Executive Summary

Q3 2025 delivered solid top-line and traffic momentum: revenue rose 25.6% to $316.0M, same‑restaurant sales +7.1% with traffic +2.6%, and restaurant-level operating margin expanded 80 bps to 19.7% .
Versus S&P Global consensus, revenue beat ($316.0M vs $309.6M*), while EPS missed ($0.05 vs $0.070*); management guided FY25 Adjusted EBITDA to the high end at ~$123M and tightened other outlook items .
Unit growth continues to be a key driver: 21 system-wide openings in Q3 (18 company-owned), ending with 620 restaurants across 32 states; new units and second‑generation conversions are opening at record volumes and strong returns .
Cost backdrop mixed but improving: commodity inflation moderated vs 1H (3% in Q3; bacon and coffee elevated), labor inflation ~3.6%; operating discipline and pricing (~1.1% in late Aug; ~3.5% full‑year carry) supported margin expansion .
Incremental catalysts: stronger weekday breakfast traffic, growing delivery occasions (incremental), and targeted marketing/digital investments driving awareness, with 2026 plans to expand learnings across more markets .

What Went Well and What Went Wrong

What Went Well

Revenue, traffic and margins improved: revenue +25.6% to $316.0M; same‑restaurant sales +7.1% on +2.6% traffic; restaurant‑level operating margin up to 19.7% (+80 bps YoY) .
New restaurants outperformed: 21 openings with record first‑week volumes; 9 of the 10 highest opening‑week sales in company history were from restaurants opened in the last 12 months; second‑gen sites are opening at >190% of AUV in some cases .
Management discipline on pricing and value: “There aren’t many metrics where we lag, but we’re pleased to be laggard when it comes to pricing,” reinforcing long‑term traffic and margin durability (targeting 18–20% restaurant-level margins) .

What Went Wrong

EPS missed Street despite revenue beat: diluted EPS was $0.05 vs consensus ~$0.070*; EBITDA (GAAP) tracked near consensus, but Adjusted EBITDA growth was required to expand margins amid cost pressures .
Commodity inflation pockets persisted: Q3 commodities up ~3% with bacon and coffee primary pressures; full‑year commodity inflation guided to ~6% and restaurant labor inflation ~4%, tempering flow‑through .
Operating expense intensity remained visible: G&A increased in dollars with marketing and headcount investments, though leveraged slightly as % of revenue (10.7%) .

Financial Results

Headline P&L and Margins (Q1–Q3 2025)

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenues ($M)	$282.2	$307.9	$316.0
Net Income ($M)	$(0.8)	$2.1	$3.0
Diluted EPS ($)	$(0.01)	$0.03	$0.05
Income from Operations Margin (%)	0.4%	2.4%	3.2%
Adjusted EBITDA ($M)	$22.8	$30.4	$34.1
Adjusted EBITDA Margin (%)	8.1%	9.9%	10.8%
Restaurant-Level Operating Profit Margin (%)	16.5%	18.6%	19.7%

Q3 2025 Actual vs S&P Global Consensus

Metric	Consensus	Actual
Revenue ($M)	309.6*	316.0
Primary EPS ($)	0.070*	0.05
EBITDA ($M)	32.5*	29.9 (EBITDA) / $34.1 Adjusted EBITDA

Values with an asterisk (*) are retrieved from S&P Global.

Segment Revenue Mix (Q3 2025)

Metric	Q3 2025
Restaurant Sales ($M)	313.636
Franchise Revenues ($M)	2.386
Total Revenues ($M)	316.022

KPIs and System Metrics

KPI	Q1 2025	Q2 2025	Q3 2025
Same‑Restaurant Sales Growth (%)	0.7%	3.5%	7.1%
Same‑Restaurant Traffic Growth (%)	(0.7)%	2.0%	2.6%
System‑Wide Sales ($M)	323.0	346.2	352.7
System‑Wide Restaurants (EoP)	584	600	620

Cost and Efficiency Highlights (Q3 2025)

Food & Beverage as % of restaurant sales: 22.2% (‑20 bps YoY) .
Labor & related as % of restaurant sales: 32.6% (‑100 bps YoY); restaurant-level labor inflation ~3.6% .
G&A: $33.7M; 10.7% of revenue (‑30 bps YoY leverage) .

Guidance Changes

Metric	Period	Previous Guidance (as of Q2 2025)	Current Guidance (Q3 2025)	Change
Same‑Restaurant Sales Growth	FY 2025	Positive low‑single digits; traffic flat to slightly positive	~4% SSS; ~1% traffic	Raised
Total Revenue Growth	FY 2025	~20% (incl. ~4% from acquisitions)	20.0%–21.0% (incl. ~4% from acquisitions)	Raised (upper bound)
Adjusted EBITDA ($M)	FY 2025	$119–$123	~$123 (high end)	Tightened to high end
Blended Tax Rate	FY 2025	35%–40%	~45%	Raised
Capital Expenditures ($M)	FY 2025	$148–$152	~$150	Narrowed
New System‑Wide Restaurants	FY 2025	59–64 net of 3 closures; 55–58 company‑owned; 7–9 franchise	60–61 net of 3 closures; 55 company‑owned; 8–9 franchise	Narrowed/Refined
Commodity Inflation	FY 2025	5%–7%	~6%	In line (narrowed)
Labor Inflation	FY 2025	3%–4%	~4%	High end

Notes: Management highlighted ~$7M Adjusted EBITDA contribution and ~4% revenue growth contribution from acquisitions embedded in outlook .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2 2025)	Current Period (Q3 2025)	Trend
Marketing & Brand Awareness	Pilots in late 2024; 2025 focus on digital/targeted campaigns; consistent gains in awareness; spend focused in <⅓ of markets	Continued success; September targeted campaign doubled engagement despite smaller audience; plans to expand in 2026 based on ROI	Positive momentum; broader rollout likely
Pricing Strategy & Value	Mid‑year price actions (~2.8% in July); carry ~3% for FY; intention to price only for permanent inflation	Additional ~1.1% in Aug tied to fall menu; carry ~3.5% for FY; still conservative on pricing	Balanced; value focus persists
Commodities & Supply Chain	Elevated eggs/bacon/coffee; guided commodity inflation to 5–7%; improvement in egg costs in 2H	Q3 ~3% commodity inflation; bacon and coffee still elevated; reaffirmed ~6% FY	Moderating overall; pockets remain
Digital & Technology	Relaunch of consumer-facing digital properties; waitlist automation; KDS rollout supports efficiency	App holds 5‑star ranking; continued CDP/CRM/geolocation upgrades; early data supports targeted micro‑marketing	Execution and data capabilities improving
Development & Second‑Gen Sites	~40% of last 80 openings second‑gen; high AUVs; flexible prototypes; landlords eager for national credit	~50% of 2025 class second‑gen; 9 of top 10 opening weeks in last 12 months; strong second‑gen performance	Expanding mix; strong ROI and speed
Off‑Premise/Delivery	Channel optimized; surcharge reduction; improved execution; occasions incremental	Continued demand increase; ~3% contribution to comps cited in Q&A; material EBITDA contributor	Growing, incremental
Labor & Culture	Turnover trending below industry; investments in training and pipeline (CGM, FARM)	#1 Most Loved Workplace in America for second straight year; daytime “No Nights Ever” model supports retention	Strong employer brand supports scaling

Management Commentary

“We’re pleased to report strong financial results with same restaurant traffic growth and same restaurant sales growth sequentially higher for the fourth consecutive quarter… restaurant‑level operating profit margin materially improving from earlier this year.” — CEO Chris Tomasso .
“In light of our performance and considering current trends, we are pleased to guide to the high end of our previous range for FY25 adjusted EBITDA at approximately $123 million.” — CEO Chris Tomasso .
“Restaurant‑level operating profit margin was 19.7% in the third quarter, an 80 basis point improvement from the third quarter last year… general and administrative expenses… 10.7% of total revenue.” — CFO Mel Hope .
“Nine of our 10 highest opening week sales in company history were achieved in restaurants opened within the last 12 months… many were second‑generation sites opening at volumes >190% of AUV.” — CEO Chris Tomasso .

Q&A Highlights

Traffic composition: Both dine‑in and third‑party channels contributed; frequency vs. new guest mix needs longer cohorts to read, but targeted campaigns focus on occasion growth .
Second‑generation success: ~50% of 2025 openings; landlords often give first calls; second‑gen sites provide visibility/parking and are opening at standout volumes .
Pricing cadence: ~1.1% incremental price in late Aug linked to fall menu; carry ~3.5% FY; Q3 carry ~5%; plan remains to price for permanent inflation only .
Commodities: Bacon and coffee remain headwinds; eggs and avocados moderated; Q4 expected to step up slightly but FY ~6% commodity inflation .
Daypart performance: Weekday breakfast was the standout daypart for traffic growth in Q3, a constructive signal for core demand .
Delivery profitability: Considered incremental; RLOP roughly close to in‑restaurant on an un‑loaded basis; sizable contributor to Adjusted EBITDA .

Estimates Context

Revenue beat: $316.0M actual vs $309.6M consensus* (+$6.4M; +2.1%) .
EPS miss: $0.05 diluted actual vs $0.070 Primary EPS consensus* (−$0.02; ~−28%), reflecting cost pockets and investment spending despite margin improvement .
Street looking ahead: Q4 2025 consensus currently implies revenue ~$321.7M* and EPS ~$0.083*; combined with management’s move to the high end on FY Adjusted EBITDA, estimate revisions may skew toward higher revenue and cautious EPS given commodity and labor inflation.
Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

Top-line momentum and traffic inflection are intact; the company is comping above peers while expanding unit count at a double‑digit clip, with strong new unit productivity and second‑gen ROI .
Despite an EPS miss vs consensus, Q3 delivered revenue upside and margin expansion; management raised FY25 Adjusted EBITDA to the high end, de‑risking back‑half profitability .
Value-forward pricing and targeted marketing are supporting traffic; digital/app improvements and a growing identified customer base (~7M) add medium‑term demand levers .
Commodity costs are moderating vs 1H but remain mixed (bacon/coffee); watch Q4 cost cadence and the 2026 input outlook commentary as contracts get set .
Delivery remains incremental and a material EBITDA contributor; operational execution (KDS, waitlist, training) continues to support throughput and guest experience .
Development pipeline is robust with continued shift to high‑visibility second‑gen sites; landlords increasingly prioritize FWRG, supporting pace and returns .
Near‑term trading: beats on traffic/margins and guidance high‑end bias are supportive; EPS sensitivity to commodities and labor suggests continued focus on execution and mix to sustain margin trajectory.

Additional Detail Citations:

Q3 results and guidance updates: .
Q2 trend references (for context): .
Q1 trend references (for context): .
Cultural recognition press release: .

First Watch Restaurant Group, Inc. (FWRG)·Q3 2025 Earnings Summary