Q3 2021 Texas Roadhouse Inc Earnings Call
Yes.
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Thank you Robert.
Okay.
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Good evening and welcome to the Texas Roadhouse third quarter earnings Conference call. Today's call is being recorded will participants are now in listen only mode.
After the Speakers' remarks, there will be a question and answer session at that time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad.
Anyone need assistance at any time during todays conference. Please press star followed by zero and an operator will assist you I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse, you May begin your conference.
Thank you Anna and good evening, everyone by now you should have access to our earnings release for the third quarter ended September 28 2021.
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 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. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detail.
Discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements, including factors related to the COVID-19 pandemic.
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. Following our remarks, we will open the call up for questions now I'd like to turn the call over to Jerry.
Thanks, Tonya and good evening.
Sales momentum continued in the third quarter was strong comparable sales growth versus 2020 and 2019.
It is encouraging to continue to see our dining rooms busy well our to go volumes remain elevated.
Our operators and their teams are delivering on the promise of legendary food and legendary service each and every shift.
Their commitment to the quality of our food and the level of our service remains unwavering and the benefit of this commitment is seen in the growing number of guests choosing our restaurants, our strong topline performance during the quarter led to continued unprecedented growth in the restaurant.
Margin dollars and earnings per share at the same time industry wide labor and supply chain issues on top of rising commodity inflation remained a challenge while inflation is certainly impacting our financial results. We remain focused on what we can control.
And executing on our top priority, which is taking care of our guests.
With sales growing and margin dollars, increasing we are confident that we are doing the right things for the long term success of our business.
As I mentioned on our last call during the third quarter, we completed our normal process of evaluating our menu pricing with the feedback from our operators, we implemented a menu price increase of approximately 4.2% last week. This increase will help offset some of the <unk>.
Structural cost pressures that our restaurants are facing while 4.2% pricing is above our typical range. We are comfortable that we are maintaining our leading value position in the industry.
On the development front, our pipeline of openings remains on track despite the challenges of buying the supplies and equipment necessary to open new restaurants, we opened seven company restaurants in the third quarter and expect to open as many as 11 more in the fourth quarter for a total of.
29 company openings in 2021.
This total is expected to include five bubbles and one jaggers our franchise partners should opened two more roadhouse locations in the fourth quarter, which would give us a total of four franchise openings. This year as we look ahead to next year, we are targeting 25 to 30 <unk>.
Company owned Texas, Roadhouse, and Bubbas 33 restaurant openings. Additionally, we look forward to adding seven more restaurants to our company base as we have a non binding agreement with one of our franchisees to acquire their restaurants at the beginning of 2020.
Two.
As I conclude my prepared remarks, I want to again, thank all of our managing partners are managers and roadies for their efforts I also want to extend a special congratulations to David Hollinger, our managing partner from Greenville, North Carolina for <unk>.
Recently being named our 2019 managing partner of the year, while COVID-19 caused us to delay recognizing David until just recently it does not diminish the passion partnership integrity and fun that David consistently brings to the restaurant and to Texas.
Roadhouse, Congratulations David and team G. By guess now Tonya will provide a financial update thanks, Terry for the third quarter of 2021, we reported diluted earnings per share of <unk> 75 cents, driven by $869 million of revenue and 135.
In a restaurant level profit average weekly sales grew to over 120000 as compared to approximately 92000 in Q3 2020 and approximately 99000 in Q3 2019 comparable restaurant sales for the third quarter grew 32% versus 22.
<unk> comprised of 23, 6% traffic growth and a six 6% increase in average check as compared to Q3 2019 comparable restaurants sales grew 22, 3%, including 12.2% traffic growth and average check growth of 10, 1%.
The two year check growth includes positive mix of four 3% as gets moved to higher priced entrees by month comparable restaurant sales versus 2019 grew 25, 5% 21, 5% and 23% for our July August and September periods respective.
Lee.
As Jerry noted we continue to benefit from elevated to go sales volumes in the third quarter, our restaurants averaged approximately 18000 per week in to go sales, which represented 15, 1% of total sales over the course of the quarter. We saw a gradual increase in to go sales as a percentage of total sales as Dino.
<unk> sales levels moderated slightly which we attribute to normal seasonality.
Sales in our October period were also strong with average weekly sales of over 121000 and comparable restaurant sales growth of 23, 6% versus 2019.
In October to go sales remained at approximately 18000 per store week or 14, 8% of total sales.
For the third quarter of restaurant margin as a percentage of total sales was 15, 7% up 111 basis points as compared to the third quarter of last year restaurant margin benefited by approximately 45 basis points from a $4 8 million dollar adjustment to other sales primarily related to adjusting our historical <unk>.
Card breakage assumption.
Food and beverage costs as a percentage of total sales were 34, 6% for the third quarter. This was 242 basis points higher than the prior year as a higher than expected increase in beef prices during the back half of the quarter drove total commodity inflation to 13, 9%.
Commodity inflation was approximately 10%, 15% and 16% for our July August and September periods, respectively.
Labor shortages at the processing plants, coupled with high consumer demand are the primary drivers of the higher beef prices and these cost pressures have been magnified for us because we need to buy even more b for our restaurants. So they can continue to serve a significantly higher number of guests.
Based on our current outlook, we expect high teens in plate inflation for the fourth quarter, which would bring full year 2021 inflation to approximately 10%.
Looking ahead to next year, we expect commodity costs to remain elevated with approximately 30% of our commodity basket locked for the first half of 2022, we currently expect high teens inflation over that time period with inflation likely above that range for the first quarter.
With little of the basket locked for the back half of 2022 and given the level of volatility. We are seeing we currently do not have enough visibility to provide meaningful full year inflation guidance. At this time, we expect inflation in the back half of the year to moderate given the prices the beef prices that we will be lapping.
Labor as a percentage of total sales improved 147 basis points to 33, 2% as compared to Q3 2020, However, like last quarter. We believe a comparison to the third quarter of 2019 is more relevant and beneficial.
As compared to Q3 2019 labor as a percentage of sales was 62 basis points lower even as labor dollars per store week increased 19, 3%.
This increase in labor dollars per store week was driven by wage and other inflation of 15, 1% and growth in hours of three 4%.
The remaining increase of 0.8% was due to adjustments to our quarterly reserve for Workers' comp and group health insurance, including a $2 6 million charge this year.
For 2022, we are forecasting wage and other inflation of approximately 6% with the first quarter above this level as wage rates did not begin to significantly increase until the second quarter of 2021.
Other operating costs were 14, 8% of sales, which was 163 basis points lower than the prior year period, approximately 60 basis points of the decrease relates to adjustments to our quarterly reserve for general liability insurance, which includes a $3 $2 million benefit this year and a $1 $4 million charge in 2000.
'twenty.
Moving below restaurant margin G&A costs for the quarter increased $15 3 million to four 7% of revenue at 63 basis point increase versus the prior year period. The increase in G&A dollars includes $2 $8 million of conference expense in the third quarter, while we held our M. P Award celebration this quarter next.
Year, we will return to holding conference during the second quarter.
Additional drivers of the G&A increase include cash and equity compensation, which was up $8 2 million and travel and meeting expense, which was up $1 7 million lastly, we lapped at $3 million benefit from the sale of a legal claim in 2020.
Our effective tax rate in the third quarter was 11, 6% and like last quarter, our tax rate saw a higher than normal benefit from FICA tip credits driven by the increase in our sales based on current sales trends, we expect our full year effective tax rate will be approximately 14% and for 2022, we would expect an income tax.
<unk> rate of approximately 15% assuming no changes to the federal tax code are enacted.
With regards to cash flow, we ended the third quarter with $437 million of cash, which is down $47 million from the end of the second quarter cash flow from operations was 52 million net of a 24 million FICA tax liability payment that had been deferred from 2020. This was offset by $54 million of capital.
<unk> $28 million of dividend payments, and a $15 million and $15 million of share repurchases under our program that we restarted in August we.
We expect full year 2021 capital expenditures will be approximately 200 million for next year. We are currently projecting that will grow to approximately $230 million. The majority of the year over year increase is due to the planned relocation of sixth Texas Roadhouse restaurants in 2022.
Finally on a housekeeping note I want to point out that Christmas day will be on a Saturday this year versus a Friday in 2020, we estimate that this shift will have an approximately one 5% negative impact on comp sales growth for the fourth quarter.
Like Jerry I when it congratulate David Hollinger and also thank the entire Texas Roadhouse family for their continued dedication and commitment.
Please open the line for questions.
Thank you if you'd like to ask a question today. Please press star followed by one on your telephone keypad.
Okay.
Our first question today comes from Jared Gaba from Goldman Sachs. Please go ahead your line.
Is now open.
Okay.
Hi, Jared can you just make sure that you're not on mute.
Okay.
Yeah.
Yeah.
Yeah.
Okay. Our next question today comes from Peter <unk> from BTG. Please go ahead. Your line is now open.
Yeah can you hear me alright.
Yes.
Oh excellent alright, thanks for taking my question I'll, just one point of clarification.
And you took a four 2%.
This increase last week I believe about 100 basis points or so was rolling off of your price what is the implied pricing in the fourth quarter and going forward for the next couple.
Yes, so for Q4, the implied pricing we'd be about five 3% Peter that all he you know the impact from taking the four point too also we have about 175% that we took in April.
Of 2020, and then about 1.4% that we took in October of 2020 that rolled off this quarter. So as you're going forward, you're really looking just into 2022 at the four point too I'm sure that you know most of the year and then at 175 rolls off in April So that gives you for Q.
One about five 9%.
And then you essentially just dropped down to the four point too.
Got it Okay and is it do you anticipate taking any more replacing our pricing and in April I mean, I know, it's kind of early but given what you're seeing right. Now do you think that youre comfortable with.
The four point to that you took in October do you think you'll come back in April and take some more.
Well I think we'll look at it again and evaluate either late January or February and and really see where we're at but we typically look at it twice a year and then see what we need to do to the adjustment from that standpoint, but yes, we will definitely be looking again and see them, where we need to be.
Great and then just on the restaurant margins.
2022 Tony or any thoughts on you know where do you guys think you'll land given the pricing that we're taking in all the inflationary pressures I know historically you.
You guys tried to defend that 17%.
Just curious as to where you think you'll land next year.
Yeah that could be a little tougher in 2022, you know that 17% 17 to 18 range that we talked about really is the long term goal with this level of commodity inflation that could be coming in 'twenty, two that's going to be a little bit tougher to do now on the sales side of things you know, we're going to continue to drop drive.
Top line sales, we're going to continue to protect us to go sales and Q1 is a bit more beneficial because we're lapping still you know some capacity restrictions that we had in Q1 of 'twenty.
And then as you had into Q2, you know, we're kind of fully up and running both years. So a lot will depend on traffic growth a lot depends on where that commodity inflation you know.
It does land, particularly in the back half of the year and we're going to continue to be pushing on staffing and making sure that we're staffed appropriately and and doing all of those things. So you know that all of those things could make it a bit tougher on the margins.
For the full year.
Yeah.
Alright, Thank you very much I'll pass it along.
Thank you thanks Peter.
Our next question today comes from Chris <unk> from Stifel. Please go ahead, Chris Your line is now open.
Thanks, Good afternoon guys.
I had a follow up on the pricing question.
I know the company typically raises prices to cover structural changes like you mentioned like wage increases, but I was hoping you could explain how you determined that four 2% or 4% was the necessary increase in that and then I had a follow up.
Sure. So really we went through the same process. We always go through we sat down with our operators really talking to them about you know the things that we look at them you know how are their sales during what's child's traffic behaving how they're feeling about the competitive environment, you know theyre looking closely our competitor pricing and things like that.
On the menu and so we did all of those things and we came in a little bit higher you know just as we were thinking about how wage inflation is going to probably continue to grow and we were learning more about this commodity inflation.
And the potential that it could be pretty impactful for you know for a bit of time and given that we didn't take a price you know to price increases in 2020, we had to skip one you know that gave us more comfort to that you know we could come in just a bit higher maybe than we normally would.
With that level without pricing this time.
Okay. That's helpful and then Jerry the company consistently opened as 25% to 30 units a year release targets that but the mix has been shifting between roadhouse and Bubba is what when do you believe <unk> will have the scale to <unk>.
Art opening more stores and potentially increase the total number of units that the company can open a year.
I really have a lot of confidence in our team currently we have been able to open five to eight a year very successfully all of our openings. This year have really opened strong on the sales side and being able to get to the profitability a little quicker than in the past. So we're very confident we've got.
We're continuing to work on some building cost to look at what we can do there to get it to the financial position, we'd like a little sooner, but we're happy with the sales we're happy with the food and the service model that we have so I don't think we're that far away, we got a real good product there couple of more.
We want to work on before we kind of open up that gate, a little a little further.
Okay. Thanks, guys I appreciate it.
Thank you.
Okay.
Our next question today comes from Nick Satkin from Wedbush Securities. Please go ahead, Nick Your line is now open.
Thank you.
Many of your peers are pointing to staffing challenges impacting top line growth.
Obviously, we didn't see much of a slowdown with respect to your top line can you just talk about weather.
Or whether you do feel like you're fully staffed if not.
What kind of.
Percentage.
Growth in labor hours, we should expect them.
In 2022.
Just any context, there would be very helpful.
Yeah, well I would say that we're feeling much better about it we had a pretty good summer of hiring and getting new people into the system. We're back to our original 2019 numbers, but again based on our sales growth, we still need some folks in and adjust in different areas.
The country and the front of the house and the back of the house and manage it but I will tell you that our folks are probably working a little more over time and spend a few extra shifts and we'd really like to get them. Some fresh legs and some help and we definitely need some more people, but I think overall, we met with our regional <unk>.
<unk> partners yesterday, and when we dug in and we really feel good about where we're at we'd like to feel great, but we're really feeling good we do have some clothes sections of times and things because we are in parkinson areas, but overall, we feel very confident I'd like to get really.
Really confident and back to 100% we're not there yet it's hard for me to tell you whether what range of number we are but I feel very confident that we are very close to where we want to be we still need some great people to help us and we're looking we just had our second national hiring day, and we're excited to see some of the numbers come out of there.
As we add more help to the team and the people that have settled into school. So like I said, we feel real good I don't want to feel real great. So we still got work to do.
Yeah, Nick and you know on the hours prospect from an hours perspective for 'twenty. Two I think youll continue to see ours pick up a little bit more right now youre seeing you know the productivity and be pretty high because we're probably a little short in some situations from an hours perspective, and we like that it's Gerry.
That would be a little more staff. So I don't know what the percentage will end up being you know we always talk about that in terms of traffic them, you know and maybe we get back to more of that 70% to 75% of traffic.
From an hours labor hours perspective that overtime shows up in the wages and that's kind of helping to drive a little bit of that wage inflation right now.
So maybe you get a little relief there, but you see the hours pick up a little bit more.
Great. Thank you very much.
Youre welcome.
Our next question today comes from drew North from Baird. Please go ahead drew your line is now open.
Great. Thanks, I had two questions on the development front first as it relates to your outlook.
What's the breakdown of Texas public 30 threes in terms of the openings next year how many.
Embedded in that outlook.
Just wanted to confirm that the six relocations are not embedded in that 25 to 30 that you mentioned and then the follow up there is just so everyone. The industry has called out upward pressure on development costs and I believe you had mentioned that last quarter for new store openings.
Wondering if you could comment on what you're seeing from a development cost perspective, how much upward pressure, you're seeing there and if it's having an impact on the development pipeline over the next 12 to 24 months.
Sure I'll take the first couple of questions. You had you that those relocations are not in the 25 to 30 guidance for 'twenty two so those would be in addition.
The seven franchise acquisitions are not in those store openings, either just to be clear and then there is about I would say that as many as eight bubba that are built into that number there.
The rats being roadhouse, obviously, you know sometimes that changes throughout the course of the year as deal change and things like that but the way the pipeline looks right now it looks like right now I think that's about where it will be and then from a cost perspective, you know where we could see cost creep up a little bit you do see that you know I think.
Definitely hear anecdotally that contractors continue to have labor staffing issues, just like all of us are having and that can impact sometimes the building cost things like that it hasnt been anything that has been on manageable at this point nothing that makes US say, we want to you know take our foot off the gas from a development person.
<unk>, so so far so good but we're definitely keeping an eye on it you know trying to making sure that we've got equipment sourced in and that we're ready to go to keep these this pipeline moving.
I would agree I feel really comfortable with the roadhouse a piece of it the 22 to.
<unk> to 'twenty four may be and then obviously bubbles is about eight and six relocations were very excited about we look back in the history of the last four or five years and we've done six to eight relocations and and really provided a bigger restaurant with more parking and saw our sales spike in our ability to make a lot.
More money. So we feel like these relocations are again in addition.
To where theyre at sometimes the energy move so our investment in these relocations of some really top performers is it real smart business I believe.
Okay.
Thanks, that's helpful I'll pass it on.
Thank you.
Our next question today comes from Eric Gonzalez from Keybanc. Please go ahead Erik Your line is now open.
Hey, Thanks. Good afternoon I was wondering if you can comment on maybe the long term implications of the supply chain issues right now as you speak with your suppliers due to sense about whether this will have a long tail in terms of beef inflation given the below replacement cycle and then just on your hedging strategy right. Now I think you said, you're about 30% locked maybe correct.
If I'm wrong was that for the first half of the year.
But wondering how that compares to the Paas and maybe.
Sure. So yes, 30% is locked on the first half of the year.
And Thats, probably you know I would I would say a little lower maybe than we normally would be now normals, maybe going back to 2018 2019, but yeah, we would like to end.
We do a lot of that you know in fourth in the fourth quarter and into the first quarter of the year. So I think we'll continue to see you know getting a little more locked on on some of those some of those amounts that we need so that'll be good.
And then I'm, sorry, Eric but I forgot. The other question that you were asking about supply chain I believe is what it was and how we think that Kim.
The long term implications you know I think a lot of people have different perspectives of long term implications. Some would tell you. Maybe this is just going to be a few quarters others would tell you you know we're hearing hey, this could go into 2023. So I think it's just a lot depends on how some things play out and staffing is definitely one of them I think.
For you know the supply chain folks transportation. Another and then it's just that ability to build up some inventory of product you know given the high demand of beef and so you know we have a great supply chain, we have awesome vendors that have been working very closely with us.
To supply the beef that we need supply all of the commodities that we need at these levels. So that's been really great and on the inflation.
And I think we'll just we'll just kind of have to wait and see kind of how that plays out.
Yes Bill.
Sure.
Sure.
Well I just wanted to.
I mean, obviously, we've been buying the same product for 28 years, and where our team has done a really good job the meters available. It's just the pricing of it obviously the supply chain for the development side, we're really paying close attention to especially as we get in there we are having to stock some.
Tori on things that we didn't have to do in the past. So we're aware of that we are definitely building up inventory on on things that are big ticket items that we will absolutely need to get our restaurant open and to grow in and obviously the relocation. So our vendor partners have been working very closely with US we are definitely looking out for the.
Whole year, we want to know where we are on each quarter for all of the items that we need we're asking those questions. So far it's gotten a little tight I can tell you that so we're aware of that but as of right now it looks really good.
Obviously, if we get into a situation of our vendors are aware of that and there. We're working closely with them to know if we're going to have any emergencies of something critical from an equipment standpoint that would delay us but as of right now we feel real good about 'twenty, two and being able to get the things that we need.
Need to open all of these restaurants.
Alright, thanks for that and maybe on real quick on pricing I was wondering if you test it any different levels of pricing or do you ever go out into the market.
If you would you expect to see any resistance to that 4% level or if you push it higher where you might start to see resistance and then if you can maybe comment on where youre seeing some of the competitors in the category.
Price relative to what Youre doing that'd be helpful. Thanks.
Sure. So we really are testing all the time, because we have a number of pricing tiers across the country I'm, you know and that allows us to do different things at different times and so we learned a lot from that and we utilize that when we're looking at you know pricing each year and doing it twice a year to really allows us.
The ability to pivot and do you think differently. So that's been working really well I mean, historically I would tell you we don't see any issues with flow through we don't see you know any issues when we when we take pricing and.
Lot of times, it's hard to tell youre not going to see it in the short term, sometimes it's a longer term.
<unk>.
And it gets really hard to kind of see it but we're watching it it's only been a week since we took the $4 to them, but we're going to definitely be keeping an eye out and in a lot of it is just talking with operators and getting their thoughts and what they're hearing from gas and things like that from a competitive side you know.
I think again as I said earlier, we feel very good about how we're positioned and where we're definitely measuring certain items on our menu looking at them compared to others in the industry, making sure we feel good about that and as much as the pricing its the quality of the product the quality of the food.
The quality of the service that we're delivering that whole experience really comes into play. So it's definitely something that we think about for sure yes.
Eric and I would say again, we haven't changed our quality model at all and we still cut our stakes in house, we serve US a brand that we are very specific and happy with we haven't changed any of that in and we feel very good. We know that we have to earn it every single day from for our <unk>.
If we are going to charge a little bit more and we all know that we got to ramp up the level of that experience and thats on our operations team and we're very committed to continuing to cut our own steaks and make all of our food from scratch and which is definitely more difficult, but it absolutely tastes better and we have to deliver on.
Our legendary food and our legendary service experience every single time, if we do that people will be okay, with what we have to charge them because of some of the other pressures.
Great. Thanks, I'll pass it on.
Okay.
Our next question today comes from Jeff Farmer from Gordon Haskett. Please go ahead, Jeff Your line is my wife.
Thank you very much just wanted to follow up on staffing question from a few minutes ago. One of your casual dining peers last week did say that at least from their perspective, they thought the peak casual dining staffing shortfalls or pressures we're seeing in August.
From what Youre seeing August September into October due do you agree with that do you think it's getting a little bit easier out there two to bring our employees into the restaurant.
But all I don't know about easier I think we're still hustling to find people.
We're doing a couple of things to recruit and to retain people. We've just offered some tuition.
Benefit and so we're having we're having did I say, having to do things were doing things because we feel great about being able to add people to our program and offering some better benefits and even better pay so we know that but I would I say easy by no means are there more people.
And the pool, I would say, maybe a little bit and.
And we have to go earn the right for them to come choose us to work out so.
Easing up a little bit, but I still think there's a long way to go to get enough people out there that could supply all of us with our needs.
Okay, and then just one more similar topic, which is on the labor side of the equation, which is that again the same peer called out.
Roughly 100 plus basis points of what they considered transitory labor cost pressures in their quarter and that included things like training costs reduced productivity waste I think things like retention bonuses.
<unk> seen a healthy component of that in your own labor cost right now.
Jeff I don't know if I could quantify any of those things as far as how we're seeing them in the labor model I mean, where we're seeing higher wage inflation, we know we're paying higher wages.
Especially in the back of House, you know that become very competitive as you know not just outside the industry, even just across the country. So so that's something we're doing where we've always had a phenomenal training program and development program.
So we are definitely double down on those and taken us to another level. During this time, but we really we don't really slice and dice it that way or look at it from that perspective, So I don't know that I could tell you we're comparable there.
Okay. Thank you very much.
Mhm.
Our next question today comes from James Rutherford from Stephens, Inc. Please go ahead.
There's no way pin.
Great. Thank you I wanted to circle back on the commodity question the guidance for high teens commodity inflation in the first half of the year I'm curious what assumption is embedded into that for the 70% of your basket.
I understand you'll be buying on the spot market are you assuming that essentially current spot prices hold from today or is there some kind of improvement in those dollar costs, just as we kind of track the market as we go forward here.
Sure James I would tell you we're assuming more.
Probably along the lines of the trend continues that the elevated costs continue versus seeing anything you know he's up I think we saw some easing in October late October.
And then you know the expectation, though is we're going to see the historic seasonality than normal spike from the holiday seasonality.
So that's kind of our expectation and remember too you know, we're buying where aging or need as Jerry mentioned earlier, so youre doing anything from 30 to 45 days. So well we're buying in October are things, we're probably using in December into the new year and so we expect to see the COO.
<unk>.
Stay elevated and you know right now a lot of that is just based on you know market prices spot prices.
Perfect. That's really helpful. And then just one more on the commodity side if I may.
Just if you can kind of all level set our models for the fourth quarter and it kind of Peter asked a question earlier about 2022 restaurant margins, but I'm I'm kind of putting together the commodity and wage information you gave us in getting to our restaurant margin in the 13% range am I off there, but very much just if you can help a little bit on that and calibrating that margin.
Yeah sure there's a lot of moving pieces in those numbers, there's no doubt about it and a lot depends on what you're using for traffic and sales growth. So you know as I mentioned earlier, we're expecting you know Q1 sales were going to be lapping.
Patsy restrictions from last year, So we're definitely going to see some benefit there from a sales perspective, and thats going to help from you know from leveraging cost and then I think that staffing issues. You know we continue to see some of those occur throughout the year that might keep hours growth you know a little moderated along with that.
Percent wage inflation. So I think it's definitely tough to to say kind of where where we'll be on that that I would tell you that seems a little low to me, but I might be a little more optimistic from a sales perspective.
Got it thank you very much Tanya and Jerry I appreciate it.
Thank you.
Our next question today comes from Brian Vaccaro from Raymond James. Please go ahead, Brian Your line is open.
Thanks, and good evening I, just wanted to circle back on staffing levels as well and I. Appreciate your earlier comments, but could you help frame what percentage of your stores maybe at levels that are still meaningfully below 19 staffing levels. However, you may define that if they are below can you frame how.
A an impact that it may be having to comps in those locations.
Well I think it's a small number that are below the 19 levels are really I mean, there are some staffing areas like Louisiana has been hit hard by some weather and we've had some challenges getting people back in that area. So just because they had to relocate to the volatile. So I would say that's one of our tough.
Her areas necessarily to get completely staffed but other than that theres. Some real small pockets of people that that are far, but we know who they are we've got a well.
Colin a ninja staffing team that is helping these restaurants get there, but I would say the vast majority are at 19 levels and just looking to go and cover the additional sales that we have today. So we like I said, we feel real good I'd like to feel great.
Okay. That's helpful. Thanks, Jerry and I'm, telling you on the on the average hours per store I think you said that was up three or three 5% versus 19 in the quarter.
Is it fair to assume that that progressed higher through the quarter and can you ballpark kind of where you exited the quarter or where you may be thus far in October on average hours per store.
I don't have that number in front of me, Brian as far as the cadence throughout the quarter I'm, just trying to think a little bit off the top of my head I would expect that you know it probably grew a little bit throughout the quarter.
Just you know looking but you're also looking at volumes that kind of you know had some seasonality throughout the quarter. Two so could have been a little bit more lumpiness there.
But you know like I said earlier, you know I would expect to be you know for us to start seeing hours getting close you know more.
More in that 60, 70, you know 70% range when we're looking at traffic growth now.
And right now traffic a lot of.
The traffic growth is driven by to go sales. So that's a little more efficient from a labor perspective, and that explains a little bit of why those hours, maybe a little bit lower.
And we still have the people working you just have fewer people working so again you have people working over time things like that so that's something that we're focused on you know moving a little bit more away from them overall.
Okay. Okay. That's helpful and you touched on seasonality there so it'd be a little segue to average weekly sales.
Just to frame kind of expectations as he moves through the fourth quarter can you remind us how October November December typically the interplay between those months I think you said you gave US October average weekly sales, but what's typical seasonality looks like as we move through the rest of Q4.
So that typically as you move into the holiday was different.
Yeah sure Yeah, typically youre going to see those volumes increased throughout the quarter you know as we as Gary mentioned, we're getting into the holiday season.
Things like that now you do have the impact of that Christmas shift to Saturday. So it will be closed on that Saturday. We gave you that impact, but typically seasonality would be growing volumes over the course of the year over the course of that quarter sorry.
Okay, Okay, I'll circle back on that offline I guess just last one.
Tony I appreciate the early thoughts on 'twenty, two but could you ballpark your expectations on G&A just so we're all on the same page there. Thanks again.
Yeah, No problem, Brian So yeah from a G&A perspective, I think you continue to see growth you know stay moderate I think as a percentage of revenue we stay below 5%.
Our revenue is our expectation. So obviously, we talked a little bit about some cluster ramping back up travel, which we're really excited to see that ramping back up getting those meetings going in the restaurants.
With our managers and our coaches and things like that it's been wonderful to see happening.
And.
So I would expect you know a little bit of increased spend in G&A in 2022 versus 2020, but I think it will still you know, we'll keep it below 5% of revenue and see some leverage there.
Okay.
Okay. Thank you.
Thank you.
Our next question today comes from Jeffrey Bernstein from Barclays. Please go ahead Jeffrey your line is now open.
Thanks. This is actually Jeff priester on for Jeff Bernstein, just wanted to dive into the franchisee acquisition a little bit more.
Longer term how has your thoughts changed any on how the Texas Roadhouse brand in particular will look from a company franchise mix going forward and then on this transaction in particular.
They approach you or did you approach them and kind of what was the driving force behind wanting to make this transaction.
Sure Jeff This is something even prior to Covid. We were we were having conversations with franchise partners. All the time I don't know if theres a one approach versus another it's kind of a joint conversation that we're always kind of talking about and and just seeing where everybody stands and I think from a franchise perspective.
Masterfully for Texas Roadhouse.
We're really not looking at at growth from a franchise perspective, we may add one or two a year.
Domestically the growth from a roadhouse perspective on our franchise, it's really international focus.
All of our international growth right now its franchise and we expect that to continue.
Bob is right now is all company.
We can see we expect that to continue to stay and then jaggers is probably why there is some opportunity and we signed a franchise partner really excited about them getting a restaurant openings next year.
We continue to you know look at the past for company restaurants. So overall really roadhouse I would say not as much franchised domestic I'm very very little and is kind of the way we're looking at it and we're going to keep talking to franchise partners.
Everybody is kind of in a different place and and we'll continue to have conversations with them and we'd like to continue to you know just add more of those rollouts.
I appreciate it.
Sure.
Yeah.
Our next.
Today comes from Josh Gaba from Goldman Sachs. Please go ahead, Josh Your line is my wife.
Hey can you hear me this time.
Yes, yes, we can have great sorry about that and then also this is Michael <unk> on for Jared Garber, sorry about that.
So quick question on <unk>.
Unit growth actually in the outer years and kind of 'twenty three 'twenty four you're just seeing great demand right now and expect positive comps next year does that maybe drive maybe accelerating unit growth, especially Texas Roadhouse now we kind of touched on Bubbas earlier in the call in and what could that look like kind of 23 and 'twenty four onwards.
Sure Jared I'll kind of start out and tell you. We've always felt really good about that range of 25 to 30 for several reasons. One you know we just we make really good disciplined real estate decisions when we're in that range.
And we also make really good people choices and that's a big those are the two probably bigger drivers when youre talking about opening new restaurants. So I don't see that changing for US now just like Jerry mentioned as Bob has begins to ramp up a little more maybe we start living at the higher end of that range, but for 'twenty 'twenty. Two we wanted to kind of keep that that off.
<unk> of 25 out there just as you're dealing with some of the supply chain stuff, but in the out years, you are mentioning I I could see us getting closer to 30 more often.
For the Roadhouse concept.
Great. Thank you I appreciate that and then as far as next year goes with that positive comp aside from price.
You talk a little bit about what you expect kind of for traffic or mix. You know obviously you are lapping very strong 21, what does that sort of look like.
Obviously from a mix perspective also very strong so any clarity around that would be great. Thanks.
Yeah, I would just say if we nail it on the operation side and keep delivering on the quality of our food and the experience. The demand is there I think if you look at our comp sales that is a strong model and yes, we are.
We know that we have to compete against that in 'twenty, two and but as I said, we met with our regional operations, but we were at with our operations team and as we get more staff as we continue to make sure that we're delivering on our promise of legendary food and luxury service, our consumer is telling us to keep doing what.
We're doing open our doors create a great environment to deliver on our promise of the food and the service and and and and I don't see that going away, we're going to continue to operate at a very very high level.
It is important for us to have operational excellence.
Have a memorable experience and develop our people so as long as we deliver on that promise to our guests and we put the right people up there and they enjoy working for US I think we will continue to have a still I expect us to be very aggressive on the top line sales.
Yeah, I'll tell you that it's really hard to follow that but.
I'll tell you on the mix.
Because we have seen some phenomenal mixed growth.
Over you know starting in late 'twenty and into 'twenty, one we would expect that to moderate quite a bit probably get closer back to flatten. It for 2022 would be my expectation.
Thank you I appreciate that and then one last quick one for me we've heard from a couple of your peers that repairs and maintenance kind of have have up ticked a little bit recently and maybe that's because you haven't been able to get equipment or <unk>.
George I just wanted to get more use again something along those lines. What are you seeing from that front. Thank you.
Yes, we're definitely seeing that on.
On the P&L all Youre seeing.
There were delays in 2020, we were putting things on hold in.
Things like that so yeah, you see some of those projects that had been on hold getting getting going in and then you know probably a little inflation I would venture to guess just you know again everyone's dealing with labor.
Shortages in and getting things done and things like that so definitely seeing that a little bit.
Okay.
All right.
And I think that's the last question.
Yeah, that's our last question for today.
Alright, well, thanks, everyone for joining us hope youre doing well.
And let US know if you have any questions. Thanks, so much have a great night.
Okay.
Thank you everyone for joining today's cool enjoy your evening you may now disconnect your lines.
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