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Texas Roadhouse readies second growth vehicle

Texas Roadhouse is laying the groundwork now for the company’s long-term growth prospects by shifting more development dollars and attention to a burger, pizza and beer concept that had been in the incubator for more than a year.

The venture, Bubba’s 33, shares many similarities to the Texas Roadhouse concept, according to the executives of the two brands’ parent company, Texas Roadhouse Inc. Both rely on a partnership or fraction-of-the-action model, where general managers pony up equity for partial ownership of their stores.

The menu is limited to familiar bar-type appetizers, with the exception of a fried pickle; burgers made with what’s touted as freshly ground beef; hand-tossed pizzas; and beer advertised as being served at 33 degrees.

The “33” also refers to Bubba’s signature burger, which mixes ground bacon with ground beef in a 1-to-2 ratio, or a 33 percent mix. The bacon-beef combo is reminiscent of Slater’s 50/50, a high-volume concept that has found great success with burgers made with 50 percent bacon and 50 percent beef.

“Just like [at] Texas Roadhouse, we make the food from scratch,” said Kent Taylor, founder and CEO of the parent company, told stock analysts this week.

The place strives for a sports-bar feel, with ample flat screen TVs showing a variety of games.

Sales are “pretty strong compared to a Roadhouse,” said corporate president Scott Colosi. Margins are slightly better because more of Bubba’s sales come from alcohol and food costs are a little lower, he added, without providing specifics.

The new concept costs slightly more than a Roadhouse to build because the stores are bigger, and the real estate expense is now roughly the same as the site cost of the older brand, according to Taylor.

Management has maintained that there is ample room left for Texas Roadhouse to grow beyond the current 440 or so units. Indeed, the company opened 22 Roadhouses and franchised six others last year, and plans to add at least 25 in 2015.

But “we realize that the development of Bubba's 33 is important,” Taylor said, “not only for the long-term growth of the company but also for the growth opportunities it brings to our people.” He indicated that some Roadhouse partners are already asking about adding a Bubba’s to their portfolios.

The company plans to add five Bubba’s to the three that are already in operation.

Several of the initial Bubba’s stores were located near a Roadhouse, without a negative effect on the older brand’s sales, Taylor said.

Still, he cautioned investors that Bubba’s has yet to prove itself as a viable nationwide option.

“Nobody is celebrating victories here,” he said. “We are trying to plant some seeds and we got three seeds in the ground. We are going to plant five more seeds and it doesn’t make a whole field, but we are planting some more seeds to hopefully have a brand that we can grow pretty substantially in the future really for the benefit of our people as much as anything else.

He called the current ramp up “Phase II of our pilot phase.”

The first Bubba’s was converted from an Aspen Creek, an upscale casual concept that Roadhouse tested a few years ago.

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