Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc.'s third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, the conference call will be open for analyst questions and instructions on how to ask a question will be given at that time. This call is being recorded today, November 7, 2022 at 8:00 A.M. Eastern Time, and will be archived and available for replay at investors.firstwatch.com under the News and Events section. I would now like to turn the conference over to Raphael Gross, Partner at ICR. Please begin. Good morning, everyone, and welcome. I'm joined here today by First Watch's Chief Executive Officer and President, Chris Tomasso, and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the third quarter 2022 on GlobeNewswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. Let me first cover a few housekeeping matters before introducing Chris. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the conditions of the company's industry and its operations, performance and financial condition, growth strategies, and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in its filings with the SEC, including its most recent annual report on Form 10-K and quarterly reports on Form 10-Q. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law. Lastly, management's remarks today will include references to various non-GAAP measures, including restaurant level operating profit, restaurant level operating profit margin, adjusted EBITDA, and adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the company's earnings release filed this morning. With that, I would like to turn the call over to Chris. Good morning, and thank you for joining us. First Watch had another fantastic quarter where we experienced positive trends and improvement across several key areas of the business. We achieved same-restaurant sales growth, driven in part by an increase in same-restaurant traffic. We accelerated our new restaurant development. Management staffing increased, and we benefited from an easing of commodity inflation. Our confidence in the continued momentum we are experiencing with consumers to drive sustainable growth remains higher than ever. This morning, I look forward to sharing our third quarter highlights. I'll also provide an update on Hurricane Ian's impact on our Florida business and discuss the national recognition as a beloved workplace that we recently received. Afterward, I'll pass the call to Mel to dive into our quarterly results in greater detail. In an environment where economic uncertainty and global turmoil dominated the news cycle, First Watch experienced great strength. System-wide sales for the third quarter were up 19.2% year-over-year. We achieved 12% same-restaurant sales growth, driven in part by 3.7% same-restaurant traffic growth when compared to a successful third quarter of 2021. Performance brings our year-to-date same-restaurant sales and traffic growth to 17% and 10.6%, respectively. When we compare our Q3 results to 2019, same-restaurant sales growth was 32.7% and same-restaurant traffic growth was 7%. This brings our geometric three-year stacks to 36.1% and 10.4%, respectively. We know that very few brands out there are generating traffic-driven growth in this environment. In fact, Black Box Intelligence recently reported that September was the industry's seventh consecutive month of traffic declines. In Q3, the industry as a whole was down 4.6% in traffic. Though as you know, First Watch saw the opposite. Our traffic grew 3.7% during the same period. Our continued same-restaurant performance appears to be consistently among the best in the industry, demonstrating the enduring strength of the First Watch brand. Because of these continued strong results, we'll again be raising certain elements of our full year guidance, which Mel will elaborate on shortly. Breakfast and brunch occasions continue to grow as consumers crave elevated experiences and opportunities for meaningful social interactions, and we show up very well here. We continue to see evidence that consumers truly recognize our unique positioning and our overall value proposition and are seeking out our highly differentiated offering. According to Technomic data, we maintain high ratings related to food quality and health and wellness. In addition to appealing to a high-income consumer, we've seen a desirable balancing out of our customer base with strong growth among the Millennial and Gen Z segments, who now make up a majority of our heavy users according to Technomic, filling that pipeline of future diners. Growth in these segments is undoubtedly related to our increased relevance, and these customer groups have the highest stated likelihood of increasing usage at restaurants, especially during the breakfast daypart. In an environment where consumers are nervous about inflation, breakfast or lunch at First Watch is an affordable luxury and an appealing alternative to more expensive meals like dinner with our elevated and on-trend menu made with fresh, high-quality ingredients at a per person average just under $15.50. Our scale is an advantage here, and as the leader in dining, we continue to see a long runway ahead. Further to the point of continuing relevance, our seasonal menu program serves as a key differentiator and a traffic driver. We introduced our fall menu in late August, featuring unique takes on some classic favorites like our Brisket Corned Beef Hash and Modern Croque Madame. Just one week ago, we unveiled our holiday menu, which includes a braised Barbacoa Breakfast Burrito and shareable Gingerbread Spice Donut Holes. Now across most of our restaurants, you can enjoy a refreshing Mimosa or Bloody Mary made the way only First Watch can. We're proud of the investments we've made in developing our award-winning culinary strategy, and this approach continues to propel the First Watch brand forward, build tremendous loyalty among both staff and customers, and create buzz throughout the year. Our teams embrace a culture of innovation. As an organization, we continue to invest in resources to support evolution and growth on the culinary, operational enhancement, and human capital fronts. We've been pleased to see continued increases in applicant flow, and our team's focus on hiring has resulted in continued improvement in staffing levels. In fact, during Q3, we returned to full management staffing for the first time since before the pandemic. We opened 11 system-wide restaurants during the third quarter, and we will open an additional 17 in the fourth quarter. This brings our full year total to 44, which is above the midpoint of our previously announced full-year guidance range. Our company-owned restaurants open to date in fiscal 2022 continue to boast annualized AUVs above our comp group average and have maintained that momentum regardless of geography, which reinforces our proven portability. Our kitchen display systems, or KDS, continue to be a popular upgrade among our staff. In addition to efficiencies in our day-to-day execution, the system also streamlines our onboarding and training process for both our hourly employees and our managers. KDS is now active in more than 300 restaurants. We're ahead of schedule with this rollout and now anticipate it will be active in every company-owned First Watch restaurant by early next year, with plans for our franchise restaurants to implement the system next year as well. With the capital spent on this system, we will reap the intended benefits in 2023. First Watch has delivered tremendous growth and success for decades. Throughout that time, our organization has managed through challenging times, including economic crises, natural disasters, and of course, the COVID-19 pandemic. These challenges are by no means easy to navigate, but I can assure you that each time we face an obstacle, we've continued to invest in people, we've continued to invest in our brand, and we've continued to invest in our growth. Our customers trust us, and they've shown unwavering support for their neighborhood First Watch during each difficulty we faced. In every instance, we've emerged stronger than before. About 5 weeks ago, we provided an update on Hurricane Ian and its effects on our Florida business after the Category 4 storm hit Southwest Florida during the first week of our fourth quarter. At that time, we shared, most importantly, that every First Watch employee had been accounted for and that 10 of our restaurants remained temporarily closed. Later that same week, following our update, we were able to reopen 9 of those 10 restaurants while we began to rebuild one 35-year-old restaurant that sits right on the Intracoastal Waterway in Naples that had sustained substantial damage. I'm proud to share that next week our training team is heading to Naples, preparing to reopen that final restaurant two weeks from today. The team is thrilled to return to their home restaurant, reunite with their longtime colleagues, and of course, welcome back our loyal customers. Through the storm's destruction and Southwest Florida's ongoing recovery, we once again saw the absolute best in our people. They showed up for each other and for our communities. Through our You First Fund, thus far, we've been able to provide tax-free grants to more than 230 of our employees in need in Southwest Florida, which is helping them get back on their feet more quickly. Companies talk about culture all the time. In my 16 years with First Watch, I've seen firsthand our culture come to life through inspiring actions, particularly during difficult times. A few weeks ago, First Watch was honored nationally as one of Newsweek's top 100 most loved workplaces. In fact, we were the top-ranked full-service restaurant concept. When the culture our people have built over the past 39 years is noticed and appreciated with recognition like this, it makes me so proud. I want to personally congratulate and thank our teams in every First Watch restaurant and in our home office. This one is because of you, and it's for you. With that, I'll pass the mic to Mel to share our third quarter results. Thanks, Chris, and good morning, everybody. During the quarter, First Watch restaurants realized system-wide sales of $235.2 million, which is, as Chris mentioned, a 19.2% year-over-year increase. Total revenues for the company were $186.9 million, including sales of $184 million in the company-operated restaurants and $2.9 million of franchise revenues. Total revenues were $29.4 million more than in the same period last year or up almost 19%. The growth in our comp sales and traffic, which Chris also noted, was 12% and 3.7%, respectively. Overall growth in comp sales and traffic was driven by the continued recovery of our dining rooms, which increased to 93.3% in the third quarter relative to our pre-pandemic levels in the third quarter of 2019. Starting in the 5th week of the quarter, sales benefited from a menu price increase of roughly 3.9%. This increase has not affected our dining room traffic, and we continued to achieve year-over-year growth in our third-party delivery sales and traffic through the rest of the quarter. As a percentage of restaurant sales, our food and beverage costs for the quarter were 24.2%, which is a 70 basis point improvement from the second quarter. Commodity inflation of our market basket costs topped out earlier in the year and trended down to 11.2% during the third quarter. We anticipate 12% to 14% inflation during the fourth quarter as we lose some benefit of lapping a short-term spike in egg prices that was contained in the third quarter last year. Labor and other related expenses were 33.3% of restaurant sales, which is an increase of 100 basis points from the second quarter. Our management staffing reached a target goal of 2.9 managers per restaurant by the end of the quarter. That's the highest it's been since pre-COVID. Over the next several quarters, we're focusing on optimizing our staffing as our restaurants have returned to a more normal seasonality. General and administrative expenses at $21.7 million were slightly lower than the second quarter. Our net income includes costs of approximately $1.6 million incurred in connection with the secondary offering we completed during the quarter. As a reminder, these issuance costs are nondeductible for tax purposes, and so the associated provision for income taxes is also higher. Our year-to-date net income is $7.4 million. Adjusted EBITDA was $17 million with a margin of 9.1%, bringing our year-to-date adjusted EBITDA to $54.2 million with a margin of 10%. Restaurant level operating profit was $31.9 million with a margin of 17.3%. Our year-to-date restaurant level operating profit is $98.4 million with a margin of 18.3%. I, too, want to echo Chris's comments about the determination of our teams to swiftly reopen our restaurants impacted by Hurricane Ian. Our fourth quarter got off to a slower start than we had planned, but our team's efforts minimized those effects. All things considered, we're raising certain elements of our full year guidance. Based on our sales results, we now expect full year same-restaurant sales growth at the top end of our previously shared range of 13% to 15%, including continued positive traffic. We now expect year-over-year total revenue growth will be in the range of 20% to 22%. We expect to open 12 new company-owned restaurants and 5 new franchise-owned restaurants during the fourth quarter. This brings us to 30 new company-owned restaurants and 14 new franchise-owned restaurants in 2022, for a total of 44 new system-wide restaurants. This is above the midpoint of our previously shared range. Capital expenditures should land in a range of $60 million to $63 million and will include the capital spending associated with rolling out our KDS system to our company-owned restaurants. We confirm our previous fiscal 2022 guidance with respect to adjusted EBITDA in the range of $70 to $72 million. Finally, we've increased our blended tax rate to 40% to 41% due to the nondeductible secondary offering costs, along with the increase of certain permanent book to tax differences. For some further detail, you can visit our third quarter supplementary materials deck on our investor relations website. Want to thank you for the opportunity to share our continued success with you. If the operator would please open the line, we'll be happy to take some questions. Certainly. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Our first question today will come from Jared Garber with Goldman Sachs. Please go ahead. Hi. Great, thanks so much. Morning, Jared. Morning. How are you? Fine. Thanks. Wanted to get a little bit of a sense on the new store productivity. Chris, I think you mentioned continuing to see really strong sort of ramps in new markets on those new units that you opened. I think in the release today, you said you opened new restaurants across, I think nine different states. Some of those presumably are states you're already in, like Florida, but presumably some are new as well. Could you just give an update on new store productivity and what you're seeing in the new stores that are opened in the last three to six months in some of those newer markets? Thanks. Most of our new restaurants now are annualizing its sales of about $2.2 million, which is above the system average. Great. I guess anything just in terms of productivity ramps, or productivity in new markets versus core markets? They're performing pretty similarly across different geographies. Frankly, that's been the history of the company. It's less about the locations of where they are unless there's some outside event that has more to do with the site selection, so that when we, you know, when we observe our site selection principles, they pretty much have a fairly predictable ramp. Jared this is Chris. One thing I'd add there is, for us, we feel like that's a tremendous advantage for us to be able to balance out where we open, you know, a good mix of core, emerging and new markets like we've talked about in the past. We don't have to weight it heavily more towards mature to get the volumes that we're looking for. We're able to do that, as Mel said, across geographies. Great. Thanks for that. I guess just one more on the higher level sort of consumer outlook. Clearly, you know, First Watch is getting its share of traffic, positive traffic share. Just wanted to get a sense if you're seeing anything in terms of check management, from diners or guests that are coming in, maybe there's a little bit of a shift there, potentially lower beverage attach, lower add-on attach. Is there anything you're seeing with that respect or maybe not and consumers still continue to spend and trade up at First Watch? Just curious what you're seeing there. Thanks. Thanks. No, actually, just the opposite. I mean, obviously the first measure of that is the growth in traffic. From a check management standpoint, we're not seeing that at all. Not seeing, you know, folks manage their check. Our beverage attachment is up. All the signs that we're seeing are positive. We think that's because of the focus that we've placed on just delivering a great experience, for both our team and our customer during this time. We believe that as we move further into this economic environment, that the strong will get stronger. We're really focused on within our four walls and making sure that we deliver a tremendous value and an incredible experience. I think, you know, the performance in our traffic is showing the dividends there. Great. Thanks so much. Our next question will come from Andy Barish with Jefferies. Please go ahead. Hey, guys. Good morning, Andy. How are you? Fine. Great. How are you? Good. Just two quick ones for me. I mean, one, we've been seeing, you know, across the industry, the other operating expense line, you know, certainly elevated. Any color there, you know, relative to, I guess, probably primarily utilities, but, you know, how we should expect that continuing into the fourth quarter, and then I had one other one after this. Yeah. So that line does experience some inflation too. Yeah, the utilities are in there. But also, we run repair and maintenance through that line item as well. Our repair and maintenance expenses have, like every contractor expense has, been you know, the product of some inflationary increase as well. You know, we've got a 35-year-old system, so or nearly four decades now. So frankly, we're having to get back into some of the restaurants where, over the course of the last several years, we're visiting those restaurants and spending more time on the repair and maintenance costs. But it is something that we continue to see some increased inflation rolling through there. It's, you know, it's in terms of what I look at going forward. I don't see any reason to be optimistic that it's gonna come down tremendously, but we'll continue to manage it. Gotcha. Then your comments just, you know, on the Q4 start, I mean, the guide at, you know, at 15-ish for the year implies about 8 in the fourth quarter, which is basically what you're running on, I think, on pricing. Maybe where are you now? How much, you know, hurricane impact was in there for the first, you know, week or two of October, as you mentioned? You know, do you expect a ramp as the quarter goes on with, you know, with what's expected to be a strong holiday season? Just, you know, any color on that that could help us out. Generally speaking, we would expect it to improve as we go through the balance of the year. You know, beyond the hurricane costs, there are other fourth quarter costs just to think about. One, we have our national conference that occurs in the fourth quarter. We have a Sunday holiday shift where we, you know, Christmas falls on a Sunday this year. That important day, our crews were not serving. We have the cost of the shelf registration and then the hurricane during the fourth quarter. We're looking for a strong fourth quarter, but I just I do wanna be sure I temper everybody's results a little bit about the fact that we come into the quarter doing, you know, continuing to deliver on growing traffic and growing sales. But I don't want people to get too far in front of us on that. We've built all that into our annual guidance that we put out. Okay. Appreciate that. Thanks, guys. Yep. Our next question will come from Andrew Charles with Cowen. Please go ahead. Great, thanks. Chris, can we just go over alcohol for a second? Just curious that at the last update is around 75% of the system, looking to complete rollout to all the stores that contain a liquor license by the end of the year. Curious, where you guys are with that, if that's still the right target, and where you guys are seeing that mix and recognizing that obviously you haven't started to build awareness of this yet 'cause you're more focused on just implementation. Just early reads, kind of where is alcohol mixing for you guys? Yeah, sure. I'll answer the first part of your question. We have alcohol in about 83% of the system right now. On track, if not ahead of the rollout. We do expect to have that in place by, you know, the end of the year, at the, you know, latest, of next year. Alcohol continues to increase in mix. We're getting more and more emboldened by the, you know, the attention that it's gaining from the consumer. We think it's a traffic driver, and we're really looking forward to innovating around that platform once we get it rolled out. Super. Then, Mel, I just wanna come back to the other operating expenses that were a bit elevated. You called it repair and maintenance. Is the KDS rollout going ahead of schedule? Does that have any impact there, or is that more capitalized? No, that's most of the KDS system is CapEx for us. There's probably, you know, when they get in and they install it, some costs that they, you know, pick up at the time. For the most part, it's not driving repair and maintenance increases. Got it. Okay. That's helpful. Thanks, guys. Our next question will come from Jeffrey Bernstein with Barclays. Please go ahead. Great. Thank you. Two questions. The first one, just following up on the comp trends. Just wondering, I got the impression that trends improved sequentially through the third quarter. Just trying to confirm that. I thought when you said about a soft start in October, I wasn't sure whether you were talking about the system due to more the broader macro, or whether you were purely talking about the hurricane. Just trying to get a sense for that and what initiatives you might implement if trends were to slow, which again, I don't get the sense that you're seeing that at all, but just trying to get a sense for what leverage you might pull if you saw a slowdown in your business, and then one follow-up. Yep. I'll just answer it directly. Traffic grew sequentially each month during the third quarter, and all day parts were up. my reference to the slow start was that the hurricane actually hit us that first quarter. I mean, excuse me, the first week of the fourth quarter. Fourth quarter, yeah. Got it. Otherwise, other than that impact, you're not really seeing any underlying change in trend. Just curious, what might you do? Are there levers that you would pull from a value perspective, or do you kinda stick to your kind of core regardless of maybe what the competitors are doing? Yeah. We've already begun that work, you know, a year ago, which is definitely not discounting. We don't see ourselves going down that path. Again, we're focused heavily on taking care of the customer, innovating around our menu, just doing what we need to do to make sure that we're a tremendous value to the consumer. I will say this, that our industry research has seen that searches on Yelp, for example, for restaurants are down versus 2019. We think consumers are being less promiscuous with their dining dollars, and so they're sticking more to what they know and trust. We've been called out as a restaurant that people can trust. In fact, we were second in the industry, according to Technomic, in a consumer ranking on you know, restaurants that I trust. Our positioning with the more affluent customers, we really just feel like we're well positioned for you know, both the near and long term. Understood. My follow-up is more on the margin side. I know you're not giving any guidance per se looking into 2023, but directionally speaking, it does seem like investors are excited that, you know, sales seem to be holding up and for sure in your case, and menu pricing seems to be outsized, and as you mentioned, maybe inflation is easing a little bit. With that kind of a trifecta, it seems like there's the potential for significant margin expansion and earnings growth. Just wondering whether that's all directionally accurate going into 2023, or are we underestimating maybe the inflation impact or the pricing not being enough to fully offset? Just trying to get your directional thoughts on what could be a compelling or attractive fundamental outlook into 2023. Well, what I can tell you about 2023 is that we're certainly planning on battling back the cost of the inflating prices and that sort of thing. I don't think that we're going to get a lot. I think the pace of inflation, you know, may slow, but I don't think we're necessarily expecting to see prices, you know, real prices drop a great deal. I think we still have to continue to shave basis points in the business. We'll have some, you know, good 2023 guidance out there as we get closer and have a better visibility into what's happening. Great. Thank you, guys. Thank you, Jeff. Thanks. Our next question will come from Brian Vaccaro with Raymond James. Please go ahead. Hi, good morning. Thanks for taking my questions. I wanted to ask on the commodity inflation front, you noted moderating inflation. Could you just give a little more color on where you're starting to see some pressure ease, some of the puts and takes within that line? I know the world can turn on a dime these days, but any early reads on where food inflation could trend for your business in 2023? Brian, you know, earlier in the year, we were pushing 18% inflation in the late in the first quarter and in the second quarter. We've begun to roll over inflated costs last year now that we're in the fourth quarter. We've seen some, you know, relaxation across the rollover effect. If you just think about our largest commodities, bacon, potatoes, avocados, eggs, coffee, they're all elevated in price, but we're starting to roll over their elevated periods last year as well. I don't know that we're actually seeing a whole lot of abatement, although bacon kind of bounces around from time to time. We probably are getting a better price today than we were earlier. For the most part, it's the rollover effect that we're seeing. All right, thank you for that. I also wanted to ask about KDS and some of the other changes you're making in the back of the house for sort of a post-COVID reality where your AUVs are, you know, north of $2 million, et cetera. I think you said it's in 300 units. Could you elaborate how that's benefiting just the employee or guest experience? Is there any way to, you know, maybe parse out the ones that have had it in for longer, quantify the lift and benefit to throughput or comps, or perhaps any cost savings that might be associated with the change? Thank you. Yeah, big question there, but I'll try to run down some things on it. First of all, the KDS system is still in its, you know, infancy in our environment as we're still rolling it out. But it's also part of a package of things that we do. It's a KDS standalone. You know, we're driving out other changes in terms of the effectiveness of our staffing and as well as our allocation of staffing, our organization of the kitchens and that sort of thing. KDS sheds light on, you know, different elements. You know, maybe we're preparing food at pace and need to get it to the tables faster or something like that. It shows a lot of, you know, for us, different opportunities, and we're excited about those. What the immediate benefit is once we roll it out in a restaurant is that it simplifies the complexity of operating the restaurants based on, you know, a verbal system or the team's judgment about the time to prepare guests' orders. As a consequence, it allows us to you know, it opens us up to the ability to hire more back of house people who come from systems who already have a KDS and a reader system, and they've already trained on it, and they become some apostles for it. You know, just by increasing the number of qualified applicants, it helps us to deal with turnover better or fewer training costs, and allows us to improve that, you know, those sort of, they're not sexy things in the back of the house, but they are realities of the restaurant business. Thank you, Mel. Our next question will come from Nicole Miller Regan with Piper Sandler. Please go ahead. Good morning. Thank you. Two quick ones. The first, as you exit this year and enter the new year, I think like 390 basis points of price would fall off. Historically, that would be an annual, call it 2%-3%, price opportunity. Should we think about that more as a return to normal? What I'd say here is that just as we've been in the past, we intend to be nimble and thoughtful as it relates to pricing, and we'll make decisions as needed, but we'll keep our value proposition in mind. You know, we mentioned earlier that we'd most likely be getting back to a normal cadence of the number of times we do it throughout the year. With our focus on building traffic through trialing and, you know, also increasing frequency with our core customers, we've just, as you know, been intentionally conservative with our pricing, and we will try to continue along that path, hoping that we see some easing in costs. From a cadence standpoint, I think as we've said before, we'll most likely get back to that twice a year. Okay. I mean, it's interesting because price is so sticky, so there's an opportunity, but it doesn't mean you want to flex it. To confirm, it is usually in one Q would be a normal period. It's just a question of how much, is that right? That's been our history, Nicole. Okay. We don't really visit it until after we've actually adjusted the menu prices. We don't announce when we're gonna do it, but we'll take a close look at the right timing with that value proposition in mind. The thinking of, you know, labor as one of your biggest assets, especially returning to the I guess fully staffed levels you're looking for. Can you talk about how you got there? I mean, was it applicant flow or, you know, better applicant flow? Was it an ability to just take on those applications and process them? Yeah. Really, you know, what is the cost of labor today, not just from a dollar, you know, per hour perspective, but how have you enhanced the total benefits package, to be at these staffing levels? Thank you. Sure. This is Chris. I think, the first piece is that, you know, even back during COVID times, I mentioned on previous calls that we did not do sign-on bonuses or those type of things. We focused on our internal teams, being advocates and evangelists for, the environment and the experience of working for First Watch. That benefited us well during COVID, and it's benefited us since then. I will say that we've done, a tremendous amount of work around, the employee proposition and benefits and other things, and I think that's helping us too. Also, I think being, you know, again, the fastest-growing full-service restaurant company in America helps us attract people when the applicants are out there. We think we show up really well when they're looking for jobs and our No Nights Ever ad pops up right in front of them. It's appealing. We get our fair share of applicants. It's a lot of those things. Honestly, it's at a perfect time for us as we you know continue to ramp up our growth to have the management pipeline that we have in place to support that growth is really important right now. We feel like we're in a really good place. Thank you. Our next question will come from Chris O'Cull with Stifel. Please go ahead. Thanks. Good morning, guys. Morning, Chris. Mel, the low end to high ends of your EBITDA guidance imply a pretty wide range for the fourth quarter. I was just hoping you could help us understand what are some of the key factors that could determine whether you land at the low or high end of the range? I really was alluding to the same things I mentioned a few minutes ago, that we have going through that, the, you know, that quarter, we know we have some costs, that are a little bit unique to the fourth quarter in that we lose the Sunday business. We have shelf registration costs. We have the conference costs. We have the effects of the hurricane, which we're in some respects, while we know the hard costs associated with the hurricane, we're also evaluating the, business flow through of, you know, adjusted traffic and that sort of thing in those affected restaurants during some period of time. knowing that and knowing just, you know, the risk associated with some of the environmental issues, I would say, or the economic issues and the economy we're operating in, there's a little bit of caution that I've built into our range there. Okay. Then my second question relates to development. I know the company's on track to hit its guidance for the year, but is the company planning to make any adjustments to maybe its approach for development next year, given challenges to opening restaurants will probably continue, it sounds like next year? Then I was hoping you could also just give us a sense of how the company store pipeline shaping up for next year. Will we be adjusting our development would be the first thing. You know, we have what I think is a very data-driven and a healthy approach to how we select sites. I don't think you would expect to see us make any major changes on the way we develop the restaurants and develop sites. You still have to, as I say, kiss a lot of frogs in order to find the ones that the sites where you wanna open. I know our development team is working hard to get out there. Well, Mel, what I was asking more around was just, you know, given the delays in permitting, given the delays in construction, are there any other changes you're making in terms of just that process so that you can assure you get openings on time? I mean, there are no major changes. I mean, our teams already are very, they work on a schedule, and we're very confident in our long-term guidance on growth of new restaurants. I'll jump in, Chris, and say that, you know, our ability to deliver on our unit growth, I think speaks for itself this year and certainly going into the fourth quarter. Our team has done an absolutely incredible job of what I call seeing around the corner and identifying what those challenges and whether it's supply chain or permitting and whatnot, and have built a pipeline that's sufficient for us to reach our long-term goals, which we would, you know, count next year in there as well. We feel really good about our process from start to finish. Perfect. Thanks, guys. Mm-hmm. Our next question will come from Gregory Francfort with Guggenheim Securities. Go ahead. Hey, thanks for the question. I had a couple. The first was just maybe in follow-up to Andy's question. I think it was Andy. I'm getting that the implied comp for the fourth quarter out of 15 would be something closer to 9%-10%. Maybe if you could just check my math and then I had two questions. Well, we haven't really guided directly to the fourth quarter on that, but that sounds in the ballpark. Okay. Got it. Just in terms of, I think you made a comment about trying to claw back some margin next year, and it feels like the big question is kind of every restaurant company tries to do that, should you try to run pricing ahead of cost inflation next year? Do you need to do that to get margins back higher? I'm just curious how you're thinking about that framework. As maybe commodity inflation comes down, do you think you should try to run pricing ahead of some of your cost inflation next year? Do you think the consumer is gonna allow that? Couple things on that point. As long as I've been in the restaurant industry, there is always a battle for margin points and clawing back costs, right? I think every restaurant company spends a great deal of effort trying to, you know, trying to claw back or claim basis points improvement with more efficiencies or lower costs. that sort of thing. Yes, we'll be continuing that battle just like we always do. In terms of solving for it at the top line, you know, it's not as easy as just taking the number and saying we're gonna increase it by pricing. We're very thoughtful about staying committed to the value proposition that we present to our guests. We think, you know, our customers see us as a value. We don't wanna lose that position with the customer. As we think about pricing, timing of pricing, what it will be, what it'll be on, where it'll be, that science will, you know, take place pretty thoughtfully about making sure that we preserve the value proposition with our customer. Thanks. Then maybe if I can sneak one more in. I think in terms of the changes to your unit growth guidance this year, it skewed a little bit more franchise than even the high end of that range that you had projected earlier in the year. Do you expect the franchise mix of your store openings to maybe pick up in the next couple of years versus where you were expecting before? Is that kind of one-off to this year? Thanks. I don't. I don't expect it to change. Thank you, guys. Appreciate it. Our next question will come from Sara Senatore with Bank of America. Please go ahead. Great. Thank you so much. A follow-up question on mix and then a separate question, if I may. First is just the gap between check and price was, I think, a bit wider this quarter, so actually suggests some more positive mix. I wanted to, you know, make sure I'm looking at that the right way and also ask what was the driver of that, was just more off-premise, or, you know, other kinds of, you know, trade up or to higher price items. I know you mentioned, you know, you're not seeing any trade down, but just trying to sort of disaggregate a little bit what that might be. Then, like I said, I have a different question, please. Sure. As far as the mix is concerned, I think, again, that's one of the true benefits of our seasonal menu program, where we have menu news out there, you know, 5 times a year, 10 weeks at a time. It builds excitement for our staff and our customers. You'll see customers trading into that seasonal menu. I think that's where we see some of the mix. Then also, keep in mind, as the alcohol continues to roll out, we'll see a mix impact there as well. Okay, great. It was less about higher average check on delivery, which I guess is probably pretty similar to your in-restaurant check and more about, like you said, the seasonal menu and some beverage attached. Yeah. The dollars on the transactions on off-premise was pretty much flat. Obviously, the dollars were a little bit elevated because of the surcharge and the price increase that we took. Got it. Okay. My question, you mentioned you said that users are a little bit less promiscuous now. I mean, we often see that when the demand environment gets a little under pressure, you know, people are less willing to take a risk, if you will, on you know, on occasions or on concepts that you know, aren't as consistent. I'm just curious, is that what you think is driving this change in usage, just people feeling a little you know, tighter purse strings, or are you seeing something about loyalty, you know, something specific to First Watch, you know, that's just sort of gradually edging up your frequency or your loyalty among guests? Yeah. I think it's what we've been focusing on, which is, you know, delivering consistency and value and an incredible experience during these times. I stand behind what I said, that I think, you know, consumers, if they choose to dine out less, they're gonna go to the restaurants they trust. They're gonna go to the restaurants that they know they'll get a good value. And just as importantly, they know that it'll be a consistent experience. They don't wanna risk their dollars when they're you know being more decisive about where they go. That and, you know, the audience that we appeal to, the fact that, you know, breakfast and brunch continues to be a growing day part, and it is an experience where people feel like they can splurge a little bit, and they're able to do it at our restaurants and at a very reasonable price point. All that work that we've been doing with being conservative on our pricing, you know, the evolution of our prototypes, the building out of the environment to attract that customer is what we believe sets us up for that. Right. It's just sort of the core value proposition as opposed to, say, you know, we're getting lists of, you know, from our off-premise business, we're able to identify people and market to them directly. That's still an opportunity to come. Right now, it's just offering a better experience in a time when that's what consumers really want. I think that's a very important case for us is that recovery of in-restaurant dining, which we have seen tick up sequentially. It's at its highest it's been for us for a period. We look to that as a key indicator of driving that in-restaurant traffic and also how we're going about doing it through these steps that we're talking about, which is, to your point, focusing on the fundamentals and making sure that we deliver what the consumer is looking for at this time. Got it. Thank you. Mm-hmm. Our next question will come from Jon Tower with Citi. Please go ahead. Great. Thanks for taking the question. Good morning. Hey, Jon. Hey, thanks for making the time. Just a few from me, if I may. First, where are you seeing the traffic growth coming from? Is it concentrated on weekends and you're seeing maybe faster table turns in part due to the KDS? Or are you seeing it spread throughout the weekdays? I'm just curious to kind of get some color there. Yeah. As I mentioned earlier, the traffic growth was sequentially, you know, it grew sequentially across each month of the quarter. More importantly, I guess, all day parts are up. We're, you know, seeing it across the entire business. And then, in reference to off-premises, we talked about how that from a dollar standpoint or excuse me, from a transaction standpoint, has remained steady. That growth's come across all of our operating hours. You know, we've talked about we look at, you know, three very distinct day parts, weekday breakfast, weekday lunch, and then weekends, we just call that brunch. In all instances, we're seeing that traffic growth. I think what's important for us is to be able to unlock those peak sales hours where we have unmet demand, and that's the critical nature of KDS and some of the other initiatives that Mel has talked about, so that we can really unlock that. Because our off-premise business pretty much mirrors our in-restaurant dining. When we're busy in the restaurants, we're busy with off-premise orders. That's why we're so focused on that increased throughput during those times. Got it. No specific period stood out during the third quarter. It was all pretty much across the board. Correct. Okay, cool. In the model, I know seasonally, or at least hard to tell in the model, but the labor cost per operating week stepped up sequentially this quarter. Mel, I know you've mentioned that you got some of the management staffing at the stores near or above pre-COVID levels, or at pre-COVID levels, excuse me. I'm curious, how should we think about that going forward? Is there an opportunity to kind of manage that lower going forward, or is that a line where it's just gonna be pretty sticky because of underlying inflation? I'm kind of counting on our 33%-33.5% that we've enjoyed being pretty sticky. Early in the year, you know, we had signaled that we felt like the 34% level was kind of optimal and for us has been sort of the you know, kind of a good level of staffing to have in our restaurants. I think we've learned a bit about ourselves and also we've taken some price, and so I think that 33%-33.5% is a level I'm not expecting to see shift abruptly over a long period of time. It might, you know, from quarter to quarter, we might see some movement up or down, but we wanna be little careful about that. Got it. Then the last one from me. In terms of thinking about CapEx beyond new store growth, and obviously this year, KDS has been an important piece, and I know there'll be some more of that rolling through next year. Are there any other initiatives that we should be thinking of in terms of CapEx spend into the next, say, two to three years? We don't have anything that we'd be ready to announce right now, and we'll probably, you know, give a much better indication of what it will be for next year when we give guidance for next year. Got it. All right. Thanks for the time. This will conclude our question and answer session. I'd like to turn the conference back over to Chris Tomasso for any closing remarks. Thank you for joining us for this morning's call. I appreciate it. These results reiterate our strategic positioning as leaders of not only a growing daytime dining segment, but also of the restaurant industry as a whole. We always appreciate the opportunity to share First Watch's progress. As our operators across the nation gear up to lead us through another holiday season, we look forward to closing out a strong 2022 together. Thank you. This conference is now concluded. 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