People are eating at Texas Roadhouse like it’s 2019.
The steakhouse chain said dine-in traffic has returned to pre-pandemic levels this year, helping the company to another quarter of strong sales—and executives believe its restaurants have room to serve even more guests.
Dine-in visitor counts grew each month of the first quarter, a trend that continued into the current period, executives said during an earnings call Thursday.
“I think in April is really where we saw the dining room guest counts surpass 2019, so that was very encouraging,” CFO Tonya Robinson said.
Executives credited operational execution for driving the growth as well as new technology in the dining room, including an online waitlist system and the option for customers to cash out using tabletop devices.
They also said guests were starting to come back in markets that were being hit hard by COVID-19 a year ago, like California.
“You probably did have that guest maybe a little hesitant to come out, and you’re seeing that change a little bit there a year later,” Robinson said.
CEO Jerry Morgan noted that the chain has kept many of its pandemic-era safety precautions in place, suggesting that has helped make people feel comfortable dining in.
Overall for the quarter, same-store sales rose 16% year-over-year at company restaurants and 20.4% at franchised locations. Sales through the first five weeks of the current quarter were trending 9% above last year.
The 16% included 7% traffic growth and average check growth of 9% as dine-in guests ordered more food and drinks and pricier entrees.
The increase in in-person visits did come at the expense of some off-premise business. To-go accounted for 14.8% of total sales in the quarter compared to 22.3% a year ago. Some of those takeout customers apparently decided to get a table this time.
“We actually like that because that means the dining room’s going up,” Robinson said.
Roadhouse believes it can still generate more dine-in sales, particularly earlier in the day and later at night, Morgan said.
“It really comes down to us executing in the power hours and then really trying to drive folks to those earlier hours,” he said. “We still know we’ve got room.”
The chain is still learning how much volume its restaurants can handle between dine-in and to-go, Robinson added. After all, it’s kitchens only have so much room.
“There’s still a little bit more to learn about what can the capacity be maybe in the dining room, above and beyond what we’re seeing today given the big volume of to-go that we do now,” she said.
Dining room traffic in the broader casual-dining segment still appears to be down relative to before the pandemic. Both BJ’s Restaurants and The Cheesecake Factory, for instance, reported recently that on-site traffic has been anywhere from 10% to 20% below 2019 levels.
Despite the sales growth, Texas Roadhouse’s restaurant-level profits felt the squeeze of rising food and labor costs. Its margins for the quarter were 16.4%, down 213 basis points from a year ago and below its target of 17% to 18%.
Commodity inflation for the quarter was 17%, and wage and other labor inflation was 10.5%.
The chain is still expecting commodity inflation of 12% to 14% for the year and wage and other labor inflation of 7%.
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