While Texas Roadhouse officials are bullish about their prospects for future earnings growth, they said the casual-dining chain is likely to take a slight price increase some time in the first quarter of 2011.
The brand is currently testing a 2-percent price increase across its menu in 25 units, and chief executive G.J. Hart told investors that those locations are not seeing any significantly negative impact on traffic through the first few months of the test.
Nevertheless, executives of the Louisville, Ky.-based chain said the amount of the price increase and exact time is yet to be determined.
“We continue to hold value near and dear to our hearts,” Hart said, “and we feel we’re positioned very well. Value is imperative to grow guest counts. All we’re saying at this time is that we will take some pricing in the first quarter.”
Officials are also forecasting 20 new unit openings next year as part of a conservative reacceleration for the casual-dining brand.
In the third quarter ended Sept. 28, traffic rose 4.5 percent at Texas Roadhouse compared to the same period last year. Executives said the increase would “pave the way” for the brand to hit the high end of its earnings per share growth guidance of between 16 percent and 20 percent.
They added that a 4.6-percent growth in average unit volumes outpaced same-store sales growth in the third quarter of 4.3 percent at corporate stores and 4.4 percent at franchised locations, due largely to sales strength at newer units.
Price Cooper, vice president of finance for Texas Roadhouse, said the brand's 243 locations that have been open at least 18 months averaged $70,100 in weekly sales. By comparison, the 17 restaurants that have been open six to 18 months have averaged weekly sales of $72,100. The seven newest restaurants have been registering average weekly sales of $84,500, Cooper said.
Hart attributed the higher volumes in newer units to several factors.
“First, we continue to get better recognition as we get larger in scale,” he said. “We focus our training efforts around our managing partners, keeping them in our system for a year and through the selection process making sure we hit all those key attributes that we think will make a successful managing partner.”
He also said trainers are remaining longer at new locations to help support the restaurants. “Where they may have stayed a week, it’s significantly longer now, and I think we’re seeing some success from that,” he said.
The executives on the call added that average unit opening costs should decrease between $200,000 and $400,000 to somewhere in the $3.6 million to $3.8 million range. The 20-unit development schedule for next year would be back-end-loaded, with most of the openings taking place in the second half of 2011.
“The 20 openings is right where we want to be [for 2011],” said chief financial officer Scott Colosi. “We’re most comfortable taking a step forward and doing it in a conservative fashion. We’re not going to go too far too fast.”
However, Texas Roadhouse anticipates spreading new unit openings more evenly the following year, Hart said.
Texas Roadhouse operates 267 restaurants and franchises another 71 locations in 46 states.
Contact Mark Brandau at [email protected]
