Sales are soaring at the steakhouse chain as dine-in and to-go create a formidable one-two punch.

Texas Roadhouse, long resistant to delivery and business outside its four walls in general, had no choice in spring 2020. In the seven days leading up to March 10—when coronavirus felt more like gossip than inescapable news—the brand generated $113,777 in average weekly sales across its system. To-go accounted for only $8,741 of that.

By the time March 24 rolled around, however, and dine-in went dark in restaurants across America, sales at Texas Roadhouse plunged 73 percent to $29,432. And $25,938 stemmed from to-go.

At that juncture, CEO Kent Taylor, who passed away this March, gathered Texas Roadhouse leaders and set a $40,000 per week, per store aim. “Everybody thought that was incredible,” Travis Doster, VP of communications, says. “There’s no way. And guess what? Within two weeks, we hit $40,000, and then we hit $50,000.”

When March ended, Texas Roadhouse was up to $41,892 (all from to-go), as Doster mentioned. It rose to $48,815 the following week and $51,650 the next. It then jumped to $62,852, and the comeback was on for Texas Roadhouse.

In more recent weeks, with restrictions loosening and pent-up demand crowding dining rooms again, the question for restaurants has been whether or not elevated to-go business was a COVID flash or something more lasting. Likely, it settles somewhere between extremes.

But as Texas Roadhouse showed in Q2, the three-month period that ended June 29, thanks to changes in guest behavior brought forth by the pandemic, and improvements made on the operations side in response, it won’t ever return to the low end.

Same-store sales at Texas Roadhouse soared 80.2 percent in Q2 against a 32.8 percent drop in the comparable, pandemic-hit 2020 quarter. More telling, the chain’s same-store sales were up 21.3 percent versus 2019 levels. As a refresher, Texas Roadhouse wasn’t exactly struggling in Q2 2019. Comps lifted 4.7 percent that period compared to 5.7 percent in Q2 2018. That after a 4 percent rise in Q2 2017 following a 4.5 percent uptick the year earlier. Steady results that were commonplace from of one of the highest-performing brands in casual dining.

This past quarter’s run wasn’t built on complicated pillars. Texas Roadhouse posted average weekly sales of $126,442. To-go sales mixed 16.9 percent of that average, north of $21,000 per week.

In June, the company witnessed average guest counts in dining rooms comparable to 2019 levels. Yet it still served roughly 2.5 times the number of to-go customers than it did two years ago. And so, Texas Roadhouse sailed past the $106,000 weekly overall take it earned in Q2 2019, when off-premises was a natural afterthought for the steakhouse concept, known for its line dancing servers and peanut shell-littered floors.

Texas Roadhouse’s average check also grew 8.9 percent in Q2, including a mix of about 3.9 percent, as customers moved to higher-priced entrees. A reflection, CFO Tonya Robinson said Thursday, of guests seeking experience as they head back out from lockdowns. More appetizers. Higher frequency of alcohol and soft drinks. The per-person average climbs $4 inside restaurants versus to-go for Texas Roadhouse.

Still, the question of whether or not this is a Q2 2021 story, and the tailend of the COVID journey, remains top-of-mind.

Texas Roadhouse’s same-store sales in July tracked 25.5 percent higher than 2019 levels. That’s with to-go inching back to 14.2 percent of average weekly sales of $123,927, or $17,500. Robinson said the brand’s pervious target for to-go, with dine-in back in the picture, was $20,000, and that’s still the case. But it’s difficult to gauge today given the different levels of capacity restrictions throughout Texas Roadhouse’s 580-unit U.S. footprint. “But there are some stores out there who do very, very well on the To-Go side of the business,” Robinson said. “And you’ve got a lot of operators who definitely see the benefit, have learned a lot through 2020.”

Texas Roadhouse made a few changes in 2020 to react to COVID. It put windows in at the front of stores for employees to hand-off to-go food. It also tested drive-up windows in “a couple of stores,” CEO Jerry Morgan said. Texas Roadhouse can now communicate via text with consumers pulling up. This strengthened its ability, Morgan said, to simply get people their food, whether curbside or walking up to the window, when they want it without wondering how to alert the restaurant. “I think those are all very strategic moves that are going to help continue as we move forward to hold our to-go business,” Morgan said.

As dining-room business increases, the logistics within Texas Roadhouse’s buildings concerning how they manage added to-go volume has shifted. And that’s a permanent change. “That’s been great to see,” Robinson.

And really, it’s no small feat for Texas Roadhouse, which has hardly tweaked its design since George Lask developed the prototype some 24 years ago. Its famous for sightlines and the ability to see every guest walking through the door. And for the manager’s front-and-center presence.

Texas Roadhouse reacted quickly, though, to extreme changes, adding outdoor dining where possible and testing the conversion of “corrals” to include to-go curbside staging and pickup areas. Essentially, the brand took waiting areas and, in some cases, pushed the wall out so there was additional space to serve off-premises business. It then launched a new app with the ability to accept gift cards as a method of payment and, as Morgan mentioned, deployed a two-way texting program to strip friction out of to-go execution.

Robinson said to-go usage helped spread occasions. Usage stays high “just about every day of the week.” It’s coming in what Texas Roadhouse calls “the power hours,” or the 6 to 8 p.m. timeframe when dining rooms are typically busiest.

Going forward, Robinson added, Texas Roadhouse is more focused on the dollars coming from to-go than the percentage, which will undoubtedly fall back as dining rooms open up further. “We’re very excited about what we’ve learned on how we can execute on the to-go side,” Morgan said.

Inflation, labor, challenges to consider

Despite the surge in sales and underlying optimism, Texas Roadhouse isn’t over the COVID hurdle just yet. Capacity restrictions might not be the A1 issue today; but labor and supply chain dynamics are.

Texas Roadhouse said Thursday it expects food cost inflation of 7 percent into the near future, up from a previous guidance of 4 percent laid out in April. Morgan highlighted something that’s come up often recently among restaurant leaders—higher volumes are bringing forth new challenges. Namely, the outpacing of demand and supply.

Morgan said most of the chain’s restaurants have made “great strides” in staffing, while others continue to face challenges reaching and holding desired levels on a consistent basis.

In regards to commodities, Texas Roadhouse has had to buy more product on the open market and outside the cost parameters of its original contracts.

As a result, it’s seeing costs for basket items, in particular beef, trending higher than anticipated, Morgan said. “Despite the cost pressures we are facing, we will continue to run our restaurants with a steady approach and a long-term focus,” he said, adding the chain would hold its normal internal talks with operators on menu prices “several weeks from now.”

A price bump, if decided on, could come in late October. Texas Roadhouse’s Q2 margins (17.7 percent) benefited from the aforementioned higher check, and that included 2.8 percent menu pricing (1.75 of that came in May and 1.4 percent in the back half of 2020). Q3 is expected to clock in at about 2.9 percent. As always, Texas Roadhouse tries to approach pricing conservatively, and generally goes market-to-market to address different pressures.

“They’re facing similar labor issues,” Robinson said of suppliers, “transportation and things like that, and they’re starting to pass those costs on that they’re feeling. So some of it is how long does that last, as we kind of all feel there’s a bit of supply tightening and things like that, just across everything.”

Texas Roadhouse added 5,000 employees in Q2 on the heels of a national hiring day. “So that’s a big win,” Morgan said.

“I think we’ve had a lot of success in the second quarter and a lot of momentum going into the third quarter,” he added of staffing. “Unknown is how school goes back and does it change our trend? It typically does. I don’t know that it will this year. So we’re anxious to see how this couple of months goes as kids get back to school and are we really going to get back some normal, but we made a lot of gains on the success of getting staffed across the country to be able to continue to provide a great service to our guests.”

Texas Roadhouse opened eight company units in Q2, including two Bubba’s 33 stores. For the year, the brand expects to debut 26–29 restaurants, with five of those being Bubba’s and one Jaggers, the brand’s fast casual. Bubba’s comps in Q2 rose north of 20 percent versus 2020, while Jaggers lifted more than 30 percent.

Casual Dining, Chain Restaurants, Feature, Texas Roadhouse