First Watch Restaurant Group, Inc. (NASDAQ:FWRG) Q1 2024 Earnings Call Transcript

Christopher Tomasso : Yeah, I think our focus is on the – first of all, we’re rolling over some softer comps in the back half of the year. So I still remain confident that our original expectation that things would begin to flatten out with that softer comp as it gets pretty reliable, plus we have a good program plan for the year in terms of our offerings and performance. So it’s – we’re – part of this is depending on 40 years of experience of recovering short term with the company’s typical history of long term growth.

Jon Tower : Got it. And then, just lastly, I believe you had mentioned earlier in the call, Chris, something about flexing not just LTOs and labor with demand, but also some G&A projects and later on in the conversations, you’ve talked about some – doing some stuff on the marketing side, very early stages. Can you elaborate a little bit on perhaps what projects you’re going after right now?

Christopher Tomasso : Yeah. So, when I talked about the flexibility, we’re – what we’re doing I believe is a thoughtful balance of near term solutions and long-term brand implication type initiatives. And from a long-term perspective, it really is starting to leverage the data that we’ve been collecting now for a while with some of the new platforms and tools that we’ve done. So it’s not any different than what I’ve talked about before, Jon it’s just that we’re really starting to get voluminous data that we’re tying together to get more insights into consumer behavior in our restaurants. Everything from operational KPIs to seek to eat times to actual visit times, the pay-at-the-table is a big part of that for us. And we’ve been really pleased with how that’s gone. So, it’s really just starting to dig in and leverage all that data.

Jon Tower : Got it. Thanks for taking the questions.

Christopher Tomasso : You are welcome.

Operator: Our next question comes from Brian Vaccaro with Raymond James. Please proceed with your question.

Brian Vaccaro : Hi, thanks and good morning. Just given the current environment, you noted rather consumer obviously seeking value. I thought maybe if you could elaborate on how First Watch’s value proposition stacks up to peers and sort of positions you for the current environment. I think you’ve taken around 20% pricing cumulative during the pandemic. Is that about right? Maybe you could tighten up for us? And maybe just speak to or provide any metrics on sort of on how your average menu price is compared to your direct peers in most markets? Any color there would be great.

Christopher Tomasso : Yeah, we have quite a bit of pricing power. You’re right on how much we taken since the pandemic has been about 3.5% a year. But when we look at our per person average versus our competitive set, we are believe it or not, actually at the low end of that and while we realize and that we have pricing power, we’re sticking to our philosophy of pricing to cover inflation. So, I think, if you look at that 3.5% a year and look at it comparatively, you’ll see that we’ve been quite conservative and we’ll continue to be that way. Our focus has always even in times like this incredible relative to value, really want to focus on traffic. I think our numbers here and how we’re beating the industry versus Black Box kind of a test to that. And we think that’s the right approach for us. It’s what we’ve done for years and we’re going to continue to do that.

Brian Vaccaro : All right, thank you for that. And one follow-up, just on the operational improvements that you’re seeing, you mentioned ticket times. Could you provide any more color or quantification on the year-on-year improvement you’re seeing there? And on labor, it looks like the cost per week as we look at it was about flat year-on-year, despite wage inflation. Obviously, traffic was lower but. Is there any way to parse out sort of the level of efficiencies being generated by some of the new tools you’ve deployed in recent quarters? Thank you.

Christopher Tomasso : Sure. I’ll speak to the ticket times. I’m not sure how Mel have the answer for your labor piece. But on ticket times, we’re seeing what we consider to be significant improvements. Keep in mind we’re just at the point now where we’re comping over the installation and the full rollout. As I always caution, just because it was rolled out doesn’t mean it was optimized at that point. So, even with that as we can continue to optimize the KDS system to, based on the information that we get, I mean, we’re seeing early on 10% to 20% improvements in ticket times, which – excuse me, which is most impactful during the peak sales hours obviously.

Mel Hope : It’s Mel. Brian, in terms of the labor, really a couple of things are going on. One is that our operators are doing a very, very good job of managing that and managing the crews. But I think one of the things that’s really been successful with that and maybe gets some underappreciated is that our turnover has gone way down. And so – when – and that’s been deliberate. It’s been part of their process. But that helps us lower overall cost. They become more efficient when you have when you have tenured employees. And that that low turnover is also part of the lowering just over time charges. So, we’ve been delighted to see the improvements that the operators and our people services folks have made in terms of the crews and they’re interested in creating careers with the company, because it’s really paid off a great deal on a much, much lower turnover over the course of the last several years.

It’s been taken down to a great degree. It’s been it’s been fun to watch.

Brian Vaccaro : All right. That’s helpful color. I’ll pass it along. Thank you.

Operator: [Operator Instructions] Our next question comes from Gregory Francfort with Guggenheim Securities. Please proceed with your question.

Gregory Francfort: Hey. Thanks guys. I had a couple questions. The first is, it looks like you may have a stronger mix from the fourth quarter to the first quarter. I’m curious, one, is that right and what’s maybe driving that?

Christopher Tomasso : So, I think that goes back to our LTOs and we don’t – as you know, we don’t consider mix in our plans. But we have experienced it in the past. And I think our decision to select high appeal items that are proven and that the consumer is – it looks forward from us I think help with that mix in Q1.

Gregory Francfort: Got it. And then, maybe just to level for expectations that the commentary on the traffic throughout the year is helpful, but do you expect comps in 2Q to be better or worse than comps in the first quarter?