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In one of the largest corporate deals in Southwest Florida’s history, First Watch Restaurants will become the nation’s largest and fastest-growing breakfast lunch and brunch cafes in the country after doubling its size by acquiring The Egg & I Restaurants.
First Watch, based in Manatee County’s University Park, will add 114 new restaurants from the acquisition of the Colorado-based chain, taking it to 267 restaurants in 26 states, with 18 more under development.
The deal also increases the reach of the First Watch chain, which has expanded aggressively in recent years through the Northeast, Midwest and even into Colorado and Arizona.
The terms of the deal were not released.
The Egg & I restaurants will not immediately be rebranded with the First Watch name, but some restaurants will change during the next two years, executives said.
“First Watch has a fresh new look and they have a certain brand recognition and strength among consumers,” said Darren Tristano, executive vice president of Technomic, a Chicago-based restaurant research firm. “People go there because they know what to expect from the brand.”
The First Watch and The Egg & I chains are similar in a lot of ways, both in the products and services they offer as restaurants, but also in their history and growth as companies.
“The Egg and I is a wonderful concept with a loyal following that has experienced tremendous growth, particularly over the past several years,” First Watch president and CEO Ken Pendrey said. “We saw this acquisition as an opportunity to immediately and significantly expand our presence in markets where we don’t currently operate.”
The Egg & I — founded in 1987 in Fort Collins, Colorado — is a chain known for its laid back dining atmosphere. Like First Watch, it does not serve alcohol, and the hours are limited from 6 a.m. until 2 p.m. most days. Most of its restaurants also offer private meeting rooms.
“The culture of both companies is very similar,” said Chris Tomasso, First Watch’s chief marketing officer. “The deal made perfect sense to us in a lot of ways. The top priority being that we would immediately and significantly expand our scope and reach.”
The Egg & I has eight restaurants in Florida, the closest to Southwest Florida in Riverview, south of Tampa
“First Watch doesn’t consider themselves competition with big chains,” said Brian Connors, of Conners Davis Hospitality, a global food and beverage consulting firm based in Fort Lauderdale. “Instead, they think of the chef-driven local concepts and mom-and-pop restaurants as competition.”
Owned by franchisees
Like First Watch, The Egg & I company has a strong recruitment of franchisee owners.
Each franchisee-owned restaurant generates nearly $1 million in sales each year, according to The Egg & I’s franchise inquiry packet. The cost to get started ranges from $120 to $160 per square foot.
The Egg & I has accumulated a number of accolades through the years, including a No. 12 on a list of the fastest-growing chains in the Technomic, and third on a list of the fastest-growing full-service restaurants.
“It was always apart of our strategy, that if the right deal came along, we would sell,” CEO Don Lamb said. “But it had to be right for our associates, our customers and our franchisee owners. First Watch is that right deal.”
First Watch has been on a growth trajectory since 2011, when the chain was acquired by Los Angeles-based private-equity firm Freeman, Spogli & Co. It was the second time in the company’s history that it sought out private equity. The first acquisition was in 2004.
Prior to the acquisition of The Egg & I, First Watch had more than 120 restaurants in 17 states, including 45 in Florida and 20 restaurants under The Good Egg name in Arizona.
“First Watch is in a space that’s trending,” Tristano said. “They are as nationally known as anyone else. They’ve looked for the right opportunities to expand and have aggressively acquired reach chains and rebranded them.”
The Southwest Florida company bought Nashville, Tennessee-based Bread & Co., late last year, which included two restaurants and all the company’s recipes, marks and intellectual property.
In January, First Watch signed its largest franchise development agreement to date: 15 restaurants in the Dallas-Fort Worth market in the next five years.
The deal will be the chain’s debut in Texas, with the first restaurant to open at the end of this year.
“Chains in this sector grow pretty quickly and there’s a lot of opportunity for continued growth,” Tristano said.
First Watch began in California in 1983, but, by 1986, the chain moved to Southwest Florida.
Pendery, the CEO, had owned restaurants in Denver and other markets with founder, John Sullivan, before. Both agreed that Florida was a smart place to start a new venture.
“And to raise a family,” Pendery said.
First Watch plans to have 300 restaurants open around the country by 2017, which does not include those under The Egg & I name.
First Watch will maintain its corporate headquarters in University Park in a Benderson Development Co.-owned office park.
The restaurant company, which moved to the space off Cooper Creek Boulevard in late 2011, already has outgrown it and is looking to expand into nearby unoccupied space in the same park.
First Watch also will maintain The Egg & I’s corporate headquarters in Denver, Colorado.
“As you grow, the challenge lies in the scale. It’s harder to keep the same quality and service when your cost is increasing,” Connors said. “You know it’s the right thing to do but it’s not always the easiest.”