Company: FWRG
Filing Date: 2025-04-08
Form Type: ARS
Source: 0001789940-25-000033
Chunk: 88

Company: First Watch Restaurant Group, Inc.
Filing Date: 2025-04-08
Form: ARS
Chunk 88
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 included in Item 8 of Part II of this Annual Report on Form 10-K for additional information. Insurance Reserves The Company is self-insured for employee group health claims and Ohio workers’ compensation and carries retention levels and per-claim deductibles for a significant portion of expected losses associated with other workers’ compensation and general liability programs. We record liabilities for unresolved and incurred but not reported claims at the anticipated cost below applicable retention levels or per-claim deductible amounts. Insurance reserve liabilities are established using actuarial assumptions and judgments regarding the frequency and severity of claims. Recently Issued Accounting Pronouncements For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, in the accompanying notes to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K. Stock-Based Compensation and Fair Value of Common Stock Stock-based compensation expense is measured based on the award’s fair value at the date of grant. Stock-based compensation expense related to time-based stock option awards issued under the 2017 Equity Plan is recognized on an accelerated recognition method over the requisite service period. Upon the Company’s IPO in October 2021, certain performance-based stock option awards issued under the 2017 Equity Plan for which the performance and market conditions were satisfied as a result of the Company’s IPO, converted into time-based stock option awards with the related stock-based compensation expense to be recognized on an accelerated recognition method over the remaining service period. No awards were granted under the 2017 Equity Plan during 2024 or 2023, and the Company does not intend to grant any further awards under the 2017 Equity Plan. Stock-based compensation expense related to time-based stock option awards issued under the 2021 Equity Plan is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized as they occur for all awards. We estimate the fair value of stock option awards using the Black-Scholes valuation model, which involves several assumptions and judgments including the expected term of the stock option, expected volatility, the risk-free interest rate and the expected dividend yield. The Company does not have sufficient historical stock option exercise activity and therefore we estimated the expected term of stock options granted under the 2021 Equity Plan using the simplified method, which represents the mid-point between the vesting period and the contractual term for each grant. Prior to the IPO, the expected term of stock option awards was determined based on data from publicly traded companies. The expected volatility of stock option awards is based