Q2 2025 Texas Roadhouse Inc Earnings Call

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 question speakers 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.

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

Thank you Tama and good evening by. Now, you should have access to our earnings release for the second quarter and the July 1st 2025. It may also be found on our website at Texas roadhouse.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 are undue Reliance. Should not be placed upon them.

We refer all of you to our earnings release and our recent filings with the SEC.

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

To the Gap. Information can be found in our earnings release.

On the call with me today is Jerry Morgan, Chief Executive Officer of Texas, Roadhouse, and Keith heike, our interim, 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. Could everyone, please limit yourself to 1 question. 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 and the continued Topline momentum of the business.

Strong traffic growth throughout the quarter drove. A 5.8% increase in same store sales.

As a result, our revenue for the quarter grew to over 1.5 billion dollars for the first time in our history.

We are especially encouraged to see that all 3 Brands contributed to our second quarter traffic and sales growth.

Texas Roadhouse averaged approximately 172,000 dollars in weekly sales for the second quarter. The brand continues to benefit from a Relentless focus on food, service, hospitality and value. This is why Texas Roadhouse. Once again, earned top recognition from external surveys for guest experience and satisfaction in the casual dining segment.

And above is 33 average, weekly sales, exceeded 128,000 in the second quarter in addition to solid performance. From our same store sales group, we are also seeing strong sales at our most recent openings.

We Believe Bubba's 33, which currently has 53 locations. In 16 States has a sound infrastructure and the season management team in place who can execute our road to 200 locations strategy. This could include double digit openings. Next year, we are equally excited about Jaggers we delivered average weekly sales of nearly 76,000 in the second quarter.

New store openings have been limited, as we have been building the growth strategy for the brand.

With our plan in place, we could open as many as 8 company and franchise locations next year.

We recently, completed discussions with our operators regarding menu pricing.

Based on those conversations, we will take a menu price increase of approximately 1.7% at the beginning of the fourth quarter, we feel confident. This is the right level of pricing to maintain our everyday value while offsetting some of the inflationary pressures we are facing on the development front. We recently opened our 8

00, systemwide restaurant. This Milestone is a testament to the appeal of Our Brands. Our operational excellence and the effectiveness of our growth strategy.

During the second quarter, we opened 4 company-owned restaurants. Including 2 Brothers 33 locations and we remain on track to open approximately 30 company-owned restaurants this year.

Our franchise Partners, open 1 Jaggers location in the second quarter. And we currently expect, they will open 4 International Texas Roadhouse restaurants in the second half of this year.

During the second quarter, we completed the acquisition of 3 franchise restaurants, bringing the total number of franchise restaurants acquired this year to 17.

We also have plans in place to acquire 3, more franchise locations in the fourth quarter. Additionally, we will be purchasing our remaining 5 California Franchise restaurants at the beginning of 2026.

We are also excited to share. We entered into an agreement to purchase our support center the purchase of these 2 buildings which we previously leased solidifies space planning for the future and reflects our long-term commitment to our hometown of Louisville. Kentucky, we remain

Main rooted in our community and look forward to Growing. Our presence in Louisville for many years to come.

On its mission of providing legendary food and legendary service to every guest.

Now, Keith will provide some thoughts.

Thanks Jerry. During the second quarter, we saw our positive traffic Trends Accelerate from what we experienced in the first quarter.

Also our mixed Trends in the second quarter remained similar to what we have seen the last several quarters.

these traffic and mixed Trends show that our guests continue to appreciate the high quality food experience and value that all 3 of Our Brands provide

As for Commodities, our second quarter inflation, was in line with our expectations.

Looking ahead, we have increased our guidance for full year inflation, to approximately 5% primarily due to higher than previously forecasted beef inflation. Particularly in the third quarter,

this guidance includes approximately 30 basis points of full year 2025 inflation, related to tariffs, which remains consistent with our initial estimates from last quarter,

Labor inflation. In the second quarter was also in line with our expectations, our operators continue to do a great job, Staffing the restaurants as labor hours grew at approximately 40% of comparable traffic growth.

With greater visibility into inflationary twins. Trends for the year, we have lowered our guidance for full year wage and other labor inflation to approximately 4%.

With regards to capital allocation, we ended the second quarter with $177 million in cash.

Cash flow from operations was $128 million, which was offset by $148 million of capital expenditures, dividend payments, and share repurchases, as well as $16 million for the 36th.

As Jerry mentioned, we will be acquiring our Support Center buildings in the third quarter for a net purchase price of approximately 23 million.

We are maintaining our full year of capital expenditure guidance at approximately 400 million dollars inclusive of this transaction.

Going forward. Our Capital allocation philosophy remains unchanged. Our first priority Remains the funding of new restaurant development and taking care of our existing restaurant base.

We also expect our dividend will continue to increase annually at a measured rate. And at a minimum we will repurchase shares to offset, deletion beyond that, we will continue to look at opportunities to acquire additional domestic, Texas, Roadhouse franchise restaurants as well as repurchase additional shares as appropriate.

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

Thanks Keith for the second quarter of 2025, we reported Revenue growth of 12.7%, primarily driven by a 5.3% increase. In average, weekly sales and 7.2% store weak growth.

We also reported a restaurant. Margin dollar increase of 6.1% to 257 million, and a diluted earnings per share, increase of 4% to 1.86.

Average weekly sales in the second quarter were over, 167,000 with to go representing approximately 22,000, or 13.3% of these total weekly sales.

Comparable sales increased 5.8% in the second quarter driven by 4% traffic growth and a 1.8% increase in average check.

By month, the comparable sales grew 4.3%, 7.2%, and 5.8% for our April, May, and June periods, respectively.

And comparable sales for the first 5 weeks of the third quarter were up. 5.3% with our restaurants, averaging sales of over 158,000 per week during that period.

In the second quarter, restaurant margin dollars per store week decreased 1% to over $28,500, with restaurant margin as a percentage of total sales decreasing 108 basis points year-over-year to 17.1%.

Food and beverage costs as a percentage of total sales were 34%. For the second quarter, the 131 basis, point year-over-year, increase was driven by 5.2% commodity inflation combined with shifts. Within the entree category, which was partially offset by the benefit of a 1.8%, check increase.

As compared to the second quarter of 2024.

labor dollars per store week, increased 5.4%, due to wage and other labor, inflation of 3.8% and growth in hours of 1.6%

Other operating costs were 14.5% of sales which was 32 basis points better than the second quarter of 2024.

The Improvement was driven by leverage on operator bonuses, as well as the year-over-year change in our quarterly, reserved for general liability insurance.

These Insurance adjustments include $100,000 of additional expense this year as compared to 2.1 billion dollars of additional expense last year.

Moving below restaurant margin GNA dollars, grew 7.9% year-over-year and came in at 4.2% of revenue for the second quarter.

Our effective tax rate for the quarter was 14.9%.

based on our outlook for the remainder of the year, we are updating the guidance for our full year, 2025 income tax rate to approximately, 15%

Now, I will turn the call back over to Jerry for final comments.

Michael, I am so proud of our operators and support.

To deliver great results. I'm also excited to spend time with our managing Partners on our annual fall tour. As always we look forward to getting feedback on how we can better support them or remove any obstacles. So they can focus on partnering with Roadies serving their guests and growing the business.

Back includes our prepared remarks comma, please open the line for questions.

at this time, if you would like to ask a question press star 1 on your telephone keypad, if your question has been answered and you would like to remove yourself from the queue press star 1,

Your first question is from the line of Sarah Senator with Bank of America.

Oh, thank you very much. Um, you know, obviously very strong Topline results. Uh, I, I was just wanted to ask about the, um, maybe the, the inflation, I know last year, um, commodity inflation, beef inflation, kind of was consistently surprised. The downside this year, it seems to be surprising the upside, um, I was wondering if you could maybe talk about some of the Dynamics there. I know, uh, in the past, you know, the retail, um, you know, what, what's happening in retail and groceries has been a, a big impact, but, you know, there may also be, you know, the supply has been coming down consistently

Um, and then within that, I know you said 3Q perhaps was the peak in terms of, you know, relative to your expectation. So I guess is any of this maybe timing or um you know, quarter to quarter. So I know there's a lot in there, but you always have good insight into the um, the cycle.

Thanks, Sarah. This is Michael. I'll do my best to, to cover those, uh, those questions? Uh, yeah. I think, uh, we, we obviously, you know, updated our guidance and, you know, it's a combination of Demands specifically retail demand for beef. Uh, has made has remained resilient. So, uh, we're seeing strong demand out there and, uh, the supply situation, which we knew was going to be tight. As we move through the year, saw some additional pressure on the, on the production side from, uh, the the beef suppliers cutting back on, uh, how much they were producing, uh, given some of their, you know, margin commentary that we've probably heard. So we, we saw, um, a, a further tightening of Supply, which is certainly drove the cost higher in in June. And so we are expecting um you know to as that beef ages to see the impact of that here in the third quarter. Um, you know, we have about 8

80% of our beef locked for the third quarter and about, 50% locked for the fourth quarter. So uh, you know, our, our team continues to monitor the situation and uh, you know, we'll update you all accordingly.

Thank you.

Your next question is from the line of David Palmer with evercore isi.

Uh, thank you. Uh, just, um, a couple of line item, uh, questions that maybe there are some insights behind. You know, when I look at, uh, the mix effects, uh, you know, for Q2 over two years now, and initially, I was thinking this would make a lot of sense that mix would be negative coming out of COVID. There was a lot of check growth during those.

A slightly negative mix. I'm wonder you know how you're thinking about that. You know, maybe what are the behaviors? That's driving that maybe it's some of the alcohol Dynamics or maybe this is just the cautious consumer but anything that maybe, you know, drives your strategy as you think about pricing, for example, and then and then secondly, you did really well with labor leverage. Uh, this quarter obviously traffic accelerated. That's a good way to get that. Um, you know, does it really come down to that if you're doing a very nice traffic number like this quarter, does that labor is the labor leverage that gap of 2 points. You know, just much more possible than, than cutting back on hours. I'd love to hear your thoughts on that. Thanks.

Yeah. Hey David. It's Michael on the mix front. I'll tell you, uh, you know, all of the negative mix pressure is coming from the alcohol category. We are actually, you know, continue to see positive entree. Mix, the guest is actually trading up, uh, still to, you know, bigger Stakes or, you know, more often ordering a steak from us. Uh, and, you know, we're seeing positive mix in the mocktail categories. Uh, so really know, downward pressure, uh, overall from, you know, our from our menu pricing actions. It it's all in that alcohol category which, uh, a lot of that, you know, we've talked about before is, is societal and not just a Roadhouse specific item. And that's what, uh, you know, drove us to, you know,

Partly to introduce mocktails which have been well received, uh, by the guests. So I think we feel very good about how the guest is using our menu. And uh, we're we're in our training on the men on the menu as far as the labor question. Yes, certainly, you know more traffic helps um, you know, on the the labor line. But our operators are doing a very good job, uh, of of Staffing their restaurants and they're also, you know, benefiting from, you know, lower turnover in their restaurants and they a longer tenured employee is a is a more productive employee and some of that can go to our, you know, digital kitchen, uh, Investments and just the overall, you know, way we're running those restaurants. So we are, uh, definitely encouraged by those. Um, you know, labor productivity trends that we've seen and uh, we're cautiously optimistic that those can continue throughout the year.

Thank you.

Your next question.

David tarot with beard.

Hi, uh, good afternoon. Um, maybe 2 questions, I'm going to cheat here, but um, Michael can you just give us a sense of what the inflation and Q3 and Q4 is going to look like based on your current Outlook and I just want to make sure everybody's on the same page and then, I guess that my real question is Jerry. Um, you mentioned the Step Up in Bubba's openings, for next year and I just

Just wanted to get your thoughts on what that means for the the total Enterprise and and your your overall growth rate. I know you said in the past you're pretty comfortable a 30 or so openings. But does this allow you to push higher than that as you as you think about next year and in future years? Um, thank you

Yeah, David. I'll I'll, I'm assuming you're talking about, you know, beef inflation and our expectations there. And as we said, you know, as of now we we expect that highest pressure in the third quarter. And that could be uh, as much as you know, 7%, uh, you know, commodity inflation in the third quarter. And then, you know, the expectation is it would probably come down, um, you know, from there more in the, you know, 4 to 5% range in the fourth quarter would be our current, um, you know, expectations and remember we are

Feeling some additional negative impact on the cost of sales line. In addition to that inflation coming from, uh, the guest trading, you know, more often to, to stake. So, that's something we've seen the last several quarters and, you know, would expect us to see in the third quarter as well.

And David, uh, this is Jerry on the growth above us. Yeah, we've got 7 openings, uh, slated that will happen this year, and, and the pipeline for 26 looks very solid. We are, uh, approaching that double digit count and so there could we obviously have said, uh, around 30 or 30, uh, is approximately 30, so it could be a little bit on the high side of that approximate 30, uh, with the, uh, escalation of Bubba's growth. So, we are excited about the results that we're getting and, and the investment and the, and the brand in itself. So I, I think we could see a little tick up on that.

Alright, thank you.

Thank you.

Your next question is from the line of Lawrence Silverman with Deutsche Bank.

Thank you so much on the comp side, the monthly Cadence any additional color. You can provide on what drove some of the monthly differences. I think broadly the industry has seen some choppiness, so just wondering if there's anything you're seeing that's different than typical consistency.

Yeah. Hey Lauren, it's Michael. Uh, you know, obviously we were pleased with the overall, you know, you know, performance that we have seen. I, I guess, you know, the, the July, uh, you know, period, you probably had about a 70 basis point negative impact from the, the, the timing of the Easter. Uh, and, uh, the the 5-week period that we gave for the beginning of the third quarter, uh, has about 60 basis points, uh, of, you know, negative pressure from the uh, calendar shift for the 4th of July.

Negative impact that was well that was on just our April period on the quarter. It was about 20 basis points, yes, just April the 70th

Understood, um, anything you can provide on comp performance or differences that you're seeing across region days.

Yeah, I'll tell you when we, when we look at that and this is been been the case for a while. You know, we're seeing, you know, solid growth 7 days a week, uh, through all, you know, day Parts. Um, you know, you know, of each day in our both, in our dining room and, and to go. And when you look at our regionally, uh, strong performance, uh, you know, in all areas. So nothing really to call out uh, as a specific area of weakness or of, um, outsized, you know, strength. So we're you know, very pleased to, you know what, we're seeing across the board.

Your next question is from Dennis Geiger with UBS.

Great, thanks, guys. And appreciate all the color on, the the cost inflation pieces, uh, maybe just 1, more and thinking about restaurant margins for the, for the back half of the year. Um, just as far as you know, the other Opex line thinking about that. And if there's any differences, 3 q and 4 q. As we think about how the labor setup might play out and anything. That's a highlight there to kind of fully fill in uh the pieces for us and thinking about 2 H restaurant margins. Thank you.

Hey Dan. It's my, it's Michael. I I think you guys saw both labor and other op and I, I would see obviously a part of it will be, um, based on your assumption for traffic growth. But if you're assuming, you know that we, you know, continue with some modest level of traffic growth. And I think that, you know, that other offline, you know, could continue to get a could continue to get a similar level of Leverage that it's been getting, you know, the last uh, you know, 2 quarters. Uh, so you could see that again in, you know, Q3 and Q4 and the labor line, um, again with some traffic growth. You know, you know, is probably in that flat to maybe a little, uh, potential for a little bit of, of Leverage as we move into the, uh, the back half of the year.

Great, thanks. Michael. Appreciate it.

Your next question is from Brian Harbor with Morgan Stanley.

Hi. This is Kelly Merrill on for Brian. Thank you for taking our question. Obviously, I saw some commodity inflation in the second quarter with the expectation of that continuing into 2 H. Could you just provide some color on what's driving? That obviously beef. But is there anything else inflationary outside of that and could there be any offsets to Beef on the commodity side? And then on labor, is there anything to explore there? Just from an efficiency standpoint, as you look to offset the commodity inflation. Thank you.

Um, you know, restaurants, we aren't mandating any kind of scheduling, you know, you know, for them and, uh, you know, they do. What is appropriate for the restaurants, for Staffing for the sales they have and the sales they want, um, you know, in the future. And so, they're always looking at that to see if there is opportunity. But I do, I don't believe there are any, um, you know, levers to be pulled that, um, you know, will dramatically change, you know, our approach to labor.

Thank you so much.

Your next question is from the line of Jim sailor with Stevens.

Yeah, good afternoon. Thanks for taking our question.

I wanted to dig in a little bit on Bubba's 33, you guys cross 50 units. Um,

Mainly concentrated in in Texas but just thoughts around. You know, how do we kind of continue to scale that and maybe Regional attack plan and and where we should anticipate to see new units?

in the strategy for, you know, engaging

new guests as as that brand becomes more and more visible.

Yeah, thanks Jim. This is Jerry. Yeah we've uh like we said we're in 16 States and we're continuing to focus. Typically in our program we have a multi-unit operator that lives in a certain area and we try to build out that Turf and as we continue to expand and bring on more Market partners and get into uh a new turf or

Or 2, uh demographic areas, we'll continue to grow. We're having, uh, good success on, on the openings. We're kind of spread out over those 16 States and and we'll probably keep that philosophy. But the big thing really is been getting uh, stable on the leadership side. Clearly focusing on our our menu and our execution, and we've always felt great about the look of the building and the energy that the restaurant provides between the entertainment and the sports. And, and, uh, and the food is, is incredible. But, uh, as we continue to just settle in and really start executing at a high level, I think we'll continue to be able to develop, it it, uh, at a, at a higher rate than we have in the in the last few years. So uh, exciting times for sure.

Great, thanks. I'll back. Thank you.

Thank you.

Your next question is from Jeff. Bernstein with Barclays.

Hi, this is Amisha. Dat on for Jeff Bernstein I wanted to ask about value.

How has the mix of value oriented sales evolved at both Texas, Roadhouse and Bubba's compared to historical levels? And do you have plans to further emphasize value offerings? And coming quarters, particularly to support lower income guests. Thank you.

Yeah, um, I'll start with that on. On the value side, we've we've always believed that there's a lot of value built into our menu in there, the country dinners and the, and because we offer multiple, um, uh, cuts of beef, you can pick how much you want to spend and, uh, from 6 oz to 16 ounces. So, I think from that side of it, we've got an early dine feature. All of those things have been in play for a very long time. And, and we really see people picking and choosing how they want to have their dining experience. And we like it that way, we want people to to spend as much money as they like or to be as much a very conscious as they, they want to be too. And but you get a protein and 2, free sides and bread and butter and and all of the things that go with it, the peanuts. So it's just, uh, like I said, the value is really built into it. I think, in the last year, we've leaned into more on a 5 Dollar, uh, beverage mix menu, so offering some a value pipe

Beer and, and a value 10 oz, Margarita. And and our mocktails are 5 dollars, which have really new to us. So there's a lot of things that are very reasonably priced, uh, with great quality and I think that's what's always been the Big Driver for our success, on the top line and, and our operators, executing at a high level and and acting like owners. They're, they're all owners in the business and they grow their sales, they control their costs and they run a great business and they get rewarded.

By driving that top line. So, uh, I hope that answered your question.

Great. Thank you.

Thank you.

Your next question is from the line of Peter clay with btig.

Or is this mostly a function of the uh, shorter or or or tighter Supply and then, uh, second on construction costs going forward, um, are you seeing any elevated, um, costs or anything? That's been dislocated anything with tariffs uh that may be impacting the construction costs going forward. Thank you.

hey Peter, it's Michael, uh, you know, first on, on the beef comments, you know, I I I think

That, you know, certainly beef is being offered at retail but I don't think they're, I don't think the retailers are being irrational.

In in their pricing, they are not using it as a loss, leader to drive people, uh, into their stores. But they are marketing. Uh, you know, you know, beef at a, at a pretty high level. And what we've seen this year is the consumer, uh, you know, willing to, you know, to pay for that. So I I think that's really the part of what's Driven, you know, the pressure is, uh, a consumer who's willing to keep, you know, spending and um you know, uh a supply that is, you know, been very uh, very tight.

Yeah, and then Peter uh this is Keith on the on the construction side. We really aren't seeing any impact yet from tariffs. Uh, you know, we had a lot of inventory for all of our builds for the year. So uh we like I said we just really haven't seen anything yet. And we're still evaluating that uh to see how that's going to affect us going forward.

Thank you very much.

Your next question is from the line of Jeff farmer with Gordon haskett.

Uh, thanks, just shifting gears a bit. I'm just looking for an update on on the Roadhouse mobile app.

Specifically, can you guys share the the number of active, users? How quickly that's growing and, and how you guys have been leveraging? That customer database. Thanks.

Uh, yeah. I I mean obviously it is out there. I don't know that we know the exact amount of users, but I mean, there is a large percentage of folks that are obviously placing their to-go orders uh, getting on our wait list. Um, the efficiency of being able to really do that. We did upgrade our, our mobile app to have more pictures when you are kind of ordering the side items. So we continue to look at the mobile app, on an making, it easier to navigate and place your order. And then we're executing at the restaurants at a much higher level, um, on on how we grade making sure, we don't have missing items that the orders ready when you get there.

And all of those little details that really do matter when you're, uh, off premise, uh, orderer and and it the consistency of the, of the product in the food. And obviously, we believe the mobile app is, is really widely used in a lot of ways. And it's been a, a game changer in a lot of ways since, uh, early on coming out of the pandemic, uh, from that and we continue to, uh, upgrade and and, and find ways to make it easier for our guests to, to get, uh, that order placed. And then again at the Restaurant level, we're executing at at a higher level than we ever have. And we're continuing to find ways to improve that experience, uh, at the pickup window.

Okay, thank you.

Thank you.

Your next question is from the lineup. Andrew St., with BMO Capital Markets.

Hey thanks for taking the question. Um obviously a lot of focus on the discussion of value and uh in the industry these days and I'm curious, you know, where now are your price gaps against your competitive set versus either the last several years or historical levels? Is there anything uh that that that has changed? And also, can you uh remind us over the next several quarters? And especially with the 17 coming in in the fourth quarter where your price will Trend. Thank you.

And bread and, and peanuts, and all of that. I think that's all built into the value component. Uh, and then what were you had the question on the Michael's, got the other side of that question. The other side of the question was on our pricing and how much pricing will have in the menu. Uh, we'll have 2.3% pricing in the menu here for the third quarter, and then we'll have 0.9% that rolls off when the 17th 1% pricing for the fourth quarter of this year and the first quarter of 2026.

Great, thank you very much.

Thank you.

Goodness question is from the line of Brian. Vaccaro with Raymond James.

Hi, thanks and good evening. I had a question on California. And I think you said you were requiring, the remaining 5 franchise units, in that state, and it's a state. I think with only around 20, uh, Roadhouse units. So, I'm just curious how you think about the growth opportunity there and if you're setting the table. So to speak, to, to maybe accelerate growth there over the next few years.

Uh, thanks, Brian. This is Jerry. Yeah, we're we're very excited. Um, we obviously were able to get an acquisition done on the Northern California group. And now, uh, through some great partnership and hard work through both our company and our great, uh, franchise group down, in in Southern California, have been able to come to terms. We're very excited, uh, to have them in the family. And, and that is a very special unit to us, is obviously, uh, that group has been with our Organization for a very, very long time, and we're really proud of that partnership. And it's a little Bittersweet. But, uh, we are happy for Stephen and his family and, and happy for the Roadhouse family. And as we look at the owning all the stores in California and our growth strategy, we are meeting as a group and really discussing from a real estate team to an operations team on. How do we look at California? We know there's a lot of folks there that that love great food and and we've had a lot of success.

There with our 19 stores open. And, uh, we will continue to see our presence in California grow. We, we believe that, uh, people of California are, are loving legendary food and high level hospitality and and that's what Texas Roadhouse provides.

Mhm, absolutely. All right. Well, thank you. And then Michael just a quick follow-up. Um, what's a reasonable expectation for GNA, uh, spend this year?

Oh yeah, this is Keith. I'll take that 1. Yeah. Um, GNA, I'd say for the rest of the year, you can expect us uh, to get some leverage. I'd say especially in the fourth quarter, as we're lapping the 53rd week and then uh you know, just 1 thing to mention with us purchasing the support center on an annual basis. We're going to be saving about 2 and a half million dollars in rent. And so, you'll see a little, you know, a pro-rated benefit of that for this year. Also, in the back app.

Very helpful. Thank you.

Your next question is from the line of Jim Sanderson with North Coast research.

Hey, thanks for the question. I was hoping you could talk a little bit more about how you expect, corporate store margin to evolve, as you start to look more closely at developing Bubbas and then how you foresee mix

Of uh company versus franchised uh as you target that 200 unit growth goal.

Yeah. Hey Jim, it's Michael. I guess all, I mean, I think the second part first, uh, with that 200, you know, number, I assume you're. This is a question about Bubba's. Bubba's is all, you know, company, you know, plan to be company, uh, development uh, at this time. So that is that is all company. And really most of our growth uh on for for Texas Roadhouse and Baba's domestically

Um, is is company growth. Uh, Jaggers will be a mix of company and franchise and international is a franchise business. Um, you know, we expect above is over time. Will deliver similar margins? Uh, you know, to a Texas Roadhouse, uh, you know, obviously Roadhouse sales are a little bit higher which, which helps on the margin side. But, um, you know, Bubba's is, is proving that it can do very strong performance as well. So, um, over time we would um, you know, expect uh, to continue to, you know, Drive strong, you know, margins um, out of both brands.

All 3 Brands, all right?

All right. Thank you very much.

Your next question is from the line of Gregory.

Frank Frank forth with Google. Hi.

I know it's a bit of a tongue twister. Um, I blame my parents. The, uh, the question I had, Jerry, is um, uh, margin profile. And I know you guys have said for a long time that, uh, 17 to 18 is the right place to be.

Kind of, but but maybe between the beef Cycles in 2024, you got kind of just over 17 and I guess probably headed lower with this, this level of inflation.

As I look back, 5 or 6 years, I think you're auvs are up 10 to 15 points, more than your development, costs are up. And so I I wonder if that 17 to 18 is going to be 16 and a half to 17 and a half, or you still think 17 to 18 is the right place to be. Thanks.

Yeah. And thank you and and we do believe that internally that obviously the world has to cooperate to. And and the beef cycle does have to turn for us. But, you know, I want to always challenge ourselves to be a strong of balance when we're talking about financial results. And, and for our organization to believe that over the years in 32 years or or so, you know, that that's a great spot for us to be. But again, things have to work out and so we are not changing that. As of right now, we did get our chin Over the Bar, uh, last year, and we were very happy with that. And it had been growing in the momentum. Had been building up to that point. And obviously we're fighting some inflation this year, which we, uh,

Thankfully didn't have as much of last year and and that helped us through there. But I I believe that as of right now we're going to continue to focus on that Top Line and do everything we can to control that cost and be very balanced when it comes to fiscal responsibility, for our Roadies, our guests, and for our shareholders. And and uh we we'll continue. If, if we ever did feel like that was unreasonable, uh, we would have some internal discussions but as of now, we still believe that we can get our chin over that bar at some point.

Thank you very much.

Thank you.

Your next question is from Jake. Bartlett with truist securities.

Great, thanks for taking the question. Um, I had 1 and then I had a follow-up. Um, you know the the question is about your off premise sales and and this might, you know, build on the answer about about your app. But you know, over the last 4 quarters, um, off premise um sales for operating week have have been growing much faster than than, than on premise and has been a a driver of your your comps. Uh, the question is what is driving that is it just really just spill over and people kind of peeling out of the line and taking it home. Um or is it something operationally that you've done? Is it the app or you know and then I guess most importantly how sustainable do you think that is?

Yeah, Jake, this is Jerry. Thanks for the question. I, I truly believe it's a combination of all those things. The convenience of us putting in Windows for folks to be able to walk up and and get their order the mobile app, the the easier, uh, that it is to order and and navigate through that app, uh, we're seeing a more completion rate through that. Um, you know, and then the missing items is really the biggest thing and and we've just gotten better at it. We've focused on it. We've got uh, ways of of it's really the operators. In my opinion that are executing at a very high level. The guest is rewarding us because when they get home, they have their items, they're opening our food in their dining room table with their families. And they've got everything that they need and we've heard it over and over again. If, if you focus on something, you put energy on it, then the result improves and I think that's what we're seeing uh, from that standpoint. So it it is exciting to see it. Continuing to

Grow. But I really believe it's the app. It's the ease of pickup and it's the operator's delivering, a great experience to our consumer.

Great great and and the follow-up was on, you know, building on your comments and I just want you to kind of maybe say it again, or I just want to make sure I'm hearing it right. But the idea that as you increase the number of Bubbas, um, you also talked about some some company-owned Jaggers in 26. Um, you know, you you've been very consistent about kind of about keeping the the total number of units. Um, about um, about 30, you know, because of operational limitations or just, you know, making sure you execute very well is that changing? I mean it seems like you you have the capacity of gotten bigger you. You could I just want to make sure I'm hearing it, right? So we didn't get over my skis, um, as we as we look at, you know, your ability of maybe sustain, um, the pace of of Roadhouse openings and then and then add to that, um, with, with these other Concepts.

There's a pipeline for Roadhouse that is still strong. We are pressing on the gas with Bubba's a little bit, and you'll see, as we mentioned, Jaggers coming into the fold also. So I really want to get into the next year, and we have that confidence before I move that number up. But we are clearly starting to tip our head over the skis in that direction.

That's great to hear. Thank you.

Thank you.

Your next question is from line of John Tower with City Group.

John, your line is open.

Hi. Uh, this is uh, Karen Holt house on for John uh piggybacking a little bit on the off, premise questions. Um, you know, I understand there's the state argument State doesn't travel well and some things like that. But would you consider, you know, doing kind of, uh, doing delivery on a unit-by-unit basis? Um, you know, managing Partners, we're asking for it. Uh, you know, it was a maybe in unit in a denser Marketplace or they're Tech, you know, Tacker back a house, limitation to doing that.

Oh, yeah. Thanks for the question. We, you know, we have, uh, resisted the temptation of going that route as of now. Um, we do do it at the jaggerz concept and it Bubbles and we have 1 store, that's in a very Urban Market in in New Rochelle, New York that we do, uh, delivery at um, and then I will continue to have conversations with operators. Uh, but as of right now, um, you know, I think we're holding the line on not doing delivery and the rest of the concept unless there's a real reason to do it individually, we will have some conversations but uh, as of right now we we have resisted going that route we're focused on providing our guests, a great experience, in the dining room and through our off premise uh, through our pickup system and and through the app and, and all of that, that's where we'd really like to continue to focus as of right now.

Great. Thank you.

Your next question is from the line of Zachary for them with Wells Fargo.

Hey, good afternoon, on the entree, mix shifting more to be. Looks like it's been about a 30 basis point headwind on the food, and beverage line, assuming that held in Q2, curious, if you view this, more cyclical or or a structural phenomenon, and as you think about the impact in the second half is, is the 30th still the right impact or would you expect it to step down?

Yeah, hey Zack, it's Michael and it was, you know, around 30 basis points in the first quarter. It probably stepped down to about 25 basis points uh in the second quarter and um you know maybe it holds in that 20 to 25 level. In the third quarter would be my expectation. And then uh I I think it would step down a little bit more in the fourth quarter as we lap it. So uh, I kind of view it as a 1 year change in behavior and whether whether that means it'll change back and we will see something else occur. You know, we'll have to wait and see on that but I I do think of what what's driving a lot of it is the value on the menu and the state category and the and the guests, appreciating uh you know, the price they can pay with Texas Roadhouse for for a steak. And you know, that helps our our Top Line uh growth. But you see a little bit more pressure right now on the cogs line, uh, you know, from that. But as a steakhouse, we love seeing people wanting to, you know, try our steaks. We think that

is great for our, uh, long-term success.

Thanks for the time.

Good. Nice question is from Todd Brooks with Benjamin Benchmark. Cop company.

Hey, thanks. I'm going to keep the uh, off premise. Train rolling here. So it looks like off premise has been mixing

In kind of that mid 13% range. Recently, I think there was 1 point is the the roll out of Cadiz was happening. And it brings that additional efficiency and and calm to the kitchen. That there might have been a theory that more off premise, demand.

Uh, could be met out of the kitchens and that, um,

Managers would be more comfortable going after and servicing that demand. Has that been the case? Is that still on the common? If you look at, maybe your best quartile of stores with off premise, how high is their mix versus the 13% chain wide? Thanks.

At this point, then as we get finished this year and we continue to learn from each other about how we can utilize that technology to help us bigger faster and stronger and improve our guest experience, as well as our Roi experience in the back of the house. Uh, we believe that the digital kitchen will have some components that will, will play into our ability to be faster, um, and to be focused on taking great care of our guests. So I do believe, it is a component of of that, increase for sure. Yeah, and Todd, there are definitely restaurants that do higher levels of to go on a dollar basis than a percentage basis. Don't have, uh, all those numbers, you know, at our fingertips. But, um, you know, you know, we definitely have stores that are examples to others that you can do even more to go, um, in your restaurant. So we think there still is a lot of opportunity.

Okay, thank you both.

Thank you.

At this time, there are no further audio questions. I will now hand today's call over to Jerry Morgan for closing remarks.

Thank you all. I want to close with a special shout out to our Jaggers team, in Lexington Kentucky, which represents our 800 systemwide restaurant, great job on delivering high-level hospitality and creating raving fans. Let's go txrh

Good night, y'all.

This concludes today's call, thank you for joining. You may now disconnect your lines.