Texas Roadhouse Q2 2025 Earnings Report

Texas Roadhouse EPS Results

• Actual EPS: $1.86
• Consensus EPS: $1.95
• Beat/Miss: Missed by -$0.09
• One Year Ago EPS: $1.79

Texas Roadhouse Revenue Results

• Actual Revenue: $1.51 billion
• Expected Revenue: $1.50 billion
• Beat/Miss: Beat by +$11.80 million
• YoY Revenue Growth: +12.70%

Texas Roadhouse Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 5:00PM ET

Texas Roadhouse (NASDAQ:TXRH), together with its subsidiaries, operates casual dining restaurants in the United States and internationally. It also operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers names in 49 states and ten internationally. Texas Roadhouse, Inc. was founded in 1993 and is based in Louisville, Kentucky.

Texas Roadhouse Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Texas Roadhouse delivered a 5.8% increase in same‐store sales and reported record quarterly revenue exceeding $1.5 billion, driven by strong traffic across all three brands.
• Negative Sentiment: The company raised its full‐year commodity inflation outlook to approximately 5%, citing higher‐than‐expected beef costs that could peak at around 7% in Q3 before easing to 4–5% in Q4.
• Neutral Sentiment: To help offset inflationary pressures while preserving everyday value, management will implement a menu price increase of about 1.7% starting in Q4.
• Positive Sentiment: The system reached its 800th restaurant milestone and remains on track to open roughly 30 new company‐owned stores this year, with plans for double‐digit Bubba’s 33 openings and up to eight Jaggers locations next year.
• Negative Sentiment: Restaurant margin as a percentage of sales fell by 108 basis points to 17.1%, pressured by a 131 basis point year‐over‐year rise in food and beverage costs despite a 1.8% check increase.

Presentation

[Operator]

Good evening, and welcome to the Texas Roadhouse Second Quarter Earnings Conference Call. Today's call is being recorded. All participants are now in a listen only mode. After the speakers' remarks, there will be a question and answer session. I would now like to introduce Michael Balen, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Thank you, Tamika, and good evening. By now, you should have access to our earnings release for the second quarter ended 07/01/2025. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements. In addition, we may refer to non GAAP measures. If applicable, reconciliations of the non GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Gerry Morgan, Chief Executive Officer of Texas Roadhouse and Keith Humpic, our Interim Chief Financial Officer.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, could everyone please limit yourself to one question? Now I would like to turn the call over to Gerry.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thanks, Michael, and good evening, everyone. We are pleased with our second quarter results and the continued top line momentum of the business. Strong traffic growth throughout the quarter drove a 5.8% increase in same store sales. As a result, our revenue for the quarter grew to over $1,500,000,000 for the first time in our history. We are especially encouraged to see that all three brands contributed to our second quarter traffic and sales growth.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Texas Roadhouse averaged approximately $172,000 in weekly sales for the second quarter. The brand continues to benefit from a relentless focus on food, service, hospitality and value. This is why Texas Roadhouse once again earned top recognition from external surveys for guest experience and satisfaction in the casual dining segment. At Bubba's thirty three, average weekly sales exceeded $128,000 in the second quarter. In addition to solid performance from our same store sales group, we are also seeing strong sales at our most recent openings.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

We believe Bubba's thirty three, which currently has 53 locations in 16 states, has a sound infrastructure and a seasoned management team in place who can execute our road to 200 locations strategy. This could include double digit openings next year. We are equally excited about Jaggers. We delivered average weekly sales of nearly $76,000 in the second quarter. New store openings have been limited as we have been building the growth strategy for the brand.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

With our plan in place, we could open as many as eight company and franchise locations next year. We recently completed discussions with our operators regarding menu pricing. Based on those conversations, we will take a menu price increase of approximately 1.7% at the beginning of the fourth quarter. We feel confident this is the right level of pricing to maintain our everyday value while offsetting some of the inflationary pressures we are facing. On the development front, we recently opened our eight hundredth system wide restaurant.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

This milestone is a testament to the appeal of our brands, our operational excellence and the effectiveness of our growth strategy. During the second quarter, we had opened four company owned restaurants, including two BUZZ 33 locations, and we remain on track to open approximately 30 company owned restaurants this year. Our franchise partners opened one Jaggers location in the second quarter, and we currently expect they will open four international Texas Roadhouse restaurants in the second half of this year. During the second quarter, we completed the acquisition of three franchised restaurants, bringing the total number of franchised restaurants acquired this year to 17. We also have plans in place to acquire three more franchised locations in the fourth quarter.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Additionally, we will be purchasing our remaining five California franchise restaurants at the 2026. We are also excited to share we entered into an agreement to purchase our support center. The purchase of these two buildings, which we previously leased, solidifies space planning for the future and reflects our long term commitment to our hometown of Louisville, Kentucky. We remain rooted in our community and look forward to growing our presence in Louisville for many years to come. As to our future, I am fully confident in the strength of our operations and the commitment of Roadie Nation.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

While there are always be challenges, we will continue to focus on what we can control for the long term health of our business. Through it all, we will remain a people first company that delivers on its mission of providing legendary food and legendary service to every guest. Now Keith will provide some thoughts.

[Keith Humpich, Interim CFO at Texas Roadhouse]

Thanks, Jerry. During the second quarter, we saw our positive traffic trends accelerate from what we experienced in the first quarter. Also, our mix trends in the second quarter remained similar to what we have seen the last several quarters. These traffic and mix trends show that our guests continue to appreciate the high quality food, experience and value that all three of our brands provide. As for commodities, our second quarter inflation was in line with our expectations.

[Keith Humpich, Interim CFO at Texas Roadhouse]

Looking ahead, we have increased our guidance for full year inflation to approximately 5%, primarily due to higher than previously forecasted beef inflation, particularly in the third quarter. This guidance includes approximately 30 basis points of full year 2025 inflation related to tariffs, which remains consistent with our initial estimates from last quarter. Labor inflation in the second quarter was also in line with our expectations. Our operators continue to do a great job staffing the restaurants as labor hours grew at approximately 40% of comparable traffic growth. With greater visibility into inflationary trends for the year, we have lowered our guidance for full year wage and other labor inflation to approximately 4%.

[Keith Humpich, Interim CFO at Texas Roadhouse]

With regards to capital allocation, we ended the second quarter with $177,000,000 of cash. Cash flow from operations was $128,000,000 which was offset by $148,000,000 of capital expenditures, dividend payments and share repurchases as well as $16,000,000 for the three franchise restaurant acquisitions. As Jerry mentioned, we will be acquiring our support center buildings in the third quarter for a net purchase price of approximately $23,000,000 We are maintaining our full year capital expenditure guidance at approximately $400,000,000 inclusive of this transaction. Going forward, our capital allocation philosophy remains unchanged. Our first priority remains the funding of new restaurant development and taking care of our existing restaurant base.

[Keith Humpich, Interim CFO at Texas Roadhouse]

We also expect our dividend will continue to increase annually at a measured rate and at a minimum, we will repurchase shares to offset dilution. Beyond that, we will continue to look at opportunities to acquire additional domestic Texas Roadhouse franchise restaurants as well as repurchase additional shares as appropriate. And now Michael will walk us through the second quarter results.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Thanks, Keith. For the 2025, we reported revenue growth of 12.7%, primarily driven by a 5.3% increase in average weekly sales and 7.2% store week growth. We also reported a restaurant margin dollar increase of 6.1% to $257,000,000 and a diluted earnings per share increase of 4% to $1.86 Average weekly sales in the second quarter were over $167,000 with To Go representing approximately $22,000 or 13.3% of these total weekly sales. Comparable sales increased 5.8% in the second quarter, driven by 4% traffic growth and a 1.8% increase in average check. By month, comparable sales grew 4.3%, 7.25.8% for our April, May and June periods, respectively.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

And comparable sales for the first five weeks of the third quarter were up 5.3%, with our restaurants averaging sales of over $158,000 per week during that period. In the second quarter, restaurant margin dollars per store week decreased 1% to over $28,500 Restaurant margin as a percentage of total sales decreased 108 basis points year over year to 17.1%. Food and beverage costs as a percentage of total sales were 34% for the second quarter. The 131 basis point year over year increase was driven by 5.2% commodity inflation combined with shifts within the entree category, which was partially offset by the benefit of a 1.8% check increase. Labor as a percentage of total sales increased six basis points to 32.9% as compared to the 2024.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Labor dollars per store week increased 5.4% due to wage and other labor inflation of 3.8% and growth in hours of 1.6%. Other operating costs were 14.5% of sales, which was 32 basis points better than the 2024. The improvement was driven by leverage on operator bonuses as well as the year over year change in our quarterly reserve for general liability insurance. These insurance adjustments include $300,000 of additional expense this year as compared to $2,100,000 of additional expense last year. Moving below restaurant margin, G and A dollars grew 7.9% year over year and came in at 4.2% of revenue for the second quarter. Our effective tax rate for the quarter was 14.9%. Based on our outlook for the remainder of the year, we are updating the guidance for our full year 2025 income tax rate to approximately 15. Now I will turn the call back over to Gerry for final comments.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thanks, Michael. I am so proud of our operators and support center roadies who work together as one team to deliver great results. I'm also excited to spend time with our managing partners on our annual fall tour. As always, we look forward to getting feedback on how we can better support them or remove any obstacles so they can focus on partnering with Rhodes, serving their guests, and growing the business.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

That concludes our prepared remarks. Tamika, please open the line for questions.

[Operator]

Your first question is from the line of Sara Senatore with Bank of America.

[Sara Senatore, Senior Research Analyst at Bank of America]

Thank you very much. Obviously, very strong top line results. I just wanted to ask about the maybe the inflation. I know last year commodity inflation, beef inflation kind of consistently surprised the downside. This year, seems to be surprising upside.

[Sara Senatore, Senior Research Analyst at Bank of America]

I was wondering if you could maybe talk about some of the dynamics there. I know in the past, the retail what's happening in retail and groceries has been a big impact, but there may also be, obviously, the supply has been coming down consistently. And then within that, I know you said 3Q perhaps was the peak in terms of, you know, relative to your expectations. So is any of this maybe timing or, know, quarter to quarter? So I know there's a lot in there, but you always have good insight into the fee cycle.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Thanks, Sarah. This is Michael. I'll do my best to to cover those those questions. Yeah. I think we obviously updated our guidance, and it's a combination of demand, specifically retail demand for beef, has remained resilient.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

So we're seeing strong demand out there. And the supply situation, which we knew was going to be tight as we move through the year, saw some additional pressure on the production side from the beef suppliers cutting back on how much they were producing given some of their margin commentary that we've probably heard. So we saw a further tightening of supply, which certainly drove the cost higher in June. And so we are expecting to as that beef ages to see the impact of that here in the third quarter. We have about 80% of our beef locked for the third quarter and about 50% locked for the fourth quarter.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

So our team continues to monitor the situation, and we'll update you all accordingly.

[Sara Senatore, Senior Research Analyst at Bank of America]

Thank you.

[Operator]

Your next question is from the line of David Palmer with Evercore ISI.

[David Palmer, Senior MD at Evercore]

Thank you. Just a couple of line item questions that maybe there's some insights behind. When I look at the mix effect for over two years now, initially I was thinking this would make a lot of sense that mix would be negative coming out of COVID. There was a lot of check growth during those particularly the later stages, people had some money. And but now 2.5 of slightly negative mix, I'm wondering how you're thinking about that.

[David Palmer, Senior MD at Evercore]

Maybe what are the behaviors that's driving that? Maybe some of the alcohol dynamics or maybe this is just the cautious consumer, but anything that maybe drives your strategy as you think about pricing, for example? And then secondly, you did really well with labor leverage this quarter. Obviously, accelerated. That's a good way to get that.

[David Palmer, Senior MD at Evercore]

Does it really come down to that if you're doing a very nice traffic number like this quarter? Does that labor is the labor leverage that gap of two points just much more possible than cutting back on hours? I'd love to hear your thoughts on that. Thanks.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Yes. Hey, David, it's Michael. On the mix front, I'll tell you know, all of the negative mix pressure is coming from the alcohol category. We are actually, you know, continue to see positive entree mix. The guest is actually trading up still to, you know, bigger steaks or, you know, more often ordering a steak from us.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

And we're seeing positive mix in the mocktail categories. So really no downward pressure overall from our menu pricing actions. It's all in that alcohol category, which a lot of that we've talked about before is societal and not just a Roadhouse specific item. And that's what drove us to partly to introduce mocktails, which have been well received by the guests. So I think we feel very good about how the guest is using our menu and where they're trading on the menu.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

As far as the labor question, yes, certainly, more traffic helps you know, on the the labor line, but our operators are doing a very good job of of staffing their restaurants, and they're also, you know, benefiting from, you know, lower turnover in their restaurants. And a longer tenured employee is more productive employee, and some of that can go to our digital kitchen investments and just the overall way we're running those restaurants. So we are definitely encouraged by those labor productivity trends that we've seen, and we're cautiously optimistic that those can continue throughout the year. Thank you.

[Operator]

Your next question is from the line of David Tarantino with Baird.

[David Tarantino, Director - Research & Senior Research Analyst at Robert W. Baird & Co]

Hi, good afternoon. Maybe two questions. I'm going to cheat here. But Michael, can you just give us a sense of what the inflation in Q3 and Q4 is going to look like based on your current outlook? And I just want to make sure everybody is on the same page.

[David Tarantino, Director - Research & Senior Research Analyst at Robert W. Baird & Co]

And then I guess my real question is, Jerry, you mentioned the step up in Bubba's openings for next year. And I just wanted to get your thoughts on what that means for the total enterprise and your overall growth rate. I know you said in the past you're pretty comfortable at 30 or so openings, but does this allow you to push higher than that as you think about next year and future years? Yes,

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

David, I'm assuming you're talking about beef inflation and our expectations there. And as we said, as of now, expect that highest pressure in the third quarter and that could be as much as 7% commodity inflation in the third quarter. Then the expectation is it would probably come down from there more in the 4% to 5% range in the fourth quarter would be our current expectations. And remember, we are feeling some additional negative impact on the cost of sales line in addition to that inflation coming from the guests trading more often to stakes. So that's something we've seen in the last several quarters and would expect us to see in the third quarter as well.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

And David, this is Jerry. On the growth above us, yes, we've got seven openings slated that will happen this year, and the pipeline for '26 looks very solid. We are approaching that double digit count. And so there could we obviously have said around 30 or 30 ish, approximately 30. So it could be a little bit on the high side of that approximate 30 with the escalation of Bubba's growth.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

So we are excited about the results that we're getting and the investment and the brand in itself. So I think we could see a little tick up on that.

[Operator]

Your next question is from the line of Lauren Silberman with Deutsche Bank.

[Lauren Silberman, Director at Deutsche Bank]

Thank you so much. On the comp side, the monthly cadence, any additional color you can provide on what drove some of the monthly differences? I think broadly, the industry has seen some choppiness. So just wondering if there's anything you're seeing that's different than typical consistency.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Hey, Lauren. It's Michael. You know, obviously, we were pleased with the overall, you know, performance that we have seen. I I guess, you know, the the July, you know, period probably had about a a 70 basis point negative impact from the the the timing of the Easter And the five week period that we gave for the beginning of the third quarter has about 60 basis points of negative pressure from the calendar shift for the July 4.

[Lauren Silberman, Director at Deutsche Bank]

Sorry. Is 2Q is a 70 basis point negative impact?

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Was on just our April period. On the quarter, was about 20 basis points. Yes. Just April was 70.

[Lauren Silberman, Director at Deutsche Bank]

Understood. Anything you can provide on comp performance or differences that you're seeing across region days?

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Yeah. I'll tell you when we when we look at that, and this has been been the case for a while, you know, we're seeing, you know, solid growth seven days a week, through all, you know, day parts, you know, of each day in our both in our dining room and and to go. And when you look at it regionally, strong performance, you know, in all areas. So nothing really to call out as a specific area of weakness or of outsized strength. We're very pleased to what we're seeing across the board.

[Lauren Silberman, Director at Deutsche Bank]

Great. Thank you very much.

[Operator]

Your next question is from Dennis Geiger with UBS.

[Dennis Geiger, Equity Research - Restaurants at UBS Group]

Great. Thanks guys and appreciate all the color on the cost inflation pieces. Maybe just one more in thinking about restaurant margins for back half of the year. Just as far as the other OpEx line, thinking about that and if there's any differences 3Q and 4Q as we think about how the labor setup might play out. Anything to highlight there to kind of fully fill in the pieces for us in thinking about 2H restaurant margins? Thank you.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Hey, Dan. It's Mike it's Michael. I I think you guys talked about labor and other op. And I I would see obviously, a part of it will be, based on your assumption for traffic growth. But if you're assuming, that we continue with some modest level of traffic growth, then I think that other offline could continue to get a similar level of leverage that it's been getting the last two quarters.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

You could see that again in Q3 and Q4. And the labor line, again, with some traffic growth, is probably in that flat to maybe a little potential for a little bit of leverage as we move into the back half of the year.

[Dennis Geiger, Equity Research - Restaurants at UBS Group]

Great. Thanks, Michael. Appreciate it.

[Operator]

Your next question is from Brian Harbour with Morgan Stanley.

[Kelly Merrill, Equity Research Associate at Morgan Stanley]

Hi. This is Kelly Merrill on for Brian. Thank you for taking our question. Obviously, saw some commodity inflation in the second quarter with the expectation of that continuing into 2H. Could you just provide some color on what's driving that?

[Kelly Merrill, Equity Research Associate at Morgan Stanley]

Obviously, beef, but is there anything else inflationary outside of that? And could there be any offsets to beef on the commodity side? And then on labor, is there anything to explore there just from an efficiency standpoint as you look to offset the commodity inflation? Thank you.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Yeah. Hi. It's Michael. On on it really is the beef that is driving, you know, that inflation in you know, for commodities, you know, with it being over 50% of our basket and there really not being another item that's large enough to make a serious impact on the overall numbers. I'd say the rest of the proteins maybe are slightly inflationary, getting a little bit of offset, maybe a little benefit on the produce area, but really all the pressure is coming from, you know, beef.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

And and on the labor side, you know, our our operators are always looking to run efficient, you know, restaurants. We aren't mandating any kind of scheduling, you know, you know, for them, and, you know, they do what is appropriate for their restaurants for staffing for the sales they have and the sales they want, you know, in the future. And so they're always looking at that to see if there is an opportunity, but I don't believe there are any levers to be pulled that will dramatically change our approach to labor.

[Kelly Merrill, Equity Research Associate at Morgan Stanley]

Thank you so much.

[Operator]

Your next question is from the line of Jim Saylor with Stephens.

[Jim Salera, Research Analyst at Stephens Inc]

Guys, good afternoon. Thanks for taking our question.

[Jim Salera, Research Analyst at Stephens Inc]

Wanted to dig in a little bit on Bubba's thirty three. You guys crossed 50 units, mainly concentrated in Texas. But just thoughts around how do we kind of continue to scale that and maybe regional attack plan and where we should anticipate to see new units in the strategy for engaging new guests as that brand becomes more and more visible?

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yes. Thanks, Jim. This is Jerry. Yes, we've like we said, we're in 16 states, and we're continuing to focus. Typically, in our program, we have a multiunit operator that lives in a certain area, and we try to build out that turf.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

And as we continue to expand and bring on more market partners and get into a new turf or or two demographic areas, we'll continue to grow. We're having good success on on the openings. We're kinda spread out over those 16 states, and and we'll probably keep that philosophy. But the big thing really has been getting stable on the leadership side, clearly focusing on our our menu and our execution. And we've always felt great about the look of the building and the energy that the restaurant provides between the entertainment and the sports and and and the food is is incredible.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

But as we continue to just settle in and really start executing at a high level, I think we'll continue to be able to develop it at a higher rate than we have in the in the last few years. So exciting times for sure.

[Jim Salera, Research Analyst at Stephens Inc]

Great. Thanks. I'll hop back in queue.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you.

[Operator]

Your next question is from Jeff Bernstein with Barclays.

[Anisha Datt, Equity Research AVP at Barclays Capital]

Hi. This is Anisha Dat on for Jeff Bernstein. I wanted to ask about value. How has the mix of value oriented sales evolved at both Texas Roadhouse and Bubba's compared to historical levels? And do you have plans to further emphasize value offerings in coming quarters, particularly to support lower income guests? Thank you.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yeah. I'll start with that. On on the value side, we've we've always believed that there's a lot of value built into our menu. And there's the country dinners and the and because we offer multiple cuts of beef, you can pick how much you wanna spend in from six ounces to 16 ounces. So I think from that side of it, we've got an early dine feature.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

All of those things have been in play for a very long time, and and we really see people picking and choosing how they wanna have their dining experience, and we like it that way. We want people to to spend as much money as they like or to be as much very conscious as they they wanna be too. And but you get a protein and two free sides and bread and butter and and all of the things that go with it, the peanuts. So it's just like I said, the value is really built into it. I think in the last year, we leaned into more on a five dollar beverage mix menu.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

So offering some value pint beer and and a value 10 ounce margarita, and and our mocktails are $5, which are really new to us. So there's a lot of things that are very reasonably priced with great quality, and I think that's what's always been the big driver for our success on the top line and and our operators executing at a high level and and acting like owners. They're they're all owners in the business, and they grow their sales. They control their costs, and they run a great business, and they get rewarded by driving that top line. So I hope that answered your question.

[Anisha Datt, Equity Research AVP at Barclays Capital]

Great. Thank you.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you.

[Operator]

Your next question is from the line of Peter Saleh with BTIG.

[Peter Saleh, MD - Restaurants at BTIG]

Great. Thanks for taking the question. Just couple of quick ones on my end. In the past, you guys have when we've seen beef inflation, sometimes you see a highly promotional retail environment, which kind of contributes to those elevated beef prices. Are you seeing any of that today?

[Peter Saleh, MD - Restaurants at BTIG]

Or is this mostly a function of the shorter or tighter supply? And then second on construction costs going forward, are you seeing any elevated costs or anything that's been dislocated, anything with tariffs that may be impacting the construction costs going forward? Thank you.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Hey, Peter. It's Michael. First on the beef comment, I think that certainly beef is being offered at retail, but I don't think the retailers are being irrational in their pricing. They are not using it as a loss leader to drive people into their stores, but they are marketing beef at a at a pretty high level. And what we've seen this year is the consumer willing to pay for that.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

So think that's really been part of what's driven the pressure is a consumer who's willing to keep spending and a supply that has been very tight.

[Keith Humpich, Interim CFO at Texas Roadhouse]

Yes. And then, Peter, this is Keith. On the construction side, we really aren't seeing any impact yet from tariffs. We had a lot of inventory for all of our builds for the year. So like I said, we just really haven't seen anything yet and we're still evaluating that to see how that's going to affect us going forward.

[Peter Saleh, MD - Restaurants at BTIG]

Thank you very much.

[Operator]

Your next question is from the line of Jeff Farmer with Gordon Haskett.

[Jeff farmer, Managing Director at Gordon Haskett Research Advisors]

Thanks. Just shifting gears a bit. I'm just looking for an update on the Roadhouse mobile app. Specifically, can you guys share the the number of active users, how quickly that's growing, and and how you guys have been leveraging that customer database? Thanks.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yeah. I I mean, obviously, it is out there. I don't know that we know the exact amount of users, but, I mean, there is a large percentage of folks that are obviously placing their to go orders, getting on our wait list, the efficiency of being able to really do that. We did upgrade our our mobile app to have more pictures when you are kinda ordering the side items. So we continue to look at the mobile app on an making it easier to navigate and place your order, and then we're executing at the restaurants at a much higher level on on how we grade, making sure we don't have missing items, that the order is ready when you get there.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

And all of those little details that really do matter when you're a a off premise, orderer and and the consistency of the of the product and the food. And, obviously, we believe the mobile app is is really widely used in a lot of ways, and it's been a a game changer in a lot of ways since early on coming out of the pandemic from that. And we continue to upgrade and and and find ways to make it easier for our guests to to get that order placed. And then, again, at the restaurant level, we're executing at a higher level than we ever have, and we're continuing to find ways to improve that experience, at the pickup window.

[Jeff farmer, Managing Director at Gordon Haskett Research Advisors]

Okay. Thank you. Thank you.

[Operator]

Your next question is from the line of Andrew Strozic with BMO Capital Markets.

[Andrew Strelzik, Restaurant Analyst at BMO Capital Markets]

Hey, thanks for taking the question. Obviously, lot of focus on the discussion of value in the industry these days. And I'm curious, where now are your price gaps against your competitive set versus either the last several years or historical levels? Is there anything that has changed? And also, can you remind us over the next several quarters and especially with the 1.7 coming in, in the fourth quarter where your price will trend? Thank you.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thanks, Andrew. I believe we still always look at where we're positioned. I think we look at ourselves first and make sure that we're comfortable with our pricing. And then we fact check a little bit against some of our competitors just to make sure that we feel comfortable with that gap. And and we it has changed over the years and and in different items for different reasons.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

But I think in general, we're very happy with the value that's built into the menu, the gap that we have between our competitors. And and some of that gap, is it really just about the dollar, or is it about the ability to execute? Is it the portion side? There's so many components that are built into value. And with getting a protein in two sides and free butter and bread and and peanuts and all of that, I think that's all built into the value component.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

And then what was you had the question on the Michael's got the other side of that question.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

The other side of the question was on our pricing and how much pricing we'll have in the menu. We'll have 2.3% pricing in the menu here for the third quarter, and then we'll have 0.9% that rolls off when the 17% rolls in. That'll leave us with a 3.1% pricing for the fourth quarter of this year and the 2026.

[Andrew Strelzik, Restaurant Analyst at BMO Capital Markets]

Great. Thank you very much.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you.

[Operator]

Your next question is from the line of Brian Vaccaro with Raymond James.

[Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial]

Hi. Thanks and good evening. I have a question on California, and

[Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial]

I think you said you were acquiring the remaining five franchise units in that state. And it's a state, I think, that's only around 20 Roadhouse units. I'm just curious how do you think about the growth opportunity there and if you're setting the table, so to speak, to maybe accelerating growth there over the next few years.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thanks, Brian. This is Jerry. Yeah. We're we're very excited. We obviously were able to get an acquisition done on the Northern California group.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

And now through some great partnership and hard work through both our company and our great franchise group down in in Southern California have been able to come to terms. We're very excited to have them in the family, and and that is a very special unit to us. It's obviously that group has been with our organization for a very, very long time, and we're really proud of that partnership. And it's a little bittersweet, but we are happy for Steve and his family and and happy for the Roadhouse family. And as we look at the owning all the stores in California and our growth strategy, we are meeting as a group and really discussing from a real estate team to an operations team on how do we look at California.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

We know there's a lot of folks there that that love great food, and and we've had a lot of success there with our 19 stores open and where we'll continue to see our presence in California grow. We we believe that people of California are are loving legendary food and high level hospitality, and that's what Texas Roadhouse provides.

[Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial]

Mhmm. Absolutely. Alright. Well, thank you.

[Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial]

And then, Michael, just a quick follow-up. What's the reasonable expectation for G and A spend this year?

[Keith Humpich, Interim CFO at Texas Roadhouse]

Oh, yeah. This is Keith. I'll take that one. Yeah. On G and A, I'd say for the rest of the year, you can expect us to get some leverage, I'd say, especially in the fourth quarter as we're lapping the fifty third week.

[Keith Humpich, Interim CFO at Texas Roadhouse]

And then just one thing to mention with us purchasing the support center on an annual basis, we're going be saving about $2,500,000 in rent. And so you'll see a little a prorated benefit of that for this year also in the back half.

[Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial]

Very helpful. Thank you.

[Operator]

Your next question is from the line of Jim Sanderson with Northcoast Research.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

Hey, thanks for the question. I was hoping you could talk a little bit more about how you expect corporate store margin to evolve as you start to look more closely at developing Bubba's? And then how you foresee mix of company versus franchised as you target that 200 unit growth goal?

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Yeah. Hey, Jim. It's Michael. I guess I'll I mean, I'll take the second part first. With that 200, you know, number, I assume you this is a question about Bubba's.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Bubba's is all your company you know, plan to be company development at this time. So that is that is all company. And really, most of our growth offered for Texas Roadhouse and Bubba's domestically is company growth. Jaggers will be a mix of company and franchise and international is a franchise business. We expect Bubba's over time will deliver similar margins to a Texas Roadhouse.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Now obviously, Roadhouse sales are a little bit higher, which helps on the margin side. But Bubba's is proving that it can do a very strong performance as well. So over time, we would expect to continue to drive strong margins out of both brands, all three brands.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

All right. Right. Thank you very much.

[Operator]

Your next question is from the line of Gregory Francfort with Guggenheim.

[Gregory Francfort, MD - Senior Restaurant Analyst at Guggenheim Partners]

I know it's a bit of a tongue twister. I blame my parents. The question I had, Jerry, is margin profile. And I know you guys have said it for a long time that 17% to 18% is the right place to be. Kind of but maybe between the beef cycles in 2024, you got kind of just over 17% and I guess probably headed lower with this level of inflation. As I look back five or six years, I think your AUVs are up 10 to 15 points more than your development costs are up. And so I wonder if that seventeen to eighteen is going to be 16.5 to 17.5 or you still think seventeen to eighteen is the right place to be? Thanks.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yes. And thank you. And we do believe that internally that obviously, the world has to cooperate too, and and the beef cycle does have to turn for us. But, you know, I I wanna always challenge ourselves to be a strong balance when we're talking about financial results. And and for our organization to believe that over the years, in thirty two years or or so, you know, that that's a great spot for us to be.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

But, again, things have to work out. And so we are not changing that as of right now. We did get our chin over the bar last year, and we were very happy with that. And it had been growing, and the momentum had been building up to that point. And, obviously, we're fighting some inflation this year, which we, thankfully didn't have as much of last year, and and that helped us through there.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

But I I believe that as of right now, we're gonna continue to focus on that top line and do everything we can to control that cost and be very balanced when it comes to fiscal responsibility for our roadies, our guests, and for our shareholders, and and we'll we'll continue. If if we ever did feel like that was unreasonable, we would have some internal discussions. But as of now, we still believe that we can get our chin over that bar at some point.

[Gregory Francfort, MD - Senior Restaurant Analyst at Guggenheim Partners]

Thank you very much.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you.

[Operator]

Your next question is from Jake Bartlett with Truist Securities.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Great. Thanks for taking the question. I had one and then I had a follow-up. The question is about your off premise sales and this might build on the answer about your app. But over the last four quarters, off premise sales for operating week have been growing much faster than on premise and has been a driver of your comps.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

The question is what is driving that? Is it just really just spillover and people kind of peeling out of the line and taking it home? Or is it something operationally that you've done? Is it the app? And then, I guess, most importantly, how sustainable do you think that is?

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yeah. Jake, this is Jerry. Thanks for the question. I truly believe it's a combination of all those things. The convenience of us putting in windows for folks to be able to walk up and and get their order, the mobile app, the easier that it is to order and and navigate through that app.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

We're seeing a more completion rate through that. You know? And then the missing items is really the biggest thing, and and we've just gotten better at it. We've focused on it. We've got ways of of it's really the operators, in my opinion, that are executing at a very high level.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

The guest is rewarding us because when they get home, they have their items. They're opening our food in their dining room table with their families, and they've got everything that they need. And we've heard it over and over again. If if you focus on something, you put energy on it, then the result improves. And I think that's what we're seeing from that standpoint.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

So it is exciting to see it continuing to grow. But I really believe it's the app, it's the ease of pickup and it's the operators delivering a great experience to our consumer.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Great. Great. And the follow-up was on building on your comments, and I just want you to kind of maybe say it again, I just want to make sure I'm hearing it right. But the idea that as you increase the number of Bubba's, you also talked about some company owned Jaggers in '26. You've been very consistent about kind of about keeping the total number of units about 30 because of operational limitations or just making sure you execute very well.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Is that changing? I mean it seems like you have the capacity, you've gotten bigger, you could. I just want to make sure I'm hearing you right so we didn't get over my skis as we look at your ability of maybe sustain the pace of roadhouse openings and then add to that with these other concepts.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yeah, Jake. I am encouraged by our ability to get that approximately 30. I think you will see us a little on the high side of that the next couple of years. The pipeline for Roadhouse is still strong. We are pressing on the gas with Bubba's a little bit, and you'll see, as we mentioned, Jaggers coming into the fold also.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

So I really want to get into the next year and we have that confident before I move that number up. But we are clearly starting to tip our head over the skis in that direction.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

That's great to hear. Thank you. Thank you.

[Operator]

Your next question is from the line of Jon Tower with Citigroup. Jon, your line is open.

[Karen Holthouse, Vice President at Citigroup]

Hi. This is Karen Holthouse on for Jon. Piggybacking a little bit on the off premise questions. You know, I understand there's you had state the argument state doesn't travel well and some things like that. But would you consider, you know, doing kind of doing delivery on a unit by unit basis?

[Karen Holthouse, Vice President at Citigroup]

You know, if managing partners were asking for it, you know, was it maybe in unit in a denser marketplace? Like, are there tech you know, tech or back of house limitations to doing that?

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Yeah. Thanks for the question. We, you know, we have resisted the temptation of going that route as of now. We do do it at the Jagger's concept and at Bubba's, and we have one store that's in a very urban market in in New Rochelle, New York that we do delivery at. And then I will continue to have conversations with operators.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

But as of right now, you know, I think we're holding the line on not doing delivery and the rest of the concept. Unless there's a real reason to do it individually, we will have some conversations. But as of right now, we we have resisted going that route. We're focused on providing our guests a great experience in the dining room and through our off premise, through our pickup system, and and through the app and and all of that. That's where we'd really like to continue to focus as of right now.

[Karen Holthouse, Vice President at Citigroup]

Great. Thank you.

[Operator]

Your next question is from the line of Zachary Fadem with Wells Fargo.

[Zachary Fadem, MD and Senior Equity Analyst - Retail Hardlines, Broadlines & Restaurants at Wells Fargo]

Hey, good afternoon. On the entree mix shifting more to beef, looks like it's been about a 30 basis point headwind on the food and beverage line, assuming that held in Q2. Curious if you view this more cyclical or a structural phenomenon? And as you think about the impact in the second half, is the 30 bps still the right impact or would you expect it to step down?

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Zach, it's Michael. And it was around 30 basis points in the first quarter. It probably stepped down to about 25 basis points in the second quarter. Maybe it holds in that 20% to 25% level in the third quarter would be my expectation. And then I think it would step down a little bit more in the fourth quarter as we lap it.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

So I kind of view it as a one year change in behavior and whether that means it'll change back and we will see something else occur, we'll have to wait and see on that. But I do think what's driving a lot of it is the value on the menu and the steak category and the guests appreciating the price they can pay with Texas Roadhouse for a steak. That helps our top line growth, but you see a little bit more pressure right now on the COGS line from that. But as a steakhouse, we love seeing people wanting to try our steaks. We think that is great for our long term success.

[Zachary Fadem, MD and Senior Equity Analyst - Retail Hardlines, Broadlines & Restaurants at Wells Fargo]

Thanks for the time.

[Operator]

Your next question is from Todd Brooks with Benchmark Company.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Hey, thanks. I'm going to keep the off premise train rolling here. So it looks like off premise has been mixing in kind of that mid 13% range recently. I think there was one point as the the rollout of KDS was happening, and it brings that additional efficiency and and calm to the kitchen that there might have been a theory that more off premise demand demand could be met out of the kitchens and that managers would be more comfortable going after and servicing that demand. Has that been the case?

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Is that still on the common? If you look at maybe your best quartile of stores with off premise, how high is their mix versus the 13% chain wide? Thanks.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Hey, Todd. This is Jerry. Yeah. I I believe it is definitely one of the components probably helping us be able to to have a little more capacity through the to go business. So I think you're right.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

We're 80% done of having all the concept on the digital kitchen at this point. Then as we get finished this year and we continue to learn from each other about how we can utilize that technology to help us bigger, faster, and stronger and improve our guest experience as well as our roadie experience in the back of the house, We believe that the digital kitchen will have some components that will will play into our ability to be faster and to be focused on taking great care of our guests. So I do believe that it's a component of of that increase for sure.

[Michael Bailen, Senior Director & Head - IR and Financial Analysis at Texas Roadhouse]

Yeah. And Todd, there are definitely restaurants that do higher levels of to go on a dollar basis and a percentage basis. Don't have all those numbers at our fingertips, but we definitely have stores that are examples to others that you can do even more to go in your restaurant. So we think there still is a lot of opportunity.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Okay. Thank you both.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you.

[Operator]

At this time, there are no further audio questions. I will now hand today's call over to Gerry Morgan for closing remarks.

[Gerald Morgan, CEO & Director at Texas Roadhouse]

Thank you all. I want to close with a special shout out to our Jaggers team in Lexington, Kentucky, which represents our eight hundredth system wide restaurant. Great job on delivering high level hospitality and creating raving fans. Let's go, TXRH. Good night, y'all.

[Operator]

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Participants

Executives

• Michael Bailen, Senior Director & Head - IR and Financial Analysis
• Gerald Morgan, CEO & Director
• Keith Humpich, Interim CFO

Analysts

• Sara Senatore, Senior Research Analyst at Bank of America
• David Palmer, Senior MD at Evercore
• David Tarantino, Director - Research & Senior Research Analyst at Robert W. Baird & Co
• Lauren Silberman, Director at Deutsche Bank
• Dennis Geiger, Equity Research - Restaurants at UBS Group
• Kelly Merrill, Equity Research Associate at Morgan Stanley
• Jim Salera, Research Analyst at Stephens Inc
• Anisha Datt, Equity Research AVP at Barclays Capital
• Peter Saleh, MD - Restaurants at BTIG
• Jeff farmer, Managing Director at Gordon Haskett Research Advisors
• Andrew Strelzik, Restaurant Analyst at BMO Capital Markets
• Brian Vaccaro, Managing Director - Equity Research at Raymond James Financial
• Jim Sanderson, MD & Research Analyst at Northcoast Research
• Gregory Francfort, MD - Senior Restaurant Analyst at Guggenheim Partners
• Jake Bartlett, Senior Equity Research Analyst at Truist Securities
• Karen Holthouse, Vice President at Citigroup
• Zachary Fadem, MD and Senior Equity Analyst - Retail Hardlines, Broadlines & Restaurants at Wells Fargo
• Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC