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The story behind how First Watch Restaurants closed a deal that nearly doubles the size of what was already a $140 million company mirrors the daytime eatery chain itself: Friendly and quick, and no hassles.
East Manatee County-based First Watch, backed by a Los Angeles private equity firm, acquired Centennial, Colo.-based The Egg & I Restaurants, in a deal announced May 27. First Watch has 153 restaurants in 17 states and The Egg & I has 114 locations in 20 states, according to a press release. First Watch leans corporate-owned in its store mix, while The Egg & I is heavy on franchise. Terms of the deal, which creates a 267-restaurant chain across 26 states, weren't released.
“Even though this pushes up our numbers in a big way,” says First Watch CEO Ken Pendery, “we still don't see ourselves as a big company.”
Pendery tells Coffee Talk the deal began with a phone call, late last year, when he heard the chain was up for sale. It wasn't a drawn-out courtship. Pendery and his executive team met with The Egg & I leadership team, including President and CEO Don Lamb, several times in early 2015. The deal fell into place from there.
Both firms, executives discovered, have similar easy-going corporate cultures. Both were founded by entrepreneurs in the mid-1980s and grew slowly, at first. The hours are similar and there's no dinner — primarily so employees can go home at the end of the day. First Watch locations, on average, do about $1.2 million a year in sales, Pendery says, while The Egg & I stores do about $1.1 million. First Watch had $140 million in revenues last year, up 40% from $100 million in 2013.
There's also the franchise strength The Egg & I brings to the deal. It has franchises in areas where First Watch wants to grow, including Colorado and Texas. “They have a significant franchise platform,” Pendery says. “That's what drove the enthusiasm.”
What further drove the deal is the breakfast category is one of the fastest growing hospitality sectors. That's another reason First Watch and Freeman Spogli & Co., the private equity firm that owns the chain, moved quickly on the acquisition.
The deal caps a two-year period of major growth news for First Watch, from small acquisitions to large franchise agreements. While First Watch will remain in growth mode, Pendery has no plans to chase acquisitions for the sheer thrill of the deal.
“We aren't a company out to make crazy acquisitions,” Pendery says. “This was a little bit of luck, having a great company and brand available to us.”
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