Texas Roadhouse Inc (TXRH) Q3 2021 Earnings Call Transcript

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Texas Roadhouse Inc (TXRH -0.57%)
Q3 2021 Earnings Call
Oct 28, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening and welcome to the Texas Roadhouse Third Quarter Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse. You may begin your conference.

Tonya R. Robinson -- Chief Financial Officer

Thank you, Emma, and good evening, everyone. By now, you should have access to our earnings release for the third quarter ended September 28th, 2021, it may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need 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, including factors related to the COVID-19 pandemic. 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. Following our remarks, we will open the call for questions.

Now, I'd like to turn the call over to Jerry.

Gerald L. Morgan -- Chief Executive Officer and President

Thanks Tonya and good evening. Our sales momentum continued in the third quarter with strong comparable sales growth versus 2020 and 2019. It is encouraging to continue to see our dining rooms busy while our To-Go volumes remain elevated. Our operators and their teams are delivering on the promise of legendary food and legendary service each and every shift. Their commitment to the quality of our food and the level of our service remains unwavering and the benefit of this commitment is seen in the growing number of guests choosing our restaurants. Our strong topline performance during the quarter led to continued unprecedented growth in the restaurant margin dollars and earnings per share. At the same time, industrywide labor and supply chain issues on top of rising commodity inflation remain a challenge. While inflation is certainly impacting our financial results, we remain focused on what we can control and executing on our top priority, which is taking care of our guests. With sales growing and margin dollars increasing, we are confident that we are doing the right things for the long-term success of our business. As I mentioned on our last call, during the third quarter, we completed our normal process of evaluating our menu pricing. With the feedback from our operators, we implemented a menu price increase of approximately 4.2% last week. This increase will help offset some of the structural cost pressures that our restaurants are facing. While 4.2% pricing is above our typical range, we are comfortable that we are maintaining our leading value position in the industry.

On the development front, our pipeline of openings remains on track despite the challenges of buying the supplies and equipment necessary to open new restaurants. We opened seven company restaurants in the third quarter and expect to open as many as 11 more in the fourth quarter for a total of 29 company openings in 2021. This total is expected to include five Bubba's and one Jaggers. Our franchise partners should open two more Roadhouse locations in the fourth quarter, which would give us a total of 4 franchise opened this year. As we look ahead to next year, we are targeting 25 to 30 company-owned Texas Roadhouse and Bubba's 33 restaurant openings. Additionally, we look forward to adding seven more restaurants to our company base as we have a nonbinding agreement with one of our franchisees to acquire their restaurants at the beginning of 2022. As I conclude my prepared remarks, I want to again thank all of our managing partners, our managers and Roadies for their efforts. We want to extend a special congratulations to David Hollinger, our managing partner from Greenville, North Carolina for recently being named our 2019 Managing Partner of the Year. While COVID caused us to delay recognizing David until just recently, it does not diminish the passion, partnership, integrity and fun that David consistently brings to the restaurant and to Texas Roadhouse. Congratulations, David and Team G Vegas.

Now Tonya will provide a financial update.

Tonya R. Robinson -- Chief Financial Officer

Thanks, Jerry. For the third quarter of 2021, we reported diluted earnings per share of $0.75 and driven by $869 million of revenue and $135 million of restaurant-level profit. Average weekly sales grew to over 120,000 as compared to approximately 92,000 in Q3, 2020 and approximately 99,000 in Q3 2019. Comparable restaurant sales for the third quarter grew versus 2020, comprised of 23.6% traffic growth and a 6.6% increase in average check. As compared to Q3 2019, comparable restaurant sales grew 22.3%, including 12.2% traffic growth and average check growth of 10.1%. The 2-year check growth includes positive mix of 4.3% as guests move to higher-priced entrees. By month, comparable restaurant sales versus 2019 grew 25.5%, 21.5% and 20.3% for our July, August and September periods, respectively. As Jerry noted, we continue to benefit from elevated To-Go sales volumes. In the third quarter, our restaurants averaged approximately 18,000 per week in To-Go sales, which represented 15.1% of total sales. Over the course of the quarter, we saw a gradual increase in To-Go sales as a percentage of total sales as dine-in sales levels moderated slightly, which we attribute to normal seasonality. Sales in our October period were also strong with average weekly sales of over 121,000 and comparable restaurant sales growth of 23.6% versus 2019. In October, To-Go sales remained at approximately 18,000 per store week or 14.8% of total sales. For the third quarter, restaurant margin as a percentage of total sales was 15.7%, up 111 basis points as compared to the third quarter of last year. Restaurant margin benefited by approximately 45 basis points from a $4.8 million adjustment to other sales, primarily related to adjusting our historical gift card breakage assumption. Food and beverage costs as a percentage of total sales were 34.6% for the third quarter.

This was 242 basis points higher than the prior year as a higher than expected increase in beef prices during the back half of the quarter drove total commodity inflation to 13.9%. Commodity inflation was approximately 10%, 15%, and 16% for our July, August, and September periods, respectively. Labor shortages at the processing plants, coupled with high consumer demand, are the primary drivers of the higher beef prices. And these cost pressures have been magnified for us as we need to buy even more beef for our restaurants, so they can continue to serve a significantly higher number of guests. Based on our current outlook, we expect high teens inflation for the fourth quarter, which would bring full year 2021 inflation to approximately 10%.Looking ahead to next year, we expect commodity costs to remain elevated with approximately 30% of our commodity basket locked for the first half of 2022. We currently expect high teens inflation over that time period with inflation likely above that range for the first quarter. With little of the basket locked for the back half of 2022 and given the level of volatility we are seeing, we currently do not have enough visibility to provide meaningful full year inflation guidance. At this time, we expect inflation in the back half of the year to moderate given the prices -- the beef prices that we will be lapping. Labor as a percentage of total sales improved 147 basis points to 33.2% as compared to Q3 2020. However, like last quarter, we believe a comparison to the third quarter of 2019 is more relevant and beneficial. As compared to Q3 2019, labor as a percentage of sales was 62 basis points lower even as labor dollars per store week increased 19.3%. This increase in labor dollars per store week was driven by wage and other inflation of 15.1% and growth in hours of 3.4%. The remaining increase of 0.8% was due to adjustments to our quarterly reserve for workers' comp and group health insurance, including a $2.6 million charge this year.

For 2022, we are forecasting wage and other inflation of approximately 6% with the first quarter above this level as wage rates did not begin to significantly increase until the fourth quarter 2021. Other operating costs were 14.8% of sales, which was 163 basis points lower than the prior year period. Approximately 60 basis points of the decrease relates to adjustments to our quarterly reserve for general liability insurance, which includes a $3.2 million benefit this year and a $1.4 million charge in 2020. Moving below restaurant margin, G&A costs for the quarter increased $15.3 million to 4.7% of revenue, a 63 basis point increase versus the prior year period. The increase in G&A dollars includes $2.8 million of conference expense in the third quarter. While we held our NPE Awards celebration this quarter, next year, we will return to a holding conference during the second quarter. Additional drivers of the G&A increase include cash and equity compensation, which was up $8.2 million; and travel and meeting expense, which was up $1.7 million. Lastly, we lapped a $3 million benefit from the sale of a legal claim in 2020. Our effective tax rate in the third quarter was 11.6%. And like last quarter, our tax rate saw a higher-than-normal benefit from FICA tip credits driven by the increase in our sales. Based on current sales trends, we expect our full year effective tax rate will be approximately 14%. And for 2022, we would expect an income tax rate of approximately 15%, assuming no changes to the federal tax code are enacted. With regards to cash flow, we ended the third quarter with $437 million of cash, which is down $47 million from the end of the second quarter.

Cash flow from operations was $52 million, net of a $24 million FICA tax liability payment that had been deferred from 2020. This was offset by $54 million of capital expenditures, $28 million of dividend payments and $50 million of share repurchases under our program that we restarted in August. We expect full year 2021 capital expenditures will be approximately $200 million. For next year, we are currently projecting that will grow to approximately $230 million. The majority of the year-over-year increase is due to the planned relocation of six Texas Roadhouse restaurants in 2022. Finally, on a housekeeping note, I want to point out that Christmas Day will be on a Saturday this year versus a Friday in 2020. We estimate that this shift will have an approximately 1.5% negative impact on comp sales growth for the fourth quarter. Like Jerry, I want to congratulate David Hollinger and also thank the entire Texas Roadhouse team for their continued dedication and commitment.

Emma, please open the line for questions.

Questions and Answers:

Operator

Operator: [Operator Instructions] Our first question today comes from Jared Garber from Goldman Sachs. Please go ahead. Your line is now open. Hi Jared. Can you just make sure that you are non-mute? Our next question today comes from Peter Saleh from BTIG. Please go ahead. Your line is now open.

Peter Saleh -- BTIG -- Analyst

Can you hear me all right?

Operator

Yes.

Peter Saleh -- BTIG -- Analyst

Excellent. All right. Thanks for taking the question. Just one point of clarification. I think you guys mentioned you took a 4.2% price increase last week. I believe about 100 basis points or so was rolling off of your price. What is the implied pricing in the fourth quarter and going forward for the next couple?

Gerald L. Morgan -- Chief Executive Officer and President

Yes. So for Q4, the implied pricing would be about 5.3%. Peter, that will be the impact from taking the 4.2%. Also, we have about 1.75% that we took in April of 2020 and then about 1.4% that we took in October of 2020 that rolls off this quarter. So as you're going forward, you're really looking just into 2022 at the 4.2% for the most of the year, and then that 1.75% rolls off in April. So that gives you for Q1, about 5.9% and then you essentially just drop down to the 4.2%.

Peter Saleh -- BTIG -- Analyst

Got it. Okay. And is it -- do you anticipate taking any more replacing pricing in April? I mean, I know it's kind of early, but given what you're in right now, do you think that you're comfortable with the 4.2% that you took in October? Or you think it'll come back in April and take some more?

Gerald L. Morgan -- Chief Executive Officer and President

Well, I think we'll look at it again and evaluate either late January or February and really see where we're at, but we typically look at it twice a year and then see what we need to do to the adjustment from that standpoint. But yes, we will definitely be looking again and seeing where we need to be.

Peter Saleh -- BTIG -- Analyst

Great. And then just on the restaurant margins in 2022. Tonya, any thoughts on where you guys think you'll land given the pricing that you're taking in all the inflationary pressures? I know historically, you guys tried to defend that 17%. Just curious as to where you think you'll land next year?

Tonya R. Robinson -- Chief Financial Officer

Yes. That could be a little tougher in 2022. That 17% -- 17% to 18% range that we talked about really is the long-term goal. With this level of commodity inflation that could be coming in 2022, that's a little bit tougher to do. Now, on the sales side of things, we're going to continue to drive topline sales. We're going to continue to protect those To-Go sales. And Q1 is a bit more beneficial because we're lapping still some capacity restrictions that we had in Q1 of 2020. And then as you head into Q2, we're kind of fully up and running both years. So, a lot will depend on traffic growth, a lot depends on where that commodity inflation does land, particularly in the back half of the year. And we're going to continue to be pushing on staffing and making sure that we're staffed appropriately and doing all of those things. So, all of those things could make it a bit tougher on the margins for the full year.

Peter Saleh -- BTIG -- Analyst

All right. Thank you very much. I'll pass it along.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you.

Tonya R. Robinson -- Chief Financial Officer

Thanks Peter.

Operator

Our next question today comes from Chris O'Cull from Stifel. Please go ahead. Chris, your line is now open.

Chris O'Cull -- Stifel -- Analyst

Thanks. Good afternoon guys. I had a follow-up on the pricing question. I know the company typically raises prices to cover structural changes, like you mentioned, like wage increases. But I was hoping you could explain how you determined that 4.2% was the necessary increase, and then I have a follow-up.

Tonya R. Robinson -- Chief Financial Officer

Sure. So really, we went through the same process we always go through. We sat down with our operators really talking to them about the things that we look at, how are the sales during, what's hot traffic behaving, how they're feeling about the competitive environment. They're looking closely at competitor pricing and things like that on the menu. And so we did all of those things. And we came in a little bit higher just as we were thinking about how wage inflation is going to probably continue to grow, and we were learning more about this commodity inflation and the potential that it could be pretty impactful for a bit of time. And given that we didn't take a price -- two price increases in 2020, we had to skip one, that gave us more comfort too that we could come in just a bit higher maybe than we normally would with that pricing this time.

Chris O'Cull -- Stifel -- Analyst

Okay, that's helpful. And then Jerry, the company consistently opens 25 to 30 units a year, release targets that, but the mix has been shifting between Roadhouse and Bubba's. When do you believe Bubba's will have the scale to start opening more stores and potentially increase the total number of units that the company can open a year?

Gerald L. Morgan -- Chief Executive Officer and President

Yes. I really have a lot of confidence in our team currently. We've been able to open five to eight a year very successfully. All of our openings this year have really opened strong on the sales side and being able to get to the profitability a little quicker than in the past. So we're very confident. We've got to -- we'll continue to work on some building costs to look at what we can do there to get it to the financial position. We'd like a little sooner, but we're happy with the sales. We're happy with the food and the service model that we have. So I don't think we're that far away. We got a real good product there. A couple of more things we want to work on before we kind of open up that gate a little further.

Chris O'Cull -- Stifel -- Analyst

Okay. Thanks guys. Appreciate it.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you.

Operator

Our next question today comes from Nick Setyan from Wedbush Securities. Please go ahead. Nick, your line is now open.

Nick Setyan -- Wedbush Securities -- Analyst

Many of your peers are pointing to staffing challenges impacting top line growth. Obviously, we did see slowdown with respect to your top line. Can you just talk about whether you're fully staffed? If not, what kind of percentage growth in labor hours we should expect in 2022? Just any context there would be very helpful?

Gerald L. Morgan -- Chief Executive Officer and President

Yes. I would say that we're feeling much better about it. We had a pretty good summer of hiring and getting new people into the system. We're back to our original 2019 numbers. But again, based on our sales growth, we still need some folks and just in different areas of the country and the front of the house and the back of the house and management. But I will tell you that our folks are probably working a little more over time and spend a few extra shifts, and we'd really like to get them some fresh legs and some help, and we definitely need some more people. But I think overall, we met with our regional operations partners yesterday and with Doug and really feel good about where we're at. We'd like to feel great, but we're really feeling good. We do have some close sections at times and things because we are in pockets and areas. But overall, we feel very confident. I'd like to get really, really confident and back to 100%. We're not there yet. It's hard for me to tell you whether what number we are, but I feel very confident that we are very close to where we want to be. We still need some great people to help us, and we're looking. We just had our second national hiring day, and we're excited to see some of the numbers come out of there as we add more help to the team and as the people that have settled into school. So like I said, real good. I want to feel real great. So we still got work to do.

Tonya R. Robinson -- Chief Financial Officer

Yes, Nick. And on the hours -- from an hour's perspective for '22, I think you'll continue to see hours pick up a little bit more. Right now, you're seeing the productivity be pretty high because we're probably a little short in some situations from an hours' perspective. And we like that, as Jerry said, to be a little more staff. So I don't know what will end up being -- I mean, we always talk about that in terms of traffic. And maybe we get back to more of that 70%, 75% of traffic from an labor hours' perspective. That over time shows up in the wages, and that's kind of helping to drive a little bit of that wage inflation right now. So, maybe you get a little relief there, but you see the hours pick up a little bit more.

Nick Setyan -- Wedbush Securities -- Analyst

Great. Thank you very much.

Tonya R. Robinson -- Chief Financial Officer

You're welcome.

Operator

Our next question today comes from Drew [Phonetic] from Baird. Please go ahead Drew. Your line is now open.

Drew -- Baird -- Analyst

Great. Thanks. I had two questions on the development front. First, as it relates to your outlook, what's the breakdown of Texas versus Bubba's 33 in terms of the openings next year? How many Bubba's are embedded in that outlook? And just wanted to confirm that the six relocations are not embedded in that 25 to 30 that you mentioned? And then the follow-up there is just several in the industry have called out upward pressure on development costs and I believe you had mentioned that last quarter for new store openings. Wondering if you could comment on what you're seeing from a development cost perspective, how much upward pressure you're seeing, if any, there? And if it's having an impact on the development pipeline over the next 12 to 24 months?

Tonya R. Robinson -- Chief Financial Officer

Sure. I'll take the first couple of questions you had. That -- those relocations are not in the 25% to 30% guidance for 2022. So, those would be in addition. The seven franchise acquisitions are not in those store openings either, just to be clear. And then there's about, I would say, as many as eight Bubba's that are built into that number. The rest being Roadhouse. Obviously, some of that changes throughout the course of the year as deals change and things like that. But the way the pipeline looks right now I think -- looks like right now, I think that's about where we'll be. And then from a cost perspective, we could see cost creep up a little bit. You do see that. I think definitely here, anecdotally, the contractors continue to have labor staffing issues just like all of us are having, and that can impact sometimes the building costs, things like that. It hasn't been anything that has been unmanageable at this point, nothing that makes to say we want to take our foot off the gas from a development perspective. So, so far, so good. But we're definitely keeping an eye on it, trying to make sure that we've got equipment sourced and that we're ready to go to keep this pipeline moving.

Gerald L. Morgan -- Chief Executive Officer and President

Yes, I would agree. I feel really comfortable with the Roadhouse piece of it, the 22 to 24 maybe. And then obviously, Bubba's is about eight. And the six relocations, we're very excited about. We look back in the history of the last four or five years, and we've done six to eight relocations and really provided a bigger restaurant with more parking and saw our sales spike and our ability to make a lot more money. So, we feel like these relocations are again, in addition to where they're at. Sometimes the energy moves. So our investment in these relocations of some really top performers is a real smart business, I believe.

Drew -- Baird -- Analyst

Thanks. That's helpful. I'll pass it on.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you.

Operator

Our next question today comes from Eric Gonzalez from KeyBanc. Please go ahead Eric. Your line is now open.

Eric Gonzalez -- KeyBanc -- Analyst

Hey thanks. Good afternoon. I'm just wondering if you can comment on maybe the long-term implications of the supply chain issues right now. And as you speak with your suppliers, do you have a sense about whether this will have a long tail in terms of beef inflation given the loan replacement cycle? And then just on your hedging strategy right now, I think you said you're about 30% locked. Maybe correct me if I'm wrong, but was that for the first half of the year? But wondering how that compares to the past and maybe why you might not want to push that higher.

Tonya R. Robinson -- Chief Financial Officer

Sure. So yes, 30% is locked on the first half of the year. And that's probably, I would say, a little lower maybe than we normally would be. Now normal is maybe going back to 2018, 2019. But yes, we would like to -- and we do a lot of that in the fourth quarter and into the first quarter of the year. So I think we'll continue to see getting a little more locked on some of those amounts that we need. So that will be good. And then I'm sorry, Eric, but I forgot the other question that you were asking. Oh, about supply chain, I believe, is what it was and how we think that in the long-term implications? I think a lot of people have different perspectives of long-term implications. Some would tell you maybe this is just going to be a few quarters. Others would tell you, we're hearing, hey, this could go into 2023. So I think it just -- a lot depends on how some things play out. And staffing is definitely one of them, I think, for the supply chain folks. Transportation, another. And then it's just that ability to build up some inventory of product given the high demand of beef, and so we have a great supply chain. We have awesome vendors that have been working very closely with us to supply the beef that we need, supply all of the commodities that we need at these levels. So that's been really great. And the inflation, I think we'll just kind of have to wait and see kind of how that plays out.

Gerald L. Morgan -- Chief Executive Officer and President

Well, I just wanted to -- I mean, obviously, we've been buying the same product for 28 years, and our team has done a really good job. The meat is available. It's just the pricing of it, obviously. The supply chain for the development side, we're really paying close attention to, especially as we get in there. We are having the stocks on things that we didn't have to do in the past. So we're aware of that. We are definitely building up inventory on things that are big ticket items that we will absolutely need to get our restaurant open and to grow and obviously, the relocation. So our vendor partners have been working very closely with us. We are definitely looking out for the whole year. We want to know where we're at on each quarter for all of the items that we need. We're asking those questions. So far, it's gotten a little tight. I can tell you that, so we're aware of that. But as of right now, it looks really good. And the -- obviously, if we get into a situation, our closely with them to know if we're going to have any emergencies of something critical from an equipment standpoint would delay us. But as of right now, we feel real good about '22 and being able to get the things that we need to open all these restaurants.

Eric Gonzalez -- KeyBanc -- Analyst

Thanks a lot. And maybe real, quick on pricing. Was wondering if you tested any different levels of pricing or if you ever go out to the market and if you would you expect to see any resistance to that 4% level, or if you push it higher, where you might start to see resistance. And then if you can maybe comment on where you're seeing some of the competitors of the category price relative to what you're doing, that would be helpful? Thanks.

Gerald L. Morgan -- Chief Executive Officer and President

Sure. So we really are testing all the time because we have a number of pricing tiers across the country, and that allows us to do different things at different times. And so we learn a lot from that, and we utilize looking at pricing each year. And doing it twice a year, too, really allows us the ability to pivot and do things I mean, historically, I would tell you, we don't see any issues with flow-through. We don't see any issues when we take pricing. And a lot of times, it's hard to tell. You're not going to see it in the short term. Sometimes it's a longer-term impact, and it gets really hard to kind of see it. But we're watching it. It's only been a week since we took the 4.2%, but we're going to definitely be keeping an eye out. And a lot of it is just talking with operators and getting their thoughts and what they're hearing from guests and things like that. From a competitive side, I think, again, as I said earlier, we feel very good about how we're positioned, and we're definitely measuring certain items on our menu, looking at them compared to others in the industry, making sure we feel good about that. And as much as the pricing, it's the quality of the product, the quality of the food, the quality of the service that we're delivering. That whole experience really comes into play. So it's definitely something, Eric, that we think about for sure.

Tonya R. Robinson -- Chief Financial Officer

Yes, Eric. And I would say, again, we're -- we haven't changed our quality model at all and we still cut our stakes in-house. We use a brand that we are very specific and happy with. We haven't changed any of that. And we feel very good. We know that we have to earn it day from -- for our guests, if we are going to charge a little bit more, then we all know that we got to ramp up the level of that experience, and that's on our operations team. And we're very committed to continuing to cut our own stakes and make off our food from scratch, which is definitely more difficult. But it absolutely takes better, and we have to deliver on our legendary food and our legendary service experience every single time. If we do that, people will be OK with what we have to charge them because of some of the other pressures.

Eric Gonzalez -- KeyBanc -- Analyst

Okay. Thanks. I will pass it on.

Operator

Our next question today comes from Jeff Farmer from Gordon Haskett. Please go ahead, Jeff. Your line is now open.

Jeff Farmer -- Gordon Haskett -- Analyst

Thank you very much. Just wanted to follow up on staffing question from a few minutes ago. One of your casual lending peers last week did say that at least from their perspective, they thought that peak casual dining staffing shortfalls or pressures we're seen in August. From what you've seen, August, September into October, do you agree with that? Do you think it's getting a little bit easier out there to bring employees into the restaurant?

Gerald L. Morgan -- Chief Executive Officer and President

I don't know about easier. I think we're still hustling to find people. We're doing a couple of things to recruit and to retain people. We've just offered some tuition benefit. And so we're having -- I say having to do things, we're doing things because we feel great about being able to add people to our program and offering some better benefits and even better pace, so we know that. But would I say easy by no means, are there more people in the pool? I would say maybe a little bit, and we have to go earn the right for them to come choose us to work at. So easing up a little bit, but I still think there's a long way to go to get enough people out there that could supply all of us with our needs.

Jeff Farmer -- Gordon Haskett -- Analyst

Okay. And then just one more similar topic, which is on the labor side of the equation, which is that, again, the same peer called out roughly 100-plus basis points of what they consider transitory labor cost pressures in their quarter. And that included things like training costs, reduced productivity, waste, I think things like retention bonuses. Are you seeing a healthy component of that in your own labor cost right now?

Gerald L. Morgan -- Chief Executive Officer and President

Jeff, I don't know if I could quantify any of those things as far as how we're seeing them in the labor model. I mean we're seeing higher wage inflation. We know we're paying higher wages, especially in the back of house. That's become very competitive, not just by the industry, even just across the country. So, that's something we're doing. We're -- we've always had a phenomenal training program and development program and so we've definitely doubled down on those and taken those to another level during this time. But we really -- we don't really slice and dice it that way or look at it from that perspective, so I don't know that I could tell you we're comparable there.

Jeff Farmer -- Gordon Haskett -- Analyst

Okay. Thank you very much.

Operator

Our next question today comes from James Rutherford from Stephens Inc. Please go ahead, your line is now open.

James Rutherford -- Stephens Inc -- Analyst

Great. Thank you. I wanted to circle back on the commodity question. The guidance for high teens commodity inflation in the first half of the year, I'm curious what assumption is embedded into that for the 70% of your basket that I understand you'll be buying on the spot market. Are you assuming that essentially current spot prices hold from today? Or is there some kind of improvement in those dollar costs just as we kind of track the market as for here?

Tonya R. Robinson -- Chief Financial Officer

Sure. James, I would tell you, we're assuming more probably along the lines of the trend continues. The elevated costs continue versus seeing anything ease up. I think we saw some easing in October -- late October. And then the expectation though is we're going to see the historic seasonality, the normal spike from the holiday seasonality. So, that's kind of our expectation. And remember, too, we're buying -- we're aging our need, as Jerry mentioned earlier, so you're doing anything from 30 up to 45 days. So, what we're buying in October are things we're probably using in December into the New Year. And so we expect to see the cost stay elevated and right now, a lot of that is just based on market prices, spot prices.

James Rutherford -- Stephens Inc -- Analyst

Perfect. That's really helpful. And then just one more on the commodity side, if I may. Just so we can kind of all level set our models for the fourth quarter, I know kind of Peter asked the question earlier about 2022 restaurant margins, but I'm kind of putting together the commodity and wage information you gave us in getting to a restaurant margin in the 13% range. Am I off there by very much? Just if you can help a little bit on that, calibrating that margin.

Tonya R. Robinson -- Chief Financial Officer

Yes, sure. There's a lot of moving pieces in those numbers. There's no doubt about it, and a lot depends on what you're using for traffic and sales growth. So, as I mentioned earlier, we're expecting Q1 sales, we're going to be lapping capacity restrictions from last year. So, we're definitely going to see some benefit there from a sales perspective, and that's going to help from leveraging cost. And then I think the staffing issues, we continue to see some of those occur throughout the year. That might keep hours' growth a little moderated, along with that 6% wage inflation. So, I think it's definitely tough to say kind of where we'll be on that. That I would tell you, that seems a little low to me, but I might be a little more optimistic from a sales perspective.

Brian Vaccaro -- Raymond James -- Analyst

Got it. Thank you, very much Tonya and Jerry. I appreciate it.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you.

Operator

Our next question today comes from Brian Vaccaro from Raymond James. Please go ahead Brian. Your line is open.

Brian Vaccaro -- Raymond James -- Analyst

Thanks and good evening. I just wanted to circle back on staffing levels as well and I appreciate your earlier comments. But could you help frame what percentage of your stores may be at levels that are still meaningfully below 2019 staffing levels, however you may define that? And if they are below, can you frame how much of an impact it may be having to comps in those locations?

Gerald L. Morgan -- Chief Executive Officer and President

Well, I think it's a small number that are below the 2019 levels really. I mean there are some staffing areas like Louisiana has been hit hard by some weather, and we've had some challenges people back in that area. So, just because they had to relocate because of all. So, I would say that's one of our tougher areas necessarily to get completely staffed. But other than that, there's some real small pockets of people that are -- we know who they are. We've got a -- what we're calling, a ninja staffing team that is helping these restaurants to get there. But I would say the vast majority are at 2019 levels and just looking to go and cover the additional sales that we have today. So, like I said, we feel real good. I'd like to feel great.

Brian Vaccaro -- Raymond James -- Analyst

Okay, that's helpful. Thanks Jerry. And Tonya, on the average hours per store, I think you said that was up 3% or 3.5% versus 19% in the quarter. Is it fair to assume that, that progressed higher through the quarter? And can you ballpark kind of where you exited the quarter or where you may be thus far in October on average outlets per store?

Tonya R. Robinson -- Chief Financial Officer

I don't have that number in front of me, Brian, as far as the cadence throughout the quarter. Just trying to think a little bit off the top of my head, I would expect that it probably grew a little bit throughout the quarter just looking -- but you're also looking at volumes that kind of had some seasonality throughout the quarter, too. So, could have been a little bit more lumpiness there. But like I said earlier, I would expect to be -- for us to start seeing hours getting more in that 60%, 70% range when we're looking at traffic growth. Now, when -- right now, traffic, a lot of the traffic growth is driven by To-Go sales. So, that's a little more efficient from a labor perspective, and that explains a little bit of why those hours may be a little bit lower. And we still have the people working, you just have fewer people working. So, again, you have people working over time, things like that. So, that's something that we're focused on, moving a little bit more away from overall.

Brian Vaccaro -- Raymond James -- Analyst

Okay, OK. That's helpful. And you touched on seasonality there, so a good little segue to average weekly sales and just to frame kind of expectations as we move through the fourth quarter. Can you remind us how October, November, December, typically the interplay between those months? I think you said you gave us October average weekly sales, but what's typical seasonality as we move through the rest of Q4?

Tonya R. Robinson -- Chief Financial Officer

Typically, as you're moving in the holiday--.

Brian Vaccaro -- Raymond James -- Analyst

It was different.

Tonya R. Robinson -- Chief Financial Officer

Yes, sure. Typically, you're going to see those volumes increase throughout the quarter. As Jerry mentioned, we're getting into the holiday season. things like that. Now, you do have the impact of that Christmas shift to Saturday. So, we'll be closed on that Saturday. We gave you that impact. But typically, seasonality would be growing volumes over the course of the year -- over the course of that quarter, sorry.

Brian Vaccaro -- Raymond James -- Analyst

Okay, OK. I'll circle back on that offline. I guess just last one, and Tonya, I appreciate the early thoughts on 2022. But could you ballpark your expectations on G&A just so we're on the same page there? Thanks again.

Tonya R. Robinson -- Chief Financial Officer

Yes. No problem, Brian. So, yes, from a G&A perspective, I think you continue to see growth stay moderate. I think as a percentage of revenue, we stable our 5% of revenue is our expectation. So obviously, we talked a little bit about some cost of ramping back up; travel, which we're really excited to see that ranging back up, getting those meetings going in the restaurant with our managers and our coaches and things like that. It's been wonderful to see happening. And so, I would expect a little bit of increased spend in G&A in 2022 versus 2020, but I think it will still -- we'll keep it below 5% of revenue and see some leverage there.

Brian Vaccaro -- Raymond James -- Analyst

Okay. Thank you.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you.

Operator

Our next question today comes from Jeffrey Bernstein from Barclays. Please go ahead, Jeffrey. Your line is now open.

Jeff Priester -- Barclays -- Analyst

This is actually Jeff Priester [Phonetic] on for Jeff Bernstein. Just wanted to dive into the franchisee acquisition a little bit more. Longer term, has your thoughts changed any on how the Texas Roadhouse brand in particular will look from a company franchise mix going forward? And then on this transaction in particular did they approach you or did you approach them? And kind of what was the driving force behind wanting to make this transaction?

Gerald L. Morgan -- Chief Executive Officer and President

Sure, Jeff. This is something even prior to COVID, we were having conversations with franchise partners all the time. I don't know if there's a one approach versus another. It's kind of a joint conversation that we're always kind of talking about and just seeing where everybody stands. And I think from a franchise perspective, domestically, Texas Roadhouse, we're really not looking at growth from a franchise perspective. We may add one or two a year domestically. The growth from a Roadhouse perspective on a franchise is really international focus. All of our international growth right now is franchised, and we expect that to continue. Bovis right now is all company. We expect that today. And then Jaggers is probably where there's some opportunity, and we've signed a franchise partner really excited about them getting a restaurant open in next year. We continue to look at the path for company restaurants. So overall, really Roadhouse, I would say, not as much franchise. Domestic, very, very little. And it's kind of the way we're looking at it, and we're going to keep talking to franchise partners. Everybody is kind of in a different place, and we'll continue to have conversations with them, and we'd like to continue to just add more of those roll-ups.

Jeff Priester -- Barclays -- Analyst

Appreciate it.

Operator

Our next question today comes from Jared Garber from Goldman Sachs. Please go ahead, Jared. Your line is now open.

Michael Rothstein -- Goldman Sachs -- Analyst

Hey, can you hear me this time?

Gerald L. Morgan -- Chief Executive Officer and President

Yes.

Michael Rothstein -- Goldman Sachs -- Analyst

Great. Sorry about that. And also, this is Michael Rothstein on for Jared Garber. Sorry about that. So quick question on unit growth actually. In the outer years, and kind of '23, '24 seeing great demand right now and expecting positive comps next year. Does that maybe drive maybe accelerating unit growth, especially Texas Roadhouse, we kind of touched on Bubba's earlier in the call. And what could that look like kind of '23 and '24 onwards?

Tonya R. Robinson -- Chief Financial Officer

Sure, Jared. I'll kind of start out and tell you, we've always felt really good about that range of 25 to 30 for several reasons. One, we just -- we make really good disciplined real estate decisions when we're in that range. And we also make really good people choices. And that's a big -- those are the two probably bigger drivers when you're talking about opening new restaurants. So I don't see that changing for us. Now just like Jerry mentioned, as Bubba begins to ramp up a little more, maybe we start living at the higher end of that range. But for 2022, we wanted to kind of keep that that option of 25 out there, just we're dealing with some of the supply chain stuff. But in the out years you're mentioning, I could see us getting closer to 30 more often for the Roadhouse Bubba's concept.

Michael Rothstein -- Goldman Sachs -- Analyst

Great. Appreciate that. And then as far as next year goes with that positive comp, aside from price, can you talk a little bit about what you expect kind of for traffic or mix? Obviously, you're lapping a very strong 2021. What does that sort of look like? Obviously, from a mix perspective, also very strong. So, any clarity around that would be great. Thanks.

Gerald L. Morgan -- Chief Executive Officer and President

Yes, I would just say, if we nail it on the operations side and keep delivering on the quality of our food and the experience, the demand is there. I think if you look at our comp sales, that is a strong model. And yes, we know that we have to compete against that in 2022. And -- but as I said, we met with our regional operations, but we were with our operations team and as we get more staffed, as we continue to make sure that we're delivering on our promise of legendary food and legendary service, our consumer is telling us to keep doing what we're doing. Open our doors, create a great environment, deliver on our promise of the food and the service, and I don't see that going away. We're going to continue to operate at a very, very high level. It is important for us to have operational excellence, have a memorable experience and develop our people. So, as long as we deliver on that promise to our guests and we put the right people out there and they enjoy working for us, I think we will continue to have a -- still I expect us to be very aggressive on the topline sales.

Tonya R. Robinson -- Chief Financial Officer

Yes. And I'll tell you here, it's really hard to follow that. But I'll tell you on the mix because we have seen some phenomenal mix growth over -- starting in late 2020 and into 2021, we would expect that to moderate quite a bit, probably get closer back to flat mix for 2022 would be my expectation.

Michael Rothstein -- Goldman Sachs -- Analyst

Thank you. Appreciate that. And then one last quick one for me. We've heard from a couple of your peers that repairs and maintenance kind of have up-ticked a little bit recently. Maybe that's because you haven't been able to get equipment or stores are starting to get more used again or something along those lines. What are you going to seeing from that front? Thank you.

Tonya R. Robinson -- Chief Financial Officer

Yes, we're definitely seeing that on the P&L. You're seeing -- there were delays in 2020. We were putting things on hold and things like that. So, yes, you see some of those projects that have been on hold and getting going. And then probably a little inflation, I would venture to guess, just again, everyone's dealing with labor shortages and getting things done and things like that. So, definitely seeing that a little bit. All right. Emma, I think that's the last question.

Operator

Yes, that's our last question for today.

Tonya R. Robinson -- Chief Financial Officer

All right. Well, thanks, everyone, for joining us. Hope you're doing well and let us know if you have any questions. Thanks so much. Have a great night.

Gerald L. Morgan -- Chief Executive Officer and President

Thank you, all.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Tonya R. Robinson -- Chief Financial Officer

Gerald L. Morgan -- Chief Executive Officer and President

Peter Saleh -- BTIG -- Analyst

Chris O'Cull -- Stifel -- Analyst

Nick Setyan -- Wedbush Securities -- Analyst

Drew -- Baird -- Analyst

Eric Gonzalez -- KeyBanc -- Analyst

Jeff Farmer -- Gordon Haskett -- Analyst

James Rutherford -- Stephens Inc -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

Jeff Priester -- Barclays -- Analyst

Michael Rothstein -- Goldman Sachs -- Analyst

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