Q4 2020 Texas Roadhouse Inc Earnings Call
Good evening and welcome to the Texas Roadhouse for Quanta.
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 of question and answer session. At the time of if you would like to ask the question. Please press Star then the number one on the telephone keep at should anyone in need of expense at any time during the.
The conference. Please press Star Zero, and an operator will assist you I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse, you'll need the.
Nick on for example.
Thank you Annie and good evening, everyone by now you should have access to our earnings release for the fourth quarter ended December 29th of 2020 at May also be found on our website at Texas Roadhouse Dot com in the investors section before we begin our formal remarks I need to remind everyone. The part of our discussion.
And today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the FTC. These documents provide a more detailed discussion of the relevant factors that could cause actual.
All of us to differ materially from those forward looking statements, including factors related to the COVID-19 outbreak.
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.
On the call with me today is Kent, Taylor, founder and Chief Executive Officer of Texas, Roadhouse, and Gerry Morgan President of Texas Roadhouse. Following our remarks, we will open the call for questions now I'd like to turn the call over to Ken.
Thanks, Tania and thanks, everyone for joining us the challenges we face in 2020 of our unlike any other at I'm very proud of how our operators worked through the uncertainty the fourth quarter was another example of how we must stay on our toes ready for the quick changes this pandemic throws our way at.
After a good start in October our top and bottom line results were impacted by the re closure of approximately 90 of our dining rooms, along with increased capacity restrictions in many other of our restaurant starting in mid November more importantly, most of these dining rooms have reopened and as of today over 98 per cent of our company.
The owned restaurants at some level of dining room capacity in place.
Sales are benefiting from reopening and the easing of restrictions as weekly sales and limited capacity restaurants have averaged over $108000 for the first seven weeks of 'twenty and 'twenty one.
The last of the last 11 months of shown us that Texas Roadhouse brand as strong as ever end consumer demand. The dine inside of restaurants remains high and the addition of art to go sales continued to be a big part of our restaurant.
Our restaurant business.
For restaurants with dining rooms opened to go sale of average just over 225000 per week or approximately <unk> 23 per cent of sales during the first seven weeks of 2021.
Our expectation is that to go sales will remains a significantly larger part of our business. After capacity restrictions are lifted and our dining rooms fill up again however.
However, we are simply waiting for everything to return of normal or we are not I'm sorry, we are in growth mode. In 2020, we opened 22, new company owned restaurants across our three concepts at our franchise partners opened four restaurants, including two of international locations in Korea and Taiwan.
In addition, we signed several new development agreements in the back half of 2020 for Korea, Brazil, and Puerto Rico, which is providing a pipeline of locations for 'twenty 'twenty, one and beyond our 2021 development plan at shaping up nicely and we plan to open between 25, and 30 company restaurants, this year, including <unk>.
As many as five Bubbas 33 restaurants in one jaggers restaurant.
Speaking of Badger's, our newest location opened in early December and continues to perform the way above our expectations. We have a few more company owned locations already in the works for 2022, and we will continue to explore potential franchise opportunities.
Our retail business continues to expand with two recently signed licensing agreements the.
First is for a bottle of version of our Marguerite of mix. While the second is for a canned cocktails seltzer that will be offered in a variety of Texas Roadhouse branded Margarita flavors.
Both are expected to be end retail locations sometime during 2021. These initiatives together with our butcher shop business are low risk and requires minimal investment we believe over time, they have the potential to generate strong returns.
We are excited about our growth opportunities. However, we remain focused on the operational challenges, we continue to face due to the pandemic.
Just like in 2020 of the safety and well being of our guests and employees remains our top priority of this year. We are also feeling the impacts of inflationary pressures throughout the business.
From commodities to wage rates for the cost of supplies and food packaging over the coming weeks, we will have conversations with the operators about menu pricing options and based on their feedback we could take some additional menu pricing as early as the middle of the second quarter.
And we will be keeping a close eye on federal minimum and tip wage developments of any increases would factor into our pricing decision.
The business of certainly back not back to normal we are encouraged by the direction of the business and our current financial position, we are committed to making the right decisions for the long term benefit of the company, making the right decisions for the existing business. While also focusing on the future growth requires strong leadership that is.
I am pleased about the recent addition of Gerry Morgan as President of Texas Roadhouse, Jerry shares My vision and has the same passion that our entire management team has his experience and perspective will be of Great addition to our leadership team for Gerry what you'd give us some of your thoughts man.
Thanks, Kent I appreciate that this company has been a big part of my life starting back at 1997, when I joined as the managing partner at the first Texas location and Grand Prairie I'm excited and honored to serve as the president of this amazing company that can't created the 19 nineties.
Three.
Over the last several weeks I have been spending time with each and every person in our support center to understand ways I can better serve and set them up for success as I become involved the new areas of the business I look forward to working with Kent and our leadership team to build upon our success.
And before I pass it back the tent I would like to give a shout out to all of our folks dealing with the weather issues across the country. We are here if you need us. Thank you for all of that you do.
Are you doing out there and stay safe get back to you.
Thanks, Jerry I'll look forward of working closely with you in your new role.
With your guidance at the support center as well as partnering with Doug Thompson, our CFO and our strong regional partners on restaurant operations. All he I'll have even more time to focus on new ideas. For example, I've had a lot of fun on the past six months working on new retail initiatives and fine tuning jag.
There's which it sets us up for future growth over the next decade, we've been very successful in the full service world. So why not retail and fast food too I want to end with a big Thank you to our operators and support Center staff 2020 was a year filled with challenges and you all did not hesitate.
And your efforts to tackle on overcome them without your efforts, Texas Roadhouse would not be as strong as it is and ready to get back on track in 'twenty 'twenty, one now Tanya take it away.
Thanks Curt.
Nine 5% decline in average weekly sales and at 3% decline in store weeks.
The 7.6 per cent negative impact of lapping the extra week in the fourth quarter of 2019.
Comparable restaurant sales for the fourth quarter declined eight 9% by month comparable sales increased <unk>, 8% day.
Six 3% and decreased 18, 2% for October November and December periods, respectively.
Comparable sales for the for seven weeks of 'twenty 'twenty, one of our down only 2% at more dining rooms reopened in January and February.
The goal it sounds accounted for slightly over $20000 per week or approximately 21% of sales at our limited capacity restaurants in the fourth quarter and at Cagny luncheon to go sales of ground to over 25000 per week per restaurant and approximately 23% of sales at a limited capacity restaurants during the first seven weeks of.
2021.
This growth is great to see given sales volumes inside our dining rooms are also increasing.
And as we think about what sales could look like in the future. We are encouraged to see that our higher capacity restaurants, those who can use 75 per cent or more of their dining room seats at average slightly under 23000 per week of to go sales. So far this year.
This represents represents approximately 20% of their total sales. So to date, we are seeing minimal drop off in to go sales as indoor dining capacity increases.
The restaurant margin as a percentage of total sales decreased 300 at an 80 basis points. The 13, 3% with approximately 60 basis points of the decline due to overlapping the benefit of the extra week in the fourth quarter of 2019 margins were below our initial mid teen expectation because of increased dining room closures in November.
We're at in December, which like the lower sales volume in the larger than expected percentage of sales coming from lower margin to go of transactions.
Food and beverage costs as a percentage of total sales were essentially flat versus last year remaining at 32, 4% in the fourth quarter commodity inflation of approximately 1.5% and the impact of guests shifting to less profitable on chase was offset by the benefit of menu pricing and a higher overall guest check.
For 'twenty and 'twenty, one we currently expect commodity inflation of approximately 3% driven by higher prices on beef pork and oil based products.
The labor as a percentage of total sales increased 213 basis points, the 35.2% in the fourth quarter labor dollars per store week for down three five per cent compared to the prior year period. The decrease includes an $8 six per cent reduction in hours, partially offset by wage and other inflation.
At four 6% and.
In addition, one time items at a 0.5 per cent negative impact on labor dollars per store week. This was driven by a 1.6 million dollar insurance reserve charge this quarter compared to a $1 million charge last year. It also includes point $5 million of cost incurred this quarter for relief pay and <unk>.
Enhance the benefits for hourly restaurant employees net of employee retention payroll tax credits for.
Finally on other operating cost as a percentage of total sales was 16, 9%, which was 134 basis points higher than last year. Other operating costs were negatively impacted by lower sales volume as well as the added expense at the purchasing PPE to go supplies and other COVID-19 related costs.
Moving below restaurant margin G&A costs for the quarter decreased 7.2 million as compared to the prior year period. The primary drivers of the decrease were at $4 1 million reduction of cash and equity compensation and of 2.2 million dollar reduction in travel and meeting expense. In addition, the benefit from overlapping the extra.
The expense of the extra week from the fourth quarter of 2019 was $2 2 million.
With regards to cash flow, we ended the fourth quarter with $363 million of cash which is at 35 million from the end of the third quarter. The increase was driven by $84 million of cash flow from operations with most of the offset coming from 37 million of capital expenditures and the acquisition of two franchise locations.
Some of the schedule of new store openings for 'twenty and 'twenty. One we are projecting $210 million to $220 million of Capex for full year 2021.
We expect these new stores along with the 22, we opened in 2020 will lead to store week growth of 4% to 5% in 2021.
These expectations assume we continue to see positive sales momentum from the continued easing of dining room restrictions for.
For 'twenty, one 'twenty 'twenty, one we believe 15% to 16% restaurant margins are attainable, given the current sales and cost environment.
Margin should continue to improve our sales growth, but will remain pressured from lower dining room sales wage rate inflation and ongoing cost pressures related to supplies.
The timing of of returned to pre pandemic restaurant margin will depend on the lifting of capacity restrictions the mix of dining room in to go sales and the easing of Covid related costs.
Finally, I'll conclude our prepared remarks by reiterating earlier comments on the strength of our business and financial position with the net cash position of $123 million and continued improvement of cash flow generation. We believe we will be well positioned to returns of our usual uses of free cash flow later this year.
Operator, please open the lines for questions.
Thank you ma'am, ladies and gentlemen answer of your mind day to ask the question you will need to press the star one on your telephone keypad again that is star one on your telephone keypad.
We kind of our first question from the line of Keith Bachman from tourists Securities. Your line is open you may ask your question.
Great. Thanks for taking the question. So my first is just to just to understand the the first seven weeks of the quarter.
At the same store sales were down 2%, but January they were down less than just confirm the is that is that related to weather or are there any other factors. There then.
That would of had a deceleration of in the last three weeks.
Sure Hey, take this is tonya on.
Yeah, when we're looking at the sales what you had going on and on.
In January we got some benefit from the calendar shift related to new year's Eve and we think that was probably about a 1.3 per cent benefit to January.
And then on the seven weeks, you, obviously get a little bit less benefit there, but also what comes into play on is Valentine's day, and weather, which are both the negative impact on on those tails for the three weeks of February.
We estimate that on a total of seven week number that's probably about you know what.
1113 per cent of a negative impact on the total seven weeks.
Great that's helpful and you know what.
You know its obviously surprising and encouraging to see the the in store dining in increasing.
As we start 2021 as well as the off premise.
How do you how do you square that I mean people are coming more for off premise as they come more for for dine in.
Anything that you're doing to kind of promote at or just maybe help.
Help explain why why do you think that's happening.
Hey, Jerry you just came from operations once you give him a little color on how we kick ass on the go.
Yeah. Thanks, Ken I would just say that number one as people get more confidence and get out and about its going to drive our to go and our dining room sales and as the capacities get lifted you know people still want our amazing food and they want to experience that service and end up we feel.
People are anxious to be served so the convenience of the windows that we've installed in our corrals and at our outdoor waiting areas makes it a lot easier and and we've done some things from a technology standpoint, with the two way texting to be able to communicate to our guests to make it very easy for them to.
Check in and then to be.
Communicated with when their food is ready for them to come pick it up so many many things will be driving not only the experience, but the ease of the pick up.
Great and then last question you told you you you mentioned the the guidance of 15% to 16% restaurant level margins.
That's assuming kind of having a negative impact from from sales. So it seems like you're barely having a net negative impact now.
I mean do you.
If the sales recover to maybe 2019 levels and what what level of margins do you think you could achieve at at those levels just trying to.
Gage, if theres any kind of temporary or or costs that you think youre going to bear in 'twenty, one that the degree of unique to 'twenty one.
No I don't think Theres anything I would point out that's different I think of lot of it just depends on the timing in 'twenty, one as far as when we see that those restrictions get lifted him in the dining room.
Because it really comes down to increasing sales end and then as you do that it comes down to the mix of those sales. So you know if you see a return in the dining room to historic levels or higher and we hold on to those to go sales, that's where you can really see those margins get back to normal and you know potentially even.
On a little beyond if dining room sales don't go get back to those historical levels, but we continue to see the high level of to go on the other end of the spectrum, that's where there's a little more pressure on those margins because of that to go transaction is a little bit lots of profitable.
So that's kind of the way we see at we expect to continue to have costs related to COVID-19 throughout 'twenty 'twenty. One we expect to have the PPE costs supplies costs of different things like that continue to be part of the business and don't know when maybe those you know we potentially see those go away.
I appreciate it thank you.
Uh huh.
Okay.
Thank you we do have another question from the line of of Dennis <unk> from UBS. Your line is open.
Great. Thanks for the question of first off I was just wondering if you could speak to kind of the the G&A of <unk>.
Spend in the opportunity for investment maybe just looking out over the next couple of years, you know, particularly as as digital becomes a bigger focus in some other opportunities that you folks just commented on just wondering if you could kind of help frame up.
What that might look like or at least directionally or any kind of commentary on on some of that investment behind the behind some of these initiatives.
Sure. Yeah, you know we will continue to see those investments you know I think over time at some.
Some of that could impact DNA of a lot depends on you know what what we're investing in if at software end hard assets versus you know some other thing services and things like that but on definitely wanted to stay on top of the technology and that that perhaps has been a bit of a silver lining to all of the says that we have moved pretty quickly on some technology.
Key enhancements to the business with the higher to go volumes and things like that that we've seen so I'm expecting that we continue to see that happening just from an overall perspective on G&A.
We did see G&A down quite a bit in 2020, just due to the situation. We were facing you know lower travel meetings and a big piece of it as I mentioned is on equity and cash compensation. So a lot of that will come back into play in 2021, and as you kind of looking at what 'twenty, one could be I mean, our goal is to say Gee.
On a.
Spend at stays around you know the 5% of revenue Mark am I anticipate that it will be higher than 2019, G&A just because you do have on that equity compensation piece of it that's driven by share price.
So it's likely that we'll see that pop and you know be at that higher in 'twenty one than it was in 2019 outside of that you know 'twenty. One we'll have additional costs coming back into the model, whether it's related to the conference.
On a lot of our compensation is based on performance. So that was down pretty significantly in 20 of those with that costly coming back into play in 'twenty one.
Those are just a few things that I can think of off the top of my head done at that I would call out.
For sure.
That's super.
The Super helpful. And then maybe on just just one more if I could on just kind of of the upside framework to the 17 to 18 and I think you gave a lot of detail on framed it well.
And talking about the puts and takes but I guess just going back to the point on if the dining rooms fully come back in the off Prem remains elevated you know maybe some upside to the historical margin of over time does that contemplate.
Improving the off Prem margins or where is that is that not even part of the consideration there and just based on the the sales piece of it you kind of frame you could you could see upside to that 17 to 18 potentially from from that scenario of alone if that makes sense.
Yeah, It really doesn't build anything in specifically for improving the profitability, but that's certainly something we're working on on you know speaking to the digital App and we moved those are apps to of different platform in October we've seen more digital downloads of our apps at both of that is in Texas Roadhouse, and we're seeing a bigger percentage.
Signage of digital and online orders as a percentage of our total to go sales. So you know I think on you know we've been talking quite a bit of just about what does that to go transaction look like how can we make it more efficient how do we help the operators with that higher level of to go volume.
So it's definitely something we're talking about but not necessarily built in I think that would be a little bit of the crazy on the upside when I'm talking about 17% margins are maybe a little bit higher.
Hey at this rate.
Remember we were doing.
Seven 8000, a year ago.
Before the the Covid experience end to go sales and now we're averaging over 23000 with dining rooms typically.
Less than half full inside too when you think of you know later this summer hopefully the.
There's a lot of people that are ordering to go now that maybe werent such big to go customers before or do not want to come inside.
So as we are able to see more seats. Inside then obviously you can make up the math of whatever you think that might be up for sales.
Got it thank you.
Yeah.
Thank you we do have another question from the line of Peter sang Lee from B T. I G. Your line is open.
Great. Thanks for taking the question Tonya can you just give us a sense on on the commodity inflation I know you talked about about 3%.
This year give us a sense on the cadence on how that plays out through the year.
Sure Peter Yeah at you know, it's going to be a little tough to tell where a little more locked on the front end of the year than we are on the back so there's probably less of visibility in the back half of the year by the I'll tell you at it's pretty evenly spread throughout the year, obviously Q2 and Q3 last year of 22.
'twenty, we had higher levels of inflation. So it would go to say that you know that could mean, some some lower level of inflation in in 'twenty one.
But outside of that nothing that I would call out from a cadence perspective that would be significant.
Great and then all of it sounded like you're expecting some more labor inflation. This year of can you just in the context of the overall environment with high unemployment.
And on the level of pricing that you guys may be taken at just talk about the labor environment on what you guys are seeing today and how much inflation of you really expect on the labor line in 'twenty and 'twenty one.
Yeah, it's really tough to say I mean, you know obviously this year you know we continue to see some decent inflation and some of that was due to changes we made them entering into the pandemic in March when we went to that high level of to go business with dining room shut down we made the decision to take those employ.
He's working the to go to min wage to minimum wage for its just tipped wage. So we've kept that in place of our mm 302020 will continue to you know to evaluate that but that's a good piece of why we're seeing labor higher in 2020 and still in 'twenty. One still expect you know your normal state mandated increases.
Is we think you know that could drive about one 5% or so of inflation in 'twenty one.
And still expect market pressure in just a little bit more difficult at the hiring environment that we're seeing today and whether that's going to be due to you know just the COVID-19 impact of folks maybe you know, it's still a little nervous about coming out to work on whatever might be we're just anticipating that the staffing that you know it still stays at pretty challenge.
<unk> you know thing to do in in 'twenty. One so that's something we're definitely focused on but I think you'll see growth in our just get back to normal you know continue to see growth in hours with sales being higher in the dining rooms filling up things like that that'll take that labor dollar that percentage of labor dollars per store week growth you know up.
Alright, Thank you very much thanks.
Thanks Peter.
Thank you Sir we have another question from the line of David Tarantino from Baird. Your line is open.
Hi, good afternoon.
Yeah I had a question about the comment you made about the the cohort of.
Restaurants that has 75 per cent or more of the capacity opened I think you said that.
The to go sales are running around 23000 of weak end and that's 20 per cent of the sales.
Can you confirm that I heard that correctly.
Yes, that's right David I'm, it's about 165 stores I believe is whats in that group that are in that 75% to 100% capacity range and they were positive comps for the first seven weeks seven weeks is still not of lot of you know, it's it's hard to read a whole lot into just seven weeks of data, but I think.
That it does give us some comfort that we're seeing the stores do while comp positively and maintain the those to go sales levels.
Yeah, the that was going to be my follow up so I guess.
Is that.
Would imply they're doing something on the order of 115000.
And average weekly sales on that that's about.
Kevin or so per cent above what you did in Q1 of 19 for the system.
Just wondering is that of a good way to think about how those restaurants are performing kind of comp book, maybe mid to high single digits and do you think that the precursor for what we might see when the rest of the system.
So those capacity levels.
Yeah, you're absolutely right. That's how the math works for those for that group of stores of course, you know I guess that at the 165 restaurants I think it gives us some comfort to see them do on performing at that level of them. When we try to extrapolate what that means for the rest of the restaurants in the system when they can get into that bucket of capacity.
Do you know anything you know at it we we never take that for granted and we're never going to assume that's going to happen. I think you know, we'll see how things continue to play out but on definitely good to see those stores doing doing that well.
And then the.
Last question is what if you split those stores out of what what type of margin structure or the.
The running them are they are they up and at 17 18 per cent range. If you kind of normalize for the market.
Or the the above that or below that I guess any context, you could give kind of once those volumes to come in.
Weighing on the margin side.
Sure I would I don't have that data in front of me in detail, but I would venture to guess that it's probably at a variety of outcomes from a margin perspective, because of lack of gonna depend on what states are at and what labor you know what the labor looks like for them and things like that so cost of sales tends to be pretty steady across the system across the country labor is really the one.
On that acts differently, depending on the geography. So I think you could definitely the stores in that group that are about you know probably even above 17, and you might have some stores in that group that are right, they're slightly below would be my expectation.
Okay got it and then I guess I do have one of the more on the margin guidance for this year do you expect Q1 to be at the low point for restaurant margin and that the bill in the second half of the year of you get more capacity or how would you encourage us to think about the sequence of <unk>.
But that would certainly be the hope them because that would imply that things are getting better throughout the year. So that's what fingers crossed you know that's the direction. We're heading on a watch this obviously depends as we found out in November you know at if things if there's a spike and we start seeing states you know kind of a walk from step backwards that definitely is impactful but.
That would be our expectation I'm you know of course, because we don't have the crystal ball or know that season at from a seasonality perspective Q1 does tend to be of better you know of higher performing quarter.
From a sales perspective, and things like that but on definitely hope to see you know.
Things improved throughout the year.
So just to be first of would you expect Q1 to be inside that range or below that range.
I would expect Q1, probably to be inside that range.
Okay, great. Thank you very much.
Sure.
Thank you we do have an answer the question from the line of Lauren Silverman from Credit Suisse. Your line is open.
Hi, Thanks, so much so just a quick follow up on the 165 restaurants or so operating at 75 for 100% capacity. It looks like implied on premise sales are down about 10% relative to on premise of the prior year is that correct and then is that all function of capacity restrictions are also demand.
Yeah, Lauren that would that would be how to look at those numbers and you know we would say we would we look at at is at capacity restriction issue I'm not of demand not a demand issue. So we believe you know as the restrictions lifted I mean, there there's still even at 100% capacity that doesn't necessarily mean, they're getting all of that.
They could still be having to you know skip seats around the bar and the.
At the different things like that and then you also have wait times at our longer because you know you do you have some of that capacity that we have to manage them because of the any restrictions that are in place. So I'm definitely at more of the capacity restriction issue then of demand one.
And then Kent I would also say that.
We have a computer system at our kitchen and there are times when people call in the on to go at and because of our kitchen is getting the slam. So hard you know we.
You have to kind of push their time back on when we can get there to go maybe Jerry you want to explain that in the little more detail.
Well at.
Basically how we control.
So that our kitchens can maintain at so depending on how many orders that we expect coming in or how many people we have on the dining room and how many to go the orders are coming in so I think as we continue to improve that process and be able to handle more of that will definitely help our execution on our sales to an end.
Again, as we find out each restaurant and their ability.
You know most of the Mexican very very well, there's a few that are just outstanding and they probably have a bigger capacity window.
Excepting order so I hope that explains at a little bit.
That's really helpful. I understand it I just don't know they day, but we'll see.
[laughter] at Walmart, but on labor reform, so given the roadhouse teams on what I consider a competitive advantage for the company. How do you think labor of form could change the employee proposition in the industry specific the tip credit and then as well as the 15th on minimum wage.
At presumably menu prices will have the increase limiting upside the tips or how do you expect the managed through that should that Pat.
Well you know, we're kind of doing some of that already in a lot of places across the country. We we already run those higher wage rates, California, specifically, we've seen that movement in Colorado, Arizona, Minnesota at doesn't have it tipped wage just I know, there's a handful of states across the country that are already operating without of tipped wage so.
We see that working end and I can tell you Lauren I mean in general on it and I'm sure Jerry could chime in from you know what he sees them out in the field, but we don't really see an impact of tips for those servers and those higher stay in those higher wage states. They continue to get you know to tip well end and.
And you know there their overall average wage is pretty high Jerry I don't know if you want to.
Jump in on any of any color youre seeing there out in the field.
I would agree Tanya from that aspect again, it's kind of unknown if people will change their tips behaviors. When they know people are making quite a bit more money than maybe they are today. So at all.
Obviously at this gradually takes place.
We'll adjust our business model to make sure that our services continues to be legendary and outstanding and obviously, we deliver on the guest experience and I think that's what people will be continuing to focus on.
No matter what people get paid inside the of buildings.
Great. Thanks, so much.
Mhm.
Thank you. Our next question comes from the line of Brian Bittner from Oppenheimer. Your line is open you may ask your question. Please.
Thanks, Thanks for taking the question kind of can you just provide us some more color on the indoor capacity for the portfolio that you've had so far in January and February to achieve those average weekly sales.
You've talked a lot about what the stores that at 75 per cent or more of doing but just if you could maybe just give us on average across the portfolio so far year to date.
Sure on it so are we a lot of our stores living at 50% capacity bucket them.
And I don't have P. Two numbers in front of me, but for January you know, we had over 250 restaurants, they're running at 50% capacity range I don't have the details of what they're doing from a sales perspective again, our operators worked really hard to find ways to continue to maximize what they can do so they are learning.
A lot through this as far as you know on seating utilization end and just all of those different things utilizing that text to Texas to page system as far as being at bringing people in because remember we don't have waiting rooms anymore.
You know everybody's waiting in the car. So all of those things I think really really help them maximize as much as they can on based on what they are dealing with but Brian. That's the majority of them. We have about 50 restaurants sitting in that 25% capacity bucket still at.
And then the remainder of them and then we had on.
I think we're down at this point this is actually as of today down to just eight restaurants that are on still have no dining room capacity, but otherwise everybody is living in in some of those other buckets premiere at primarily the 50% and the 7500 per cent range.
Okay.
And I know it does the perfect and I'm going to throw another margin question your way.
The average weekly sales that you're doing so far year to date is on.
Very similar to what you were doing in first half of 19, when you were approaching at 18% margin. So presumably the difference between the 15 16 and kind of the close to 18 is is all of that to go lower mix can.
Can you is it possible for you the parse that out of a little bit more dive into kind of the spread of margin structure between to go and the in store I know thats really hard to do but just as we kind of think about this mixing elevated.
And ultimately what that portion of your business generates from the full margin perspective.
Sure Yeah, you're right at it does get pretty complicated because a lot of times. It just depends on how you're allocating those costs to the buckets as far as do you allocate anything from rent do you allocate you know any you know any of those fixed cost over into that to go to that to go side of things. So it does get a little hard to break that out I can tell you from a PPA perspective.
Of those to go to go sales, there's about a $4 GAAP between dining room and to go on P. P. A and then of course you know you layer in you know you probably have a little bit higher labor costs on to go again, you could probably split that 50 different ways to Sunday to get a different answer them and you have the higher to go supplies.
Now there are some other cost you don't have on the to go transaction that might offset some of that so they really that P. P. A difference, but not having that alcohol attachment is really what drives the bigger piece of that difference and and that's something we're focused on them you know operating on beverage items on the you know.
To go and areas, where we can do alcohol to go in what's our opportunity. There. So those are just some of the things. We're looking at there, but really you know to your point of what it comes down to is you know when the dining rooms are for that to go impact does become more neutral to margin.
And that's really you know kind of how the equation work.
Okay. Thank you.
Yep.
Thank you Sir we do have another question from the line of John Glass from Morgan Stanley. Your line is open.
Thanks for the can I, just ask about pricing talked about maybe you're thinking about pricing what is the effect of pricing right now given that you're experiencing some of these pressures labor.
Labor. It's commodities do you think there is at the end to end the demand is coming back because there's an opportunity of sort of take a larger than average price increase.
And have you ever thought I guess, just going into that to go question of service charge of some other way to kind of recoup some of those costs on the to go or is that really you think of transient that is not worth doing things.
I'll start and then hand, the baton to the Tanya.
We're not interested in doing a service charge at this time at.
And we have of probably 30 different separate menus with different pricing around the country. So at usually changes per state and what the wages are in those specific states and then the other costs that might be more expensive you know AK like New York for California.
I'll hand, the baton the Tanya.
Yeah that that's exactly what I was going to say I mean, it at just a lot depends.
You know, we don't ever take for granted at being able to take pricing and you know we'll be having those conversations with our operators to really hear from them and their specific locations you know how they feel like the consumer is feeling it certainly feels like John like you were saying no. The you know demand is good the consumer feels good I'm you know the.
Obviously, we want to make sure that we're keeping as much value on on the many of them as we possibly can on so we're just gonna be looking at that end end seeing kind of what the opportunity is end and how those operators feel across the country. I tell you right now from a pricing perspective, we have about 1.4% pricing in the menu.
About 40 basis points of at or so will roll off in September that was some beverage pricing alcohol pricing. We took in September of 'twenty and then the remaining 1% rolls off in November.
Got it okay. Thank you.
Sure.
Thank you Sir we do have another question from the line of at exactly Bernstein from Barclays. Your line is open.
Great. Thank you very much.
Two questions one as we think about the the unit openings.
Glad you were able to narrow that down I guess for the 25 to 30 of this year. It looks like that's pretty much in line with historical kind of starting of the year.
But now seemingly you'll have to or it sounds like you're excited about jaggers, maybe at three brands going forward I'm wondering if there's potential upside whether there's any insight on maybe youre seeing independent closures or better real estate availability.
The color on what you've seen lately from a real estate perspective that would allow you to increase that number and then one follow up on this.
Ken what we've found as I've mentioned before us.
We're doing extremely extremely well in some of these smaller markets that we would look at before the end.
Yes, there are some of real estate.
You know there are some businesses that have gone out of business that have given us some additional locations. However, construction costs or continue to rise.
So what we might save in rent, we we kind of get offset on the mix.
Increases in the cost of construction, specifically, a concrete number of things like that even the of the the trades you know like plumbing and HVAC and electric.
And then with Jaggers of obviously you know if we should pursue the franchise model then that would be additional sales without the added cost of the developing sites.
And then Tonya do you want to fill in anything else.
Yeah sure Yeah, I think just looking at the cadence of the 25 to 30 over the course of the year, it's a little more back end loaded which does create a little more risk, but I think we feel very good about the pipeline that we have in place we've got restaurants under construction right now you know getting ready to open and you know so far so good.
Good from the standpoint of the contracts contractors being able to get those jobs done in the end the labor supply being okay cant absolutely right on point with the cost being higher I'm, you know 21 or for 2020, we came in at about a $6 1 million dollar development cost for Texas Roadhouse.
Which was up just you know a little bit compared to where we were in 2019. So a lot of the things Kent mentioned are we're definitely adding to those cards from a bill of building cost perspective, we think those costs will come down in 'twenty one on right.
Right now of based on the info, we're getting in the bids and things like that we think those will offset of look come down a little bit, but I'm, we're going to continue to keep an eye on it.
Understood and then the follow up question was a little bit.
More broad, but a question for Jerry I mean, it seems like a kind of holds true in high regard. So I'm wondering maybe from your perspective, what you think you bring to the table, maybe the biggest opportunities that you've seen at the restaurant level, maybe best practices that you can share with the broader system I'm just wondering what your initial take is on what you can bring to us.
To help the broader system.
Well alright.
Thank you for that I I hope that the my results over the last 24 years at I've been with Roadhouse is a managing partner so I've run of restaurant and.
<unk> had pretty good success, and I've opened probably 'twenty as the market partner and have so I do understand how we execute and what we're trying to accomplish inside the restaurants and that is to hustle to help people end and always provide an environment for our.
Our roadies at our employees that they want to work at and at an experience for our guests that is memorable and to represent the standards and expectations of our company. So I feel like the the value that I had is that I really do understand the hospitality side and you know so when I'm in Louisville is joining.
That team will be able to represent that as well as respect the people that are in that building that are kind of our phone a friend whenever we're doing some need something in the field, we call the support center and that's when where our phone a friend reach out and so that they can accomplish that so I hope that I'll be able to.
The individual departments understand how valuable they are to the execution of our experience for our roadie of guest or even of vendor partners. So I hope that mentality of we're here to serve we're here to take care of our people and we're going to represent our company with the hired stand at the highest standards when it comes to.
The foodservice at our facility if that we'll share what you were looking for.
Yeah, that's great Hey, there at all.
Also like the throw in that you know the.
The Thompson did a stellar job.
The Covid, you're are really leading our operations and as regionals are.
Of all of them have come from operations and are all homegrown and matter of fact, our new regional Mike Smith started at the buzzard for us.
Some of 27 years ago and at Neal Nicholas Another one of our regionals are ran one of our most successful units and actually was the father of line dancing. So so we're very operationally driven and have a lot of experience with the people that run on operations in the field.
Thank you.
Okay.
Thank you. Our next question comes from the line off of Brent on the Levy from.
M. P M partners. Your line is open.
Thank you for taking the call.
If we could just talk a little bit.
On the margin and two on the to go customer when.
When you think about the to go customer I guess, we'll start there.
What what are you seeing in terms of new to the brand customers. What are you seeing in terms of those that have transitioned from.
Previously in house, the only too when you look on.
The only to go and then how are we of what are you seeing in terms of buckets of those people that are using both of them are you seeing any difference in their check of behavior of any difference in their frequency.
They are doing one or the other.
Well. The this is Ken before Tanya attacks that we we we do lose lose the beverage sales typically.
And in the cocktail of sales in the restaurant. So you know when people are ordering to go even though we do sell ice tea to go and in some markets. We're allowed to sell of a Margarita has a you know, let's say by the court to go.
So of Jerry any any comments on that from that question.
Yes, I mean, I think you're seeing a blend of depending on again where the.
Some states are still somewhat locked down I mean, you think about at the beginning of December we had 100 restaurants that I think we're to go only in and now here. We are two and a half months later and it's down to eight or so so that's been a real win for from that standpoint, but are there.
There's still a lot of folks that I think are trying to stay safe in precautious on on how much they get into public places. So at that continues to drive our to go sales in our but our experience of the convenience that the upgrade of our app the installation of the windows.
Or just the adjustment in how to execute the to go at that.
The dollar amount on a weekly basis of in our ships has definitely been supportive of the sales growth there in the execution of the bottom line is for the people take their food home and they they opened it up and out of that bag and their own dining room table. We were very much happy to serve you your dinner at <unk>.
Dining room table, but now when you get it at home and you on package you know the packaging and all of the things that we have done to make sure that our food travels well and has presented well when you're sitting at your own home eating, Texas Roadhouse food and.
And we want to have the experience to be as legendary as it could be from that aspect.
Yeah, and Brett This is Tonya I'll tell you just you know from an online ordering perspective, the digital side of things you know we've seen that increase I think it's as much as 55% of total to go sales today I mean, that's been climbing over the course of 2020 end and wanted at of the phenomenon that you see the areas that digital P. P. A is high.
Here than your normal to go P. P. A.
And I think that's just the nature of when you get on that at P. C Pictures Youre getting prompted.
For choices, if you pick something we'd give you hey, you might like this to end and different things like that so and you know we had a tremendous amount of downloads on those opt in January so I think we're starting to see the GAAP to get more and more comfortable using those apps and that really gives us a great way to communicate with them then.
You don't have that they're calling into the restaurant. So I think all of US would say that's pretty exciting to see that opportunity.
Great. Thanks, and then just on the margin front.
Obviously sales will cure many woes, but.
You've taken some cuts you have made some refinement.
If you could walk us through just how you're thinking about what won't return what will return at work.
Are the real puts and takes regardless of what happens from the sales level.
Thank you.
Sure I'll give that one of shy so from a margin perspective, I mean as I mentioned earlier, you know you're probably going to see the COVID-19 related expenses stick around them on the labor line. You know we have COVID-19 pay that is available to our employees.
For them if they you know contract the virus are exposed to the virus I expect that's probably going to stick around for a little while through 2021 end you know, we'll see what happens in 'twenty two and I think you know you're at you're also going to see just the supply is related to the PPE and things like that probably stick around.
Round I'm one of the other increases that we saw you know on costs as a percentage of total sales, which is the increase in you know compensation you know at least.
You remember a lot of our all of our operators the majority of their compensation kind of based on the performance of the restaurants.
So during 2020, we had some guaranteed bonuses in place to make sure they were taking care of and more and more of them. We're seeing return to actual of bonuses based on live results, but we all still you know have a little bit of that guarantee hanging in there probably for a little bit in 'twenty, one and then that'll go away I'm completely so.
Just a couple of the things that I, you know I'm kind of thinking of a off the top of my head some of the cost structure will depend on kind of where we land from it to go perspective, you know at what level of to go sales. We continue to see will dictate you know some of the costs, we might be seeing you know related to go supplies and labor and things like that too.
But hopefully that helps those are just a few of the things I can think of.
Thank you.
Mhm.
Yeah.
Yeah.
We do have another question from the line on for Jeff Farmer from Gordon Haskett. Your line is open you may ask your question. Please.
Tom you just a couple of quick clarifications for you so.
The 15% to 16% of restaurant level margin for 'twenty and 'twenty, one does that assume that that our spring 2021 price increase will take place for is that still would that be I guess beneficial to that 15% to 16% restaurant level margin.
Yeah, Jeff just as a placeholder in our models, we are assuming a little bit of pricing in in mid Q2, I'm not a not a big amount of at all.
But you know it does assume a little bit a little bit of at the placeholder at.
On.
Yeah other than that we're not assuming of second price increase or anything like that later on in the year not making any assumptions. There. That's helpful. And then just a clarification and probably a little bit more detail on G&A. So I think you were indicating that 2021 G&A dollars would be higher the I think he was at $2019. Just so just want to clarify that.
You did mean 2019, rather than in 2020 of which I assume you did.
And if so if we're talking about 2019, what G&A dollar number are you using because I think there were some one time expenses in there that some of us might have pulled out.
Yeah, So I'm looking at reported G&A dollars for 2019.
And so that number just to make sure. We're all on the same page is of little over $149 million.
So I'm kind of looking at it from that perspective, and you're right that does have the benefit of the extra week is I'm sorry of the additional cost of the extra week is in 2019.
It's the one off of you know that I remember off the top of my head for 2019, but it isn't there. Okay. So just to be clear of 'twenty 'twenty. One of your thinking of at least right now high level will probably be at least at that level of about $1 49.
Yeah, and the big piece of that again, it's at equity compensation.
No part of our compensation based on performance involved the Psus performance shares which are based on you know the granted share price. So we did that we had at grant on those in January early January this year. So that's a big piece of what's driving that additional cost up alright. Thank you and the congratulations on the new role Gerry. Thank you.
Yes.
Thank you very much I appreciate it.
Okay.
Thank you Sir another question from the line of and you see it.
So the zinc from BMO Your line is open.
Great. Thank you very much instead of question on on on the unit growth and I believe last quarter. You said that you hope to get back to that 30% kind of a typical company owned.
The unit openings and end this year and now you're guiding slightly below that but I'm just curious.
Is that really a function of the construction costs that you talked about or is there something that's all of the nuance in there that's impacting that number and then as we think kind of more broadly.
We see a lot of optimism around for on Jaggers in young boys and international as well some positive commentary there I know some of that would be franchise locations, but I'm. Just curious where you think the unit opening numbers could go kind of over time, if we think several yourself.
The others can't.
This is Kent I I.
I believe you know based on those smaller towns.
The you know we can continue the space for the next you know.
Quite a few years are giving you more of the exact number but I think tanya might spank needs of all backhaul.
[laughter], well and I'll tell you Andrew I mean, when we came in at 2020, we had goals of hitting 30 restaurants, you know getting 30 restaurant to open in 2020. So obviously you know we were very proud of the fact that we got 22 opened during a global pandemic, but.
You know I think you know we would we were ready to kind of pull the trigger on 30 for this year for 2020. So 25 to 30 really of in 'twenty, one isn't a function of cost higher cost. It's more just a function of the pipeline and what it looks like and then we are still in the middle of the kind of of this pandemic. So we're just taking that into consideration.
And the moderating things a little bit because you know at finding the you know at the sites. We've got a pipeline of already work in the works you know through 2022 2023, but the other piece of it when you're opening restaurants is finding the people finding of the management teams, making sure all of that is good and so that's something we definitely spend a lot of time on and make sure that.
We're covered because the success of that restaurant is just so predicated on that managing partner and that management team. So I'm really not a function of the cost of the development cost themself for that.
Okay, great. Thank you very much.
Sure.
Thank you Sir we do have another question from the line of Andy Barish from Jefferies. Your line is open to me asking the question.
Thanks, Hey, guys, we got the the the as at the end of that gas.
The follow up on <unk>.
The follow up on pricing from what I recall I mean, you guys usually take at about now kind of in the middle of the first quarter.
Is there anything going on with some I mean, obviously other than the uncertainty on the external environment with the pandemic, that's leading you to kind of push.
Push that out of few months.
No. This is tonya and nothing going on are there other than just what you mentioned you know December November December obviously, we had a lot of uncertainty as far as windows of restaurants would reopen end and given the process that we go through for pricing with having those conversations with the operators that adds a little time to the process of getting that.
And then you know just given rolling it out with menu printing and all of those things. So that's more of what pushes it and typically Andy we usually get its on in March.
In March so yeah. It is at is about them you know potentially could be about a month and of happen. You know, it's two months push them and a lot again will depend on the operators and end the feedback they give us.
Yes.
Excellent and then on the on the year to date number is just a couple of.
Quick questions on that.
The holiday gift cards, I know, it's obviously of weird weird year, but you guys had.
Rolled out the ability with the new app to use gift cards through the App.
Did you see some benefit from that and then on the other side.
This week's weather I assume is not in the the first seven week data or for.
He is at.
Yeah, Oh, well the the seven week number would've been through Tuesday. So it does have some of that weekend weather, we saw over the Valentine's day weekend, and that's why it's kind of a higher hard to quantify Valentine's day separately from the weather impact we think that the negative impact as is.
The mix of the shifting of Valentines day, and you know and the weather impact so a little bit of both of them is kind of what we're looking at there from that perspective, and then I'm sorry. If there was another piece of that question that I didn't answer I apologize.
Oh, just how you saw kind of holiday gift cards, and then moving out of this year and that's usually a nice the nice bump yeah. You guys go ahead.
Yeah, absolutely so yeah gift card season for US is big those eight weeks leading up to.
At the end of the year end, our operators really killed at I mean on our gift card goals or you are pretty big golf and we didn't you know we came in a little shy of our goal, but given everything that we went through I mean at was it was awesome and so youre right and having that ability to use redeem on the App is has really helped gift card redemptions those he kind of tailed.
The off throughout 2020, because we didn't have that ability and we definitely saw those pick up with the rollout of that mobile app starting in October and we continue to see that happening.
Okay. Thank you.
You're welcome.
Thank you Sir we do have another question from the lineup of Chad Garber from Goldman Sachs. Your line is open you may ask the question.
Hi, Thanks for taking the question.
Just wanted to ask a question about kitchen capacity and Jeremy maybe this is a good question for you. If you could talk a little bit about at earlier in terms of throttling some of those online or to go orders, but in an environment, where knock on wood things get back to normal.
And dining rooms are essentially full again, how are you thinking about managing for the kitchen capacity to sustain those higher level of to go orders.
Yeah, I think we'll just take the approach of of.
On a day to day basis, and look at how you know, especially during the peak hours. That's when we need to continue to be able to balance that number so that execution.
It is not negatively affected so we can throttle that up and down the the operator actually has the control or has some control of that restaurant at these they can open up the window, where they can shrink it down a little bit and they have ability to do that when to get caught up or not.
I think we've got a lot to learn about it and especially during the holidays as we just learned at Valentines day, and even new your Christmas or I'm, sorry, New year's Eve, how to most effectively use it. So it's something that we are continuing to get better at I would tell you the operators are really sure.
And they want to get every dollar that they can.
So they're not accustomed to share.
Selling things down to where we lose potential sales. So I have total confidence in and Doug on the regionals in all of our fantastic managing partners to figure out how to maximize every 15 minutes that we have orders coming in.
So I think it's gonna be a tool that we're getting used to are more accustomed to and it will definitely help us down the road to keep our operational excellence at the top.
Thanks for the color.
Thank you and we have another question from the line of Brian Vaccaro from Raymond James Your line is open.
I think for good evening of I guess on the spirit of keeping an eye on the relationship between traffic and hours and maybe for all the time sake as well at the times you can you give what the <unk> traffic and check dynamics, where the company units.
Sure. So in at eight 9% decrease on comp sales three 2% increase.
Increase in check is part of that number so you've got 1% of that is positive mix and then the remainder is pricing.
Okay. Thank you for your point keep pushing on pricing yet.
Okay. Thank you for that end and I guess circling back on the store margin I think you said that your quarter to date store margins are in the 15% to 16% range. I guess first did I hear that correctly and then if so can you give some more color on how you or your team members of our bringing certain costs back at you seen sale.
All of the accelerate into that one O five range, maybe help us with sort of labor cost per week in the quarter to date period or maybe there are some other costs in the other opex line that are you bring it back on line that were cut during 2020, just some perspective there.
Sure, Brian and I want to be really careful because obviously you know as I said earlier seven weeks. It's just not you know a big a big.
Big group rate of seven weeks of data. So you know what I'd be careful of reading too much into that from a margin perspective end and you know it's better to look at that from of 13 weeks perspective. So just wanted to kind of say that you know at the word of caution him you know end and I think what we said you know the 165 restaurants that are in that 75%.
For 100% bucket you know that are Comping positively I think you know you'd see those stores. The margin you know performing well, but she's still at stores out there who have a lot of restrictions and that's going to kind of weigh those numbers down a bit I think when you think about where you see the upside on the margin to get to 15 of six to 16.
With higher sales youre going to see some benefit on that labor line for sure.
Because you're going to see you know you are going to see growth in hours of our hours starting to grow more of them. They may not be positive, but youre going to see at you know more hours being utilized in the dining room and.
You're going to get benefit from those higher sales that's going to help that labor line as a percentage. So I would say, that's probably where you're going to see the bigger impact again cost of sale shouldn't fluctuate too much of.
On and other operating my obviously youre going to get some benefit from those higher sales on the other operating line.
And on that rent line, but outside of that there isn't anything else I would really call out or point to.
Alright, thank you.
Youre welcome.
Thank you Sir there are no further questions at this time I would like to turn the call back to the management for closing remarks.
Yeah. Thank you Andy and thanks, everyone for joining US Tonight, I hope everyone's staying safe with all of this crazy weather going on across the country do you need of any other information don't hesitate to reach out to us. Thanks, So much havoc at night.
Ladies and gentlemen. This concludes today's conference call. You may now disconnect. Thank you for participating you have of the day.
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