Executives say 20-unit offshoot is “work in progress”
Texas Roadhouse Inc. is continuing to work on its five-year-old sports-bar-themed Bubba’s 33 concept, evaluating size, operations and profitability while continuing to add units, executives said this week.
The Louisville, Ky.-based casual-dining company said its second brand, which ended the fourth quarter with 20 units, will open seven new restaurants this year. Some of those had been scheduled for 2017, but the company is continuing to hone the concept and pushed development into this year.
“Our unit economics on Bubba's are still very much a work in progress,” said Scott Colosi, Texas Roadhouse president, in a fourth-quarter earnings call Tuesday. “We continue to tweak our prototype and, similar to Roadhouse, are very focused on the strength of our day-to-day execution.”
The company has 527 units of the Texas Roadhouse brand and introduced the Bubba’s 33 sports concept in 2013. Bubba’s was a Nation’s Restaurant News Hot Concept in 2017.
“Essentially Bubba's has just been pretty mixed and continues to be pretty mixed bag,” Colosi said. “We've got some restaurants that are doing exceptionally well, we've got others that aren't doing so well, and we are still trying to sort out some of the causes and factors of that.”
Colosi said turnover and location might be a factor in the mixed results.
“Some of it may be just we're early in growing the concept and getting more brand awareness of the concept, just like Texas Roadhouse was 25 years ago,” he said. “We didn't just start out like gangbusters.”
Operationally, the company is looking at everything, Colosi said, from the number of televisions to the kitchen size and building footprint. Generally, Bubba’s units cover about 8,400 square feet.
“Our average development cost in 2017 was a little bit lower than 2016, albeit we opened fewer restaurants,” Colosi said. “So we feel like we're making a little bit of progress there. We'll see how 2018 turns out. We do have an even little smaller prototype — a little bit smaller — and that one is scheduled to open near the end of this year.”
Colosi said the company is also evaluating the menu, the pricing and the hours of operation for the newer brand.
“We still have enough confidence in what the guest is telling us about how much they value the experience at Bubba's to push us to keep going,” he said.
Texas Roadhouse opened four Bubba’s units in 2017, fewer than it had planned, and pushed scheduled units to be among the seven it plans to open this year, Colosi noted.
“I can tell you that for 2019 it's certainly up in the air how many, we'll probably do at least a few, and then depending upon how much momentum we've got, we may opt to do a few more,” he said. “Time will tell.”
For the fourth quarter ended Dec. 26, Texas Roadhouse reported net income was up 38.1 percent to $28.6 million, or 40 cents a share, from $20.7 million, or 29 cents a share, in the same period last year. Revenue was up 12.4 percent, to $545.1 million, from the prior-year quarter.
Same-store sales increased 5.8 percent at company restaurants and rose 4.7 percent at domestic franchise restaurants. For 2018 year to date, as of this week, Texas Roadhouse said same-store sales were up 4.5 percent at company restaurants and up 4.2 percent at domestic franchised units. The company owned 440 domestic Texas Roadhouse restaurants, franchised 70 units in the United States and has 17 international units.
Kent Taylor, Texas Roadhouse CEO, said on the earnings call that the company would not be “chasing” delivery opportunities.
With about 6 percent of sales to-go, the company is looking at making its packaging more environmentally friendly, he said, and looking at containers to keep food hotter.
“We just want to make sure that our experience when people do come in and get to-go is the best that it can be,” he said.
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