First Watch Restaurant - 10-Q quarterly report FY2026 Q3

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2026


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission file number 001-40866

First Watch Restaurant Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware		82-4271369
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
	8725 Pendery Place, Suite 201, Bradenton, FL 34201
	(Address of Principal Executive Offices) (Zip Code)

(941) 907-9800

(Registrant’s telephone number, including area code)

N/A

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FWRG	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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 61,726,533 shares of common stock as of October 30, 2026.

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements

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, 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 can be identified by 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. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance and statements discussing our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business, such as those contained in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include:

•our vulnerability to changes in consumer preferences and economic conditions such as inflation and recession;

•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 in existing markets;

•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;

•our vulnerability to food safety and food-borne illness concerns;

•unsuccessful financial performance of our franchisees;

•our limited control over our franchisees’ operations;

•our inability to maintain good relationships with our franchisees and 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 and artificial intelligence;

•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

•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.

See Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K as of and for the year ended December 28, 2025 (“2025 Form 10-K”) and Part II. Item 1A. “Risk Factors” in this Form 10-Q for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this Form 10‑Q and in our other filings with the Securities and Exchange Commission (the “SEC”). Any forward-looking statement made by us in this Form 10-Q speaks only as of the date hereof and is expressly qualified in its entirety by these cautionary statements. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Table of Contents

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(Unaudited)


	SEPTEMBER 27, 2026		DECEMBER 28, 2025
Assets
Current assets:
Cash and cash equivalents	$	21,065	$	21,246
Accounts receivable	7,164		6,859
Inventory	7,299		7,174
Prepaid expenses	8,283		7,945
Deposits and other current assets	3,373		5,856
Total current assets	47,184		49,080
Goodwill	420,208		420,208
Intangible assets, net	168,644		174,908
Operating lease right-of-use assets	673,795		614,548
Property, fixtures and equipment, net of accumulated depreciation of $338,884 and $285,706, respectively	540,270		478,451
Other long-term assets	8,329		4,834
Total assets	$	1,858,430	$	1,742,029
Liabilities and Equity
Current liabilities:
Accounts payable	$	10,011	$	8,701
Accrued liabilities	46,808		38,496
Accrued compensation	33,374		24,281
Deferred revenues	3,561		6,778
Current portion of operating lease liabilities	81,166		75,034
Current portion of long-term debt	16,116		13,309
Interest rate swap liabilities, current	31		900
Total current liabilities	191,067		167,499
Operating lease liabilities	716,604		651,254
Long-term debt, net	275,160		269,071
Deferred income taxes	22,544		21,972
Derivative liabilities	—		557
Other long-term liabilities	9,214		5,397
Total liabilities	1,214,589		1,115,750
Commitments and contingencies (Note 12)
Equity:
Preferred stock; $0.01 par value; 10,000,000 shares authorized; none issued and outstanding	—		—
Common stock; $0.01 par value; 300,000,000 shares authorized; 61,726,533 and 61,131,978 shares issued and outstanding at September 27, 2026 and December 28, 2025, respectively	617		611
Additional paid-in capital	672,477		661,153
Accumulated deficit	(29,949)		(34,390)
Accumulated other comprehensive income (loss)	696		(1,095)
Total equity	643,841		626,279
Total liabilities and equity	$	1,858,430	$	1,742,029

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(Unaudited)


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Revenues
Restaurant sales	$	346,722	$	313,636	$	1,026,351	$	898,210
Franchise revenues	3,139		2,386		9,141		7,939
Total revenues	349,861		316,022		1,035,492		906,149
Operating costs and expenses
Restaurant operating expenses (exclusive of depreciation and amortization shown below):
Food and beverage costs	77,402		69,730		234,305		208,355
Labor and other related expenses	112,962		102,387		339,294		300,451
Other restaurant operating expenses	56,048		50,140		163,509		141,002
Occupancy expenses	29,506		25,891		85,261		73,849
Pre-opening expenses	3,461		3,813		9,833		9,980
General and administrative expenses	35,244		33,746		113,916		97,150
Depreciation and amortization	22,700		19,662		65,935		54,355
Impairments and loss on disposal of assets	170		175		437		311
Transaction and restructuring expenses, net	1,320		428		2,828		2,220
Total operating costs and expenses	338,813		305,972		1,015,318		887,673
Income from operations	11,048		10,050		20,174		18,476
Interest expense	(4,933)		(4,567)		(14,603)		(11,904)
Other income, net	362		191		840		1,141
Income before income taxes	6,477		5,674		6,411		7,713
Income tax expense	(1,690)		(2,683)		(1,970)		(3,445)
Net income	$	4,787	$	2,991	$	4,441	$	4,268

Net income	$	4,787	$	2,991	$	4,441	$	4,268
Other comprehensive income (loss):
Unrealized gain (loss) on derivatives	1,331		88		2,381		(920)
Income tax related to other comprehensive income (loss)	(330)		(22)		(590)		229
Comprehensive income	$	5,788	$	3,057	$	6,232	$	3,577


Net income per common share - basic	$	0.08	$	0.05	$	0.07	$	0.07
Net income per common share - diluted	$	0.08	$	0.05	$	0.07	$	0.07
Weighted average number of common shares outstanding - basic	61,719,871		61,027,278		61,544,361		60,933,443
Weighted average number of common shares outstanding - diluted	62,550,856		62,834,080		62,600,196		62,798,962

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Equity
	Shares	Amount
Balance at December 29, 2024	60,700,090	$	607	$	649,045	$	(53,822)	$	(441)	$	595,389
Net loss	—	—		—		(829)		—		(829)
Stock-based compensation	—	—		2,259		—		—		2,259
Common stock issued under stock-based compensation plans, net	274,453	3		130		—		—		133
Other comprehensive loss, net of tax	—	—		—		—		(663)		(663)
Balance at March 30, 2025	60,974,543	$	610	$	651,434	$	(54,651)	$	(1,104)	$	596,289
Net income	—	—		—		2,106		—		2,106
Stock-based compensation	—	—		2,842		—		—		2,842
Common stock issued under stock-based compensation plans, net	49,428	—		170		—		—		170
Other comprehensive loss, net of tax	—	—		—		—		(94)		(94)
Balance at June 29, 2025	61,023,971	$	610	$	654,446	$	(52,545)	$	(1,198)	$	601,313
Net income	—	—		—		2,991		—		2,991
Stock-based compensation	—	—		2,941		—		—		2,941
Common stock issued under stock-based compensation plans, net	8,134	—		—		—		—		—
Other comprehensive income, net of tax	—	—		—		—		66		66
Balance at September 28, 2025	61,032,105	$	610	$	657,387	$	(49,554)	$	(1,132)	$	607,311


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Equity
	Shares	Amount
Balance at December 28, 2025	61,131,978	$	611	$	661,153	$	(34,390)	$	(1,095)	$	626,279
Net loss	—	—		—		(2,685)		—		(2,685)
Stock-based compensation	—	—		3,420		—		—		3,420
Common stock issued under stock-based compensation plans, net	493,177	5		84		—		—		89
Other comprehensive income, net of tax	—	—		—		—		554		554
Balance at March 29, 2026	61,625,155	$	616	$	664,657	$	(37,075)	$	(541)	$	627,657
Net income	—	—		—		2,339		—		2,339
Stock-based compensation	—	—		3,771		—		—		3,771
Common stock issued under stock-based compensation plans, net	87,280	1		165		—		—		166
Other comprehensive income, net of tax	—	—		—		—		236		236
Balance at June 28, 2026	61,712,435	$	617	$	668,593	$	(34,736)	$	(305)	$	634,169
Net income	—	—		—		4,787		—		4,787
Stock-based compensation	—	—		3,717		—		—		3,717
Common stock issued under stock-based compensation plans, net	14,098	—		167		—		—		167
Other comprehensive income, net of tax	—	—		—		—		1,001		1,001
Balance at September 27, 2026	61,726,533	$	617	$	672,477	$	(29,949)	$	696	$	643,841

The accompanying notes are an integral part of these consolidated financial statements.

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FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(Unaudited)


	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Cash flows from operating activities
Net income	$	4,441	$	4,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	65,935		54,355
Stock-based compensation, net of amounts capitalized	10,688		7,926
Non-cash operating lease costs	28,022		24,167


Deferred income taxes	(18)		1,798
Amortization of debt discount and deferred issuance costs	512		493
Impairments and loss on disposal of assets	437		311

Changes in assets and liabilities, net of effects of business combinations:
Accounts receivable	(305)		1,729
Inventory	(125)		(179)
Prepaid expenses	(338)		365
Deposits and other assets, current and long-term	261		(2,590)
Accounts payable	1,310		270
Accrued liabilities and other long-term liabilities	9,509		11,546
Accrued compensation and deferred payroll taxes	9,093		9,320
Deferred revenues, current and long-term	(3,190)		(3,570)

Operating lease liabilities	(15,787)		(2,757)
Net cash provided by operating activities	110,445		107,452
Cash flows from investing activities
Capital expenditures	(113,263)		(120,108)
Acquisitions, net of cash acquired	(171)		(54,833)
Purchase of intangible assets	(515)		(830)

Net cash used in investing activities	(113,949)		(175,771)
Cash flows from financing activities
Proceeds from borrowings on revolving credit facility	604,500		261,500
Repayments of borrowings on revolving credit facility	(592,000)		(226,500)
Proceeds from issuance of long-term debt	—		27,500
Repayments of long-term debt, including finance lease liabilities	(9,599)		(7,082)

Proceeds from exercise of stock options, net of employee taxes paid	422		303

Net cash provided by financing activities	3,323		55,721
Net decrease in cash and cash equivalents	(181)		(12,598)
Cash and cash equivalents
Beginning of period	21,246		33,312
End of period	$	21,065	$	20,714

The accompanying notes are an integral part of these consolidated financial statements.

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FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(IN THOUSANDS)

(Unaudited)


	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Supplemental cash flow information
Cash paid for interest, net of amounts capitalized	$	13,997	$	6,918
Cash paid for income taxes, net of refunds	$	2,190	$	2,061

Supplemental disclosures of non-cash investing and financing activities
Leased assets obtained in exchange for new operating lease liabilities (1)	$	82,948	$	104,097
Leased assets obtained in exchange for new finance lease liabilities	$	5,424	$	9,536
Remeasurements and terminations of operating lease assets and lease liabilities	$	4,321	$	5,620
Remeasurements and terminations of finance lease assets and lease liabilities	$	(259)	$	(520)
Increase (decrease) in liabilities from acquisition of property, fixtures and equipment	$	2,764	$	(391)

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

The accompanying notes are an integral part of these consolidated financial statements.

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Organization

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 33 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 27, 2026, the Company operated 601 company-owned restaurants and had 80 franchise-owned restaurants.

2. Summary of Significant Accounting Policies

Basis of Presentation

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 27, 2026 and September 28, 2025 were 13-week periods. These unaudited interim consolidated financial statements (“these financial statements”) include only the information and notes required for interim financial statements by generally accepted accounting principles in the United States of America (“GAAP”) and the Securities and Exchange Commission (“SEC”) and 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 28, 2025 (“2025 Form 10‑K”).

These financial statements have been prepared on the same basis as those presented in the 2025 Form 10-K and include all adjustments necessary for fair presentation of the quarterly periods presented. The quarterly results of operations are not necessarily indicative of the expected results for other quarters or the entire fiscal year. Preparation of financial statements requires Management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ materially from the estimates.

Fair Value of Financial Instruments

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, deposits and other current assets, and other current liabilities approximate their fair values due to their short-term maturities.

Interest Rate Swaps

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 consolidated balance sheets 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.

Summary of Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 on disclosures.

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

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging: Hedge Accounting Improvements, which includes amendments to more closely align hedge accounting with the economics of the Company’s risk management activities. The amendments in this update are effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management is currently evaluating the impact of this new standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting: Narrow-Scope Improvements, which makes targeted, narrow scope improvements to interim reporting to clarify application and improve consistency in practice. The amendments in this update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact of this new standard.

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

3. Business Acquisitions

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 Company has finalized the purchase price allocations for the acquisitions and there were no adjustments made to the initial preliminary valuations.


	DATE OF ACQUISITION
(in thousands, except number of acquired restaurants)	APRIL 14, 2025		APRIL 28, 2025
Number of acquired restaurants	3		16
Purchase price (cash)	$	6,985	$	49,247
Transaction costs incurred	$	416	$	1,017
Deferred franchise fees recognized as a result of termination of pre-existing franchise agreement	$	—	$	398
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	5	$	24
Inventory	$	31	$	159
Other assets	$	9	$	124
Property, fixtures and equipment	$	2,998	$	19,800
Reacquired rights	$	1,920	$	13,060
Goodwill	$	2,876	$	18,767
Operating right-of-use assets, net of lease positions and prepaid rent	$	2,922	$	17,305
Operating lease liabilities	$	(3,735)	$	(19,896)
Accounts payable	$	(2)	$	—
Deferred revenues - gift card liabilities assumed	$	(39)	$	(96)

Goodwill reflects the value of expected synergies and assembled workforce, and was assigned to the Company’s single reporting unit. The Company treated 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 was 6.1 years on the acquisition dates.

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

4. Revenues

Revenues recognized, disaggregated by type, were as follows:


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Restaurant sales:
In-restaurant dining sales	$	279,365	$	254,155	$	829,383	$	728,282
Third-party delivery sales	42,442		37,163		123,477		103,633
Take-out sales	24,915		22,318		73,491		66,295
Total restaurant sales	346,722		313,636		1,026,351		898,210

Franchise revenues:
Royalty and system fund contributions	3,077		2,333		8,941		7,371
Initial fees	62		53		200		170
Business combinations - revenues recognized	—		—		—		398
Total franchise revenues	3,139		2,386		9,141		7,939
Total revenues	$	349,861	$	316,022	$	1,035,492	$	906,149

The following tables include details of liabilities from contracts with customers:


(in thousands)	SEPTEMBER 27, 2026		DECEMBER 28, 2025
Deferred revenues:
Deferred gift card revenue	$	3,311	$	6,548
Deferred franchise fee revenue - current	250		230
Total current deferred revenues	$	3,561	$	6,778
Other long-term liabilities:
Deferred franchise fee revenue - non-current	$	1,253	$	1,226

Changes in deferred gift card contract liabilities were as follows:


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Deferred gift card revenue:
Balance, beginning of period	$	4,151	$	3,301	$	6,548	$	5,385
Gift card sales	1,787		1,455		7,217		6,305
Gift card redemptions	(2,336)		(2,073)		(9,352)		(8,422)
Gift card breakage	(291)		(260)		(1,102)		(980)
Gift card liabilities assumed through acquisitions	—		—		—		135
Balance, end of period	$	3,311	$	2,423	$	3,311	$	2,423

Changes in deferred franchise fee contract liabilities were as follows:


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Deferred franchise fee revenue:
Balance, beginning of period	$	1,485	$	1,489	$	1,456	$	1,929
Cash received	80		20		247		95
Franchise revenues recognized	(62)		(53)		(200)		(170)
Business combinations - franchise revenues recognized	—		—		—		(398)
Balance, end of period	$	1,503	$	1,456	$	1,503	$	1,456

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

5. Accounts Receivable

Accounts receivable consisted of the following:


(in thousands)	SEPTEMBER 27, 2026		DECEMBER 28, 2025
Receivables from third-party delivery providers	$	2,568	$	2,068
Receivables from vendors	1,579		1,337
Receivables from franchisees	1,196		907
Receivables related to gift card sales	452		2,091
Other receivables	1,369		456
Total accounts receivable	$	7,164	$	6,859

6. Accrued Liabilities

Accrued liabilities consisted of the following:


(in thousands)	SEPTEMBER 27, 2026		DECEMBER 28, 2025
Construction liabilities	$	14,352	$	11,588
Sales tax	9,698		8,806
Insurance liabilities	4,646		4,047
Utilities	3,424		2,892
Credit card fees	2,298		2,110
Property tax	2,802		1,453
Contingent rent	1,282		1,239
Other	8,306		6,361
Total accrued liabilities	$	46,808	$	38,496

7. Debt

Long-term debt, net consisted of the following:


	SEPTEMBER 27, 2026			DECEMBER 28, 2025
(in thousands)	Balance		Interest Rate	Balance		Interest Rate
Term Facilities	$	203,188	6.90%	$	211,625	6.54%
Revolving Credit Facility	68,500		7.05%	56,000		7.17%
Finance lease liabilities	17,442			12,906
Financing obligation	3,050			3,050
Less: Unamortized debt discount and deferred issuance costs	(904)			(1,201)
Total debt, net	291,276			282,380
Less: Current portion of long-term debt	(16,116)			(13,309)
Long-term debt, net	$	275,160		$	269,071

Credit Facility

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, 2024 (as amended, the “Credit Agreement”), 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, collectively with the Term Facilities, the “Credit Facility”). The Credit Facility matures on January 5, 2029.

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

As of September 27, 2026, 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) the secured overnight financing rate (“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. Additionally, an unused commitment fee of between 37.5 and 50 basis points is paid on the undrawn commitments under the Revolving Credit Facility, also 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.

Fair Value of Debt

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:


	SEPTEMBER 27, 2026				DECEMBER 28, 2025
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Facilities	$	203,188	$	202,975	$	211,625	$	210,860
Revolving Credit Facility	$	68,500	$	68,416	$	56,000	$	55,761

Debt Covenants

The Credit Facility is guaranteed by all of FWR’s wholly-owned domestic restricted subsidiaries, subject to customary exceptions, 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 intangible assets, in each case, subject to customary exceptions.

Under the Credit Agreement, FWR (and in certain circumstances, Holdings) and its restricted subsidiaries are subject to customary 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 the covenants under the Credit Agreement as of September 27, 2026.

8. Interest Rate Swaps

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

On June 23, 2023, the Company 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 these interest rate swaps, the Company pays a weighted average fixed rate of 4.16% on the notional amount and receives payments from, or makes payments to, the counterparties based on the three-month SOFR rate.

On May 17, 2024, the Company 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 these interest rate swaps, the Company pays a weighted average fixed rate of 4.42% on the notional amount and receives payments from, or makes payments to, the counterparties based on the three-month SOFR rate.

On August 18, 2026, the Company entered into two additional variable-to-fixed interest rate swaps. These interest rate swaps have an initial aggregate notional amount of $50.0 million, which will increase to a notional amount of $80.0 million on December 24, 2026 and mature on December 29, 2028. Under the terms of these interest rate swaps, the Company pays a weighted average fixed rate of 4.08% on the notional amounts and receives payments from, or makes 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 used observable 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 Company has determined that the impact of the credit valuation adjustments was not significant to the overall valuation. As a result, the derivatives were classified within Level 2 of the fair value hierarchy.

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Amounts reported in Other comprehensive income (loss) related to the interest rate swaps will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the thirty-nine weeks ended September 27, 2026, a total of $0.6 million was reclassified from Other comprehensive income (loss) as an increase to interest expense. Over the next 12 months, Management estimates that $0.3 million will be reclassified as a decrease to interest expense.

9. Leases

The following table includes detail of lease assets and liabilities:


(in thousands)	Consolidated Balance Sheet Classification	SEPTEMBER 27, 2026		DECEMBER 28, 2025
Finance lease assets - current	Deposits and other current assets	$	652	$	120
Operating lease right-of-use assets	Operating lease right-of-use assets	673,795		614,548
Finance lease assets	Property, fixtures and equipment, net	14,376		10,730
Total lease assets		$	688,823	$	625,398

Operating lease liabilities - current(1)	Current portion of operating lease liabilities	$	81,166	$	75,034
Operating lease liabilities - non-current	Operating lease liabilities	716,604		651,254
Finance lease liabilities - current(1)	Current portion of long-term debt	2,053		2,059
Finance lease liabilities - non-current	Long-term debt, net	15,389		10,847
Total lease liabilities		$	815,212	$	739,194

_____________

(1) Excludes all variable lease expense.

The components of lease expense were as follows:


(in thousands)	Consolidated Statements of Operations and Comprehensive Income Classification	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Operating lease expense	Other restaurant operating expenses Occupancy expenses Pre-opening expenses General and administrative expenses	$	24,643	$	21,905	$	71,494	$	62,449
Variable lease expense	Food and beverage costs Occupancy expenses General and administrative expenses	6,633		5,953		18,931		16,997
Finance lease expense:
Amortization of leased assets	Depreciation and amortization	514		342		1,521		760
Interest on lease liabilities	Interest expense	245		155		691		286
Total lease expense (1)		$	32,035	$	28,355	$	92,637	$	80,492

_____________

(1) Includes contingent rent expense of $0.6 million and $0.5 million during the thirteen weeks ended September 27, 2026 and September 28, 2025, respectively, and $1.6 million and $1.5 million during the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively.

Supplemental cash flow information related to leases was as follows:

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)


(in thousands)	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	59,259	$	41,044
Operating cash flows - finance leases	$	691	$	286
Financing cash flows - finance leases	$	1,162	$	223

Supplemental information related to leases was as follows:


	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Weighted-average remaining lease term (in years)
Operating leases	12.4		12.9
Finance leases	13.3		9.4
Weighted-average discount rate (1)
Operating leases	7.7	%	7.8	%
Finance leases	6.8	%	6.2	%

____________

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

10. Equity and Stock-Based Compensation

Stock option awards

There were no stock option awards granted during the thirty-nine weeks ended September 27, 2026. A summary of stock option activity during the thirty-nine weeks ended September 27, 2026 was as follows:


	NUMBER OF OPTIONS	WEIGHTED AVERAGE EXERCISE PRICE PER SHARE		AGGREGATE INTRINSIC VALUE (in thousands)		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (in years)
Outstanding, December 28, 2025	3,577,374	$	10.15	$	20,614	3.2
Expired	(78,748)	$	12.89
Exercised	(42,879)	$	9.84
Outstanding and exercisable, September 27, 2026	3,455,747	$	10.10	$	3,595	2.4

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 the Nasdaq Global Select Market (“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 27, 2026 is as follows:


	NUMBER OF OPTIONS	WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER SHARE
Nonvested, December 28, 2025	3,946	$	5.22
Vested	(3,946)	$	5.22
Nonvested, September 27, 2026	—	$	—

Restricted stock units

During the thirty-nine weeks ended September 27, 2026, a total of 1,136,227 restricted stock units (“RSUs”) were granted. Of these RSUs, 901,643 will vest over a period of three years; 113,353 will vest in full one year from the grant date; 94,636 will vest in full three years from the grant date; and 26,595 will vest in full four years from the grant date.

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

A summary of the Company’s RSU activity during the thirty-nine weeks ended September 27, 2026 is as follows:


	RESTRICTED STOCK UNITS	WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER SHARE		AGGREGATE INTRINSIC VALUE (in thousands)
Outstanding, December 28, 2025	2,010,917	$	17.60	$	31,994
Granted	1,136,227	$	12.33
Forfeited	(105,288)	$	15.51
Vested	(551,676)	$	18.30
Outstanding, September 27, 2026	2,490,180	$	15.13	$	25,250

The aggregate intrinsic value is based on the closing price of the Company’s common stock on Nasdaq of $10.14 and $15.91 on September 25, 2026 and December 26, 2025, the last trading days of the periods, respectively.

Stock-based compensation expense, net of amounts capitalized, was $3.6 million and $2.9 million during the thirteen weeks ended September 27, 2026 and September 28, 2025, respectively, and $10.7 million and $7.9 million during the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively. Capitalized stock-based compensation included in property, fixtures and equipment totaled $0.2 million and $0.1 million for the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively.

Unrecognized stock-based compensation expense

The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of September 27, 2026:


	UNRECOGNIZED STOCK-BASED COMPENSATION EXPENSE (in thousands)		REMAINING WEIGHTED AVERAGE RECOGNITION PERIOD (in years)
Restricted stock units	$	27,351	2.3

As of September 27, 2026, all stock options were fully vested and there were no unvested stock options outstanding.

11. Income Taxes


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			SEPTEMBER 27, 2026			SEPTEMBER 28, 2025
Income before income taxes	$	6,477		$	5,674		$	6,411		$	7,713
Income tax expense	$	(1,690)		$	(2,683)		$	(1,970)		$	(3,445)
Effective income tax rate	26.1		%	47.3		%	30.7		%	44.7		%

Management accounts for income taxes in interim periods using an estimated annual effective tax rate, adjusted for discrete items recognized during the period. Income tax expense reflects the application of the estimated annual effective income tax rate to the Company’s actual earnings for the periods, partially offset by discrete tax items, including stock-based compensation and certain state income tax matters.

The effective income tax rate for the thirteen and thirty-nine weeks ended September 27, 2026 decreased compared to the same periods in the prior year primarily due to changes in (i) the benefit of federal tax credits received by the Company for FICA taxes paid on certain employee tips, (ii) state income taxes, and (iii) stock-based compensation tax impacts.

Valuation allowance

Management routinely assesses the realizability of deferred tax assets, and may record a valuation allowance if, based on all available positive and negative evidence, the determination is reached that some portion of the deferred tax assets may not be realized prior to expiration. If Management determines that the Company may be able to realize the deferred tax assets in the future, the Company would make an adjustment to the deferred tax assets valuation allowance, which would reduce the provision for income taxes during the period in which the determination was made. As of the period ended

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

September 27, 2026 based upon all available evidence, Management has maintained a valuation allowance against a portion of the deferred tax assets.

As the Company’s future taxable earnings increase and the 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.

12. Commitments and Contingencies

Legal Proceedings

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 27, 2026. In the event any litigation losses become probable and estimable, the Company will recognize anticipated losses.

13. Segment Information

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 our 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 as total assets. The measure of capital expenditures for the reporting segment is reported on the consolidated statements of cash flows as capital expenditures.

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


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Total revenues	$	349,861	$	316,022	$	1,035,492	$	906,149
Less:
Food and beverage costs	77,402		69,730		234,305		208,355
Labor and other related expenses	112,962		102,387		339,294		300,451
Other restaurant operating expenses	56,048		50,140		163,509		141,002
Occupancy expenses	29,506		25,891		85,261		73,849
Pre-opening expenses	3,461		3,813		9,833		9,980
Stock-based compensation, net of amounts capitalized	3,639		2,877		10,688		7,926
General and administrative expenses (1)	31,605		30,869		103,228		89,224
Depreciation and amortization	22,700		19,662		65,935		54,355
Other segment items (2)	1,490		603		3,265		2,531
Interest expense	4,933		4,567		14,603		11,904
Other income, net	(362)		(191)		(840)		(1,141)
Income tax expense	1,690		2,683		1,970		3,445
Net income	$	4,787	$	2,991	$	4,441	$	4,268

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

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

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

14. Net Income Per Common Share

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


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(in thousands, except share and per share data)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Numerator:
Net income	$	4,787	$	2,991	$	4,441	$	4,268
Denominator:
Weighted average common shares outstanding - basic	61,719,871		61,027,278		61,544,361		60,933,443
Weighted average common shares outstanding - diluted	62,550,856		62,834,080		62,600,196		62,798,962
Net income per common share - basic	$	0.08	$	0.05	$	0.07	$	0.07
Net income per common share - diluted	$	0.08	$	0.05	$	0.07	$	0.07
Stock options outstanding not included in diluted net income per common share as their effect is anti-dilutive	1,253,332		12,552		220,522		12,552
Restricted stock units outstanding not included in diluted net income per share as their effect is anti-dilutive	1,015,422		222,055		547,131		9

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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q and our audited consolidated financial statements and notes included in our 2025 Form 10-K. As discussed in the “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may materially differ from those discussed in such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in our 2025 Form 10-K, including under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in “Part II, Item 1A. Risk Factors” of this Form 10-Q.

References to “we,” “us,” “our,” “the Company” and “Management” in this Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) refer to First Watch Restaurant Group, Inc., collectively with its wholly-owned subsidiaries.

Overview

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

We employ more than 19,000 employees, operate and franchise restaurants in 33 states under the “First Watch” trade name and, as of September 27, 2026, had 601 company-owned restaurants and 80 franchise-owned restaurants.

Recent Developments

Financial highlights for the thirteen weeks ended September 27, 2026 (“third quarter of 2026”) as compared to the thirteen weeks ended September 28, 2025 (“third quarter of 2025”) reflect the continued momentum of our operating performance and include the following:

•Opened 16 system-wide restaurants in 11 states resulting in a total of 681 system-wide restaurants (601 company-owned and 80 franchise-owned) across 33 states as of September 27, 2026

•Total revenues increased 10.7% to $349.9 million from $316.0 million

•System-wide sales increased 10.9% to $391.2 million from $352.7 million

•Same-restaurant sales growth of 1.0%

•Same-restaurant traffic growth of negative 1.9%

•Income from operations margin remained flat at 3.2%

•Restaurant level operating profit margin* decreased to 19.4% from 19.7%

•Net income increased to $4.8 million, or $0.08 per diluted share, from net income of $3.0 million, or $0.05 per diluted share

•Adjusted EBITDA* increased to $39.7 million from $34.1 million

___________________

* See Non-GAAP Financial Measures Reconciliations section below.

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Business Trends

In the third quarter of 2026, we experienced same-restaurant sales growth of 1.0% and same-restaurant traffic growth of negative 1.9%. We expect annual same-restaurant sales growth to be approximately 2.0%.

We experienced commodity deflation of 0.4% in the third quarter of 2026, primarily due to lower costs of bacon and avocados, somewhat offset by an increase in turkey sausage prices and the demand for higher cost beef offerings. We expect our full year commodity inflation to be approximately flat.

Restaurant-level wage inflation during the third quarter of 2026 was 4.1% and full year inflation is expected to be approximately 4.0%.

Key Performance Indicators

Throughout this MD&A, we 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 27, 2026 and September 28, 2025, there were 454 restaurants and 381 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 year-over-year traffic counts 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 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.

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Non-GAAP Financial Measures

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 operating restaurants, 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.

Selected Operating Data


	THIRTEEN WEEKS ENDED SEPTEMBER 27, 2026
	COMPANY-OWNED	FRANCHISE-OWNED	TOTAL
Beginning of period	586	79	665
New restaurant openings	15	1	16
Closures	—	—	—
End of period	601	80	681

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	THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2026
	COMPANY-OWNED	FRANCHISE-OWNED	TOTAL
Beginning of period	560	73	633
New restaurant openings	42	8	50
Closures	(1)	(1)	(2)
End of period	601	80	681


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			SEPTEMBER 27, 2026			SEPTEMBER 28, 2025
System-wide sales (in thousands)	$	391,192		$	352,688		$	1,155,803		$	1,021,896
Same-restaurant sales growth	1.0		%	7.1		%	2.4		%	3.7		%
Same-restaurant traffic growth	(1.9)		%	2.6		%	(1.4)		%	1.3		%
Income from operations (in thousands)	$	11,048		$	10,050		$	20,174		$	18,476
Income from operations margin	3.2		%	3.2		%	2.0		%	2.1		%
Restaurant level operating profit (in thousands) (1)	$	67,343		$	61,675		$	194,149		$	164,573
Restaurant level operating profit margin (1)	19.4		%	19.7		%	18.9		%	18.3		%
Net income (in thousands)	$	4,787		$	2,991		$	4,441		$	4,268
Net income margin	1.4		%	0.9		%	0.4		%	0.5		%
Adjusted EBITDA (in thousands) (2)	$	39,748		$	34,099		$	102,015		$	87,231
Adjusted EBITDA margin (2)	11.4		%	10.8		%	9.9		%	9.6		%

________________

(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, respectively, are set forth in the tables 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, respectively, are set forth in the tables within the Non-GAAP Financial Measures Reconciliations section below.

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Results of Operations

The following table summarizes our results of operations and the percentages of items in our Consolidated Statements of Operations and Comprehensive Income in relation to Total revenues or, where indicated, Restaurant sales for the thirteen and thirty-nine weeks ended September 27, 2026 and September 28, 2025:


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026				SEPTEMBER 28, 2025				SEPTEMBER 27, 2026				SEPTEMBER 28, 2025
Revenues
Restaurant sales	$	346,722	99.1	%	$	313,636	99.2	%	$	1,026,351	99.1	%	$	898,210	99.1	%
Franchise revenues	3,139		0.9	%	2,386		0.8	%	9,141		0.9	%	7,939		0.9	%
Total revenues	349,861		100.0	%	316,022		100.0	%	1,035,492		100.0	%	906,149		100.0	%
Operating costs and expenses
Restaurant operating expenses (1) (exclusive of depreciation and amortization shown below):
Food and beverage costs	77,402		22.3	%	69,730		22.2	%	234,305		22.8	%	208,355		23.2	%
Labor and other related expenses	112,962		32.6	%	102,387		32.6	%	339,294		33.1	%	300,451		33.4	%
Other restaurant operating expenses	56,048		16.2	%	50,140		16.0	%	163,509		15.9	%	141,002		15.7	%
Occupancy expenses	29,506		8.5	%	25,891		8.3	%	85,261		8.3	%	73,849		8.2	%
Pre-opening expenses	3,461		1.0	%	3,813		1.2	%	9,833		1.0	%	9,980		1.1	%
General and administrative expenses	35,244		10.1	%	33,746		10.7	%	113,916		11.0	%	97,150		10.7	%
Depreciation and amortization	22,700		6.5	%	19,662		6.2	%	65,935		6.4	%	54,355		6.0	%
Impairments and loss on disposal of assets	170		—	%	175		0.1	%	437		—	%	311		—	%
Transaction and restructuring expenses, net	1,320		0.4	%	428		0.1	%	2,828		0.3	%	2,220		0.2	%
Total operating costs and expenses	338,813		96.8	%	305,972		96.8	%	1,015,318		98.1	%	887,673		98.0	%
Income from operations (1)	11,048		3.2	%	10,050		3.2	%	20,174		2.0	%	18,476		2.1	%
Interest expense	(4,933)		(1.4)	%	(4,567)		(1.4)	%	(14,603)		(1.4)	%	(11,904)		(1.3)	%
Other income, net	362		0.1	%	191		0.1	%	840		0.1	%	1,141		0.1	%
Income before income taxes	6,477		1.9	%	5,674		1.8	%	6,411		0.6	%	7,713		0.9	%
Income tax expense	(1,690)		(0.5)	%	(2,683)		(0.8)	%	(1,970)		(0.2)	%	(3,445)		(0.4)	%
Net income	$	4,787	1.4	%	$	2,991	0.9	%	$	4,441	0.4	%	$	4,268	0.5	%

_____________

(1) As a percentage of restaurant sales.

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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 the combined result of our menu price increases and changes to our menu mix.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Restaurant sales:
In-restaurant dining sales	$	279,365	$	254,155	9.9	%	$	829,383	$	728,282	13.9	%
Third-party delivery sales	42,442		37,163		14.2	%	123,477		103,633		19.1	%
Take-out sales	24,915		22,318		11.6	%	73,491		66,295		10.9	%
Total restaurant sales	$	346,722	$	313,636	10.5	%	$	1,026,351	$	898,210	14.3	%

The increase in total restaurant sales during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year was due principally to (i) a higher number of company-owned restaurants from new openings and (ii) menu price increases, partially offset by an increase in promotional usage and a (1.9)% decrease in same-restaurant traffic.

The increase in total restaurant sales during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year was due principally to (i) a higher number of company-owned restaurants from new openings, (ii) the acquisition of 19 franchise-owned restaurants during the second quarter of 2025 and (iii) menu price increases, partially offset by an increase in promotional usage and a 1.4% decrease in same-restaurant traffic.

Franchise Revenues

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.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Franchise revenues:
Royalty and system fund contributions	$	3,077	$	2,333	31.9	%	$	8,941	$	7,371	21.3	%
Initial fees	62		53		17.0	%	200		170		17.6	%
Business acquisitions - franchise revenues recognized	—		—		—	%	—		398		(100.0)	%
Total Franchise revenues	$	3,139	$	2,386	31.6	%	$	9,141	$	7,939	15.1	%

The increases in franchise revenues during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year was due to (i) an increase in the system fund contribution rate during the first quarter of 2026 and (ii) 9 new franchise-owned restaurant openings between September 28, 2025 and September 27, 2026. The increase for the thirty-nine weeks ended September 27, 2026 was partially offset by one franchise-owned restaurant closure and our acquisitions of 19 franchise-owned restaurants during the second quarter of 2025.

Food and Beverage Costs

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


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Food and beverage costs	$	77,402		$	69,730		11.0	%	$	234,305		$	208,355		12.5	%
As a percentage of restaurant sales	22.3		%	22.2		%	0.1	%	22.8		%	23.2		%	(0.4)	%

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Food and beverage costs as a percentage of restaurant sales increased during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year primarily as a result of the timing of vendor credits that did not recur in the same period in 2026, partially offset by (i) menu price increases and (ii) the lower cost of bacon and avocados, partially offset by an increase in the cost of turkey sausage and the demand for higher cost beef offerings.

Food and beverage costs as a percentage of restaurant sales decreased during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year primarily as a result of (i) menu price increases and (ii) the lower cost of bacon, eggs, and avocados, partially offset by the higher cost of coffee and the demand for higher cost beef offerings.

Food and beverage costs increased during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year primarily as a result of an increase in the number of company-owned restaurants between September 28, 2025 and September 27, 2026. These increases were partially offset by commodity deflation.

Labor and Other Related Expenses

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 competition for qualified staff.


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Labor and other related expenses	$	112,962		$	102,387		10.3	%	$	339,294		$	300,451		12.9	%
As a percentage of restaurant sales	32.6		%	32.6		%	—	%	33.1		%	33.4		%	(0.3)	%

Labor and other related expenses as a percentage of restaurant sales remained flat for the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year primarily as a result of the leverage associated with menu price increases, offset by wage increases.

Labor and other related expenses as a percentage of restaurant sales decreased during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year primarily as a result of the leverage associated with menu price increases, partially offset by wage increases.

The increases in labor and other related expenses during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year were primarily due to (i) the increase in the number of company-owned restaurants and related headcount and (ii) wage increases.

Other Restaurant Operating Expenses

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


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change			SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Other restaurant operating expenses	$	56,048		$	50,140		11.8	%		$	163,509		$	141,002		16.0	%
As a percentage of restaurant sales	16.2		%	16.0		%	0.2	%		15.9		%	15.7		%	0.2	%

Other restaurant operating expenses as a percentage of restaurant sales increased during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year primarily due to an increase in (i) utilities and (ii) third-party delivery fees.

The increase in other restaurant operating expenses during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year was primarily due to the increase in the number of company-owned restaurants driving increased expenses, including (i) $2.0 million related to utilities, repairs and maintenance expenses, (ii) $1.3 million in third-party delivery fees, (iii) $1.1 million in operating supplies and (iv) $1.1 million in credit card fees.

Table of Contents

The increase in other restaurant operating expenses during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year was primarily due to the increase in the number of company-owned restaurants driving increased expenses, including (i) $7.9 million related to utilities, repairs and maintenance expenses, (ii) $5.6 million in operating supplies, (iii) $4.5 million in third-party delivery fees and (iv) $3.0 million in credit card fees.

Occupancy Expenses

Occupancy expenses primarily consist of rent expense, property insurance, common area expenses and property taxes.


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Occupancy expenses	$	29,506		$	25,891		14.0	%	$	85,261		$	73,849		15.5	%
As a percentage of restaurant sales	8.5		%	8.3		%	0.2	%	8.3		%	8.2		%	0.1	%

Occupancy expenses as a percentage of restaurant sales increased during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year primarily due to higher rent expense associated with new restaurants.

The increases in occupancy expenses during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year were primarily due to the increase in the number of company-owned restaurants.

Pre-opening Expenses

Pre-opening expenses are costs incurred to open new company-owned restaurants. Pre-opening expenses include rent expense, manager salaries, recruiting expenses, employee payroll and training costs. Pre-opening expenses can fluctuate from period to period, based on the number and timing of new company-owned restaurant openings.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Pre-opening expenses	$	3,461	$	3,813	(9.2)	%	$	9,833	$	9,980	(1.5)	%

The decrease in pre-opening expenses during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year was primarily due to the lower number of new company-owned restaurants opened during the 2026 periods.

General and Administrative Expenses

General and administrative expenses primarily consist of costs associated with our corporate and administrative functions that support restaurant development and operations including marketing and advertising costs incurred as well as legal fees, professional fees, stock-based compensation and expenses associated with being a public company, including costs associated with our compliance with the Sarbanes-Oxley Act. General and administrative expenses are impacted by changes in our employee headcount and costs related to strategic and growth initiatives.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
General and administrative expenses	$	35,244	$	33,746	4.4	%	$	113,916	$	97,150	17.3	%

The increase in general and administrative expenses during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year was mainly due to (i) a $1.7 million increase in compensation expenses related to stock-based compensation and additional employee headcount to support growth, (ii) a $0.5 million increase in licenses and fees including information technology related expenses for an increased number of restaurants and (iii) a $0.4 million increase in marketing expenses. The increase was partially offset by a decrease in consulting, legal and other professional service fees.

Table of Contents

The increase in general and administrative expenses during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year was mainly due to (i) a $6.2 million increase in compensation expenses related to stock-based compensation, bonus expenses and additional employee headcount to support growth, (ii) a $6.1 million increase in marketing expenses, (iii) a $3.9 million increase related to 2026 leadership conference expenses and (iv) a $1.7 million increase in licenses and fees including information technology related expenses for an increased number of restaurants. The increase was partially offset by a decrease in consulting, legal and other professional service fees.

Depreciation and Amortization

Depreciation and amortization consists of the depreciation of fixed assets, including leasehold improvements, fixtures and equipment and the amortization of definite-lived intangible assets, which are primarily comprised of franchise rights.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Depreciation and amortization	$	22,700	$	19,662	15.5	%	$	65,935	$	54,355	21.3	%

The increases in depreciation and amortization during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year were primarily related to depreciating and amortizing the assets of NROs and of acquired restaurants, including reacquired rights from franchisees.

Transaction and Restructuring Expenses, Net

Transaction and restructuring expenses, net principally include (i) incremental severance costs resulting from organizational optimization, (ii) costs incurred in connection with the 2025 acquisitions of franchise-owned restaurants, (iii) non-recurring professional fees, (iv) investor relations costs and (v) costs related to secondary equity offerings completed in 2025.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Transaction and restructuring expenses, net	$	1,320	$	428	208.4	%	$	2,828	$	2,220	27.4	%

The increase in transaction and restructuring expenses, net during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year was primarily due to an increase in costs related to (i) non-recurring professional fees and (ii) investor day costs. The increase was partially offset by secondary equity offering costs incurred in 2025 that did not recur in 2026.

The increase in transaction and restructuring expenses, net during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year was primarily due to an increase in (i) organizational optimization costs, (ii) costs related to non-recurring professional fees and (iii) investor day costs. The increase was partially offset by costs incurred in connection with (i) 2025 acquisitions and (ii) 2025 secondary equity offering costs that did not recur in 2026.

Income from Operations


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Income from operations	$	11,048		$	10,050		9.9	%	$	20,174		$	18,476		9.2	%
As a percentage of restaurant sales	3.2		%	3.2		%	—	%	2.0		%	2.1		%	(0.1)	%

Table of Contents

Income from operations margin remained flat during the thirteen weeks ended September 27, 2026, compared to the same period in the prior year, as revenue increases and a decrease in general and administrative expenses as a percentage of restaurant sales were offset by increases in other costs, primarily (i) depreciation and amortization expense, (ii) other restaurant operating expenses and (iii) occupancy expenses.

Income from operations margin decreased during the thirty-nine weeks ended September 27, 2026 compared to the same period in the prior year as revenue increases were exceeded by increases in other costs, primarily (i) depreciation and amortization expense, (ii) labor and other related expenses, (iii) general and administrative expenses, (iv) other restaurant operating expenses and (v) occupancy expenses.

Interest Expense

Interest expense primarily consists of interest and fees on our outstanding debt and the amortization expense for debt discount and deferred issuance costs.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Interest expense	$	4,933	$	4,567	8.0	%	$	14,603	$	11,904	22.7	%

The increase in interest expense during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year was due to increased debt.

Other Income, Net

Other income, net includes items deemed to be non-operating based on Management’s assessment of the nature of the item in relation to our core operations.


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change		SEPTEMBER 27, 2026		SEPTEMBER 28, 2025		Change
Other income, net	$	362	$	191	89.5	%	$	840	$	1,141	(26.4)	%

Other income, net increased during the thirteen weeks ended September 27, 2026 as compared to the same period in the prior year primarily due to an increase in (i) interest income and (ii) sales tax commissions.

Other income, net decreased during the thirty-nine weeks ended September 27, 2026 as compared to the same period in the prior year primarily due to a decrease in insurance proceeds.

Income Tax

Income tax consists of federal and state taxes.


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Income tax expense	$	(1,690)		$	(2,683)		(37.0)	%	$	(1,970)		$	(3,445)		(42.8)	%
Effective income tax rate	26.1		%	47.3		%	(21.2)	%	30.7		%	44.7		%	(14.0)%

Income tax expense and the effective income tax rate during the thirteen and thirty-nine weeks ended September 27, 2026 decreased as compared to the same period in the prior year primarily due to (i) the impact of federal FICA tax credits and the related valuation allowance, (ii) stock-based compensation and (iii) certain discrete state income tax matters.

Net Income


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Net income	$	4,787		$	2,991		60.0	%	$	4,441		$	4,268		4.1	%
As a percentage of total revenues	1.4		%	0.9		%	0.5	%	0.4		%	0.5		%	(0.1)	%

Table of Contents

Net income increased during the thirteen and thirty-nine weeks ended September 27, 2026 as compared to the same periods in the prior year primarily due to (i) the increase in income from operations and (ii) a decrease in income tax expense, partially offset by an increase in interest expense.

Restaurant Level Operating Profit and Restaurant Level Operating Profit Margin


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Restaurant level operating profit	$	67,343		$	61,675		9.2	%	$	194,149		$	164,573		18.0	%
Restaurant level operating profit margin	19.4		%	19.7		%	(0.3)	%	18.9		%	18.3		%	0.6	%

Restaurant level operating profit margin during the thirteen weeks ended September 27, 2026 decreased as compared to the same period in the prior year primarily due to an increase as a percentage of restaurant sales in (i) other restaurant operating expenses, (ii) occupancy expenses and (iii) food and beverage costs, partially offset by a decrease in pre-opening expenses as a percentage of restaurant sales.

Restaurant level operating profit margin during the thirty-nine weeks ended September 27, 2026 increased as compared to the same period in the prior year primarily due to (i) favorable labor and other related expenses as a percentage of restaurant sales and (ii) favorable food and beverage costs as a percentage of restaurant sales, partially offset by the increase in other restaurant operating expenses as a percentage of restaurant sales.

Restaurant level operating profit for the thirteen and thirty-nine weeks ended September 27, 2026 increased as compared to the same periods in the prior year due to sales growth driven by increases in (i) restaurant locations and (ii) same-restaurant sales. This was partially offset by increases in expenses associated primarily with an increase in the number of company-owned restaurants, including (i) labor and other related expenses, (ii) food and beverage costs, (iii) other restaurant operating expenses and (iv) occupancy expenses.

Adjusted EBITDA and Adjusted EBITDA Margin


	THIRTEEN WEEKS ENDED								THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change		SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			Change
Adjusted EBITDA	$	39,748		$	34,099		16.6	%	$	102,015		$	87,231		16.9	%
Adjusted EBITDA margin	11.4		%	10.8		%	0.6	%	9.9		%	9.6		%	0.3	%

Adjusted EBITDA margin increased during the thirteen weeks ended September 27, 2026 compared to the same period in the prior year primarily due to a decrease in general and administrative expenses as a percentage of revenues, partially offset by a decrease in restaurant level operating profit margin.

Adjusted EBITDA margin increased during the thirty-nine weeks ended September 27, 2026 compared to the same period in the prior year primarily due to an increase in restaurant level operating profit margin, partially offset by an increase in general and administrative expenses as a percentage of revenues.

Adjusted EBITDA increased during the thirteen and thirty-nine weeks ended September 27, 2026 compared to the same periods in the prior year primarily due to an increase in restaurant level operating profit, partially offset by an increase in general and administrative expenses.

Table of Contents

Non-GAAP Financial Measures Reconciliations

Adjusted EBITDA and Adjusted EBITDA margin - The following table reconciles Net income and Net income margin, the most directly comparable GAAP measures to Adjusted EBITDA and Adjusted EBITDA margin, respectively, for the periods indicated:


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			SEPTEMBER 27, 2026			SEPTEMBER 28, 2025
Net income	$	4,787		$	2,991		$	4,441		$	4,268
Depreciation and amortization	22,700			19,662			65,935			54,355
Interest expense	4,933			4,567			14,603			11,904
Income tax expense	1,690			2,683			1,970			3,445
EBITDA	34,110			29,903			86,949			73,972
Strategic transition costs (1)	509			715			1,113			2,748

Stock-based compensation, net of amounts capitalized (2)	3,639			2,877			10,688			7,926
Delaware Voluntary Disclosure Agreement Program (3)	—			1			—			54
Transaction and restructuring expenses, net (4)	1,320			428			2,828			2,220
Impairments and loss on disposal of assets (5)	170			175			437			311


Adjusted EBITDA	$	39,748		$	34,099		$	102,015		$	87,231

Total revenues	$	349,861		$	316,022		$	1,035,492		$	906,149
Net income margin	1.4		%	0.9		%	0.4		%	0.5		%
Adjusted EBITDA margin	11.4		%	10.8		%	9.9		%	9.6		%

Additional information
Deferred rent (6)	$	(337)		$	(141)		$	(836)		$	337

_____________________________

(1) Represents costs related to process improvements and strategic initiatives. These costs are recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

(2) Represents non-cash, stock-based compensation expense, net of amounts capitalized, which is recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

(3) Represents professional service costs incurred in connection with the Delaware Voluntary Disclosure Agreement Program related to unclaimed or abandoned property. These costs are recorded in General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

(4) Represents severance costs resulting from organizational optimization, costs incurred in connection with the acquisition of franchise-owned restaurants, non-recurring professional fees, secondary equity offering costs, costs related to restaurant closures and investor relations costs.

(5) Represents impairment charges and costs related to the disposal of assets due to retirements, replacements and restaurant closures.

(6) Represents the non-cash portion of straight-line rent recorded within both Occupancy expenses and General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

Table of Contents

Restaurant level operating profit and Restaurant level operating profit margin - The following table reconciles Income from operations and Income from operations margin, the most comparable GAAP measures to Restaurant level operating profit and Restaurant level operating profit margin, respectively, for the periods indicated:


	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026			SEPTEMBER 28, 2025			SEPTEMBER 27, 2026			SEPTEMBER 28, 2025
Income from operations	$	11,048		$	10,050		$	20,174		$	18,476
Less: Franchise revenues	(3,139)			(2,386)			(9,141)			(7,939)
Add:
General and administrative expenses	35,244			33,746			113,916			97,150
Depreciation and amortization	22,700			19,662			65,935			54,355
Transaction and restructuring expenses, net (1)	1,320			428			2,828			2,220
Impairments and loss on disposal of assets (2)	170			175			437			311
Restaurant level operating profit	$	67,343		$	61,675		$	194,149		$	164,573

Restaurant sales	$	346,722		$	313,636		$	1,026,351		$	898,210
Income from operations margin	3.2		%	3.2		%	2.0		%	2.1		%
Restaurant level operating profit margin	19.4		%	19.7		%	18.9		%	18.3		%

Additional information
Deferred rent(3)	$	(353)		$	(168)		$	(883)		$	211

_____________________________

(1) Represents severance costs resulting from organizational optimization, costs incurred in connection with the acquisition of franchise-owned restaurants, non-recurring professional fees, secondary equity offering costs, costs related to restaurant closures and investor relations costs.

(2) Represents impairment charges and costs related to the disposal of assets due to retirements, replacements and restaurant closures.

(3) Represents the non-cash portion of straight-line rent recorded within Occupancy expenses on the Consolidated Statements of Operations and Comprehensive Income.

Liquidity and Capital Resources

As of September 27, 2026, we had cash and cash equivalents of $21.1 million and outstanding borrowings under our senior secured credit facility (the “Credit Facility”) of $271.7 million, excluding unamortized debt discount and deferred issuance costs. We had availability of $54.0 million under our revolving credit facility of $125.0 million, of which $2.5 million is reserved under letters of credit pursuant to our credit agreement, dated as of October 6, 2021, as amended (“Credit Agreement”). Our principal uses of cash include capital expenditures for the development, acquisition or remodeling of restaurants, lease obligations, debt service payments and strategic infrastructure investments. Our working capital requirements are low due to our restaurants storing minimal inventory and customers paying for their purchases at the time of the sale, which frequently precedes our payment terms with suppliers.

We believe that our cash flow from operations combined with our availability under the Credit Facility and our cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next 12 months. We anticipate that to the extent that we require additional liquidity, or should we decide to pursue one or more significant acquisitions, the funds would be furnished first through additional indebtedness and thereafter through the issuance of equity. Although we believe that our current level of total available liquidity is sufficient to meet our short-term and long-term liquidity requirements, we regularly evaluate opportunities to improve our liquidity position in order to enhance financial flexibility.

We estimate that our capital expenditures will total approximately $145.0 million in 2026. This capital is invested primarily in new restaurant projects and planned remodels. We intend to fund the capital expenditures primarily with cash generated from our operating activities as well as with borrowings pursuant to our Credit Agreement.

Table of Contents

Summary of Cash Flows

The following table presents a summary of our cash provided by (used in) operating, investing and financing activities for the thirty-nine weeks ended September 27, 2026 and September 28, 2025:


	THIRTY-NINE WEEKS ENDED
(in thousands)	SEPTEMBER 27, 2026		SEPTEMBER 28, 2025
Cash provided by operating activities	$	110,445	$	107,452
Cash used in investing activities	(113,949)		(175,771)
Cash provided by financing activities	3,323		55,721
Net decrease in cash and cash equivalents	$	(181)	$	(12,598)

Cash provided by operations is our typical source of liquidity used (i) to fund capital expenditures for new restaurants, (ii) to maintain and remodel existing restaurants and (iii) for debt service. During the thirty-nine weeks ended September 27, 2026 as compared to the thirty-nine weeks ended September 28, 2025, there was an increase in cash provided by operations primarily due to an increase in company-owned restaurants, partially offset by the timing of operational payments.

Cash used in investing activities decreased during the thirty-nine weeks ended September 27, 2026 from the thirty-nine weeks ended September 28, 2025 due principally to (i) amounts paid in 2025 to acquire franchise locations and (ii) the timing of capital expenditures and payments.

Cash provided by financing activities includes borrowing from, and repayments of, the Company’s Credit Facility.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon the accompanying consolidated financial statements and notes thereto, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements and related notes requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry and information available from other outside sources, as appropriate. We evaluate our estimates and judgments on an on-going basis. Our actual results may differ from these estimates. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. There have been no significant changes to our critical accounting policies as disclosed in “Critical Accounting Policies and Estimates” in the 2025 Form 10-K.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, in the accompanying notes to these consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity and Food Price Risks

We expect our full year commodity inflation to be approximately flat.

Interest Rate Risk

On August 18, 2026, we entered into two additional variable-to-fixed interest rate swaps. These interest rate swaps have an initial aggregate notional amount of $50.0 million, which will increase to a notional amount of $80.0 million on December 24, 2026 and mature on December 29, 2028. Under the terms of these interest rate swaps, we will pay a weighted average fixed rate of 4.08% on the notional amounts and receive payments from, or make payments to, the counterparties based on the three-month SOFR rate.

Except as described above, there have been no material changes to our exposure to market risks as disclosed in the 2025 Form 10-K.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures, as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures are also designed to ensure that information allowing for timely disclosure decisions is accumulated and communicated to Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate.

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 27, 2026, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended September 27, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings

We are involved in various claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these actions, individually or taken in the aggregate, will have a material adverse effect on our financial position, results of operations, liquidity or capital resources. A significant increase in the number of claims or an increase in amounts owing under successful claims could materially adversely affect our business, financial condition, results of operations and cash flows. See Note 12, Commitments and Contingencies, in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

In addition to the other information discussed in this Form 10-Q, please consider the factors described in Part I, Item 1A., “Risk Factors” in our 2025 Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or results of operations.

There have been no material changes to the risk factors disclosed in our 2025 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Insider Adoption or Termination of Trading Arrangements:

During the fiscal quarter ended September 27, 2026, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

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Item 6. Exhibits

The exhibits listed in the Exhibits index to this Form 10-Q are incorporated herein by reference.

Exhibit No.

Description

FILINGS REFERENCED FOR INCORPORATION BY REFERENCE

31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

101

The financial information from First Watch Restaurant Group, Inc.’s Quarterly Report on Form 10-Q for the third fiscal quarter ended September 27, 2026, filed on November 3, 2026, formatted in Inline Extensible Business Reporting Language (“iXBRL”)

Filed herewith

104

Cover Page Interactive Date File (formatted as iXBRL and contained in Exhibit 101)

Filed herewith

_____________

* This certification is not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 3, 2026.


			FIRST WATCH RESTAURANT GROUP, INC.

			By:			/s/ Christopher A. Tomasso
			Name:			Christopher A. Tomasso
			Title:			President, Chief Executive Officer and Director (Principal Executive Officer)

			By:			/s/ Ashlee Weisser
			Name:			Ashlee Weisser
			Title:			Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

First Watch Restaurant - 10-Q quarterly report FY2026 Q3

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		Page
Cautionary Note Regarding Forward-Looking Statements		3
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

Part II - Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37