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First Watch (FWRG) to Expand Presence With Acquisitions
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First Watch Restaurant Group, Inc. (FWRG - Free Report) is set to acquire 21 of its franchise restaurants in North Carolina and their development rights for an aggregate of $75 million. The transaction will be on a cash-free, debt-free basis, subject to customary adjustments.
The acquisition of its largest franchisee's restaurants is set to be completed by the end of April. This transaction will bring First Watch's total to 44 franchised restaurants acquired across five accretive acquisitions since May 2023.
The acquisition of the restaurants aligns with First Watch’s long-term growth strategy. The company anticipates these restaurants, serving North Carolina communities for nearly 10 years, will yield average unit volumes and operating profit margins in line with its company-owned restaurants.
Amendment of Existing Credit Agreement
In relation to the above-mentioned acquisition agreement, the company made changes to its existing credit agreement. These amendments include a new $125-million delayed draw term facility, valid for 18 months for permitted franchisee acquisitions and new restaurant construction. There is a replacement revolving credit facility with $125-million commitments (previously $75 million) and a new $100-million term loan A facility, replacing the prior $100-million term loan A facility. All these facilities have substantially similar terms and a new maturity date set five years following the closing date.
The amended credit agreement enhances the company's financial flexibility. Upon the completion of the franchisee restaurant acquisition, the company plans to utilize the new delayed draw facility. The company is committed to maintaining a conservative balance sheet and leverage profile.
Focus on Restaurant Development
Shares of FWRG have risen 29% in the past year compared with the Zacks Retail - Restaurants industry’s growth of 2.8%. The company has been benefiting from accretive acquisitions, expansion efforts and traffic growth. Also, its focus on the pricing structure bodes well.
Image Source: Zacks Investment Research
As of Dec 31, 2023, First Watch operated a total of 524 system-wide restaurants. This comprised 425 company-owned restaurants and 99 franchise-owned restaurants, spanning across 29 states.
In 2023, the company opened 51 new restaurants system-wide. This includes 37 company-owned restaurants and 14 franchise-owned restaurants. One company-owned restaurant was closed during the same period.
Zacks Rank & Key Picks
First Watch carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Abercrombie & Fitch Co. (ANF - Free Report) currently flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 246.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s 2024 sales and earnings per share (EPS) suggests increases of 13.5% and 2,216%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have surged 47.5% in the past year.
The Zacks Consensus Estimate for ARCO’s 2024 sales and EPS indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 9.4% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS suggests a rise of 5% and 26.2%, respectively, from the year-ago period’s levels.
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First Watch (FWRG) to Expand Presence With Acquisitions
First Watch Restaurant Group, Inc. (FWRG - Free Report) is set to acquire 21 of its franchise restaurants in North Carolina and their development rights for an aggregate of $75 million. The transaction will be on a cash-free, debt-free basis, subject to customary adjustments.
The acquisition of its largest franchisee's restaurants is set to be completed by the end of April. This transaction will bring First Watch's total to 44 franchised restaurants acquired across five accretive acquisitions since May 2023.
The acquisition of the restaurants aligns with First Watch’s long-term growth strategy. The company anticipates these restaurants, serving North Carolina communities for nearly 10 years, will yield average unit volumes and operating profit margins in line with its company-owned restaurants.
Amendment of Existing Credit Agreement
In relation to the above-mentioned acquisition agreement, the company made changes to its existing credit agreement. These amendments include a new $125-million delayed draw term facility, valid for 18 months for permitted franchisee acquisitions and new restaurant construction. There is a replacement revolving credit facility with $125-million commitments (previously $75 million) and a new $100-million term loan A facility, replacing the prior $100-million term loan A facility. All these facilities have substantially similar terms and a new maturity date set five years following the closing date.
The amended credit agreement enhances the company's financial flexibility. Upon the completion of the franchisee restaurant acquisition, the company plans to utilize the new delayed draw facility. The company is committed to maintaining a conservative balance sheet and leverage profile.
Focus on Restaurant Development
Shares of FWRG have risen 29% in the past year compared with the Zacks Retail - Restaurants industry’s growth of 2.8%. The company has been benefiting from accretive acquisitions, expansion efforts and traffic growth. Also, its focus on the pricing structure bodes well.
Image Source: Zacks Investment Research
As of Dec 31, 2023, First Watch operated a total of 524 system-wide restaurants. This comprised 425 company-owned restaurants and 99 franchise-owned restaurants, spanning across 29 states.
In 2023, the company opened 51 new restaurants system-wide. This includes 37 company-owned restaurants and 14 franchise-owned restaurants. One company-owned restaurant was closed during the same period.
Zacks Rank & Key Picks
First Watch carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Abercrombie & Fitch Co. (ANF - Free Report) currently flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 246.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s 2024 sales and earnings per share (EPS) suggests increases of 13.5% and 2,216%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have surged 47.5% in the past year.
The Zacks Consensus Estimate for ARCO’s 2024 sales and EPS indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 9.4% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS suggests a rise of 5% and 26.2%, respectively, from the year-ago period’s levels.