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First Watch Restaurant Group Inc. (FWRG) said it plans to raise $175 million by offering 9.5 million shares at a price range of $17 to $20. First Watch is a daytime restaurant concept serving made-to-order breakfast, brunch, and lunch using fresh ingredients. The original First Watch opened in 1983 in Pacific Grove, California. Founder John Sullivan and his colleague Kenneth L. Pendery, Jr. set out to create a place of their own based upon their shared vision of what a neighborhood cafe should be. Long before "farm to table" became a culinary mantra, First Watch incorporated fresh, quality ingredients into elevated executions of classic dishes.
First Watch Restaurant Group would command a fully diluted market value of $1.1 billion at the midpoint of the proposed range. First Watch is a daytime restaurant concept that serves made-to-order breakfast, brunch, and lunch. As of June 2021, it had 423 restaurants across 28 states, 335 of which were company-owned and 88 operated by its franchisees. In the FY20 and the 1H21, it opened 42 and 18 system-wide restaurants, respectively, and it recorded same-restaurant sales growth of 16% in the 2Q21. First Watch Restaurant Group had $490 million in revenue for the 12 months ended June 30, 2021. It plans to list on the Nasdaq under the symbol FWRG.
There are a couple of inconsistencies in the S1, most notable is the bio of Director and Chairman Ralph Álvarez. Why would FWRG leave out that Mr. Alvarez was the COO of McDonald's and put in his time at DNKN? Presumably, that would be a good indication? Mr. Alvarez announced his retirement from McDonald's effective December 2009 and this was his second chance at MCD after being forced out in 1998 for having an affair with a subordinate. Given how the last MCD CEO departed, did they not want to draw attention to this?
GROWTH STRATEGIES AND OUTLOOK
DRIVE UNIT GROWTH AND INCREASED TRAFFIC GROWTH: FWRG growth will come from opening new restaurants in existing and new markets and driving same-store sales & traffic in existing restaurants. Same-restaurant sales growth will be driven by offering innovative menu items, increasing brand awareness, delivering excellent customer service, and launching relevant sales platforms and initiatives.
MENU INNOVATION: The ongoing evolution of the menu keeps First Watch relevant for consumers. "The development of award-winning menu items and the training and experience of our staff enables us to replicate complex preparations across all our restaurants."
ALCOHOL SALES: The company recently extended its successful fresh juice program with innovative, craft alcohol cocktails in many restaurants, providing a new platform for growth.
INCREASED ACCESSIBILITY THROUGH OFF-PREMISES: In fiscal 2020, FWRG integrated new technology and processes to enable its restaurants to meet better the demand for convenience off-premises dining through take-out and delivery.
INCREASE BRAND AWARENESS: The continued evolution of marketing and advertising strategy focuses on building brand awareness through digital marketing that emphasizes connection with First Watch customers. Is a loyalty plan a possibility?
ON-PREMISE DINING IS IMPORTANT: FWRG plans to continue to prioritize service and deliver a memorable dining experience to every customer and every visit.
NEW TECHNOLOGY: Like many operators that have gone digital, the company will look to expand its appeal and market share (of weekday lunch occasions) with new tools to capture, interpret, and communicate actionable data to improve its abilities to understand customer behaviors and drive additional occasions.
ON THE CALL, WE WILL COVER:
- The current setup for the restaurant industry
- Growth Drivers & Footprint
- First Watch's differentiated daypart focus
- Unit Economics
- Peer Comparison
- Margin Leverage
- Income statement/Balance Sheet/Cash flow (estimates)
- Valuation
