Texas Roadhouse sells a lot of steak. Most of the time, that’s a good thing, except when beef costs get out of hand, as they have recently.
The chain reported commodity inflation of 7.9% in the third quarter, driven largely by higher-than-expected beef costs. It came as Texas Roadhouse customers continue to order more steak—possibly because of how expensive it has become at the grocery store.
That combination was good for the chain’s sales, but bad for its bottom line. Same-store sales rose 6.1% year over year in the three months ended Sept. 30, including a 4.3% traffic increase and a 1.8% mix improvement. Restaurant-level profit margins, on the other hand, declined 168 basis points, to 14.3%.
U.S. beef prices hit record highs over the summer as drought, labor shortages and high grain costs drove cattle herds to their lowest levels in decades.
Executives emphasized that they believe the issue is cyclical, but that it could take some time for herds to rebuild. As such, the company is projecting commodity inflation of 7% for 2026. It also updated its inflation guidance for the full year 2025 to 6%, a full 2 points higher than it was expecting when the year began.
This puts Texas Roadhouse in a tough spot. As a rule, it does not offset inflation with menu price increases; it raised prices a modest 1.7% at the beginning of the fourth quarter.
"We are not going to be able to price for every beef inflation as of right now, but we want to make sure that we protect the value side of our business," CEO Jerry Morgan said during an earnings call Thursday.
Affordability is one reason customers continue to flock to Texas Roadhouse, as they did last quarter and are continuing to do: Same-store sales through the first five weeks of the current quarter were up 5.4%.
Asked whether the chain might consider promoting other proteins, such as chicken, to protect from higher beef costs, Morgan said customers come to Texas Roadhouse because it serves a great steak.
“That’s what they crave,” he said. “We’re not going to take that away from them.”
That hasn’t stopped the chain from experimenting on the menu, though, particularly on the beverage side. It continues to see strong demand for new mocktails and $5 all-day beverage specials. And now it is testing dirty sodas in Utah and Idaho, which have also been well-received.
It comes as alcohol sales continue to fall at the chain, and as restaurants across the industry experiment with new kinds of beverages.
“I think people want a good beverage, maybe not as much the beer and margarita anymore, but they want to have a quality beverage option,” Morgan said. “I think we’re learning that the better the offering, the more options the guest and the consumer has, the better it is for us.”
Texas Roadhouse opened nine U.S. restaurants in the period—four of its namesake brand, two of its Bubba's 33 concept and one Jaggers—all company-owned. Franchisees opened two Texas Roadhouses overseas. The company now has 806 restaurants worldwide across its three brands.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.