First Watch's Texas Alcohol Decline Slowed in Q3. Seven Stores Near Its Newest Openings Fell 18%.

The November 3 print

First Watch Restaurant Group reported third-quarter revenue of $349.9 million, up 10.7%, with same-restaurant sales up 1.0% and same-restaurant traffic down 1.9%. Adjusted EBITDA rose to $39.7 million from $34.1 million. Net income was $4.8 million, or $0.08 a diluted share, against a $0.04 consensus. Shares rose in premarket trading.

The company called the quarter "another encouraging proof point for the strength of First Watch" in its earnings release. Full-year adjusted EBITDA guidance moved to about $136 million, the top of the prior $133 million to $136 million range, and the long-term adjusted EBITDA growth target through 2028 rose to above 15%, from 11% to 14%. Full-year same-restaurant sales guidance is now about 2%, inside the earlier 1.5% to 3% range.

The quarter carried the year's hardest comparison: same-restaurant sales grew 7.1% in the third quarter of 2025. The investor presentation said First Watch grew comps "against our toughest comparison of the year." On a two-year basis, same-restaurant sales are up 8.1% and traffic 0.8%.

The traffic explanation is where the Texas receipts have something to add. Management tied most of the decline to "planned strategic sales transfer" from new restaurants, and said the transfer built into its underwriting has stayed within expectations. The company expects about 55 system-wide openings in 2027, a slower pace than recent years, and said fewer openings would ease sales-transfer pressure over time.

First Watch ended the quarter with 681 restaurants in 33 states, 601 company-owned and 80 franchised. Texas had 72 of 633 system restaurants at year-end 2025, about 11%, and 24 of those were franchised.

The Texas scorecard

We matched locations with positive reported beverage revenue in all three months of July through September in both 2025 and 2026, and excluded any location whose first reporting month fell inside the comparison window.

| Brand | Comparable locations | Jul-Sep 2025 | Jul-Sep 2026 | YoY | Locations down | |---|---:|---:|---:|---:|---:| | First Watch | 69 | $773,810 | $699,255 | -9.6% | 52 | | Kerbey Lane Cafe | 10 | $357,064 | $330,135 | -7.5% | 8 | | Another Broken Egg | 12 | $462,794 | $390,823 | -15.6% | 11 | | The Toasted Yolk Cafe | 21 | $950,239 | $788,980 | -17.0% | 19 | | Dish Society | 6 | $290,101 | $232,179 | -20.0% | 6 |

Across 15,620 Texas venues reporting in all six months, beverage revenue rose 0.2%. Daytime beverage revenue fell at all five brunch chains in the table.

The direction holds across windows. The same method gives -15.3% for January through March (68 locations, 63 down) and -14.6% for April through June (68, 62 down). Year to date, January through September, 67 comparable locations are down 13.0%, with 65 lower. By month, July fell 14.2%, August 5.5% and September 9.2%, so September's decline was wider than August's. June through August, on a slightly different panel, was -11.6%.

Scale matters. A comparable First Watch in Texas reported about $3,378 a month in beverage revenue this quarter, roughly $110 a day. The four brunch peers reported $10,856 to $12,899 a month per comparable store, three to four times as much. The company last disclosed alcohol at 2.7% of in-restaurant sales at company-owned restaurants, in the second quarter of 2022.

Where the declines cluster

Six First Watch locations in Texas opened since July 2025: Austin on East Parmer Lane, Waxahachie, Tomball on Kuykendahl Road, Bastrop, Texarkana and Leander. We measured each comparable location's distance to the nearest of them.

| Distance to nearest new Texas opening | Comparable locations | Jul-Sep YoY | Locations down | |---|---:|---:|---:| | 8 miles or less | 7 | -18.0% | 6 | | 8 to 15 miles | 4 | -14.9% | 4 | | More than 15 miles | 58 | -8.2% | 42 |

The closer the store, the steeper the drop. Round Rock fell 30.7%, 7.8 miles from the Parmer Lane opening. The Anderson Lane store in Austin fell 24.6%. Cedar Park and Georgetown, each 7.7 miles from Leander, fell 18.6% and 20.1%. The established Tomball store on FM 2920, about six miles from the new Kuykendahl location, fell 17.2%. The one close-in store that grew was Shenandoah, up 12.0%.

Two limits apply. The close-in groups are small, and most of those stores are in the Austin area, so some of the gap may be the Austin market. And these figures measure beverage dollars rather than visits. Even so, the pattern is consistent with what the company described.

Inside the beverage line

For the category split we use the 47 comparable locations that file under First Watch's main Texas operating entity, because they itemize wine and liquor consistently across both years. The other locations changed how they categorize in March 2026, which makes a year-over-year category comparison unreliable for them. Their total revenue is unaffected and is included everywhere else.

In that group, liquor revenue fell 12.2% in July through September, from $243,571 to $213,909. Wine fell 6.2%, from $272,706 to $255,929. No beer was reported. Wine accounted for 54.5% of the group's third-quarter beverage revenue. The 47 were down 9.0% in total; the other 22 comparable locations were down 10.9%, so both groups moved the same direction.

The receipts report dollars by category, so they can't say which drinks slowed.

Menu prices

First Watch said carried pricing was 3.6% in the third quarter and steps down to just under 3% in the fourth as last year's increase rolls off. Discounts and promotions ran higher than a year earlier after an annual email offer drew more redemptions, and a lower-priced fall item pulled mix down.

Pourcast's menu pricing data recorded First Watch's online-ordering menus at 73 Texas locations on October 10 and 11, 2026. Texas prices run on store-level tiers. Plain French toast was listed at five prices from $11.79 to $12.99; $12.79 was the most common, at 49 stores. Dallas, Euless, Grand Prairie and Webster locations sit in the top French toast tier at $12.99. The Works omelet ran from $14.49 to $15.79, and the Godfather Breakfast Bowl and Pumpkin Pancake Breakfast each from $14.49 to $15.29. Online-ordering prices can differ from dine-in menus. We don't have matched prices from earlier periods at the same stores, so no price change is claimed.

Breakfast commodities

Management cited about 40 basis points of commodity deflation, led by bacon and avocados and partly offset by turkey sausage. Public wholesale series point the same way on the breakfast staples. USDA's derind pork belly price, the bacon input, was $104.03 per hundredweight in the week of November 1, 2026, down 38.2% from a year earlier. USDA's national wholesale price for extra-large white eggs was $20.16 per 30-dozen case on October 1, 2026, down 58.3%. Arabica coffee averaged 360.9 cents a pound in August 2026, down 1.3% from a year earlier. These are market benchmarks; First Watch's contracted costs may differ.

Food and beverage cost was 22.3% of sales, up 10 basis points, with the steak limited-time offer running until mid-August. Restaurant-level margin was 19.4%, down from 19.7%.

Earlier stories, one evolving scorecard

In our August piece, same-store beverage revenue was down 14.8% for January through July across 68 locations, and we said we'd watch whether the decline decelerated against easier second-half comparisons. Through September, 67 comparable locations were down 13.0% year to date, and the third quarter alone was -9.6%. We also flagged the steak limited-time offer. It ended August 17.

In March, we ranked Texas locations by monthly beverage revenue: Grand Prairie led at $7,049, and Lakewood Hill Drive in Fort Worth sat near the bottom at $2,422. On year-over-year change in the third quarter, Lakewood Hill posted the largest gain in the comparable group, up 22.1%, and Grand Prairie rose 13.2%. Round Rock, at $7,028 a month in March, fell 30.7%.

First Watch holds its Investor Day in Boston on November 12. Management said it will go deeper there on the labor and G&A drivers behind the higher EBITDA target.

What we're watching

The October filings. Management expects the fourth quarter to step down from the third and shifted some marketing spend into it. October beverage revenue lands in late November.

The new-store gradient. If sales transfer is the driver, the gap between close-in and distant stores should narrow as the 2025 and 2026 openings mature.

Investor Day. A sales-transfer figure or a current alcohol mix would let the national results and the Texas data be read side by side.

Sources: First Watch's November 3, 2026 earnings release, Form 10-Q, investor presentation and earnings call; First Watch's 2025 Form 10-K and 2022 registration statement; Texas beverage tax receipts, July-September 2025 and 2026, matched locations with positive reports in all six months; Pourcast menu pricing data, October 10-11, 2026, 73 Texas locations; USDA AMS and FRED series as dated. First Watch's quarter ended September 27 and is mapped to calendar July-September.