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First Watch raises menu prices again in response to food, labor inflation

Increases in January and July pushed the Bradenton chain’s prices nearly 8 percent higher than last year.
First Watch, the Bradenton-based brunch chain, announced on an investor call Tuesday that it would raise menu prices again, pushing prices for the rest of 2022 nearly 8% above last year, in response to labor and food cost inflation.
First Watch, the Bradenton-based brunch chain, announced on an investor call Tuesday that it would raise menu prices again, pushing prices for the rest of 2022 nearly 8% above last year, in response to labor and food cost inflation. [ First Watch ]
Published Aug. 9|Updated Aug. 9

For the second time this year, Bradenton casual-dining chain First Watch has raised menu prices in response to inflation in food and labor costs.

After holding menu pricing steady throughout 2021, the chain raised prices 3.9% in January and again in late July, executives told investors on an earnings call Tuesday, pushing prices for the rest of 2022 nearly 8% above last year.

The increases came amid strong revenue and customer traffic numbers during First Watch’s second fiscal quarter, covering April, May and June. The company reported revenues of $184.5 million, up 19.8% over the same quarter in 2021. Same-restaurant sales and traffic were up not only over last year, but over 2019, reflecting the chain’s persistent expansion during the pandemic. As a result, First Watch raised its annual revenue and sales growth outlook from its projections at the start of the year.

But income and profit margins for the quarter were down year over year as First Watch saw the cost of commodities, supplies and labor rise during the first half of the year. The income and profit decreases were partially offset by the menu price hikes.

“We’ve been conservative with our approach on pricing, and I still think relative to what our industry’s taking and what we’re seeing in grocery (stores) and food away from home, we still feel really good sitting at 8 percent for the rest of the year,” CEO and president Chris Tomasso said.

Tomasso said the company has not seen any negative impact on traffic or check management due to the price increases. In fact, as the company continues rolling out a nationwide alcohol sales program, customers are typically spending more per check. Chief financial officer Mel Hope illustrated that demand by pointing to the success of a recent limited menu offering, crab cakes Benedict.

“That was simultaneously one of the most popular (limited-time offers), and I think it was as pricey as anything we’ve ever put on our menu,” Hope said. “Customers consumed it to the point where we were ordering every bit of crab we could find. So frankly, we have a customer who seems to see value in a lot of our items, even when we take the price up.”

Other restaurant companies, including Tampa’s Bloomin’ Brands — the parent of chains like Outback Steakhouse and Carrabba’s Italian Grill — have also raised prices this year in response to inflationary pressures.

Related: Inflation dents profits, prices may rise at Tampa's Outback, Carrabba's

Tomasso and Hope said the year’s worst food inflation has likely peaked, while labor cost inflation is remaining steady at 8% to 10%. The company is operating at about 93 percent of its 2019 staffing levels, and has openings planned in multiple states throughout the year.

“We really believe in the differentiation of the brand and our offering, and the fact that we’re an affordable luxury,” Tomasso said. “For consumers to get the kind of food and experience that we’re offering for $15 really sets us apart.”

After opening at $17.77 per share Tuesday morning, First Watch stock had dipped below $17 by late morning.

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