While revenue growth remains resilient at 17.3% in 2026Q1, the company's operating margin has compressed to a thin 0.8%, suggesting that rapid unit scaling is currently failing to deliver proportional bottom-line profitability.
| Sales/Revenue | 1.27B | 1.22B | 1.02B | 891.55M | 730.16M | 601.19M | 342.39M | 436.37M | 349.77M |
| Revenue Growth % | 20.41% | 20.34% | 13.95% | 22.1% | 21.45% | 75.59% | -21.54% | 24.76% | - |
| Cost of Goods Sold | 825.08M | 1.06B | 223.1M | 701.43M | 590.63M | 476.96M | 312.51M | 348.96M | 278.4M |
| COGS % of Revenue | - | 86.96% | 21.96% | 78.68% | 80.89% | 79.34% | 91.27% | 79.97% | 79.6% |
| Gross Profit | 446.14M | 159.44M | 792.81M | 190.12M | 139.53M | 124.23M | 29.88M | 87.41M | 71.36M |
| Gross Margin % | 35.1% | 13.04% | 78.04% | 21.32% | 19.11% | 20.66% | 8.73% | 20.03% | 20.4% |
| Gross Profit Growth % | - | -79.89% | 317.01% | 36.25% | 12.32% | 315.75% | -65.81% | 22.49% | - |
| Operating Expenses | 418.3M | 125.67M | 753.91M | 148.85M | 122.62M | 101.99M | 77.1M | 124.97M | 68.13M |
| OpEx % of Revenue | - | 10.28% | 74.21% | 16.7% | 16.79% | 16.96% | 22.52% | 28.64% | 19.48% |
| Selling, General & Admin | 141.77M | 128.95M | 113.27M | 103.12M | 84.96M | 70.39M | 46.32M | 55.82M | 37.53M |
| SG&A % of Revenue | - | 10.55% | 11.15% | 11.57% | 11.64% | 11.71% | 13.53% | 12.79% | 10.73% |
| Research & Development | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| R&D % of Revenue | - | - | - | - | - | - | - | - | - |
| Other Operating Expenses | 4M | -3.28M | 640.64M | 45.73M | 37.66M | 31.6M | 30.78M | 69.15M | 30.6M |
| Operating Income | 29.55M | 33.77M | 38.91M | 41.27M | 16.91M | 22.24M | -47.22M | -37.56M | 3.23M |
| Operating Margin % | 2.32% | 2.76% | 3.83% | 4.63% | 2.32% | 3.7% | -13.79% | -8.61% | 0.92% |
| Operating Income Growth % | - | -13.2% | -5.72% | 144% | -23.96% | 147.1% | -25.74% | -1261.65% | - |
| EBITDA | 109.4M | 108.78M | 96.62M | 82.49M | 51.14M | 54.62M | -16.5M | -9.53M | 29.36M |
| EBITDA Margin % | 8.61% | 8.9% | 9.51% | 9.25% | 7% | 9.09% | -4.82% | -2.18% | 8.39% |
| EBITDA Growth % | 21.92% | 12.59% | 17.13% | 61.29% | -6.37% | 431.1% | -73.12% | -132.46% | - |
| D&A (Non-Cash Add-back) | 79.85M | 75.01M | 57.72M | 41.22M | 34.23M | 32.38M | 30.73M | 28.03M | 26.12M |
| EBIT | 29.74M | 33.77M | 40.67M | 44.14M | 17.82M | 20.47M | -46.74M | -37.81M | 7.71M |
| Net Interest Income | -18.14M | -16.7M | -12.64M | -8.06M | -5.23M | -20.1M | -22.82M | -20.08M | 0 |
| Interest Income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Interest Expense | 18.14M | 16.7M | 12.64M | 8.06M | 5.23M | 20.1M | 22.82M | 20.08M | 0 |
| Other Income/Expense | -17.61M | -21.64M | -10.88M | -5.19M | -4.32M | -21.87M | -22.33M | -20.34M | -15.76M |
| Pretax Income | 10.24M | 12.13M | 28.03M | 36.08M | 12.59M | 370K | -69.55M | -57.89M | -12.52M |
| Pretax Margin % | 0.81% | 0.99% | 2.76% | 4.05% | 1.72% | 0.06% | -20.31% | -13.27% | -3.58% |
| Income Tax | -7.34M | -7.3M | 9.1M | 10.69M | 5.68M | 2.48M | -19.87M | -12.42M | -221K |
| Effective Tax Rate % | -71.71% | -60.16% | 32.47% | 29.63% | 45.14% | 669.46% | 28.57% | 21.45% | 1.76% |
| Net Income | 17.58M | 19.43M | 18.93M | 25.39M | 6.91M | -2.11M | -49.68M | -45.44M | -12.3M |
| Net Margin % | 1.38% | 1.59% | 1.86% | 2.85% | 0.95% | -0.35% | -14.51% | -10.41% | -3.52% |
| Net Income Growth % | 85.67% | 2.68% | -25.45% | 267.53% | 427.81% | 95.76% | -9.34% | -269.54% | - |
| Net Income (Continuing) | 17.58M | 19.43M | 18.93M | 25.39M | 6.91M | -2.11M | -49.68M | -45.47M | -12.3M |
| Discontinued Operations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 250K |
| EPS (Diluted) | 0.29 | 0.31 | 0.30 | 0.41 | 0.11 | -0.04 | -0.86 | -0.79 | -0.27 |
| EPS Growth % | 66.71% | 3.33% | -26.83% | 272.73% | 375% | 95.35% | -8.86% | -192.59% | - |
| EPS (Basic) | - | 0.32 | 0.31 | 0.43 | 0.12 | -0.04 | -0.86 | -0.79 | -0.27 |
| Diluted Shares Outstanding | 61.24M | 62.84M | 62.35M | 61.19M | 60.14M | 48.21M | 58.51M | 58.51M | 45.01M |
| Basic Shares Outstanding | 61.24M | 60.96M | 60.37M | 59.53M | 59.1M | 48.21M | 57.63M | 57.63M | 45.01M |
| Dividend Payout Ratio | - | - | - | - | - | - | - | - | - |
Margin compression from labor costs
According to recent financial disclosures, FWRG achieved a 17.3% revenue growth rate in 2026Q1, maintaining a consistent expansion trajectory despite broader consumer discretionary headwinds, as the company continues to scale its footprint through aggressive new unit openings and the strategic re-acquisition of previously franchised restaurant locations.
The double-digit revenue growth suggests that the brand's daytime-only value proposition continues to resonate with consumers, effectively driving traffic despite a challenging macro environment. However, investors should monitor whether this growth is primarily volume-driven or increasingly reliant on menu price adjustments to offset rising input costs.
As reported in quarterly filings, FWRG's gross margin has exhibited significant volatility, swinging from 77.5% in 2026Q1 to 19.6% in 2025Q4, which likely reflects inconsistent accounting treatments of store-level labor and occupancy costs that complicate direct comparisons with traditional casual dining peers in the restaurant sector.
This wide variance in reported margins suggests that the company's underlying profitability is highly sensitive to the classification of operating expenses. The narrow net margins, which dipped into negative territory in 2026Q1, indicate that the business lacks a significant buffer to absorb inflationary shocks in labor or commodity inputs.
Based on the company's income statement data, operating income has failed to scale proportionally with revenue, as evidenced by a thin 0.8% operating margin in 2026Q1, suggesting that the firm's rapid unit expansion is currently outpacing its ability to achieve meaningful economies of scale at the corporate level.
The inability to consistently expand operating margins during periods of high revenue growth implies that the cost of supporting new restaurant openings is heavily weighing on the bottom line. Management's focus on aggressive expansion appears to be prioritizing market share over immediate profitability, which warrants caution regarding long-term earnings durability.
Analysis of recent income statements reveals that FWRG's reliance on re-acquiring franchised units may be masking underlying margin compression, as the transition from high-margin royalty streams to lower-margin, company-operated restaurant sales creates a structural headwind that could limit future earnings growth and return on invested capital.
Short-sellers may focus on the company's thin cash position and the potential for rising labor costs to further erode the already narrow net margins. If the company's expansion into new, less familiar geographic markets fails to replicate the success of its core Southeast footprint, the current growth-oriented valuation may face a significant downward re-rating.
Quick answers to the most common questions about buying FWRG stock.
For fiscal year 2025, First Watch Restaurant Group, Inc. (FWRG) reported total revenue of $1.22B. This represents a 249.5% increase compared to $349.8M in 2018.
First Watch Restaurant Group, Inc. (FWRG) is profitable, generating $19.4M in net income for the fiscal year ending 2025 with a net profit margin of 1.6%.
First Watch Restaurant Group, Inc. (FWRG) reported an operating income of $33.8M, resulting in an operating profit margin of 2.8%. This margin reflects the operational efficiency of the business before interest and taxes.
First Watch Restaurant Group, Inc. (FWRG) generated $159.4M in gross profit for the year, representing a gross profit margin of 13.0%. This demonstrates the company's core pricing power and production efficiency.