First Watch, a well-known daytime dining chain with a national presence, is making a significant move to acquire 21 franchise locations in North Carolina for a substantial $75 million. This noteworthy deal is expected to be finalized by the end of April, subject to the fulfillment of standard closing requirements.
The agreement also includes acquiring development rights, as stated in an official announcement. Interestingly, this deal involves First Watch's largest franchisee partner, based in east Manatee County. However, the specific identity of this franchisee remains undisclosed.
First Watch's Strategic Franchise Acquisitions
First Watch, famous for its chef-driven breakfast, lunch, and brunch offerings, is taking significant strides in its long-term growth strategy. The company is set to acquire 44 franchised restaurants through strategic acquisitions. It includes the latest deal, which encompasses 21 locations in North Carolina.
These acquisitions represent a substantial expansion effort by First Watch, which has gained recognition for its unique menu featuring both classic favorites and specialty dishes such as the Quinoa Power Bowl, Farm Stand Breakfast Tacos, Avocado Toast, Spiked Lavender Lemonade, and the signature Million Dollar Bacon.
This latest move follows a pattern established in May, during which First Watch has undertaken five accretive acquisitions to strengthen its presence. Notably, in November, the company announced the purchase of six franchise locations in the Florida Panhandle.
These acquisitions were made possible through pre-negotiated purchase options established before First Watch's initial public offering on October 1, 2021.
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Financial Flexibility for Expansion: First Watch's Strategic Move
First Watch has amended its credit agreement to prepare for the North Carolina acquisition and ongoing expansion. This strategic adjustment gives the company the financial flexibility to facilitate these franchise acquisitions and construct new restaurants.
Chris Tomasso, CEO and president of First Watch, emphasized the company's commitment to maintaining a conservative approach to debt despite an impressive 11% growth in the 2023 year over year.
Last year, First Watch made remarkable strides in expanding its footprint. The company added 51 new restaurants across 19 states, including 37 company-owned and 14 franchise units. This expansion brought the number of First Watch restaurants to 524, 425 company-owned and 99 franchised locations, with only one company-owned restaurant closure.
Chris Tomasso, First Watch's CEO and president, expressed the significance of the latest acquisition, stating, "Our acquisition of franchise-operated restaurants is a vital component of our long-term growth and value creation strategy. This deal represents our most substantial transaction to date."
Tomasso also highlighted the company's expectations for the 21 restaurants acquired in one of their key markets. They anticipate these locations will generate average unit volumes and restaurant-level operating profit margins that align with their company-owned restaurants. Moreover, this strategic move will provide them with additional territories for organic growth in the future.
First Watch's recent franchise acquisitions and financial adjustments underscore its strategic growth and expansion commitment. With its unique menu and strong presence, the company continues to make waves in the competitive world of daytime dining.
About First Watch
First Watch, founded in 1983 in California, is a daytime dining chain known for its nautical-inspired name and limited hours (7:00 AM to 2:30 PM).
Over the years, it has seen significant growth, including a 2004 investment that expanded its presence in the Southeast and Midwest. In 2011, Advent International acquired First Watch, and in 2012, it received top ratings for its breakfast offerings.
In 2014, First Watch acquired The Good Egg in Arizona. In 2018, it began sourcing coffee from Colombia to support local communities. In 2021, First Watch went public with an IPO, raising $170 million on Nasdaq, and has converted 18 former Good Egg restaurants into its own establishments.
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