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Texas Roadhouse warms to takeout, but delivery’s still out

The high-flying casual chain said its traffic growth will be fueled by to-go business.
Photograph: Shutterstock

Executives of Texas Roadhouse all but cuss and spit at the mention of delivery, but takeout is a different matter. Mastering that form of off-premise business will be critical to sustaining traffic growth at a concept that once professed to be all about the dine-in experience, CEO Kent Taylor informed investors yesterday.

The officials also highlighted some of the changes that are being eyed for the company’s secondary concept, Bubba’s 33. Taylor said two new prototypes of the full-service burger brand are being tested, and the operation is also experimenting with weekday lunch service on a limited scale. 

But the focus continually turned during the conference call with financial analysts to the potential of takeout for the company's core brand. “That's probably our No. 1 focus as we continue to have more and more demand for it,” Taylor said after Roadhouse posted a second quarter same-store sales gain of 4.7% for company units and 4.3% for franchised U.S. restaurants. “We're looking at how we can make that process more efficient and more appealing for our guests.”

He noted that some stores have been retrofitted with separate entrances for pickup orders. “In the stores that we do that, to-go has increased quite a bit,” Taylor said. He also noted that some franchisees are doing “crazy and good things” to handle the additional kitchen volume, without revealing details.  

He predicted that takeout would be the top focus of the chain’s upcoming annual conference of store operators. 

To-go orders currently generate about 7% of sales, and the volume is growing at a rate of about 20%, according to CFO Tonya Robinson. 

A key driver, Taylor said, has been Roadhouse’s high volume of dine-in business, which can result in longer waits for tables than some customers are willing to accept.  “Instead of going to a competitor, they actually get the food to-go and eat it at home,” he said. “We're happy that they want that.”

Taylor noted that the typical Roadhouse is handling 94 more guests per week than it did a year ago.

Still, he left no doubt that Roadhouse remains adamantly opposed to delivery, a service Taylor believes will provide the chain’s fans with a disappointing experience. “We're not looking at delivery at all,” he said.

Tweaks to Bubba’s

Simultaneous with Roadhouse’s efforts to streamline takeout, Taylor and his team are tinkering with several core features of Bubba’s, which has slowly grown to 20 units. The brand posted a year-over-year sales increase for the second quarter of 8.1%, with an average intake of $93,000 per week, but management isn’t ready to accelerate expansion in 2019, Taylor indicated. 

Five Bubba’s units are currently testing weekday lunch. The executives did not divulge results from that added daypart, but noted that at least half of the brand’s current locations are not in strong midday markets. 

Regardless of the results, investors can forget about seeing the Roadhouse chain add weekday lunch. At Bubba's, "we have pizza, hamburgers, sandwiches—unlike our dinner items at Roadhouse," said Taylor.

Roadhouse is also trying two new prototypes for Bubba’s. One eliminates a service bar in the kitchen, consistent with the floor plan of a Roadhouse, and includes just one beer dispensing system. “Those are big savings if that test goes well,” Taylor said.

In the other, more seats are provided in the bar area, “making it either less friendly to families or more friendly,” he quipped.

Once all the variables are tested and evaluated, Roadhouse will finalize a growth plan for Bubba’s, Taylor added. Right now, the company is looking to add up to four units in 2019 and as many as six in 2020.

Overall, Roadhouse posted a quarterly net income of $44.8 million, a rise of 1.4% from the year-ago period, on revenues of $689.8 million, up 9.6%.

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