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Yes, First Watch is still growing quickly. In fiscal 2025, revenue rose 20.3% to $1.2 billion, helped by new restaurants and acquired franchise locations. But growth did not translate into stronger consolidated operating profit: operating income fell to $27.5 million and operating margin dropped to 2.3%. Established-store sales rose, though traffic growth was modest—and turned slightly negative in the latest reported quarter, Q2 2026.
Is First Watch still growing?
Yes. The company expanded both its restaurant base and its sales in fiscal 2025. It ended that year with 633 system-wide restaurants across 32 states: 560 company-owned and 73 franchise-owned. It opened 64 system-wide restaurants and acquired 19 operating restaurants from franchisees during the year. Total revenue increased 20.3% to $1.2 billion, while system-wide sales rose to $1.4 billion from $1.2 billion. These are company-reported fiscal 2025 results in its Form 10-K.
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The revenue increase reflects more than performance at existing restaurants. New openings and acquired locations expanded the business, while comparable-store sales also contributed. Those sources of growth matter because revenue can rise quickly as a chain adds locations even if the economics of its established restaurants are not improving at the same pace.
How did established restaurants perform?
First Watch reported 3.6% same-restaurant sales growth in fiscal 2025, but same-restaurant traffic grew only 0.5%. The sales figure therefore should not be read as evidence of a comparable increase in customer visits. The company defines same-restaurant sales using a base of company-owned First Watch restaurants that were open at least 18 months at the beginning of the fiscal year; new and transitioning restaurants are excluded.
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The latest available quarter here, Q2 2026, showed a similar split: same-restaurant sales grew 3.4%, while same-restaurant traffic declined 0.4%. Customers spent enough for comparable sales to increase despite a small decline in visits, but the reported figures do not by themselves identify why spending and traffic moved differently.
Why did revenue grow while operating income fell?
Revenue measures the scale of sales; operating income is what remains after operating costs, including restaurant expenses and corporate costs. In fiscal 2025, First Watch’s revenue rose, but its GAAP income from operations decreased to $27.5 million from $38.9 million in fiscal 2024. Operating margin—operating income as a share of revenue—fell to 2.3% from 3.9%. The company’s audited fiscal 2025 Form 10-K reports these results.
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That does not mean expansion failed. It means that the reported revenue growth did not convert into a higher consolidated operating margin in that year. First Watch also reported net income of $19.4 million, compared with $18.9 million in 2024, and adjusted EBITDA of $120.9 million, compared with $113.8 million. These measures answer different questions and should not be substituted for GAAP operating income.
Keep the profit measures separate
- Income from operations and operating margin: GAAP measures of consolidated operating results. These are the clearest measures in the reported figures for whether operating profit kept pace with revenue.
- Restaurant-level operating profit: a company-defined non-GAAP measure focused on restaurant operations. It rose to $224.1 million in fiscal 2025, but its margin declined to 18.5% from 20.1%.
- Adjusted EBITDA: another non-GAAP measure. It increased to $120.9 million from $113.8 million in fiscal 2024, but it is not the same as GAAP operating income.
The restaurant-level measure can help readers assess restaurant operations apart from other costs, but it does not replace the consolidated GAAP result. First Watch’s fiscal 2025 shareholder overview is available in its 2025 annual report to shareholders.
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What did the latest reported quarter show?
In Q2 2026, which ended June 28, revenue increased 15.2% to $354.7 million, and system-wide sales increased 14.7% to $397.0 million. Same-restaurant sales grew 3.4%, but traffic declined 0.4%. GAAP operating margin was 2.3%, compared with 2.4% a year earlier. Restaurant-level operating-profit margin was 18.8%, up from 18.6%, and net income was $2.3 million versus $2.1 million.
The quarter continued the growth-versus-profit-conversion pattern: sales increased, while the consolidated operating margin remained thin. The slight improvement in the company-defined restaurant-level margin is a separate data point, not evidence that GAAP operating margin improved. These Q2 figures are from First Watch’s Q2 2026 Form 10-Q and accompanying results release.
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What costs affected the results?
First Watch reported 5.0% commodity inflation in fiscal 2025, driven largely by eggs, coffee, avocado, and bacon. Restaurant-level labor inflation was 3.7%. In Q2 2026, the company reported commodity deflation of 1.6% for the second consecutive quarter, mainly because of lower egg, avocado, and bacon costs; higher coffee prices and new, higher-cost beef offerings partly offset those decreases. Restaurant-level wage inflation in the quarter was 4.1%.
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What is First Watch forecasting for fiscal 2026?
In guidance issued August 4, 2026, management forecast fiscal 2026 same-restaurant sales growth of 1.5%–3.0%, total revenue growth of 12.5%–14.0%, adjusted EBITDA of $133–$136 million, and 60–62 net new system-wide restaurants. These are forecasts, not achieved results. The ranges were updated after the wider outlook published with fiscal 2025 results.
Management said the outlook includes the net impact of completed acquisitions: approximately 1 percentage point of revenue growth and $2 million of adjusted EBITDA. The company did not reconcile its adjusted EBITDA guidance to GAAP because it said it could not reasonably predict all reconciling items. See the Q2 2026 results release for the dated outlook.
How to judge First Watch’s growth story
The fairest reading is neither that growth is failing nor that rising revenue proves the business is becoming more profitable. First Watch is adding restaurants and increasing sales, but its established-store traffic was barely positive in fiscal 2025 and negative in Q2 2026, while GAAP operating margin was 2.3% in both fiscal 2025 and Q2 2026. The useful test is whether future expansion and comparable-store sales can translate into stronger consolidated operating income and margin—not revenue growth alone.
In its February 24, 2026 results release, CEO and President Chris Tomasso described 2025 as a year of significant progress, citing nearly 11% new-restaurant growth, revenue growth above 20%, same-restaurant sales growth of 3.6%, and positive traffic. That is management’s characterization; the operating-income and margin figures provide essential context. The quote appears in the company’s SEC-filed fiscal 2025 earnings release.
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