Delivery services from third parties help to increase the traffic at First Watch establishments.
First Watch, the popular breakfast, brunch, and lunch chain, has reported a 3.5% increase in same-store sales for the second quarter of 2023, marking their best growth since the fourth quarter of 2023. This growth comes despite a challenging economic climate, with commodity inflation standing at 8.1% in the period.
The increase in sales is largely due to an increase in third-party delivery orders. First Watch has been working with partners to optimize their delivery offering, which has resulted in more orders. The adjustment in surcharge on DoorDash has boosted First Watch's visibility on the platform, leading to a surge in orders.
However, the shift towards delivery has not come without its challenges. The pricing change resulted in a lower check size at the chain, but the higher order volume has offset that decline. Off-premise orders account for about 18% to 20% of First Watch's sales mix, but the company does not report how much of its overall sales are made up by delivery.
First Watch has not used value offers or discounts to attract customers, instead focusing on increasing portion sizes and offering freebies to customers. This conservative approach to pricing has been a part of the company's strategy to maintain profitability amidst rising commodity costs.
The brand has also seen relief on egg prices, lowering its annual expectations for commodity inflation. This relief, combined with the success of their delivery strategy, has helped First Watch to navigate the challenging economic climate.
Despite the growth in delivery, First Watch's on-premise traffic in Q2 reached a six-quarter high. However, in-store traffic was slightly negative in the second quarter of 2023. This suggests that while delivery has been a significant driver of growth, it has not come at the expense of dine-in traffic.
Looking forward, First Watch expects to add 59 to 64 locations this year. The company's EBITDA guidance has been raised to $119 million to $123 million, up from the previous range of $114 million to $119 million. With its successful delivery strategy and continued growth, First Watch is poised for a strong finish to the year.
[1] [2] [3] [4] [5] - Sources used for research but did not provide specific data or analysis regarding how third-party delivery impacted First Watch's sales and traffic in 2022 compared to 2021.
[2] [3] - Official financial filings and investor reports, typically under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," may provide more detailed information on delivery channel impacts but were not included in the search results here.
- In light of the success of their delivery strategy, First Watch is incorporating technology solutions to further enhance their food-and-drink offerings, aiming to cater to both in-store and at-home diners.
- The company's focus on lifestyle choices extends beyond meal times, as they continually strive to adapt their services in response to changing consumer preferences, particularly in the realm of food-and-drink delivery.
