Texas Roadhouse is doubling down on business outside of its four walls with a new app and plans for an online store where customers can purchase its steaks for delivery.
It’s a testament to the impact off-premise made for the Louisville, Ky.-based chain during the third quarter, when its same-store sales got better each month, turning positive in October. Outdoor dining and eased capacity limits also contributed to the improvement.
And yet even as more customers returned to its dining rooms, takeout and curbside pickup sales remained steady, executives said. As of this month, about a third of the casual steakhouse chain’s 600 restaurants (188) were operating at full capacity, with another 111 at 75%.
“The to-go mix doesn't change a whole lot based on where the stores are, what capacity buckets they're in,” said CFO Tonya Robinson during an earnings call with shareholders Wednesday afternoon. “It seems like we're holding on to a good portion of the to-go sales.”
That’s a good sign for Roadhouse as it leans further into off-premise. It recently rolled out a new mobile app for its flagship chain and sister brand Bubba’s 33, and has seen increased frequency and check size from app users. It’s also introducing a two-way text messaging system to streamline curbside pickup and converting some of its corrals into staging areas for to-go. It’s even testing drive-thru windows at a few locations, CEO Wayne Kent Taylor said on the call.
Overall, to-go made up about 23% of total sales during the three months ended Sept. 30. Outdoor dining helped too, contributing as much as 2.5% to same-store sales. A little more than a third of the chain offered some form of outdoor dining.
In addition to improvements around to-go, Roadhouse is launching a new channel called Texas Roadhouse Butcher Shop, an online store offering frozen steaks for delivery. The chain is working with Amazon and a steak supplier on the initiative, which will launch in November, in time for the holidays.
Robinson touted attractive margins on the steaks and said she didn’t think they would take away from dine-in business. “If anything, it brings more awareness to the brand with the steaks that we're offering and the quality of the steaks,” she said.
Same-store sales declined 6.3% for the quarter, with comps for company-owned stores rising each month, from negative 13% in July to negative 0.5% in September. In October, same-store sales at company-owned restaurants turned positive, up 0.8% compared to last October.
Restaurant margin was 14.5%, impacted by labor and higher beef costs, particularly in July.
Overall for the quarter the chain posted a net income of $29.2 million, a 20% dropoff from the $36.5 million it brought in during the year-ago period.
As sales stabilized in late summer, Roadhouse resumed its development plans for the year. It expects at least 20 openings in 2020, including the third location of fast-casual offshoot Jaggers, in Louisville. The company is also bullish on it’s Bubba’s 33 sports bar concept; Taylor said 25% of its openings next year would be Bubba’s.
The chain now turns its attention to the traditionally high-margin holiday season. Outdoing 2019’s same-store sales could be challenging this year with capacity limits in place, but Taylor emphasized his company’s habit of overachieving.
“If you'd ask me in July … ‘Would you be positive in October?’ I would have said probably not. And here, we were positive in October, which just basically tells me that our operators, as usual, are exceeding our expectations,” he said. “I just know that I keep being surprised by our operators, and I look forward to continue being surprised.”