Company: FWRG
Filing Date: 2025-04-08
Form Type: ARS
Source: 0001789940-25-000033
Chunk: 89

Company: First Watch Restaurant Group, Inc.
Filing Date: 2025-04-08
Form: ARS
Chunk 89
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 on the historical volatilities of a set of publicly traded peer companies in a similar industry as the Company lacks company-specific historical or implied volatility information. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the expected term of the stock option award. The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not have intentions of paying dividends in the foreseeable future. These assumptions represented Management’s best estimate, which involved inherent uncertainties and the application of Management’s judgment. As a result, if we had used significantly different assumptions or estimates, our stock-based compensation expense could have been materially different. 56

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 58 Consolidated Balance Sheets - December 29, 2024 and December 31, 2023 59 Consolidated Statements of Operations and Comprehensive Income (Loss) - For Fiscal Years 2024, 2023 and 2022 60 Consolidated Statements of Equity - For Fiscal Years 2024, 2023 and 2022 61 Consolidated Statements of Cash Flows - For Fiscal Years 2024, 2023 and 2022 62 Notes to Consolidated Financial Statements 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Commodity and Food Price Risks Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and beverage, energy, fuel costs and other commodities. We have been able to partly offset cost increases resulting from a number of factors, including market conditions, shortages or interruptions in supply due to weather, the macroeconomic impacts of regional conflicts, including the ongoing Russia-Ukraine conflict, or other conditions beyond our control, governmental regulations and inflation, by increasing our menu prices, as well as making other operational adjustments that increase productivity. However, elevated inflation in commodity markets and substantial increases in costs and expenses could impact our results of operations to the extent that such increases cannot be offset by menu price increases. Currently we do not use financial instruments to hedge our commodity risk. The Company’s market basket experienced cost inflation of 320 basis points in 2024. We expect a high-single digit percentage increase in our 2025 commodity prices as compared to the prior year. In 2024, we have negotiated annual pricing for approximately 30% of our market basket. Other commodities are purchased based upon price ranges established