What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-24 compared with 2025-03-11 · 295 added, 260 removed, 826 unchanged (40% of the section changed)

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Consolidated Balance Sheets - December 2 8 , 202 5 and December 29 , 20 24

Consolidated Statements of Operations and Comprehensive Income (Loss) - For Fiscal Years 2024, 2023 and 2022

Consolidated Statements of Operations and Comprehensive Income - For Fiscal Years 202 5 , 202 4 and 202 3

Consolidated Statements of Equity - For Fiscal Years 202 5 , 202 4 and 202 3

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To the Board of Directors and Shareholders of First Watch Restaurant Group, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of First Watch Restaurant Group, Inc.

and its subsidiaries (the "Company") as of December 29, 2024 and December 31, 2023, and the related consolidated statements of operations and comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 29, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024 in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the "Company") as of December 28, 2025 and December 29, 2024, and the related consolidated statements of operations and comprehensive income, of equity and of cash flows for each of the three years in the period ended December 28, 2025, including the related notes (collectively referred to as the “consolidated financial statements”).

We have also audited the Company’s internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2025 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2025, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

The Company’s management is responsible for the consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Managements’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Insurance Reserves

As described in Note 2 to the consolidated financial statements, the Company’s estimated unpaid claims and other insurance liabilities was $6.3 million as of December 28, 2025.

The Company is self-insured for employee group health claims and Ohio workers’ compensation.

The Company also carries retention levels and per-claim deductibles associated with other workers’ compensation and general liability insurance programs.

Stop loss coverage is maintained with third-party insurers to limit loss exposure.

Management records liabilities for unresolved and incurred but not reported claims at the anticipated cost below applicable retention levels or per-claim deductible amounts.

Insurance reserve liabilities are established at the balance sheet date using actuarial assumptions and historical data including the frequency and severity of claims.

The principal considerations for our determination that performing procedures relating to the valuation of insurance reserves is a critical audit matter are (i) the significant judgment by management when developing the estimate of insurance reserves;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the frequency and severity of claims;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s valuation of insurance reserves, including controls over the development of significant assumptions.

These procedures also included, among others (i) testing management’s process for developing the estimate of insurance reserves, (ii) evaluating the appropriateness of the actuarial methods used by management, (iii) evaluating the reasonableness of the significant assumptions used by management related to the frequency and severity of claims, and (iv) testing the completeness and accuracy of the underlying data used in the valuation.

Evaluating management’s assumptions related to the frequency and severity of claims involved considering (i) the consistency with external market data;

and (ii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge assisted in evaluating the reasonableness of management's estimate by (i) developing an independent estimate of insurance reserves and comparing the independent estimate to management's actuarial determined reserves, (ii) evaluating the appropriateness of management's actuarial methodologies and, (iii) evaluating the reasonableness of management's significant assumptions related to frequency and severity of claims.

Acquisition of Franchise Operated First Watch Restaurants on April 28, 2025 – Valuation of Reacquired Rights

As described in Notes 2 and 3 to the consolidated financial statements, on April 28, 2025, the Company acquired certain franchise operated First Watch restaurants for a net purchase price of $49.2 million.

Of the assets acquired, $13.1 million of reacquired rights were recorded.

The fair value of reacquired rights is determined as of the acquisition date by management using the excess earnings method.

Under this method, the fair value is determined based on estimated future cash flows arising from the reacquired rights over their estimated economic lives.

The assumptions that have the most significant effect on the fair value calculations are projected Earnings Before Interest and Taxes (“EBIT”) margins and the discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of reacquired rights acquired in the acquisition of franchise operated First Watch restaurants on April 28, 2025 is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reacquired rights intangible asset acquired;

(ii) a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to the projected EBIT margins and the discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the reacquired rights intangible asset acquired.

These procedures also included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the reacquired rights intangible asset acquired;

(iii) evaluating the appropriateness of the excess earnings method used by management;

(iv) testing the completeness and accuracy of the underlying data used in the excess earnings method;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the projected EBIT margins and the discount rate.

Evaluating management’s assumptions related to projected EBIT margins involved considering (i) the current and past performance of the franchisee’s franchise locations;

(ii) the consistency with the historical performance of the Company’s existing restaurants;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the excess earnings method and (ii) the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

Tampa, Florida

March 11, 2025

February 24, 2026

We have served as the Company’s auditor since 1999.

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Cash and cash equivalents $ 21,246 $ 33,312

Restricted cash — 329

Accounts receivable 6,859 7,235

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Prepaid expenses 7,945 7,008

Derivative assets, current 20 457

Other current assets 2,184 2,365

Deposits and other current assets 5,856 2,204

Total current assets 49,080 55,876

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Accrued liabilities 38,496 39,607

Accrued compensation and deferred payroll taxes 21,244 21,711

Accrued compensation 24,281 21,244

Deferred revenues 6,778 5,623

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FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

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Income before income taxes 12,133 28,026 36,075

Income tax expense ( 9,101 ) ( 10,690 ) ( 5,684 )

Income tax benefit (expense) 7,299 ( 9,101 ) ( 10,690 )

Net income $ 19,432 $ 18,925 $ 25,385

Other comprehensive income (loss):

Unrealized gain (loss) on derivatives 301 ( 889 ) —

Other comprehensive (loss) income:

Unrealized (loss) gain on derivatives ( 869 ) 301 ( 889 )

Income tax related to other comprehensive (loss) income 215 ( 75 ) 222

Other comprehensive income (loss) 226 ( 667 ) —

Other comprehensive (loss) income ( 654 ) 226 ( 667 )

Comprehensive income $ 18,778 $ 19,151 $ 24,718

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Stock-based compensation — — 7,604 — — 7,604

Other comprehensive loss, net of tax — — — — ( 667 ) ( 667 )

Balance at December 31, 2023 59,891,705 $ 599 $ 634,099 $ ( 72,747 ) $ ( 667 ) $ 561,284

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Stock-based compensation — — 8,525 — — 8,525

Other comprehensive loss, net of tax — — — — ( 667 ) ( 667 )

Other comprehensive income, net of tax — — — — 226 226

Balance at December 29, 2024 60,700,090 $ 607 $ 649,045 $ ( 53,822 ) $ ( 441 ) $ 595,389

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Stock-based compensation — — 10,919 — — 10,919

Other comprehensive income, net of tax — — — — 226 226

Other comprehensive loss, net of tax — — — ( 654 ) ( 654 )

Balance at December 28, 2025 61,131,978 $ 611 $ 661,153 $ ( 34,390 ) $ ( 1,095 ) $ 626,279

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Depreciation and amortization 75,011 57,715 41,223

Stock-based compensation 8,525 7,604 10,374

Stock-based compensation, net of amounts capitalized 10,760 8,525 7,604

Non-cash operating lease costs 32,786 26,579 19,472

Non-cash portion of gain on lease modifications ( 5 ) ( 123 ) ( 83 )

Non-cash loss on extinguishments and modifications of debt — 358 —

Deferred income taxes ( 10,031 ) 6,823 8,315

Amortization of debt discount and deferred issuance costs 664 567 452

Non-cash loss on extinguishments and modifications of debt 358 — —

Impairments and loss on disposal of assets 448 525 1,359

Gain on insurance proceeds ( 34 ) ( 1,198 ) ( 219 )

Changes in assets and liabilities:

Changes in assets and liabilities, net of effects of business combinations:

Accounts receivable 376 ( 1,703 ) 632

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Prepaid expenses ( 868 ) 509 ( 1,671 )

Other assets, current and long-term 111 ( 2,342 ) 1,072

Deposits and other assets, current and long-term ( 5,655 ) 77 ( 3,540 )

Accounts payable 1,740 637 ( 1,301 )

Accrued liabilities and other long-term liabilities 6,580 2,648 6,082

Accrued compensation and deferred payroll taxes, current and long-term ( 467 ) 3,812 ( 3,297 )

Accrued compensation and deferred payroll taxes 3,037 ( 467 ) 3,812

Deferred revenues, current and long-term 555 ( 136 ) ( 657 )

Operating lease liabilities ( 5,142 ) ( 11,399 ) ( 7,048 )

Other liabilities — ( 259 ) ( 368 )

Operating lease liabilities ( 8,056 ) ( 5,142 ) ( 11,399 )

Net cash provided by operating activities 125,912 115,673 95,338

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Capital expenditures ( 156,906 ) ( 127,915 ) ( 83,329 )

Business acquisitions, net of cash acquired ( 78,638 ) ( 39,880 ) —

Acquisitions, net of cash acquired ( 56,008 ) ( 78,638 ) ( 39,880 )

Purchase of intangible assets ( 850 ) ( 100 ) ( 161 )

Insurance proceeds 34 1,198 219

Net cash used in investing activities ( 213,764 ) ( 206,653 ) ( 123,370 )

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Proceeds from borrowings on revolving credit facility 443,500 22,500 30,000

Repayments of borrowings on revolving credit facility ( 387,500 ) ( 52,500 ) —

Proceeds from issuance of long-term debt 27,500 197,500 —

Repayments of long-term debt, including finance lease liabilities ( 8,907 ) ( 96,793 ) ( 6,183 )

Payment of debt discount and deferred issuance costs — ( 2,430 ) —

Proceeds from exercise of stock options, net of employee taxes paid 1,193 6,429 5,827

Repayments of note payable — ( 1,376 ) ( 2,868 )

Note payable borrowing — — 1,892

Proceeds from issuance of long-term debt 197,500 — —

Repayments of borrowings on revolving credit facility ( 52,500 ) — —

Contingent consideration payment — ( 375 ) ( 198 )

Payment of debt discount and deferred issuance costs ( 2,430 ) — —

Net cash provided by (used in) financing activities 74,331 28,070 ( 2,018 )

Net (decrease) increase in cash and cash equivalents and restricted cash ( 16,649 ) 38 ( 2,192 )

Cash and cash equivalents and restricted cash:

Repayment of notes payable — — ( 1,376 )

Net cash provided by financing activities 75,786 74,331 28,070

Net (decrease) increase in cash and cash equivalents ( 12,066 ) ( 16,649 ) 38

Cash and cash equivalents:

Beginning of period 33,312 49,961 49,923

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Remeasurements and terminations of finance lease assets and lease liabilities $ ( 575 ) $ 86 $ ( 48 )

Increase in liabilities from acquisition of property, fixtures and equipment $ 2,825 $ 7,036 $ 2,463

(1) Leased assets and liabilities obtained in Fiscal 2024 and 2023 include $ 28.1 million and $ 24.0 million from business acquisitions.

(Decrease) Increase in liabilities from acquisition of property, fixtures and equipment $ ( 5,181 ) $ 2,825 $ 7,036

(1) Leased assets and liabilities obtained in Fiscal 2025 and 2024 include $ 23.6 million and $ 28.1 million, respectively, from business acquisitions.

The accompanying notes are an integral part of these consolidated financial statements.

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(collectively with its wholly-owned subsidiaries, “the Company” or “Management”) is a Delaware holding company.

The Company operates and franchises restaurants i n 29 states operating under the “First Watch” trade name, which are focused on made-to-order breakfast, brunch and lunch.

The Company operates and franchises restaurants in 32 states operating under the “First Watch” trade name, which are focused on made-to-order breakfast, brunch and lunch.

The Company does not operate outside of the United States and all of its assets are located in the United States.

The Company’s outstanding stock was purchased by funds affiliated with or managed by Advent International L.P.

on August 21, 2017 (the “Advent Acquisition”).

The Company operates restaurants through its wholly owned subsidiary, First Watch Restaurants, Inc., and is a franchisor through its wholly owned subsidiary, First Watch Franchise Development Co.

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The consideration transferred in a business combination, identifiable assets acquired and liabilities assumed are measured at their estimated fair value as of the date of the acquisition.

The fair value of reacquired rights is determined as of the acquisition date by Management using the excess earnings method.

Under this method, the fair value is determined based on estimated future cash flows arising from the reacquired rights over their estimated economic lives.

The assumptions that have the most significant effect on the fair value calculations are projected Earnings Before Interest and Taxes (“EBIT”) margins and the discount rate.

Goodwill is recognized for the amount by which the purchase consideration exceeds the fair values of the net assets acquired.

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Interest Rate Swaps

Interest rate swaps are used as an element of the Company’s interest rate risk management strategy.

The intent of these instruments is to reduce cash flow exposure to variability in expected future interest rates on the Company’s debt.

Interest rate swaps are used as an element of the Company’s interest rate risk management strategy with the intent of reducing cash flow exposure to variability in expected future interest rates.

Management has elected to designate and qualify the interest rate swaps as cash flow hedges.

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The Company has elected to record cash flows from interest rate swaps within operating activities, the same category as the items being hedged, in its Consolidated Statements of Cash Flows.

Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less.

Amounts receivable from credit card processors are considered cash equivalents because they are highly liquid and are typically converted to cash within three business days.

Amounts included in restricted cash represent those required to be set aside by a contractual agreement for the settlement of insurance claims.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of market and credit risk, are cash and cash equivalents and restricted cash.

Financial instruments, which potentially subject the Company to concentrations of market and credit risk, are cash and cash equivalents.

At times, cash balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.

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The lease liability is initially measured as the present value of the future fixed lease payments that will be made over the lease term using the Company ’ s incremental borrowing rate as there are no implicit rates provided in the lease contracts.

The Company ’ s incremental borrowing rate is based on a market yield implied by the Company ’ s outstanding secured term loan interpolated for various maturities using the Company ’ s synthetic credit rating, which was determined using a regression analysis of rated publicly-traded comparable companies and their financial data.

The Company ’ s incremental borrowing rate is based on a market yield implied by the Company ’ s outstanding secured term loans interpolated for various maturities using the Company ’ s synthetic credit rating, which was determined using a regression analysis of rated comparable publicly-traded companies and their financial data.

Occupancy expense, which includes the effects of free rent periods and rent escalation clauses within certain of the Company ’ s leases, is recognized on a straight-line basis over the lease term.

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Contingent rent payments, which are based on a percentage of sales for certain restaurant facilities, are recorded as variable lease expense when the Company determines that such sales levels will be achieved.

In addition to fixed lease payments, certain of the Company ’ s real estate leases also require payment of a proportionate share of property taxes, insurance and maintenance costs, which are expensed as incurred in the Consolidated Statements of Operations and Comprehensive Income (Loss) and future variable rent obligations are not included within the lease liabilities on the Consolidated Balance Sheets.

The operating lease right-of-use asset is measured at the amount of the lease liability with adjustments for (i) rent prepayments made prior to or at lease commencement, (ii) landlord incentives and (iii) favorable and unfavorable leasehold positions.

In addition to fixed lease payments, certain of the Company ’ s real estate leases also require payment of a proportionate share of property taxes, insurance and maintenance costs, which are expensed as incurred in the Consolidated Statements of Operations and Comprehensive Income and future variable rent obligations are not included within the lease liabilities on the Consolidated Balance Sheets.

The operating lease right-of-use asset is measured as the amount of the lease liability with adjustments for (i) rent prepayments made prior to or at lease commencement, (ii) landlord incentives and (iii) favorable and unfavorable leasehold positions.

The depreciable life of an operating lease right-of-use asset is limited by the lease term.

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Fixed lease and non-lease components of the Company’s restaurant facility leases are accounted for as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets, however, they are recognized on a straight-line basis over the lease term in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Finance lease liabilities and corresponding finance lease assets are recognized at an amount equal to the present value of the minimum lease payments over the lease term.

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Leasehold improvements are depreciated over the shorter of their useful life or the lease term.

The carrying amount of assets sold, replaced or retired and the related accumulated depreciation are eliminated at the time of disposal and any resulting gains and losses on disposal are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Direct internal costs associated with the acquisition, development, design and co nstruction of company-owned restaurants are capitalized as these costs have a future benefit to the Company.

Once a restaurant opens, these costs are depreciated and recorded in Depreciation and amortization.

Direct internal costs of $ 1.2 million and $ 1.0 million w ere capitalized in Fiscal 2024 and Fiscal 2023, respectively.

Direct internal costs o f $ 1.7 million and $ 1.2 million w ere capitalized in Fiscal 2025 and Fiscal 2024, respectively.

FIRST WATCH RESTAURANT GROUP, INC.

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The respective carrying values are compared to the related estimated fair values and an impairment loss is recognized in an amount equal to the excess of the carrying value over estimated fair values.

Management performed a qualitative annual impairment assessment for goodwill and indefinite-lived intangible assets as of the first day of the fourth quarter of Fiscal 2024 and Fiscal 2023 and concluded that impairment of both goodwill and indefinite-lived intangible assets was not more likely than not.

As a result, a quantitative assessment was not required.

Management performed a qualitative annual impairment assessment for goodwill and indefinite-lived intangible assets as of the first day of the fourth quarter of each of Fiscal 2025 and Fiscal 2024 and concluded that impairment of both goodwill and indefinite-lived intangible assets was not more likely than not.

As a result, a quantitative assessment was not required in either year.

Definite-Lived Intangible Assets

Intangible assets with definite lives consist of franchise rights which arose from the purchase price allocation in connection with the Advent Acquisition and also include reacquired rights from the Company ’ s acquisitions of franchised restaurants.

Intangible assets with definite lives consist of franchise rights and reacquired rights from the Company ’ s acquisitions of franchised restaurants.

Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

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Fair value is generally estimated using a discounted cash flow model using unobservable inputs that fall within Level 3 of the fair value hierarchy.

No i mpairment loss was recorded for definite-lived intangible assets in Fiscal 2024, Fiscal 2023 and Fiscal 2022.

No impairment loss was recorded for definite-lived intangible assets in Fiscal 2025, Fiscal 2024 and Fiscal 2023.

Impairment Assessment of Long-lived Assets

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Income taxes are accounted for under the asset and liability method of accounting.

Under this method, deferred tax assets or liabilities are recognized for the estimated future tax effects attributable to temporary differences between the carrying value and the tax basis of assets and liabilities as well as tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable in the years in which the differences are expected to be recovered or settled.

Changes in deferred tax assets or liabilities are recognized in Income tax expense.

Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which the deductible temporary differences can be utilized.

Realization of deferred tax assets is dependent upon the availability of taxable income and a valuation allowance for deferred tax assets is provided when it is more likely than not that a portion of the deferred tax assets will not be realized.

In the assessment for realization of deferred tax assets, Management considers all sources of taxable income including (i) taxable income in any available carry back period, (ii) scheduling of anticipated reversal of taxable temporary differences, (iii) tax-planning strategies and (iv) taxable income expected to be generated in the future other than from reversing temporary differences and carryforwards.

Management continues to evaluate the rationale for recording a valuation allowance on its deferred tax assets and as the Company increases earnings and utilizes deferred tax assets, it is possible the valuation allowance could be reduced or eliminated.

Interest and penalties, when incurred, are recognized in Other (expense) income, net.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

When Management determines it is more likely than not that some portion or all of the deferred tax assets may not be realized, a valuation allowance is established against the deferred tax assets.

In the assessment for realization of deferred tax assets, Management considers all sources of taxable income including carryback available, scheduling of anticipated reversal of taxable temporary differences, prudent and feasible tax-planning strategies and future taxable income expected.

Management evaluates our tax filing positions and recognizes a tax benefit from an uncertain tax position only if, based on its technical merits, it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities.

The tax benefits recognized in the financial statements from such a position would be measured based on the largest tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority.

For uncertain tax positions that do not meet this threshold, we would record a related tax reserve in the period in which it arises.

We would adjust our unrecognized tax benefit liability and provision for income taxes in the period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new information becomes available that would require a change in recognition and/or measurement of the liability.

We recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in the provision for income taxes.

Accrued interest and penalties would be included within the related tax reserve on our consolidated balance sheets.

Stock-Based Compensation

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As a result, if Management had used significantly different assumptions or estimates, the fair value of stock option awards and stock-based compensation expense could have been materially different.

Stock option exercises and restricted stock unit vesting is settled with authorized but unissued shares of the Company’s common stock.

Stock option exercises and restricted stock unit vesting are settled with authorized but unissued shares of the Company’s common stock.

Forfeitures of stock-based awards are recognized as they occur.

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Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which requires incremental disclosures related to a public entity’s reportable segments but does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments.

The new guidance requires that a public entity disclose, on an annual and interim basis, disaggregated expense information that is regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

The disclosures are also required for public entities that have a single reporting segment.

The Company adopted ASU No, 2023-07 on December 29, 2024.

See Note 19, Segment Information, for further detail.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures , which establishes new income tax disclosure requirements including disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income taxes paid.

The Company adopted ASU 2023-09 prospectively on December 28, 2025.

See the disclosure included in Note 14, Income Taxes .

New Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which establishes new income tax disclosure requirements including disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income taxes paid.

The new guidance is effective for fiscal years beginning after December 15, 2024 and should be applied on a prospective basis with the option to apply the standard retrospectively.

Early adoption is permitted.

Management is currently evaluating the impact of this new standard.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which establishes new disclosure requirements related to purchases of inventory, employee compensation, selling expenses, depreciation and intangible amortization.

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Management is currently evaluating the impact of this new standard.

Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software , which updates the accounting for internal-use software by replacing stage-based rules with a principles-based framework, clarifying the criteria for capitalization and merging website development cost guidance.

The amendments in this update are effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

The update may be applied prospectively, retrospectively, or on a modified transition basis based on the status of the project and whether software costs were capitalized before the date of adoption.

Management is currently evaluating the impact of this new standard.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging:

Hedge Accounting Improvements, which includes amendments to more closely align hedge accounting with the economics of the Company’s risk management activities.

The amendments in this update are effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.

Early adoption is permitted.

Management is currently evaluating the impact of this new standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting:

Narrow-Scope Improvements, which makes targeted, narrow scope improvements to interim reporting to clarify application and improve consistency in practice.

The amendments in this update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

Management is currently evaluating the impact of this new standard.

Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact on the Company.

Business Acquisitions

During Fisca l 2024, the Company acquired substantially all the assets associated with 22 franc hise operated First Watch restaurants.

The purchase price was allocated to the fair value of assets acquired and liabilities assumed, which are based on preliminary valuations and are subject to adjustment as additional information is available.

The details of each acquisition are as follows:

DATE OF ACQUISITION

(dollars in thousands) JANUARY 22, 2024 APRIL 15, 2024

Number of acquired restaurants 1 21

Number of acquired restaurants under development — —

Purchase price (cash) $ 3,002 $ 75,119

Transaction costs incurred $ 211 $ 1,328

Deferred franchise fees recognized as a result of termination of pre-existing franchise agreement $ 30 $ 383

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash $ 1 $ 32

Inventory $ 15 $ 213

Other assets $ 1 $ 133

Property, fixtures and equipment $ 1,391 $ 16,511

Reacquired rights $ 498 $ 21,459

Goodwill $ 1,097 $ 37,585

Operating right-of-use assets, net of lease positions and prepaid rent $ 1,251 $ 26,199

Operating lease liabilities $ ( 1,247 ) $ ( 26,853 )

Deferred revenues - gift card liabilities assumed $ ( 5 ) $ ( 160 )

During Fiscal 2025 and Fiscal 2024, the Company acquired substantially all the assets associated with 19 and 22 franchise operated First Watch restaurants, respectively.

The purchase price was allocated to the fair value of assets acquired and liabilities assumed.

Fiscal 2025 acquisitions are based on preliminary valuations and are subject to adjustment as additional information is available.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During Fisca l 2023 , the Company acquired substantially all the assets associated with 23 franc hise operated First Watch restaurants.

The details of each acquisition are as follows:

DATE OF ACQUISITION

(dollars in thousands) MAY 1, 2023 JUNE 26, 2023 AUGUST 9, 2023 NOVEMBER 13, 2023

The dates and details of each acquisition are as follows:

FISCAL YEAR 2025 FISCAL YEAR 2024

(dollars in thousands) APRIL 28, 2025 APRIL 14, 2025 APRIL 15, 2024 JANUARY 22, 2024

Number of acquired restaurants 16 3 21 1

Number of acquired restaurants under development — — 1 —

Purchase price (cash) $ 49,247 $ 6,985 $ 75,119 $ 3,002

4 unchanged sentences

Inventory $ 159 $ 31 $ 213 $ 15

Prepaid rent and other assets $ 67 $ 26 $ 89 $ 51

Other assets $ 124 $ 9 $ 133 $ 1

Property, fixtures and equipment $ 19,800 $ 2,998 $ 16,511 $ 1,391

3 unchanged sentences

Operating right-of-use assets, net of lease positions and prepaid rent $ 17,305 $ 2,922 $ 26,199 $ 1,251

Operating lease liabilities $ ( 3,418 ) $ ( 5,269 ) $ ( 8,962 ) $ ( 6,388 )

Accounts payable $ — $ ( 2 ) $ — $ —

Deferred tax liability — $ — $ ( 72 ) $ —

Operating lease liabilities $ ( 19,896 ) $ ( 3,735 ) $ ( 26,853 ) $ ( 1,247 )

Deferred revenues - gift card liabilities assumed $ ( 96 ) $ ( 39 ) $ ( 160 ) $ ( 5 )

16 unchanged sentences

Balance, end of period $ 6,548 $ 5,385 $ 5,224

Gift cards are combined in one pool and are not separately identifiable.

As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Gift cards are combined in one pool and are not separately identifiable.

As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.

Changes in deferred franchise fee contract liabilities were as follows:

22 unchanged sentences

Thereafter $ 487

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounts Receivable

7 unchanged sentences

Total accounts receivable $ 6,859 $ 7,235

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The changes in the carrying value of goodwill were as follows:

24 unchanged sentences

Total amortization expense related to definite-lived intangible assets was $ 8.5 million, $ 5.6 million and $ 1.5 million in Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimated future amortization of definite-lived intangible assets as of December 28, 2025 is as follows:

1 unchanged sentence

Thereafter $ 2,916

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Fixtures and Equipment

13 unchanged sentences

In Fiscal 2025 and Fiscal 2024, there were no impairment losses recorded.

In Fiscal 2023, the Company recognized impairment losses of $ 0.5 million which primarily related to the long-lived assets of two company-owned restaurants due to their approved closures.

In Fiscal 2023, the Company recognized impairment losses of $ 0.5 million, primarily related to the long-lived assets of two company-owned restaurants due to their approved closures.

Loss on disposals of assets of $ 0.4 million, $ 0.5 million and $ 0.8 million were recognized in Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively, primarily related to the write-off of assets retired as a result of the replacement of assets or restaurant closures.

As of December 28, 2025 and December 29, 2024, Property, fixtures and equipment, net included $ 1.2 million in land related to sale and leaseback transactions accounted for as financing obligations.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrued Liabilities

3 unchanged sentences

Sales tax 8,806 7,919

Self-insurance, general liability and workers’ compensation reserves 2,521 1,593

Insurance liabilities 4,047 2,521

Utilities 2,892 2,156

Credit card fees 2,110 1,973

Contingent rent 1,058 1,160

Property tax 1,453 830

Common area maintenance 618 749

Interest payable 267 401

Contingent rent 1,239 1,058

Other 6,361 6,381

Total accrued liabilities $ 38,496 $ 39,607

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Long-term debt, net consisted of the following:

1 unchanged sentence

(in thousands) Balance Interest Rate Balance Interest Rate

Term Facility $ 98,125 6.93 % $ 92,500 7.70 %

Delayed Draw Term Facility 95,672 6.93 % —

Term Facilities $ 211,625 6.54 % $ 193,797 6.93 %

Revolving Credit Facility 56,000 7.17 % —

6 unchanged sentences

Credit Facilities

FWR Holding Corporation (“FWR”), a subsidiary of the Company, is the borrower under the credit agreement, dated October 6, 2021 (“Credit Agreement”), which provided for (i) a $ 100.0 million term loan A facility (the “Term Facility”) and (ii) a $ 75.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Facility, collectively, the “Credit Facility”).

On February 24, 2023, the Company entered into Amendment No.

1 to the Credit Agreement to replace the London interbank offer rate (“LIBOR”) with a secured overnight financing rate (“SOFR”) pursuant to the terms and LIBOR fallback language in the Credit Agreement.

All outstanding borrowings under the Credit Agreement continued to bear interest at LIBOR until March 27, 2023.

On January 5, 2024, the Company entered into Amendment No.

2 to the Credit Agreement (the “Second Amendment”) with terms substantially identical to the Credit Agreement to (i) replace the $ 100.0 million Term Facility with a new $ 100.0 million term loan A facility (the “New Term Facility”), (ii) replace the $ 75.0 million Revolving Credit Facility with a new $ 75.0 million revolving credit facility (the “New Revolving Credit Facility”), (iii) increase the New Revolving Credit Facility by $ 50.0 million, bringing the aggregate committed amount under the New Revolving Credit Facility to $ 125.0 million and (iv) add a new $ 125.0 million incremental delayed draw term loan facility (the “New Delayed Draw Term Facility”).

The New Delayed Draw Term Facility is available to FWR for a period of 18 months from the date of the Second Amendment and the proceeds may be used to fund permitted acquisitions and new restaurant capital expenditures, repay revolving loans and/or replenish balance sheet cash, in each case, used for such permitted acquisitions or capital expenditures.

On April 12, 2024, the Company drew $ 97.5 million of the $ 125.0 million New Delayed Draw Term Facility.

The proceeds were used to repay $ 22.5 million of borrowings under the New Revolving Credit Facility and fund the franchise acquisition on April 15, 2024 that was completed for approximately $ 75.1 million.

As of December 29, 2024, borrowings under the Credit Facility, as amended, bear interest at the option of FWR at either (i) the alternate base rate plus a margin of between 150 and 225 basis points depending on the total rent adjusted net leverage ratio of FWR and its restricted subsidiaries on a consolidated basis (the “Total Rent Adjusted Net Leverage Ratio”) or (ii) SOFR plus a credit spread adjustment of 10 basis points plus a margin of between 250 and 325 basis points depending on the Total Rent Adjusted Net Leverage Ratio.

In addition, an unused commitment fee of between 37.5 and 50 basis points is paid on the undrawn commitments under the New Revolving Credit Facility and New Delayed Draw Term Facility, also depending on the Total Rent Adjusted Net Leverage Ratio.

Refer to Note 11, Interest Rate Swaps , for information about the variable-to-fixed interest rate swap agreements entered in June 2023 and May 2024.

FWR Holding Corporation (“FWR”), a subsidiary of the Company, is the borrower under the credit agreement dated October 6, 2021, the terms of which were amended on February 24, 2023 and January 5, 2024, which provides for (i) a $ 225.0 million term loan A facility and delayed draw facility (the “Term Facilities”) and (ii) a $ 125.0 million revolving credit facility (the “Revolving Credit Facility” and collectively with the Term Facilities the “Credit Facility”).

The Credit Facility matures on January 5, 2029.

During Fiscal 2024, the Company drew $ 97.5 million of the $ 125.0 million delayed draw facility.

The proceeds were used to repay $ 22.5 million of borrowings under the Revolving Credit Facility and fund the business acquisition that was completed on April 15, 2024 for approximately $ 75.1 million.

During Fiscal 2025, the Company drew the remaining $ 27.5 million on the delayed draw facility and $ 32.5 million on the Revolving Credit Facility, primarily to fund the business acquisitions referenced in Note 3, “Business Acquisitions”.

As of December 28, 2025, the delayed draw facility was fully drawn with the same servicing and repayment terms as the term loan A facility.

The Company drew an additional $ 23.5 million on the Revolving Credit Facility during Fiscal 2025 primarily to fund capital expenditures.

As of December 28, 2025, borrowings under the Credit Facility bear interest at the option of FWR at either (i) the alternate base rate plus a margin of between 150 and 225 basis points depending on the total rent adjusted net leverage ratio of FWR and its restricted subsidiaries on a consolidated basis (the “Total Rent Adjusted Net Leverage Ratio”) or (ii) the secured overnight financing rate (“SOFR”), plus a credit spread adjustment of 10 basis points plus a margin of between 250 and 325 basis points depending on the Total Rent Adjusted Net Leverage Ratio.

Additionally, an unused commitment fee of between 37.5 and 50 basis points is paid on the undrawn commitments under the New Revolving Credit Facility, also depending on the Total Rent Adjusted Net Leverage Ratio.

Refer to Note 11, Interest Rate Swaps, for information about the Company’s variable-to-fixed interest rate swap agreements.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Loans drawn under the New Delayed Draw Term Facility amortize at the same rate per annum applicable to loans under the New Term Facility.

The New Term Facility and New Delayed Draw Term Facility are subject to amortization of principal, payable in quarterly installments equal to (i) 1.9 % of the original principal amount of the term loans in Fiscal 2024 , (ii) 4.4 % of the original principal amount of the term loans in the fiscal year ending December 28, 2025, (iii) 5.0 % of the original principal amount of the term loans in the fiscal year ending December 27, 2026, (iv) 6.9 % of the original principal amount of the term loans in the fiscal year ending December 26, 2027 and (v) 9.4 % of the original principal amount of the term loans in the fiscal year ending December 31, 2028.

The Term Facilities are subject to amortization of principal, payable in quarterly installments equal to (i) 1.9 % of the original principal amount of the term loans in Fiscal 2024, (ii) 4.4 % of the original principal amount of the term loans in the fiscal year ending December 28, 2025, (iii) 5.0 % of the original principal amount of the term loans in the fiscal year ending December 27, 2026, (iv) 6.9 % of the original principal amount of the term loans in the fiscal year ending December 26, 2027 and (v) 9.4 % of the original principal amount of the term loans in the fiscal year ending December 31, 2028.

The remaining principal amount outstanding is payable at maturity.

The New Term Facility, New Delayed Draw Term Facility and New Revolving Credit Facility mature on January 5, 2029.

Principal payments due on the outstanding debt, excluding finance lease liabilities and financing obligations, as of December 28, 2025 are as follows:

FISCAL YEAR (in thousands)

2026 $ 11,250

Interest Expense

6 unchanged sentences

The estimated fair value of the outstanding debt, excluding finance lease obligations and financing obligations, is classified as Level 3 in the fair value hierarchy and was estimated using discounted cash flow models, market yield and yield volatility.

The following table includes the carrying value and fair value of the Company’s debt as of the periods indicated:

The following table includes the carrying value and fair value of the Company’s debt as of the dates indicated:

DECEMBER 28, 2025 DECEMBER 29, 2024

(in thousands) Carrying Value Fair Value Carrying Value Fair Value

Term Facility $ 98,125 $ 97,933 $ 92,500 $ 92,201

Delayed Draw Term Facility $ 95,672 $ 95,484 $ — $ —

Term Facilities $ 211,625 $ 210,860 $ 193,797 $ 193,417

Revolving Credit Facility $ 56,000 $ 55,761 $ — $ —

4 unchanged sentences

The Company pays participation fees for the letters of credit based on a varying percentage of the amount not drawn.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Debt Covenants

2 unchanged sentences

FWR was in compliance with covenants under the Credit Agreement as of December 28, 2025 and December 29, 2024.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Interest Rate Swaps

On June 23, 2023, the Company entered into variable-to-fixed interest rate swaps to hedge a portion of the cash flows of the Company’s variable rate debt.

Interest rate swaps are utilized to hedge a portion of the cash flows of the Company’s variable rate debt.

On June 23, 2023, the Company entered into two variable-to-fixed interest rate swaps.

The interest rate swaps have an aggregate notional amount of $ 90.0 million and mature on October 6, 2026.

Under the terms of the interest rate swaps, the Company pays a weighted average fixed rate of 4.16 % on the notional amount and will receive payments from the counterparties based on the three-month SOFR rate.

Under the terms of the interest rate swaps, the Company will pay a weighted average fixed rate of 4.16 % on the notional amount and will receive payments from, or make payments to, the counterparties based on the three-month SOFR rate.

On May 17, 2024, the Company entered into two additional variable-to-fixed interest rate swaps.

These interest rate swaps have an aggregate notional amount of $ 60.0 million and mature on June 30, 2027.

Under the terms of the interest rate swaps, the Company pays a weighted average fixed rate of 4.42 % on the notional amount and will receive payments from the counterparties based on the three-month SOFR rate.

Under the terms of the interest rate swaps, the Company pays a weighted average fixed rate of 4.42 % on the notional amount and will receive payments from, or make payments to, the counterparties based on the three-month SOFR rate.

The fair value measurement of the interest rate swaps was based on the contractual terms and used observable market-based inputs.

4 unchanged sentences

Amounts reported in Other comprehensive income (loss) related to the interest rate swaps will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

During the fiscal years ended December 29, 2024 and December 31, 2023, a total of $ 1.0 million and $ 0.5 million was reclassified from Other comprehensive income (loss) as a reduction to interest expense, respectively.

Over the next 12 months, the Company estimates that $ 0.2 million will be reclassified as an increase to interest expense.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the fiscal year ended December 28, 2025, a total of $ 0.1 million was reclassified from Other comprehensive income (loss) as an increase to interest expense.

During the fiscal year ended December 29, 2024, a total of $ 1.0 million was reclassified from Other comprehensive income (loss) as a reduction to interest expense.

Over the next 12 months, Management estimates that $ 1.1 million will be reclassified as an increase to interest expense.

The following table includes a detail of lease assets and liabilities:

(in thousands) Consolidated Balance Sheets Classification DECEMBER 28, 2025 DECEMBER 29, 2024

Finance lease assets - current Deposits and other current assets $ 120 $ —

Operating lease right-of-use assets Operating lease right-of-use assets 614,548 527,674

9 unchanged sentences

(1) Excludes all variable lease expense.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The components of lease expense were as follows:

(in thousands) Consolidated Statements of Operations and Comprehensive Income (Loss) Classification FISCAL YEAR

(in thousands) Consolidated Statements of Operations and Comprehensive Income Classification FISCAL YEAR

2025 2024 2023

12 unchanged sentences

_____________

(1) Includes contingent rent expense of $ 1.8 million and $ 2.1 million and $ 1.6 million during Fiscal 2024, Fiscal 2023 and Fiscal 2022 , respectively.

(1) Includes contingent rent expense of $ 2.1 million, $ 1.8 million and $ 2.1 million during Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

Supplemental cash flow information related to leases was as follows:

4 unchanged sentences

Financing cash flows - finance leases $ ( 764 ) $ 590 $ 558

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental information related to leases was as follows:

6 unchanged sentences

(1) Based on the Company’s incremental borrowing rate.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of December 28, 2025, future minimum lease payments for operating and finance leases consisted of the following:

(in thousands) OPERATING LEASES FINANCE LEASES

(in thousands)

FISCAL YEAR OPERATING LEASES FINANCE LEASES

2026 $ 77,739 $ 1,996

9 unchanged sentences

_____________

(1) Excludes approxim ately $ 116.1 million of exec uted operating leases that have not commenced as of December 29, 2024.

(1) Excludes approximately $ 130.7 million of executed operating leases that have not commenced as of December 28, 2025.

Sale-Leaseback Transactions

3 unchanged sentences

The balance of the financing obligation was $ 3.1 million as of December 28, 2025 and December 29, 2024.

Transaction Expenses (Income), Net

Transaction expenses (income), net consisted of the following:

Transaction Expenses, Net

Transaction expenses, net consisted of the following:

(in thousands) 2025 2024 2023

2 unchanged sentences

Credit Agreement modification — 268 127

Contingent consideration liability revaluation ( 612 ) — 165

(Gain) Loss, net on restaurant closures/relocations 13 ( 73 ) 391

Total transaction expenses (income), net $ 2,587 $ 3,147 $ 2,513

Loss (Gain), net on restaurant closures/relocations 49 13 ( 73 )

Other 80 ( 548 ) —

Total transaction expenses, net $ 2,533 $ 2,587 $ 3,147

During Fiscal 2025 and 2024, $ 1.1 million and $ 1.6 million, respectively, of costs were incurred in connection with the acquisition of certain franchise-owned restaurants.

During both Fiscal 2025 and 2024, $ 1.3 million of costs were incurred by the Company in connection with underwritten secondary offerings of the Company’s common stock and public resales of the Company’s common stock under Rule 144 of the Securities Act of 1933, as amended, by entities affiliated with or managed by our former majority owner.

During Fiscal 2023, total costs of $ 1.0 million were incurred by the Company in connection with secondary offerings.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During Fiscal 2024 and 2023, $ 1.6 million and $ 2.1 million of costs were incurred in connection with the acquisition of certain franchise-owned restaurants, which was partially offset by the gain recognized from the lease modification o f one company-owned restaurant in 2024 and one company-owned restaurant in 2023.

During Fiscal 2024 and 2023 $ 1.3 million and $ 1.0 million of costs were incurred by the Company in connection with underwritten secondary public offerings of the Company’s common stock by entities affiliated with our majority owner, Advent International L.P., (“Secondary Offerings”).

During Fiscal 2022, total costs of $ 2.0 million were incurred by the Company in connection with Secondary Offerings as well as for the Registration Statement on Form S-3 that allows the Company to sell up to 5,000,000 shares of common stock from time to time in one or more offerings.

The Company revalued the contingent consideration liability initially recognized in connection with the Advent Acquisition (see Note 14, Income Taxes , for additional information) and recorded a gain of $ 0.6 and a loss of $ 0.2 million in Fiscal 2024 and Fiscal 2022, respectively.

There was no revaluation adjustment recorded for the contingent liability in Fiscal 2023.

Income tax expense consisted of the following:

Income before taxes were as follows:

(in thousands) 2025 2024 2023

income before tax $ 12,133 $ 28,026 $ 36,075

Income before taxes $ 12,133 $ 28,026 $ 36,075

The components of the provision for income taxes were as follows:

(in thousands) 2025 2024 2023

Current provision:

2 unchanged sentences

Total current provision ( 2,732 ) ( 2,278 ) ( 2,375 )

Deferred provision:

Deferred benefit (provision):

Federal 9,846 ( 7,031 ) ( 8,896 )

State 185 208 581

Total deferred provision ( 6,823 ) ( 8,315 ) ( 4,677 )

Income tax expense $ ( 9,101 ) $ ( 10,690 ) $ ( 5,684 )

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Total deferred benefit (provision) 10,031 ( 6,823 ) ( 8,315 )

Income tax benefit (expense) $ 7,299 $ ( 9,101 ) $ ( 10,690 )

A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

Federal statutory rate $ 2,548 21.0 %

State and local income taxes, net of federal income tax effect (a) 1,415 11.7 %

FICA tip credit ( 12,561 ) ( 103.5 ) %

Change in valuation allowance ( 3,147 ) ( 25.9 ) %

Nontaxable or nondeductible items

FICA tip expenses 2,638 21.7 %

Stock-based compensation 1,278 10.5 %

Secondary offerings - costs 291 2.4 %

Meals 130 1.0 %

Other nondeductible items 75 0.6 %

Other adjustments 34 0.3 %

Effective tax rate $ ( 7,299 ) ( 60.2 ) %

_____________

( a) State taxes in Florida, Texas and Missouri make up the majority (greater than 50 percent) of the tax effect of this category

The effective income tax rate for Fiscal 2025 differed from the federal statutory rate primarily due to (i) the benefit of the tax credits for FICA taxes on certain employee tips, (ii) the change in valuation allowance, (iii) state taxes and (iv) impacts of executive stock-based compensation.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate before the adoption of ASU 2023-09 is as follows:

Income taxes at federal statutory rate 21.0 % 21.0 %

9 unchanged sentences

Total 32.5 % 29.6 %

The effective income tax rate for Fiscal 2024, Fiscal 2023 and Fiscal 2022 was different than the blended federal and state statutory rate mainly due to (i) the change in the valuation allowance on deferred tax assets, (ii) the benefit of tax credits for FICA taxes on certain employees’ tips, (iii) impacts of executive stock-based compensation and (iv) non-deductible costs associated with the Secondary Offerings and the Registration Statement on Form S-3.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The effective income tax rate for Fiscal year 2024 and Fiscal year 2023 differed from the blended federal and state statutory rate primarily due to (i) the change in the valuation allowance, (ii) the benefit of the tax credits for FICA taxes on certain employee tips, (iii) impacts of executive stock-based compensation and (iv) non-deductible costs associated with the secondary offerings.

The components of deferred tax assets and liabilities were as follows:

21 unchanged sentences

Net deferred income tax liabilities $ ( 21,972 ) $ ( 32,218 )

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Tax Carryforwards

4 unchanged sentences

The Company also has state net operating loss carryforwards of $ 11.9 million.

Section 382 of the Internal Revenue Code limits the ability of a company to utilize attribute carryforwards if there is a change in ownership of more than 50% of shareholders over a rolling three-year period.

The Company experienced an ownership change in March 2024 associated with the Secondary Offerings.

Management completed an analysis and concluded that no carryforwards will expire unused due to the application of Section 382.

Certain federal loss carryforwards, state loss carryforwards and general business credits were accumulated from operations prior to the August 2017 merger through which the Company became majority owned by Advent.

Under the terms of an agreement with the previous stockholders, to the extent that these credits and carryforwards were utilized to reduce taxes payable, the Company was required to pay the previous stockholders an amount equal to tax savings.

In accordance with the agreement, an initial contingent consideration liability of $ 1.2 million was recognized and adjusted periodically for estimated future use and the actual distributions to previous stockholders.

By agreement the obligation would lapse following a change in control event.

During the first quarter of 2024, Advent sold common stock of the Company through a secondary public offering.

As a result, Advent no longer controlled a majority of the Company’s issued and outstanding shares of common stock.

Advent’s first quarter sale, therefore, represents a change of control event as defined in the agreement.

Given this change in control event, the remaining $ 0.6 million of the contingent consideration liability was released through Transaction expenses, net.

Final payment to previous stockholders was made in the second quarter of 2024.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the U.S., a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (“FICA tip credit”).

During the first quarter of 2024, the Company’s former majority shareholder sold shares, through a secondary offering.

The sale resulted in a change in control event, per the terms of the agreement with previous stockholders, and the contingent liability was reevaluated and final payment to previous stockholders was made in the second quarter of 2024.

Section 382 of the Internal Revenue Code (“IRC § 382”) limits a company’s ability to utilize tax attribute carryforwards in the event of an “ownership change”, which is defined as a change in ownership of more than 50% of a company’s stock within a rolling three-year period.

We have considered the impact of potential ownership changes to our ability to realize the benefit of our deferred tax assets and do not believe that any resulting limitation will have a material impact.

Valuation Allowance

Based upon an evaluation of the Company's deferred tax assets, Management has recognized a valuation allowance of $ 57.7 million and $ 48.1 million as of December 29, 2024 and December 31, 2023, respectively.

The valuation allowance primarily relates to the Company’s federal tax credit carryforwards that are not expected to be realized prior to the statutory expiration of the carryforward.

Management continues to monitor and evaluate the rationale for recording a valuation allowance for deferred tax assets.

As the Company’s future taxable earnings increase and deferred tax assets are utilized, it is possible that a portion of the valuation allowance will no longer be needed.

Release of any portion of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period of the release.

The timing and amount of any release related to future taxable income is currently indeterminable.

During the year ended December 31, 2023, a release of the valuation allowance related to certain state loss carryforwards decreased income tax expense by approximately $ 1.2 million.

As a result of Management’s annual assessment, for the fiscal year ended on December 28, 2025, there was a net decrease to the valuation allowance on federal tax credit carryforwards.

Management’s assessment of the valuation allowance considered all available positive and negative evidence, including the scheduled reversal of temporary differences, cumulative income position, recent and projected future taxable income, and prudent and feasible tax planning strategies.

Changes in the deferred tax asset valuation allowance were as follows:

5 unchanged sentences

Balance as of December 29, 2024 ( 57,664 )

Increase ( 9,553 )

Decrease 3,299

Balance as of December 28, 2025 $ ( 54,365 )

1 unchanged sentence

As of December 28, 2025, the tax years that remain subject to examination by major tax jurisdictions under the statute of limitations are from the year 2017 and forward.

Disclosure of Income Taxes Paid

Income taxes paid by jurisdiction are as follows:

(in thousands) 2025

Federal $ 597

All other states 1,028

Total taxes paid $ 2,562

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Enactment of H.R.

On July 4, 2025, H.R.

1 - the One Big Beautiful Bill Act (“the Bill”) was enacted in the U.S.

The Bill includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions and provisions allowing accelerated tax deductions for qualified property and research expenditures.

The Bill has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027.

The Bill’s enactment did not materially impact our effective income tax rate or cash tax position for the year ended December 28, 2025.

Stockholders’ Equity

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In addition, all common stockholders are entitled to share equally on a share-for-share basis in any assets available for distribution to common stockholders upon liquidation, dissolution, or winding up of the Company after payment is made to the preferred stockholders.

During Fiscal 2024, funds managed by Advent International L.P.

sold 6,000,000 and 8,000,000 shares through Secondary Offerings that were completed on March 12, 2024 and November 13, 2024, respectively.

The selling stockholders sold an additional 900,000 shares of common stock on March 12, 2024 pursuant to the terms of the underwriter’s option associated with the secondary public offering.

All net proceeds from the sale of the shares of common stock were distributed to the selling stockholders.

During Fiscal 2023, funds managed by Advent International L.P.

sold 3,500,000 and 3,000,000 shares through Secondary Offerings that were completed on May 18, 2023 and June 13, 2023 respectively.

The selling stockholders sold an additional 525,000 and 450,000 shares of common stock on May 18, 2023 and July 3, 2023, respectively, pursuant to the terms of the underwriter’s option associated with each secondary public offering.

All net proceeds from the sale of the shares of common stock were distributed to the selling stockholders.

During Fiscal 2022, funds managed by Advent sold 4,500,000 shares of the Company’s common stock through a Secondary Offering.

The selling stockholders sold an additional 675,000 shares of common stock on October 6, 2022 pursuant to the terms of the underwriter’s option associated with the Secondary Offering.

All net proceeds from the sale of the shares of common stock were distributed to the selling stockholders.

During Fiscal 2025, our former majority shareholder sold their remaining 10,289,784 shares of common stock through secondary offerings.

During Fiscal 2024 and Fiscal 2023, our former majority shareholder sold 14,900,000 and 7,475,000 shares of common stock through secondary offerings, respectively.

The net proceeds from the sales of common stock from the transactions were distributed to the selling stockholders.

No cash dividends were declared or paid in Fiscal 2025, Fiscal 2024 and Fiscal 2023.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Savings Plans

Defined Contribution Plan

The Company sponsors a defined contribution 401(k) savings plan (“401(k) Plan”) which requires the Company to match contributions for participants.

In Fiscal 2024 and Fiscal 2023, the Company matched 50 % of the first 6 % of employees’ wages deferred into the 401(k) Plan.

In Fiscal 2022, the Company matched of 25 % of the first 6 % of employees’ wages deferred into the 401(k) Plan.

The Company matches 50 % of the first 6 % of employees’ wages deferred into the 401(k) Plan.

The 401(k) Plan also allows for additional profit-sharing contributions by the Company at the sole discretion of Management.

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Total expense recognized for the Company’s contributions to the 401(k) Plan was $ 2.3 million, $ 1.9 million and $ 1.1 million in Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

Non-Qualified Deferred Compensation Plan

The First Watch Deferred Compensation Plan is a non-qualified plan that allows officers and other eligible key employees to defer a percentage of their base salary and cash bonus on a pre-tax basis.

The plan allows participants to make tax-deferred contributions that would otherwise be limited under the 401(k) Plan because of Internal Revenue Service rules.

The Company matches 50 % of the first 6 % of employees’ wages deferred into the First Watch Deferred Compensation Plan.

The employer match credits vest over a five-year service period, or vest in full upon an active participant’s death, disability or a Company change in control event, as defined in the plan.

Participants’ earnings on contributions fluctuate with the actual earnings and losses of available investment choices selected by the participants.

Changes to deferred compensation liabilities incurred under the First Watch Deferred Compensation Plan are recorded as general and administrative expenses.

As of December 28, 2025 , the deferred compensation obligation was included in Other long-term liabilities and totaled $ 1.9 million .

While the First Watch Deferred Compensation Plan is unsecured, Management has elected to fund certain of these obligations through a rabbi trust, the assets of which consist of company-owned life insurance policies.

The life insurance policies cover certain of our officers and other key employees included in the First Watch Deferred Compensation Plan.

The assets held in the rabbi trust are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

Changes to the cash surrender value are recorded as general and administrative expenses.

The cash surrender value of the life insurance policies in the rabbi trust is recorded in Other long-term assets and totaled $ 1.8 million as of December 28, 2025 .

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-Based Compensation

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2021 Equity Plan

The number of common stock reserved for issuance under the 2021 Equity Plan (“Share Reserve”) for Fiscal 2024, Fiscal 2023 and Fiscal 2022 was 6,416,126 , 5,218,292 and 4,034,072 respectively.

The number of shares of common stock reserved for issuance under the 2021 Equity Plan (“Share Reserve”) for Fiscal 2025, Fiscal 2024 and Fiscal 2023 was 7,630,128 , 6,416,126 , and 5,218,292 , respectively.

The number of shares of common stock that may be issued under the 2021 Equity Plan will automatically increase on the first day of each fiscal year, beginning on December 26, 2022 and continuing for each fiscal year until, and including, the fiscal year ending on December 29, 2030, equal to the least of (i) 2.0 % of the total number of shares of common stock actually issued and outstanding on the last day of the preceding fiscal year, (ii) a number of shares of common stock determined by the Board of Directors;

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Shares that are withheld from any award in payment of the exercise, base or purchase price or taxes related to such an award, not issued or delivered as a result of the net settlement of any award, or repurchased by the Company on the open market with the proceeds of a stock option will be deemed to have been delivered and will not be available for future awards under the 2021 Equity Plan.

There were no stock option awards granted under the 2021 Equity Plan during Fiscal 2024 or Fiscal 2023.

The non-qualified time-based option awards granted under the 2021 Equity Plan in Fiscal 2022 vest over a three-year requisite service period from the date of grant and expire 10 years after the grant date.

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Stock-based compensation expense for awards made under the 2021 Equity Plan is recognized on a straight-line recognition method over the requisite service period.

There were no stock option awards granted under the 2021 Equity Plan after Fiscal 2022.

2017 Equity Plan

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All stock options have an exercisable life of no more than 10 years from the date of grant.

No awards were granted under the 2017 Equity Plan during Fiscal 2024, Fiscal 2023 and Fiscal 2022, and the Company does not intend to grant any further awards under the 2017 Equity Plan.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

No awards were granted under the 2017 Equity Plan after Fiscal 2021, and the Company does not intend to grant any further awards under the 2017 Equity Plan.

Modification of Performance-Based Option Awards - 2017 Equity Plan

On August 31, 2021, the Company’s board of directors amended the 2017 Equity Plan such that the performance-based option awards that convert into time-based option awards upon an initial public offering no longer vest over a period of three years , but instead vest one-third (1/3rd) on each of the first two anniversaries of an initial public offering and one-third (1/3rd) on the 273rd day following the second anniversary of an initial public offering.

On August 31, 2021, the Company’s Board of Directors amended the 2017 Equity Plan such that the performance-based option awards that convert into time-based option awards upon an initial public offering no longer vested over a period of three years , but instead vested one-third (1/3rd) on each of the first two anniversaries of an initial public offering and one-third (1/3rd) on the 273rd day following the second anniversary of an initial public offering.

This was accounted for as a modification, resulting in a new fair value for all the performance-based option awards using an option-pricing model as of the modification date.

On September 19, 2021, the Company’s Board of Directors modified performance-based option awards that contained a market condition granted under the 2017 Equity Plan, such that the vesting terms for one such tranche were amended to waive the market condition.

Accordingly, upon the Company’s IPO, such tranche converted into time-based option awards and vest one-third (1/3rd) on each of the first two anniversaries of the Company’s IPO and one-third (1/3rd) on the 273rd day following the second anniversary of the Company’s IPO.

Accordingly, upon the Company’s IPO, such tranche converted into time-based option awards and vested one-third (1/3rd) on each of the first two anniversaries of the Company’s IPO and one-third (1/3rd) on the 273rd day following the second anniversary of the Company’s IPO.

This was accounted for as a modification resulting in a new fair value using the option-pricing model for such performance-based option awards as of the modification date.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On September 19, 2021, the Company’s Board of Directors modified the terms of performance-based option awards granted under the 2017 Equity Plan to the Company’s Chairman Emeritus.

The modification accelerated the vesting period of the performance-based option awards that convert into time-based option awards upon an initial public offering such that they no longer vest one-third (1/3rd) on each of the first two anniversaries of an initial public offering and one-third (1/3rd) on the 273rd day following the second anniversary of an initial public offering, but instead will vest on August 1, 2022.

The modification accelerated the vesting period of the performance-based option awards that convert into time-based option awards upon the Company’s IPO such that they no longer vested one-third (1/3rd) on each of the first two anniversaries of the Company’s IPO and one-third (1/3rd) on the 273rd day following the second anniversary of the Company’s IPO, but instead vested on August 1, 2022.

Additionally, the exercise period of these time-based and performance-based vested option awards was modified such that any vested option may be exercised at any time prior to the 10th anniversary of the original grant date.

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The total intrinsic value of stock options exercised was $ 0.9 million, $ 6.6 million, and $ 5.7 million during Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of the non-vested stock option activity during Fiscal 2025 is as follows:

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Nonvested, December 28, 2025

324,245 $ 6.55

There were no stock options granted during Fiscal 2024 or Fiscal 2023.

The weighted average grant date fair value of options granted during Fiscal 2022 was $ 6.81 .

The total grant date fair value of stock options that vested during Fiscal 2025, Fiscal 2024 and Fiscal 2023 was $ 2.1 million, $ 6.8 million and $ 7.1 million, respectively.

There were no stock options granted after Fiscal 2022.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value of Stock Options

The Black-Scholes valuation model is used to estimate the fair value of stock option awards granted.

The assumptions utilized to estimate the grant date fair value of these awards granted in Fiscal 2022 were as follows:

Weighted average expected term (years) 6.5

Weighted average expected volatility 52.4 %

Risk-free interest rate 2.6 %

Expected dividend yield —

The Company did not have sufficient historical stock option exercise activity and therefore the expected term of stock options granted in Fiscal 2022 is estimated using the simplified method, which represents the mid-point between the vesting period and the contractual term for each grant.

The Company has not had sufficient historical stock option exercise activity and therefore the expected term of stock options granted is estimated using the simplified method, which represents the mid-point between the vesting period and the contractual term for each grant.

The expected volatility of stock options is based on the historical volatilities of a set of publicly traded peer companies in a similar industry as the Company lacks company-specific historical or implied volatility information.

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2,010,917 $ 17.60 $ 31,994

Of the 475,328 RSUs granted in Fiscal 2024, 353,683 will vest ratably over a period of three years from the grant date, 50,049 will vest one year from the grant date, and 50 % of the remaining 71,596 will vest two years from the grant date and 50 % will vest three years from the grant date.

Of the 1,572,044 RSUs granted in Fiscal 2025, 597,737 will vest ratably over a period of three years from the grant date, 65,364 will vest one year from the grant date, and the remaining 908,943 will vest four years from the grant date.

The total intrinsic value of restricted stock units that vested in Fiscal 2025 and Fiscal 2024 was $ 5.8 million and $ 4.7 million, respectively.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-Based Compensation Expense

Stock-based compensation expense was $ 8.5 million, $ 7.6 million and $ 10.4 million during Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

Stock-based compensation expense, net of amounts capitalized, was $ 10.8 million, $ 8.5 million and $ 7.6 million during Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

Capitalized stock-based compensation included in property, fixtures and equipment totaled $ 0.2 million during Fiscal 2025.

The total related income tax benefit for stock-based compensation expense was $ 0.3 million, $ 0.8 million and $ 0.6 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

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We enter into various purchase obligations in the ordinary course of business, generally of a short-term nature.

These purchase obligations include commitments for inventory purchases, marketing-related contracts, corporate sponsorships, software/license commitments and service contracts.

These purchase obligations include commitments for inventory purchases, marketing-related contracts, corporate sponsorships,

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

software/license commitments and service contracts.

We also enter into long-term, exclusive contracts with vendors to supply us with certain goods and services, however, they generally do not include firm minimum purchase commitments.

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Future payments of noncancellable unconditional purchase obligations with a remaining term in excess of one year were $ 14.4 million and $ 11.7 million as of December 28, 2025 and December 29, 2024, respectively.

The majority of these purchase obligations are due within three years, however commitments with various vendors extend through 2029.

The majority of these purchase obligations are due within two years, however commitments with various vendors extend through 2029.

The Company’s unconditional purchase obligations primarily consist of payments for subscriptions, technology, restaurant level services, and marketing-related platforms.

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In the event any litigation losses become probable and estimable, the Company will recognize any anticipated losses.

Unclaimed Property

The Company is subject to unclaimed or abandoned property (escheat) laws which require it to turn over to state governmental authorities the property of others held by the Company that has been unclaimed for specified periods of time.

Property subject to escheat laws generally relates to uncashed checks, trade accounts receivable credits and unredeemed gift card balances.

In 2023, the Company expensed $ 0.8 million in General and administrative expenses associated with the State of Delaware Abandoned or Unclaimed Properly Voluntary Disclosure Program, into which the Company had applied and been accepted in 2022.

In the second quarter of 2024 , $ 0.7 million of the previously accrued amount was paid to the State of Delaware in resolution of escheat matters arising from unclaimed gift card balances.

The Company believes any additional payments to the State of Delaware to resolve the remaining escheat matters will not be significant.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Management believes the Company is not currently required to remit any amounts relating to future unredeemed gift cards to states as the Company’s subsidiary that is the issuer of our gift cards was re-domiciled in Florida, which exempts gift cards from the abandoned and unclaimed property laws.

Segment Information

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The measure of capital expenditures for the reporting segment is reported on the consolidated statements of cash flows as total capital expenditures.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table details consolidated net income for the segment for the periods indicated:

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Pre-opening expenses 12,933 10,109 7,173

Stock-based compensation 8,525 7,604 10,374

Stock-based compensation, net of amounts capitalized 10,760 8,525 7,604

General and administrative expenses (1)

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Other income, net ( 1,321 ) ( 1,759 ) ( 2,871 )

Income tax expense 9,101 10,690 5,684

Income tax (benefit) expense ( 7,299 ) 9,101 10,690

Net income $ 19,432 $ 18,925 $ 25,385

(1) General and administrative expenses excludes stock-based compensation presented separately.

(1) General and administrative expenses excludes stock-based compensation, net of amounts capitalized, presented separately.

(2) Other segment items included in segment net income primarily includes transaction expenses, and impairments and loss on disposal of assets.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net Income Per Common Share

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Diluted net income per common share is calculated by adjusting the weighted average shares outstanding for the theoretical effect of potential common shares that would be issued for preferred stock using the two-class method, as well as for stock options and restricted stock units outstanding and unvested as of the respective periods using the treasury method.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Financial Information of Registrant (Parent Company Only)

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FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

FIRST WATCH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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As a result of these restrictions, these parent company financial statements have been prepared in accordance with Rule 12-04 of Regulation S-X, as restricted net assets of the Company’s subsidiaries (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25 % of the Company’s consolidated net assets as of December 28, 2025 and December 29, 2024.

FIRST WATCH RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

These condensed financial statements have been prepared on a “parent-only” basis.

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The accompanying financial information should be read in conjunction with the accompanying Company’s consolidated financial statements and related notes thereto.

Subsequent Events

Business Acquisitions

On November 8, 2024, the Company executed an asset purchase agreement to acquire 16 restaurants from a franchisee, together with other associated assets, including, but not limited to, franchise and development rights for cash of approximately $ 49.0 million.

On February 12, 2025, the Company executed an asset purchase agreement to acquire 3 restaurants from a franchisee, together with other associated assets, including, but not limited to, franchise and development rights for cash of approximately $ 7.0 million.

The closing dates of the purchases are subject to the satisfaction of certain customary closing conditions set forth in the respective asset purchase agreements.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data