FWRG

First Watch is executing a credible unit-growth story — 560 company-owned plus 73 franchise restaurants across 32 states as of Dec 28, 2025, with FY2025 revenue up 20.3% to $1.22B and a five-year revenue CAGR from $601M (FY2021) to $1.22B (FY2025). The MD&A's emphasis on a Comparable Restaurant Base that expanded from 327 (2023) to 381 (2025) shows the breakfast/brunch concept is scaling without cannibalizing the existing base, and operating cash flow of $126M (+8.9%) confirms the unit economics still generate real cash.

The problem is what's happening below the revenue line. Operating income fell 29.3% to $27.5M even as revenue grew 20%, compressing operating margin to 2.3% and net margin to 1.6%. ROE is just 3.1%. D&A jumped 30% to $75M and capex hit $157M — more than operating cash flow — so the company is outspending its own cash generation to build new units, which explains why cash & equivalents fell 36.2% to $21.2M and current liabilities ($167M) now dwarf current assets ($49.1M) for a working-capital deficit. Liabilities/equity of 1.78x is manageable but rising (liabilities +21.4% YoY vs. equity +5.2%), and the 10-K explicitly notes the Credit Agreement restricts dividends — a tell that lenders are watching leverage.