Texas Roadhouse achieves 12.8% revenue growth amid strong demand, plans 30 new openings in 2025

OPERATOR - (00:01:38)

Good evening and welcome to The Texas Roadhouse 3rd Quarter Earnings Conference call. Today's call is being recorded. All participants are now in a listen only mode. After the speaker's remarks, there will be a question and answer session. At that time, if you would like to ask a question, please press STAR then the number one on your telephone keypad. Should anyone need assistance at any time during the conference, please press STAR zero and an operator will assist you. I would now like to introduce Michael Balin, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

Michael Balin - Vice President of Investor Relations - (00:02:12)

Thank you Julianne and good evening. By now you should have access to our earnings release for the third quarter ended September 30, 2025. It may also be found on our website at texasroadhouse.com in the Investor SECtion. I would like to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements. In addition, we may refer to non GAAP measures. If applicable, reconciliations of the non GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse and Keith Humpick, our Interim Chief Financial Officer. Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, could everyone please limit yourself to one question? Now I'd like to turn the call over to Jerry.

Jerry Morgan - Chief Executive Officer - (00:03:31)

Thanks Michael. And good evening everyone. Before we begin our formal remarks, I want to take a moment to recognize Michael Bailyn on his promotion to Vice President of Investor Relations. As many of you know, he has played a pivotal role in our in shaping our investor outreach and communicating the company's financial strategy. Congratulations, Michael. I am very proud of all you have done for Texas Roadhouse and I'm excited to see you continue to grow our investor relations program. Moving on to our quarterly results. Our strong top line momentum continued in the third quarter with revenue topping $1.4 billion. Through the relentless efforts of the best operators in the business, we achieved our highest quarterly growth of the year in revenue, same store sales and traffic. There's no doubt there is a healthy demand for our brands. Our people first focused value proposition and operational excellence continue to be a winning formula to drive our long term success. On the development front, we opened seven company owned locations in the third quarter including two Bubba's, 33 restaurants and one Jaggers. We remain on track to open approximately 30 restaurants across the three brands in 2025. We have also acquired 20 franchise restaurants this year including three purchased at the beginning of the fourth quarter. Our franchise partners opened two international Texas Roadhouse restaurants during the third quarter. We expect they will open one more franchise location in the fourth quarter. Looking ahead to 2026, we expect to open approximately 35 company owned restaurants including approximately 20 Texas Roadhouses, 10 Bubba's, 33 and as many as five Jaggers. Additionally, as mentioned on last quarter's earnings call, we have an agreement in place to acquire our five remaining California franchise locations at the beginning of 2026. On the franchise side, our partners are planning to open 10 new restaurants including six international Texas roadhouses and four domestic Jaggers. Regarding consumer behavior in the third quarter, we are pleased with what we saw from our guests visiting our restaurants as they continue to favor stakes in larger size entrees. In addition, we haven't seen any noticeable change in guest behavior since our 1.7% menu price increase at the beginning of the fourth quarter. The guest is also responding positively to our newer offerings. On the beverage side, in addition to mocktails and our $5 all day everyday beverage specials, we are also having success with our regional approach to the beverage menu and offerings. For example, we are testing dirty sodas in Utah and Idaho which have been well received by our guests. The regional approach allows us to be more receptive and responsive to local taste and potential trends. Our to go business continues to show solid momentum. Our operators have done a great job focusing on speed and and order accuracy. This focus has improved the overall guest experience and as we become more efficient, our operators can take more orders per hour outside the four walls of our restaurants. We are also very excited about the retail segment of our business. Our retail strategy is about building guest awareness and engagement. Over the past several years we have introduced many rolls, Buttery Spreads, Steak sauces and Dips. We are excited that between our gift cards and retail items, we have a presence in over 120,000 retail outlets across the country. We believe having our logo in the grocery store aisles helps keep Texas Roadhouse top of mind to our current and potential guests. Our success would not be possible without the partnership of our vendors. We just recently held our annual Vendor Partner Summit. During this event we met with many of our key suppliers. There were a number of takeaways around how we continue to work together to strengthen our partnership and ultimately better support our operators. Moving on to technology approximately 95% of our restaurants are currently using a digital kitchen and upgraded guest management system. We expect the rollout of both systems to be completed by year end. As we look to next year, our operating philosophies remain unchanged despite the current inflationary environment. We will maintain our focus on driving top line through a combination of guest traffic growth and the expansion of our restaurant base. We'll remain an industry leader in all in offering high level hospitality and everyday value to our guests and continue to invest in our roadies to ensure we remain an employer of choice. And finally, we will stay true to our mission, values and purpose for the long term health of the business. This is what has made us successful for over 30 years and what we believe best sets us up for further success going forward. Now Keith will provide some thoughts. Thanks Jerry.

Keith Humpick - Interim Chief Financial Officer - (00:09:31)

As Jerry mentioned, our operators drove strong sales performance in the third quarter with all three brands delivering same store sales growth. Weekly sales averaged nearly $162,000 at Texas Roadhouse, $119,000 at Bubba's 33 and over $75,000 at Jaggers. On commodities, inflation in the third quarter was above our expectation due to higher than anticipated beef prices in the back half of the quarter. These higher prices have persisted and have impacted our forecast for beef inflation over the remainder of the year. As a result, we are updating our full year 2025 commodity inflation guidance to approximately 6%. As everyone is aware, there is certainly significant volatility and multiple unknowns related to beef prices. With that said, we are setting our initial 2026 commodity inflation guidance at approximately 7%. At this time, we expect to be above the guidance in the first half of the year and below the guidance in the second half of the year. Moving on to labor wage and other labor inflation for the third quarter was in line with our expectations. Our operators continue to execute at a very productive level as labor hours grew at approximately 35% of comparable traffic growth. Our full year 2025 wage and other labor inflation guidance remains unchanged at approximately 4%, and for 2026 we are guiding to wage and other labor inflation of 3 to 4% with mandated increases representing approximately 1% of the increase. With regard to capital allocation, we ended the third quarter with a cash balance of $108 million. Cash flow from operations was $144 million, which was offset by $214 million of capital expenditures, dividend payments and share repurchases. Also, as previously mentioned we acquired three franchise restaurants at the beginning of the fourth quarter and we will be acquiring five California franchise restaurants at the beginning of 2026. Finally, with regard to capital expenditures in 2026, we will continue to prioritize new store development and maintaining our existing restaurants. With approximately 35 new store openings and five restaurants being acquired at the beginning of the year, we are expecting 5 to 6% store week growth in 2026 and we are establishing our initial 2026 capital expenditure guidance at approximately $400 million. This excludes the cost of acquiring the California franchise restaurants and now Michael will.

Michael Balin - Vice President of Investor Relations - (00:12:15)

Walk us through the third quarter results thanks, Keith. For the third quarter of 2025, we reported revenue growth of 12.8%, primarily driven by a 5.5% increase in average weekly sales and 6.8% store week growth. We also reported a restaurant margin dollar increase of 1.1% to $204 million and a diluted earnings per share decrease of 0.8% to $1.25. Average weekly sales in the third quarter were over $157,000, with To Go representing approximately $21,500, or 13.6% of these total weekly sales. Comparable sales increased 6.1% in the third quarter, driven by 4.3% traffic growth and a 1.8% increase in average check by month. Comparable sales grew 5%, 7%, and 6.1% for our July, August and September periods respectively, and comparable sales for the first five weeks of the fourth quarter were up 5.4%, with our restaurants averaging sales of nearly $160,000 per week during that period. In the third quarter, restaurant margin dollars per store week decreased 5.3% to approximately $22,500. Restaurant margin as a percentage of total sales decreased 168 basis points year over year to 14.3%. Food and beverage costs as a percentage of total sales were 35.8% for the third quarter. The 224 basis point year over year increase was driven by 7.9%. Commodity inflation combined with shifts within the entree category, which was partially offset by the benefit of a 1.8% check increase. Labor as a percentage of total sales decreased 18 basis points to 33.6% as compared to the third quarter of 2024. Labor dollars per store week increased 5.2% due to wage and other labor inflation of 3.9% and growth in hours of 1.3%. Other operating costs were 14.7% of sales, which was 40 basis points better than the third quarter of 2024. The improvement was driven by leverage on operator bonuses, partially offset by changes in our quarterly reserve for general liability insurance. These Insurance adjustments include $1.7 million of additional expense this year as compared to $400,000 of additional expense last year. Moving below restaurant margin, GNA dollars declined 1.4% year over year and came in at 3.8% of revenue for the third quarter. The decline was primarily driven by lower incentive compensation and lapping the additional expense. From our change to annual equity grants, our effective tax rate for the quarter was 13.1%. Based on our outlook for the remainder of the year, we are updating the guidance for our full year 2025 income tax rate to approximately 14.5%. We are also setting our guidance for the full year 2026 income tax rate at approximately 15%. Finally, as a reminder, in the fourth quarter of 2025, we will be lapping a 14 week quarter from last year. We estimate that this will have an approximately 10% negative year over year impact on fourth quarter EPS growth. Now I will turn the call back over to Jerry for final comments.

Jerry Morgan - Chief Executive Officer - (00:16:19)

Thanks Michael. We just completed our 20th annual fall tour where we traveled to 28 cities over a six week period gathering feedback from nearly 800 managing partners. While it is called Fall Tour, it is really about listening to and engaging with our managing partners to learn how we can better support them. There's nothing that feeds my soul more than spending time with the best operators in the industry who continue to create a place where roadies want to work and our guests want to dine. And speaking of guests, I want to give a big shout out to some of our raving fans, Mike and Judy McNamara, who have just completed their 530th store visit. We are proud to have Mike and Judy as a part of Roadie Nation.

OPERATOR - (00:17:11)

That concludes our prepared remarks. Julianne, please open the line for questions.

Sarah Sedator - Equity Analyst at Bank of America - (00:17:16)

Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad. Our first question comes from Sarah Sedator from Bank of America. Please go ahead. Your line is open. Oh, thank you very much. I just, I guess maybe one question and one clarification. I'll start with a clarification. As you think about the outlook for beef inflation or commodity inflation. I think you know the implication is that beef inflation might be up kind of mid teens if your commodity basket is up high single digits. Could you, could you just talk a bit about, you know, what you're seeing that is that's that's leading you to draw that conclusion? I guess I thought maybe we would start to see some pullback in demand at retail just given where prices have gone. And it sounds like perhaps that's not the case. And then I guess the question was more about your beverage program. I know that's something that you've been working on for a while, kind of mocktails and shifting perhaps to address the fact that younger consumers maybe aren't drinking alcohol. Could you talk a little bit about whether, you know, whether you're continuing to see that trend in terms of negative mix? Thanks.

UNKNOWN - (00:18:33)

Sarah.

Michael Balin - Vice President of Investor Relations - (00:18:33)

This is Michael. I'll start with your commodity question. Were you referring to fourth quarter of this year or into our next year commentary?

Sarah Sedator - Equity Analyst at Bank of America - (00:18:41)

Next year. Next year, please.

Michael Balin - Vice President of Investor Relations - (00:18:44)

Yeah. So for next year we are assuming, five single digit, inflation when it comes to, formula, pricing. We also will be lapping some favorable contracts from this year. So the combination, of those two, two things is what gets us into, low double digits unweighted beef inflation.

Jerry Morgan - Chief Executive Officer - (00:19:17)

And then I'll Sarah, this Jerry talk about the beverage program. You know, I really am excited last couple of years as we rolled out our $5 all day, every day, which is a 10 ounce margarita, a value pint beer and some other things there. And the mocktails have gone very well. Dirty sodas, we're testing in Utah and Idaho. And you know, there's a lot of our consumers out there that beverages is a different category for them. And I think us being aware of consumer trends and how that applies and I think people want a good beverage, maybe not as much the beer and margarita anymore, but they want to have a quality beverage option. And so whether it be liquor, beer and wine, whether it be soft or iced teas and sodas or a mocktail or a dirty soda. And I think we're learning that the better the offering, the more options the guest and the consumer has, the better it is for us. So I think the overall blend of the beverage category has clearly been a focus of ours for the last 18 to 24 months. And, and I'm excited to see that continue to expand.

Sarah Sedator - Equity Analyst at Bank of America - (00:20:28)

Okay, great, very helpful. And just impact on mix. Anything to say there on the check.

Michael Balin - Vice President of Investor Relations - (00:20:33)

Mix when it comes to mix, we're continuing to see, some negative alcohol mix that's really remained, consistent through the year. And that's where most of the negative mix that we are really, where all the negative mix that we're seeing this year is Coming from some of that is being offset by positive mix of mocktails and soft beverages continue to be flat year over year.

Sarah Sedator - Equity Analyst at Bank of America - (00:21:01)

Thank you.

OPERATOR - (00:21:03)

Thank you.

Gregory Frankfurt - Equity Analyst at Guggenheim - (00:21:04)

Our next question comes from Gregory Frankfurt from Guggenheim. Please go ahead. Your line is open. Hey, thanks for the question. I guess I'm curious, maybe not to hammer on beef, but what gives you. Guys the confidence that this is transitory versus structural? And I guess how are you evaluating the structural nature of what's going on. Versus maybe not pricing against it because it's transitory? Thanks.

Michael Balin - Vice President of Investor Relations - (00:21:33)

Yeah, hey Greg, it's Michael. Thanks for the question. I think, the industry, the experts, our purchasing department all believe that this is a, we are in a cattle cycle and it is transitory in nature. You know, cattle cycles do last longer and, and you tend to, when you come out of it, settle in probably higher than where you came into it. So, certainly as we take pricing for other structural inflationary pressures, that is wage pressure, it does help offset any component that is, structural in nature. On the commodity line, we're not going to, on the front end, guess of what, what is structural and what is transitory. You know, when the cattle cycle ends or the industry expects something different, then we would have, different conversations. But right now, everything we're told and believe is that this is a cyclical issue and one that we just need to manage through.

Gregory Frankfurt - Equity Analyst at Guggenheim - (00:22:37)

Thank you.

Jacob Aiken Phillips - Equity Analyst at Melius Research - (00:22:39)

Our next question comes from Jacob Aiken Phillips from Melius Research. Please go ahead. Your line is open. Hi everyone. Good afternoon. I just wanted to ask on your take on the consumer. I know traffic was strong, but are you seeing any differences by income cohort, age cohort? And then like other, other restaurants have said that there's been a bifurcation among consumers and how you manage your menu and your pricing architecture to appeal to both sides of.

Jerry Morgan - Chief Executive Officer - (00:23:13)

Thanks, Jacob. This is Jerry. I'll kick it off and then I think Michael will have a comment. But, you know, there's nothing significant that we can see. We're excited about our traffic growth and our sales growth and you know, our menu has always had value built into it and, and we have some offerings on our early dine. And, and so I think we've always been focused on that from the very beginning. And you know, we do have some larger steaks and some entrees that can go to that side of the menu, but there's also a lot of entrees, country dinners, our 6 ounce sirloin with two sides are still extremely value oriented. And I do believe that that is what allows our menu to be very, you know, favorable for all consumers. So we feel like we're in a great position to be able to pride folks when we talk about our beef selection. And we have four cuts of sirloin that you can choose, a 6 and 8, 11 or 16, you know, so that you have options on how much you want to spend and how much you want to eat. And I do believe that that's always been our philosophy and it's. And it's really served us extremely well.

Michael Balin - Vice President of Investor Relations - (00:24:19)

Yeah. And Jacob, this is Michael. When I look at our mixed trends, what, from the third quarter and the first part of the fourth quarter, I'm really not seeing anything different than what we've been seeing all year. We don't spend a lot of time separating out, income or consumer by cohorts, but there's nothing in there that tells me that we are continuing to see a guest that appreciates the value that we're offering. When I look by region, I'm seeing strong results. When I look seven days a week, I'm seeing strong results. When I look by day part, I'm seeing strong results. And that goes for both our dine in business and our to go business. So we're very happy with what we're seeing from the consumer and believe that just goes to the value that we offer and the overall experience that we're offering. And the guests still is enjoying what they're getting from us.

Jacob Aiken Phillips - Equity Analyst at Melius Research - (00:25:16)

Great, thank you.

David Palmer - Equity Analyst at Evercore ISI - (00:25:18)

Our next question comes from David Palmer from Evercore isi. Please go ahead. Your line is open. Great, thank you. Congratulations, Michael, on that, on the promotion.

Michael Balin - Vice President of Investor Relations - (00:25:30)

Crazy well deserved. Thank you.

David Palmer - Equity Analyst at Evercore ISI - (00:25:34)

Yeah. Two questions. Jerry. I was just wondering, you know, philosophically about pricing, and I'm wondering how you. Weigh the potential impact of pricing or not pricing or underpricing the inflation on. Manager, managing partner pay. You know, you. You were one in the past and then. And you manage a ton of them now and. And then, you know, if this is. Going to be a year where, you. Know, we're getting a spike in beef, and I'm not saying you should chase that with pricing because it won't last forever, but I do wonder how you. Manage that in a year like what. We might be having in 26 and then. And then separately. I just wanted to ask about Bubba's. You know, the same store sales, it decelerated a bit, you know, two and. A half points or so. You know, not a massive slowdown, but. Obviously Texas roadouts really didn't slow at all. It actually accelerated a little bit. So any. Any theories about why those would have been different in terms of those sequential growth and thank you.

Jerry Morgan - Chief Executive Officer - (00:26:35)

Thanks, David. Yeah, I'll. You know, as far as the MP compensation, it really has been built around that partnership side of it. And you grow your sales, you grow your profits, you grow your paycheck. And, you know, I think that philosophy works very well. And when we look at store, restaurant, store margin, those dollars are what they get paid off of. So, you know, we continue to monitor and reach that. But, you know, again, you. If you're running a healthy business and you're executing at a high level and. And you're growing your sales and your profits and your people, then you're going to. You're going to get compensated for that. And I think that's been a great philosophy for us. If there are people in our system that. That might be struggling for whatever reason, then we will continue and have great conversations with them if there's any adjustments. But the overall system works extremely well when you got skin in the game and you've got ownership and partnership. You know, and we just came off a fall tour and we talked about, you know, they all have their own individual challenges and problems and how can we help them solve them, whether it be sales, profits, or people, and helping them run a healthy business for the long term. And there are ups and downs in business, and that is part of partnership. We're not going to be able to fix everything for you every time, but we will work with you to help you grow that side of the business. And, you know, and as far as Bubba's concerned, I think we are still very excited. You know, there's been a lot of work put into Bubba's the last few years from a leadership standpoint, from a menu engineering standpoint, there's a lot of things going on in their competitor set. So what we feel have a lot of confidence in what Bubba's doing and the offerings that we have with our burgers and pizzas and wings and all of those things that go in there, the sports, the rock and roll. Michael, let's say that again for me.

Michael Balin - Vice President of Investor Relations - (00:28:22)

Rock and roll. Yeah.

Jerry Morgan - Chief Executive Officer - (00:28:24)

So we like what we got going on in Bubba's. It's always been a great. It's our second brand. We believe in it completely. So we'll continue to watch and see if there's anything we need to do differently. But we still have a lot of faith and confidence in Bubbis33.

David Palmer - Equity Analyst at Evercore ISI - (00:28:40)

Thank you. Thank you.

David Tarantino - Equity Analyst at Baird - (00:28:42)

Our next. Our next question Comes from David Tarantino from Baird. Please go ahead. Your line is open. Hi. I wanted to follow up on the last question about the restaurant profit dollars. And you know, if I look at restaurant profit dollars per location or per operating week, which is, I guess a proxy for the metric that you pay the store managers on, you know, it's been a really long time since that that metric has declined in two consecutive years. So this year looks like a year where we're going to see a decline. So I'm just wondering, Jerry, if you could comment specifically on the appetite for letting that decline in 2026, given all this inflation or perhaps, you know, is there a thought to around the time you make your next pricing decision to price in a manner that would protect that line specifically so that you don't have two years in a row of declines in pay?

Jerry Morgan - Chief Executive Officer - (00:29:48)

Yeah, David, thank you. I think we'll continue to look at our philosophy on pricing. We've always tried to have a conservative approach and we do believe that protects that top line and that consumer. And we do understand that the beef is driving a lot of those other results. But as we look at it, we just started our pricing for the fourth quarter. We took the 1.7%. And as we get closer to the end of the year, our next pricing will be in period four, which is the start of April. We'll start having conversations with our company and within ourselves and within all of the operators and seeing what, what they're going up against when they're competitive, set in their own communities, and then we'll make that decision from that standpoint. So I think again, we always try to have a conservative approach and I think it's paid us very well overall. And we want to talk to our partners before we make a decision like that.

Michael Balin - Vice President of Investor Relations - (00:30:45)

And David, this is Michael. Our, our partners take a long term view just like we do. And you know, you know, we were, you know, we look back and you know, know that those restaurant margin dollars per store week are still, you know, you know, approximately 35% higher than they were in 2019. So, yeah, maybe we've given a little bit back and we need to watch and see what happens next year. But, you know, where those profit dollars have gone over the last five or six years is still very impressive.

David Tarantino - Equity Analyst at Baird - (00:31:16)

Great, thank you.

Brian Bittner - Equity Analyst at Oppenheimer - (00:31:21)

Our next question comes from Brian Bittner from Oppenheimer. Please go ahead. Your line is open. Hey, thanks. Good afternoon. Hey. Clearly you're seeing really resilient traffic trends. In an environment where most are seeing. Choppier or softer trends. And that's not surprising based on your track record. But my question is, based on the. Data and insights, you guys have seen new customers coming through the door. Are you picking up new customers right now? And if so, where are you stealing those customers from?

Jerry Morgan - Chief Executive Officer - (00:31:53)

Are they trading up from qsr? Are you stealing them from the grocery store? How would you frame, frame that up? I'll kick it off, but it's hard. We don't really measure it that way. We try to get a great reputation in a community, be the talk of the town to some degree, and that's what really drives the excitement around. When you drive into a Texas roadhouse and the parking lot's full and the energy's going on and the lights are so bright, I mean, that is our attraction. And if you drive to another business and maybe they don't have same the activity, but I think we're drawing from, from everyone, whether it be a higher end steakhouse, whether it be qsr, whether it be, I mean, we got quality made from scratch food, we cut our own steaks and we've got this energy and this vibe in these restaurants. So I think the American consumer, the consumer across the world is just saying they like what we're doing from an energy standpoint, a hospitality standpoint. And the quality of our food always has been in our respect and reputation in the communities all across America and the world is something to be really proud of. And we are extremely proud and we work really hard to deliver a great experience for our employees and for our guests. Thank you.

Peter Saleh - Equity Analyst at BTIG - (00:33:15)

Our next question comes from Peter Saleh from btig. Please go ahead. Your line is open. Great, thanks. Maybe two quick questions, just one on the beef side. Just curious if you can comment a little bit on how much of this. Beef is already locked for next year. If we do see a rolling over, which I don't think anybody expects of of beef, could there be some, you. Know, moderation in your inflation targets for 20, 26? And then just secondly on the KDS, 95% of the units now have it. Can you talk about what you're seeing on table turns and just how you. Try and balance speed of going fast, maybe getting a couple table turns, but not going too fast and not destroying. The overall guest experience. Thank you.

Michael Balin - Vice President of Investor Relations - (00:34:03)

Hey Peter, this is Michael. I'll definitely take the first one on the commodity basket. I will tell you that the overall commodity basket is approximately 40% locked in the first half of the year for competitive reasons. We're not going to get into specifics on, you know, what percent of the beef has been locked, but I think it's fair to say if there's moderation or a change in and expectations, then that could certainly, you know, you know, move the needle on, on our forecast for overall inflation in, in 2026 and.

Jerry Morgan - Chief Executive Officer - (00:34:42)

Then on the digital kitchen. I think, like you said, well, we'll be completely rolled out with the digital kitchen, the guest management system upgrade by the end of the year. There are indicators that show that it does give us more information so that we can make great decisions. We want to balance how fast that we are. We still see the guest experience at about 54 minutes and that's a good spot for us to be. You want them, you want them to feel important and that we're hustling but not rushed. And so I think all of this does is give us some more information about how to make sure that we balance a great experience when it comes. To your drinks, to. Your appetizer salads, your entrees and your, you know, and obviously the roadhouse pay or the pay at the table has been a huge component where our guests can pay and leave when they're ready and they're wanting, not waiting on us or we're not waiting on them kind of thing. So I think all of technology, if it enhances the guest experience, then we're all about it. If we learn things once the whole system is on it, then we will share that with our operators and make some decisions on how do we increase speed of service if needed. Thank you. Thank you.

Jeffrey Bernstein - Equity Analyst at Barclays - (00:35:59)

Our next question comes from Jeffrey Bernstein from Barclays. Please go ahead. Your line is open. Great, thank you very much. My question is on the uses of cash. I guess it's a two part question. The first part just on the franchise acquisitions, seems like a clear ramp in activity over the past few years. Just wondering what those conversations are like. Presumably these are very profitable units. I'm just wondering how many are still outstanding which could be potential targets for 20, 26 and then to balance that, I guess on the capex side, I think you mentioned for 26 it's going to be 400 million, which is similar to 25. But we know you're opening up more new units and I'm sure there's inflation on the cost to build and there's larger boxes. So I'm just wondering the offset there why we're not seeing an increase in that capex, whether it's you found a way to be more efficient with the openings or maybe Bubba's is a much lower cost to build. Just trying to figure out the balance of CapEx between the two years despite greater openings. Thank you.

Keith Humpick - Interim Chief Financial Officer - (00:37:04)

Yeah, Jeff, this is Keith. Thanks for the question on the franchise acquisition side. After we complete the California acquisition at the beginning of the year, we will have approximately 30 franchises left. I think it's actually 31 is the exact number. And you know, we just continue to have ongoing conversations with all of our franchise groups. We still have, I'd say, three large franchise groups left after this and we continue to have ongoing conversations with them. And I think you can expect to see, you know, other franchise acquisitions in the Future on the CapEx. You know, I think you have to factor in that this year we had the support center acquisition was part of our number. So I think you kind of have to back that out. And when you do that, I think the numbers become a little bit more comparable.

Jeffrey Bernstein - Equity Analyst at Barclays - (00:37:53)

How much Was that acquisition?

Keith Humpick - Interim Chief Financial Officer - (00:37:56)

23 million.

Jeffrey Bernstein - Equity Analyst at Barclays - (00:37:59)

Thank you. Thank you.

Brian harbor - (00:38:03)

Our next question comes from Brian harbor from Morgan Stanley. Please go ahead. Your line is open. Thanks. Good afternoon, guys. I guess, I think the B side is pretty clear. I guess I'm just curious, you know. As you think about sort of labor lines, opex lines which were a bit favorable in the quarter G and A. As well, you know, is that something. You still expect to continue in 4Q. And you know, some of those I assume were affected by the extra week. So how should we think about that?

Michael Balin - Vice President of Investor Relations - (00:38:35)

Hey, Brian, it's Michael. I say, yeah, that the fourth quarter we should still be able to, you know, if the top line trends continue the way they have the first five weeks, I would expect to see leverage on all those line labor other OP in gna. And those are also lines that potentially could see some leverage into, you know, 2026 again, if the top line trends, you know, continue. Our operators are doing a great job in staffing the restaurants and so that those labor hour growth relative to traffic has been very favorable. Other op, you know, again, we continue to get to see some leverage on that and you know, you know, gna, we'll see how that plays out.

Brian harbor - (00:39:27)

Thank you.

Brian Vaccaro - Equity Analyst at Raymond James - (00:39:30)

Our next question comes from Brian Vaccaro from Raymond James. Please go ahead. Your line is open. Good evening and congrats. Michael, wanted to ask you this. Sort of the sticker shock effect in the grocery store, you know, in my local market, ribeye is over $23 a pound and I think for maybe six or seven bucks more I could have you guys cook it and not burn it like I do at home and have great service and you'll Even do the. You'll even do the dishes for me. I mean, I mean. So I guess the question is, even anecdotally, are you hearing that from your customers and do you think that that's adding some incremental top spin to your comps? Is there any way to flesh that out in your data or any demand destruction you're seeing in the grocery store? I don't think I've ever seen it. That that pronounced is sort of my point. Even 10, 12 years ago, it just seems quite intense, that effect. Yeah.

Michael Balin - Vice President of Investor Relations - (00:40:30)

Hey, Brian, it's Michael. I certainly do think that people are aware of what it costs to buy beef in the grocery store. And, you know, while maybe we weren't seeing as much retail demand degradation over the, you know, in the second and third, you know, second quarter and third quarter, we've heard that maybe, you know, you're seeing a little bit more, you know, of that now. And we certainly have seen this year that more of our guests, when they come in, are getting a steak when they order from Texas Roadhouse than what we had seen in years past. So I think they are recognizing the value of our steak offerings relative to what they can can do at home. And as a company that prepares a tremendous stake, I think that creates loyal guests for us for years to come. So we are aware of that, and I think it is helping us.

Brian Vaccaro - Equity Analyst at Raymond James - (00:41:31)

All right, that's helpful. And then just on the unit growth. Side, I was going to touch on.

Jerry Morgan - Chief Executive Officer - (00:41:34)

Maybe both Jaggers and Bubbas, but you know, Bubba's opening 10 units, and I think you said five on Jaggers, but on Bubba's specifically, maybe can you talk about any new markets that you're going into or is it mostly existing markets? Maybe just elaborate on sort of the growth and how it's accelerating at Bubba's. Yeah, Brian, this is Jerry. We, I think this year we'll get seven, and the year prior couple years we got four handful, and we've been able to work the pipeline. We are trying to stay primarily with the market partners that we have. We're continuing to look at the future growth, but I would say most of that growth is in pretty existing markets from that standpoint. And Jaggers, we have a homeland or a, you know, strategy here of the heartland, and it's really Ohio, Indiana, Kentucky, Tennessee, Georgia. So our company side stores will be kind of close to the Louisville base. And that's the strategy for now, but we're very excited about the growth. We will be going into Tennessee or Nashville area and then start looking in A little south of that but and try to even break into Ohio. So that's kind of the strategy that we have with Jaggers is stay close to Kentucky and maybe the two states north and south from that. We call that the heartland strategy for the company side. All right, thank you very much. Thank you.

Dennis Geiger - Equity Analyst at UBS - (00:43:12)

Our next question comes from Dennis Geiger from ubs. Please go ahead. Your line is open. Great, thanks guys. And Michael, I'll echo the congrats. Well deserved. Always appreciate all of your help for sure. Great detail on the inflation on your key cost items for 26. Curious if you would comment at all on thinking about that other OPEX line Item looking to 26 GNA. Any, any notable call outs there? I know the other OPEX has a. Gazillion buckets in it and we're not in 26 yet. But any call outs on those other.

Michael Balin - Vice President of Investor Relations - (00:43:45)

Items as we just kind of trying to get a full picture of, of how the P and L looks in the next year. Thank you. Hey Dennis, it's Michael. Appreciate the kind comments. You know, it's certainly, you know, early but as we think about other, you know, operating for next, you know, year it could look, you know, grow in a similar fashion to what we've seen this year, low, you know, single digit growth in you know, other operating dollars per store week. You know we have heard that, you know, utility costs are going up and you know, tariffs would be something that maybe flow through there but not expecting anything dramatic on that line as we know it right now. So assuming our top line continues to grow at a healthy traffic pace right now I'm expecting low single digit dollar.

Dennis Geiger - Equity Analyst at UBS - (00:44:35)

Per store week growth. Thank you very much.

Andy Barach - Equity Analyst at Jeffries - (00:44:41)

Our next question comes from Andy Barach from Jeffries. Please go ahead. Your line is open. Hey, good evening guys. Did want to level set on the quarter to date. I mean with, with the pricing you took. It looks like traffic. We don't know all the variables but it looks like traffic is probably running half the rate of the 3Q. Is that in the ballpark and what may explain that other than maybe comparisons. Or something else out there?

Michael Balin - Vice President of Investor Relations - (00:45:11)

Hey Andy, it's Michael. Yeah, so we reported a 5.4% for those first five weeks. I will tell you that the timing of Halloween moving from a Thursday to a Friday had over a 60 basis point negative impact on that number. So I would say if you were to adjust for that, we would be running over a 6%. But, but within that 5.4 you do have pricing that's probably running in the little over you Know, two and a half percent. And so you are, you know, seeing traffic that's over 3% at this point. But that 3% would probably be over 3 1/2% ex the Halloween adjustment.

Andy Barach - Equity Analyst at Jeffries - (00:45:57)

Okay.

Michael Balin - Vice President of Investor Relations - (00:45:57)

So your menu price kind of layered in through the month. Well, the 3.1% pricing was fully, you know, that was fully in effect as a day one. But we still have some negative mix, call it 50 to 60 basis points. So you're running two and a half, 2.6% check increase and the remainder is traffic. Okay, got it, got it. And then, yeah, with the, with the beef side of things, I mean, 2015.

Andy Barach - Equity Analyst at Jeffries - (00:46:27)

Was, you know, your previous high on COGS at 36%. Is that kind of the analog with the, hopefully the peak in the, you know, in the cattle cycle at least. The low in the cattle cycle driving. Peak prices for, you know, 2026 at least. We what we know today in terms.

Michael Balin - Vice President of Investor Relations - (00:46:48)

Of what you've laid out. Yeah, you know, Andy, you know, it's. Michael, again, it's, it's hard to fully, you know, you are right. 2015, I think it was a 35.9% and that was the end of the cycle. And then, you know, the next year when things, you know, did turn, you know, we, we were 200 basis points lower. So you know, we do obviously expect, you know, you know, that percentage to increase in 2026. We will see what happens beyond that. But again, we know when the cycle does turn and, and you get that year of, of less inflation or deflation that, that, that cogs line does improve. You know, very quickly. And so that's why we're remaining patient. But you know, too early for us to, you know, you know, guide and predict what will happen beyond, you know, 2026.

Andy Barach - Equity Analyst at Jeffries - (00:47:40)

Okay, appreciate the call.

Lauren Silberman - Equity Analyst at Deutsche Bank - (00:47:44)

Our next question comes from Lauren Silberman from Deutsche Bank. Please go ahead. Your line is open. Thank you very much. A couple follow ups. I wanted to also ask on the quarter to date side, there's been a lot of noise around October industry wide. It's been pretty volatile in recent weeks. Sounds like things have slowed, you know, given pressure from the government shutdown. Outside of what you saw with the Halloween, are you seeing any volatility in trends at all more recently or. It's been pretty stable.

Michael Balin - Vice President of Investor Relations - (00:48:14)

This is Michael, I would say, you know, as I looked at each week of, you know, the October period outside of Halloween, it was very stable and consistent. So we saw strong performance, you know, throughout the month of October.

Lauren Silberman - Equity Analyst at Deutsche Bank - (00:48:29)

That's great. And then on the commodity guide Are you guys actually embedding a step up in underlying cost on a dollar basis in 26 or is this more about compares? I guess I'm just thinking through commodities up 8, 9% in 2H25 and I guess your guide would imply close to mid single digit in the back half of next year as well. So just trying to understand that.

Michael Balin - Vice President of Investor Relations - (00:48:52)

Yeah, Warren, it is a mixture of that, you know, beef, you know, does go through, you know, cycles of prices or you know, there is seasonality in beef prices. So it is not on every cut that the dollar cost is going straight up from where it was in the third quarter. In some cases it may be lower in the fourth quarter and then, you know, it could go, you know, higher. So things move around. So it is not a linear assumption in there. It's, you know, our procurement experts in the beef area spend a lot of time thinking about how this will play out. And it varies by cut. So a lot of this inflation certainly in the first half of the year is simply the fact that formula based pricing was much lower and really escalated in the back half of the year. So some of this is just the year over year lap, even if it comes down from where we were in the third quarter.

John Ivanko - Equity Analyst at JPMorgan - (00:49:55)

Understood. Thank you very much. Our next question comes from John Ivanko from JPMorgan. Please go ahead. Your line is open. Hi, thank you. I actually had to remind myself when your IPO was, which I think was in 2004. Correct me on that. But you know, shortly after your unit growth obviously significantly accelerated as a public company and sometimes in this industry, 20 year old restaurants, can one lead to lease renewals? So just kind of comment if there are any kind of step ups in rent as you go from the first 20 years to the second. And then the question just kind of on as you think about the asset itself, do you have an opportunity or is there a need to kind of come and say, okay, you can only remodel a restaurant kind of cosmetically to an extent where it actually makes sense to go back and do some more major work for the next 20 years of the restaurant's life. Is that something that we should consider as part of the future CapEx cycle?

Michael Balin - Vice President of Investor Relations - (00:50:57)

Yeah. Hey John, it's Michael. First on the rent. We do straight line on the rent, so we report similar and so there wouldn't be the step up there. It is certainly possible if we came to the end of the negotiated lease term with a restaurant, whether that's 20 or 30 years or with the landlord, excuse me, that you Know, there is a reset that could be higher, but you know, that was going to be, you know, on a smaller number of stores. So probably wouldn't have a huge impact on that rent number as far as, you know, the need for investing in our restaurants. I mean, we, we continually maintain our restaurants and you know, certainly there have been some that we have relocated that maybe in the early days that, that Texas Roadhouse, you know, you know, wasn't the first restaurant to be in that building and it wasn't something where you could not continue to just take care of, you know, the building. And we, we did relocate and you'll have cases like that. The fact that we take care of these restaurants I think prevents us from having any major concern about a huge step up in the Capex needs because we're taking care of them year in and year out.

Keith Humpick - Interim Chief Financial Officer - (00:52:21)

And John, this is Keith. You know, I would just add, you know, on the Capex side, we do have an aging restaurant base now. And that is why you have seen kind of the uptick in the last couple years is all the projects that we have been doing to maintain our restaurants. So I think you can, you can expect to see it kind of like the level that we've been at going forward.

John Ivanko - Equity Analyst at JPMorgan - (00:52:42)

Thank you.

Andrew Strelzyk - Equity Analyst at BMO - (00:52:45)

Our next question comes from Andrew Strelzyk from bmo. Please go ahead. Your line is open. Hey, thanks for taking the question. Had a follow up and then a question. The follow up is on the mix. Shift to larger entrees and stakes and things like that. Can you quantify how much of a margin headwind that created is number one. And number two on, on the pricing. Side, you know, your, your, your price increases that you've been taking for the. Last couple rounds here have been stepping. Up a little bit. Not a ton, but, but a little bit. And at the same time, your, you know, wage growth expectations have actually been. Coming down from 4 to 5 to. 4 to 3 to 4. So in your conversations with the operators. What are they pointing to that's driving that larger price increase over the last couple rounds?

Michael Balin - Vice President of Investor Relations - (00:53:29)

Thanks, Andrew. I'll, I'll start on the mix shift. You know, certainly the, you know, the higher percentage of guests ordering a steak has had a little bit of a negative impact on our food and beverage as a percentage of sales. Maybe 20 to 30 basis points of, of impact on that percentage. But I'll tell you, it's net neutral by and large to our profit dollars. Those stakes tend to be, you know, or larger entrees come at a higher, you know, sales price. So we get more sales dollars and their profit dollars are probably equal to what the guest maybe would have ordered otherwise. So from a margin dollar standpoint, not having a huge impact, but you definitely do see a little bit of a extra pressure on the food and bad percent line.

Jerry Morgan - Chief Executive Officer - (00:54:23)

And Andrew. Yeah, this is Jerry on the pricing. I think we have really candid conversations about what's going on in their local community, what's going on in their state, whether it be labor or continued commodity and utilities and all the other factors that come into running a profitable business and then make those decisions based off of that. And, and sometimes it is about a store or a market or a state, but at the overall for the company, it's what we can, what we feel comfortable with and it is a little bit about what our competitors do. We try to get as educated as possible when we make those decisions twice a year on where we're at and what we're comfortable with. We're not going to be able to price for every beef inflation as of right now, but we want to make sure that we protect the value side of our business and our menu and our perception.

Andrew Strelzyk - Equity Analyst at BMO - (00:55:17)

Great. Thank you very much. Thank you.

Jim Solera - Equity Analyst at Stevens - (00:55:21)

Our next question comes from Jim Solera from Stevens. Please go ahead. Your line is open, guys. Good afternoon. Thanks for taking our question, Jerry. If you're looking for a place for new Jaggers in Ohio, I recommend the. West side of Cleveland. If the real estate team needs some site selection help. Thank you. I wanted to, I wanted to. A. Little bit about the, the retail piece. Of the business that you guys had mentioned earlier. Are you able to quantify how much of an impact that is? I would think given the, the really. Strong brand equity that you have, that. Can potentially be a way to access. Kind of a whole new group of. Consumers at what I would think is. A decent margin for you.

Jerry Morgan - Chief Executive Officer - (00:56:04)

It's just any, any color you can offer there and if you have any thoughts around maybe the potential size of that business. Well, thanks for the. Obviously all of our retail initiatives are about the brand awareness and being on the grocery store and you know, our consumer, they see that logo and they, they put a smile on their face and they think about their local Texas roadhouse. And you know, all we're trying to do in all of that now with that said, you know, the. Obviously the inspired by rolls are really a hit and they are really selling well at the retail outlets out there. We are extremely happy and so is our vendor partner. So it's still just early on as we wrap up the year and we see what kind of revenue that it. It provides. But I will tell you, there is a demand for that particular product. And so we're excited about it, and we will continue to look at making sure that it's available to folks. And we've had a tough time keeping up with it, but it's exciting to see Texas Roadhouse inspired by many roles flying off the shelf like they are. So we're very proud of that.

Jim Solera - Equity Analyst at Stevens - (00:57:13)

Great. I appreciate it. All back in the queue. Thank you. And I'll let the real estate team know about that selection. Thank you.

Zach Fathom - Equity Analyst at Wells Fargo - (00:57:23)

Our next question comes from Zach Fathom from Wells Fargo. Please go ahead. Your line is open. Hey, good afternoon. So on the inflation front, you see competitors trying to shift the mix to chicken or less inflation, inflationary items either via promo or other avenues. So philosophically curious if there's a point where beef inflation gets to, you know, so high, where you would consider either a menu pivot at the core business or Bubba's, etc. Any thoughts there? Yeah, we're kind of a steakhouse, and I think that it would be hard. We have a lot of offerings with our chicken and pork and salmon and the country dinners with our country fried chicken and all of those things. So I think we have a lot of other offerings. But, you know, Americans really do believe that we cook a great steak, we serve a great steak, and we provide a great steak, and that's what they crave. So we're not going to take that away from them. Appreciate the time. Thank you very much.

Jake Bartlett - (00:58:28)

Our last question comes from Jake Bartlett from Truist Securities. Please go ahead. Your line is open. Great. Thanks for taking the question. Mine was on your pace of development, and nice to see the increase in 26 and kind of putting a number on that, really. Driven by the bub of 33. My question was on the growth at Texas Roadhouse. You've always been very disciplined, not wanting to stretch the team, but, you know, 20 openings would be the least amount that you've opened since, I guess since COVID or just post Covid and, you. Know, on the low end of your historical range. So the question is, why? Why have it, you know, so low? You know, are there any sort of headwinds or anything to think about of why that couldn't be a little higher? I know bandwidth is something you're very. Conscious about, but I think. I would think as. As you open different brands, that the. Bandwidth is more on a kind of. A per concept basis. But any. Any comments there would be helpful.

Jerry Morgan - Chief Executive Officer - (00:59:24)

Yeah, I think we said approximately. So, you know, that gives us some wiggle room. Some of these deals take a little longer. But I'll tell you, I feel great about the pipeline for 26 and 27 for Texas Roadhouse for Bubba's and Jaggers. We obviously know that that roadhouse is what drives a big part of the business. So we feel very comfortable at approximately 20. I can't commit too far past that. It's a little early, but I do believe that we will be north of that number. Great.

Jake Bartlett - (00:59:53)

Thank you so much. Thank you.

OPERATOR - (00:59:57)

We have no further questions. I would like to turn the call back over to Jerry Morgan for any closing remarks.

Jerry Morgan - Chief Executive Officer - (01:00:03)

Thank you, everyone. Congratulations, Michael, for all your hard work with everyone and we appreciate the support. It's been a heck of a year. And let's go, Roadhouse.

OPERATOR - (01:00:15)

This concludes today's conference call. Thank you for your participation. You may now disconnect.