Q2 2024 Texas Roadhouse Inc Earnings Call

Operator: Good evening, and welcome to the Texas Roadhouse second quarter earnings conference call. Today's call is being recorded. All participants are now in a listen-only mode.

Operator: Good evening and welcome to the Texas Roadhouse Second Quarter earnings conference call. Today's call is being recorded. All participants are now in a listen-only mode.

Speaker Change: Good evening and welcome to the Texas Roadhouse second quarter earnings conference call. Today's call is being recorded. All participants are now in a listen-only mode. After the speakers remarks there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. At that time, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Should anyone need assistance at any time during the conference, please press star zero, and an operator will assist you.

Operator: After the speaker's remarks, there will be a question-and-answer session. At that time, if you would like to ask a question, please press star, then the number one on your telephone keypad.

At that time, if you would like to ask a question, please press star, then the number one on your telephone keypad.

Operator: Should anyone need assistance at any time during the conference, please press star zero, and an operator will assist you.

Should anyone need assistance at any time during the conference, please press star zero and an operator will assist you.

Michael Bailen: I would now like to introduce Michael Bailen, head of Investor Relations for Texas Roadhouse. You may begin your conference.

Operator: I would now like to introduce Michael Bailen, Head of Investor Relations for Texas Roadhouse. You may begin your presentation. Thank you, Brianna, and good evening.

Speaker Change: I would now like to introduce Michael Bailen, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

Michael Bailen: Thank you, Rihanna, and good evening. By now, you should have access to our earnings release for the second quarter and June 25th, 2024. It may also be found on our website at TexasRoadhouse.com in the investor section.

Michael Bailen: By now, you should have access to our earnings release for the second quarter and for June 25, 2024. It may also be found on our website at texasroadhouse.com in the investor section. I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures.

Michael Bailen: Thank you, Brianna, and good evening. By now, you should have access to our earnings release for the second quarter and June 25, 2024. It may also be found on our website at TexasRoadhouse.com in the Investors section.

Michael Bailen: I would like to remind everyone that part of our discussion today will include forward booking statements. These statements are not guarantees of future performance. And therefore, undue reliance should not be placed upon them.

Speaker Change: I would like to remind everyone that part of our discussion today will include forward-looking statements.

Speaker Change: 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.

Michael Bailen: We refer all of you to our earnings release in our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward booking statements.

Speaker Change: These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements.

Michael Bailen: In addition, we may refer to non-gap measures. If applicable, reconciliation of the non-GAAP measures to the GAAP information can be found in our earnings release.

Michael Bailen: 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 Jerry Morgan, Chief Executive Officer of Texas Roadhouse, and Chris Monroe, our Chief Financial Officer. Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, please limit yourself to one question. Now, I would like to turn the call over to Jared. Thanks, Michael. And good evening, everyone.

Speaker Change: 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.

Michael Bailen: On the call with me today is Jerry Morton, Chief Executive Officer of Texas Roadhouse, and Chris Monroe, our Chief Financial Officer. Following the prepared remarks, we will be available to answer your questions.

Speaker Change: On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse, and Chris Monroe, our Chief Financial Officer.

Michael Bailen: In order to accommodate everyone that would like to ask a question, please limit yourself to one question.

Speaker Change: Following the prepared remarks, we will be available to answer your questions.

Speaker Change: In order to accommodate everyone that would like to ask a question, please limit yourself to one question. Now, I would like to turn the call over to Jerry.

Jerry Morton: Now, I would like to turn the call over to Jerry. Thanks, Michael, and good evening, everyone. We are pleased with our second quarter results as our operators continue to do an amazing job serving our guests and communities. Same-store sales growth of 9.3% and the benefit of a steady pace of new-store openings in 2024 helped us drive revenue to over $1.3 billion in the quarter. We remain excited about the future of all three of our brands. During the second quarter, Texas Roadhouse restaurants averaged approximately $163 in weekly sales. Our managing partners continue to drive sales and traffic growth, which keeps the brand's position as a leader in the casual dining industry.

Gerald L. Morgan: We are pleased with our second quarter results, as our operators continue to do an amazing job serving our guests and communities. Same store sales growth of 9.3% and the benefit of a steady pace of new store openings in 2024 helped us drive revenue to over $1.3 billion in the quarter. We remain excited about the future of all three of our brands. During the second quarter, Texas Roadhouse Restaurants averaged approximately $163 in weekly sales.

Gerald L. Morgan: Thanks, Michael, and good evening, everyone. We are pleased with our second quarter results as our operators continue to do an amazing job serving our guests and communities.

Gerald L. Morgan: Same store sales growth of 9.3% and the benefit of a steady pace of new store openings in 2024 helped us drive revenue to over $1.3 billion in the quarter.

Gerald L. Morgan: We remain excited about the future of all three of our brands.

Gerald L. Morgan: During the second quarter, Texas Roadhouse restaurants averaged approximately $163 in weekly sales.

Gerald L. Morgan: Our managing partners continue to drive sales and traffic growth, which keeps the brands positioned as leaders in the casual dining industry. Bubba's 33 maintained its positive trend with approximately $123,000 in weekly sales. I recently had the opportunity to visit the three newest Bubba's 33 locations in Texas and Virginia.

Gerald L. Morgan: Our managing partners continue to drive sales and traffic growth, which keeps the brands positioned as a leader in the casual dining industry.

Jerry Morton: Bubbles 33 maintains its positive trend with approximately $123,000 in weekly sales. I recently had the opportunity to visit the three newest Bubbles 33 locations in Texas and Virginia. Nothing is more energizing than spending time in the restaurants, working alongside our people and getting feedback from our guests. There's no doubt that our Bubbles 33 operators are building name recognition and creating guest loyalty. Bubbles is also receiving a number of local awards, including being named Best Burger and Best Family in Casual Dining Restaurant in Chesapeake, Virginia. And 2024 Best Pizza and View for George. Jaggers, our quick service brand, is also gaining increased consumer awareness, which helps generate approximately $73,000 in weekly sales during the second quarter.

Gerald L. Morgan: Bubba's 33 maintained its positive trend with approximately $123,000 in weekly sales.

Gerald L. Morgan: I recently had the opportunity to visit the three newest Bubba's 33 locations in Texas and Virginia.

Gerald L. Morgan: Nothing is more energizing than spending time in the restaurants working alongside our people and getting feedback from our guests. There's no doubt that our Bubba's 33 operators are building name recognition and creating guest loyalty. Bubba's is also receiving a number of local awards, including being named Best Burger and Best Family and Casual Dining Restaurant in Chesapeake, Virginia, and Best Pizza in Beaufort, Georgia.

Gerald L. Morgan: Nothing is more energizing than spending time in the restaurants, working alongside our people, and getting feedback from our guests.

Gerald L. Morgan: There's no doubt that our Bubba's 33 operators are building name recognition and creating guest loyalty.

Gerald L. Morgan: Bubba's is also receiving a number of local awards, including being named Best Burger and Best Family and Casual Dining Restaurant in Chesapeake, Virginia, and 2024 Best Pizza in Beaufort, Georgia.

Gerald L. Morgan: Jaggers, our quick service brand, is also gaining increased consumer awareness, which helped generate approximately $73,000 in weekly sales during the second quarter. Jaggers is also being recognized, as its burger was named a Community Choice finalist in Louisville, Kentucky. Additionally, we are looking forward to our first international Jaggers franchise location later this year on the Camp Humphreys military base in South Korea.

Gerald L. Morgan: Jaggers, our quick service brand, is also gaining increased consumer awareness which helped generate approximately $73,000 in weekly sales during the second quarter.

Jerry Morton: Jaggers is also being recognized as its burger was named a Community Choice finalist in Louisville, Kentucky. Additionally, we are looking forward to our first international Jaggers franchise location later this year on the campus at Humphreys Military Base in South Korea. Speaking of openings during the second quarter, we opened three company-owned Texas Roadhouses and three buffers, 33 restaurants. For the full year, we remain on track to open approximately 30 company-owned restaurants across all brands. Also, our franchise partners opened three Texas Roadhouse locations, including our first restaurant in Puerto Rico. We expect as many as 13 franchise openings this year, including three Jaggers.

Gerald L. Morgan: Jaggers is also being recognized as its burger was named a Community Choice finalist in Louisville, Kentucky.

Gerald L. Morgan: Additionally, we are looking forward to our first international Jaggers franchise location later this year on the Camp Humphreys military base in South Korea.

Gerald L. Morgan: Speaking of openings, during the second quarter, we opened three company-owned Texas Roadhouses and three Bubba's 33 restaurants. For the full year, we remain on track to open approximately 30 company-owned restaurants across all brands. Additionally, our franchise partners opened three Texas Roadhouse locations, including our first restaurant in Puerto Rico.

Gerald L. Morgan: Speaking of openings, during the second quarter we opened three company-owned Texas Roadhouses and three Bubba's 33 restaurants.

Gerald L. Morgan: For the full year, we remain on track to open approximately 30 company-owned restaurants across all brands.

Gerald L. Morgan: Also, our franchise partners opened three Texas Roadhouse locations, including our first restaurant in Puerto Rico. We expect as many as 13 franchise openings this year, including three Jaggers.

Gerald L. Morgan: We expect as many as 13 franchise openings this year, including three Jaggers. We also made great progress on our technology initiatives during the second quarter. First, we completed the rollout of our Roadie First technology system throughout the company. We believe improved mobile access to our resources will provide roadies with the help to help us remain as an employer of choice for years to come. Second, the pace of the digital kitchen conversion remains on track. We have completed 50% of the approximate 230 scheduled for this year.

Jerry Morton: We also made great progress on our technology initiatives during the second quarter. First, we completed the rollout of our Roadie First technology system throughout the company. We believe improved improved mobile access to our resources will provide roadies with the help, the help us remain as employer of choice for years to come. Second, the pace of the digital kitchen conversion remains on track. We have completed 50% of the approximate 230 scheduled for this year. The feedback remains positive, and our current expectation is that nearly all restaurants will convert to a digital kitchen by the end of 2025.

Gerald L. Morgan: We also made great progress on our technology initiatives during the second quarter.

Gerald L. Morgan: First, we completed the rollout of our Roadie First technology system throughout the company.

Speaker Change: We believe improved mobile access to our resources will provide roadies with the help to help us remain as an employer of choice for years to come.

Speaker Change: Second, the pace of the digital kitchen conversion remains on track. We have completed 50% of the approximate 230 scheduled for this year.

Gerald L. Morgan: The feedback remains positive, and our current expectation is that nearly all restaurants will convert to a digital kitchen by the end of 2025. Finally, there has been significant discussion within the restaurant industry concerning the health of the consumer, as well as the increased focus on promotions and discounting from others in the industry. Through the first half of the year, we have not seen a measurable impact on our overall business from these issues.

Speaker Change: The feedback remains positive, and our current expectation is that nearly all restaurants will convert to a digital kitchen by the end of 2025.

Jerry Morton: Finally, there has been significant discussion within the restaurant industry concerning the health of the consumer, as well as the increased focus on promotions and discounting from others in the industry. Through the first half of the year, we have not seen a measurable impact on our overall business from these issues. Our guests continue to recognize the quality and value we offer and do not appear to be changing their dining habits. At Texas Roadhouse, we will continue to focus on what we do best, which is taking care of our roadies and providing a legendary experience to each and every one of our guests.

Speaker Change: Finally, there has been significant discussion within the restaurant industry concerning the health of the consumer, as well as the increased focus on promotions and discounting from others in the industry.

Speaker Change: Through the first half of the year, we have not seen a measurable impact on our overall business from these issues. Our guests continue to recognize the quality and value we offer and do not appear to be changing their dining habits.

Gerald L. Morgan: Our guests continue to recognize the quality and value we offer and do not appear to be changing their dining habits. At Texas Roadhouse, we will continue to focus on what we do best, which is taking care of our roadies and providing a legendary experience to each and every one of our guests.

Speaker Change: At Texas Roadhouse, we will continue to focus on what we do best, which is taking care of our roadies and providing a legendary experience to each and every one of our guests. Now Chris will provide some thoughts.

Chris Monroe: Now Chris will provide some thoughts. Thanks, Jerry. We are pleased from top to bottom with our second quarter financial results. Leverage from same-store sales growth coupled with lower-than-forecasted inflationary pressures drove a meaningful increase in diluted earnings per share. During the second quarter, we continued seeing resilient guests visiting our restaurant. In addition to strong traffic growth, we also experienced encouraging mixed trends within our checks. For the quarter, our overall mix was basically flat, with positive mix in entrees, add-ons, and soft beverages. This was offset by continued, but improving, negative mix in alcohol.

Chris Monroe: Now Chris will provide some thoughts. Thanks, Jerry. We are pleased from top to bottom with our second quarter financial results. Leverage from same store sales growth, coupled with the lower than forecasted inflationary pressures, drove a meaningful increase in diluted earnings per share. During the second quarter, we continued seeing a resilient guest visiting our restaurants. In addition to strong traffic growth, we also experienced encouraging mixed trends within our check. For the quarter, our overall mix was basically flat, with positive mix in entrees, add-ons, and soft beverage.

Chris Monroe: Thanks Jerry. We are pleased from top to bottom with our second quarter financial results.

Chris Monroe: Leverage from same-store sales growth, coupled with the lower-than-forecasted inflationary pressures, drove a meaningful increase in diluted earnings per share.

Chris Monroe: During the second quarter, we continued seeing a resilient guest visiting our restaurants.

Speaker Change: In addition to strong traffic growth, we also experienced encouraging mix trends within our check. For the quarter, our overall mix was basically flat, with positive mix in entrees, add-ons, and soft beverages.

Michael Bailen: This was offset by continued but improving negative mix and alcohol. Additionally, our sales momentum has carried forward into the third quarter with strong same store sales growth through the first four weeks. In the coming weeks, we will have our normal discussions with our operators regarding the amount of menu pricing we may take at the beginning of the fourth quarter. We will continue to follow our discipline process of focusing on maintaining our value proposition while balancing the impact of structural inflationary pressures. On the topic of inflation, we benefited in the second quarter from lower commodity costs than we had forecasted. The benefit came from our floating beef contracts that enable us to take advantage of market prices that were lower than our expectation for the back half of the quarter. At this time, we are updating our full-year commodity inflation guidance to approximately 2%. This adjustment reflects both the impact of the lower than initially forecasted inflation incurred so far this year and our current expectation of between 2 and 3% commodity inflation in the second half of the year. With regard to labor in the second quarter, wage and other inflation came in as expected. We also saw a continuation of the positive productivity trends of the last several quarters. We believe the benefit of fully staffed restaurants with longer tenured roadies should result in continued labor efficiency improvement through at least the end of this year. Our guidance remains at 4 to 5% wage and other labor inflation for the full year. With regard to cash flow, we ended the second quarter with 197 million of cash. Cash flow from operations was 134 million, which was offset by 145 million of capital expenditures, dividend payments, and share repurchases. Given our current cash position and an expectation for strong operating cash flow generation to continue, we have approved and/or accelerated additional store-level capital projects that were not in our initial plan. As such, we are raising our full year 2024 capital expenditure guidance to between 360 and 370 million. We are excited to make this capital commitment as we believe investing in new and existing restaurants remains a productive use of our cash for creating shareholder value. And now, Michael will walk us through the second quarter results. Thanks, Chris. To the second quarter of 2024, we reported revenue growth of 14.5%, driven by an 8.5% increase in average unit volume and 5.6% store-week growth. We also reported a restaurant margin dollar increase of 32.7% to 243 million dollars and a diluted earnings per share increase of 46.4% to $1.79. Awards weekly sales in the second quarter were approximately $159,000, with to go representing approximately $20,000 or 12.6% of these total weekly sales.

Speaker Change: This was offset by continued, but improving, negative mix in alcohol. Additionally, our sales momentum has carried forward into the third quarter, with strong same-store sales growth through the first four weeks.

Chris Monroe: Additionally, our sales momentum has carried forward into the third quarter with strong same-store sales growth through the first four weeks. In the coming weeks, we will have our normal discussions with our operators regarding the amount of menu pricing we may take at the beginning of the fourth quarter. We will continue to follow our disciplined process of focusing on maintaining our value proposition while balancing the impact of structural inflationary pressure. On the topic of inflation... We benefited in the second quarter from lower commodity costs than we had forecast.

Speaker Change: In the coming weeks, we will have our normal discussions with our operators regarding the amount of menu pricing we may take at the beginning of the fourth quarter.

Speaker Change: We will continue to follow our disciplined process of focusing on maintaining our value proposition while balancing the impact of structural inflationary pressures.

Speaker Change: On the topic of inflation, we benefited in the second quarter from lower commodity costs than we had forecasted.

Chris Monroe: The benefit came from our floating beef contracts that enabled us to take advantage of market prices that were lower than our expectations for the back half of the quarter. At this time, we are updating our full-year commodity inflation guidance to approximately 2%. This adjustment reflects both the impact of the lower than initially forecasted inflation incurred so far this year and our current expectation of between 2 and 3 percent commodity inflation in the second half of the year. As for labor in the second quarter, wage and other inflation came in as expected.

Speaker Change: The benefit came from our floating beef contracts that enable us to take advantage of market prices that were lower than our expectation for the back half of the quarter.

Speaker Change: At this time, we are updating our Full Year Commodity Inflation Guidance to approximately 2%.

Speaker Change: This adjustment reflects both the impact of the lower than initially forecasted inflation incurred so far this year, and our current expectation of between 2 and 3 percent commodity inflation in the second half of the year.

Speaker Change: With regard to labor in the second quarter, wage and other inflation came in as expected.

Chris Monroe: We also saw a continuation of the positive productivity trends of the last several quarters. We believe the benefit of fully staffed restaurants with longer tenured roadies should result in continued labor efficiency improvement through at least the end of this year. As for cash flow, we ended the second quarter with $197 million of cash.

Speaker Change: We also saw a continuation of the positive productivity trends of the last several quarters.

Speaker Change: We believe the benefit of fully staffed restaurants with longer tenured roadies

Speaker Change: should result in continued labor efficiency improvement through at least the end of this year.

Speaker Change: Our guidance remains at 4-5% wage and other labor inflation for the full year.

Speaker Change: With regard to cash flow, we ended the second quarter with $197 million of cash.

Speaker Change: Cash flow from operations was $134 million, which was offset by $145 million of capital expenditures, dividend payments, and share repurchases.

Michael Bailen: Cash flow from operations was $134 million, which was offset by $145 million of capital expenditures, dividend payments, and share repurchases. Given our current cash position and an expectation for strong operating cash flow generation to continue, we have approved and or accelerated additional store-level capital projects that were not in our initial plan. As such, we are raising our full year 2024 capital expenditure guidance to between $360 million and $370 million. We are excited to make this capital commitment as we believe investing in new and existing restaurants remains a productive use of our cash for creating shareholder value. And now, Michael will walk us through the second quarter results. Thanks, Chris.

Speaker Change: Given our current cash position and an expectation for strong operating cash flow generation to continue, we have approved and or accelerated additional store level capital projects that were not in our initial plan.

Speaker Change: As such, we are raising our full year 2024 capital expenditure guidance to between $360 and $370 million.

Speaker Change: We are excited to make this capital commitment as we believe investing in new and existing restaurants remains a productive use of our cash for creating shareholder value.

Michael Bailen: For the second quarter of 2024, we reported revenue growth of 14.5%, driven by an 8.5% increase in average unit volume and 5.6% store week growth. We also reported a restaurant margin dollar increase of 32.7% to $243 million and a diluted earnings per share increase of 46.4% to $1.79. Average weekly sales in the second quarter were approximately $159,000, with take-out representing approximately $20,000, or 12.6% of these total weekly sales. Comparable sales increased 9.3% in the second quarter, driven by 4.5% traffic growth and a 4.8% increase in average checks.

Speaker Change: And now, Michael will walk us through the second quarter results.

Michael Bailen: Thanks, Chris. For the second quarter of 2024, we reported revenue growth of 14.5%, driven by an 8.5% increase in average unit volume and 5.6% store week growth.

Michael Bailen: We also reported a restaurant margin dollar increase of 32.7% to $243 million and a diluted earnings per share increase of 46.4% to $1.79.

Michael Bailen: Average weekly sales in the second quarter were approximately $159,000, with to-go representing approximately $20,000, or 12.6% of these total weekly sales.

Michael Bailen: Comparable sales increased 9.3% in the second quarter, driven by 4.5% traffic growth and a 4.8% increase in average check. By month, comparable sales grew 9.8%, 9%, and 9.1% for our April, May, and June periods, respectively. And comparable sales for the first four weeks of the third quarter were up 8%, with our restaurants averaging sales of approximately $151,000 per week during the period. In the second quarter, restaurant margin dollars per store week increased 25.7% to nearly $29,000. Restaurant margin as a percentage of total sales increased 250 basis points year over year to 18.2%. Food and beverage costs as a percentage of total sales were 3.7% for the second quarter.

Michael Bailen: Comparable sales increased 9.3% in the second quarter, driven by 4.5% traffic growth and a 4.8% increase in average checks.

Michael Bailen: By month, comparable sales grew 9.8%, 9%, and 9.1% for our April, May, and June periods, respectively. And comparable sales for the first four weeks of the third quarter were up 8%, with our restaurants averaging sales of approximately $151,000 per week during that period. In the second quarter, restaurant margin dollars per store week increased 25.7% to nearly $29,000. Restaurant margin as a percentage of total sales increased 250 basis points year-over-year to 18.2%. Food and beverage costs as a percentage of total sales were 32.7% for the second quarter.

Michael Bailen: By month, comparable sales grew 9.8%, 9%, and 9.1% for our April , May, and June periods, respectively.

Michael Bailen: And comparable sales for the first four weeks of the third quarter were up 8%, with our restaurants averaging sales of approximately $151,000 per week during that period.

Michael Bailen: In the second quarter, restaurant margin dollars per store week increased 25.7% to nearly $29,000.

Michael Bailen: Restaurant margin as a percentage of total sales increased 250 basis points year-over-year to 18.2%.

Michael Bailen: Food and beverage costs as a percentage of total sales were 32.7% for the second quarter.

Michael Bailen: The 176 basis point year-over-year improvement was primarily driven by the benefit of a 4.8% check increase offsetting the 0.4% commodity inflation for the quarter. Labor as a percentage of total sales decreased 76 basis points to 32.8% as compared to the second quarter of 2023. Labor dollars per store week increased 6% due to wage and other labor inflation of 4.4% and growth in hours of 1.6%. A 2.2 million dollar adjustment to our quarterly insurance reserve had a 16 basis point negative impact on this quarter's labor expense as a percentage of sales. This charge had minimal impact on the year-over-year change as we left a $1.8 million reserve adjustment from last year.

Michael Bailen: The 176 basis point year-over-year improvement was primarily driven by the benefit of a 4.8% check increase, offsetting the 0.4% commodity inflation for the quarter. However, labor as a percentage of total sales decreased 76 basis points to 32.8% as compared to the second quarter of 2023. Labor dollars per store week increased 6% due to wage and other labor inflation of 4.4% and growth in hours of 1.6%. A $2.2 million adjustment to our quarterly insurance reserve had a 16 basis point negative impact on this quarter's labor expense as a percentage of sales.

Michael Bailen: The 176 basis point year-over-year improvement was primarily driven by the benefit of a 4.8% check increase, offsetting the 0.4% commodity inflation for the quarter.

Michael Bailen: Labor, as a percentage of total sales, decreased 76 basis points to 32.8% as compared to the second quarter of 2023.

Michael Bailen: Labor dollars per store week increased 6% due to wage and other labor inflation of 4.4% and growth in hours of 1.6%.

Michael Bailen: A $2.2 million adjustment to our quarterly insurance reserve had a 16-basis point negative impact on this quarter's labor expense as a percentage of sales.

Michael Bailen: This charge had minimal impact on the year-over-year change as we lapped a $1.8 million reserve adjustment from last year. Other operating costs were 14.8% of sales, which was seven basis points higher than the second quarter of 2023. Higher operator bonuses as a percentage of sales resulting from increased year-over-year restaurant-level profitability had a 30 basis point negative impact. Additionally, a $2.1 million adjustment to our quarterly reserve for general liability insurance had a 16 basis point negative impact on this quarter's other operating expense as a percentage of sales.

Michael Bailen: This charge had minimal impact on the year-over-year change as we lapped a 1.8 million dollar reserve adjustment from last year.

Michael Bailen: Other operating costs were 14.8% of sales, which was 7 basis points higher than the second quarter of 2023. Higher operator bonuses as a percentage of sales resulting from increased year-over-year restaurant level profitability had a 30 basis point negative impact. Additionally, a 2.1 million dollar adjustment to our quarterly reserve for general liability insurance had a 16 basis point negative impact on this quarter's other operating expense as a percentage of sales. This charge had minimal impact on the year-over-year change as we left a $1.6 million reserve adjustment from last year. Moving below restaurant margin, G&A dollars grew 14% year over year and came in at 4.3% of revenue for the second quarter.

Michael Bailen: Other operating costs were 14.8% of sales, which was 7 basis points higher than the second quarter of 2023.

Michael Bailen: Higher operator bonuses as a percentage of sales resulting from increased year-over-year restaurant-level profitability had a 30 basis point negative impact.

Michael Bailen: Additionally, a $2.1 million adjustment to our quarterly reserve for general liability insurance had a 16-basis point negative impact on this quarter's other operating expense as a percentage of sales.

Michael Bailen: This charge had minimal impact on the year-over-year change as we lapped a $1.6 million reserve adjustment from last year. Moving below restaurant margin, G&A dollars grew 14% year over year and came in at 4.3% of revenue for the second quarter. The majority of the year-over-year increase was due to higher compensation and benefit expense. Our effective tax rate for the quarter was 15%.

Michael Bailen: This charge had minimal impact on the year-over-year change as we lapped a $1.6 million dollar reserve adjustment from last year.

Michael Bailen: Moving below restaurant margin, G&A dollars grew 14% year-over-year and came in at 4.3% of revenue for the second quarter. The majority of the year-over-year increase was due to higher compensation and benefit expense.

Michael Bailen: The majority of the year-over-year increase was due to higher compensation and benefit expense. Our effective tax rate for the quarter was 15%; the higher tax rate is driven by our increased profitability. Based on our outlook for the remainder of the year, we are updating our fully year 2024 income tax rate to approximately 14.5%.

Michael Bailen: The higher tax rate is driven by our increased profitability. Based on our outlook for the remainder of the year, we are updating our full-year 2024 income tax rate to approximately 14.5%. Finally, as a reminder, 2024 is a 53-week year for us. As such, the fourth quarter will have 14 weeks versus our normal 13 weeks.

Michael Bailen: Our effective tax rate for the quarter was 15%. The higher tax rate is driven by our increased profitability.

Michael Bailen: Based on our outlook for the remainder of the year, we are updating our full year 2024 income tax rate to approximately 14.5 percent.

Michael Bailen: Finally, as a reminder, 2024 is a 53-week year for us. As such, the fourth quarter will have 14 weeks versus our normal 13 weeks. We estimate that the additional week could benefit fully year 2024, or any for share growth by approximately 4%.

Michael Bailen: Finally, as a reminder, 2024 is a 53-week year for us. As such, the fourth quarter will have 14 weeks versus our normal 13 weeks.

Michael Bailen: We estimate that the additional week could benefit fully-year 2024 earnings per share growth by approximately 4%.

Gerald L. Morgan: Now, I will turn the call back over to Jerry for final comments. Thanks, Michael. I'm looking forward to our upcoming annual fall tour, where our senior leadership travels the country for six weeks visiting with our managing partners. This gives us the opportunity to personally thank them for their efforts, and just as importantly, we will listen to what is on their mind and learn how we can help continue growing their business.

Gerald L. Morgan: We estimate that the additional week could fully benefit year 2024 earnings per share growth by approximately 4%. Now, I will turn the call back over to Jerry for final comments. Thanks, Michael. I'm looking forward to our upcoming annual fall tour, where our senior leadership travels the country for six weeks, visiting with our managing partners. This gives us the opportunity to personally thank them for their efforts, and, just as importantly, we will listen to what is on their minds and learn how we can help continue growing their businesses. Finally, thank you to all of Rhody Nation for your contributions to our success.

Michael Bailen: Now I will turn the call back over to Jerry for final comments.

Gerald L. Morgan: Thanks, Michael. I'm looking forward to our upcoming annual fall tour, where our senior leadership travels the country for six weeks, visiting with our managing partners.

Gerald L. Morgan: This gives us the opportunity to personally thank them for their efforts, and just as importantly, we will listen to what is on their mind and learn how we can help continue growing their business.

Jerry Morton: Finally, thank you to all of Road Nation for your contributions to our success. It takes all of us to deliver on our mission of legendary food and legendary service.

Speaker Change: Finally, thank you to all of Rhody Nation for your contributions to our success. It takes all of us to deliver on our mission of legendary food and legendary service.

Michael Bailen: That concludes our prepared remarks. We are going to open the line for questions. Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Operator: It takes all of us to deliver on our mission of legendary food and legendary service. That concludes our prepared remarks. Brianna, please open the line for questions. Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: That concludes our prepared remarks. Brianna, please open the line for questions.

Brianna: Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Operator: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Brianna: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Jake Bartlett: Your first question comes from the line of Jake Bartlett with Tourist Securities. Please go ahead.

Jake Rowland Bartlett: Your first question comes from the line of Jake Bartlett with Truist Securities. Please go ahead. Great, thank you so much for taking the question. You know, mine was on the implications of the quarter-to-date trend. You mentioned 8% in the first four weeks of the quarter. One question is whether there's any moving pieces there, like calendar shifts, you know, the 4th of July impact. Just want to make sure on that.

Speaker Change: Your first question comes from the line of Jake Bartlett with Truist Securities. Please go ahead.

Jake Bartlett: Great.

Jake Rowland Bartlett: Thank you so much for taking the question. My mind was on the implications of the quarter-to-date trend. You mentioned 8% in the first four weeks or the quarter. One question is whether there's any moving pieces there like counter-ships, you know, for the July impact. I'm just going to make sure on that. The other part of the question is, you can pair these materials last year, so in August and September. How do you think about those compares easing? Does that give you comfort that we could accelerate from the current levels, or was last year more in relation to what was happening in the prior year?

Jake Rowland Bartlett: Great, thank you so much for taking the question. Mine was on the implications of the quarter-to-date trend. You mentioned 8% in the first four weeks of the quarter. One question is whether there's any moving pieces there like calendar shifts.

Michael Bailen: And then the other part of the question is, you know, comparisons eased materially last year, so in August and September. So, you know, how do you think about those comparisons easing? Does that give you comfort that we could accelerate, you know, from the current levels, or was last year more in relationship to what was happening the prior year? Just how should we think of the quarter-to-date and the implications for the quarter as a whole? Hey, Jake, it's Michael.

Speaker Change: And then the other part of the question is, you know, compares eased materially last year, so in August and September , so, you know, how do you think about those compares easing? Does that give you comfort that we could accelerate, you know, from the current levels or, you know, was last year more in relationship to what was happening the prior year? How should we think of the quarter to date and the implications for the quarter as a whole?

Jake Bartlett: How should we think of the quarter-to-date and the implications for the day? I think we're very happy with the 8% for the month.

Michael Bailen: I appreciate the question. At first, I think we're, you know, very happy with the 8%, you know, for the month. There's really no timing issues in there that we would call out. And, you know, I think we've somewhat moved away from looking at the multi-year stacks.

Speaker Change: Hey Jake, it's Michael. I appreciate the question. I mean, I first say I think we're, you know, very happy with the 8%, you know, for the month. There's really no timing issues in there that we would call out.

Chris Monroe: There's really no timing issues in there that we would call out, and I think we somewhat moved away from looking at the multi-year stacks, but to the extent you do look at them on a two-year or on even a five-year basis, there is no weakness being shown in that 8% number. And given what we are lapping from prior years, you are right, the overall conflict in the next several months, you know, on its surface it's easier, but on a multi-year basis, you know, we will see what happened. And so we'll continue to do what we're doing, and our operators are focused on driving more guests through the doors, and we feel very happy about the trends we're seeing.

Speaker Change: And, you know, I think we've somewhat moved away from looking at the multi-year stacks but, you know, to the extent you do look at them on a, you know, a two-year or on even a five-year basis, you know, there is...

Speaker Change: No weakness being shown in that 8% number, given what we are lapping from prior years. You are right, the overall comp in the next several months...

Michael Bailen: But, you know, to the extent you do look at them on a, you know, a two-year or even a five-year basis, there is, you know, no weakness being shown in that 8% number and, you know, given what we are lapping from prior years. You are right, the overall comp in the next several months, you know, on its surface, it's easier, but you, but on a multi-year basis, you know, we, you know, we will see what happens.

Speaker Change: You know, on its surface, it's easier, but on a multi-year basis, you know, we will see what happens. So, we'll continue to do what we're doing, and our operators are focused on driving more guests through the doors, and we feel very happy about the trends we're seeing.

Jake Bartlett: Thank you.

Brian Bittner: Our next question comes from the line of Brian Bittner with Oppenheimer.

Michael Bailen: So we'll continue to do what we're doing, and our operators are focused on driving more guests through the doors. And, you know, we feel very happy about the trends we're seeing. Thank you. Our next question comes from the line of Brian Bittner with Oppenheimer. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Brian Bittner with Oppenheimer. Please go ahead.

Brian Bittner: Please go ahead. Thanks. Congratulations on great results.

Brian John Bittner: Congratulations on the great results. I wanted to ask you about margins, and it's kind of a two-part question about margins. First on the labor side, it just seems like you've cracked the code on growing hours at a much lower rate than traffic. So, first, can you just help us understand what's going on with labor and why it's so successful now from a leverage perspective?

Brian John Bittner: And then, secondly, on the food cost side, 2 to 3 percent in the second half of the year. Can you just remind us how that's going to pace in 3Q versus 4Q, whether it's going to be bifurcated in the trend between those two quarters so we can think about the amount of COGS leverage you're going to get in 3 and 4Q, potentially? Yeah, Brian, this is Jerry.

Brian Bittner: I wanted to ask about margins and kind of a two-part question on margins. First on the labor side, it's just the flow through on labor margins is meaningfully better this year. It just seems like you crack the code on growing hours at a much lesser rate than traffic. So first, can you just help us understand what's going on with labor and why it's so successful now from a leverage perspective?

Speaker Change: Thanks.

Brian John Bittner: Congratulations on great results. I wanted to ask about margins and...

Brian John Bittner: Kind of a two-part question on margins first on the labor side

Speaker Change: It's just the flow through on labor margins is meaningfully better this year. It just seems like you've cracked the code on, you know, growing hours at a...

Speaker Change: Much lesser rate than traffic. So first, can you just help us understand

Speaker Change: What's going on with labor and why it's so successful now from a leverage perspective and then secondly on the food cost side

Brian Bittner: And then secondly, on the food cost side, two to three percent in the second half of the year, can you just remind us how that's going to pace in three Q versus four Q, whether it's going to be bifurcated in the trim between those two quarters so we can think about the amount of COGS leverage you're going to get in three and four Q potentially.

Speaker Change: Two to three percent in the second half of the year. Can you just remind us how that's going to pace in 3Q versus 4Q? Whether it's going to be bifurcated in the trend between those two quarters so we can think about the amount of COGS leverage you're going to get in 3 and 4Q potentially?

Jerry Morton: Yeah, Brian, this is Jerry. I'll take the labor side, and then I think Michael's dressed the food cost side, but I really do believe that our investment in the last couple of years in our rebuilding of our management teams and our hourly ranks has really found a way to flow through the productivity now. And obviously, with our elevated sales and people getting comfortable and in doing their jobs and getting the reputation reps in basically from that side of it, I think is all flowing through where we're fully staff. We're comfortable with the tenure that we're having, and all of that is producing some outstanding results on the labor side, which we've been really pushed in the last couple of years.

Gerald L. Morgan: I'll take the labor side. And then I think Michael's addressed the food cost side. But I really do believe that our investment in the last couple of years in our rebuilding of our management teams and our hourly ranks has really found a way to flow through productivity now. And obviously, with our elevated sales and people getting comfortable and doing their jobs and getting the reputed reps in basically, from that side of it, I think it's all flowing through.

Gerald L. Morgan: Yeah, Brian , this is Jerry. I'll take the labor side, and then I think Michael will address the food cost side, but I really do believe that our investment in the last couple of years in our rebuilding of our management teams and our hourly ranks has really found a way to flow through the productivity now.

Michael Bailen: And obviously with our elevated sales and people getting comfortable and doing their jobs and getting the reps in, basically.

Gerald L. Morgan: We're fully staffed, we're comfortable with the tenure that we're having, and all of that is producing some outstanding results on the labor side, which we've been really pushing the last couple of years. Jerry, I'll just jump in there. This is Chris before we get it over to Michael.

Michael Bailen: from that side of it. I think it's all flowing through. We're fully staffed. We're comfortable with the tenure that we're having. And all of that is producing some outstanding results on the labor side, which we've been really pushing the last couple of years.

Chris Monroe: And Jerry, I'll just jump in there. This is Chris. Before we get it over to Michael on the labor, just for percentages. You know, we've talked about having about a 50% of our labor hours growth compared to our traffic growth, and we got there in the fourth quarter. We were down to 25% in Q One. We're still below the 50% in the mid 30s this quarter, and it's all reflective of the things that Jerry was talking about.

Michael Bailen: And Jerry, I'll just jump in there. This is Chris before we get it over to Michael. On the labor, just for percentages, you know, we've talked about having about a 50% of our labor hours growth compared to our

Chris Monroe: On the labor side, just for percentages, we've talked about having about 50 percent of our labor hours growth compared to our traffic growth. We got there in the fourth quarter. We were down to 25 percent in Q1. We're still below 50 percent in the mid-30s this quarter. It's all reflective of the things that Jerry was talking about. Michael, do you want to speak to me about food costs? Sure. But when it comes to the back half of the year, commodity inflation, where we said two to three percent, maybe you're a little bit higher in the third quarter than you are in the fourth, but at this time, they really aren't that different from each other.

Gerald L. Morgan: Our traffic growth, and we got there in the fourth quarter.

Gerald L. Morgan: We were down to 25% in Q1. We're still below the 50% in the mid-30s this quarter, and it's all reflective of the things that Jerry was talking about.

Michael Bailen: And Michael, you want to speak to the food cost?

Michael Bailen: Sure. Yeah, I'm going to come to the back half of the year, commodity inflation, where we said 2 to 3%.

Michael Bailen: And Michael, you want to speak to the food cost? Sure. Yeah, when it comes to the back half of the year, commodity inflation, where we said two to three percent, yeah, maybe you're a little bit, you know, higher in the third quarter than you are the fourth, but at this time they aren't, they really aren't that that different from each other.

Brian John Bittner: Yeah, maybe you're a little bit higher in the third quarter than you are the fourth, but at this time they aren't, they really aren't that that different from each other. Thank you, guys.

Brian Bittner: Thank you.

Speaker Change: Thank you, guys.

David Tarantino: Our next question comes from the line of David Tarantino with Baird.

Michael Bailen: Thank you, guys. Thank you. Our next question comes from the line of David Tarantino with Baird. Please go ahead. Hi. I had a question, maybe a follow-up on the beef cough. Thank you for watching! Talk about your current outlook for beef costs, more about the next year. Hey, David. It's Michael.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of David Tarantino with Baird. Please go ahead.

David Tarantino: Please go ahead.

David Tarantino: Hi, I had a question, maybe a follow-up on the beef cost. I guess, you know, two quarters ago, there was a lot of concern about beef cost being elevated for a multi-year period. And this year it seems like they've come in quite a bit below what you're anticipating. So I guess, can you just maybe talk about your current outlook for beef costs? I know maybe some pressures coming in in the second half, but I'm thinking more about the next year or two and what the beef cycle might look like for you.

David E. Tarantino: Hi. I had a question, maybe a follow-up on the beef costs. I guess, you know,

David E. Tarantino: Two quarters ago, there was a lot of concern about beef costs being elevated for a multi-year period. And this year, it seems like they've come in quite a bit below what you were anticipating.

Speaker Change: Can you just maybe talk about your current outlook for beef costs? I know maybe some pressure is coming in in the second half but I'm I'm thinking more about the next year or two and what the beef cycle might look like for you.

Michael Bailen: David, it's Michael. Appreciate the question. I mean, we have. I think the belief that the supply is going to be down in the back half of the year, and we have benefited from maybe a little bit less demand out there in the retail space than we had expected. The men has kept prices from going as high as we had originally expected them to do. We're obviously expecting to feel more pressure from men in the back half of the year.

Michael Bailen: I appreciate the question. Yeah, I mean, we have the belief that, you know, the supply is going to be down in the back half of the year. And, you know, we have benefited from maybe a little bit less demand out there in the retail space than we had expected. And that has kept prices from going as high as we had originally expected them to do. We were obviously expecting to feel more pressure from that in the second half of the year.

Speaker Change: Hey David, it's Michael. Appreciate the question. Yeah, I mean, we have...

Speaker Change: You know, I think the belief that, you know, the supply is going to be down in the back half of the year, and, you know, we have...

Speaker Change: benefited, you know, from maybe a little bit less demand out there in the retail space.

Speaker Change: than we had expected, and that has kept prices from going as high as we had originally expected them to do. We were obviously expecting to feel more pressure from that in the back half of the year. It's a little early for us to get into any kind of guidance

Michael Bailen: It's a little early for us to get into any kind of guidance for 2025, but I think the industry data, you know, calls out the expectation for supply to continue to tighten. But, you know, we'll see what happens with demand and what that does to the beef pressures. We'll give you our probably early thoughts on commodity inflation for 2025 on our next earnings call. Great, thank you for that. Relates to the pricing decision you're going to make, you know, I guess, you know, you mentioned, I guess I'm wondering... Would that be considered structural in your mind? Would you take pricing against that?

Michael Bailen: It's a little early for us to get into any kind of guidance. For 2025, I think the industry data calls out the expectation for supply to continue to tighten, but we'll see what happens with demand and what that does to the beef pressures. We'll give you our probably early thoughts on commodity inflation for 2025 on our next earnings call.

Speaker Change: for 2025. I think the industry...

Speaker Change: Data, you know, calls out the expectation for supply to continue to tighten.

Speaker Change: But, you know, we'll see what happens with them.

Speaker Change: with demand and what that does.

Speaker Change: to the beef pressures. We'll give you our probably early thoughts on commodity inflation for 2025 on our next earnings call.

David Tarantino: Great. Thank you for that.

Michael Bailen: And then, as it relates to the pricing decision, you're going to make, I guess you mentioned that you'll take some pricing against whatever you consider structural inflation to be, but I guess I'm wondering, on this topic of beef cost, if it looks like commodity costs are going to be elevated for the next year or two beyond this year. Would that be considered structural, in your mind? Would you take pricing against that, or would you consider that more cyclical?

Speaker Change: Great. Thank you for that. And then, as it relates to the pricing decision you're going to make, you know, I guess, you know, you mentioned that you'll take some pricing against whatever you consider structural inflation to be.

Speaker Change: But I guess I'm wondering on this topic of beef costs, if it looks like commodity costs are going to be elevated for the next...

Speaker Change: You know year or two You know beyond this year would that be considered structural in your mind? Would you take pricing against that or would you consider that more cyclical?

Michael Bailen: Yeah, I think we would consider that side a little more citricle, but you know, we will start that process in a few weeks talking with all of our operators across the country and going through that, really looking at what that will be at this time of year, knowing that things have changed a little from the beginning of the year. But I do believe we'll continue to approach it with a very conservative mindset, and we'll see what our operators have to say, and then make a great decision.

Speaker Change: Yeah, I think we would consider that side of it a little more citrical, but, um...

Speaker Change: You know, we will start that process in a few weeks, talking with all of our operators across the country and going through that, really looking at what that will be at this time of year, knowing that things have changed a little from the beginning of the year.

Speaker Change: But I do believe we'll continue to approach it with a very conservative mindset and we'll see what our operators have to say and then make a great decision.

David Tarantino: Great. Thank you very much, and congrats on a great quarter. Thank you very much. Appreciate that.

Gerald L. Morgan: Yeah, I think we would consider that side of it a little more cyclical. But, you know, we will start that process in a few weeks talking with all of our operators across the country and really looking at what it will be at this time of year, knowing that things have changed a little from the beginning of the year. But I do believe we'll continue to approach it with a very conservative mindset, and we'll see what our operators have to say and then make a great decision. Thank you very much and congrats on a great job. Thank you very much.

Speaker Change: Great. Thank you very much and congrats on a great quarter.

Brian Harbour: Our next question comes from the line of Brian Harbor with Morgan Stanley. Please go ahead.

Speaker Change: Thank you very much, appreciate that.

Gerald L. Morgan: Appreciate that. Our next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead. Yeah, thank you. Good afternoon. I was just curious. What's that?

Speaker Change: Our next question comes from the line of Brian Harbour with Morgan Stanley . Please go ahead.

Brian Harbour: Yeah, thank you.

Brian Harbour: Good afternoon. I was just curious on the capex comments you made increasing for this year. What's that going towards? Are you doing, you know, some more store expansion, or is that perhaps going to some of the other brands, or is some of this kind of getting a head start on next year's new units?

Brian James Harbour: Yeah, thank you. Good afternoon. I was just curious on the...

Brian James Harbour: CapEx comments you made increasing for this year. What's that going towards? Are you doing, you know, some more store expansion, or is that perhaps going to some of the other brands, or is some of this kind of getting a head start on next year's new units?

Chris Monroe: Going towards, or are you doing? For more information, visit www.fema.gov. Hey, Brian, it's Chris.

Chris Monroe: Hey, Brian, it's Chris. Yeah, thanks for that question. It's really sort of all of the above, you know. We even in last quarter's call, we talked about how we were getting good returns on these store investments. And so we're going to continue to do that. So we're expanding; we're expanding dining areas, we're expanding back of house. And this also gives us an opportunity to get after the 2025 pipeline to just put, put some more into that to make sure that we get that good opening cadence throughout the year.

Chris Monroe: Yeah, thanks for that question. It's really sort of all of the above, you know. We even talked about it on last quarter's call. We talked about how we were getting good returns on these store investments. And so we're going to continue to do that. So we're expanding, we're expanding the dining areas, we're expanding back of house. And this also gives us an opportunity to get after the 2025 pipeline to just put some more into that to make sure that we get that good opening cadence throughout the year. Our next question comes from the line of Jim Salera with Stevens. Please go ahead.

Brian James Harbour: Hey Brian , it's Chris. Yeah, thanks for that question. It's really sort of all of the above, you know, we even in last quarter's call we talked about how

Brian: We were getting good returns on these store investments, and so we're going to continue to do that. So we're expanding dining areas. We're expanding back of house.

Brian: And this also gives us an opportunity to get after the 2025 pipeline, to just put some more into that, to make sure that we get that good opening cadence throughout the year.

Jim Valera: Our next question comes from the line of Jim Valera with Stevens. Please go ahead.

Brian: Our next question comes from the line of Jim Salera with Stevens. Please go ahead.

James Ronald Salera: Hi guys, thanks for taking our question. You continue to deliver. It seems like on strong value and good quality food as a combo to keep customers coming on the door.

James Ronald Salera: Hi guys, thanks for taking our question. You continue to deliver, it seems like, on strong value and good quality food as a combo to keep customers coming in the door. Can you give us any commentary around possible trade-down dynamics and maybe interactions that you're seeing from customers by income cohorts? Yeah, Jeff, it's Michael.

James Ronald Salera: Hi guys, thanks for taking our question.

James Ronald Salera: You continue to deliver, it seems like, on...

James Ronald Salera: Strong value and good quality food is a combo to keep customers coming in the door. Can you give us any commentary around?

Jim Valera: Can you give us any commentary around possible trade down dynamic? and maybe interactions that you're seeing from customers by income cohort.

Speaker Change: possible trade-down dynamics and maybe interactions that you're seeing from customers by income cohort.

Michael Bailen: Yeah, Jim, it's Michael. I can talk on that yet not a lot of commentary that we're hearing right now as far, you know, anything being different than what we've been seeing for a while, which I think we have people, you know, trading up to us, trading down to us, trading across to us. So we're very pleased. With, you know, the guests, you know, decision to visit with us. We're not seeing any degradation in what they are ordering you, as seen by kind of our flat, you know, mixed trends right now. So really right now, there's been really no change in what we're seeing, and we're very pleased by that.

Michael Bailen: I can talk about that. Yeah, not a lot of commentary that we're hearing right now as far as anything being different than what we've been seeing for a while, which I think we have people, you know, trading up to us, trading down to us, trading across to us. So we're very pleased with, you know, the guests' decision to visit with us; we're not seeing any degradation in what they are ordering, you know, as seen by the kind of our flat, you know, mixed trends right now.

Speaker Change: Yeah, Jeff, it's Michael. I can talk on that.

Jeff: Not a lot of commentary that we're hearing right now as far, you know, of anything being different than what we've been seeing for a while, which I think we have people

Speaker Change: trading up to us, trading down to us, trading across to us.

Speaker Change: With the guests' decision to visit with us, we're not seeing any degradation in what they are ordering, as seen by our flat, mixed trends right now.

Speaker Change: Really, right now, there's been really no change in what we're seeing, and we're very pleased by that.

Jim Valera: Okay, great. And then in some of our pricing data that we look at, it seemed like pricing in California was, you know, minimal during the quarter.

Michael Bailen: So really, right now, there's really been no change in what we're seeing, and we're very pleased by that. And then, in some of the pricing data that we look at, it seems like pricing in California was, you know, minimal during the quarter. Can you talk about the labor market in California specifically and kind of your thoughts around, you know, pricing for the FAST Act? Yeah, sure, I can speak to that. You know, Jim, we realize we don't have a large presence in California.

Speaker Change: Okay, great. And then in some of our pricing data that we look at, it seems like pricing in California was, you know, minimal during the quarter. Can you talk about the labor market in California specifically and kind of your thoughts around, you know, pricing for the FAST Act?

Michael Bailen: Can you talk about the labor market in California specifically and kind of your thoughts around, you know, pricing for the Fast Act? Yeah, sure, I can speak about, you know, Jim. We don't have a large presence in California. So, you know, not not a lot really the comment on out there are California stores from a sales standpoint are doing fine and, you know, obviously if there's more structural pressure, you may have a little bit more pricing that you take in a state like that. But we certainly haven't done anything in California for a pricing standpoint out of our outside of our normal process.

Michael Bailen: So, you know, not a lot really to comment on out there. Our California stores, from a sales standpoint, are doing fine. And, you know, obviously, if there's more structural pressure, you might have a little bit more pricing that you take in a state like that. But we certainly haven't done anything in California from a pricing standpoint outside of our normal process.

Speaker Change: Yeah, sure, I can speak on that. You know, Jim, realize we don't have a large presence in California.

Speaker Change: So, you know, not a lot really to comment on out there. Our California stores, from a sales standpoint, are doing fine. And, you know, obviously if there's more structural pressure, you may have a little bit more pricing that you take in a state like that.

Speaker Change: But we certainly haven't done anything in California from a pricing standpoint outside of our normal process.

Jim Valera: Okay, I said I'll be back in the queue. Thank you.

Michael Bailen: Okay, great. Thanks guys. I'll hop back in the queue.

Speaker Change: Okay, great. Thanks guys. I'll hop back in the queue.

Elliott Simon: Our next question comes from the line of Elliott Simon with Evercore ISI. Please go ahead.

Simon Elliott: Thanks. Our next question comes from the line of Elliot Simon with Evercore ISI. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Elliot Simon with Evercore ISI. Please go ahead.

Elliott Simon: Hey guys, congrats on a great quarter. I was particularly impressed by those five and a half percent same store sales growth in the quarter, which may be short of Roadhouse, but it's seemingly much better than most other concepts this quarter. I know you've done a lot of work on the brand.

Gerald L. Morgan: Hey guys, congrats on a great quarter. I was particularly impressed by Bubba's 5.5% same store sales growth in the quarter, which may be short of Roadhouse, but it's seemingly much better than most other concepts this quarter. I know you've done a lot of work on the brand, so can you talk about the timeline to reaching that eight to 10 net opening figure annually you've referenced in the past? And are you able to walk us through the building blocks of the ROI on new Bubba's units, incorporating the strong performance you've recently achieved, maybe ex-capitalized leases and pre-opening costs, which is how many others in the industry give Yeah, I'll start us off and let Michael finish.

Elliot Simon: Hey guys, congrats on a great quarter.

Elliot Simon: I was particularly impressed by Bubba's 5.5% same-store sales growth in the quarter, which may be short of Roadhouse, but it's seemingly much better than most other concepts this quarter. I know you've done a lot of work on the brand, so can you talk about the timeline to reaching that 8 to 10 net opening figure annually you've referenced in the past?

Elliott Simon: So can you talk about the timeline to reach that eight to 10 net opening figure NLA reference in the past. And are you able to walk us through the building blocks of the ROI on new bubbles units incorporating the strong performance you've recently achieved. Maybe X capitalized leases and pre opening costs, which is how many others industry give it.

Speaker Change: And are you able to walk us through the building blocks of the ROI on new Bubba's units incorporating the strong performance you've recently achieved? Maybe ex-capitalized leases and pre-opening costs, which is how many others in the industry give it?

Jerry Morton: Yeah, I'll start us off and let Michael finish on the, you know, we're really, really excited about what Bubba's brand is doing. And we've made some adjustments a few years ago in our leadership and in just really our identity to some degree made a few adjustments, added a couple of menu items, a combo appetizer. We restructured the wings and have been testing with a couple other products that have been very, very successful. But I think the biggest thing for us is the consistency of the experience that we are providing for our guests with our burgers and pizzas.

Michael Bailen: On the, you know, we're really, really excited about what Bubba's brand is doing. And we made some changes a few years ago in our leadership and, and just really our identity to some degree, made a few adjustments, added a couple of menu items, a combo appetizer, we restructured the wings, and been testing with a couple other products that have been very, very successful. But I think the biggest thing for us is the consistency of the experience that we are providing for our guests with our burgers and pizzas and, and just all of our offerings, the consistency of our operations.

Speaker Change: Yeah, I'll start us off and let Michael finish. On the, you know, we're really, really excited about what Bubba's brand is doing and we've made some adjustments a few years ago in our leadership.

Speaker Change: And just really our identity, to some degree, made a few adjustments, added a couple of menu items, a combo appetizer, we restructured the wings and

Michael Bailen: and I've been testing with a couple other products that have been very, very successful. But I think the biggest thing for us is the consistency of the experience that we are providing for our guests with our burgers and pizzas and just all of our offerings, the consistency of our operations.

Jerry Morton: And just all of our offerings, the consistency of our operations. So it just from an operator standpoint and from a brand standpoint, we feel like we are really excited about where we're at and the things that we've done. And we'll continue to look at how we ramp it up going forward.

Michael Bailen: So just from an operator standpoint and from a brand standpoint, we feel like we are really excited about where we're at and the things that we've done. And we'll continue to look at how we ramp it up going forward. Elliot, this is Michael.

Michael Bailen: So, just from an operator standpoint and from a brand standpoint, we feel like we are really excited about where we're at and the things that we've done, and we'll continue to look at how we ramp it up going forward.

Michael Bailen: I can go in a little bit on your question. I'm probably not going to walk through the whole ROI equation on the call. But from an investment cost, if you're excluding the rent, and so therefore just getting to the capex and the cash cost of pre-opening, you're probably more in the $6.5 million range for that.

Michael Bailen: And Elliot, this is Michael, I can go in a little bit on your question, I'm probably not going to walk through the whole ROI equation on the call, but from an investment cost, if you're excluding

Elliot Simon: The rent, and so therefore just getting to the, you know, the CapEx and the...

Michael Bailen: And again, Above, with its focus on burgers, pizza, and wings, and a little bit higher alcohol mix than our Texas Roadhouse, probably has the ability to generate higher restaurant margins. So we're very pleased with the ability of Above us to meet our internal hurdles and believe that it's very possible going forward. Great. And then, just as a quick follow-up, I know it's at 10k. Thank you. But I get a little antsy.

Elliot Simon: [inaudible]

Speaker Change: We're very pleased with the ability of Above Us to meet our internal hurdles and believe that it's very possible going forward.

Michael Bailen: What was the restaurant margin for Bubba's in the quarter? Yeah, Ellie, I think we're just gonna let you stay antsy and see that in the queue when it comes out shortly. Got it.

Elliot Simon: Great, and then just as a quick follow-up, I know it's at 10k, thank you, but I get a little antsy. What was the restaurant margin for Bubba's in the quarter?

Speaker Change: Yeah, Elliot, I think we're just going to let you stay antsy and see that in the queue when it comes out shortly.

Speaker Change: Got it. Great. Thanks, guys, and best of luck. Thank you.

Jeffrey Andrew Bernstein: Great. Thank you. Our next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Speaker Change: Our next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Michael Bailen: Hi, this is ProductCon for Jeff. I appreciate the question. Just a quick question about technology.

ProductCon: Hi, this is ProductCon for Jeff. Appreciate the question. Just a quick question about technology. It's exciting to see that digital kitchens are going to be deployed, I guess, fully throughout the system by the end of 2025.

Michael Bailen: It's exciting to see that digital kitchens are going to be deployed, I guess, fully throughout the system by the end of 2025. Just looking ahead, what's next on the list? Any exciting initiatives that you guys are potentially looking at, perhaps at the front of the house to help drive greater throughput? It just seems like your stores are as busy as ever. Thank you. Well, thank you very much for the question. We are very excited about the digital kitchen.

Speaker Change: Just looking ahead, what's next on the list, any exciting initiatives that you guys are potentially looking at? Perhaps at the front of the house to help drive greater throughput? It just seems like your stores are as busy as ever. Thank you.

Speaker Change: Well, thank you very much for the question. We are very excited about the digital kitchen.

Michael Bailen: Again, we're halfway through, so we've got a little over 100 stores rolling out on it. It's still very new to us. We're definitely learning some things and excited about it. We rolled out the Roadhouse Pay or Pay at the Table a couple of years ago, and that's been very successful. For our AGM or guest management, we are looking at a new version that might help us be a little faster at the host stand.

Speaker Change: Again, we're halfway through, so we've got a little over 100-plus stores rolling out on it. It's still very new to us.

Speaker Change: Definitely learning some things and excited about it.

Speaker Change: We rolled out the Roadhouse Pay, or the Pay at the Table, a couple of years ago, and that's been...

Speaker Change: Very successful. Our AGM or guest management, we are looking on a new version that might help us be a little faster at the host stand. So there's a few things that are in progress.

Michael Bailen: So there are a few things that are in progress, but we need to make sure that the digital kitchen is up and rolling and we're really comfortable there. Again, we'll look at the guest management and the Roadhouse Pay. They're all teaching us that they help enhance the guest experience and our employee work experience with us. So both of them are big wins.

Speaker Change: But we need to make sure that the digital kitchen is up and rolling and we're really comfortable there. We're, again, we'll look at the guest management and the Roadhouse Pay, or they're all teaching us that these are, they help enhance the guest experience and our employee work experience with us. So, both of them are big wins.

Michael Bailen: Thank you, I appreciate the call. Thank you. Our next question comes from the line of Lauren Silberman with Deutsche Bank. Please go ahead.

Speaker Change: Thank you, I appreciate the call.

Lauren Danielle Silberman: Hey, thanks for the question. Congratulations on the quarter. I wanted to ask about restaurant margin in the near term, close to 18% in the first half of the year. Given the commodity guide, do you expect it to hit at least 17% this year? Any other dynamics we should consider? And then, just on a longer-term question on margin, as you guys inch back to the 17 to 18% target, is there a scenario where we could be talking about margins north of 18% in a couple of years, or how do you guys think about choosing to reinvest? Hey Lauren, it's Chris.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: Hey, thanks for the question, congrats on the quarter. I wanted to ask about restaurant margin. On the near term, close to 18% in the first half of the year. Given the commodity guide,

Speaker Change: Do you expect to hit at least 17% this year? Any other dynamics we should consider? And then just on a longer term question on margin, have you guys inched back to the 17 to 18% target?

Speaker Change: There is an area where we could be talking about margins north of 18% in a couple of years, or how do you guys think about, like, choosing to reinvest?

Chris Monroe: Well, look, what a great first half, right? I mean, we expanded margins by 250 basis points year over year. A true team effort, and it really was led by the operators. For the second half, we're definitely expecting to see margin expansion relative to last year. But there are a lot of factors that, you know, you have to consider.

Speaker Change: Hey Lauren, it's Chris. Well, look, what a great first half, right? I mean we expanded margins by 250 basis points over year over year, a true team effort and it really is led by the operators.

Speaker Change: For the second half...

Speaker Change: We're definitely expecting to see margin expansion relative to last year.

Speaker Change: But there's a lot of factors that, you know, you have to consider, and I think these are the things that you guys model.

Speaker Change: It's all the things that you know, but mainly commodities, and that has concern for us. But the bottom line in the short run for the rest of this year is a fantastic first half on margin and definite expectations for margin expansion year over year for the second half.

Chris Monroe: And I think these are the things that you guys model. It's all the things that you know, but mainly commodities, and that has been a concern for us. But the bottom line, in the short run, for the rest of this year, is a fantastic first half on margin, and definite expectations for margin expansion year over year for the second half. In terms of the long term, you know, that 17 to 18 has been our goal for a long time, and you get much north of that, and you're usually, you can impact your customer, you're not, you may lose your value, so there's Thank you for that. Quick one on, I guess, quarter to date. Did you guys see any impact from the hurricane? and some of the severe weather that's worth calling. Hey, Lauren, it's Michael.

Speaker Change: In terms of long term, that 17 to 18 has been our goal for a long time.

Speaker Change: You get much north of that and you're usually, you can impact your customer, you're not, you may lose your value. So there's, that's been a north star here for a while and I think that's likely to continue.

Speaker Change: Thank you for that. Quick one on, I guess, quarter-to-date. Did you guys see any impact from the hurricane and some of the severe weather that's worth calling out?

Michael Bailen: Yeah, I mean, we looked at that, as we typically do, for a short-term event like that, in a specific area, you do, you know, feel a short-term impact, and then you also get a bounce back. So we think it's a very minimal impact, if any, on the overall number. So not something worth, you know, quantifying at this time. Okay, thank you very much.

Michael Bailen: Hey Lauren, it's Michael. We looked at that, as we typically do for a short-term event like that in a specific area, you do feel a short-term impact and then you also get a bounce back, so we think it's a very minimal impact, if any, on the overall numbers, so not something worth quantifying at this time.

Peter Mokhlis Saleh: Our next question comes from Peter Saleh with BTIG. Please go ahead. Great, thanks and congrats on a great quarter. I did want to ask a couple questions, one on menu mix. Menu mix was flat for the first time in, call it, six or seven quarters now, and it was a pretty meaningful improvement from the first quarter to the second quarter.

Lauren Danielle Silberman: Okay, thank you very much.

Speaker Change: Our next question comes from the line of Peter Saleh with BTIG. Please go ahead.

Peter Mokhlis Saleh: Great, thanks and congrats on a great quarter. I did want to ask a couple questions. One on menu mix. Menu mix was flat the first time in call it six or seven quarters.

Speaker Change: and it was a pretty meaningful improvement from the first quarter to the second quarter.

Michael Bailen: What can you tell us about that? Are you seeing customers trading up to you, trading down to you? I assume this is not the end of this kind of improving trend. And any color on what you saw in terms of menu mix in the month of July? And then just on the second question on labor hours. You grew labor hours substantially less than the historical rate of 50% of traffic.

Speaker Change: What can you tell us about that? Are you seeing customers trading up to you?

Speaker Change: Trading down to you is, I assume this is not the end of this kind of improving trend and any color on what you saw in terms of menu mix in the month of July . And then just on the second question on labor hours.

Speaker Change: You grew the labor hours, you know, substantially less than, you know, the historical rate of 50% of traffic. Should we anticipate that to continue in the back end of the year? Or do you think labor hours will grow kind of more in that 50% of traffic in the second half? Thank you.

Michael Bailen: Should we anticipate that to continue in the back end of the year, or do you think labor hours will grow kind of more in that 50% of traffic? Sure. Hey Peter, it's Michael.

Michael Bailen: Yeah, I mean, I think we're very pleased with the mixed trends that we are seeing. And as we had in our prepared remarks, we were seeing some positive mix in entrees and add-ons and soft beverages, still seeing some negative mix in alcohol, but not as much as we had been, which led to a basically flat mix for the quarter. And that trend has basically continued into July, somewhere, you know, remaining in that flattish range. And we'll see how that trend holds up into the back half of the year. It would not surprise me to see some alcohol's negative mix remain with us.

Speaker Change: Sure, hey Peter, it's Michael.

Michael Bailen: Yeah, I mean, I think we're, you know, very pleased with the mixed trends that, you know, we are seeing. And, you know, as we had in our, you know, prepared remarks, we were seeing some positive mix.

Michael Bailen: and entrees and add-ons and the soft beverages, still seeing some negative mix.

Michael Bailen: in alcohol, but not as much as we had been, which led to a basically flat mix for the quarter. And that trend basically continued into July, somewhere remaining in that flattish.

Michael Bailen: We'll see how that trend holds up into the back half of the year. It would not surprise me to see some alcohol negative mix remain with us. That seems to be not a roadhouse specific issue, but more in the industry and societal at this point.

Michael Bailen: That seems to be not a roadhouse-specific issue, but more in the industry and society at this point. And yeah, overall, very pleased with our guests' reception of our menu prices and their recognition of the value that we're offering them. On your second point, with the labor hours and the productivity that we're seeing, yeah, I would say we are cautiously optimistic that we can continue to see that trend continue through the back half of the year.

Michael Bailen: And yeah, but overall, very pleased with our guests.

Michael Bailen: reception to our menu prices and they're recognizing

Michael Bailen: On your second part with the labor hours and the productivity that we're seeing, yeah, I would say we are cautiously optimistic that we can continue to see that trend continue through the back half of the year. We'll see what the future holds, but I think the hard work that our operators have done to get their stores, their restaurants well-staffed will continue to pay dividends into the back half of the year.

Michael Bailen: We'll see what the future holds, but I think the hard work that our operators have done to get their stores and their restaurants well-staffed will continue to pay dividends into the back half of the year. Our next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great, thanks, guys. And congratulations. Just a quick follow-up to kind of the back half margin question and answer. Anything specific since you've given us most of the pieces? I think there is anything else specific to the operating expenses as we think about inflation. I know it's a big bucket there.

Dennis Geiger: Great, thanks guys and congratulations. Just a quick follow-up to kind of the back half margin.

Speaker Change: Question and answer. Anything specific since you've given us most of the pieces I think there anything else specific to

Michael Bailen: But as we think about inflation across that bucket or any other items to be thinking about, you know, compares, one-time things over the back half of this year, that's worth flagging, I guess, specific to that other operating expense bucket over the balance of the year. Thank you. Yeah, sure, Dennis, it's Michael. Obviously, you know, that other operating, you know, some of the pressure that we felt the last several quarters has been from the benefit on the COGS line, the benefit on the labor line, which is leading to this margin expansion, which means there are, you know, higher bonuses that we're, you know, pleased to pay to our operators.

Dennis Geiger: The operating expenses, as we think about inflation, I know it's a big bucket there, but as we think about inflation across that bucket or any other items to be thinking about, you know, compares, one-time things over the back half of this year, that's worth flagging, I guess, specific to that other operating expense bucket over the balance of the year. Thank you.

Michael Bailen: So if we continue to see some of that benefit into the back half of the year on those other lines, then our bonuses, you know, will continue to be a pressure point for us. We'll see if we have any reserve adjustments that, you know, that continue into the back half of the year. And but come the fourth quarter, with the extra week, there probably is a little bit more of an opportunity to get some leverage on that line.

Dennis Geiger: Yes, sure. Dennis, it's Michael. You know, obviously, you know, that other operating, you know, some of the pressure that we felt the last...

Speaker Change: Several quarters has been from the benefit on the COGS line, the benefit on the labor line that's leading to this margin expansion, which means there's, you know, higher bonuses that we're, you know, pleased to pay to our operators. So, if we continue to see some of that benefit...

Speaker Change: into the back half of the year on those other lines.

Michael Bailen: But, you know, we'll see what happens in Q3 and Q4 as far as the other lines are concerned, but yeah, the other op remains growing on dollars per store week. amount, but a lot of that's because we're growing the top line. It's great stuff.

Speaker Change: Then our bonus is, you know, we'll continue.

Speaker Change: to be a pressure point for us.

Speaker Change: You know, we'll see if we have any reserve adjustments.

Speaker Change: that continue into the back half of the year.

Speaker Change: and but come the fourth quarter with the extra week there probably is a little bit more of an opportunity to get some

Speaker Change: some leverage on that line, but we'll see what happens in Q3 and Q4 as far as the other lines. Remains a growing on a dollars per store week amount.

Speaker Change: A lot of that's because we're growing the top line.

Jeffrey Daniel Farmer: Thanks, Michael. Congratulations, guys. Thank you. Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please go ahead.

Speaker Change: It's great stuff. Thanks, Michael. Congrats, guys.

Michael Bailen: Thank you.

Speaker Change: Our next question comes from the line of Jeff Farmer with Gordon Hoskett. Please go ahead.

Gerald L. Morgan: Thanks. You guys touched on the upcoming pricing conversations with your operators, but I am curious what your current read is on your own consumers in terms of acceptance of incremental pricing. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/advertisements, segment of the sector.

Jeffrey Daniel Farmer: Thanks. You guys touched on the upcoming sort of pricing conversations with your operators, but I am curious what your current read is on your own consumers in terms of acceptance of incremental pricing. I know that

Speaker Change: You've mentioned that there's been a little bit of pushback over the last year or so, but nothing too material. Listening to Chipotle last night, different sort of segment of the sector.

Speaker Change: They strongly implied that it was getting a little bit more challenging to pass through menu pricing. So, at least from your perspective, your lens, I'm curious how you are thinking about your customers' tolerance to incremental menu pricing moving forward.

Gerald L. Morgan: They strongly implied that it was getting a little bit more challenging to pass through menu pricing. So, at least from your perspective, your lens, I'm curious how you are thinking about your customers' tolerance for incremental menu pricing moving forward. Yeah, Jeff, I think we're sensitive to it also.

Gerald L. Morgan: You know, we have done our AU study. And if you've been a consumer with us for a very, very long time, you might feel a certain way. And so we're definitely listening to both.

Speaker Change: Yeah, Jeff, I think we're sensitive to it also.

Speaker Change: You know, we have done our AU study, and if you've been a consumer with us for a very, very long time, you might feel a certain way.

Gerald L. Morgan: There's a lot of folks that trade into us and feel like we are value, value, value, which is fantastic and is the way it's designed and supposed to be. But I think we need to hear from our operators; we've heard, you know, there's no significant hearing from the guest and the consumer at this time. But we're focused on our food, our service, and our community partnership and the value that we built into that menu.

Speaker Change: And so we're definitely listening to both. There's a lot of folks that trade into us and feel like we are value, value, value, which is fantastic in the way it's designed and supposed to be. But I think we got to hear from our operators. We've heard, you know, there's no significant hearing from the guest and the consumer at this time. But we're focused on our food, our service, and our community partnership and the value that we built into that menu. You know, if we charge a little bit more, then the guests should expect more. We've got heaping size. We've got everything that we've ever done is still intact. So I think as long as we stay focused on what we do and make sure the portion that we put in front of the guest is of value, then they feel good about it.

Gerald L. Morgan: And, you know, if we charge a little bit more than the guests should expect, we've got a huge size, we've got everything that we've ever done is still intact. So I think as long as we stay focused on what we do and make sure the portion that we put in front of the guest is of value, then they feel good about getting that piece of it. And, you know, we'll continue to talk with our operators and then make a great decision after we discuss what's going on in their local communities. All right, I appreciate it.

Speaker Change: We'll continue to talk with our operators and then make a great decision after we discuss what's going on in their local communities.

Speaker Change: I appreciate it. Thank you.

Andrew Strelzik: Thank you. Thank you. Our next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please go ahead. Hey, good afternoon.

Speaker Change: Our next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please go ahead.

Michael Bailen: Thanks for taking the questions. I just had two quick follow-ups. The first one is on the commodity basket. How much visibility do you have on the back part of the year?

Andrew Strelzik: Hey, good afternoon. Thanks for taking the questions. I just had two quick follow-ups. The first one is on the commodity basket. How much visibility do you have?

Andrew Strelzik: On the back part of the ear, how much do you have locked for the commodity basket? And then the second question, you kind of alluded to learning some things about the digital kitchen, and I'm just curious if you could elaborate a little bit what you're learning. Are you planning to make any changes? Just what exactly did you mean by that? Thanks.

Gerald L. Morgan: How much do you have locked up for the commodity basket? And then the second question, you kind of alluded to learning some things about the digital kitchen. And I'm just curious if you could elaborate a little bit on what you're learning. Are you planning to make any changes? Just what exactly did you mean by that? Hey, Andrew, I'll, you know, I'll start with the commodity basket. This is Michael, you know, similar to, you know, the first half of the year. We are going to, you know, probably see a lot of our beef being purchased on a formula basis. We still believe that is the best approach in the environment that we are in right now.

Andrew Strelzik: Hey Andrew, I'll start with the commodity basket. This is Michael. Similar to the first half of the year, we are

Andrew Strelzik: You'll probably see a lot of our beef being purchased on a formula basis. We still believe that is the best approach.

Andrew Strelzik: in the environment that we are in right now. So, you know, where we are in the third quarter, we already have some of our beef purchased.

Gerald L. Morgan: So, you know, we're where we are in the third quarter; we already have some of our beef purchased. So we have better visibility into the third quarter. And then there's, you know, less visibility into Q4, but I'm probably not going to, for competitive reasons, not get into much more detail on levels of beef locked for the back half of the year. And Andrew, this is Jerry.

Speaker Change: So, we have better visibility into the third quarter, and then there's less visibility into Q4, but probably going to, for competitive reasons, not get into much more detail on levels of beef locked for the back half of the year.

Michael Bailen: On the digital kitchen, you know, the thing that we're really learning is organization in the back of the house and the cooks really doing the math for the cooks to some degree. So it's just a calmer environment, not having to look at all of the checks. And sometimes it just tells you how much to fire and when to fire it.

Speaker Change: And Andrew, this is Jerry. On the digital kitchen...

Andrew: You know, the thing that we're really learning is the organization in the back of the house and the cooks really are doing the math for the cooks to some degree, so it's just a calmer environment not having to look at all of the checks and sometimes it just tells you how much to fire and when to fire it, so that's been a big win. We can monitor our broiled cook times, which is really our steak side of it, so we definitely have the ability to see what the average check is coming out of the kitchen at, so I think those are all very helpful and will help us go forward. Again, we're still pretty new into it at 100 plus stores in it.

Gerald L. Morgan: So that's been a big win. We can monitor our broil cook times, which is really the steak side of it. So, you know, we definitely have the ability to see what the average check is coming out of the kitchen at. So I think those are all very helpful and will help us go forward. Again, we're still pretty new to it at 100 plus stores in it. We've got a very aggressive back half of the year to get to that 230 number.

Andrew: We've got a very aggressive back half of the year to get to that 230 number, but we're very excited. All of the feedback from our managers and our employees is very positive and, you know, ultimately it would sound, and we couldn't measure it at this time because we're not up against ourselves, but what will it do in the future? We're expecting it to be positive.

Gerald L. Morgan: But we're very excited. All of the feedback from our managers and our employees is very positive. And, you know, ultimately, it would sound, and we couldn't measure it at this time, because we're not up against ourselves.

Gerald L. Morgan: But what will it do in the future? We're expecting it to be positive. Thank you very much. Our next question comes from Jon Tower with Citigroup. Please go ahead.

Speaker Change: Great, thank you very much.

Speaker Change: Our next question comes from the line of Jon Tower with Citigroup. Please go ahead.

Jon Michael Tower: Great, thanks for taking the question. Maybe just going, you hit on the idea of taking up CapEx a little bit higher this year. And I'm curious, you know, you're obviously rich with capital, your brands seem to have quite a bit of strong momentum right now with respect to traffic and sales. So I'm just curious, when you think about your ability to kind of flex above that 30 stores or so into 2025 and beyond, like what would prevent that from not happening next year?

Jon Michael Tower: Great, thanks for taking the question. Maybe just go in, you hit on the idea of taking up CapEx a little bit higher this year.

Jon Michael Tower: And I'm curious, you know, you're obviously rich with capital, your brands seem to have quite a bit of strong momentum right now with respect to traffic and sales, so I'm just curious when you think about your ability to kind of flex above that 30 stores or so into 2025 and beyond, like, what

Jon Michael Tower: You know, I know human capital is probably a part of it, but it seems like you're on a great trajectory to open more stores than what you've been doing the past couple of years. Thank you for that question. You know, I like our pipeline.

Speaker Change: What would prevent that from not happening next year? You know, I know human capital is probably a part of it But it seems like you're on a great trajectory to open more stores than what you've been doing in the past couple of years

Gerald L. Morgan: We're targeting that 30-ish number, and if we get a few extra deals that come in, we know that we can handle that. So I think when we look at all three of the brands, we continue to focus on – the pipeline's done for 24, most of 25. We're working on 26. So I think we're going to land somewhere in that 30-ish number.

Speaker Change: Thank you for that question. You know, I like our pipeline. We're targeting that 30-ish number, and if we get a few extra deals that come in, we know that we can handle that, so I think when we look at all three of the brands, we continue to focus, the pipeline's done for 24, most of 25, we're working on 26, so I think we're going to land somewhere in that 30-ish number. I don't ever really expect us to get too much further north of that unless something really special happens, but it's a good practice for us. We're very disciplined and focused on that number. We've got three brands we're building out, so we feel really good at that pace and that cadence that we have in New York.

Gerald L. Morgan: I don't ever really expect us to get too much further north of that unless something really special happens, but it's good practice for us. We're very disciplined and focused on that number. We've got three brands we're building out, so we feel really good at that pace and that cadence that we have in new store openings. So we'll probably stay in that area. Got it. And then just, I know you have a few bubbles that, I'm curious, you know, in terms of your own thinking going forward, how do you see the brands, you know, growing across markets?

Speaker Change: We'll probably stay in that area.

Speaker Change: Got it. And then just, I know you have a few bubblers that...

Gerald L. Morgan: You know, do you feel like there's a lot of opportunity to infill Bubba's near roadhouses across markets going forward, and ditto for Jagger's? Yeah, I it hasn't hurt us by doing that. We have several that are right side by side.

Chris Monroe: kind of overlapped pretty nicely with with Roadhouse's.

Speaker Change: I'm curious, you know, in terms of your own thinking going forward, how you see the brands, you know, growing across markets, you know, do you feel like there's a lot of opportunity to infill Bubba's near roadhouses across markets going forward and ditto for Jagger's?

Gerald L. Morgan: And, and, you know, as I look back on the industry and on the old, there were a lot of concepts that put their side by side. And I think because of the different menu offerings, we feed the community in different segments. So steaks and potatoes and burgers and pizza complement each other from that. And I do believe Jaggers will be able to get in the mix in a community. They may not all be on a pad or something, but I do think that the communities that Roadhouse is in are having success.

Speaker Change: Yeah, it hasn't hurt us by doing that. We have several that are right side by side and

Speaker Change: And, you know, as I look back in the industry of the old, that, you know, there's a lot of concepts that put there side by side. And I think because of the different menu offerings, we feed the community in different segments. So steaks and potatoes and burgers and pizza complement each other from that. And I do believe Jaggers will be able to get in the mix in a community. They may not all be on a pad or something, but...

Gerald L. Morgan: And, you know, when we present Bubba's and we present Jagger's, we believe that will benefit us. And, you know, they've got to live up to their end of the bargain with quality food and quality service and represent our brand at a high level.

Speaker Change: I do think that the communities that Roadhouse is in and having success...

Speaker Change: And, you know, when we present Bubba's and we present Jagger's, we believe that will benefit us. And, you know, they've got to live up to their end of the bargain with quality food and quality service and represent our brand at a high level.

Chris Monroe: Thanks for taking the question. Thank you. Our next question comes from the line of Chris O'Cull with Stiefel. Please go ahead.

Speaker Change: Got it. Thanks for taking the questions.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Chris O'Cull with Stiefel. Please go ahead.

Chris Monroe: Thanks, good afternoon, guys. Chris, are you currently seeing commodity inflation in the third quarter in line with that two to 3% guidance you provided for the back half of the year? Yeah, hey Chris, good to talk to you.

Chris O'Cull: Thanks. Good afternoon, guys. Chris, are you currently seeing commodity inflation in the third quarter in line with that 2% to 3% guidance you provided for the back half of the year?

Chris Monroe: Yeah, I mean, we are. It's following that pattern for now. Okay, and then as a follow-up question related to the pricing, can you confirm that the company will be rolling off about 2.7% of pricing in October, and I know you are going to be speaking with operators here in the next several weeks, but it does sound like, for modeling purposes, we should assume some level of pricing that would replace... What's going to be some level of pricing that will replace what's rolling off in October? Is that fair?

Speaker Change: Yeah, hey Chris, good to talk to you. Yeah, I mean, we are, it's following that pattern for now.

Speaker Change: Okay.

Speaker Change: And then as a follow-up question related to the pricing, can you confirm the company will be rolling off about 2.7% pricing in October ? And I know you are going to be speaking with operators here in the next several weeks, but it does sound like, for modeling purposes, we should assume some level of pricing that would replace...

Speaker Change: What's going to be, some level of pricing will replace what's rolling off in October . Is that fair?

Chris Monroe: I'm going to answer the first part, you are correct, the 2.7 is rolling off, and I don't know if Jerry if you want to speak to that specific question or not. We still have work to do, we have to talk to our operators. Yeah, I think we're still, we'll go into it, like we say with a conservative mindset, we'll see what the operators are feeling and thinking, and it's just a little too early to make that call. Okay, fair enough.

Speaker Change: I'm going to answer the first part. You are correct, the 2.7 is rolling off, and I don't know, Jerry, if you want to speak to that specific question or not. We still have work to do. We have to talk to our operators.

Gerald L. Morgan: Yeah, I think we're still, we'll go into it, like we say, with a conservative mindset. We'll see what the operators are feeling and thinking, and it's just a little too early to make that call.

Gerald L. Morgan: Okay, fair enough. Thanks guys.

Gerald L. Morgan: Thanks, guys. Thank you. Our next question comes from the line of Gregory Francfort with Guggenheim Securities. Please go ahead. Hey, thanks. I have two quick ones.

Gerald L. Morgan: Thank you.

Gerald L. Morgan: Our next question comes from the line of Gregory Francfort with Guggenheim Securities. Please go ahead.

Gregory Ryan Francfort: The first is just maybe going back, I don't know if it's Jon's development question. I think this is like kind of the second quarter in a row where new store productivity is kind of between low 90% and 100%. Anything going on specifically with the new units, just in terms of their opening up in different areas, just just trying to, you know, sort through that number? Hey, Greg, it's Michael.

Gregory Ryan Francfort: Hey, thanks. I have two quick ones. The first is just, maybe going back, I don't know if it was Jon's development question. I think this is like kind of the second quarter in a row where new store productivity

Speaker Change #101: It's kind of more like low 90% instead of 100%. Anything going on specifically with the new units, just in terms of they're opening up in different areas, just trying to sort through that number?

Michael Bailen: Yeah, when I look at the new store, and I can tell you, we are, you know, very pleased with their performance, and, you know, they're hitting our expectations and their hurdles. You know, part of the reason for that maybe, you know, separation is just the incredible growth the comparable stores have had over the last, whether it's a couple of quarters or a couple of years.

Speaker Change #101: Yeah, hey Greg, it's Michael. Yeah, when I...

Greg: When I look at the new stores, I can tell you we are, you know, very pleased, you know, with their performance and, you know, they're hitting our expectations and their hurdles. You know, you can't expect...

Speaker Change #103: Part of the reason for that maybe separation is just the incredible growth the comparable stores have had over the last, whether it's a couple of quarters or a couple of years, and to expect a brand new restaurant.

Michael Bailen: And, you know, to expect a brand new restaurant to run at that level is maybe a little, you know, aggressive, but we are very pleased with the performance of our new restaurant. Got it, thanks.

Speaker Change #103: To, you know, run at that level is maybe a little, you know, aggressive, but we are very pleased with the performance of our new restaurants.

Gerald L. Morgan: And then just on the kitchen technology that's going to be in over the next 18 months, can you help frame what that's going to allow you to do in the kitchen, and if there are going to be benefits more on the cost of sales side, on the labor side, just what that unlocks? Thanks. Yeah, it's still a little early on all of that.

Speaker Change #104: Got it, thanks. And then just on the kitchen technology that's going in over the next 18 months, can you help frame what that's going to allow you to do in the kitchen and if there's going to be benefits more on the cost of sales side, on the labor side, just what that unlocks? Thanks.

Gerald L. Morgan: Again, the biggest thing it does is it just calms us down because it organizes for us. So I think the employee experience, we're expecting that there could be some benefit, whether it be speed of service or how we do our production sheets. So, still a little bit early for us to really determine the impact of that. But the big win, really and truly, is the organization and the calmness of not having to hear the printer pull paper and have paper everywhere. And it just organizes everything from it. It's a bump screen.

Speaker Change #105: That's still a little early on all of that again We the biggest thing it does is it just calms the because it organizes for so I think the employee experience

Speaker Change #105: We're expecting that there could be some benefit, whether it be speed of service or how we do our production sheets. So, still a little bit early on us to really determine the impact of that. But the big win, really and truly, is the organization and the calmness of not having to hear a pull paper and have paper everywhere. And it just organizes everything. It's a bump screen. So, that bump screen really allows them to focus on the checks in front of them on the screen. And so, they don't stress out as much, I guess, when you have a rail of 50 checks hanging in front of you. It can be very intimidating at times. So, that's the real benefit. The employees just keep a very steady pace.

Speaker Change #106: Thank you.

Gerald L. Morgan: So that bump screen really allows them to focus on the checks in front of them on the screen. And so they don't stress out as much, I guess, when you have a rail of 50 checks hanging in front of you, it can be very intimidating at times. So that's the real benefit: the employees just keep a very steady pace because of this, the bump system that we're using on the digital kitchen. So it's still very early, but we're excited. Thank you guys, I appreciate it. Hey, thank you. Our next question comes from the line of Logan Reich with RBC Capital Markets. Please go ahead.

Speaker Change #107: Thank you guys. Appreciate it.

Speaker Change #107: Hey, thank you.

Speaker Change #108: Our next question comes from the line of Logan Reich with RBC Capital Markets. Please go ahead.

Logan Paul Reich: Hey, thanks for taking my question and congrats on the really solid results this quarter. I kind of wanted to give a little bit of a follow-up question to the prior one just on the digital kitchen, then also ask about the roadie first. I feel like you guys have been talking about labor improvements for a while now. Can you help us sort of dimensionize or delineate where exactly those improvements are coming from? You know, is the Roadie First system a big driver of that? Or, or can you just help us sort of like delineate the key drivers of that labor productivity improvement? Yeah, hey Logan, it's Michael.

Logan Reich: Hey, thanks for taking my question and congrats on the really solid results this quarter. I kind of wanted to give a little bit of a follow-up question to the prior one just on the digital kitchen, then also ask about the roadie first.

Speaker Change #110: I feel like you guys have been talking about labor improvements for a while now. Can you help us sort of dimensionalize or delineate where exactly those improvements are coming from?

Speaker Change #110: You know, is the roadie-first system a big driver of that, or can you just help us sort of like delineate the key drivers of that labor productivity improvement?

Michael Bailen: Yeah, I wouldn't say that those are the big drivers of that improvement. Really, it's the hard work of the last several years of getting our restaurants, you know, that our operators have, you know, under, you know, taken to get their restaurants well-staffed and that staff is staying with the restaurant. So, they are, you know, more tenured. They've had more reps that are doing their job, so they're better at it.

Speaker Change #110: Yeah, hey Logan, it's Michael. Yeah, I wouldn't say that those are the big drivers of that improvement. Really, it's the...

Speaker Change #110: You know the hard work of the last several years of getting our restaurants, you know, then our operators that have you know under

Speaker Change #110: take him to get their restaurants.

Speaker Change #110: Well staffed and and that staff is staying with the restaurant. So they are they are, you know more tenured They've had more reps at doing their job. So they're better at it. They can do it more quickly We're we're not having to you know train as much so You're we're able to do

Michael Bailen: They can do it more quickly. We're not having to, you know, train them as much, so we're able to do more with what we have. That's really, you know, what we're seeing is, you know, a lot of the hard work the last several years coming to fruition and, you know, now, you know, now seeing that benefit come through. Gotcha, okay, great that's helpful, and then just wanted to ask one quick question on takeout versus in-store. It looks like in-store accelerated while takeout decelerated relative to Q1.

Speaker Change #110: more with what we have. That's really, you know, what we're seeing is, you know, a lot of the hard work the last several years coming to fruition and, you know, now, you know, now seeing that benefit come through.

Speaker Change #111: Gotcha. Okay, great. That's helpful. And then, just wanted to ask one quick one on the...

Speaker Change #112: Takeout versus in-store looks like in-store accelerated while takeout decelerated relative to Q1. I guess just how should we think about the

Michael Bailen: I guess just how should we think about the in-store business. Is that still an area of growth for you guys, or is it, you know, sort of a little bit of like a post-COVID, nice-to-have business that you're doing? It is, but it's not necessarily a large gross driver, and it's just sort of how would you characterize takeout? Yeah, look, I think you may have said the dining business, but you're asking about our feelings on the to-go business, correct? Oh, yeah, apologies.

Speaker Change #113: In-store business, is that still an area of growth for you guys, or is it, you know, sort of a little bit of like a post-COVID, nice-to-have business that you have, but it's not necessarily a large growth driver, and just sort of how would you characterize the takeout business?

Speaker Change #114: Yeah, and look, I think you may have said the dining business, but you're asking about our feelings on the to-go business, correct?

Michael Bailen: Yeah, the takeout business as a driver. Sure. Yeah, that is still certainly a big area of focus and very important to us. We continue to see in the second quarter, you know, what we feel are very, you know, strong trends there and an increase in not only sales dollars but the number of guests served. So that is definitely something our operators view as, you know, core to their business out there. They want to make sure those dining rooms are full and get in and continue to get fuller. But absolutely being able to drive more business is a huge opportunity and something that they're focused upon. Thank you so much and congrats again.

Speaker Change #115: Oh, yeah, apologies. Yeah, the takeout business.

Speaker Change #115: as a driver going forward.

Speaker Change #116: Sure. Yeah, that is still certainly a big area of focus and very important to us. We continue to see in the second quarter, you know, what we feel is, you know, very, you know, strong trends there and an increase in not only the sales dollars, but the number of guests.

Speaker Change #116: you know, served, you know, to go. So that is definitely something our operators...

Speaker Change #116: view as, you know, core to their business now. They're, you know, they want to make sure those dining rooms are full and get and and continue to get fuller, but absolutely being able to drive more to-go business, you know, is a huge opportunity and something that they're focused upon.

Speaker Change #117: Thank you so much and congrats again.

Michael Bailen: Our next question comes from... I'm sorry, I was just going to add that I mean, that's $20,000 a week average at each store. So that's it's significant. That business is significant. It's important to us. Our next question comes from the line of Jim Sanderson with North Coast Research. Please go ahead.

Speaker Change #118: Our next question comes from...

Speaker Change #119: I'm sorry, I was just going to add that, I mean, that's $20,000 a week average at each store. So it's significant. That business is significant and it's important to us.

Speaker Change #120: Our next question comes from the line of Jim Sanderson with North Coast Research. Please go ahead.

James Jon Sanderson: Hey, thanks for the question. I wanted to go back to the pricing discussion, just make sure I understand the dynamics here. As we get to the fourth quarter, you're going to roll off about 2.7. So that leaves you about three points of price that probably could cover most of inflation. I'm wondering how traffic plays a role in your decision making.

James Jon Sanderson: Hey, thanks for the question. I wanted to go back to the pricing discussion, just make sure I understand.

Speaker Change #122: The dynamics here, as we get to the fourth quarter, you're going to roll off about 2.7, so that leaves you.

Speaker Change #123: about three points of price that probably could cover most of inflation. I'm wondering how traffic plays a role in your decision-making.

Speaker Change #124: If there's a threshold of traffic declines, let's say traffic is flattish to slightly up if that would adjust your outlook on pricing going into the fourth quarter.

Michael Bailen: If there's a threshold of traffic declines, let's say traffic is flattish to slightly up, if that would adjust your outlook on pricing going into the fourth quarter. Well, Jim, this is Michael. Let me just start off with, you know, we're currently running with about 4.9% pricing, which we'll have for Q3. So when the when the 2.7 rolls off, that will leave us with 2.2% before we do any additional pricing actions. And, and obviously, we'll be making our pricing decisions over the coming month because there is a lag time where, you know, we may need to make those decisions, you know, to get those menus printed.

Speaker Change #124: Well, Jim, this is Michael. Let me just start off with, you know, we're currently running with about 4.9 percent.

Speaker Change #125: Pricing, which we'll have for Q3. So when the 2.7 rolls off, that will leave us with 2.3.

Speaker Change #126: David M. Miller . . . . . . . . . . . .

Speaker Change #127: Pricing decisions over the, you know, the coming month, because there is a lag time where, you know, we may need to make those decisions, you know, to get those menus printed. So, you know, we certainly always take our traffic trends

Michael Bailen: So, you know, we certainly always take our traffic trends into consideration, or operators will absolutely comment on that as, you know, part of their decision-making process. Let me add just a follow-up to that. I think Olive Garden recently took down their promotional price point by about 50 cents, hoping to get a better everyday value price point. Is it part of the discussion on pricing at Texas Roadhouse to consider maybe offering a lower price point or reducing the opening price point for some of the entry-level menu entrees? Yeah, Jim, it's Michael again.

Speaker Change #127: into consideration, or our operators absolutely will, you know, comment on that as, you know, as part of their decision making process.

Speaker Change #128: Let me add, just to follow up to that, I think recently Olive Garden took down their promotional price point by about 50 cents, hoping to get a better everyday value price point.

Speaker Change #129: Is part of the discussion on pricing at Texas Roadhouse to consider maybe offering a lower price point or reducing the opening price point for some of the entry-level menu entrees?

Michael Bailen: I would say at this point, you know, our everyday value speaks for itself. We don't do any promotions. We do have our early dime, you can come in early and when the store first opens, and there is a discount on, you know, a handful of items.

Michael Bailen: Yeah, Jim, it's Michael again. I would say at this point, you know, our everyday value speaks for itself. We don't do any promotions. We do have our early dime. You can come in early and when the store first opens and there is

Michael Bailen: Discount on a handful of the items. But I don't think there's any discussion right now of us bringing down the prices on anything. I think we feel very good about where our prices are and the value.

Michael Bailen: you know, that we offer.

Jim: All right, thank you very much.

Michael Bailen: But I don't think there's any discussion right now of us bringing down the prices on anything. I think we feel very good about where our prices are and the value. You know that; you know what we offer. All right, thank you very much. Our next question comes from the line of Brian Vaccaro with Raymond James. Please go ahead. Hi, thanks. Good evening.

Jim: Our next question comes from the line of Brian Vaccaro with Raymond James. Please go ahead.

Brian Michael Vaccaro: Just following up on the labor, are there any metrics you can share on tenure or turnover, just to give us a sense of how much more efficient your teams might be on the hourly side? And you mentioned roadie first; could you just elaborate on what functionality that brings or how that benefits the employee experience? Sure. Hey, Brian, it's Michael.

Brian Michael Vaccaro: Hi, thanks. Good evening. Just following up on the labor, are there any metrics you can share on tenure or turnover just to give us a sense of how much more efficient your teams might be on the hourly side? And you mentioned roadie first. Could you just elaborate on what functionality that brings or how that benefits the employee experience?

Michael Bailen: Yeah, I don't think we have a ton of information that we're going to be able to share with you. I mean, first on the turnover, I can tell you it continues to trend in the right direction. It's at or below pre-pandemic levels.

Brian Michael Vaccaro: Hey Brian , it's Michael. Yeah, I don't think we have a...

Speaker Change #132: A ton of information that we're going to be able to share with you, I mean, first on the turnover, I can tell you it continues to trend in the right direction. It's at or below pre-pandemic levels, so very great to see that. With that comes higher tenure. I don't have any

Michael Bailen: So, very great to see that. With that comes higher tenure. I don't have any numbers with me right now that would talk about how long our roadies have been with us.

Speaker Change #133: you know, numbers, you know, with me right here that would, you know, talk to how long our, you know, our roadies have been with us. But typically if we, if someone's...

Michael Bailen: But typically, if someone's with us for 90 days, they tend to stay with us for quite a while. So, we're seeing some benefit there. And then there was a third part to your question on the roadie-first technology. But a lot of that is just, again, it gives our employees access to their information. I don't think it's necessarily driving productivity, but it's just another item that we're able to provide that makes it easier for our employees to see their information.

Speaker Change #133: With us for 90 days. They tend to stay with us for quite a while. So we're we're seeing some You know benefit there and then I there was a third part to your question RFT I'll bet on the roadie first technology. Look a lot of that is just again it gives

Speaker Change #133: You know, our employees access to their information. I don't think it's necessarily driving productivity, but it's just another item that we're able to provide that makes it easier for our, for our employees.

Speaker Change #133: to see their information and, you know...

Speaker Change #133: And so, it's just one last reason that they would have.

Speaker Change #133: to pick someone else over us. So it's really a combination of providing mobile access and then there's also just a back office benefit to the support center from...

Michael Bailen: And, you know, and so it's just one less reason that they would have to, you know, pick someone else over us. So it's really a combination of providing mobile access and then there's also a, you know, just a back office benefit to the support center from the RFP program. Yeah, this is Chris.

Chris Monroe: It's essentially a workday implementation, but it is allowing us to reduce a number of back office systems, and then it does provide our employees with mobile technology and other things that help us to become that employer of choice. All right, that's helpful. And then just one more, if I could. On the last call, you noted some incremental costs in the second half. I think it was $3 million in labor, and $3.5 million, maybe, in G&A.

Speaker Change #133: the RFT program.

Speaker Change #133: Yeah, it's essentially a workday implementation, but it is allowing us to reduce the number of back office systems, and then it does provide our employees with mobile technology and other things that helps us to become that employer of choice.

Michael Bailen: Do you still expect that? Has there been any change on that front? And would you be willing to provide some guardrails on G&A for the year? Thank you. Hey, Brian, it's Michael.

Speaker Change #134: All right, that's helpful. And then just one more if I could. On the last call, you noted some incremental costs in the second half. I think it was $3 million in labor, $3.5 million maybe in G&A. Do you still expect that? Has there been any change on that front? And would you be willing to provide some guardrails on G&A for the year? Thank you.

Michael Bailen: Yeah, we are still absolutely expecting those costs. They relate to our equity compensation program and some changes that we're making. They are going from a quarterly grant to an annual grant. So we'll start feeling that impact here in the third quarter. You know, as far as, you know, G&A goes, I think the story remains the same as what we've said before of, you know, this may be a year where GNA's percent of revenue is basically, you know, flat, you know, so maybe it's slightly, you know, maybe a slight few leverage. I think it all depends on your, you know, top line assumptions and how the year continues to play out with it being a 53-week year for us.

Speaker Change #134: Hey Brian , it's Michael. Yeah, we absolutely still are expecting those costs. They relate to our equity compensation program and some changes that we're making. They are going from a quarterly grant to an annual grant, so we'll start feeling that impact here in the third quarter.

Speaker Change #135: You know, as far as, you know, you know, GNA goes, I think it's the story remains.

Speaker Change #135: The same as what we've said before of, you know, this may be a year where G&A's percent of revenue, you know, is

Speaker Change #135: It's basically, you know, flat, you know, so maybe it's slightly, you know, maybe a slight de-leverage. I think it all depends on your, you know, top-line assumptions and how the year continues to play out with it being a 53-week year.

Sara Harkavy Senatore: You know, we do, and how the first half of the year has performed, you know, we, you know, our bonus program, you know, probably then requires us to accrue for some additional compensation expense. We have to lap that into next year. So, you know, yeah, you probably expect GNA to be flat year on a percentage of revenue year over year. That's probably the best guidance I can give you.

Speaker Change #135: For us, we do, in how the first half of the year has performed, our bonus program probably then requires us to accrue for some additional compensation expense. We have to lap that into next year.

Speaker Change #136: Yeah, you probably expect GNA to be, you know, flat, you know, flat year on a percentage of revenue year over year is probably the best guidance I can give you.

Sara Harkavy Senatore: All right, thanks very much. Our next question comes from the line of Sara Senatore with Bank of America. Please go ahead. Thank you. Just a quick clarification on the CapEx. Is this sort of, is any of this like a timing shift as in, you know, deferred maintenance or maybe pull forward? Or as you think about the back of the house, is it, you know, perhaps like capacity constraints have emerged faster just because your business has been so strong?

Speaker Change #137: Alright, thanks very much.

Sara Harkavy Senatore: Just trying to understand, I mean, certainly you've earned the right to spend the capital, but trying to understand as I think about kind of the marginal returns on the increased CapEx. Thank you. Yeah, Sara. It's Chris.

Speaker Change #138: Our next question comes from the line of Sara Senatore with Bank of America. Please go ahead.

Sara Harkavy Senatore: Thank you. Just a quick clarification on the CapEx. Is this sort of, is any of this like a timing shift as in, you know, deferred maintenance or maybe pull forward? Or as you think about the back of the house, is it, you know, perhaps like capacity constraints?

Speaker Change #141: Thank you all for joining us today, and I hope that you have emerged that faster just because your business has been so strong. Just trying to understand, I mean, certainly you've earned the right to spend the capital, but trying to understand as I think about kind of the marginal returns on the increased capex. Thanks.

Chris Monroe: I think that you have it exactly right. The back of the house expansions, the kitchen expansions, the dining room expansions, those have great returns. And then there are some elements that, you know, we wanted to do. And in terms of, you know, refreshment and making sure that we have, you know, great facilities for our employees and for our guests. And, and so those are, you know, some of those things that were on the list, but we didn't quite make it into the budget.

Speaker Change #141: Yes, Sara, it's Chris. I think that you have it exactly right. The back-of-house expansions, the kitchen expansions, the dining room expansions, those have great returns.

Speaker Change #140: And then there are some elements that we wanted to do in terms of, you know, refreshes and making sure that we have...

Speaker Change #140: you know great facilities for our employees and for our guests and and so those are you know some of those things that were on the list but we didn't quite make it into the budget now now they're making it in and so that's the that's really we're going to get great benefit out of out of all of it

Chris Monroe: Now, now they're making it in. And so that's the thing that's really going to get great benefit out of all of it. Thanks. We have no further questions at this time.

Operator: We have no further questions at this time.

Speaker Change #140: Thanks.

Gerald L. Morgan: I will now turn the call back to Jerry Morgan for any closing remarks. Thank you all. We appreciate your time. And to all the roadies out there, keep rocking legendary.

Jerry Morton: I will now turn to call back to Jerry Morgan for any closing remarks. Thank you all. We appreciate your time, and to all roadies out there. Keep rocking, legendary. Good night, Joel.

Speaker Change #140: We have no further questions at this time. I will now turn the call back to Jerry Morgan for any closing remarks.

Operator: Good night, y'all. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: .. .. .. .. .. ....

Gerald L. Morgan: Thank you all. We appreciate your time. And to all roadies out there, keep rocking legendary. Good night, y'all.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.

Speaker Change #142: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #142: .