Steak rides the wave

The math is simple: A strong economy = strong steakhouse business.
Photograph courtesy of STK

top 500

The overall full-service space might not be faring that well, but the same cannot be said for the steak segment. In 2018, sales at full-service steak-focused restaurants rose 4.5%, while sales in the full-service sector as a whole grew by only 1.4%, according to Technomic’s Top 500 Chain Restaurant Report.

“Steakhouse performance tends to be in lockstep with the overall economy,” says Joe Pawlak, managing principal with Technomic. “If the economy is strong, consumers feel better about their financial prospects and are willing to indulge a bit when they go out to eat. Steak is a great way for them to do so, so steakhouses ride the wave.”

Additionally, higher-end restaurants are often tied into business expense accounts.  “With many steakhouses falling into this category, the strong business environment is benefiting this sector of the industry, as travel and entertainment spending is soaring,” says Pawlak. But those chains beyond the traditional dark-wooded fine-dining steakhouse are doing well, too.

Value and consistency win

Texas Roadhouse, which moved up three spots in the Top 500 ranking from 29 last year to 26 this year, is powered by that thinking. “When the economy is doing well, people want to splurge,” says Travis Doster, VP of communications for the nearly 600-unit chain, where steak makes up 50% of the menu. Sales at Texas Roadhouse increased 9.8% year over year—more than 4 percentage points above the steakhouse average.

Splurges aside, Doster cites value as one of the key drivers of growth for Texas Roadhouse. Its 6-ounce sirloin has been the best-seller since the chain opened 26 years ago, and it’s still a great value—averaging $10.99 with two sides. “We offer very high-end steak at a great price. There’s a butcher installed in every restaurant and our steaks are hand-cut daily,” he says. To market that differentiation, customers encounter a large meat case as soon as they walk in the door and can actually choose their own steaks.

Consistency is another selling point for Texas Roadhouse, especially with families, its core market. “We don’t do a lot of changes and no LTOs,” says Doster. “If you add something, you have to take something else off the menu, and we want to keep things simple.” The most recent menu addition came about four years ago—a steakhouse fillet salad—perhaps a nod to  lighter eaters. “It’s been a big hit,” he says.

Embracing a lighter side

STK, on the other hand, an upscale concept with high-ticket, dry-aged beef, creative cocktails and a swanky vibe, markets directly to those lighter eaters—aka women. The steak menu has “Small” and “Medium” sections listing more petite portions, a move designed to appeal to females, says Lizzy Freier, menu analyst with Technomic. Even the 28- to 34-ounce steaks in the “Large” section are often ordered for table sharing. And even some of the large-portioned plates are feminized; the latest 16-ounce steak is called a Cowgirl Ribeye.

A younger chain with fewer units, STK’s 9.5% sales growth topped the fine-dining steakhouse average in 2018, landing it at 244 in the Top 500. It outpaced other higher-end steakhouses such as Morton’s (down 0.8%), Ruth’s Chris (up 1.4%) and Capital Grille (up 4.6%), many of which focus at least indirectly on a more masculine, business-centric audience.

Source: Technomic Top 500 Chain Restaurant Report

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