With sales holding, Texas Roadhouse is developing restaurants again

Included in the development plan is one location of the company's drive-thru concept, Jaggers.
Photograph: Shutterstock

With sales stabilizing at nearly pre-pandemic levels, Texas Roadhouse is resuming development of all its concepts, including the Jaggers drive-thru brand.

New branches of the company’s namesake brand will sport a reconfigured layout that’s intended to boost takeout and curbside delivery business. Corporate CEO Kent Taylor said the updated prototype was inspired by field-level personnel who repurposed unused waiting rooms for dine-in customers into additional pickup stations for to-go orders.

“We believe uncertainty and volatility will remain with us over the coming months and quarters,” Taylor said in explaining why the accommodation to off-premise sales will become permanent.  The chain has also seen off-premise business hold steady at about 25% of sales as dining rooms have partially reopened.

Roadhouse suspended development in March when the pandemic hit. With weekly sales topping $96,500 at Roadhouses with re-opened dining rooms and $89,000 across the system in June, the company has already started building new stores. Two Roadhouses and one Bubba’s 33, the company’s tavern concept, were opened during the second quarter. Two more Roadhouses fired up their grills in July, with four more slated to open during the remainder of the third quarter.  Another eight restaurants, including a new Jaggers, will be added to the fold by the end of the year, Taylor said.

Roadhouse said last October that it planned to grow Jaggers, the smallest by far of its three brands. Only two units are currently open.

Same-store sales at the company’s namesake brand climbed to within 13% of year-ago sales in July, according to CFO Tonya Robinson. She noted that 1.2 percentage points were due to July 4th falling on a Saturday this year.

Margins are still considerably below pre-pandemic levels, Robinson revealed. At the restaurant level, profits averaged 2.5% of sales, certainly well below pre-COVID levels.” But she projected that margins would climb to the low to mid-teen level in the next few months. Profits for 2018 and ’19 usually averaged around 17%.

Profits during Q2 were also affected by a 2.9% spike in food costs, a dynamic Robinson attributed to shutdowns at many beef processing plants early in the pandemic. “With these facilities back online, we are seeing supplies increase and prices normalized,” she said.

She also attributed lower margins to the surge in takeout business. To-go tabs average $4 less per person than dine-in tickets in large part because takeout customers often forgo a drink, which tends to have a high margin.

Exactly 332 Roadhouses were operating with half their dining room capacities in use as of this week, Robinson said. Another 115 units are back to their full indoor capacities, and 68 more are at 25% or 75% of maximum seating.

Overall for Q2, the company posted a net loss of $33.6 million, compared with a year-ago net profit of $44.8 million, on revenues of $476.4 million, down 30.9%.  

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