https://preview.redd.it/a9hrdnahpqmh1.png?width=2446&format=png&auto=webp&s=3f7165c2c577634b81667690bc9b32d3b2c1eacc
https://preview.redd.it/l4yk5pnipqmh1.png?width=2458&format=png&auto=webp&s=21bc1a25bc5bf05c659f811a7cb8147e5f336d5d
tl;dr:
\-First Watch sells avocado toast and mimosas
\-Denny's doesn't
I’ve tricked myself into buying a restaurant stock, First Watch ($FWRG), and shorting IHOP and Cracker Barrel. It’s a popular breakfast chain, think IHOP/Denny’s except the food is Instagrammable:
https://preview.redd.it/fmwkaccepqmh1.png?width=1766&format=png&auto=webp&s=ac8a0795eb86cd51be0a8e8ac8a50c2a2f627e3b
[](https://substackcdn.com/image/fetch/$s_!YyXJ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F6db343a3-8763-4677-ae5b-753fdd10af97_1766x1112.png)
It’s a high-quality business, profitable, customers love it. They’re at 650 restaurants now and plan to grow to 2,200 stores. It’s on sale: market cap is $760M, and they make about $75M a year which they reinvest into new stores, growing 10%+ a year. That’s a 10x multiple, very cheap for a healthy growing company.
https://preview.redd.it/0xi4osgupqmh1.png?width=2042&format=png&auto=webp&s=d9b6e07d3ed40387247ebe378425561b541ee833
[](https://substackcdn.com/image/fetch/$s_!Qu0t!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa37cd673-c89a-4ae7-b6f5-c49d7bca9105_2042x1000.png)People Love First Watch
First Watch is coming in at the \#1 most loved full service restaurant brand on Yelp, and is coming in on some lists as #1 most loved employer. Anecdotally, everyone I know that has been there unanimously agrees it blows traditional breakfast places out of the water. Check out the interior:
https://preview.redd.it/qhu8s3bxpqmh1.png?width=1390&format=png&auto=webp&s=8055dfa1d59d8a5d11ad93cc788586fe5a54cb34
[](https://substackcdn.com/image/fetch/$s_!GHXQ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3cabbe4b-df26-4c30-9abc-275bf3bbbd06_1390x1452.png)
Compare that to the dated feel of IHOP/Denny’s/Waffle House/Cracker Barrel:
https://preview.redd.it/g65sddyypqmh1.png?width=1566&format=png&auto=webp&s=9857a07773a878ea3e40b7ec078e290aeac7e61d
[](https://substackcdn.com/image/fetch/$s_!W6uo!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff0f93003-2217-4438-858a-e3b1ee9c5137_1566x1138.png)
First Watch is leading a trend of stylish brunch restaurants that are going to outcompete IHOP, Denny’s, Cracker Barrel and Waffle House. The brunch sector is up 11.5% last year while traditional breakfast restaurants declined:
https://preview.redd.it/p2cipsh0qqmh1.png?width=1508&format=png&auto=webp&s=0924c183d2f6e2b508ef4e5834ee3a3f4eb2969f
[](https://substackcdn.com/image/fetch/$s_!MZ8Y!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd01f9aa9-55ad-4fe8-bdb4-3efb6f7943ff_1508x558.png)
Note this is what Cracker Barrel was trying to do. Traffic was down 7% in 2023 as customers flocked to modern concepts like First Watch. The new CEO countered by rebranding to industrial-farmhouse, copying First Watch’s exact aesthetic:
https://preview.redd.it/3i2pdfc1qqmh1.png?width=932&format=png&auto=webp&s=96dcfac653b8b3a73b8ff7b130cdf1401af73dfb
[](https://substackcdn.com/image/fetch/$s_!bF0r!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F70787808-dfb4-42a2-96fd-af7baad6f62e_932x1238.png)
It was actually working, sales were up 5% in 2025. Then came the minimalist logo change where they g