Revenue was higher by 11 percent to $605.9 million in Q4 as well. Net income upped 6 percent for earnings per share of 42 cents. All the results topped Wall Street expectations.
Colosi said Texas Roadhouse has not been able to draw a definite correlation between pricing actions and traffic changes. Instead, it’s more a result of “unemployment over time when you look at the direction of unemployment getting worse or getting better.”
What that boils down to, essentially, is that Texas Roadhouse invested in the long-term health of its staffing pool, especially as it concerns turnover at the management level. For the past three years or so, Texas Roadhouse challenged its managing partner system to fully staff restaurants in an industry where the opposite is often true. And that’s a moving and growing target given the added volumes into its restaurants. In just this past year alone, Texas Roadhouse boosted average-unit volumes (at restaurants open for a full six months before the beginning of the period) 4.8 percent to $5.2 million from $4.97 million.
Many chains today, notably in the full-service arena, lament being understaffed due to triple-digit turnover rates. “And so we’re challenging the concept of what it means to be fully staffed on the hourly level,” Colosi said.
How so? By improving quality of life—the No. 1 reason people “leave us,” Colosi said. Being fully staffed is the leading cure, he added, which is why one of Texas Roadhouse’s top initiatives, despite all the cost pressure, remains adding hourly employees and managers.
Colosi said Texas Roadhouse tacked on managers in certain locations and is tracking toward near-mythical single-digit manager turnover rates (the chain is almost there, he said). This doesn’t concern managing partners; it’s kitchen managers, service managers, assistant service managers, assistant kitchen managers, and other employees that directly affect the guest-facing experience. Texas Roadhouse made progress and has room to grow in 2019, Colosi added. The initiative to fully staff created flexibility on labor schedules, which is a critical driver of employee satisfaction and that quality-of-life dynamic mentioned earlier. “When you've got management turnover getting down close to single digits, that is a huge competitive advantage for us as far as what it bodes for the future quality of the guest—what the guest is going to experience from us,” he said. “So we know that, and it's a big part of our traffic growth right now. And it's one of the things that makes us pretty confident about the future.”
The hourly challenge is more pressing, however. The chain’s turnover continues to slide upward year-over-year, Colosi said. Most of Texas Roadhouse’s hourly turnover takes place in the first 30–60 days of employment.
Another factor, Colosi said, is Texas Roadhouse’s managing partner model—a program akin to the model that helped Outback scale in its early days. So, for Texas Roadhouse, the conversation stretches out over a collection of nearly 600 individual restaurants and “600 different stories of where they are in their own staffing journey,” Colosi said.