This is an English adaptation of a FoodBud historical article originally published on September 17, 2022.
FoodBud previously tracked Texas Roadhouse but had not organized the notes. The steak-led restaurant chain is publicly listed and, at the time of the article, had a market capitalization of US$6.05 billion, or about RMB 42.2 billion.
Founder Kent Taylor died by suicide in March 2021 after struggling with post-Covid symptoms, including severe tinnitus.
The first Texas Roadhouse opened in 1993. Its core proposition is steak cooked to order, alongside unlimited peanuts and fresh-baked bread.
As of June 28, 2022, Texas Roadhouse had 678 restaurants in total: 582 company-operated restaurants and 96 franchised restaurants.
Beyond the core Texas Roadhouse brand, the company also operates Bubba’s 33 and Jaggers. Among the 582 company-operated restaurants, 541 were Texas Roadhouse units, 37 were Bubba’s 33, and 4 were Jaggers.
The 582 company-operated restaurants included 562 wholly owned units and 20 majority-owned units. Of the 96 franchised restaurants, 62 were in the United States and 34 were international, across 9 countries or regions: 15 restaurants in 5 Middle Eastern countries, 5 in the Philippines, 5 in South Korea, 3 in Mexico, 1 in mainland China, and 5 in Taiwan. Texas Roadhouse also held 5% to 10% stakes in 23 domestic franchised restaurants in the United States.
In 2021, the franchised restaurants were operated by 10 franchisees, and no franchisee operated more than 16 restaurants. Domestic U.S. franchise agreements typically ran for 10 years. Franchisees paid a royalty of 4% of sales, while revenue-related fees did not exceed 3% of sales. Texas Roadhouse also provided management services to 25 franchised restaurants in which it held equity and 5 franchised restaurants in which it did not, charging a monthly management fee equal to 2.5% of sales.
As of June 29, 2021, Texas Roadhouse held a 40% stake in a casual-dining operator in China. That company operated 3 non-Texas Roadhouse-brand restaurants. Texas Roadhouse had previously opened a restaurant in Shanghai, which later closed. In its latest financial report at the time, the company estimated that disposing of the 40% stake in the China operator would generate a loss of about US$500,000.
In the prior year-plus period, Texas Roadhouse was not only acquiring franchised restaurants but also repurchasing shares.
In March 2022, it acquired one franchised restaurant for US$6 million; before the transaction, it held a 5.49% stake in that restaurant. In December 2021, it acquired 7 franchised Texas Roadhouse restaurants for US$26.4 million. In the first half of 2022, the company repurchased more than 2.7 million shares for US$212.9 million.
Texas Roadhouse expected to open about 25 new Texas Roadhouse and Bubba’s 33 restaurants in 2022. Franchisees were expected to open 7 Texas Roadhouse restaurants, most of them in international markets.
According to Texas Roadhouse’s second-quarter financial report, second-quarter revenue was US$1 billion, up 14% year over year. First-half revenue was US$2 billion, up 18% year over year.
Second-quarter net income attributable to the parent was US$72.42 million, while first-half net income attributable to the parent was US$150 million.
Over the prior five years, revenue declined in 2020 during the pandemic, while the other years were broadly steady-growth years. In 2021, revenue recovered quickly and net profit reached US$245 million.
In the second quarter of 2022, Texas Roadhouse’s average weekly sales per unit were US$7,006. As of the end of June, average annual sales per unit were US$1.786 million. Bubba’s 33 reported average weekly sales per unit of US$478 and AUV of US$1.475 million.
The three major restaurant cost lines were food, labor, and rent. In the second quarter, Texas Roadhouse’s food cost ratio was 34.1%, labor cost ratio was 32.7%, and rent cost ratio was 1.6%.
Texas Roadhouse focuses on the dinner daypart. On weekdays, operating hours are generally limited to dinner; on Fridays, about half of the restaurants also open for lunch. By concentrating on dinner, Texas Roadhouse can centralize preparation and manage one main shift.
The article notes that the U.S. market also has chains focused on other dayparts, such as First Watch, which positions itself around breakfast and daytime dining.
Texas Roadhouse also emphasizes value. In 2021, the average guest spend at company-operated Texas Roadhouse restaurants was US$19.68, while Bubba’s 33 was US$18.94. In fiscal 2021, alcoholic beverage sales accounted for 10.8% of revenue at company-operated Texas Roadhouse restaurants.
A typical Texas Roadhouse restaurant is 7,600 to 8,400 square feet, or about 706 to 780 square meters. It has 58 to 68 tables, seating for 270 to 325 guests, and about 180 parking spaces.
The average investment for a new Texas Roadhouse restaurant opened in 2021 was US$5.7 million.
Bubba’s 33 restaurants are typically 7,200 to 8,800 square feet, or about 669 to 815 square meters. They have 55 to 59 tables and seating for 270 to 330 guests, including 26 to 46 bar seats. The target parking count is also 180 spaces.
The average investment for a new Bubba’s 33 restaurant was US$7.4 million.
As of the end of 2021, Texas Roadhouse leased 418 properties and owned 148 properties.
A new Texas Roadhouse restaurant typically takes 3 to 6 months for site selection and approvals, followed by 6 to 14 months to obtain the necessary permits, and then about 5 months for construction and fit-out.
Kent Taylor’s book was published in 2021, though at the time of the article there was no Chinese edition.
Note: market-cap, buyback, acquisition, ownership-disposal, and 2022 expansion figures are historical as reported in 2022.