Operations

Even blizzards didn't keep guests away from Texas Roadhouse

Guests are ordering less alcohol and more from the value side of the menu, but traffic was up 5.1% in the fourth quarter at company units.
The chain is planning to raise menu prices by 2.2% in late March. |Photo: Shutterstock

Inflation-weary consumers are looking for comfort at Texas Roadhouse.

The Louisville, Ky.-based casual dining chain said same-store sales at company units increased 9.9% in the Dec. 26-ended quarter, driven by a 5.1% increase in traffic and a 4.8% increase in average check. At domestic franchise units, comp sales were up 8.9%.

Through the fourth quarter month by month, comp sales grew 9.2% in both October and November, and 11.1% in December.

And though bad weather in January had about a 2.5% negative impact on traffic in the first 50 days of 2024, same-store sales were still up 6.8% during that period, including a 3% increase in traffic.

For the year, same-store sales increased 10.1% at company-owned restaurants and 9.8% at domestic franchise units.

While other chains have reported softness in traffic among lower-income guests, Texas Roadhouse seems to be picking them up as diners trade away from other casual-dining, and even fast-casual chains, said Michael Bailen, Texas Roadhouse’s head of investor relations.

“Some of those are probably going more towards the value side of our menu, the 6-ounce sirloin and the other lower-priced items,” he said. “And maybe they’re getting a soft beverage instead of an alcoholic beverage, but we feel very happy with the consumer right now.”

The company said it will raise menu prices 2.2% in late March to help offset inflationary pressures, including higher labor costs, which are expected to increase 5% this year. Beef prices are also expected to continue to be a challenge.

Sales volumes increased during the year, but so did the average investment cost, which was blamed in part on construction inflation but also because Texas Roadhouse is building bigger restaurants to serve more guests, and adding dedicated to-go areas—both of which call for more back-of-the-house space. Current prototypes are about 10% bigger than restaurants built pre-Covid.

For the year, the company opened 30 restaurants, including 22 Texas Roadhouse and five Bubba’s 33s and three of the fast-casual Jaggers concept. Another 15 franchise locations opened in 2023, including two Jaggers, for a total of 741 restaurants.

This year, the company expects to open about 30 company-owned restaurants, and another 14 franchised locations, including four Jaggers.

A big move for Texas Roadhouse is accelerating its rollout of digital kitchens, with about 200 existing Texas Roadhouse units scheduled for conversion this year.

So far about 20 restaurants have been converted to the digital kitchen format, and all new restaurants have it. The system helps improve cook times, which generates more table turns.

CEO Jerry Morgan said the system fundamentally makes kitchens more efficient by shifting to screens rather than tickets.

“It creates a lot less chaos,” he said. “It just organizes it so people don’t stress out when you got a whole bunch of tickets in front of you, and all of that, and we can clearly monitor how long our cook times are, so that will be a big win for us going forward.”

Part of that effort will include raising awareness about the digital platform, which makes it easier for guests to get on the waitlist to dine in, and to order food to go.

Net income for the fourth quarter grew 21% on revenues of $1.2 billion, up 15%. For the year, the company reported net income of $304.8 million on revenues of $4.6 billion.

 

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