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Steakhouses Are America's Favorite Type of Restaurant. Guess Which One Americans Like Best.

By Rich Duprey – Jul 27, 2015 at 8:00AM

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Despite soaring beef prices, Americans can't get their fill of this All-American meal

A meal you can sink your teeth into, steak remains one of the most popular entrees despite sky-high costs. Photo: JP, via Flickr.

Considering the prolonged love affair America seems to be having with protein, it's not surprising that steakhouses remain the top full-service restaurant where hungry folk chow down.

According to the market researchers at Technomic, while full-service restaurants in general continued to improve year over year, generating an average 3.5% increase in annual sales, steakhouses led the industry with a 5.5% gain.

And this has occurred even as beef prices hit record highs and remain at elevated levels.The Drovers Cattle Network says the average retail price for fresh beef during June was a record $6.114 per pound, $0.60 per pound higher than the year ago price and $0.05 more than the previous record set in March.

Of course, not every steakhouse fared equally well, and some did much better than others. For example, Darden Restaurants' (DRI -0.51%) LongHorn Steakhouse enjoyed sales gains of 4.4% over the course of its fiscal year that ended in May, as did its high-end specialty restaurant chain The Capital Grille, which saw sales rise 4.8%. But another pricey chain, Ruth Hospitality Group's (RUTH -0.85%) Ruth Chris Steak House, enjoyed a less than 1% increase in revenues in 2014, though it did enjoy a 9% jump in operating profits as comparable restaurant sales rose over 3%.

Similarly, Outback Steakhouse, the Australian-themed steakhouse chain from Bloomin' Brands (BLMN 0.99%), saw its comparable sales rise over 3%, though most of the gains came from price hikes. while Texas Roadhouse (TXRH 0.32%) saw an 8% jump in revenues last year with another 16% gain in the first quarter.

No beef with beef
Yet despite our love affair with beef, what restaurants serve as a meal only goes so far. If chains want to survive, let alone thrive, they've also got to satisfy our desire for an experience, as well as our pangs of hunger.

Recently the American Customer Satisfaction Index released its restaurant report for 2015 detailing how satisfied consumers were with different chains, and it's clear most are coming up short of expectations, regardless of whether they're steakhouses, fast-food chains, or coffee shops.

Although no full-service restaurant did better this year than last year -- ratings at chains like Red Lobster dropped 1% in 2015, while places like Chili's remained static -- that's in part because there were a lot of new names added to the list this time around. It might also explain why ACSI found the gap between the overall ratings of full-service and limited-service restaurants widened to its largest spread in five years. There was just more fresh meat, so to speak.

A full serving
Helping the full-service rankings were the appearance on the list of two steakhouses that rated highly on the ASCI scale, one of which received top marks.

Which steakhouse was it? If you guessed Darden's LongHorn Steakhouse, that's not a bad choice, but it actually came in No. 2 with an 81 rating (it was one of the new chains making its debut in the rankings). The Outback Steakhouse was rated third with a 78, down 3% from last year, and fifth overall among full-service restaurants.

No, the top-rated beef palace was Texas Roadhouse, which also made its first appearance on the restaurant list and earned an 83 rating in overall customer service. Not only did that make it the best steakhouse, but it means it beat out every other full-service restaurant too, regardless of type.

Texas Roadhouse has proved willing to absorb beef's rising costs rather than give up its preeminent position. Photo: Mike Mozart, Flickr.

Putting the customer first
The American Customer Satisfaction Index indicates Texas Roadhouse  was able to generate such a high score because "it has not increased prices much, opting not to pass on this cost to customers in an effort to retain them -- an approach that seems to be appreciated by diners."

Texas Roadhouse founder and CEO Kent Taylor noted in the steakhouse's fourth quarter conference call with analysts in February that the chain had only raised prices 1.8%, explaining that even though it didn't completely cover the higher expenses it faced, "our goal continues to be balancing short-term profit growth with protecting the long-term positioning and value of Texas Roadhouse."

ACSI says its survey finds people are still eating out just as much as they have been, which on average has been about four meals a week. An improving economy has put a few more dollars in their pocket, and though they're not happy in general with the service they're getting at most places, they're still finding beef represents a luxury they're willing to splurge on. That suggests investors might want to sink their teeth -- and their dollars -- into a good steakhouse too.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Texas Roadhouse. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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