Newly public First Watch Restaurant Group Inc. only serves breakfast, brunch and lunch, so none of its staff ever works a dinner rush.
That’s a selling point during a tight labor market, according to Chris Tomasso, chief executive of the company, which began trading on October 1. First Watch restaurants operate one shift, from 7 a.m. to 2:30 p.m. and have one main menu with all dishes made-to-order. According to the company’s prospectus, there are no microwaves, heat lamps or deep fryers in its kitchens.
“Back in 2019, that was one of the toughest labor markets we have ever seen with the lowest unemployment in a long time. We were still fully staffed. We were still an employer of choice,” Tomasso told MarketWatch.
“Now we’re able to differentiate ourselves again. One shift per day, you get to have a wonderful job in the hospitality industry and you’re still able to be home with your families.”
Not only is First Watch able to find interested candidates, Tomasso says the company can keep them, with the average tenure for those at the director and regional director level exceeding a decade.
“All of that combined means we don’t have to deal with the same kinds of crises,” said Tomasso.
Labor shortages have turned into a problem for a number of companies, including dining chains that have struggled to fill open positions. Domino’s Pizza Inc. /zigman2/quotes/201587798/composite DPZ +1.65% attributed declines in its third-quarter earnings to staffing issues.
Companies have raised wages and added perks like education and childcare benefits to attract and retain workers. But most restaurants are open in the evenings to serve dinner and even late night food and drinks. Not the case with First Watch.
“The period between 2 p.m. and 6 p.m. is kind of a dead zone for a lot of restaurants. It’s really a lot of expense for a lot of restaurants. We don’t have that dead zone,” said Tomasso.
It also allows the company to specialize in a couple of dayparts. “Expanding into dinner would just make us another restaurant company,” Tomasso said.
Even with the benefit of this focus, First Watch lists its supply chain as a risk factor. As of the end of 2020, the company got all of its coffee from one supplier, all of its pork from two suppliers, all of its eggs from two suppliers, and 80% of its avocadoes from one supplier.
“The cancellation of our supply arrangements with any one of these suppliers or the disruption, delay or inability of these suppliers to deliver these major products to our restaurants or distribution centers due to problems in production or distribution, inclement weather, unanticipated demand or other conditions may materially and adversely affect our results of operations while we establish alternative supplier and distribution channels, all of which may materially and adversely affect our results of operations while we establish these alternate supplier and distribution channels,” the prospectus said.
First Watch was founded in 1983 and, as of June 2021, had 423 restaurants across 28 states. The majority of those locations, 335, are company-owned and the remaining 88 are franchised. The company stopped offering franchises in 2017 and expects to see that part of the business diminish further.