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Date
Thursday, August 7, 2025, at 9:00 p.m. ET
Call participants
Chief Executive Officer — Jerry Morgan
Chief Financial Officer — Keith Humpic
Head of Investor Relations — Michael Bailen
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Takeaways
Revenue--Texas Roadhouse(TXRH -0.40%) surpassed $1.5 billion in revenue for the first time in company history, representing 12.7% growth compared to the prior year.
Comparable sales-- Increased 5.8% in comparable sales, driven by 4% traffic growth and a 1.8% average check increase.
Average weekly sales-- Texas Roadhouse achieved approximately $172,000 in average weekly sales; Bubba’s 33 average weekly sales exceeded $128,000; Jaggers delivered nearly $76,000 in average weekly sales.
Bubba’s 33 expansion-- 53 locations in 16 states; this could include double-digit openings next year for Bubba’s 33.
Menu pricing action-- Planned 1.7% price increase at the start of fiscal Q4 2025 to balance value positioning and offset inflation (fiscal year ending Dec. 30, 2025).
Company-owned restaurant growth-- Four company restaurants opened; on pace for approximately 30 company-owned openings in 2025.
Franchise acquisitions-- Purchased three franchise restaurants, totaling 17 acquired in 2025; plans to acquire three more franchise locations in fiscal Q4 and all remaining five California franchise units by end of 2026.
Inflation guidance-- Updated full-year commodity inflation guidance to approximately 5% for fiscal 2025, primarily due to increased beef cost expectations in fiscal Q3 2025.
Labor inflation-- Lowered full-year wage and labor inflation guidance to approximately 4% for fiscal 2025 from previous outlook.
Restaurant margin-- Restaurant margin dollars increased 6.1% to $257 million; margin per store week fell 1% to over $28,500; restaurant margin as a percentage of sales declined 108 basis points to 17.1%.
Cost structure-- Food and beverage costs rose to 34% of sales, up 131 basis points, reflecting 5.2% commodity inflation and shifts within the entree category, partly offset by a 1.8% check increase.
Labor efficiency-- Labor as a percentage of sales rose six basis points to 32.9%, as labor dollars per store week increased 5.4% due to 3.8% wage inflation and 1.6% labor hours growth.
Other operating costs-- Improved to 14.5% of sales, down 32 basis points compared to fiscal Q2 2024; insurance cost pressure moderated to $300,000 in additional expense, compared with $2.1 million in fiscal Q2 2024.
G&A and tax rate-- General and administrative costs grew 7.9% year-over-year, reaching 4.2% of revenue; effective tax rate was 14.9% with updated full-year guidance at approximately 15% for fiscal 2025.
Capital allocation-- Ending cash was $177 million; cash flow from operations was $128 million, $148 million of capital expenditures, dividend payments, and share repurchases combined, plus $16 million for franchise acquisitions.
Support center purchase-- Announced acquisition of the Louisville support center (two buildings) for approximately $23 million in fiscal Q3, expected to save $2.5 million in rent expense annually.
Digital kitchen rollout-- Management states the digital kitchen is supporting higher off-premise sales capacity and operational efficiency.
Pricing mix-- Total menu price increases will be 2.3% for fiscal Q3, and 3.1% for fiscal Q4 and 2026, factoring in scheduled roll-off and planned hike.
ToGo sales-- ToGo comprised about $22,000 per week, or 13.3% of average weekly sales per store.
Summary
Management highlighted system-wide revenue exceeding $1.5 billion and record average weekly sales across all three brands, signaling strong consumer demand and operational execution. Strategic clarity was provided on U.S. and international expansion, franchise acquisition plans, and continued investment in technology to support both in-restaurant traffic and growing off-premise sales channels. Explicit guidance was issued for upcoming price increases (approximately 1.7% at the beginning of fiscal Q4 2025), inflation expectations (full-year fiscal 2025 inflation guidance of approximately 5%), and capital expenditure allocation (full-year fiscal 2025 capital expenditure guidance of approximately $400 million), along with direct commentary on commodity and labor cost trends.
CEO Morgan emphasized sustained brand recognition for guest satisfaction and outlined the intended pace for Bubba’s 33 and Jaggers expansion.
CFO Humpic reaffirmed capital deployment priorities, including incremental franchise acquisitions and ongoing share repurchases at a level sufficient to offset dilution.
Food and labor cost increases were acknowledged as near-term margin headwinds, but leadership reiterated confidence in maintaining 17%-18% restaurant margin targets over the cycle and stated they are not changing that target.
Management detailed continued positive traffic and mix trends, noting guest trade-up to steak entrees drives both top-line growth and elevated commodity cost impact on margins.
Specifics on menu enhancement, technology upgrades, and value positioning were presented as primary tools for maintaining consumer engagement and managing inflation pressures.
Industry glossary
Restaurant margin: Profit after operating expenses directly attributed to restaurant operations, excluding corporate costs, interest, taxes, and depreciation.
Store week: One unit operating for one full week; used to normalize sales and expenses across varying restaurant openings.
ToGo sales: Revenue generated from orders placed for off-premise consumption, including pickup and, where applicable, limited delivery.
Digital kitchen: Technology-enabled kitchen operations designed to increase order accuracy, capacity, and efficiency, particularly for off-premise orders.
Full Conference Call Transcript
Jerry Morgan: Thanks, Michael, and good evening, everyone. We are pleased with our second quarter results and the continued top line of the business. Strong traffic growth throughout the quarter drove a 5.8% increase in same-store sales. As a result, our revenue for the quarter grew to over $1.5 billion for the first time in our history. We are especially encouraged to see that all three brands contributed to our second quarter traffic and sales growth. Texas Roadhouse averaged approximately $172,000 in weekly sales for the second quarter. The brand continues to benefit from a relentless focus on food, service, hospitality, and value.
This is why Texas Roadhouse once again earned top recognition from external surveys for guest experience and satisfaction in the casual dining segment. At Bubba's 33, average weekly sales exceeded $128,000 in the second quarter. In addition to solid performance from our same-store sales group, we are also seeing strong sales at our most recent openings. We believe Bubba's 33, which currently has 53 locations in 16 states, has a sound infrastructure and a seasoned management team in place who can execute our road to 200 locations strategy. This could include double-digit openings next year. We are equally excited about Jaggers. We delivered average weekly sales of nearly $76,000 in the second quarter.
New store openings have been limited as we have been building the growth strategy for the brand. With our plan in place, we could open as many as eight company and franchise locations next year. We recently completed discussions with our operators regarding menu pricing. Based on those conversations, we will take a menu price increase of approximately 1.7% at the beginning of the fourth quarter. We feel confident this is the right level of pricing to maintain our everyday value while offsetting some of the inflationary pressures we are facing. On the development front, we recently opened our 800th system-wide restaurant.
This milestone is a testament to the appeal of our brands, our operational excellence, and the effectiveness of our growth strategy. During the second quarter, we had opened four company-owned restaurants, including two Bubba's 33 locations, and we remain on track to open approximately 30 company-owned restaurants this year. Our franchise partners opened one Jaggers location in the second quarter and we currently expect they will open four international Texas Roadhouse restaurants in the second half of this year. During the second quarter, we completed the acquisition of three franchised restaurants, bringing the total number of franchised restaurants acquired this year to 17. We also have plans in place to acquire three more franchise locations in the fourth quarter.
Additionally, we will be purchasing our remaining five California franchise restaurants at the end of 2026. We are also excited to share we entered into an agreement to purchase our support center. The purchase of these two buildings, which we previously leased, solidifies space planning for the future and reflects our long-term commitment to our hometown of Louisville, Kentucky. We remain rooted in our community and look forward to growing our presence in Louisville for many years to come. As to our future, I am fully confident in the strength of our and the commitment of Roadie Nation.
While there will always be challenges, we will continue to focus on what we can control for the long-term health of our business. Through it all, we will remain a people-first company that delivers on its mission of providing legendary food and legendary service to every guest. Now Keith will provide some thoughts.
Keith Humpic: Thanks, Jerry. During the second quarter, we saw our positive traffic trends accelerate from what we experienced in the first quarter. Also, our mix trends in the second quarter remained similar to what we have seen the last several quarters. These traffic and mixed trends show that our guests continue to appreciate the high-quality food, experience, and value that all three of our brands provide. As for commodities, our second quarter inflation was in line with our expectations. Looking ahead, we have increased our guidance for full-year inflation to approximately 5%, primarily due to higher than previously forecasted beef inflation, particularly in the third quarter.
This guidance includes approximately 30 basis points of full-year 2025 inflation related to tariffs, which remains consistent with our initial estimates from last quarter. Labor inflation in the second quarter was also in line with our expectations. Our operators continue to do a great job staffing the restaurants, as labor hours grew at approximately 40% of comparable traffic growth. With greater visibility into inflationary trends for the year, we have lowered our guidance for full-year wage and other labor inflation to approximately 4%. With regards to capital allocation, we ended the second quarter with $177 million of cash.
Cash flow from operations was $128 million, which was offset by $148 million of capital expenditures, dividend payments, and share repurchases, as well as $16 million for the three franchise restaurant acquisitions. As Jerry mentioned, we will be acquiring our support center buildings in the third quarter for a net purchase price of approximately $23 million. We are maintaining our full-year capital expenditure guidance at approximately $400 million inclusive of this transaction. Going forward, our capital allocation philosophy remains unchanged. Our first priority remains the funding of new restaurant development and taking care of our existing restaurant base.
We also expect our dividend will continue to increase annually at a measured rate and at a minimum, we will repurchase shares to offset dilution. Beyond that, we will continue to look at opportunities to acquire additional domestic Texas Roadhouse franchise restaurants as well as repurchase additional shares as appropriate. And now Michael will walk us through the second quarter results.
Michael Bailen: Thanks, Keith. For 2025, we reported revenue growth of 12.7%, primarily driven by a 5.3% increase in average weekly sales and 7.2% store week growth. We also reported a restaurant margin dollar increase of 6.1% to $257 million and a diluted earnings per share increase of 4% to $1.86. Average weekly sales in the second quarter were over $107,000 with ToGo representing approximately $22,000 or 13.3% of these total weekly sales. Comparable sales increased 5.8% in the second quarter, driven by 4% traffic growth and a 1.8% increase in average check. By month, comparable sales grew 4.3%, 7.2%, and 5.8% for our April, May, and June periods respectively.
And comparable sales for the first five weeks of the third quarter were up 5.3% with our restaurants averaging sales of over $158,000 per week during that period. In the second quarter, restaurant margin dollars per store week decreased 1% to over $28,500. Restaurant margin as a percentage of total sales decreased 108 basis points year over year to 17.1%. Food and beverage costs as a percentage of total sales were 34% for the second quarter. The 131 basis point year-over-year increase was driven by 5.2% 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 increased six basis points to 32.9% as compared to 2024. Labor dollars per store week increased 5.4% due to wage and other labor inflation of 3.8% and growth in hours of 1.6%. Other operating costs were 14.5% of sales, which was 32 basis points better than 2024. The improvement was driven by leverage on operator bonuses as well as the year-over-year change in our quarterly reserve for general liability insurance. These insurance adjustments include $300,000 of additional expense this year as compared to $2.1 million of additional expense last year. Moving below restaurant margin, G&A dollars grew 7.9% year over year and came in at 4.2% of revenue for the second quarter.
Our effective tax rate for the quarter was 14.9%. 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 15%. Now I will turn the call back over to Jerry for final comments.
Jerry Morgan: Thanks, Michael. I am so proud of our operators and support center roadies who work together as one team to deliver great results. I'm also excited to spend time with our managing partners on our annual fall tour. As always, we look forward to getting feedback on how we can better support them or remove any obstacles so they can focus on partnering with roadies, serving their guests, and growing the business.
Michael Bailen: That concludes our prepared remarks. Tamika, please open the line for questions.
Operator: At this time, if you would like to ask a question, press 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press 1. Your first question is from the line of Sara Senatore with Bank of America.
Sara Senatore: Thank you very much. Obviously, very strong top line results. I was just wanted to ask about the maybe the inflation. I know last year, commodity inflation, beef inflation kind of consistently surprised the downside. This year, it seems to be surprising upside. I was wondering if you could maybe talk about some of the dynamics there. I know in the past, the retail what's happening in retail and groceries has been a big impact but, you know, there may also be, obviously, you know, the supply has been coming down consistently. And then within that, know you said March perhaps was the peak in terms of, you know, relative to your expectations.
So is any of this maybe timing or, you know, quarter to quarter? So I know there's a lot in there, but you always have good insight into the fee cycle.
Michael Bailen: Thanks, Sara. This is Michael. I'll do my best to cover those questions. Yeah. I think we obviously, you know, updated our guidance and, you know, it's a combination of demand, specifically retail demand for beef. Has main has remained resilient. So we're seeing strong demand out there, and the supply situation, which we knew was going to be tight as we move through the year, saw some additional pressure on the on the production side from the beef suppliers cutting back on, how much they were producing given some of their, you know, margin commentary that we've probably heard. So we saw a further tightening of supply, which certainly drove the cost higher in June.
And so we are expecting you know, to as that beep ages to see the impact of that here in the third quarter, know, we have about 80% of our beef locked for the third quarter. And about 50% locked for the fourth quarter. So, you know, our team continues to monitor the situation and you know, we'll update you all accordingly.
Operator: Thank you. Your next question is from the line of David Palmer with Evercore ISI.
David Palmer: Thank you. Just a couple of line item questions that maybe there's some insights behind. You know, when I look at the mix effects, you know, for over two years now, when I initially, I was thinking this would make a lot of sense that mix would be negative coming out of COVID. There was a lot of check growth during those particularly the later stages. People had some money, and but now, you know, two and a half years of a slightly negative mix. I wonder, you know, how you're thinking about that. You know, maybe what are the behaviors that's driving that? Maybe it's some of the alcohol dynamics or maybe this is just the cautious consumer.
Anything that maybe you know, drives your strategy as you think about pricing, for example, And then and then secondly, you did really well with labor leverage, this quarter. Obviously, traffic accelerated. That's a good way to get that, You know, does it really come down to that if you're doing a very nice traffic number like this quarter? Does that labor is the labor leverage that gap of two points you know, just much more possible than cutting back on hours. I'd love to hear your thoughts on that. Thanks.
Michael Bailen: Yeah. Hey, David. It's Michael. On the mix front, I'll tell you know, all of the negative mix pressure is coming from the alcohol category. We are actually continuing to see positive entree mix. The guest is actually trading up still to, you know, bigger steaks or, you know, more often ordering a stake from us. And, you know, we're seeing positive in the mocktail categories. So really no downward pressure, overall from, you know, our from our menu pricing actions.
It's all in that alcohol category, which a lot of that, you know, we've talked about before is societal and not just a roadhouse specific item, and that's what you know, drove us to, you know, partly to introduce mocktails, which have been well received by the guest. So I think we feel very good about how the guest is using our menu and they're trading on the men on the menu. As far as the labor question, yes. Certainly, you know, more traffic helps. You know, on the labor line, but our operators are doing a very good job of staffing their restaurants, and they're also know, benefiting from, you know, lower turnover in their restaurants.
And they a longer tenured employee is a is a more productive employee and some of that can go to our, you know, digital kitchen investments and just the overall you know, way we're running those restaurants. So we are definitely encouraged by those you know, labor productivity trends that we've seen, and we're cautiously optimistic that those can continue throughout the year.
Operator: Thank you. Your next question is from the line of David Tarantino with Baird.
David Tarantino: Hi, good afternoon. Maybe two questions. I'm gonna cheat here. But, Michael, can you just give us a sense of what the inflation in Q3 and Q4 is going to look like based on your current outlook? And just wanna make sure everybody's on the same page. And then I guess my real question is, Jerry, you mentioned the step up in Bubba's openings for next year, and I just wanted to get your thoughts on what that means for the total enterprise and your overall growth rate? I know you said in the past, you're pretty comfortable at thirty.
Or so openings, but does this allow you to push higher than that as you as you think about next year and future years? Thank you.
Michael Bailen: Yeah, David. I'll I'll I'm assuming you're talking about, you know, beef and inflation and our expectations there. And as we said, as of now, we expect that highest pressure in the third quarter, and that could be as much as, you know, 7% you know, commodity inflation in the third quarter And then the expectation is it would probably come down you know, from there more in the you know, four to 5% range. In the fourth quarter would be our current, you know, expectations. And remember, we are feeling some additional negative impact on the cost of sales line in addition to that inflation coming from the guest trading more often to stakes.
So that's something we've seen in the last several quarters and, you know, would expect us to see in the third quarter as well.
Jerry Morgan: And, David, this is Jerry. On the growth above us, yeah, we've got seven openings, slated that will happen this year, and, the pipeline for '26 looks very solid. We are approaching that double-digit count, and so there could we obviously have said, around 30 or 30 ish, approximately 30. So it could be a little bit on the high side. Of that approximate 30, with the, escalation of Bubba's growth. So we are excited about the results that we're getting, and the investment and the and the brand in itself. So I think we could see a little tick up on that.
Operator: Right. Thank you.
Michael Bailen: Thank you.
Operator: Your next question is from the line of Lauren Silberman with Deutsche Bank.
Lauren Silberman: Thank you so much. On the comp side, the monthly cadence, any additional color you can provide on what drove some of the monthly differences? I think broadly, the industry has seen some choppiness. Just wondering if there's anything you're seeing that's different than typical consistency.
Michael Bailen: Yeah. Hey, Lauren. It's Michael. You know, obviously, we were pleased with the overall you know, you know, performance that we have seen. I guess, you know, the July you know, period, you probably had about a 70 basis point negative impact from the timing of the Easter. And the five-week period that we gave for the beginning of the third quarter has about 60 basis points of, you know, negative pressure from the calendar shift for the July 4. Sorry. The
Operator: is 2Q the 2Q is a 70 basis point negative impact? That was well,
Michael Bailen: that was on just our April period. On the quarter, it was about 20 basis points. Yes. Just April was 70.
Operator: Understood. Anything you can provide on comp performance or differences that you're seeing across region, days,
Michael Bailen: Yeah. I'll tell you when we when we look at that, and this is been the case for a while, you know, we're seeing you know, solid growth seven days a week. Through all, you know, day parts. You know, of each day in our both in our dining room and to go. And when you look at it regionally, strong performance you know, in all areas. So nothing really to call out as a specific area of weakness or of outsized, you know, strength. So we're, you know, very pleased to you know, what we're seeing across the board.
Operator: Great. Thank you very much. Your next question is from Dennis Geiger with UBS.
Dennis Geiger: Great. Thanks, guys, and appreciate all the color on the cost inflation pieces. Maybe just one more in thinking about restaurant margins. For the back half of the year. Just as far as the other OpEx line, thinking about that, and if there's any differences 3Q and 4Q as we think about how the labor setup might play out. And anything to highlight there to kinda fully fill in the pieces for us in thinking about two h restaurant margins? Thank you.
Michael Bailen: Hey, Dan. It's my it's Michael. I you guys talked about labor and other op. And I would see obviously, a part of it will be based on your assumption for traffic growth. But if you're assuming that we, you know, continue with some modest level of traffic growth, then I think that you know, that other offline, you know, could continue to get a could continue to get a similar level of leverage that it's been getting, you know, the last You know, 02/2003 and Q4.
And the labor line, again, with some traffic growth, you know, you know, is probably in that flat to maybe a little potential for a little bit of leverage as we move into the back half of the year.
Dennis Geiger: Great. Thanks, Michael. Appreciate it.
Operator: Your next question is from Brian Harbour with Morgan Stanley.
Kelly Merrill: Hi, this is Kelly Merrill on for Brian. Thank you for taking our question. Obviously, I saw some commodity inflation in the second quarter with the expectation of that continuing into 2H. Could you just provide some color on what's driving that? Obviously beef, but is there anything else inflationary outside of that? And could there be any offsets to beef on the commodity side? And then on labor, is there anything to explore there just from an efficiency standpoint? As you look to offset the commodity inflation? Thank you.
Michael Bailen: Yeah. Hi. It's it's Michael. On it really is the beef that is driving you know, that inflation in know, for commodities, you know, with it being over 50% of our basket. And they're really not being another item that's large enough to make a serious impact on the overall numbers. I'd say the rest of the proteins maybe are slightly inflationary, getting a little bit of offset. Maybe a little benefit on the on the produce area, but, really, all the pressure is coming from you know, beef. And on the labor side, you know, our operators are always looking to run efficient, you know, restaurants.
We aren't mandating any kind of scheduling, you know, you know, for them and you know, they do what is appropriate for their restaurants for staffing for the sales they have, and the sales they want, you know, in the future, And so they're always looking at that to see there is opportunity, but I do I don't believe there are any you know, levers to be pulled that, you know, will dramatically change, you know, our approach to labor?
Operator: Thank you so much. Your next question is from the line of Jim Saylor Stephens.
Jim Saylor Stephens: Yes. Good afternoon. Thanks for taking our question. Wanted to dig in a little bit on Bubba's 33. You guys crossed 50 units. Mainly concentrated in Texas. But just thoughts around, you know, how do we kind of continue to scale that and maybe regional attack plan and where we should anticipate to see new units in the strategy for, you know, engaging new guests as that brand becomes more and more visible?
Jerry Morgan: Yeah. Thanks, Jim. This is Jerry. Yeah. We've, like I said, we're in 16 states, and we're continuing to focus Typically, in our program, we have a multiunit operator that lives in a certain area, and we try to build out that turf. And, as we continue to expand and bring on more market partners and get into a new turf or two demographic areas. We'll continue to grow. We're having a good success on the openings. We're kinda spread out over those 16 states, and we'll probably keep that philosophy. But the big thing really has been getting, stable on the leadership side clearly focusing on our menu and our execution.
And, we've always felt great about the look of the building and the energy that the restaurant provides between the entertainment and the sports and the food is incredible. But, as we continue to just settle in and really start executing at a high level, I think we'll continue to be able to develop it. It's at a higher rate than we have in the in the last few years. So exciting times for sure.
Jim Saylor Stephens: Great. Thanks. I'll I'll hop back in queue.
Jerry Morgan: Thank you.
Operator: Your next question is from Jeff Bernstein with Barclays.
Amisha Dat: Hi. This is Amisha Dat on for Jeff Bernstein. I wanted to ask about value. How has the mix of value-oriented sales evolved at both Texas Roadhouse and Bubba's compared to historical levels? And do you have plans to further emphasize value in coming quarters, particularly to support lower-income guests? Thank you.
Jerry Morgan: Yeah. I'll start with that. On the on the value side, we've we've always believed that there's a lot of value built into our menu in there's the country dinners and the and because we offer multiple cuts of beef, you can pick how much you wanna spend in, from six ounces to 16 ounces. So I think from that side of it, we've got an early dine feature All of those things have been in play for a very long time, and we really see people picking and choosing how they wanna have their dining experience. And we like it that way.
We want people to spend as much money as they like or to be as much very conscious as they wanna be too. And but you get a pro and two free sides and bread and butter and all of the things that go with it, the peanuts. So it's just like I said, the value is really built into it. I think in the last year, we leaned into more on a $5 beverage mix menu. So offering some a value pint beer and a value 10-ounce margarita and our mocktails are $5, which have really new to us.
So there's a lot of things that are very reasonably priced with great quality, and I think that's what's always been the big driver for our success on the top line, and our operators executing at a high level and acting like owners. They're they're all owners in the business, and they grow their sales. They control their costs, and they run a great business, and they get rewarded by driving that top line. So I hope that answered your question.
Operator: Great. Thank you.
Keith Humpic: Thank you.
Operator: Your next question is from the line of Peter Saleh with BTIG.
Peter Saleh: Great. Thanks for taking the question. Just a couple of quick ones on my end. The past, you guys have when we've seen beef inflation, sometimes you see a highly promotional retail environment, which kinda contributes to those elevated beef prices. Are you seeing any of that today? Or is this mostly a function of the shorter or tighter supply? And then second, on construction costs going forward, are you seeing any elevated costs or anything that's been dislocated, anything with tariffs may be impacting the construction cost going forward? Thank you.
Michael Bailen: Hey, Peter. It's Michael. First on the beef, comment, you know, I think that, you know, certainly beef is being offered at retail, but I don't think they're I don't think the retailers are being irrational in their pricing. They are not using it as a loss leader to drive people into their stores, but they are marketing you know, you know, beef at a at a pretty high level. And what we've seen this year is the consumer you know, willing to you know, to pay for that.
So I think that's really been part of what's driven, you know, the pressure is a consumer who's willing to keep, you know, spending and you know, a supply that has, you know, been very tight.
Keith Humpic: Yeah. And then, Peter, this is Keith. On the on the construction side, we really aren't seeing any impact yet from tariffs. You know, we had a lot of inventory for all of our builds for the year. So we like I said, we just really haven't seen anything yet, and we're still evaluating that. To see how that's gonna affect us going forward.
Peter Saleh: Thank you very much.
Operator: Your next question is from the line of Jeff Farmer with Gordon Haskett.
Jeff Farmer: Thanks. Shifting gears a bit. I'm just looking for an update on the Roadhouse mobile app. Specifically, can you guys share the number of active users, how quickly that's growing, and how you guys have been leveraging that customer database? Thanks.
Jerry Morgan: Yeah. I mean, obviously, it is out there. I don't know that we know the exact amount of users, but, I mean, there is a large percentage of folks that are obviously placing their to go orders, getting on our wait list, the efficiency of being able to really do that. We did up upgrade our mobile app to have more pictures when you are kinda ordering the side items.
So we continue to look at the mobile app on an making it easier to navigate and place your order, and then we're executing at the restaurants at a much higher level, on how we grade, making sure we don't have missing items, that the order is ready when you get there. And all of those little details that really do matter when you're a off premise, orderer and the consistency of the of the product and the food. And obviously, we believe the mobile app is really widely used in a lot of ways, and it's been a game changer in a lot of ways since early on coming out of the pandemic from that.
And we continue to upgrade and find ways to make it easier for our guests to get that order placed. And then, again, at the restaurant level, we're executing at a higher level than we ever have, and we're continuing to find ways to improve that experience, at the pickup window.
Michael Bailen: Okay. Thank you.
Jeff Farmer: Thank you.
Operator: Your next question is from the line of Andrew Strelzik with BMO Capital Markets.
Andrew Strelzik: Hey, thanks for taking the question. Obviously, a lot of focus on the discussion of value and in the industry these days. And I'm curious, you know, where now are your price gaps against your competitive set versus either the last several years or historical levels? Is there anything that has changed? And also, can you remind us over the several quarters and especially with 1.7% coming in, in the fourth quarter where your price will trend? Thank you.
Jerry Morgan: Thanks, Andrew. I believe we still always look at where we're positioned I think we look at ourselves first and make sure that we're comfortable with our pricing. And then we fact check a little bit against some of our competitors just to make sure that we feel comfortable with that gap. And we it has changed over the years and in different items for different reasons, but I think in general, we're very happy with the value that's built into the menu. The gap that we have between our competitors. And some of that gap, is it really just about the dollar, or is it about the ability to execute? Is it the portion size?
There's so many components that are built into value. And with getting a protein in two sides and free butter and bread and peanuts and all of that, I think that's all built into the value component. And then what would you had the question on the Michael's got the other side of that question.
Michael Bailen: The other side of the question was on our pricing and how much pricing we have in the menu. We'll have 2.3% pricing in the menu here for the third quarter. And then we'll have 0.9% that rolls off when the one seven rolls in. That'll leave us with a 3.1% pricing for the fourth quarter of this year and the 2026.
Andrew Strelzik: Great. Thank you very much.
Keith Humpic: Thank you.
Operator: Your next question is from the line of Brian Vaccaro with Raymond James.
Brian Vaccaro: Hi. Thanks, good evening. I have a question on California, and I think you said you were acquiring the remaining five franchise units in that state. It's a state, I think, with only around 20 roadhouse units. So I'm just curious how do you think about the growth opportunity there? If you're setting the table, so to speak, that maybe accelerate growth there over the next few years.
Jerry Morgan: Thanks, Brian. This is Jerry. Yeah. We're we're very excited. We obviously were able to get an acquisition done on the Northern group. And now through some great partnership and hard work through both our company and our great, franchise group down in Southern California, have been able to come to terms. We're very excited to have them in the family and that is a very special unit to us. It's obviously, that group has been with our organization for a very, very long time, and we're really proud of that partnership.
And it's a little bittersweet, but we are happy for Steve and his family and happy for the Roadhouse family And as we look at the owning all the stores in California, and our growth strategy, we are meeting as a group and really discussing from a real estate team to an operations team on how do we look at California. We know there's a lot of folks there that love great food, and we've had a lot of success there with our 19 stores open and, where we'll continue to see our presence in California grow. We believe that, people of California are loving legendary food and high level hospitality, and that's what Texas Roadhouse provides.
Michael Bailen: Mhmm. Absolutely. Alright. Well, thank you. And then, Michael, just a quick follow-up.
Jerry Morgan: What's the reasonable expectation for G and A spend this year
Keith Humpic: Oh, yeah. This is Keith. I'll take that one. Yeah. On g and a, I'd say for the rest of the year, you can expect us to get some leverage, I'd say, especially in the fourth quarter as we're lapping the fifty third week. And then, you know, just one thing to mention with us, purchasing the support center. An annual basis, we're gonna be saving about 2 and a half million dollars in rent. And so you'll see a little you know, a prorated benefit of that for this year also in the back half.
Brian Vaccaro: Very helpful. Thank you.
Operator: Your next question is from the line of Jim Sanderson with Northcoast Research.
Jim Sanderson: Hey, thanks for the question. I was hoping you could talk a little bit more about how you expect corporate store margin to evolve as you start to look more closely at developing Bubba's? And then how you foresee mix of company versus franchise as you target that 200 unit growth goal.
Michael Bailen: Yeah. Hey, Jim. It's Michael. I guess I'll I mean, I'll take the second part first. With that 200 you know, number, I assume you're this is a question about BABA's. BABA's is all you know, plan to be company development at this time. So that is that is all company. And, really, most of our growth for Texas Roadhouse and Baba's domestically is company growth. Jagger will be a mix of company and franchise and international is a franchise business. You know, we expect Bubba's over time will deliver similar margins. To a Texas Roadhouse. Now, obviously, Roadhouse sales are a little bit higher, which helps on the margin side.
But, you know, Bubba's is proving that it can do a very strong performance as well. So over time, we would, you know, expect continue to, you know, drive strong, you know, margins out of both brands. All three brands.
Jim Sanderson: Alright. Thank you very much.
Operator: Your next question is from the line of Gregory Francfort with Guggenheim.
Gregory Francfort: I know it's it's a bit of a tongue twister. I blame my parents. The I the question I had, Jerry, is margin profile. And I know you guys have said it for a long time that seventeen to eighteen is the right place to be. Kind of but maybe between the beef cycles, in 2024, you got kinda just over 17. And I guess you're pro probably headed lower with just this level of inflation. As I look back five or six years, I think your AUVs are up 10 to 15 points more than your development costs are up.
And so I wonder if that 17 to 18 is gonna be 16 and a half to 17 and a half or you still think 17 to 18 is the right place to be? Thanks.
Jerry Morgan: Yeah. And thank you. And we do believe that internally that obviously, the world has to cooperate too and the beef cycle does have to turn for us. But you know, I wanna always challenge ourselves to be a strong balance when we're talking about financial results. And for our organization to believe that over the years in thirty two years or so, you know, that's a great spot for us to be. But, again, things have to work out. So we are not changing that as of right now. We did get our chin over the bar. Last year, and we were very happy with that.
And it had been growing, and the momentum had been building up to that point. And, obviously, we're fighting some inflation this year, which we thankfully didn't have as much of last year. And that helped us through there. But I believe that as of right now, we're gonna continue to focus on that top line and do everything we can to control that cost and be very balanced when it comes to fiscal responsibility for our roadies, our guests, and for our shareholders. And we'll we'll continue. If we ever did feel like that was unreasonable, we would have some internal discussions.
But as of now, we still believe that we can our chin over that bar at some point.
Gregory Francfort: Thank you very much.
Jerry Morgan: Thank you.
Operator: Your next question is from Jake Bartlett with Truist Securities.
Jake Bartlett: Great. Thanks for taking the question. I had one and then I had a follow-up. The question is about your off premise sales and this might you know, build on the answer about your app. But over the last four quarters, off premise, sales for operating week have been growing much faster than on premise. And has been a driver of your of your comps. The question is what is driving that? Is it just really just spillover and people kind of peeling out of the line and taking it home? Or is it something operationally that you've done? Is it the app or you know? And then, I guess, most importantly, how sustainable do you think that is?
Jerry Morgan: Yeah, Jake. This is Jerry. Thanks for the question. I truly believe it's a combination of all those things. The convenience of us putting in windows for folks to be able to walk up and get their order, The mobile app, the easier, that it is to order and navigate through that app. We're seeing a more completion rate through that. You know? And then the missing items is really the biggest thing, and we've just gotten better at it. We've focused on it. We've got, ways of, it's really the operators, in my opinion, that are executing at a very high level The guest is rewarding us because when they get home, they have their items.
They're opening our food in their dining room table with their families. And they've got everything that they need. And we've heard it over and over again. If you focus on something, you put energy on it, then the result improves. And I think that's what we're seeing. From that standpoint. So it is exciting to see it continuing to grow, but I really believe it's the app it's the ease of pickup, and it's the operators delivering a great experience to our consumer.
Jake Bartlett: Great. Great. And the follow-up was on you know, building on your comments and I just want you to kind of maybe say it again. I just wanna make sure I'm hearing it right. But the idea that as you increase the number of bubba's, you also talked about some company owned jaggers in '26. You know, you've been very consistent about kind about keeping the total number of units, about 30, you know, because of operational limitations or just making sure you execute very well. Is that changing? I mean, seems like you have the capacity. You've gotten bigger. You could. I just wanna make sure I'm hearing you right.
We didn't get over my skis, as we as we look at your ability of maybe sustain, the pace of roadhouse openings and then and then add to that, with these other concepts.
Jerry Morgan: Yeah, Jake. I am, encouraged by our ability to get that 30. I think you will see us a little on the high side of that the next couple of years. The pipeline for Roadhouse is still strong. We are pressing on the gas with Bubba's a little bit, and you'll see, as we mentioned, Jagger's coming into the fold also. So I really wanna get into the next year and be have that confident before I move that number up. But we are clearly starting to tip our, head over the skis on in that direction.
Jake Bartlett: That's great to hear. Thank you.
Jerry Morgan: Thank you.
Operator: Your next question is from the line of Jon Tower with Citigroup.
Karen Holthouse: John, your line is open. Hi. This is, Karen Holthouse on for John. Piggybacking a little bit on the off premise questions. Know, I understand there's you had state the argument state doesn't travel well and some things like that. But would you consider, you know, doing kind of, doing delivery on a unit by unit basis? You know, managing partners were asking for it. You know, was it maybe in unit in a denser marketplace, like, or they're tech and, you know, tech or back of house limitations to doing that.
Jerry Morgan: Yeah. Thanks for the question. We, you know, we have resisted the temptation of going that route as of now. We do it at the Jagger's concept and at Bubba's. And we have one store that's in a very urban market in New Rochelle, New York. That we do, delivery at. And then I will continue to have conversations with operators But as of right now, you know, I think we're holding the line on not doing delivery and the rest of the concept unless there's a real reason to do it. Individually, we will have some conversations. But, as of right now, we have resisted going that route.
We're focused on providing our guests a great experience in the dining room and through our off premise. Through our pickup system, and through the app. And all of that. That's where we'd really like to continue to focus as of right now.
Operator: Great. Thank you. Your next question is from the line of Zachary Fadem with Wells Fargo.
Zachary Fadem: Hey, good afternoon. On the entree mix shifting more to beef, looks like it's been about a 30 basis point headwind on the food and beverage line, assuming that held in Q2. Curious if you view this more cyclical or structural phenomenon. And as you think about the impact in the second half is the 30 bps still the right impact? Or would you expect it to step down?
Michael Bailen: Yeah. Hey, Zach. It's Michael. And it was around 30 basis points in the first quarter. It probably stepped down to about 25 basis points in the second quarter. And you know, maybe it holds in that 20 to 25 level in the third quarter would be my expectation. And then I think it would step down a little bit more in the fourth quarter as we lap it. So I kind of view it as a one year change in behavior and whether that means it'll change back and we will see something else occur, you know, we'll have to wait and see on that.
But I do think what's driving a lot of it is the value on the menu and the steak category and the and the guest appreciating you know, the price they can pay with Texas Roadhouse for a stake, and, you know, that helps our top line growth, but you see a little bit more pressure right now on the COGS line you know, from that. But as a steakhouse, we love seeing people wanting to, you know, try our steaks. We think that is great for our, long term success.
Zachary Fadem: Thanks for the time.
Operator: Your next question is from Todd Brooks with Benchmark Company.
Todd Brooks: Hey. Thanks. I'm gonna keep the off premise train rolling here. So it looks like off premise has been mixing in kind of that mid 13% range recently. I think there was one point as the rollout of KDS was happening, and it brings that additional efficiency and calm to the kitchen that there might have been a theory that more off premise demand could be met out of the kitchens and that managers would be more comfortable going after and servicing that demand. Has that been the case? Is that still on the common? If you look at maybe your best quartile of stores with off premise, how high is their mix? Versus the 13% train wide? Thanks.
Jerry Morgan: Hey, Todd. This is Jerry. Yeah. I believe it is definitely one of the components probably helping us be able to have a little more capacity through the to go business. So, I think you're right. And as we're almost 80% done of having all the concept on the digital kitchen at this point. Then as we get finished this year and we continue to learn from each other about how we can utilize that technology to help us bigger, faster, and stronger and improve our guest experience as well as our roadie experience in the back of the house.
We believe that the digital kitchen will have some components that will, will play into our ability to be faster and to be focused on taking great care of our guests. So I do believe it is a component of that increase for sure.
Michael Bailen: Yeah. And, Todd, there are definitely restaurants that do higher levels of to go on a dollar basis and a percentage basis. Don't have all those numbers, you know, at our fingertips, but, you know, know, we definitely have stores that are examples to other that you can do even more to go, in your restaurant. So we think there still is a lot of opportunity.
Todd Brooks: Okay. Thank you both. Thank you.
Operator: At this time, there are no further audio questions. Will now hand today's call over to Jerry Morgan for closing remarks.
Jerry Morgan: Thank you all. I want to close with a special shout out to our Jaggers team in Lexington, Kentucky, which represents our 800 system-wide restaurant. Great job on delivering high-level hospitality and creating raving fans. Let's go, TXRH. Good night, y'all.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.