Texas Roadhouse expects to hold onto to-go sales increasesTexas Roadhouse expects to hold onto to-go sales increases

Off-premise sales continued to make up 20% to 25% of Texas Roadhouse Inc.’s revenues into the coronavirus-impacted third quarter, and CEO Kent Taylor expects the casual-dining brand to hold onto most of those as dine-in capacity returns.

The Louisville, Ky.-based casual-dining brand said to-go as a percentage of the average weekly sales was 23.3% in the third quarter ended Sept. 29, diminishing monthly as COVID-19 capacity restrictions eased. To-go sales percentages were 26.2% in July, 23.6% in August and 21.1% in September.

For the October period, some-store sales at company restaurants increased 0.8%, average weekly sales at all company restaurants were $98,797 and to-go sales as a percentage of average weekly sales were 20%.

“Consumer demand to dine inside our restaurants is strong, and we are pleased to be holding onto most of our to-go sales as well,” said Kent Taylor, founder and CEO of Texas Roadhouse, during an earnings call Wednesday.

Texas Roadhouse’s same-store sales came close in the third quarter to returning to sales levels of last year, declining 13% in July, 6.6% in August and 0.5% in September. For the quarter, same-store sales fell 6.3% at domestic company restaurants and 9.6% at domestic franchise units.

“Beginning in mid-March, we all had the choice to either accept the consequences of our dining rooms shutting down or adjust and pivot and find new ways to serve our guests,” Taylor said. “It has never been our style to sit back and be satisfied with a business-as-usual approach and we weren't going to sit back as we faced our biggest challenge ever, except for maybe when three of the first five restaurants failed, but we won't go there right now.”

Some Texas Roadhouse units opened outdoor dining areas while others converted waiting areas, or “Corrals,” into to-go and curbside pickup areas. The company also updated its smartphone app for Texas Roadhouse and Bubba’s 33 to accept gift cards as payment.

“We are introducing a new two-way texting system for our to-go/curbside guests to further improve the pickup process, while also potentially improving labor efficiency,” Taylor said. “We're even testing drive-thru windows in a few Texas Roadhouses.”

Andy Barish, an analyst with Jeffries, in a research note said Texas Roadhouse has been resourceful.

“Although still faced with dine-in capacity restrictions at two-thirds of its restaurants,” Barish wrote, “[Texas Roadhouse] has been as resourceful as any casual-dining operator as its team has shown great flexibility to handle consumer demand and drive recent AUVs back to $100,000/week, nearly in line with year-ago levels.”

Taylor said the company plans to expand its two-unit Jaggers fast-casual brand, which saw a “significant increase in sales and margin performance over the past six months.” Jaggers is a two-unit fast-casual restaurant that Texas Roadhouse debuted in 2014 near Indianapolis, Ind.

“Later this year, we will be opening our third Jaggers location with a new prototype in Louisville, Ky.,” Taylor said. “We will continue to evaluate our options for Jaggers, which could include a franchise model to allow for faster growth.”

To maintain restaurant margins, Taylor said Texas Roadhouse is rolling out a menu-price increase of about 1% this week.

For the third quarter ended Sept. 29, Texas Roadhouse’s net income was down 25.5% to $29.2 million, or 42 cents a share, from $36.5 million, or 52 cents a share, in the same period a year ago. Revenues were down 3%, to $631.2 million, from $650.5 million in the prior-year quarter.

Texas Roadhouse opened five company restaurants, including one Bubba’s 33, and one international franchise restaurant in the quarter. Three international franchise locations remain temporarily closed.

“Unit development is back on the menu,” Barish noted. “With 13 openings to date, [Texas Roadhouse] now has up to eight unit openings expected by end of year including one Jaggers.” The company expects 30 new restaurants openings in 2021.

Texas Roadhouse, founded in 1993, has grown to more than 620 restaurants systemwide, including Bubba’s 33 and Jagger’s, in 49 states and 10 other countries.

Contact Ron Ruggless at [email protected]

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