First Watch Raises 2026 EBITDA Outlook as Q3 Revenue Rises 10.7%

First Watch Restaurant Group (NASDAQ: FWRG) raised its full-year 2026 Adjusted EBITDA outlook to the high end of its previous guidance range after third-quarter earnings increased and restaurant expansion helped drive double-digit revenue growth. Comparable-restaurant sales remained positive despite lower traffic, while restaurant-level profitability narrowed slightly.

For the 13 weeks ended September 27, total revenue rose 10.7% to $349.9 million from $316.0 million a year earlier. System-wide sales, which include sales from both company-owned and franchised locations, increased 10.9% to $391.2 million from $352.7 million.

Same-restaurant sales grew 1.0% against what management described as its toughest comparison of the year. Same-restaurant traffic declined 1.9%, indicating that the comparable-sales increase occurred despite fewer customer visits.

Net income increased to $4.8 million, or $0.08 per diluted share, from $3.0 million, or $0.05 per diluted share, in the prior-year quarter. Adjusted EBITDA, a non-GAAP measure, rose to $39.7 million from $34.1 million.

The GAAP income-from-operations margin was unchanged at 3.2%. Restaurant-level operating profit margin, which excludes corporate-level expenses and certain other items, declined to 19.4% from 19.7% a year earlier.

Restaurant Expansion Continues

First Watch opened 16 system-wide restaurants across 11 states during the quarter. At quarter-end, the daytime dining chain operated 681 restaurants in 33 states, comprising 601 company-owned locations and 80 franchised restaurants.

The openings extended the company’s expansion across Arizona, Florida, Georgia, Kentucky, Maryland, Massachusetts, Michigan, Nevada, South Carolina, Tennessee and Utah. First Watch operates its restaurants exclusively during daytime hours, from 7 a.m. to 2:30 p.m., serving breakfast, brunch and lunch.

2026 Outlook

Based on third-quarter results and current trends, First Watch expects fiscal 2026 same-restaurant sales growth of approximately 2.0% and total revenue growth of about 13.5%. The revenue forecast includes an approximately one-percentage-point net contribution from completed acquisitions.

The company now projects Adjusted EBITDA of approximately $136 million, including about $2 million associated with completed acquisitions. First Watch did not provide a reconciliation of the Adjusted EBITDA forecast to a corresponding GAAP measure because it said certain reconciling items cannot be reasonably predicted.

Management continues to expect 60 net new system-wide restaurants for the 52-week fiscal year ending December 27. That plan comprises 53 new company-owned restaurants and nine new franchised locations, partly offset by two company-owned restaurant closures.

Capital expenditures are expected to total approximately $145 million, primarily for new restaurant projects and planned remodels. The estimate excludes capital outlays related to acquisitions of franchise-owned restaurants.

First Watch identified risks including weaker consumer demand, inflation or recession, lower-than-expected same-restaurant sales, changes in food and labor costs, and challenges opening restaurants or managing growth. Other uncertainties include potential sales cannibalization in existing markets, franchisee performance, supply disruptions, food-safety concerns, technology and cybersecurity failures, geographic concentration in the southeastern United States, and the company’s indebtedness and access to additional capital.