In September and October, more than half of Texas Roadhouse’s restaurants comped positive, Robinson added. For some color, units are seeing year-over-year boosts in the first half of the week compared to pre-COVID life. This is something other chains have reported as work-from-home schedules bust former routines. Texas Roadhouse started to see flat and “even a little positive” sales return from Friday to Sunday, too.
Taylor credited the rebound, in part, to Texas Roadhouse’s managing partner structure. Operators pay $25,000 to get 10 percent of the bottom line. The notion—made famous by Outback in the early days of its development—results in partners instead of employees, in practice. The idea—amplified during COVID—being operators are going to find ways to succeed considering it affects their earnings directly.
“We've got some really long-tenured studs that work at our company,” he said.
The next phase in Texas Roadhouse’s response is to uncover ways to serve even more guests inside and outside restaurants, in the same efficient and safe manner as the brand’s to-go pivot.
This includes adding outdoor dining to some locations and testing the conversion of many of its “Corrals” to include to-go curbside staging and pickup areas. Basically, Texas Roadhouse is taking waiting areas and, in some cases, pushing the wall out so there’s additional space to execute curbside. It’s also spoken about putting a barn door that goes toward the lobby where a door can slide and transform the space into on-deck seating, or a waiting space for people who need it, like older guests.
Picture it as taking all or part of waiting rooms and putting doors on them. Or a sticking a sliding window there, with curbside walk-up to the window, 6 feet away from the next.
Texas Roadhouse also released a new mobile app (at Bubba’s 33 as well) with new features designed for this crazy climate. It includes the ability to accept gift cards as a method of payment. Frequency and check rise with app use, Taylor said.
Additionally, the chain is introducing a two-way texting system for to-go curbside guests to improve the pickup process and potentially boost labor efficiencies.
One added update Taylor hinted but didn’t elaborate on was drive-thru windows, which are currently testing in a “few Texas Roadhouses.”
Expect to see more of the company’s fast casual, Jaggers, too. The third location will open later this year in Louisville, Kentucky, with a fresh prototype. “We will continue to evaluate our options for Jaggers, which could include a franchise model to allow for faster growth. Innovation is taking place outside of our restaurants, too,” Taylor said.
During shutdowns, Texas Roadhouse wanted to satisfy the stock-up behavior so many customers displayed as they tried to make grocery trips last. So it launched a new online initiative, Texas Roadhouse Butcher Shop, where guests could load up the freezer with steak. Taylor added the brand is “working on several retail opportunities,” and plans to share additional details in early 2021.
“With sales trends closer to historical levels, our managers have been able to spend more time focusing on details such as, food quality, waste, and labor efficiency, which will help our margins over the long run,” he said.
To assist with near-term margin improvement, however, Texas Roadhouse is rolling a menu price increase of about 1 percent, effective this week. It was originally scheduled for early April.
Also breaking the pandemic mold, Q3 year-to-date, Texas Roadhouse opened 13 company-owned restaurants and expects to end the year with at least 20 new venues. It plans to open as many as 10 in the first half of next year. For the full calendar, Texas Roadhouse hopes to return to its normal development target of 30 corporate stores.
Of those 20 planned for 2020, six will debut in towns of 40,000–60,000 residents, Taylor added. It’s a shift of direction gaining momentum pre-crisis. In the 2021 fleet, 25 percent will be Bubba’s 33, but 50 percent of the remaining will be Texas Roadhouses in smaller markets versus mid-sized ones. None will be in urban areas.
Concerning near-term trends, about a third of units currently offer outdoor dining (35 percent to be exact). It measures to about 200 stores. But Taylor isn’t overly concerned with winter’s impending arrival since it will just flip the system. “You could not do that in, say, Florida with the bugs and the hot weather, Arizona, super hot, southern Texas,” he said. “So I would say, the 200 this winter becomes slightly over 100. So you do lose a little bit. But you're not losing a lot. Because we do pick up those states, that enjoy the nice weather in the wintertime.”
Texas Roadhouse tested doing a bump out that’s fully enclosed, or essentially covered patios. Then Texas Roadhouse can wrap plastic around to weatherproof. The company estimated outdoor sales contributed as much as 2–2.5 percent of its comp in Q3.
Texas Roadhouse came out of Q3 with earnings of 42 cents per share, which sailed the Zacks Consensu Estimate of 20 cents. Revenue was $631.19 million compared to $650.49 million in Q3 2019.