CFO Tonya Robinson said Texas Roadhouse is trying to stem turnover rates, which are in the high 120s. “We’ve talked a lot about hiring right, training right, making sure we are allowing flexibility in the schedules, making sure we’re paying a fair wage rate and we can compete on that level,” she said.
Texas Roadhouse hasn’t seen turnover come down necessarily, Robinson added, but it hasn’t gotten worse, either. That’s a win in today’s constricted labor climate.
While the issues vary by operator and market across the 541-unit system (domestic), Robinson outlined a few success practices. Monitoring clock-in and clock-out times. Being upfront and explaining the job to new employees. Texas Roadhouse appreciates a lot of turnover with its dishwashers. So some restaurants have devised ways to improve the position. “[Our operators] come up with ways to offset these pressures,” Robinson said. “And they’re doing everything can to add the labor where they need to, where its adding value to their restaurants, and finding ways to mitigate some of that.”
Texas Roadhouse does a lot of “staff scans,”—360 development-type things to glean feedback from workers and address concerns quickly. This strategy is directly related to positive traffic, Robinson said. “Traffic, I think, at the end of the day is the biggest indicator to me of customer satisfaction.”
Texas Roadhouse has treaded an interesting line with labor lately. In Q2, labor hours were up 2.8 percent, outpacing traffic growth of 1.7 percent. That scale was weighted the same direction last quarter.
As Evercore ISI senior managing director David Palmer brought up in Monday’s call, labor is often referred to as a semi-variable cost for restaurants. It can grow less than traffic, especially if operators are trying to get their labor paid more and keep employees around. One way to do that is to allow those hours to leverage. In other terms, brands can stabilize labor hours on purpose to keep turnover down.
Starting in Q4 of 2018, Texas Roadhouse witnessed this gap tighten, with labor growth in hours surpassing traffic growth. “And we’ve also seen it in our manager levels,” she said. “And we’ve been taking a hard look at the number of managers in the restaurants and the type of manager labor hours that we have. So that’s a piece of it.”
“I think going forward,” she added, “we would hope to see those growth in hours moderate a bit and [come] back to normal where we see them growing less than traffic growth, and there’s some benefit of traffic growth on the labor line. But right now, we’re not seeing that.”
Texas Roadhouse, though, won’t stray from this following practice, and this captures the real story: It often looks at the sales growth in units with higher staffing levels. It will then intentionally increase the restaurants that don’t have those staffing levels up to those numbers—a cost it’s willing to take to generate transactions. “So that we would,” Taylor said, “hopefully, see traffic improve.” That’s usually a 6- to 12-month process for Texas Roadhouse.