Breakfast Hits the Big Leagues

When it comes to the largest players in full service, most are rooted in the lunch and dinner dayparts. High-powered breakfast brands, including IHOP, Denny’s, Cracker Barrel, and Waffle House, have carved out their own space within casual dining, but the early daypart could receive an even greater boost thanks to a number of growing NextGen Casual restaurants.

As the first concept in this enclave to go public, First Watch’s IPO reveals breakfast’s burgeoning potential. For one, few full-service restaurants have migrated to Wall Street in recent years. (Before First Watch last fall, it was Kura Sushi in 2019 and Fogo de Chão in 2015.) Secondly, its public offering made quite the splash, clinching a $1 billion valuation.

“[Going public] really sets us up to fuel our growth,” CEO Chris Tomasso told FSR. “It allows our loyal customers ... to feel even closer to our brand.”

At about 440 units, First Watch is the largest NextGen breakfast chain by far, but it’s hardly alone. Another Broken Egg (81 units), Eggs Up Grill (60), Keke’s Breakfast Café (52), Snooze an A.M. Eatery (50), Broken Yolk Café (35), Famous Toastery (25), The Toasted Yolk Café (22), and other regional concepts are expanding, too.

First Watch and Another Broken Egg disclosed average unit volumes of about $1.8 million—that’s on par with IHOP despite the former pair being open a fraction of the hours. This efficiency gives NexGen breakfast players an edge in an increasingly tight labor market. With fewer hours to staff, the brands can focus on hiring top candidates and paying them more. Plus, employees are finished with the workday long before the dinner rush.

“We’re one of the few brands ... where people can really appreciate the quality of life they can have,” Paul Macaluso, CEO of Another Broken Egg, said in June. “We’re not poached as easily by other competitors.”

These breakfast concepts are distinguishing themselves from legacy chains through elevated beverage offerings. First Watch launched a new alcohol program in fall 2020, and last year, Another Broken Egg bolstered its full-bar menu with premium options, packaged cocktails, and at-home kits. Such initiatives could raise sales even more. Snooze, which was ahead of the game in terms of its alcohol programs, boasts AUVs of $3 million.

While larger chains might try to mimic NextGen success stories, some are catching their coattails in another fashion. In May, Denny’s purchased Keke’s for $82.5 million, and with breakfast’s star showing no signs of dissipating, more deals could follow.