First Watch Restaurant Group, Inc.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(IN THOUSANDS)

(1)Leased assets and liabilities obtained during the thirty-nine weeks ended September 28, 2025 include $23.6 million from business acquisitions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Organization

First Watch Restaurant Group, Inc. (collectively with its wholly-owned subsidiaries, “the Company” or “Management”) is a Delaware holding company. The Company operates and franchises restaurants in 33 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. As of September 27, 2026, the Company operated 601 company-owned restaurants and had 80 franchise-owned restaurants.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company reports financial information on a 52- or 53-week fiscal year ending on the last Sunday of each calendar year. The quarters ended September 27, 2026 and September 28, 2025 were 13-week periods. These unaudited interim consolidated financial statements (“these financial statements”) include only the information and notes required for interim financial statements by generally accepted accounting principles in the United States of America (“GAAP”) and the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 28, 2025 (“2025 Form 10‑K”).

These financial statements have been prepared on the same basis as those presented in the 2025 Form 10-K and include all adjustments necessary for fair presentation of the quarterly periods presented. The quarterly results of operations are not necessarily indicative of the expected results for other quarters or the entire fiscal year. Preparation of financial statements requires Management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ materially from the estimates.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The carrying amounts of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, accrued expenses, deposits and other current assets, and other current liabilities approximate their fair values due to their short-term maturities.

Interest Rate Swaps

As an element of the Company’s interest rate risk management strategy, Management uses interest rate swaps. The intent of these instruments is to reduce cash flow exposure to variability in future interest rates on the Company’s debt. Management has elected to designate and qualify the interest rate swaps as cash flow hedges. As such, the instruments are recorded on the consolidated balance sheets at fair value. Thereafter, gains or losses on the instruments are recognized in equity as changes to Other Comprehensive Income (Loss) and subsequently reclassified into earnings at the time of the Company’s debt interest payments.

Summary of Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, 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 on disclosures.

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 or did not have, or is not expected to have, a material impact to the Company.

3. Business Acquisitions

During the second quarter of 2025, the Company acquired, intwo separate transactions, substantially all the assets associated with 19 franchise-operated First Watch restaurants. For both transactions, the purchase price was allocated to the fair value of the assets acquired and the liabilities assumed. The Company has finalized the purchase price allocations for the acquisitions and there were no adjustments made to the initial preliminary valuations.

Goodwill reflects the value of expected synergies and assembled workforce, and was assigned to the Company’s single reporting unit. The Company treated the transactions as asset acquisitions for income tax purposes, which allows for any goodwill recognized to be tax deductible and amortized over a 15-year statutory life.

The weighted average estimated useful life of the reacquired rights was 6.1 years on the acquisition dates.

4. Revenues

Revenues recognized, disaggregated by type, were as follows:

The following tables include details of liabilities from contracts with customers:

Changes in deferred gift card contract liabilities were as follows:

Changes in deferred franchise fee contract liabilities were as follows:

5. Accounts Receivable

Accounts receivable consisted of the following:

6. Accrued Liabilities

Accrued liabilities consisted of the following:

7. Debt

Long-term debt, net consisted of the following:

Credit Facility

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 (as amended, the “Credit Agreement”), 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.

As of September 27, 2026, 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 Revolving Credit Facility, also depending on the Total Rent Adjusted Net Leverage Ratio. Refer to Note 8, Interest Rate Swaps, for information about the Company’s variable-to-fixed interest rate swap agreements.

Fair Value of Debt

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 dates indicated:

Debt Covenants

The Credit Facility is guaranteed by all of FWR’s wholly-owned domestic restricted subsidiaries, subject to customary exceptions, and by AI Fresh Parent, Inc., a Delaware corporation and the direct parent company of FWR (“Holdings”), and is secured by associated collateral agreements that pledge a lien on substantially all of FWR’s and each guarantor’s assets, including fixed assets and intangible assets, in each case, subject to customary exceptions.

Under the Credit Agreement, FWR (and in certain circumstances, Holdings) and its restricted subsidiaries are subject to customary affirmative, negative and financial covenants, maintenance of certain ratios, restrictions on additional indebtedness and events of default for facilities of this type (with customary grace periods, as applicable, and lender remedies). FWR was in compliance with the covenants under the Credit Agreement as of September 27, 2026.

8. Interest Rate Swaps

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 intotwo variable-to-fixed interest rate swaps. These interest rate swaps have an aggregate notional amount of $90.0 million and mature on October 6, 2026. Under the terms of these interest rate swaps, the Company pays a weighted average fixed rate of 4.16% on the notional amount and receives payments from, or makes payments to, the counterparties based on the three-month SOFR rate.

On May 17, 2024, the Company entered intotwo 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 these interest rate swaps, the Company pays a weighted average fixed rate of 4.42% on the notional amount and receives payments from, or makes payments to, the counterparties based on the three-month SOFR rate.

On August 18, 2026, the Company entered intotwo additional variable-to-fixed interest rate swaps. These interest rate swaps have an initial aggregate notional amount of $50.0 million, which will increase to a notional amount of $80.0 million on December 24, 2026 and mature on December 29, 2028. Under the terms of these interest rate swaps, the Company pays a weighted average fixed rate of 4.08% on the notional amounts and receives payments from, or makes 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. The interest rate swaps were valued using a discounted cash flow analysis on the expected cash flows using observable inputs including interest rate curves and credit spreads. Although the majority of the inputs used to value the instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and the counterparties. The Company has determined that the impact of the credit valuation adjustments was not significant to the overall valuation. As a result, the derivatives were classified within Level 2 of the fair value hierarchy.

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 thirty-nine weeks ended September 27, 2026, a total of $0.6 million was reclassified from Other comprehensive income (loss) as an increase to interest expense. Over the next 12 months, Management estimates that $0.3 million will be reclassified as a decrease to interest expense.

9. Leases

The following table includes detail of lease assets and liabilities:

(1) Excludes all variable lease expense.

The components of lease expense were as follows:

(1) Includes contingent rent expense of $0.6 million and $0.5 million during the thirteen weeks ended September 27, 2026 and September 28, 2025, respectively, and $1.6 million and $1.5 million during the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively.

Supp lemental cash flow information related to leases was as follows:

Supplemental information related to leases was as follows:

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

10. Equity and Stock-Based Compensation

Stock option awards

There were no stock option awards granted during the thirty-nine weeks ended September 27, 2026. A summary of stock option activity during the thirty-nine weeks ended September 27, 2026 was as follows:

The aggregate intrinsic value is based on the difference between the exercise price of the stock option and the closing price of the Company’s common stock on the Nasdaq Global Select Market (“Nasdaq”) on the last trading day of the period.

A summary of the non-vested stock option activity during the thirty-nine weeks ended September 27, 2026 is as follows:

Restricted stock units

During the thirty-nine weeks ended September 27, 2026, a total of 1,136,227 restricted stock units (“RSUs”) were granted. Of these RSUs,901,643 will vest over a period ofthree years;113,353 will vest in fullone year from the grant date;94,636 will vest in full three years from the grant date; and 26,595 will vest in full four years from the grant date.

A summary of the Company’s RSU activity during the thirty-nine weeks ended September 27, 2026 is as follows:

The aggregate intrinsic value is based on the closing price of the Company’s common stock on Nasdaq of $10.14 and $15.91 on September 25, 2026 and December 26, 2025, the last trading days of the periods, respectively.

Stock-based compensation expense, net of amounts capitalized, was $3.6 million and $2.9 million during the thirteen weeks ended September 27, 2026 and September 28, 2025, respectively, and $10.7 million and $7.9 million during the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively. Capitalized stock-based compensation included in property, fixtures and equipment totaled $0.2 million and $0.1 million for the thirty-nine weeks ended September 27, 2026 and September 28, 2025, respectively.

Unrecognized stock-based compensation expense

The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of September 27, 2026:

As of September 27, 2026, all stock options were fully vested and there were no unvested stock options outstanding.

11. Income Taxes

Management accounts for income taxes in interim periods using an estimated annual effective tax rate, adjusted for discrete items recognized during the period. Income tax expense reflects the application of the estimated annual effective income tax rate to the Company’s actual earnings for the periods, partially offset by discrete tax items, including stock-based compensation and certain state income tax matters.

The effective income tax rate for the thirteen and thirty-nine weeks ended September 27, 2026 decreased compared to the same periods in the prior year primarily due to changes in (i) the benefit of federal tax credits received by the Company for FICA taxes paid on certain employee tips, (ii) state income taxes, and (iii) stock-based compensation tax impacts.

Valuation allowance

Management routinely assesses the realizability of deferred tax assets, and may record a valuation allowance if, based on all available positive and negative evidence, the determination is reached that some portion of the deferred tax assets may not be realized prior to expiration. If Management determines that the Company may be able to realize the deferred tax assets in the future, the Company would make an adjustment to the deferred tax assets valuation allowance, which would reduce the provision for income taxes during the period in which the determination was made. As of the period ended

September 27, 2026 based upon all available evidence, Management has maintained a valuation allowance against a portion of the deferred tax assets.

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

12. Commitments and Contingencies

Legal Proceedings

The Company is subject to legal proceedings, claims and liabilities that arise in the ordinary course of business. The amount of the anticipated liability with respect to these matters was not material as of September 27, 2026. In the event any litigation losses become probable and estimable, the Company will recognize anticipated losses.

13. Segment Information

Management determined the Company’s single operating segment on the basis that the Company’s Chief Operating Decision Maker (the “CODM”), the Chief Executive Officer, assesses performance and allocates resources at the Company’s consolidated level. The Company’s CODM uses consolidated net income to evaluate performance and make key operating decisions, such as investments in our long-term growth strategy. This measure is also used to monitor budget against actual results.

Revenue is derived from sales of food and beverage, net of discounts, by our restaurants as well as franchise royalty, system fund and initial franchise fees. The measure of total assets for the reporting segment is reported on the consolidated balance sheets as total assets. The measure of capital expenditures for the reporting segment is reported on the consolidated statements of cash flows as capital expenditures.

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

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

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

14. Net Income Per Common Share

The following table sets forth the computations of basic and diluted net income per common share:

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 stock awards outstanding and unvested as of the respective periods using the treasury method.