First Watch (FWRG) Acquires Franchise Restaurants in Milwaukee
First Watch Restaurant Group, Inc. FWRG has acquired its five previously franchise-owned restaurants along with their corresponding development rights in Milwaukee, WI. The acquisition was funded through cash on hand.
The acquisition of the restaurants aligns with First Watch’s long-term growth strategy. The company is optimistic about the buyouts and expects them to serve communities in greater Milwaukee in the upcoming years.
Focus on Franchise-Owned Restaurants
First Watch focuses on franchise-owned restaurants to drive growth. During the fiscal first quarter, the company acquired six franchised restaurants in the Omaha market and reported decent performance with regard to the same. The franchise purchase paves the path for a rise in adjusted EBITDA (by almost $1 million) and 2023 overall revenue growth by about 1%.
The company is focused on having a development pipeline with top-notch locations in new, emerging and established markets to drive growth. In fiscal 2023, the company intends to open 10 to 12 franchise-owned restaurants. As of May 2023, the company had 14 franchisees in 109 locations. Out of the total, 60 restaurants are for sale.
Price Performance
Shares of FWRG have risen 23.8% in the year-to-date period, outperforming the Zacks Retail - Restaurants industry’s growth of 10.9%. The company has been benefiting from accretive acquisitions, expansion efforts and traffic growth. Also, its focus on the pricing structure bodes well.
Image Source: Zacks Investment Research
In first-quarter 2023, the company witnessed same-restaurant sales growth of 12.9%, courtesy of 5.1% growth in same-restaurant traffic and a 4.1% in-restaurant menu price increase. Also, the restaurant-level operating profit margin grew 160 basis points (bps) to 21.2% year over year.
Going forward, the company intends to focus on back-of-house process enhancements, kitchen equipment upgrades and the optimization of kitchen display systems to drive growth. Meanwhile, earnings estimates for fiscal 2023 have increased in the past 60 days, depicting analysts’ optimism regarding the stock’s growth potential.
Zacks Rank & Key Picks
First Watch currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are Yum China Holdings, Inc. YUMC, Chuy's Holdings, Inc. CHUY and Chipotle Mexican Grill, Inc. CMG.
Yum China currently sports a Zacks Rank #1 (Strong Buy). YUMC has a trailing four-quarter earnings surprise of 301.6%, on average. Shares of the company have gained 20.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for YUMC’s 2023 sales and EPS suggests growth of 19.7% and 89.5%, respectively, from the year-ago period’s levels.
Chuy's Holdings sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have surged 106% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 9.9% and 27%, respectively, from the year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2 (Buy). CMG has a trailing four-quarter earnings surprise of 4.7%, on average. Shares of the company have gained 60.4% in the past year.
The Zacks Consensus Estimate for CMG’s 2023 sales and EPS suggests growth of 14.2% and 34.2%, respectively, from the year-ago period’s levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report
Yum China (YUMC) : Free Stock Analysis Report
First Watch Restaurant Group, Inc. (FWRG) : Free Stock Analysis Report
