be significant to the overall valuation. As a result, the derivative was classified as Level 2 in the fair value hierarchy.

Amounts reported in Other comprehensive income (loss) related to the interest rate swaps are reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the thirty-nine weeks ended September 28, 2025, a total of $0.1 million was reclassified from Other comprehensive income (loss) as a reduction to Interest expense. Over the next 12 months, Management estimates that $0.9 million will be reclassified as an increase to interest expense.

The following table includes detail of lease assets and liabilities:

_____________

(1) Excludes all variable lease expense for real estate leases.

The components of lease expense were as follows:

_____________

(1) Includes contingent rent expense of $0.5 million and $0.4 million during the thirteen weeks ended September 28, 2025 and September 29, 2024, respectively, and $1.5 million and $1.3 million for the thirty-nine weeks ended September 28, 2025 and September 29, 2024, respectively.

Supplemental cash flow information related to leases was as follows:

Supplemental information related to leases was as follows:

			THIRTY-NINE WEEKS ENDED
			SEPTEMBER 28, 2025						SEPTEMBER 29, 2024
Weighted-average remaining lease term (in years)
Operating leases			12.9						13.4
Finance leases			9.4						3.5
Weighted-average discount rate (1)
Operating leases			7.8		%				7.8		%
Finance leases			6.2		%				6.4		%

____________

(1) Based on the Company’s incremental borrowing rate.

The First Watch Deferred Compensation Plan was adopted by the Company effective January 1, 2025. The First Watch Deferred Compensation Plan allows officers and other key employees to defer their compensation within designated annual limits. Discretionary matching and other credits may be made to the accounts of active participants, which vest based on an employee’s years of service or vest in full upon an active participant’s death, disability or a Company change in control event, as defined in the plan. Participants’ earnings on contributions fluctuate with the actual earnings and losses of available investment choices selected by the participants.

While the First Watch Deferred Compensation Plan is unsecured, Management has elected to fund certain of these obligations through a rabbi trust, the assets of which consist of Company-owned life insurance policies. The assets held in the rabbi trust are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

The cash surrender value of the life insurance policies held in the rabbi trust is recorded in other long-term assets. As of September 28, 2025, rabbi trust assets totaled $1.4 million. Changes to the cash surrender value and any increases or decreases to deferred compensation liabilities incurred under the First Watch Deferred Compensation Plan are recorded as general and administrative expenses. As of September 28, 2025, the deferred compensation obligation included in other long-term liabilities totaled $1.5 million.

There were no stock option awards granted during the thirty-nine weeks ended September 28, 2025. A summary of stock option activity during the thirty-nine weeks ended September 28, 2025 was as follows:

The aggregate intrinsic value is based on the difference between the exercise price of the stock option and the closing price of the Company’s common stock on Nasdaq on the last trading day of the period.

A summary of the non-vested stock option activity during the thirty-nine weeks ended September 28, 2025 is as follows:

During the thirty-nine weeks ended September 28, 2025, a total of 1,028,509 restricted stock units (“RSUs”) were granted. Of the total RSUs granted, 597,737 will vest ratably over a period of three years from grant date, 65,364 will vest one year from the grant date, and the remaining 365,408 will vest four years from the grant date. A summary of the Company’s RSU activity during the thirty-nine weeks ended September 28, 2025 is as follows:

The aggregate intrinsic value is based on the closing price of the Company’s common stock on Nasdaq of $16.00 and $18.70 on September 26, 2025 and December 27, 2024, the last trading days of the periods, respectively.

Stock-based compensation expense, net of amounts capitalized, was $2.9 million and $2.1 million during the thirteen weeks ended September 28, 2025 and September 29, 2024, respectively, and $7.9 million and $6.4 million during the thirty-nine weeks ended September 28, 2025 and September 29, 2024, respectively. Capitalized stock-based compensation included in property, fixtures and equipment totaled $0.1 million for the thirty-nine weeks ended September 28, 2025. The total related income tax benefit for stock-based compensation expense was $0.1 million during the thirteen weeks ended September 28, 2025 and September 29, 2024, respectively, and $1.3 million and $1.6 million during the thirty-nine weeks ended September 28, 2025 and September 29, 2024, respectively.

The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of September 28, 2025:

12.    Income Taxes

The Company’s income tax expense for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising during interim periods. For both the thirteen and thirty-nine weeks ended September 28, 2025, and the thirteen and thirty-nine weeks ended September 29, 2024, there were no significant discrete items recorded.

In the United States, a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The amount of FICA tax credits generated is primarily driven by restaurant sales.

The effective income tax rates for the thirteen and thirty-nine weeks ended September 28, 2025 increased as compared to the same periods in the prior year primarily due to the changes in income before income taxes, the increase in FICA tax credits and the corresponding change in the valuation allowance, and the impact of executive compensation.

Management evaluates quarterly whether the resulting deferred tax assets are realizable given the Company’s earnings history. Based on the available evidence, the Company does not meet the more likely than not standard related to the realization of a portion of the deferred tax assets as of September 28, 2025. Accordingly, the Company has established a valuation allowance on the portion of deferred tax assets deemed not realizable, including state charitable contribution carryovers, various state loss carryforwards and various federal tax credit carryforwards.

Management continues to assess the rationale for recording a valuation allowance for deferred tax assets. As the Company’s future taxable earnings increase and deferred tax assets are utilized, it is possible that a portion of the valuation allowance will no longer be needed. Release of any valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period of the release. The timing and amount of any release related to future taxable income is currently indeterminable.

The Company is subject to legal proceedings, claims and liabilities that arise in the ordinary course of business. The amount of the anticipated liability with respect to these matters was not material as of September 28, 2025. In the event any litigation losses become probable and estimable, the Company will recognize anticipated losses.

Management determined the Company’s single operating segment on the basis that the Company’s Chief Operating Decision Maker (the “CODM”), the Chief Executive Officer, assesses performance and allocates resources at the Company’s consolidated level. The Company’s CODM uses consolidated net income to evaluate performance and make key operating decisions, such as investments in our long-term growth strategy. This measure is also used to monitor budget against actual results.

Revenue is derived from sales of food and beverage, net of discounts, by Company-owned restaurants as well as franchise royalty, system fund and initial franchise fees. The measure of total assets for the reporting segment is reported on the consolidated balance sheets. The measure of capital expenditures for the reporting segment is reported on the consolidated statements of cash flows.

The following table details consolidated net income for the segment for the periods indicated:

(1) General and administrative expenses excludes stock-based compensation, net of amounts capitalized presented separately.

(2) Other segment items included in segment net income are primarily transaction expenses, and impairments and loss on disposal of assets.

The following table sets forth the computations of basic and diluted net income per common share:

Diluted net income per common share is calculated by adjusting the weighted average shares outstanding for the theoretical effect of potential common shares that would be issued for stock awards outstanding and unvested as of the respective periods using the treasury method.

First Watch is an award-winning Daytime Dining concept serving made-to-order breakfast, brunch and lunch using fresh ingredients. The Company’s common stock trades on Nasdaq under the ticker symbol “FWRG”. A recipient of hundreds of local “Best Breakfast” and “Best Brunch” accolades, First Watch’s award-winning chef-driven menu includes elevated executions of classic favorites for breakfast, brunch and lunch. For four consecutive years, First Watch was named a Top 100 Most Loved Workplace® by Newsweek and the Best Practice Institute, and in 2025, was named the #1 Most Loved Workplace for the second year in a row.

The Company operates and franchises restaurants in 32 states under the “First Watch” trade name and as of September 28, 2025, the Company had 548 company-owned restaurants and 72 franchise-owned restaurants.

Financial highlights for the thirteen weeks ended September 28, 2025 (“third quarter of 2025”) as compared, unless otherwise indicated below, to the thirteen weeks ended September 29, 2024 (“third quarter of 2024”), reflected the continued momentum of our operating performance and include the following:

•Opened 21 system-wide restaurants in 14 states, with 1 planned closure, resulting in a total of 620 system-wide restaurants (548 company-owned and 72 franchise-owned) across 32 states

•Total revenues increased 25.6% to $316.0 million in the third quarter of 2025 from $251.6 million in the third quarter of 2024

•System-wide sales increased 20.9% to $352.7 million in the third quarter of 2025 from $291.8 million in the third quarter of 2024

•Same-restaurant sales growth of 7.1%

•Same-restaurant traffic growth of 2.6%

•Income from operations margin increased to 3.2% during the third quarter of 2025 from 2.5% in the third quarter of 2024

•Restaurant level operating profit margin* increased to 19.7% in the third quarter of 2025 from 18.9% in the third quarter of 2024

•Net income increased to $3.0 million, or $0.05 per diluted share, in the third quarter of 2025 from net income of $2.1 million, or $0.03 per diluted share, in the third quarter of 2024

•Adjusted EBITDA* increased to $34.1 million in the third quarter of 2025 from $25.6 million in the third quarter of 2024

___________________

* See Non-GAAP Financial Measures Reconciliations section below.

In the third quarter of 2025, the Company’s same-restaurant traffic grew 2.6%, marking two consecutive quarters of positive traffic growth. We expect positive traffic trends to continue through the end of the year.

Commodity inflation was 3.0% in the third quarter of 2025, driven by coffee and bacon. We project our full year commodity inflation to be approximately 6%.

Restaurant-level wage inflation during the third quarter was 3.6% and full year inflation is expected to be approximately 4%.

Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we commonly discuss the following key operating metrics that we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to evaluate performance and assess the growth of our business as well as the effectiveness of our marketing and operational strategies.

New Restaurant Openings (“NROs”): the number of new company-owned First Watch restaurants commencing operations during the period. Management reviews the number of new restaurants to assess new restaurant growth and company-owned restaurant sales.

Franchise-owned New Restaurant Openings (“Franchise-owned NROs”): the number of new franchise-owned First Watch restaurants commencing operations during the period.

Same-Restaurant Sales Growth: the percentage change in year-over-year restaurant sales (excluding gift card breakage) for the comparable restaurant base, which we define as the number of company-owned First Watch branded restaurants open for 18 months or longer as of the beginning of the fiscal year (“Comparable Restaurant Base”). For the thirteen and thirty-nine weeks ended September 28, 2025 and September 29, 2024, there were 381 restaurants and 344 restaurants, respectively, in our Comparable Restaurant Base. Measuring our same-restaurant sales growth allows management to evaluate the performance of our existing restaurant base. We believe this measure is useful for investors to provide a consistent comparison of restaurant sales results and trends across periods within our core, established restaurant base, unaffected by results of store openings, closings, and other transitional changes.

Same-Restaurant Traffic Growth: the percentage change in traffic counts as compared to the same period in the prior year using the Comparable Restaurant Base. Measuring our same-restaurant traffic growth allows management to evaluate the performance of our existing restaurant base. We believe this measure is useful for investors because an increase in same-restaurant traffic provides an indicator as to the development of our brand and the effectiveness of our marketing strategy.

System-wide restaurants: the total number of restaurants, including all company-owned and franchise-owned restaurants.

System-wide sales: consists of restaurant sales from our company-owned restaurants and franchise-owned restaurants. We do not recognize the restaurant sales from our franchise-owned restaurants as revenue.

To supplement the consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we use the following non-GAAP measures, which present operating results on an adjusted basis: (i) Adjusted EBITDA, (ii) Adjusted EBITDA margin, (iii) Restaurant level operating profit and (iv) Restaurant level operating profit margin. Our presentation of these non-GAAP measures includes isolating the effects of some items that are either nonrecurring in nature or have no meaningful correlation to our ongoing core operating performance. These supplemental measures of performance are not required by or presented in accordance with GAAP. Management believes these non-GAAP measures provide investors with additional visibility into our operations, facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance, help to identify operational trends and allow for greater transparency with respect to metrics used by Management in our financial and operational decision making. Our non-GAAP measures may not be comparable to similarly titled measures used by other companies and have important limitations as analytical tools. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP as they may not provide a complete understanding of our performance. These non-GAAP measures should be reviewed in conjunction with our consolidated financial statements prepared in accordance with GAAP.

We use Adjusted EBITDA and Adjusted EBITDA margin (i) as factors in evaluating management’s performance when determining incentive compensation, (ii) to evaluate our operating results and the effectiveness of our business strategies and (iii) internally as benchmarks to compare our performance to that of our competitors.

We use Restaurant level operating profit and Restaurant level operating profit margin (i) to evaluate the performance and profitability of each operating restaurant, individually and in the aggregate, and (ii) to make decisions regarding future spending and other operational decisions.

Adjusted EBITDA: represents Net income before depreciation and amortization, interest expense, income taxes, and items that we do not consider in our evaluation of ongoing core operating performance as identified in the reconciliation of Net income, the most directly comparable measure in accordance with GAAP, to Adjusted EBITDA, included in the section Non-GAAP Financial Measure Reconciliations below.

Adjusted EBITDA Margin: represents Adjusted EBITDA as a percentage of total revenues. See Non-GAAP Financial Measure Reconciliations below for a reconciliation to Net income margin, the most directly comparable GAAP measure.

Restaurant Level Operating Profit: represents restaurant sales, less restaurant operating expenses, which include food and beverage costs, labor and other related expenses, other restaurant operating expenses, pre-opening expenses and occupancy expenses. Restaurant level operating profit excludes corporate-level expenses and other items that we do not consider in the evaluation of the ongoing core operating performance of our restaurants as identified in the reconciliation of Income from operations, the most directly comparable GAAP measure, to Restaurant level operating profit, included in the section Non-GAAP Financial Measure Reconciliations below.

Restaurant Level Operating Profit Margin: represents Restaurant level operating profit as a percentage of restaurant sales. See Non-GAAP Financial Measure Reconciliations below for a reconciliation to Income from operations margin, the most directly comparable GAAP measure.

			THIRTEEN WEEKS ENDED												THIRTY-NINE WEEKS ENDED
			SEPTEMBER 28, 2025						SEPTEMBER 29, 2024						SEPTEMBER 28, 2025						SEPTEMBER 29, 2024
System-wide sales (in thousands)			$	352,688					$	291,806					$	1,021,896					$	880,364
Same-restaurant sales growth			7.1		%				(1.9)		%				3.7		%				(0.6)		%
Same-restaurant traffic growth			2.6		%				(4.4)		%				1.3		%				(4.3)		%
Income from operations (in thousands)			$	10,050					$	6,313					$	18,476					$	35,046
Income from operations margin			3.2		%				2.5		%				2.1		%				4.7		%
Restaurant level operating profit (in thousands) (1)			$	61,675					$	46,991					$	164,573					$	152,799
Restaurant level operating profit margin (1)			19.7		%				18.9		%				18.3		%				20.5		%
Net income (in thousands)			$	2,991					$	2,112					$	4,268					$	18,226
Net income margin			0.9		%				0.8		%				0.5		%				2.4		%
Adjusted EBITDA (in thousands) (2)			$	34,099					$	25,624					$	87,231					$	89,539
Adjusted EBITDA margin (2)			10.8		%				10.2		%				9.6		%				11.9		%

________________

(1) Reconciliations from Income from operations and Income from operations margin, the most comparable GAAP measures to Restaurant level operating profit and Restaurant level operating profit margin, are set forth in the schedules within the Non-GAAP Financial Measures Reconciliations section below.

(2) Reconciliations from Net income and Net income margin, the most comparable GAAP measures to Adjusted EBITDA and Adjusted EBITDA margin, are set forth in the schedules within the Non-GAAP Financial Measures Reconciliations section below.

The following table summarizes our results of operations and the percentages of certain items in relation to Total revenues or, where indicated, Restaurant sales for the thirteen and thirty-nine weeks ended September 28, 2025 and September 29, 2024, respectively:

			THIRTEEN WEEKS ENDED																								THIRTY-NINE WEEKS ENDED
(in thousands)			SEPTEMBER 28, 2025												SEPTEMBER 29, 2024									SEPTEMBER 28, 2025															SEPTEMBER 29, 2024
Revenues
Restaurant sales			$	313,636					99.2		%				$	248,965					98.9		%				$	898,210					99.1		%				$	743,730					98.8		%
Franchise revenues			2,386						0.8		%				2,644						1.1		%				7,939						0.9		%				8,889						1.2		%
Total revenues			316,022						100.0		%				251,609						100.0		%				906,149						100.0		%				752,619						100.0		%
Operating costs and expenses
Restaurant operating expenses (1) (exclusive of depreciation and amortization shown below):
Food and beverage costs			69,730						22.2		%				55,865						22.4		%				208,355						23.2		%				163,852						22.0		%
Labor and other related expenses			102,387						32.6		%				83,756						33.6		%				300,451						33.4		%				247,332						33.3		%
Other restaurant operating expenses			50,140						16.0		%				38,891						15.6		%				141,002						15.7		%				113,232						15.2		%
Occupancy expenses			25,891						8.3		%				21,075						8.5		%				73,849						8.2		%				60,733						8.2		%
Pre-opening expenses			3,813						1.2		%				2,387						1.0		%				9,980						1.1		%				5,782						0.8		%
General and administrative expenses			33,746						10.7		%				27,680						11.0		%				97,150						10.7		%				82,527						11.0		%
Depreciation and amortization			19,662						6.2		%				15,153						6.0		%				54,355						6.0		%				41,960						5.6		%
Impairments and loss on disposal of assets			175						0.1		%				114						—		%				311						—		%				386						0.1		%
Transaction expenses, net			428						0.1		%				375						0.1		%				2,220						0.2		%				1,769						0.2		%
Total operating costs and expenses			305,972						96.8		%				245,296						97.5		%				887,673						98.0		%				717,573						95.3		%
Income from operations (1)			10,050						3.2		%				6,313						2.5		%				18,476						2.1		%				35,046						4.7		%
Interest expense			(4,567)						(1.4)		%				(3,441)						(1.4)		%				(11,904)						(1.3)		%				(9,421)						(1.3)		%
Other income, net			191						0.1		%				624						0.2		%				1,141						0.1		%				1,663						0.2		%
Income before income taxes			5,674						1.8		%				3,496						1.4		%				7,713						0.9		%				27,288						3.6		%
Income tax expense			(2,683)						(0.8)		%				(1,384)						(0.6)		%				(3,445)						(0.4)		%				(9,062)						(1.2)		%
Net income			$	2,991					0.9		%				$	2,112					0.8		%				$	4,268					0.5		%				$	18,226					2.4		%

_____________

(1) As a percentage of restaurant sales.

Restaurant sales represent the aggregate sales of food and beverages, net of discounts, at company-owned restaurants. Restaurant sales in any period are directly influenced by the number of operating weeks in the period, the number of open restaurants, customer traffic and average check. Average check growth is driven by our menu price increases and changes to our menu mix.

The increase in total restaurant sales as compared to the same periods in the prior year was due principally to (i) the increase in number of restaurants due to NROs, (ii) restaurants acquired from franchisees, (iii) menu price increases and (iv) an increase in same-restaurant traffic, partially offset by increased promotional usage.

Franchise revenues are comprised of sales-based royalty fees, system fund contributions and the amortization of upfront initial franchise fees, which are recognized as revenue on a straight-line basis over the term of the franchise agreement. Franchise revenues in any period are directly influenced by the number of open franchise-owned restaurants.

The decrease in franchise revenues during the thirteen and thirty-nine weeks ended September 28, 2025 as compared to the same periods in the prior year was primarily driven by the Company’s acquisitions of franchise-owned restaurants, partially offset by franchise revenues from the franchise-owned NROs.

Food and beverage costs at company-owned restaurants vary with sales volume and are subject to increases and declines in commodity costs.

Food and beverage costs as a percent of restaurant sales decreased during the thirteen weeks ended September 28, 2025 compared to the same period in the prior year primarily as a result of leverage associated with menu price increases, partially offset by commodity inflation experienced in bacon and coffee.

Food and beverage costs as a percent of restaurant sales increased during the thirty-nine weeks ended September 28, 2025 as compared to the same period in the prior year primarily due to (i) commodity inflation experienced in eggs, coffee, bacon and avocados, and (ii) increased portion size in certain menu items, partially offset by the leverage associated with menu price increases.

Food and beverage costs increased during the thirteen and thirty-nine weeks ended September 28, 2025 as compared to the same periods in the prior year primarily as a result of (i) the increase in the number of company-owned restaurants, (ii) commodity inflation and (iii) increased portion size of meat in certain menu items.

Labor and other related expenses include hourly and management wages, bonuses, payroll taxes, workers’ compensation expense and employee benefits. Factors that influence labor costs include minimum wage and payroll tax legislation, health care costs, the number and performance of our company-owned restaurants and increased competition for qualified staff.

Labor and other related expenses as a percentage of restaurant sales decreased during the thirteen weeks ended September 28, 2025 compared to the same period in the prior year primarily as a result of (i) the leverage associated with menu price increases and (ii) hourly labor efficiency. These decreases were partially offset by an increase in health insurance costs.

Labor and other related expenses as a percentage of restaurant sales increased during the thirty-nine weeks ended September 28, 2025 as compared to the same period in the prior year primarily as a result of increases in (i) wage rates and (ii) health insurance costs, partially offset by the leverage associated with menu price increases.

The increase in labor and other related expenses during the thirteen and thirty-nine weeks ended September 28, 2025 as compared to the same periods in the prior year was primarily due to (i) the increase in the number of restaurants and related headcount, (ii) wage increases and (iii) increased health insurance costs.

Other restaurant operating expenses consist of marketing and advertising expenses, utilities, insurance and other operating variable expenses incidental to operating company-owned restaurants, such as operating supplies (including paper products, menus and to-go supplies), credit card fees, repairs and maintenance, and third-party delivery services fees.