Company: FWRG
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001789940-25-000086
Chunk: 31

Company: First Watch Restaurant Group, Inc.
Filing Date: 2025-11-04
Form: 10-Q
Item: Part I, Item 1
Chunk 31
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 discrete items recorded.In the United States, a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The amount of FICA tax credits generated is primarily driven by restaurant sales.The effective income tax rates for the thirteen and thirty-nine weeks ended September 28, 2025 increased as compared to the same periods in the prior year primarily due to the changes in income before income taxes, the increase in FICA tax credits and the corresponding change in the valuation allowance, and the impact of executive compensation. For the thirteen and thirty-nine weeks ended September 28, 2025 and September 29, 2024, the income tax expense includes the impact of changes to the estimate of forecasted annual income before taxes relative to the prior period in each respective year.

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Table of ContentsFIRST WATCH RESTAURANT GROUP, INC.NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Management applied the relevant provisions of  H.R. 1 – One Big Beautiful Bill in the third quarter of 2025 following its enactment on July 4, 2025, including provisions related to research and development. The impact on our consolidated financial statements was immaterial. Valuation allowanceManagement evaluates quarterly whether the resulting deferred tax assets are realizable given the Company’s earnings history. Based on the available evidence, the Company does not meet the more likely than not standard related to the realization of a portion of the deferred tax assets as of September 28, 2025. Accordingly, the Company has established a valuation allowance on the portion of deferred tax assets deemed not realizable, including state charitable contribution carryovers, various state loss carryforwards and various federal tax credit carryforwards.Management continues to assess the rationale for recording a valuation allowance for deferred tax assets. As the Company’s future taxable earnings increase and 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.

13.    Commitments and Contingencies

Legal ProceedingsThe 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 28, 2025. In