Founded in 1993 by Kent Taylor, Texas Roadhouse operates over 600 restaurants located in the United States and internationally, serving hand-cut steaks and made-from-scratch sides. Texas Roadhouse's menu has many selections under $10 that come with two sides, peanuts, and fresh bread. The steak entrees, which include two sides, range from a $10.99 6-ounce Sirloin to $26.99 for the 23-ounce Porterhouse T-Bone. The average guest check in 2020 was $17.86. During the first quarter of 2021, Texas Roadhouse increased menu prices by 1.75% to help offset an increase in wages.
While Texas Roadhouse had negative same-store-sales (SSS) during the 2008-2009 Great Recession, its low prices and suburban exposure helped the restaurant, not only survive the downturn, but also outperform the casual dining industry. Based on historical trends of opening about 20 restaurants per year, Texas Roadhouse looks to be on pace to have a total of 700-800 locations in the next few years. Management has a solid track record in terms of executing new store openings and growing sales consistently.
Over the last ten years, the median SSS was +5%. SSS most recently fell double digits due to the pandemic. During the pandemic, Texas Roadhouse improved its To-Go capabilities. The CFO, Tonya Robinson, mentioned the To-Go strength on the latest earnings call:
Texas Roadhouse is a GPM Grade Company, which we define as a high-quality, US-based business with sustainable growth. The company has a track record of delivering rewarding long-term growth in sales, earnings, cash flow, dividends, and ultimately stock prices. We believe the recent market price underestimates the sales recovery, which presented us a long-term buying opportunity of an exceptional business.