W. Kent Taylor, chief executive and founder of Texas Roadhouse, started the restaurant as a means to an end: he wanted to buy a house. However, passion for his concept and the restaurant business grew quickly. That didn’t mean instant success though.
Taylor has had his share of failed stores and growth capital that didn’t come through, but his perseverance in the face of those challenges, as well as his model of giving employees a piece of the profit, have paid huge dividends for the 420-unit Louisville, Ky.-based casual-dining chain.
Same-store sales increased 2.9 percent at company-owned units and 3.6 percent at franchised restaurants in the second quarter, driven by traffic gains and check increases.
Taylor spoke with 2013 Golden Chain winner and Operator of the Year honoree, Ray Blanchette, chief executive of Ignite Restaurant Group Inc.
An excerpt from their conversation, moderated by NRN, follows:
Can you talk to us about what it’s like to run a brand that you created?
Kent Taylor: With my original, store number one, I just wanted to make enough money to buy a house. Then I thought … maybe I can get ten stores in ten years, and then right after that, three of the first five failed, so that didn’t really work.
I had to find new investors to power ahead. I don’t think of myself as a CEO. I’m really just the head restaurant dude, and I put my mindset of that as that of a managing partner or general manager. I always make decisions as if I’m reporting to our managing partners, and I find that that’s — at least for me — a better way for me to operate the company than to worry about Wall Street or any of those folks.
RB: The culture you’ve created there is cool. I’m a guest very often in your business and your people seem to be completely bought in. In the experiences I’ve had, the execution from Danvers, Mass. to Katy, Texas is very consistent. What drove that culture in Texas Roadhouse initially? What do you do today to foster that great environment?
KT: Well day one, from our first store forward … the managing partners … have to pay $25,000 to get 10 percent of the bottom line of the stores, and then we put their name over the door. They’ve always considered themselves as partners and not employees, and I think you get a different mindset there. And we make them sign a five-year contract, and then they get stock grants. They become part of the community.
RB: If you’re partnering with somebody for a minimum of five years, then there must be some specific traits that you’re looking for in these managers.
KT: It’s kind of an attitude, energy. I look for people that have accomplished something earlier in their life that they are very proud of. Hopefully, that includes some type of community service. I like people that maybe ‘got in trouble’ at other companies because they were a little bit of an entrepreneur.
RB: It sounds like you spent some time at Bennigan’s and the traditional casual dining route. Was there something in particular or a person or people that inspired you? Did you have any mentors early in your career?
KT: It started when I was in high school. John Y. Brown was developing a Kentucky Fried Chicken at the time, and he lived maybe two miles down the same road in Louisville, and I was very inspired by that. And my uncle had some small businesses in Lexington, Kentucky, and I was kind of intrigued by that. My dad helped start the GE Answer Center in Louisville. I was always very impressed with Sam Walton developing Walmart and how he went out and selected the sites, which I still do today, [and] into the stores, which I still do today. Herb Kelleher with Southwest Airlines and the culture of Southwest [also inspired me]. I actually went to [the] Southwest [headquarters] two or three times. And then the accountability that I would hear about at the dining room table of Jack Welch, at General Electric, when he was in Louisville. [It also] goes way back when I was in high school. I was a busser at a place called Captain’s Quarters Restaurant in Louisville, and Dottie Mahon ran the restaurant, really cared about her employees, cared about her guests, and maybe that rubbed off as well.
RB: I’ve heard that you were denied financing upwards of 80 times.
KT: It was well over 100 actually.
RB: What kept you going through all that?
KT: I think I just made a game of it. I would try to see how many times I could get turned down every month and I would track it, and then I would try to get turned down more times the next month.
Future of casual dining
(Continued from page 1)
RB: Casual dining has been under pressure for several years, but your brand, the team and the culture, seem to defy gravity. Are there secrets to that success?
KT: I think it’s the partnership with our people who run the stores. They know that they’re the most important in our company, and we pay them that way. They are getting a piece of the profits. It’s not really the focus on controlling costs as much as it is the focus on building sales. We’re not coming in with this new marketing idea or this new special of the month. We basically put the onus of growing sales on the individual managing partners in the stores, and so they — as a partner — figure out a way within their own communities to be best in class.
We don’t do any national advertising, and let’s just say if we were doing 4 percent at national advertising, well, I’m putting that back into service quality and food quality, with lower table-to-server ratios and better quality food made from scratch.
RB: What most excites you about casual dining, in the future?
KT: There’s not a lot. With higher food costs and tighter labor pressures and a lot of other things, it’s tough to find many silver linings. But I feel like there’s a power of people, and if you give them enough leash, they’re going to discover new ways to build guest loyalty.
I’m just amazed how our individual people at various places in the country come up with little things here and there that we take and use across the country to build sales. We’re basically all about building sales and letting our people have the creativity, and I think as long as we continue to do that, that’s going to work specifically for us.
NRN: What would the Golden Chain winning Kent Taylor tell the 20-year-old Kent Taylor if he could give him a piece of advice?
KT: “Don’t give up.”
Ray Blanchette is chief executive of Ignite Restaurant Group, parent of the Romano’s Macaroni Grill, Joe’s Crab Shack and Brick House Tavern + Tap brands. In 2013, he won a Golden Chain award and was also named Operator of the Year, the highest honor given by Nation’s Restaurant News.