FWRG Stock Gains on a Deal to Acquire 16 Franchise Restaurants

First Watch Restaurant Group, Inc. FWRG has entered into an agreement to acquire 15 franchise-owned locations and one restaurant under construction in North and South Carolina for a total of $49 million.

The transaction is expected to close by mid-April 2025, subject to customary closing conditions, and will be funded with a combination of cash and borrowings from the company’s credit facility.

The company views strategic acquisitions of franchise-operated restaurants as a key component of its long-term growth and value-creation strategy. The addition of these 16 restaurants and its development rights will strengthen First Watch Restaurant’s corporate presence in the East Coast.

This acquisition is part of First Watch Restaurant’s ongoing expansion strategy. Since May 2023, the company has acquired 45 franchised restaurants through six transactions, significantly increasing its presence across key markets. The company’s continued expansion highlights its strong growth in the daytime dining sector.

This move will also open up new territories for organic growth in the future. First Watch Restaurant expects these restaurants to perform at levels similar to its company-owned locations, generating strong unit volumes and restaurant-level operating profit margins.

Shares of FWRG moved up 1.7% and 1.2% during yesterday’s trading session and after-hours, respectively.

FWRG Expands Presence With Franchise Acquisition

Investors looking for opportunities in the restaurant sector should pay attention to FWRG's strategic acquisitions, as these position the company for long-term growth and value generation in a competitive market.

On April 15, 2024, the company completed the acquisition of 21 franchise-owned restaurants in North Carolina for $75 million. This transaction supports First Watch Restaurant’s strategy to strengthen its market presence and drive continued growth.

In the third quarter of 2024, the company opened nine new system-wide restaurants across eight states. This brings the total number of system-wide restaurants to 547, including 466 company-owned and 81 franchise-owned locations, as of Sept. 29, 2024, across 29 states.

Shares of the company have gained 24.7% in the past year compared with the Zacks Retail – Restaurants industry’s growth of 13.4%. The company is benefiting from new restaurant openings and increased focus on strategic franchise acquisitions.

In the fourth quarter, the company expects to open 23 new restaurants. First Watch Restaurant aims to grow the size of its system by 10% or more annually. The company is currently managing more than 120 projects in its development pipeline. Many of these projects are planned for opening in 2025 and 2026.

FWRG’s Zacks Rank & Key Picks

FWRG currently carries a Zacks Rank #3 (Hold).

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