Texas Roadhouse, Inc. Aktie

Good evening, and welcome to the Texas Roadhouse Second Quarter Earnings Conference Call. Today's call is being recorded.

[Operator Instructions]

I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference.

Thank you, Holly, and good evening. By now, you should have access to our earnings release for the second quarter ended June 30, 2026. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements.

In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; and Mike Lenihan, our Chief Financial Officer.

Following the prepared remarks, we will be available to answer your questions.

[Operator Instructions]

Now I would like to turn the call over to Jerry.

Thanks, Michael, and good evening, everyone. We are excited with our second quarter results as revenue approached $1.7 billion. We continued our top line momentum with same-store sales increasing 6.2%, including 3% traffic growth. We are especially pleased that our second quarter average weekly sales exceeded $175,000 for the first time in our company's 33-year history. There's a lot to be proud of across our portfolio of restaurants. Each of our brands is at a different point in their journey and I want to take some time to talk about the potential growth each brand has going forward.

Texas Roadhouse ended the second quarter with 755 system-wide locations across the United States and 10 foreign countries. Average weekly sales at company restaurants were over $183,000. We are confident in our operators' ability to continue driving sales through traffic growth. The sales volume and consistent growth that our restaurants have delivered over the long term are a testament to the strength of the brand and the commitment of the best operators in the industry.

This year, we expect to open approximately 20 Texas Roadhouse restaurants spread throughout the country. With the momentum in our existing location and a full pipeline of sites under development, the future continues to be incredibly bright for Texas Roadhouse. Bubba's 33 ended the quarter with 59 restaurants in 16 states. And just last week, we celebrated the opening of our 60th location, which is our first in the state of Iowa. Average weekly sales for the brand were over $129,000 in the second quarter, and our recent openings continue to perform very well.

Our expectation is to open at least 10 Bubba's 33 restaurants this year and maintain this low double-digit pace of openings for the next several years. Lastly, Jaggers also continues to perform well. In the quarter, weekly sales exceeded $76,000, and we opened our 11th company location. The remainder of this year's growth of the company side will be focused in our existing markets. We expect a total of 4 company openings this year.

On the topic of development, we remain on track for approximately 35 company-owned openings this year. 9 of these occurred in the second quarter, including 5 Texas Roadhouses, 3 Bubba's 33s and 1 Jaggers. As we mentioned last quarter, our openings this year are heavily weighted toward the end of the year. At this time, 6 are scheduled for the third quarter. The remainder of the 2026 openings are planned for the fourth quarter.

On the franchise side, our partners opened 1 international Texas Roadhouse during the second quarter. We expect as many as 5 more international openings as well as 2 domestic Jaggers franchise openings in the second half of 2026.

Moving on to menu pricing. We remain committed to maintaining our everyday value while also continuing to deliver on legendary food with high-level hospitality. Based on recently completed discussions with our operators, we will take a menu price increase of 1% at the beginning of the fourth quarter. We believe this level of pricing strikes an appropriate balance between helping to offset structural inflation and maintaining our everyday value position.

During the first half of 2026, our operators continued to deliver on our mission of providing legendary food and legendary service. In the second quarter, we saw tremendous demand on Mother's Day and Father's Day, which along with Valentine's Day are the 3 legs of what we call our Triple Crown. 90% of our restaurants set daily sales records this year on 1 of those 3 days and a handful of our restaurants really crushed it with single day sales exceeding $100,000 on one of those holidays.

The trust that our guests show our restaurants on the most important dining occasions is one of our competitive advantages. This trust is earned and something we will not take for granted. Now Mike will provide some thoughts.

Thanks, Jerry. During the second quarter, guests continue to reward us for their overall experience at our restaurants. Sales and mix trends within our dining rooms were both positive, and we maintained an impressive growth rate in our to-go business during the quarter. These trends continued into the first 5 weeks of the third quarter with comparable sales up 6.2% and our restaurants averaging weekly sales of $168,000.

Moving on to commodities. While the overall beef supply outlook remains dynamic given a variety of factors, our second quarter commodity inflation came in at 7%, which was at the bottom end of our forecasted range. As previously stated, our second half inflation outlook remains lower than our first half inflation and based on our updated forecast, we are reducing our full year 2026 commodity inflation guidance from between 6% and 7% to approximately 5%. We will provide an initial outlook on 2027 commodity inflation during our quarterly call in November.

With regards to labor, second quarter inflation of 3.9% was in line with our expectations, and we are maintaining our full year 2026 wage and other labor inflation guidance of 3% to 4%. Labor productivity continued its positive trend with labor hours growing at approximately 25% of comparable traffic growth.

On the topic of our capital position, we ended the quarter with $202 million of cash. Cash flow from operations for the second quarter was $180 million, which was offset by $191 million of capital expenditures, dividend payments and share repurchases. Our guidance for 2026 capital expenditures remains unchanged at approximately $400 million. As always, our capital allocation framework prioritizes new restaurant development and maintaining our existing restaurants. And now Michael will provide the second quarter financial update.

Thanks, Mike. For the second quarter of 2026, we reported revenue growth of 11.1%, driven primarily by a 5.9% increase in average weekly sales and a 5% increase in store weeks. We also reported a restaurant margin dollar increase of 6.9% to $275 million and a diluted earnings per share decrease of 0.7% to $1.85. Average weekly sales in the second quarter were over $177,000 with to-go representing more than $25,000 or 14.3% of these total weekly sales.

Comparable sales increased 6.2% in the second quarter, driven by 3% traffic growth and a 3.2% increase in average check. By month, comparable sales grew 6.2%, 6.7% and 5.7% for our April, May and June periods, respectively. In the second quarter, restaurant margin dollars per store week increased 1.9% year-over-year to over $29,000. Restaurant margin as a percentage of total sales decreased 66 basis points to 16.4% as compared to the same period last year.

Food and beverage costs as a percentage of total sales were 35.4% for the second quarter. The 136 basis point year-over-year increase was primarily driven by 7% commodity inflation. The inflationary pressure was partially offset by the benefit of a 3.2% check increase. Labor as a percentage of total sales improved 40 basis points to 32.5% as compared to the second quarter of 2025. Labor dollars per store week increased 4.7% due to wage and other labor inflation of 3.9% and growth in hours of 0.8%.

Other operating costs were 14.2% of sales, which was 28 basis points better than the second quarter of 2025. The leverage was a result of higher sales, combined with a $1.1 million net benefit to our quarterly reserve for general liability insurance. This insurance benefit included a credit of $800,000 this year as compared to $300,000 of additional expense last year.

Moving below restaurant margin, G&A dollars increased 15.4% as compared to the second quarter of 2025 and came in at 4.3% of revenue for the second quarter. For full year 2026, we continue to forecast a low double-digit percentage increase in our total G&A dollar expense. Depreciation expense increased 15% year-over-year in the second quarter and came in at 3.5% of revenue. For full year 2026, we continue to expect a low teen percentage increase in our total depreciation dollar expense.

Our effective tax rate for the quarter was 13.5%. At this time, we are updating our guidance for the full year 2026 income tax rate from between 14% and 15% to approximately 14%. Lastly, we want to highlight the likely negative impact to same-store sales growth in the fourth quarter from several holiday shifts. Year-over-year, Halloween is shifting from a Friday to a Saturday and Christmas Day is shifting from a Thursday to a Friday. In total, we estimate an approximately 75 basis point negative impact to fourth quarter same-store sales growth from these shifts.

Now I will turn the call back over to Jerry for final comments.

Thanks, Michael. In September, we will begin our annual fall tour, where we visit with approximately 800 managing partners across the country. I'm looking forward to listening to the best operators in the business and learning how we can better support them and help them continue to grow our legendary company.

Finally, over the last several months, the world was watching as the U.S. hosted World Cup matches. It was amazing to see the social media post from visitors who experienced Texas Roadhouse for the first time. These guests fell in love with our high-level hospitality, legendary food, especially our fresh baked bread and those free peanuts. These experiences inspire us further as we continue with our purpose of serving communities across America and the world. Let's go Roadhouse.

That concludes our prepared remarks. Holly, please open the line for questions.

[Operator Instructions]

Your first question comes from the line of David Tarantino with Baird.

My question is on the pricing philosophy going forward. So thank you for the update on what you're planning for the start of Q4. But my bigger picture question is, how do you think you and the system will approach price increases in a scenario where inflation moderates more meaningfully? I know Texas Roadhouse has had a long history of pricing below inflation, and it served you well. But the last year or 2, you've absorbed quite a bit of inflation. So just maybe explain maybe how you might recapture some of that absorption, if you will, as we move forward?

Thanks, David. This is Jerry. I think we always go into these pricing conversations with a conservative approach and we've had to make adjustments over the last several years. And I think we look at it from an over an annual basis on what are we facing structurally and then what do we feel like will change. And we're going to go into it. We're going to talk to our operators. We really want to see what's going on, not only in their communities, but maybe in their state and then try to match it up to what we believe that the company needs.

So I think we've always had that approach to keep value into our menu is absolutely critical for us as we continue to try to take care of our staff and our guests and our shareholders. But understanding that we have a conservative approach. We believe that, that strategy and philosophy has paid very well over the years. And we'll continue to look at it on a biannual basis, have great conversations with our operators and then make that decision at that time.

Your next question comes from the line of David Palmer with Evercore ISI.

I want to ask you a question about labor productivity a bit. One could say you guys have been on a hot streak since the fourth quarter of '23 with labor hours growing less than 0.5%, half as fast as traffic since then. Wondering it doesn't look like it's going to stop, but I don't want to take it for granted. So I was just wondering if you could give us a sense of what you're seeing. You've talked about things like digital kitchens and guest management systems, you're testing handhelds, perhaps that's giving you a little bit of confidence to lean into to go. So I just want to give you a sense of will this hot streak continue? And what are some of the things going on behind the scenes?

Yes. David, it's Mike. Thanks for the question. It is -- you hit on it nicely. It is a number of items that are continuing to build on themselves on a quarter-to-quarter basis that is driving that momentum. A quieter kitchen is a factor. That's a beneficial part of the technology investments that we've made. Importantly, the managing partner staffing for the level of sales that they want.

The other thing that helps with that ratio for us is tenure of our Roadies being as high as it is and also the continued growth of the to-go business, all of those are working in concert. And so importantly, it's not a metric that we target our operators with. And so while we like what we see, we don't target them on it, and we do hope that it will continue based on the trends we're seeing.

Your next question comes from the line of Zack Fadem with Wells Fargo.

Could we start with the food and beverage margin bridge in terms of commodity impact versus check impact versus entree mix? And in terms of that entree mix, grocery prices are starting to peak for beef. So maybe we could talk through what that typically means for entree mix as well as traffic as grocery prices retrace.

Zack, it's Michael. So I mean, certainly, if I understand your question correctly, I mean we do see a benefit to our traffic. We're seeing a benefit to the steak category given the high price of beef at retail. What may happen in a world where beef prices come down, will we see a change in our traffic trends? Hard to know. I think we certainly, over quite a number of years through multiple beef cycles seeing very strong traffic performance.

We do, like I said, tend to outperform in a time of this inflationary beef environment. But I certainly would not expect that we won't be able to continue to grow in a lower inflationary environment. Times like this, it introduces new people to Texas Roadhouse, and we believe once they've come in, they're going to want to come back.

Your next question comes from the line of Andrew Charles with TD Cowen.

I had a 2-part question on the reduced commodity inflation. First, what did you attribute to the favorable commodity inflation in the quarter versus your forecast as you guys were about 80% contracted. And then curious on how much visibility you have, how contracted you are in the back half of the year with commodities and relative to how contract you were a year ago at this time for your back half '25?

Zack (sic) [ Andrew ] it's Michael. So our second quarter commodity inflation was only slightly better than what we were maybe internally modeling. So it was not -- because we were well informed on that going into the last call. We did see a continuation or like in June, we saw sirloin prices really start to move lower and some deflation there. And that's really been the biggest benefit to our commodity expectations.

So expecting to see much lower inflation in the third quarter than we had originally anticipated. Now expecting 2% to 3% inflation in Q3 before stepping back up to approximately 5% in the fourth quarter. So sirloin is the biggest driver of that improvement. As far as contracted, we're about -- on our overall commodity basket, we're about 80% locked for Q3 and about 40% locked for Q4, and that's not much different than you would have seen us having at this time last year for 2025.

Your next question comes from the line of Brian Harbour with Morgan Stanley.

I guess, Jerry, you started just by talking about the pipeline and development. Could you talk a little bit about just some of the recent openings, where you've been finding success, kind of size of the pipeline and how you feel about Texas Roadhouse unit growth specifically?

Yes. Thanks. Yes. So I mean, the pipeline is, obviously, we continue to focus on that 20-ish a year in openings that continue to be very successful all across the country. So I mean, we've got a full pipeline for '26, '27, '28. We're really working into '29. So with that deal. So working a lot of deals. We continue to have success. I'll tell you, wherever we go, we're focused on our food, our service and open our restaurant at the volume that we're at is really just hats off to these operators at every level, the single unit, the multiunit, the regionals, everything the commitment, all the coaches and the training managers that it takes to really make a first impression in every community that we open up at.

And when you have your reputation out there, even if you're new to the community, there are expectations. And I'm really proud of the team and all of our operators that get out there and open the doors and hustle to show our guests and our community what legendary food and legendary service is about. But the pipeline is strong. We continue to focus, and we have great success at the openings.

Your next question comes from the line of Lauren Silberman with Deutsche Bank.

Congrats on the great results. Just a clarifying question, my actual question, clarifying is just on the commodity inflation. Why is it stepping up in Q4? Just help me understand that. And then the actual question is on average weekly sales. I mean your fifth quarter of double-digit growth has been amazing. What do you think is driving the momentum? Anything that you're doing differently? And then can you remind us how the labor model works with to-go and like what capacity the restaurants have with the current labor?

Lauren, I'll start with the commodity question. So again, third quarter right now, we are seeing some good benefit on the sirloin side. We do think, again, these cuts as one moves one way and another doesn't move quite as much, that will -- that does change how the retailers look about what they're going to buy and what they're going to market. So we do think that as sirloin prices fall, that may then lead them to purchase more of that into the fourth quarter as something that they will put into their stores.

So it's our current -- it's based upon what we have locked, what we're lapping and how we believe the cuts will move over time and also factoring in what's going on with supply.

Lauren, this is Jerry. Just on the overall sales growth, I mean, we obviously are continuing to have momentum on traffic which means to me that we're opening or operating quality shifts and that we're finding ways to get more people through the dining room. And all of the components of pay at the table, our guest management system upgrade, the digital kitchen, our operators just really focusing on a high level in the peak times and even in the nonpeak times.

So it just tells me not only growing dining room sales, we're growing our to-go traffic because of the ease to order, the ease to pick up. Our operators are focused on making sure that we have all the items that the guest has ordered so that when they get home and they open up our food at their own dining room tables, they have everything that they need. So I think it's just all of us putting this energy and towards getting a great experience for our guests and whether it be through the to-go side of it or to the dining room, but just being energetic when it comes to serving people. I think, is really what's paid off for us for a long time.

Your next question comes from the line of Brian Bittner with Oppenheimer.

As it relates to the 1% pricing that you're going to take, can you just confirm, does that put you around 3% for 4Q? And can you guys talk about the mix trends that you're seeing maybe in 2Q and how you're anticipating mix to impact average check as we go into 3Q and 4Q?

Yes. Brian, it's Mike. I'll start with the first on pricing and Mike will jump in on mix. So with the 1% in Q4, we will have 2.9%. And in Q1 of next year, we'll also have that same 2.9%.

Yes. And Brian, as far as mix is concerned, in the second quarter, we definitely saw improving trends as we moved through the quarter, still about 40 basis points negative overall for mix. But in the dining room, mix turned positive, which was very good to see. And I'll tell you here in the first 5 weeks of the third quarter, we've seen a continued improvement in those mix trends with the vast majority of our pricing flowing through. And so that is certainly beneficial to profitability when that happens. We'll see if those trends continue, but so far looking very positive.

Your next question comes from the line of Dennis Geiger with UBS.

Just wondering if you could touch a little more on beef. Michael, you spoke to it a good amount a couple of minutes ago. But just anything more on what the team is seeing as far as supply and demand dynamics? I know you kind of gave the output of what supply has meant, but just anything more on the dynamics that the team is observing.

Dennis, yes, happy to do that. Not sure necessarily that much has changed of recent there from what we've spoken about over the last several quarters. Supply is still very tight, and we'll likely see a tight fourth quarter with regards to beef and cattle supply. Demand overall for beef is still very strong. There's certainly at retail, still been some movements in trade to other proteins and trade within the beef category to some extent as well, trends that we had talked about before. There's been talk -- the announcement of the Mexican border reopening later this quarter, but that's more of an opportunity, if any, for next year. It takes a while. One, it's going to be a very small reopening, and that takes a while before you would see any benefit from that.

Your next question comes from the line of Jim Salera with Stephens.

I was hoping you could provide some incremental color on the continued traffic outperformance. As you guys continue to deliver very robust traffic gains, we see the industry with traffic down low single digits. And I wonder if you can help us kind of disaggregate how much is increased guest frequency versus new households coming to the brand? I recognize not everyone might know about Texas Roadhouse, but I feel just the prominence at this point, especially you mentioned some of the World Cup visibility would allow for most people to at least know that Texas Roadhouse in their area exists. So just wondering if you could help us kind of break out that frequency versus new household drivers.

Jim, it's Jerry. I don't know that we measure it necessarily like that. I mean we focus on trying to give guests a great experience. By word of mouth, they tell others and then we get to try. But I think once they get in and when you try made from scratch food and fresh baked bread and hand-cut steaks and all those things that we do is just kind of the word gets out and we continue to exceed people's expectations. And I think that's really what we focus on.

We do have a first-time guest program. So we absolutely identify guests in the restaurant and we try to really create a relationship with all of our guests and especially on their first time in, just letting them telling our story, who we are, how we do business and how we approach things. And we just try to knock their socks off with legendary food and high-level hospitality and just put a smile on their face. I mean the worlds are complicated. Our job is to fill their bellies with legendary made-from-scratch food and put a big smile on their face and just say thank you for coming to our restaurant and providing us with an opportunity to serve them.

So I think that's really how we focus on driving traffic. And again, on the to-go side, it's just a focus and emphasis on making sure that the guest has everything that they need when they get home and they unpack our bag and our food for their family at their dining room table. It's just our operators do an incredible job of building a strong relationship. We're a nationally known company, but we like to be known as locally owned and operated and our partners really see them owning their communities. And food service and community partnership has always been the key to our success.

Your next question comes from the line of Sara Senatore with Bank of America.

I have one clarification. Hopefully, that doesn't count as some question and then a question. The clarification is, I think the negative mix you were saying, Michael, effectively, there's a little bit of pressure on mix from to-go because the average check is lower. So I want to confirm that's true. And maybe should we expect that as to-go continues to build as it has nicely as a percentage of sales, maybe you see that a little bit continue.

But the question actually is about -- Jerry, you mentioned a line of sight for Texas Roadhouse even into perhaps 2029. Does that give any sort of different thoughts on how many units you think the market can support? I mean, as your volumes keep going up, it would seem that the density you could support would be higher, but I was just curious where that stands?

Thanks, Sara. I'll kick off on the -- we have opted a couple of years ago to approximately 900 restaurants. I don't think we're going to change anything at this time. We feel confident in what we -- our game plan currently. We're focused on that 20 restaurants a year being highly successful openings. So we won't update that guidance at this time, but we are very confident that America wants more Texas Roadhouses out there serving them high-level hospitality and legendary food.

And Sara, I'll clarify on the mix in the second quarter, we did have about 40 basis points of overall negative mix. In the dining room, mix was just slightly positive, offset by the rising to-go mix. Quarter-to-date Q3, overall mix is flat. And dining room has gotten more positive and the to-go mix has actually gotten a little bit better even though the to-go is still growing.

Your next question comes from the line of Gregory Francfort with Guggenheim Partners.

You could add 2 or 3 restaurants in Bergen County, New Jersey. I would love that. I appreciate that. My question is on the smaller brands and just Bubba's, the comps have been okay, but I think the new stores the last 6 months have just been phenomenal. Just what you're seeing there? And Jaggers, I think the reason to keep it franchised has been because maybe there wasn't a lot of QSR talent in the organization existing at Roadhouse. And Mike, I guess I'm wondering with you coming in, do you think about maybe changing that into maybe a company-operated model going forward? Or just any other thoughts in terms of your experience from QSR and bringing it into the Jaggers space?

Yes. I'll start off, and we'll let Mike answer that last part. On the Bubba's 33, we continue to focus on the food and the experience, and we feel really, really good about the brands. All the openings these last couple of years have done extremely well. We continue to work on it. We've got the right leadership. We've got the focus on the food and the service model, just being consistent about it is that component. I do think that there's a lot more competition for Bubba's 33. It's not as well known.

So we got to continue to work hard on our local store marketing side, but we absolutely have great food and the same service model, a lot of excitement and energy around there. We focus on the burgers, the pizzas, the rock and roll, the energy, the sports team. And all of those things are components of what we believe long term, Bubba's 33 will continue to have tremendous success in that competitive set.

In Jaggers, I think we have had some franchise partnerships. We've really learned a lot with them. We like that learning from that standpoint. And so we'll continue to look at building the company out as well as our few franchise partners having continued success in growing that side of the business. And then Mike might have a comment.

Yes, sir. Listen, on Jaggers, I agree. I think there's a place for both franchise partners and company ownership with where the brand sits in its life cycle. I think importantly, just to piggyback on Jerry's comments around the operating DNA that exists in Jaggers because it's part of the Texas Roadhouse family. Our franchisees are very, very strong operators, and we're learning just as much from them as in our own company restaurants. So for the time period, it is a very beneficial mix for us to have both.

Your next question comes from the line of Logan Reich with RBC Capital Markets.

I wanted to ask on the fact-finding delivery test you guys did in a couple of stores recently. Just any sort of learnings from that test that you would be able to share today?

Thank you very much. Like I said, it is a micro test of 4 stores. It is first-party delivery. We do third-party at Jaggers and Bubba's and also at our New Rochelle location. I think most importantly is having a few conversations with folks is that we want to get educated. We view the test as beneficial to fact-finding purposes. We also know there's some operational complexities that we want to know about in case any of our operators ever get curious about it. So I think the micro test is still very early on. I can't say that we've got a lot of learnings to be able to share at this time. But it is a micro test of 4 restaurants across different parts of the country.

Your next question comes from the line of Jon Tower with Citi.

This is Karen Holthouse on for John. I wanted to dig a little bit into the Bubba's same-store sales performance. And maybe if there's ways to decompose that a little bit into maybe some older legacy units, more recent units, more recent markets, units that are closer to where you want the current prototype to be versus the ones that are not? Trying to get a better sense of like if you were to isolate the part of that system that's the closest to kind of where you want it to be, is that chunk outcomping the total system?

Yes. Karen, it's Mike. I think with Bubba's, I think, again, where it is in its life cycle with 60 restaurants, the metric that we are more focused on as it relates to performance are some of the newer restaurants because they embody some of the learnings that we've got there and then applying it backwards. I think the other really important thing to consider with Bubba's is that we are very much taking it with a long-term approach and not a quarter-to-quarter approach.

When we do that and we measure where Bubba's is at 60 restaurants and compare it to where Texas Roadhouse was at 60 restaurants, some of the metrics are extremely encouraging. So with that approach and applying some of the learnings to the new ones, that's where we believe the better focus is on same-store sales.

Your next question comes from the line of Jim Sanderson with Northcoast Research.

I wanted to go back to same-store sales in the second quarter. Any benefit or impact from the World Cup? I noticed that you had said June decelerated a little bit. I'm wondering if that brand exposure inspires you to accelerate international franchising.

Yes. Jim, it's Mike again. I think from a sales impact in Q2, we didn't really see anything significant across the system as a whole. We saw certain Bubba's restaurants have a bigger impact on an individual basis on game days, but nothing really measurable in the quarter across the portfolio. You did hit on a really positive impact that the World Cup had on us, and that was the social media that we got from people experiencing it for the first time. And it is very helpful to some of the conversations we're having with some of the folks that posted those internationally and some of our sales efforts there.

All right. And just one follow-up question. Any expectations of purchasing franchise restaurants here in the U.S. that you can talk about?

Yes. I mean we've got about 31 franchise locations left on the Roadhouse side, and we have roll-up rights for the majority of those sites. We talk all the time with our franchisees, and they know when they're ready to step back that we're ready to step forward.

Your next question comes from the line of Peter Saleh with U.S. Bancorp BTIG.

Great. Jerry, a few minutes ago, you mentioned the brand is a national brand, but you like to keep it more on the local level. Just wondering, historically, you're marketing advertising very much on the local side. You guys don't spend a ton on a percentage of sales on marketing. Is there any thoughts about changing that or increasing the contribution? Or any change in strategy or going forward on the marketing side?

Yes. Thanks, Peter. No, we have not ever spent any money on national TV advertising. We absolutely believe that local store marketing grassroots kind of approach, getting out into the local communities, shaking people's hands, delivering some fresh baked bread and just talking about Texas Roadhouse and what we can do for them, for their business, for their families. So we've always taken that approach to legendary food, legendary service and just high-level community engagement and involvement.

If they need us to do something to help them out in some way, shape or form, we just want to be a go-to in that deal. And whether it be local hotels, schools, churches, we want to be their partners on any of their needs. And that's really been our approach. Again, just keeping it as a locally owned and operated business, that's just always been our approach, and it's worked very well.

Your next question comes from the line of Brian Vaccaro with Raymond James.

Just a quick clarification on the lower commodity guide for the year '26. I'm curious, was there any change in your non-beef basket inflation for the year?

Brian, it's Michael. There's a little bit of an uptick in produce with everything that's gone on there, but nothing significant.

Okay. Okay. And then the question I had was, Jerry, you started off talking about the long-term growth opportunity that remains in front of you for the core Texas Roadhouse brand. I'm curious how California factors in to that future growth. I think you only have about 20 stores in that market. You've been buying those stores in, in recent years, making them company-owned. Are you spending more time and focus mapping out California and maybe we could see a rising mix within your pipeline over the next 3 to 5 years?

Thank you. Yes, we have 20 open. I think we have 6 in development. We continue to identify markets in California and exercise where we want to go there. We know that there is a lot of sales opportunities in California. We've got some really high-volume stores. We believe that over the time, we've learned how to manage and control business and work in California, even with all of the complexities that it consistently challenges businesses. But we do know people love to eat and all across there, and there's a lot of folks in California that love handcut steaks and fresh baked bread and ice cold beer and a legendary margarita, and we're going to be available to serve them.

Your next question comes from the line of John Ivankoe with JPMorgan.

This is [indiscernible] for John. I wanted to ask on your labor. So as you keep expanding towards your TAM, how are you thinking about labor availability and both at the store level and especially at the managing partner pipeline? Do you see any need to like revisit your compensation plans or incentivize your incentives to strengthen the pipeline and ensure that you have enough high-quality operators to support growth?

Yes, this is Michael. On the labor side, we have no concerns about our ability to staff our existing restaurants, staff new restaurants, new managers for new locations, we don't feel will be an issue, whether that's bringing people promoting from within or bringing in people who are already living in the community that we may expand into. And I don't think we foresee any needed change in our compensation plan. We have a very strong managing partner program and feel very good about that. So no expected changes at this time.

We have reached the end of the Q&A session. I will now turn the call back to Jerry Morgan for closing remarks.

Thank you all very much. Just wanted to say thanks to Roadie Nation for all they do to make our company just stronger and stronger every single day. So have a great summer. Enjoy your evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Good evening, and welcome to the Texas Roadhouse First Quarter 2026 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]

I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference.

Thank you, Andy, and good evening. By now, you should have access to our earnings release for the first quarter ended March 31, 2026. It may also be found on our website at texasroadhouse.com in the Investors section.

I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC.

These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release.

On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; and Mike Lenihan, our Chief Financial Officer.

Following the prepared remarks, we will be available to answer your questions. [Operator Instructions]

Now I'd like to turn the call over to Jerry.

Thanks, Michael, and good evening, everyone. We are proud of the results our operators delivered for the first quarter of 2026, driven by a same-store sales increase of 7.1%, including 4.5% traffic growth. Revenue surpassed $1.6 billion for the quarter. We are also pleased with the strong flow-through of sales to the bottom line.

Our traffic and mix trends show that our guests continue to trust us to provide an experience worthy of their time and money. Our operators continue to focus on what they can control which is maintaining our value proposition for our guests and delivering on our mission of legendary food and legendary service. This all leads to us being a place where Roadies want to work and guests want to -- and we continue to be recognized for the experience that we deliver to our guests.

For the second year in a row, Texas Roadhouse has been named America's Best Restaurant Experience in the Data Central 500 award. This award goes to the brand that earns the highest overall consumer ratings for service quality, atmosphere and guest satisfaction.

On the development front, we continue to expect approximately 35 company-owned openings for the full year. In the first quarter, we opened 4 Texas Roadhouse restaurants and expect as many as 9 openings across all brands in the second quarter. This means that openings in 2026 will be weighted towards the back half of the year.

On the franchise side, during the first quarter, our Jaggers partners opened 1 domestic restaurants, and we expect they will open an additional 3 locations over the remainder of the year. Internationally, our partners also opened on Texas Roadhouse in the first quarter, and we expect they will open as many as 6 more throughout the rest of the year.

Our international business has significant momentum as Texas Roadhouse continues to connect with guests around the world.

Moving on to technology. The results from our restaurants and the feedback from our managing partners tell us that our investments continue to positively impact operations. Our digital kitchen technologies are supporting operators as they execute a higher volume of to-go orders without negatively impacting the dine-in experience.

We are also encouraged by the initial feedback from the testing of upgraded handheld tablets that servers can use to input guest orders at the table. Our strategy remains too slowly expand this test as we continue gathering feedback.

Last week, we had our Annual Managing Partner Conference in Nashville. The theme was kicking it up which was certainly appropriate based on our operators' mindset of continuing to elevate their level of performance. It was an inspiring week filled with education, motivation and celebration as well as giving back to the local community. We were also able to kick up our level of fun while we work together.

Speaking of celebration, I want to congratulate the following Roadies. Mary Landry of Jacksonville, Florida for being named our Texas Roadhouse Managing Partner of the Year; Philip Severson from Colin, Texas for being recognized as our Bubba's 33 Managing Partner of the Year. Alvaro Glinda of Covington, Louisiana, for winning our national meat cutter championship and Allison Williams for being honored as our support center Roadie of the Year. And lastly, I would like to congratulate and thank all of our award finalists for their contributions, accomplishments and passion for all of our brands.

Now Mike will provide some thoughts.

Thanks, Jerry. During the first quarter, I spent a lot of time training in our Texas Roadhouse and Bubba's 33 restaurants. I'm grateful to the managing partners, Stephanie, Brian, Tim and Jeff for welcoming me so graciously into their stores. I saw firsthand throughout my training of their people first and guest-focused mentality drives our winning recipe for growing sales and traffic.

I also echo Jerry's comments on our Managing Partner Conference as it was an incredible way for me to experience our culture and celebrate what has and will continue to make this company so special.

Moving on to the first quarter. All of our brands delivered positive comparable sales growth. Weekly sales averaged nearly $180,000 at Texas Roadhouse, over $125,000 at Bubba's 33 and $71,000 at Jack. This top line momentum has carried forward into the first 5 weeks of the second quarter with comparable sales of 6.5% and our restaurants averaging weekly sales of $174,000.

Included within this positive sales trend is the benefit of the 1.9% menu price increase that went into effect at the beginning of the second quarter.

Now moving on to our outlook for commodities. With first quarter inflation coming in slightly better than expected as well as an updated forecast for the second quarter and increased visibility into the back half of the year, we are reducing our full year 2026 commodity inflation guidance from approximately 7% to between 6% and 7%.

Our current expectation is to be above the top end of the guidance in the second quarter, but at or below the bottom end of the guidance in the second half of the year. On the labor side, first quarter inflation was in line with our expectations, and we are maintaining our full year 2026 wage and other labor inflation guidance of 3% to 4%. Also, as expected, labor productivity improved in the first quarter with labor hours growing at approximately 35% of comparable traffic growth.

With regard to our capital position, we ended the first quarter with $215 million of cash. We also generated cash flow from operations of $259 million which was partially offset by $158 million of capital expenditures, dividend repayments and share repurchases as well as $72 million for the previously disclosed acquisition of 5 California franchise restaurants.

Our guidance for 2026 capital expenditures remains unchanged and at approximately $400 million. Our strong cash balance and healthy cash flow continue to provide us the flexibility to invest in our growth while also returning capital to shareholders, and now Michael will provide the first quarter financial update.

Thanks, Mike. For the first quarter of 2026, we reported revenue growth of 12.8%, driven primarily by a 6.8% increase in average weekly sales and a 5.7% increase in store weeks. We also reported a restaurant margin dollar increase of 10.5% and to $264 million and a diluted earnings per share increase of 9.6% to $1.87.

Average weekly sales in the first quarter were over $174,000 with To-Go representing more than $25,000 or 14.6% of these total weekly sales. Comparable sales increased 7.1% in the first quarter, driven by 4.5% traffic growth and a 2.6% increase in average check. By month, comparable sales grew 6.9%, 8.3% and 6.3% for our January, February and March periods, respectively.

In the first quarter, restaurant margin dollars per store week increased 4.5% year-over-year to over $28,000. Restaurant margin as a percentage of total sales decreased 36 basis points to 16.3% as compared to the same period last year.

Food and beverage costs as a percentage of total sales were 35.3% for the first quarter. The 122 basis point year-over-year increase was primarily driven by 6.2% commodity inflation. The inflationary pressure was partially offset by the benefit of a 2.6% check increase.

Labor as a percentage of total sales improved 46 basis points to 32.9%, as compared to the first quarter of 2025. 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% of sales, which was 36 basis points better than the first quarter of 2025.

The leverage was a result of higher sales combined with a benefit to our quarterly reserve for general liability insurance. This insurance benefit included a credit of $600,000 this year as compared to $300,000 of additional expense last year.

Moving below restaurant margin, G&A dollars increased 8.7% as compared to the first quarter of 2025 and came in at 3.7% of revenue for the first quarter. For full year 2026, we continue to forecast a low double-digit percentage increase in our total G&A dollar expense.

Depreciation expense increased 16.5% year-over-year in the first quarter and came in at 3.5% of revenue. For full year 2026, we expect a low teen percentage increase in our total depreciation dollar expense. Our effective tax rate for the quarter was 14.3%. Our forecast for the full year 2026 income tax rate remains unchanged at between 14% and 15%.

Now I will turn the call back over to Jerry for final comments.

Thanks, Michael. I wanted to give a big shout out to our vendor partners. It was great to spend time with them at our Managing Partner Conference and to have the opportunity to recognize their ongoing contributions to our success and a special congratulations to [ Bounties ] for being named our Vendor of the Year for 2025. There's no doubt 2026 is off to a great start. But as you all know, the game is #1 in the first quarter. Our operators are focused on the work and opportunity that lies ahead.

We are confident that Roadie Nation is up for the challenge of picking it up and continuing to grow our brands. Finally, I want to thank all of our Roadies who help support the best operators in the industry. Let's kick it out Roadhouse.

That concludes our prepared remarks. Amy, please open the line for questions.

[Operator Instructions]Your first call comes from Chris Carril with KeyBanc Capital Markets.

In your prepared remarks, you pointed to 1Q results and increasing visibility into the rest of the year. But can you please expand on your updated commodity inflation guidance now 6% to 7%. And perhaps any more detail on specific inputs that drove the change and your latest thoughts on the beef cost outlook?

Chris, it's Michael. I appreciate the question. Certainly, as Mike referenced, our first quarter came in a little bit better than expected at 6.2% inflation, and some of that has carried over into our expectations for the second quarter. And we do have a little bit more visibility to our cost for the back half of the year.

I would say the supply issues with Beef are well known and those have not changed. But we have seen some demand shift within the retail segment. And while beef is still very popular, there have been some shifts as to what cuts are being purchased and that has been reflected in our updated commodity guidance.

Your next question comes from the line of Drew North with Baird.

Great. I wanted to follow up on the commodity outlook and maybe get a little bit more specific. I think previously, the expectation was for commodity inflation to peak in Q2 maybe as high as the very high single digits and moderate through the balance of the year. And I appreciate the color on the shape of the year in your remarks. But I guess, could you clarify maybe where the expectation is for commodity inflation in Q2? And how you're thinking about spot prices for beef as we get to the back half relative to where we're currently sitting.

Drew, it's Michael again. Thanks for the question. We still expect that our highest commodity inflation of the year will be in the second quarter, but we're probably now talking somewhere in the range of 7% to 8% commodity inflation is where we're thinking right now. And then as we said, being below the bottom end of the range in the back half of the year, we would expect that cadence to improve as in the fourth quarter, less than the third quarter as far as the inflation.

And we obviously have our internal expectations as to where those prices will be throughout the next 6 or 7 months of the year. It's not just taking current prices and carrying those goes forward. And as a reminder, some of our inflation into the back part of the year is a result of what you're lapping last year from a fixed price contract standpoint and not just our viewpoints on the spot market.

Your next question comes from the line of Andrew Charles with TD Cowen.

Keeping on the beef train. Since your last call, given the spike in oil prices and spot beef prices, certainly encouraging to see you reduce the '26 commodity forecast, but I'm curious, if we look at the futures curve, with investor optimism that you might see flat commodity inflation in '27, -- just kind of curious what are vendors is an early peak to next year, just given the change in beef prices in the spot market since our last call.

Yes. Andrew, it's Michael. I'd say it's way too early for us to get into any commentary on next year. There's still a lot of this year to go. So going to hold off there will much later this year, we'll be talking about our 2027 expectations.

Your next question comes from the line of Andrew Strelzik with BMO Capital.

This is Jared Lesinski on for Andrew. So with value tier construction becoming central across casual dining this year, how are you thinking about the role chicken and pork play in your value strategy given their margin profile versus stake?

Jared, this is Jerry. Obviously, we've got a great selection of chicken on trades and pork and obviously, our steak. So I think we'll continue to monitor it as we got great products, that's what they're choosing to opt in on, then we're doing we don't necessarily try to guide anybody to where we want them to come in and get the experience that they want, the choice of food that they would prefer. And we have it available and we're ready to serve it. .

Your next question comes from the line of Zach Fadem with Wells Fargo.

Could we start with the cadence of traffic through the quarter? And then as you think about market share, could you talk about to what extent you maintained or widen your spread versus the industry as we move through Q1 and into April?

Zach, it's Michael. As far as traffic by month, it was 4.3% in our January period, $5.7 million in our February period and 3.7% in our March period and approximately 3.5% in the 5 weeks so far quarter to date. I would say we are very pleased with the cadence of that traffic and how it compares to the industry. I think we -- I know we have maintained healthy gap to the industry throughout those time periods.

Your next question comes from the line of Jeffrey Bernstein with Barclays.

Great. Just following up on that comp trend. The -- I think it was a 6.3% you said in March and 6.5% in the first 5 weeks of this quarter. And as you just shared, it sounds like the traffic has been in the mid-3s in March and then in April. So from the outside, there appears to be stability. But with that said, it does feel like a lot of your peers are talking about a big ramp-up in volatility doesn't seem that way with your results, but are you seeing any change in consumer behavior, whether you think it's just attributed to the macro more broadly or there's a lot of attention being paid to gas prices more specifically, especially on the lower and middle income consumer that you presumably do very well with. Any color you could share in terms of your view on the consumer trend would be very helpful.

Jeff, it's Jerry. I'll tell you, we're really pleased with what we're seeing out there. We believe our operators are executing great shifts in obviously, the value proposition that we have in our menu and the taste profile of our food and the hospitality that we're providing. It just continues to tell us that the things that we're doing are absolutely working and people are responding to that.

I think our operators are very excited to see that. We know that there's a lot going on in the industry, and with all kinds of things. But what we really focus on is open and operating and closing quality shifts and providing great places for our employees to work and for our guests to join us and spend their time and money. And I'll let Michael kind of get into some of the details, but we're really, really excited about what we continue to see for the loyalty to the Texas Roadhouse brand.

Jeff, on the mix side, our mix has been very steady throughout the year not seeing anything that is of any concern to us. Most of the negative mix is still coming from the alcohol category. When you look at our dine-in trends overall, they are pretty much flat. We're seeing positive mix in the entrees and some other areas. So we're very encouraged by what we're seeing out of the consumer.

Your next question comes from the line of Sara Senatore with Bank of America.

I guess maybe just 2 quick follow-ups. One is on the To-Go business. I noticed that it was up 14.6%, it was at 14.6%. I think that's the highest sales mix we've seen since maybe shortly after COVID. So I'm just curious if there's anything going on or if that's just a function of maybe weather was more of a headwind so people stayed home. And then I do have a question about kind of your beverage platform, please.

Sara, it's Jerry. I think we continue to operate at a high level, and we continue to execute and some of the technologies that we're using might help us manage the business a little bit more. But again, it really comes down to the ease to be able to place the order through the app the pickup window that we have in the transaction there, the people grabbing their food, getting home, making sure all of the food has everything in it. .

So I just -- I believe that not only is our food delivery a great To-Go experience, and we're continuing to improve upon it. but it's just resonating with -- when you get home and you have every item that you requested and you've got plan. We never have enough roles and butter in there, but we keep trying hard. I just really, really believe that it's about the demand for our product and the execution that our operators are continuing to focus on.

And then just a quick question on beverages. I think based on what I think your pricing was, I think 3.1%, maybe mix was very slightly negative. Have -- is there anything there? I know you said Michael entrees hasn't been the issue. Is it still alcoholic beverages? And are you seeing kind of traction with some of your other nonalcoholic beverages? .

Sara yes. So we had 3.1% pricing in the first quarter and the check was up 2.6%, so about 50 basis points of negative mix. And it's all coming from a combination [indiscernible] still some negative mix in the alcohol category, although that has been improving. That combined with the To-Go business is growing at a faster rate than the dine-in business, the dine-in is still growing. And since the To-Go business has a lower average check which typically not a beverage attachment, that puts a little bit of pressure on the overall mix. So not seeing anything in the entree or other food categories that are concerning us.

Your next question comes from the line of Elliott Simon with Evercore.

Jerry, first, I have to complement the burger eating prowess and the beer look tasty, too. I just wish there was a [indiscernible] close to New York City.

We're working on it. Thank you, though. .

Yes, it's a narrow half way. On Bubba's, you've talked in some interviews about the potential for the brand to grow well beyond 200 restaurants over time. The unit economics are already solid, but the comm energy still feels different than Texas Roadhouse, -- so as you evaluate the brand today, what are the biggest unlocks to getting Bubba's performing more like Roadhouse over time? Is it brand awareness, site selection, marketing, operational maturity or the smaller format restaurants you mentioned in the annual report. And when everything starts coming for the brand, what is the big audacious goal on the wall in terms of how many Bubba's you can build in a year?

Well, Eli, that's a big question out there, sir. And -- but I will tell you, it really -- if you don't look at Roadhouse, and put Bubba's against all of its competitors in that segment, it is at the top of the class. And we're really proud of the operations. We're proud of the people and the work that's been done get it there.

The energy has a lot of the similarity, a little different by first of the country, more into the rocket roll side but it's still got the sports, the music, the energy, the entertainment and more importantly, the fantastic food. So I think we'll continue to work on that piece of it and keep growing. And as long as we're continuing to have great success, we have tried a little smaller prototype and we've got #2 up and running now, and we'll continue to evaluate it as we build.

We've had a couple of conversions, I guess, you would call them that we're very excited about from a profitability standpoint. So we're continuing to look at all kinds of options to make sure that we have a second concept that can bring burgers and pizzas and wings and beer and margaritas and fun to any community that we plan or flag in.

So I'll tell you, we're very excited about the Bubba's brand and everything and the energy that it continues to bring to our company.

Your next question comes from the line of Jim Salera with Stephens, Inc.

Two-part question on the consumer. One, if you look back historically, is there any correlation we can glean from periods where there's longer higher gas prices. Do you see a point in which maybe some of the consumer engagement starts to fade? Or maybe do you perhaps benefit given the overall value proposition and the lower frequency?

And then the second part of that, have you seen any demand destruction at retail given higher beef prices? And is that something that you think might be supporting the robust trends you continue to see on traffic?

Yes. Jim, it's Michael. On the first part with the higher gas prices, I don't think we've ever been able to find a correlation between gas prices and our traffic trends. I think people still want to go out there and have those -- that simple luxury of a casual dining deal with friends and family. They're going to be picky as to where they go. And so what you talked around about our value proposition probably does benefit us in a situation like that.

So if someone is trying to watch what they spend because they're putting -- they're spending more money at the gas pump. Texas Roadhouse becomes a great option for them. But like I said, never been able to see an exact correlation there.

As far as demand for beef at retail. I do think there has been some demand destruction, people trading to pork and chicken. But maybe even also within the beef category, there's been some shift to lower cost cuts. So we are seeing that as well in retail.

The next question comes from the line of Lauren Silberman with Deutsche Bank.

Congrats on the quarter. I wanted to just ask on the mix side as it relates to the COGS line. I know you talked about the increase in beef consumption last year, which is a bit of a pressure point on COGS. Are you still seeing that? Or has it stabilized?

Laura, it's Michael. It really has stabilized. There may still be a little bit in there. I would expect maybe it's around 10 basis points of the COGS pressure is related to that or that's kind of what I'm expecting going forward. So we've lapped a lot of that. We are still seeing a lot of state demand but not as much of a pressure point, but then the COGS percent at this point.

Great. And then just on the comp side, any color that you gave on trends that if there's any differences across regions [indiscernible] that you're seeing?

Yes. Lauren, it's Mike. The quick answer is no. We continue to see strength across all regions. We also see strength across all age of our restaurants. And very encouragingly, we continue to see the trend of our highest restaurants. Our highest comp restaurants also being some of our highest volume restaurants.

The next question comes from the line of Peter Saleh with BTIG.

Great. Congrats on the quarter. Jerry, you mentioned the handhelds in the stores that you're testing and are maybe rolling out. Can you just give us a little bit more color on what this unlocks for you at Texas Roadhouse? Does this help the servers cover more tables? Or is that something that you're not looking for? Just trying to understand the unlock here?

And then Michael, if you could give us the pricing by quarter that's embedded now going forward given the pricing you took in April, that would be helpful.

Peter, it's Jerry. Yes. I think what it is, is technology is to enhance the experience in -- we have a group of employees that really are very reliant and used to technology. So -- and we do believe that it could speed up things a little bit if you're placing the order and sending it.

But that's not the motivation behind it is to run more tables. It's actually just to be more efficient and more functional when it comes to the overall and complete experience of our guests. And so we want to make sure that our services are comfortable, whether it's a hardwired POS or a handheld that there are ways that they can get the order in. The accuracy of it is something that we have continued to see improved on the handheld. So that is definitely a component that we like. We're still working on it. We're going slow, but there are definitely some favorable attitudes towards it.

And Peter, it's Mike. On pricing and the cadence throughout the quarter, I think Michael may have mentioned in his prepared remarks, we had 3.1% in Q1 and for Q2 and Q3, we'll have 3.6% and in Q4, it will be 1.9% plus whatever additional they choose to take at the beginning of the fourth quarter.

Your next question comes from the line of Jeff Farmer with Gordon Haskett.

Michael, you called out improved labor productivity in the quarter. I'm just curious if you see an opportunity to drive further productivity gains on the labor side.

Yes. Jeff, thanks for the question. As a reminder, we talk about that ratio with you all. That is not a ratio or measurement that our operators are focused on. It is an output. And so we still want them to staff for the volumes that they want. But with all that said, I do think the expectation is that we could be below that historical 50% level, whether we dropped further down from the 35% that we just saw here in the first quarter. I don't know if I would be expecting that, but being around 40% would not be a surprising number to me based upon the trends that we have been seeing. So that's kind of how I'm looking at it these days. So we're -- part of that is the benefit of To-Go, which is a little bit less labor intensive. So if that's growing.

You do get a little bit of maybe later additional labor productivity there.

Your next question comes from the line of Dennis Geiger with UBS.

Kudos on the results. Just curious, you gave great color on the food cost and the COGS side of things and just spoke to deliver a bit there. Anything else though as it relates to restaurant margins over the balance of the year. Maybe how to think about OpEx over the coming quarters. I probably it's the only piece that you haven't touched on. So just curious maybe if any color there for the rest of '26.

It's Michael. On restaurant margin, I do think under the assumption that we continue these positive trends on traffic that we have been seeing, and I think there's opportunity on the labor line as well as the other offline to continue to get leverage and that leverage could look fairly similar to what we saw in the first quarter. Again, the traffic trends, the pricing flow through will have a big impact on exactly what levels we do see. But those are the areas that are under our control and where our operators are doing a tremendous job of managing the sites.

So that would be the expectation as we can get some leverage on from a margin standpoint on those lines. And certainly, what's more important to us are the margin dollars and the dollars per store week and if these trends continue, we would absolutely expect that both of those on a dollar basis continue to grow year-over-year throughout the year.

Your next question comes from the line of Gregory Frankfurt with Guggenheim Securities.

Thanks for the question. Jerry, your off-prem business, I mean, it seems like it's accelerating as the base kind of grows. And anything you did specific this quarter to kind of add to that? And other strategies you're working on? And maybe any reason -- any level that can get to over time? Just curious how you're thinking about it.

Thanks for the question. I just think that we're continuing to execute at a high level. And the bottom line is, is that when people get home and they open up that food that they've got everything that they desired. And I think we worked really, really hard on not having any missing items and really making the experience.

But just the ease of getting on the app placing the order, we have revamped a little bit of the order guide and with the pictures of the food. And just some of that makes it a little easier to language. We continue to learn what makes the ordering process for to get easier through our own learnings and through our guest feedback, the pickup of the window in every restaurant being able to either get into a to-go window, and then our operators just really understanding how big of a part of the business that it is and really dedicating people to it.

And so I just feel like it's just absolutely grown because of the efforts that we've put in. We're not really doing anything additionally other than delivering on the promise of legendary food and legendary service through that hospitality and the ease of them being able to pick it up. I really believe those are the biggest drivers.

Your next question comes from the line of Brian Bittner with Oppenheimer & Company.

Last quarter, as it relates to the COGS inflation outlook, you said you expected 2Q to be the peak. And you actually said very high single digits for 2Q. So first of all, has that changed? Is it going to be better than that given the change to the inflation guide? And just for the full year, as you brought inflation to 6% to 7% from 7%. Is that all related to beef? Or is there anything else going on in the food basket that also helped drive the change in the outlook?

Brian, it's Michael. Yes, our second quarter expectation for commodity inflation is still our highest expectation for the year, but we would say it's more of the 7% to 8% inflation range now for Q2. And it really is beef and has caused the change in our expectations that almost all, if not the lion's share of it.

Your next question comes from the line of John Ivankoe with JPMorgan.

So the question is on Bubba's new unit volumes and particularly in your newest class of new unit volumes. The volumes actually look and have looked quite strong. So -- what are you really learning, I guess, in terms of those new unit volumes, which actually are compressing more towards Roadhouse the unit volumes and the overall average unit volumes of the concept. So what are you learning of the new unit volumes at Bubba's and what, if anything, can you do to take those new unit volumes that actually grow from there as opposed to just kind of experience a honeymoon.

In other words, once you have the initial customers in the door, any specific plans or things that you can do in the future, do not just retain that customer base, but even grow because that's obviously where the unit in total economics would actually compress between the 2 concepts in a very nice way.

John, it's Gerry. Yes, I mean we're very excited about Bubba's and the brand recognition as we creep up to 60 units open, and we're getting to understand who we are. I think the big thing is, again, are we opening and operating through these high-volume openings and successfully doing so are we able to serve more people and make sure that more satisfied and taken care of. And then it's about getting settled in, running great shifts and then getting out into our -- a lot like Texas Roadhouse is we're getting out there and do local store marketing, really making sure that our community knows who we are, what kind of food that we serve, what is our vibe and our energy that's going on and how can we help them in their business by partnering with them from a marketing strategy.

So using that same basically game plan boots on the ground, shaking people's hands, getting to know the brand of Bubba's 33 and how can we partner up with them. But first and foremost, you got to deliver on the experience, greet them at the front door, get them sat, get them fed and appreciate that they came in and let them be sure that they're having a great experience inside the restaurant, watching some sports, drinking cold beer, having a little pizza, burger wings and just having some fun and then being appreciated for being there.

So that's kind of the formula of that the same that we've always used as an organization, provide great food, great service and hospitality and then be great partners in our community. So that's the approach, and it seems to be working pretty well.

And your next question comes from the line of Jim Sanderson with Northcoast Research.

I wanted to go back to your pricing. I think you were carrying about, you mentioned 3.6% pricing. How does that compare to peers in the steakhouse category. Just wondering how you line up and if you're satisfied with your value position relative to those peers?

Thank you. Jim, we believe very firmly in our conservative approach to how we look at pricing. Again, we go through the same exercise. We just implemented that pricing in April, it will run through October. But we'll start having conversations with our operators in August and make that decision in September and where we go from there. But I believe that we are a little lower than most of our state competition from that standpoint. And we try not to really focus too much on that.

We just try to make sure that we feel good about the pricing that we have to charge our consumer. And again, if you're paying more, are we doing a better job. I think that's ultimately what we focus on. I believe the consumer knows that we have to charge a little bit more because of beef and everything going on in the world.

But what they expect is at least the same service and hospitality, if not better or a little more energy focused or hustle to serve them when we're forced to do some of the things that we've had to do from a pricing standpoint, but our intention is always to be conservative.

And the next question comes from the line of Logan Reich with RBC.

I wanted to go back to the [ carryout ] business. Is there any opportunity for you guys to ramp up the marketing for the carryout business given the kitchen is operating at a higher level. And then just curious how the margins compare on carryout versus in-store?

I'll kick it off with a little bit on. We don't really market things. We believe that the brand markets itself in a lot of ways in the food. So I just think that we continue to execute, and again, a high demand allows us to give our guests the choice of -- coming in the dining room or if they're in a real hurry to be able to play in a meal at home by stopping by their local Texas Roadhouse or Bubba's 33 and taking that food to their dining room table and getting a great experience.

Yes. Logan, on the second part of your question on the profitability, talk to go. So long as the dining room is full and continues to grow as it has been. The To-Go business is very beneficial to the margin dollars and is probably slightly beneficial to the overall restaurant margin percent of the business. I can allocate costs between the 2 businesses differently and make 1 look more or less profitable.

But at the end of the day, so long as we continue to grow the dining room, keep that busy and we're doing this incremental To-Go business I would expect you would see a little bit of benefit to the margin percent and the dollars benefit greatly.

Your next question comes from the line of Jacob Aiken-Phillips with Melius Research.

Got another beef question for you. I'm just curious like what would we have to see in order for you to decide that beef costs are structurally higher? Is it really just a matter of waiting until the herd rebuild a little bit, and then in that scenario, should we just expect like a similar pricing cadence based on other inflationary pressures until we get to a point where you could decide if it's structurally higher -- just [indiscernible] higher?

Jacob, it's Michael. I mean there certainly is always going to be a portion of that beef cycle that is structural. But we do believe it is a cycle that we will see relief over time, but we have to be patient there. And so the pricing that we have taken, which we've always said we tried for structural inflation. We use maybe labor is more of the guidepost for determining that level of pricing. But obviously, the pricing we take benefits to the COGS line and all the lines of the P&L.

So we'll be patient, and you are right, we'll see where things settle in, in the future and where beef prices land to help us determine, have we taken the appropriate amount of pricing where that COGS percent settles in over time. We've seen it come down in the past cycles, and that's what we would expect to occur here again.

[Operator Instructions]Your next question comes from the line of Brian Harbour with Morgan Stanley.

The good performance you had just on kind of labor hours. Is that sort of a retention thing? I guess like are your operators kind of doing anything differently in stores? Do you think you're seeing some benefits from the kitchen display system or anything else behind that, do you think?

I mean, Brian, I mean, I think our turnover, obviously, keeping people in the positions a lot longer. It's been very positive for us from that standpoint, which makes them more productive I do believe maybe that the technology things that we're doing in the kitchen that helped also by creating a common experience and allowing the cooks to really be able to look at the screen and know exactly what they have to do. So we believe there are several factors that could be helping us on that labor productivity side, and I appreciate the shout out on that. .

Your next question comes from the line of Brian Vaccaro with Raymond James.

Most of might have been asked, but maybe I'll ask -- Jerry, in your prepared remarks, you noted the tech investments positively impacting operations. And I know it's been a couple of years now in the works between different elements. But could you elaborate just on the benefits on any metrics you might share, whether it'd be kitchen output, speed of service, et cetera? And then I had just a quick bookkeeping question on comps.

Yes, Brian, I mean everything we've done, let's just -- the first thing to pay at the table it allows the guests to choose wind to pay out. That was probably 4 or 5 years ago when we instituted that's been a big win for the consumer. Our operators love it. So that has worked out.

Our guest management upgrade is really about how we manage the dining room and getting people set quickly and efficiently in the right-sized table. So there are some things with that efficiency. The digital kitchen continues to really show us some things. We are able to track a little bit of our cook times and identify something that maybe we didn't do before or we had to do manually. But -- and it will -- I believe we'll continue to learn more from that technology based in the kitchen, and then we'll continue to look at these handhelds.

So there's there are a lot of things. Technology is designed to help enhance the guest experience and that's what we're seeing. And actually, the benefit is that it's enhancing our employee experience also by doing some of the math for our physicians. And so it's working. It's working really well from the guest experience and from our employee experience and helping our managers run their business more efficiently. So all of it together is definitely helpful.

All right. That's helpful. And then just back to the comps, Michael, can you just level set kind of what the weather impact you estimate in the quarter was? And any calendar shift, I think New Year's Eve early in the quarter? And then were there any Easter spring break shift to be mindful of as we think about March versus April.

Brian, so for the first quarter, the New Year's eve shift had about a 60 basis point benefit to the quarter. That was offset by weather, and there were 2 components of the weather. There was the negative from the weather in January of this year that had about a 1.4% negative impact on the quarter, but that was offset, and I think a lot don't call this out, but lapping weather from last year, probably it was about a 60 basis point benefit to us.

So weather was about an 80 basis point negative, while the holiday was a 60 basis point positive for an overall 20 basis point negative impact to the quarter. So that 7.1% maybe would have been closer to 7.3%, if not for that noise. Nothing to call out as far as Easter or any other either in the first quarter -- or sorry, to date in the second quarter. I think everything looks good there.

Thank you. There are no further questions at this time. Mr. Morgan, I turn the call back over to you for closing remarks.

Thanks, Amy. And just a reminder, Sunday is Mother's Day, so Happy Mother's Day to all of you out there and [indiscernible]. If your plans include your favorite steakhouse, it might be good to use our digital wait list as we're usually very busy. Thank you all, and have a great evening. Let's kick it up. Roadhouse.

That concludes today's conference call. You may now disconnect.

Good evening, and welcome to the Texas Roadhouse Fourth Quarter Earnings Conference Call. Today's call is being recorded. [Operator Instructions]

I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference. .

Thank you, Krista, and good evening. By now, you should have access to our earnings release for the fourth quarter ended December 30, 2025. It may also be found on our website at texasroadhouse.com in the Investors section.

I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release.

On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse. Mike Lenihan, our Chief Financial Officer; and Keith Humpich, our Chief Accounting and Financial Services Officer. Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, could everyone please limit yourself to 1 question.

Now I would like to turn the call over to Jerry.

Thanks, Michael, and good evening, everyone. 2025 was another successful year as revenue grew to nearly $5.9 billion, and all 3 brands delivered positive sales and traffic growth. We also just completed our 60th consecutive quarter of comparable restaurant sales growth, excluding 2020. That's 15 years of sales growth going back to 2010.

2025 included a number of company milestones and accomplishments. We opened our 800th system-wide restaurant and acquired 20 of our franchise locations. Over 70% of our restaurants set both daily and weekly sales records. We completed the rollout of our digital kitchen and upgraded guest management systems. We also solidified our home in Louisville by purchasing our support center buildings.

Our operators continue to serve their communities by raising over $40 million for local schools in nonprofit organizations through their dedicated dine to donate fundraisers. And finally, we remain proud to honor those who have served our nation by providing 1.2 million meals to veterans and active military in honor of Veterans Day.

On the development front, in 2025, we added 48 restaurants to our company-owned restaurant base. This included 28 new store openings and the previously mentioned acquisition of 20 franchise restaurants and our franchise partners opened 4 restaurants, including 3 international Texas Roadhouses and 1 domestic Jaggers. For 2026, we continue to expect approximately 35 company restaurant openings across the 3 brands. will also benefit from the acquisition of 5 California franchise restaurants, which occurred on the first day of the fiscal year.

Our outlook for franchise development also remains unchanged with the expectation of opening 6 international Texas Roadhouses in 4 domestic Jaggers. For 33 years, our mission has been legendary food and legendary service with a focus on high-level hospitality and value. This will remain the same in 2026 and beyond. While commodity inflation will continue to be a headwind this year, our operators remain committed to driving growth over the long term by providing a legendary experience to every guest.

We just completed menu pricing calls with our operators. As always, maintaining our value proposition was a big topic of conversation. Based on these calls, we will be implementing a 1.9% menu price increase at the beginning of the second quarter. We will also continue to focus on our lineup of beverages with all of our restaurants offering some combination of mocktails, dirty sodas and a $5 all day everyday beverage special.

Moving on to technology. As I mentioned earlier, in late 2025, we completed the rollout of our digital kitchen and upgraded guest management systems. We are pleased with the results and our technology priorities in 2026 and will include the continued integration of these enhanced systems. Additionally, in 2026, we will expand the testing of a handheld tablet that our servers can use to input guest orders at the table. As our attention shift to 2026 and beyond, we will remain relentless in our commitment to driving top line growth, providing high-level hospitality in everyday value to our guests and remaining a people-first company.

Finally, I want to welcome Mike Lenihan, our new CFO, to the Texas Roadhouse family. For purposes of today's call, Mike is on for introductory purposes only. I will tell you that we are extremely excited to have Mike on the team. He's been getting to know us and beginning next week. He will start his operations training at each of our brands.

Mike, please share some thoughts on your experience so far.

Thanks, Jerry. I'm honored to have the privilege of joining Texas Roadhouse. As a member of the restaurant community for the last 20-plus years, and a longtime resident of Louisville, I have witnessed Texas Roadhouse's incredible journey to become a leader in the industry and our community.

Since joining in December, I've immersed myself into the culture of the support center, learning about the incredible hard work, people-first approach and teamwork needed to support our restaurants. I would like to specifically thank Keith along with the rest of team CFO who have made my transition seamless and special. It's become clear that we have an incredible team and I look forward to the opportunity to lead it while helping Texas Roadhouse on its growth journey.

Finally, as Jerry mentioned, I'm looking forward to spending the next several weeks in our restaurants, learning from the best operators in the industry.

And now I'd like to turn it over to Keith for some thoughts on our 2025 performance as well as comments on 2026.

Thanks, Mike. Along with the rest of the team, I would like to welcome you and your family to Texas Roadhouse. We can't wait to support you further in your Texas Roadhouse journey.

Moving on to our results. 2025 was another banner year for top line growth in our restaurants. Same-store sales increased 4.9% for the full year, including 2.8% traffic growth. Consolidated average unit volume exceeded $8.4 million with average weekly sales of over $166,000 at Texas Roadhouse, $122,000 at Bubs $33 and nearly $73,000 at Jaggers. In addition, despite cost pressures, we still generated the second highest restaurant margin dollars income from operations and earnings per share in our history.

While commodity inflation and the lapping of an additional week impacted our ability to generate earnings growth in 2025, we have not deviated from our strategy of serving more guests and expanding our restaurant base across the 3 brands. We are confident in our long-term strategy and believe we are set up for continued success over the coming years. Additionally, we ended the year with over $130 million of cash and cash flow from operations for the full year was over $730 million. With this cash flow, we funded $388 million of capital expenditures as well as the acquisition of 20 franchise restaurants for $108 million. We also returned $180 million to shareholders through dividends and another $150 million in share repurchases.

Moving on to 2026. Our commodity inflation guidance of approximately 7% remains unchanged with the continued expectation of being above the guidance in the first half of the year and below the guidance in the second half of the year. Beef inflation accounts for nearly all of the expected commodity inflation throughout the year. Our guidance for wage and other labor inflation also remains unchanged at 3% to 4%. We expect the wage component of the inflation should moderate despite state-mandated increases, while cost pressures on insurance and other employee benefits will likely trend higher.

Our approach to capital allocation for 2026 remains consistent with our proven philosophy of prioritizing new restaurant development and maintaining the condition of our existing locations. As such, our capital expenditure guidance of approximately $400 million remains unchanged. This amount does not include $72 million paid at the beginning of the year to complete the previously mentioned acquisition of 5 California franchise locations. As part of funding this acquisition, we borrowed $50 million on our credit facility. Also today, we announced a 10% increase to our quarterly dividend, which brings it to $0.75 per quarter.

And now Michael will provide the fourth quarter financial update.

Thanks, Keith. Before I begin the discussion of results, I want to remind everyone that the fourth quarter of 2024 included an additional week, lapping the additional week negatively impacted fourth quarter revenue growth by approximately 9% and earnings growth by approximately 12%. My discussion will be based on reported results, which include the negative impact [indiscernible].

For the fourth quarter of 2025, we reported revenue growth of 3.1%, driven by a 4% increase in average weekly sales partially offset by a 0.6% decline in store weeks. We also recorded a restaurant margin dollar decrease of 15.6% to $205 million and a diluted earnings per share decrease of 26.1% to $1.28. Average weekly sales in the fourth quarter were over $160,000 a with to-go representing approximately $22,000 or 13.8% of these total weekly sales.

Comparable sales increased 4.2% in the fourth quarter driven by 1.9% traffic growth and a 2.3% increase in average check. By month, comparable sales grew 6.1%, 4.8% and 2.2% for our October, November and December periods, respectively. And comparable sales for the first 7 weeks of the first quarter were up 8.2% with our restaurants averaging sales of approximately $170,000 per week during that period.

In the fourth quarter, restaurant margin dollars per store week decreased 15.1% to $22,200 Restaurant margin as a percentage of total sales decreased 309 basis points year-over-year to 13.9%. The year-over-year decline included lapping an estimated 45 basis point benefit from the additional week.

Food and beverage costs as a percentage of total sales were 36.4% for the fourth quarter. The 281 basis point year-over-year increase was driven by 9.5% commodity inflation, combined with shifts within the entree category. This was partially offset by the benefit of a 2.3% check increase.

Commodity inflation for full year 2025 was 6.1%, which was in line with our guidance of approximately 6%. Labor as a percentage of total sales increased 18 basis points to 33.2% as compared to the fourth quarter of 2024. Labor dollars per store week increased 4.3% and due to wage and other labor inflation of 2.9% and growth in hours of 1.4%. For the full year, wage and other labor inflation came in at 3.7% and which was slightly below our guidance of approximately 4%.

Other operating costs were 14.9% of sales, which was 4 basis points better than the fourth quarter of 2024. While higher sales continue to generate leverage within some line items of other operating costs, it was almost fully offset this quarter by lapping the benefit of last year's additional week as well as an increase in our quarterly reserve for general liability insurance. These insurance adjustments included $3.5 million of additional expense this year as compared to $2.7 million of additional expense last year.

Moving below restaurant margin, G&A dollars declined 6% as compared to the fourth quarter of 2024, and came in at 3.6% of revenue for the fourth quarter. This was primarily driven by lapping approximately $3.7 million of higher expense related to last year's additional week. With our budgeting process for 2026 complete, we are currently forecasting a low double-digit percentage increase in G&A dollars for full year 2026. Our effective tax rate for the quarter was 11.5%, and our full year 2025 income tax rate was 13.8%. At this time, we are updating our forecast for the full year 2026 income tax rate from approximately 15% to between 14% and 15%.

Now I will turn the call back over to Jerry for final comments.

Thanks, Michael. I want to take a moment to thank our guests and our operators for their continued support of our recent tinnitus fundraiser and honor of our founder, Kent Taylor. This year was our fifth annual event, and we raised over $1.1 million to the American Tinnitus Association. We are proud to raise funds for research, education and awareness for this condition that impacts so many people.

Finally, 3 years ago, Ken opened the first Texas Roadhouse. While most milestone birthday celebrations end in a 0 or a at our company, we believe 33 means something special. When we celebrate our birthday, we are also celebrating opportunity, growth and a commitment to operating at a high level. What started as Kent's dream on a napkin has grown to over 800 locations, 3 brands and more than 100,000 roadies.

I'll close with a happy 33rd birthday to Texas Roadhouse and all of Roadie Nation. So on account of 3, can I get a big yeeha? Yeeha.

That concludes our prepared remarks. Operator, please open the line for questions. .

[Operator Instructions] Your first question comes from David Palmer with Evercore ISI.

And congrats on a great year. I wanted to just squeeze 2 questions. And the one is just sort of about that fourth quarter and the fact that the sales slowed down in December, we heard in the industry that there was some weather dislocation in that month. And so a lot of times in when a chain gets caught with slow sales late in the quarter, it's tough to adjust the labor and to sort of save the budget for the quarter, so to speak. And you did have a higher ratio of labor hours versus traffic than normal for you. So I suspect that was something you're not wanting to make excuses, but maybe you could speak to what sort of a drag that, that noise or even just the fact that, that happened late in the quarter might have had on your earnings that quarter.

And then I'm just wondering also bigger picture question is just the long term, when it comes to these inflation, it feels we are this cycle where it's not getting better fast in terms of the number of cattle head out there, and the demand is remaining strong. So it feels like the relief might not be as fast as it was the last time we saw 1 of these cycles. And I'm just wondering if you're thinking, is there things that you could do besides have food costs get down to 34% to get back to 17% plus? I mean, you talked about the handhelds, but is there anything that you're thinking about on the labor side and effectiveness there to really offset some -- what might be longer -- higher for longer on beef?

David, it's Michael. I appreciate the question. Hopefully, I can touch on all the topics. You are correct for the fourth quarter, that labor hours ratio was 68%. For October and November, it was sub-50% and that slowed down. The entire industry saw in December certainly resulted in an elevated number there. I can tell you so far, in the first quarter, we are back to sub-40%. So that does feel like it was a little bit of an anomaly given the results from December. And again, December was impacted by both holiday shifts and weather. So for 2026, I think we believe that we can continue to run in that sub-50% level.

As far as beef inflation, yes, we're going to have that pressure here in '26, Far too early to start predicting what may happen in '27. But I think the industry would say that it will be certainly a little early to see the herd beginning to expand before late '27. So in periods like this, we focus on the dollars and growing the top line, and that's what flows through. And certainly, more dollars can help you leverage labor can help you leverage other operating. We're going to stay true to who we are, and that's really going to be our approach to the business.

Your next question comes from Andrew Charles with TD Cowen. .

Maybe just first, just if you just quantify, if you can, the impact of fern on the quarter-to-date, obviously, a very stellar number, but just curious with weather, how much that impacted it. And my real question is really around now that you're focused, now that you fully rolled out the digital kitchens, how does it allow you to go on offense in 2026? And can we expect more advertising around carryout could a market test a third-party delivery potentially be something you're focused on? I'd love to learn more about how the digital kitchen is over, what this allows you to do?

Andrew, it's Michael. I'll certainly start with the question on Fern. It definitely -- on the first 7 weeks, it had about a 2.5% negative impact. Now we were lapping some weather from last year that offset some of that. So I would say the net impact of weather on the 7 weeks was about 1.5% negative for us.

And then when it relates to the digital kitchen, maybe I'll start there and see if anybody else wants to join in. Certainly, it has led to that can require restaurant -- excuse me, kitchen experience. And I think it does free us up to do more to-go business. And I think we've seen that over the last several quarters. Don't know what else will change fundamentally about how we do the business. But I do believe that our operators know that it allows them to do some more to go.

And Andrew, this is Jerry. I would tell you, we will continue to learn as we now have the whole concept on the digital kitchen, what all it can do for us other than create a very calm environment that our cooks are really enjoying and just how we execute in the back. So it will not lead us to looking at delivery service at this time.

Your next question comes from the line of Sara Senatore with Bank of America.

Great. Just, I guess, first housekeeping. Could you just let me know what price was for the quarter? And also, I know you talked about taking 1.9% in 2026, at least the first price. So can you -- what should we expect for pricing? What does that mean on a quarterly basis pricing looks like? And then I do have a question.

Yes, Sara, it's Michael. So we had 3.1% pricing for the fourth quarter. We'll have that same 3.1% here in the first quarter. And then with the 1.9 rolling on, that means we'll have 3.6% in the menu for the second and third quarters before we have conversations about what we may do at the beginning of the fourth quarter.

Okay. Great. And then I guess, as I think about the sort of price cost dynamic, I know typically you price just for sort of structural changes. But I guess, as I think through the year ahead, I guess, is your sense that part of the reason the traffic growth has accelerated so much is because you've maintained your pricing kind of substantially below the competitive set? Or I guess trying to understand like how you think about that elasticity because certainly, the quarter-to-date trends, again, including weather, were very impressive. Just a sort of philosophy as you think about the year ahead.

Thanks, Sara. This is Jerry. I'll start it off a little bit on the pricing. We continue to try to be very conservative. We believe that the full-service dining segment, and we are still well underneath that. So we continue to have great conversations with our operators. We look at it from the lens of our guests and our business and our shareholders and try to find a solid balance. We also know beef is a challenge, and we will continue to look at it.

But we focus on a great experience, value in our menu that's built in throughout everything that we have. And it's been a great strategy. And I believe we don't skimp on any of our portions. We really focus on nothing has changed. All we try to do is get a little bit better for our guest experience.

Your next question comes from the line of Jim Salera with Stephens.

I wanted to ask around tax refunds. There's been a lot of conversations around that potentially driving some incremental consumption, particularly in I guess, more in the second quarter. Do you have any historical precedent for years where there's a larger-than-expected tax refunds? Do you see kind of an immediate flow through into the restaurants and more engagement? And if so, is that show up just purely in transactions? Or do you maybe see higher attachments? Any comments you could provide there would be helpful.

Jim, it's Michael. Thanks for the question. I would say historically, if the timing of the refunds moves around, I think we can see it a little bit in our numbers. So I do think refunds do have the potential to be a tailwind for us, whether this time around and who may be getting these refunds will result in a benefit for us to be determined. But -- but typically, yes, when people are getting a larger than normal refund, I would say it may result in them looking to spend some of that.

Your next question comes from the line of David Tarantino with Baird.

Michael, just a clarification on the recent comp trends. Did you have a calendar impact in December from the shift of New Year's eve? And if so, can you quantify the impact of that on Q4 and on Q1 quarter-to-date? And then I have a follow-up to that.

Yes, David, definitely, we had a negative impact from Christmas shifting and also the timing of our year-end. Those 2 on the quarter had about a little under -- when you combine in Halloween shifting as well, all of those had about a 1% negative impact on the fourth quarter. The first quarter -- or I'm sorry, the first weeks is benefiting from having New Year's Eve in the first quarter, and that's had about a 1 -- a little over 1% benefit to our first quarter -- first 7 weeks, excuse me.

Great. That's helpful. So if I net all the impacts from the calendar and the weather, it does look like Q1 has accelerated pretty meaningfully on the traffic side. So I just wanted to get your thoughts on why that's occurred, I guess, I know there's a lot of cross currents in the economy. But I guess what are your thoughts on what's driving the recent strength?

Well, thanks, David. This is Jerry. I do know there was some weather in that time line, but I really do believe that it's just about us operating at a hot level. Our operators are out there hustling. We're continuing to provide a great experience for the guest. And we benefited a little bit from some of that. It would be hard to measure exactly what it is, but I just think we're out there hustling, we're trying to make sure our employees have a great experience coming to work, and our guests are having a great experience dine-in with us, and we are very appreciative of their business.

Your next question comes from the line of Brian Harbour with Morgan Stanley.

Can you comment on just where you are with commodity contracting at this point? And then is your expectation that inflation in the first quarter could look similar to 4Q and then it sort of comes down ratably from there. Could you help us a little bit on that?

Sure, Brian, it's Michael. I would -- as far as locked, we're certainly more locked fixed price in the first half of the year, probably about 65% locked in first half of the year and only about 25% in the back half of the year, and that's probably not abnormal over the more recent years from that standpoint.

As far as the cadence of the commodity inflation, I would -- we mentioned that the first half of the year would be probably above our 7% guidance. I'd say within that, Q1 is probably in line with the guidance. And Q2 is probably where we expect to have our highest commodity inflation of the year, and that could be in the very high single-digit level. And then it should start to come down in the back half of the year.

Your next question comes from the line of Peter Saleh with BTIG.

Great. Jerry, I wanted to ask real quick on the expanding test of the handheld ordering in 2026. I think you guys have been testing this for -- since 2024, I think it was in about 40 restaurants. So can you maybe a little bit talk about what you're seeing, how much this test will expand and what you expect to see? And then, Michael, if you could just comment on the G&A and how that goes throughout the year? I think you said a low double-digit increase. So any details you could provide there would be helpful.

Yes. Thanks, Peter. This is Jerry. On the handhelds, we are -- we did absolutely have a test out there. We have pulled back on it just a little bit to rewrite some software. We have had it in a store right before the holidays and learned a lot of things. We paused it for a minute. We now have it back in that store, and we've just got a couple of more tweaks to make before I think we can offer it up to the operators.

There's no doubt that the handheld and technology side of it doesn't make us a little bit quicker when it allows the server to take the order at the table to press send, and obviously, from an order accuracy standpoint. So there's a lot of things that we really like about it what we have to have is it to be reliable. And so we're just working through a few more things. We'll continue to get it out there and test and then I think later on in the year, we should be ready to kind of offer it up for our operators to opt in if they want to do that. But we have made a lot of progress, and I feel good that a lot of focus on it right now.

And Peter, this is Keith. On the G&A, I think we guided to low double-digit increases, and I think you can pretty much see that throughout the year, evenly throughout the year.

Your next question comes from the line of Jeff Farmer with Gordon Haskett.

You did touch on it, but with all the moving pieces, how should we be thinking about the restaurant level margin for the full year 2026?

Jeff, this is Michael. Obviously, there are a lot of moving pieces. I would say with 7% commodity inflation and that's where we end up and with the pricing that we're talking about taking and assuming that some of that, not all of it, flows through the check, I think it's going to be a challenge to get leverage on the cost of sales line. Now I do believe there is opportunity on the other components of restaurant margin. but that may not fully offset. So it is certainly possible that restaurant margin percents remain under pressure. But the restaurant margin dollars certainly have a path both on an absolute and a dollar per store week basis to go higher, and that's really where more of our focus is right now during this cattle cycle.

Your next question comes from the line of Jeffrey Bernstein with Barclays.

Great. Jerry, just curious your updated thoughts on Bob is, obviously, it's taking on a bigger role in the unit growth. And needless to say, when you're big brothers, Texas Roadhouse, your results probably won't look as good in the short term. I'm wondering if you can, just because it is in a different category, do you think that one day, if you do the same focus on bubbles that you do on Texas, it will have the same level of resilience that Texas has had or probably maybe in a different category in a different position where it will never achieve something similar? Just trying to get your sense on Bubba's outlook, obviously, you're accelerating that globe for the next few years, but how you vision that brand long term relative to Texas?

Thanks, Jeff. Yes, I mean, I see Bubba's. I really like to compare it to the competitive set that it goes in it. Obviously, 6.4 million average unit volume. We have a lot of confidence in what Bubba's is doing and who it's competing with. And so we are very excited about it. We've got a great team over there. We've got great people, great operators executing at a high level. So we continue to lean into it and how we can support Bubba's to be as successful as they can be and I am really proud of where we're at from that.

We have done a lot of great things getting some of the cost out of the building to make it a little more profitability or profitable for our operators as we go forward. And we'll continue to look at ways to offset some of the inflation and other sides of it for that business. But yes, we'll ramp up the growth on it. We'll get to approximately 10 this year, and that's what's on schedule for the following year. And we believe that it will continue to add a lot of value to our company as we go forward from a sales and profit standpoint.

Your next question comes from the line of Jake Bartlett with Truist Securities.

Mine is about mix, and there's 2 kind of mixes here that I want to ask about. One is on COGS. Your COGS have been higher than we would think or 1 would think given the pricing and the commodity inflation. You mentioned that's a shift towards stake I think that differential increased in the fourth quarter. So the question is, what should we expect from that dynamic in '26? I mean is there a possibility that, that reverses out? Should we continue to expect maybe increased pressure on COGS from that dynamic. And then if I look at just a mix within check, it increased in the fourth quarter. So a little bit kind of confusing. Have that increased or get more negative yet the COGS impact getting bigger. So the question on mix, what is driving the negative mix within same-store sales? And should that continue? What are the dynamics there going into '26?

Thanks, Jake. This is Michael. First on that mix within our food cost, it was lower in the fourth quarter than it had been in the third. It probably was 30, maybe 35 basis points of pressure where it had been over 50 basis points in the third quarter. From what we're seeing so far this year, it does seem like we have lapped a lot of that trade up to the state category. That doesn't mean that it couldn't reaccelerate. But right now, my assumption is maybe 10 to 15 basis points of pressure coming from that, call it, usage line within the cost of sales.

As far as the product mix, you are right, it did step up a little bit in the fourth quarter. And we saw that trend higher as we move through the last several months of the quarter. And some of that, I think, more of that came from the to-go side of it and the growth of our to-go putting a little bit of pressure, more pressure on that line. As I've looked at the beginning of this year, some of that pressure has abated, alcohol is still negative but not as negative as it was at any point last year.

So some encouraging signs within our mix. We continue within the dining room to see positive mix in entrees, appetizers, soft beverages mocktails. But when the to-go business is growing at a slightly faster rate, and that comes with a lower average check, it does continue to put a little bit of pressure on mix.

Your next question comes from the line of Jacob Aiken Phillips with Melius Research.

So I just wanted to ask about share gains. And you've shown super consistent traffic strength and peers have shown less so I mean, restaurants, food, fast casual, QSR, et cetera, what portion of the traffic outperformance do you view as structural share gains versus like people trading between channels or in and out? And how should we view that durability if the consumer weakens further?

Yes. Jacob, I can start. I mean it's hard to predict all of that. I mean, we open up our doors and we serve our guests and represent our communities all across America in the world. And I think the guest has to make a choice, and the choice is where do they get quality food, where they get great value and where they get hospitality at a high level. And I do believe that that's where we continue to win and that reputation that we have in the industry for consistently providing great service, great food and what we call legendary food and luxury service and that just resonates with our consumer. And they want to spend money, but they want to spend money where they're getting a great product with value. And I believe that's where we settled in nicely.

Your next question comes from the line of Dennis Geiger with UBS.

Great. Just wondering if you guys could break down that -- the G&A guidance, the G&A increase a bit more. Is that increase coming from? Is it a compensation dynamic? Is it related to the acquisitions? Anything more you could say there? And then, I guess, longer term, has anything changed on how you think about G&A beyond this year? I know you've kind of given some targets in the past for the long term as a percent basis.

Dennis, it's Keith. Thanks for the question. Yes. So in December, we completed our 2026 budget process that included finalizing our incentive plans for the year. So as part of that, we did increase our G&A forecast. And this was mainly due to the new long-term management equity grants that we announced in late December and then also some higher forecasted incentive compensation. I can tell you that when we look at G&A as a percentage sales, though, I think we see it coming in very similar and consistent to what our recent years have been, and we're comfortable with that level.

Your next question comes from the line of Andy Barish with Jefferies.

One question and a quick follow-up. Just can you give us a little better sense on sort of what the guest management software is potentially driving this year? Is it is it table yields or wait time quotes? Or how is that kind of up and running?

Thanks, Andy. This is Jerry. I think it helps in all categories. to be able to manage your floor plan with the amount of consumers that are on the wait list and for them to be able to navigate a little bit on their own to get on the wait list and allowing us to if folks aren't there. So there are so many components that can help us be faster, not only in managing how table turns work, how we get guests on the list how we get them set and then how do we accurately quote them when we're on longer waits.

And we just went through a tremendous weekend over Valentine's Day and what a success. And I think it all contributes to the ability to handle that kind of volume. So we believe that there are so many things that you -- just little things that all add up to additional success. So it's about all I can share on that, but it's about really being bigger, faster and stronger in getting more people sat accurately from that standpoint. But thank you, Andy.

Yes. Very helpful. And then on the headquarters acquisition, is that -- I assume that's a benefit to G&A this year versus last, but maybe I'm thinking about it wrong.

No, Andy, this is Keith. Yes, you are correct. It will definitely be a benefit for us this year.

Your next question comes from the line of Jon Tower with Citigroup.

Jerry, just a quick question for you. The past year, 1.5 years or so, you focused a lot of some time on innovating around and focusing on beverage in the menu, I think mocktails dry sodas are a couple of things, and then having the $5 draft on tap and messaging that to the guests. Is there anything else on your menu that you see today as an opportunity, either you're not currently -- it's not either on the menu today or it's something that's underperforming your internal expectations? Or anything you're hearing from your operators that says, hey, this would be a nice area we should be focusing more on?

Well, thanks, Jon. Yes, I think on the beverage side, I mean, obviously, mocktails have become very popular out there, dirty sodas, the 5-day $5 all day every day. It is about the beer, but it's really also about that margarita and really, Roadhouse was built on ice cold beer and a legendary margarita. And having that $5 10-ounce margarita back in the system has been really, really popular.

And on the food side, I mean, we're always looking at some innovative ideas in talking with our operators about trying different things, whether it be a menu item, whether it be the ability to add on a different kind of smother or even a sidekick of some sort. So we are constantly out there looking at things. We have some things that are out there in test. We'll continue to monitor and look at them and make a decision down the road if we think it goes regionally or nationwide could be impactful.

So yes, we're constantly kind of testing and looking and talking with our operators about what we might look at on the menu. We don't have a lot that underperform at the level that they would be replaced. So it would be a tough one for us to take anything off. It really have to be a superstar to get added to it.

Your next question comes from the line of Andrew Strelzik with BMO Capital Markets. .

Going back to the beef topic, and I appreciate some of the color you gave on the cattle cycle dynamics. There's been some optimism, I guess, around beef inflation easing at some point in 26 because of demand destruction at retail. So I guess I was curious if you've seen any evidence in any of the data that you've looked at or any of your discussions around that dynamic that maybe does offer a little bit of optimism as the year progresses.

Andrew, it's Michael. Thanks for the question. I mean I think we've certainly seen at retail some trade away from beef over the last several quarters to whether it be pork or chicken or other proteins. And so that has been in effect. So the level that, that may or may not continue, it is hard for us to know. And we aren't trying -- in our forecast, we aren't trying to predict what the demand side might be. So if there was a further call it, demand destruction or trade away from beef then maybe there is some potential for our numbers to come down. But a lot of things to learn about there. What we do know what we do know is what's going on with the size of the herd and what that takes for a rebuild. So the demand will really play into how things fully play out.

Your next question comes from the line of Rahul Krotthapalli with JPMorgan.

Can you update us on the build cost inflation and how it is tracking at both Roadhouse and Bubba's and especially how you're thinking about cash-on-cash returns for both these concepts as we go forward? And I have a follow-up on the company was a franchise mix. I've seen this slowly pick up over time from low 80s company mix to the high 80s we are currently. Is there a conscious goal to get to a certain level over time? Can you share some of your thoughts here?

Yes, sure. This is Michael. I'll start with the investment costs. So on the Roadhouse side, we are expecting our average all-in investment cost that includes 10x rent factor will be increasing to around $8.9 million. We think we're around $8.3 million to $8.4 million here in 2025. Some of that increase is coming from higher rents certainly, it is not getting any cheaper to build a building but we -- and we also have a handful of restaurants in California that we will be opening in '26. And that probably adds a few hundred thousand dollars to that cost for Road House.

On the Bubba's side, the opposite is expected. We're expecting to see maybe a little more than a $0.5 million reduction in our investment costs going from around $9 million down to $8.5 million, $8.4 million for 2026. We've done a lot of work on the building and getting the prototype to where we want it to be. And we also have a handful of conversions that we are going to be doing. So taking an existing building and turning it into a Bubba's. We've done 2 of those so far that have opened and definitely seen some cost savings by doing that. So we are hopeful and expecting that, that can continue with some more of these conversions.

And as far as returns, we look at it more as an IRR. We're targeting a mid-teen IRR for our new restaurants. And I'd say we are achieving or exceeding that expectation as an overall portfolio.

Your next question comes from the line of Brian Vaccaro with Raymond James.

Most of might have been asked, but just 2 nitpicks, if I could. Within the other OpEx line, I'm curious what you're seeing just from an underlying inflation perspective within that line? And any changes in the outlook related to utilities or other areas we should be mindful of? And on the acquisition of the 5 units for $72 million, was the acquired real estate within that acquisition price?

Yes. Brian, I'll just start with the second one first. There is no acquired real estate within that acquisition price for those California stores. As far as the other I think, certainly, there is an expectation that utility costs will continue to go higher. But I do think there is still opportunity to get some potentially to get some leverage and other op in 2026, probably low single-digit growth in dollars per store week is probably the best guidance I can give you. I don't think I have an inflationary percentage to throw out at this time. So we do think we're going to continue to see some cost pressures, but nothing other than utilities 2 out of the ordinary.

Your next question comes from the line of Gregory Francfort with Guggenheim.

Maybe sticking with expenses, just labor inflation running under 3% this quarter. I guess is there anything that maybe there were less overtime hours just given the sales? Or I guess I'm trying to figure why that might ramp next year or, I guess, this year in '26?

Yes. I mean there are several components. We talk about wage and other inflation. And so the wage components, certainly, we have seen that trend down and stabilize, and that's kind of the expectation that we have into 2026. But we do think that there's still going to be some pressures on insurance costs and other components within labor that may be a little bit higher than what we saw in 2025. So we guided the 3% to 4% wage and other. I think the underlying wage component is probably down year-over-year and the overall could be a little bit down versus 2025.

Your next question comes from the line of Jim Sanderson with Northcoast Research.

I wanted to talk a little bit more about pricing. Given the $3.6 million you'll have in the second quarter, how you see yourself positioned with respect to top competitors if you feel that your value gap is just as strong and compelling? And maybe if you have any consumer feedback about how the consumer perceives the brand on a value basis, if that's improving?

Thanks, Jim. Absolutely, we will keep our close eye on any conversation that comes up. But obviously, after these first 7 weeks as we continue to roll. But again, we're built on a conservative approach to pricing. We still believe we're well under our competitors and full-service dining average 12 months rolling. So we will continue to look at that. But if we get feedback, we absolutely will consider and talk with that but we really feel like we've got such a great value, and we're continuing to operate at a high level, and that's the approach that we'll continue to take, and we feel great about it.

And that concludes our question-and-answer session. I will now turn the conference back over to Jerry Morgan for closing comments.

Thank you all for your time with us tonight. -- and to Roady Nation stay focused on high-level hospitality. Let's go to Roadhouse.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good evening, and welcome to the Texas Roadhouse Third Quarter Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to introduce Michael Bailen, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

Thank you, Julianne, and good evening. By now, you should have access to our earnings release for the third quarter ended September 30, 2025. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC.

These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release.

On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; and Keith Humpich, our Interim Chief Financial Officer. Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, could everyone please limit yourself to one question.

Now I'd like to turn the call over to Jerry.

Thanks, Michael, and good evening, everyone. Before we begin our formal remarks, I want to take a moment to recognize Michael Bailen on his promotion to Vice President of Investor Relations. As many of you know, he has played a pivotal role in our -- in shaping our investor outreach and communicating the company's financial strategy. Congratulations, Michael, I am very proud of all you have done for Texas Roadhouse, and I'm excited to see you continue to grow our Investor Relations program.

Moving on to our quarterly results. Our strong top line momentum continued in the third quarter with revenue topping $1.4 billion. Through the relentless efforts of the best operators in the business we achieved our highest quarterly growth of the year in revenue, same-store sales and traffic. There's no doubt there is a healthy demand for our brands. Our people first focused value proposition and operational excellence continue to be a winning formula to drive our long-term success.

On the development front, we opened 7 company-owned locations in the third quarter, including 2 Bubba's 33 restaurants and 1 Jaggers. We remain on track to open approximately 30 restaurants across the 3 brands in 2025. We have also acquired 20 franchise restaurants this year, including 3 purchased at the beginning of the fourth quarter. Our franchise partners opened 2 international Texas Roadhouse restaurants during the third quarter. We expect they will open 1 more franchise location in the fourth quarter.

Looking ahead to 2026, we expect to open approximately 35 company-owned restaurants, including approximately 20 Texas Roadhouses, 10 Bubba's 33 and as many as 5 Jaggers. Additionally, as mentioned on last quarter's earnings call, we have an agreement in place to acquire our 5 remaining California franchise locations at the beginning of 2026. On the franchise side, our partners are planning to open 10 new restaurants, including 6 international Texas Roadhouses and 4 domestic Jaggers.

Regarding consumer behavior in the third quarter, we are pleased with what we saw from our guests visiting our restaurants as they continue to favor stakes in larger sized entrees. In addition, we haven't seen any noticeable change in guest behavior since our 1.7% menu price increase at the beginning of the fourth quarter. The guest is also responding positively to our newer offerings on the beverage side. In addition to mocktails and our $5 all-day everyday beverage specials, we are also having success with our regional approach to the beverage menu and offerings. For example, we are testing dirty sodas in Utah and Idaho, which have been well received by our guests. The regional approach allows us to be more receptive and responsive to local taste and potential trends.

Our to-go business continues to show solid momentum. Our operators have done a great job focusing on speed and order accuracy. This focus has improved the overall guest experience and as we become more efficient, our operators can take more orders per hour. Outside the 4 walls of our restaurants, we are also very excited about the retail segment of our business. Our retail strategy is about building guest awareness and engagement. Over the past several years, we have introduced many roles, buttery spreads, steak sauces and dips.

We are excited that between our gift cards and retail items, we have a presence in over 120,000 retail outlets across the country. We believe having our logo in the grocery store aisles helps keep Texas Roadhouse top of mind to our current and potential guest. Our success would not be possible without the partners of our vendors. We just recently held our annual Vendor Partner Summit. During this event, we met with many of our key suppliers. There were a number of takeaways around how we continue to work together to strengthen our partnership and ultimately better support our operators.

Moving on to technology. Approximately 95% of our restaurants are currently using a digital kitchen and upgraded guest management system. We expect the rollout of both systems to be completed by year-end. As we look to next year, our operating philosophies remain unchanged despite the current inflationary environment, we will maintain our focus on driving top line through a combination of guest traffic growth and the expansion of our restaurant base, will remain an industry leader in all in offering high-level hospitality in everyday value to our guests and continue to invest in our rods to ensure we remain an employer of choice. And finally, we will stay true to our mission, values and purpose for the long-term health of the business. This is what has made us successful for over 30 years, and what we believe best sets us up for further success going forward.

Now Keith will provide some thoughts.

Thanks, Jerry. As Jerry mentioned, our operators drove strong sales performance in the third quarter with all 3 brands delivering same-store sales growth. Weekly sales averaged nearly $162,000 at Texas Roadhouse, $119,000 at Bubba's 33 and over $75,000 at Jaggers. On commodities, inflation in the third quarter was above our expectation due to higher-than-anticipated beef prices in the back half of the quarter. These higher prices have persisted and have impacted our forecast for beef inflation over the remainder of the year. As a result, we are updating our full year 2025 commodity inflation guidance to approximately 6%. As everyone is aware, there is certainly significant volatility and multiple unknowns related to beef prices. With that said, we are setting our initial 2026 commodity inflation guidance at approximately 7%. At this time, we expect to be above the guidance in the first half of the year and below the guidance in the second half of the year.

Moving on to labor. Wage and other labor inflation for the third quarter was in line with our expectations. Our operators continue to execute at a very productive level as labor hours grew at approximately 35% of comparable traffic growth. Our full year 2025 wage and other labor inflation guidance remains unchanged at approximately 4%. And for 2026, we are guiding to wage and other labor inflation of 3% to 4% with mandated increases representing approximately 1% of the increase. With regard to capital allocation, we ended the third quarter with a cash balance of $108 million. Cash flow from operations was $144 million, which was offset by $214 million of capital expenditures, dividend payments and share repurchases. Also, as previously mentioned, we acquired 3 franchise restaurants at the beginning of the fourth quarter, and we will be acquiring 5 California franchise restaurants at the beginning of 2026. Finally, with regard to capital expenditures in 2026, we will continue to prioritize new store development and maintaining our existing restaurants. With approximately 35 new store openings, and 5 restaurants being acquired at the beginning of the year, we are expecting 5% to 6% store week growth in 2026. And we are establishing our initial 2026 capital expenditure guidance at approximately $400 million. This excludes the cost of acquiring the California franchise restaurants.

And now Michael will walk us through the third quarter results.

Thanks, Keith. For the third quarter of 2025, we reported revenue growth of 12.8%, primarily driven by a 5.5% increase in average weekly sales and 6.8% store week growth. We also reported a restaurant margin dollar increase of 1.1% to $204 million and a diluted earnings per share decrease of 0.8% to $1.25. Average weekly sales in the third quarter were over $157,000, with to-go representing approximately $21,500 or 13.6% of these total weekly sales. Comparable sales increased 6.1% in the third quarter, driven by 4.3% traffic growth and a 1.8% increase in average check.

By month, comparable sales grew 5%, 7% and 6.1% for our July, August and September periods, respectively. And comparable sales for the first 5 weeks of the fourth quarter were up 5.4% with our restaurants averaging sales of nearly $160,000 per week during that period. In the third quarter, restaurant margin dollars per store week decreased 5.3% to approximately $22,500. Restaurant margin as a percentage of total sales decreased 168 basis points year-over-year to 14.3%.

Food and beverage loss as a percentage of total sales were 35.8% for the third quarter. The 224 basis point year-over-year increase was driven by 7.9% commodity inflation, combined with shifts within the on-trade category, which was partially offset by the benefit of a 1.8% check increase. Labor as a percentage of total sales decreased 18 basis points to 33.6% as compared to the third quarter of 2024. Labor dollars per store week increased 5.2% due to wage and other labor inflation of 3.9% and growth in hours of 1.3%.

Other operating costs were 14.7% of sales which was 40 basis points better than third quarter of 2024. The improvement was driven by leverage on operator bonuses, partially offset by changes in our quarterly reserve for general liability insurance. These insurance adjustments include $1.7 million of additional expense this year as compared to $400,000 of additional expense last year.

Moving below restaurant margin, G&A dollars declined 1.4% year-over-year and came in at 3.8% of revenue for the third quarter. The decline was primarily driven by lower incentive compensation and lapping the additional expense from our change to annual equity grants. Our effective tax rate for the quarter was 13.1%. 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 14.5%. We are also setting our guidance for the full year 2026 income tax rate at approximately 15%. Finally, as a reminder, in the fourth quarter of we will be lapping a 14-week quarter from last year. We estimate that this will have an approximately 10% negative year-over-year impact on fourth quarter EPS growth.

Now I will turn the call back over to Jerry for final comments.

Thanks, Michael. We just completed our 20th annual fall tour, where we traveled to 28 cities over a 6-week period gathering feedback from nearly 800 managing partners. While it is called fall tour, it is really about listening to and engaging with our managing partners to learn how we can better support them. There's nothing that feeds my sole more than spending time with the best operators in the industry who continue to create a place where Rotes want to work and our guests want to dine.

And speaking of guests, I want to give a big shout out to some of our Raby fans, Mike and Judy McNamara, who have just completed their 530 store visit. We are proud to have Mike and Judy as a part of Roady Nation.

That concludes our prepared remarks. Julianne, please open the line for questions.

[Operator Instructions] Our first question comes from Sara Senatore from Bank of America.

I just -- I guess, maybe one question and one clarification. I'll start with a clarification. As you think about the outlook for beef inflation or commodity inflation, I think the implication is that beef inflation might be up kind of mid-teens if your commodity basket is up high single digits. Could you -- could you just talk a bit about what you're seeing that's leading you to draw that conclusion. I guess I thought maybe we would start to see some pullback in demand at retail, just given where prices have gone in some like perhaps -- that's not the case. And then I guess the question was more about your beverage program. I know that's something that you've been working on for a while, kind of mocktails and shifting perhaps to address the fact that younger consumers maybe aren't drinking alcohol. Could you talk a little bit about whether you're continuing to see that trend in terms of negative mix?

Sara, this is Michael. I'll start with your commodity question. Were you referring to fourth quarter of this year or our next year commentary?

Next year, next year, please.

Yes. For next year, we are assuming high single-digit inflation when it comes to formula pricing. We also we'll be lapping some favorable contracts from this year. So the combination of those 2 things is what gets us into low double-digit unweighted beef inflation.

And then I'll -- Sara, this is Jerry. Talk about the beverage program. I really am excited in the last couple of years as we've rolled out or $5 all day every day, which is a 10-ounce margarita, value paint beer and some other things there. And the mocktails have gone very well. 30 sodas we're testing in Utah and Idaho, and there's a lot of our consumers out there that beverage is a different category for them. And I think us being aware of consumer trends and how that applies and I think people want a good beverage, maybe not as much the beer and margarita anymore, but they want to have a quality beverage option and so whether it be liquor beer and wine, whether it be soft or iced teas and sodas or mocktail or a dirty soda. And I think we're learning that the better the offering, the more options the guests than consumer has the better it is for us. So I think the overall blend of the beverage category has clearly been a focus of ours for the last 18 to 24 months, and I'm excited to see that continue to expand.

Okay. Great. Very helpful. And just impact on mix, anything to say there on the tech mix?

When it comes to mix, we're continuing to see some negative alcohol mix that's really remained consistent through the year, and that's where most of the negative mix that we are -- it's really where all of the negative mix that we're seeing this year is coming from. Some of that is being offset by positive mix of mocktails and soft beverages continue to be flat year-over-year.

Our next question comes from Gregory Francfort from Guggenheim.

I guess I'm curious, maybe not to hammer on beef, but what gives you guys the confidence that this is transitory versus structural? And I guess how are you evaluating the structural nature of what's going on versus maybe not pricing against this transitory?

Greg, it's Michael. Thanks for the question. I think the industry, the experts, our purchasing department, all believe that this is -- we are in a cattle cycle and it is transitory in nature. Cattle cycles do last longer, and you tend to when you come out of it, settle in, probably higher than where you came into it. So certainly, as we take pricing for other structural inflationary pressure, i.e., wage pressure, it does help offset any component that is structural in nature on the commodity line. We're not going to on the front end, guess of what is structural and what is transitory when the capital cycle ends, or the industry expects something different than we would have different conversations. But right now, everything we're told and believe that this is a cyclical issue and one that we just need to manage through.

Our next question comes from Jacob Aiken-Phillips from Melius Research.

I just wanted to ask on your take on the consumer. I know traffic was strong, but are you seeing any differences by income cohort, age cohort? And then other restaurants have said that there's been a bifurcation among consumers and how you manage your menu and your pricing architecture to appeal to both sides of...

Thanks, Jacob, this is Jerry. I'll kick it off, and then I think Michael will have a comment. But there's nothing significant that we can see. We're excited about our traffic growth and our sales growth and our menu has always had value built into it, and we have some offerings on our early dine and -- and so I think we've always been focused on that from the very beginning. And we do have some larger stakes and some entrees that can go to that side of the menu, but there's also a lot of entrees with our country dinners or 6-ounce sirloin with 2 sides are still extremely value-oriented. And I do believe that, that is what allows our menu to be very favorable for all consumers. So we feel like we're in a great position to be able to provide folks. And when we talk about our beef selection, and we have 4 cuts of sirloin that you can choose a 6 and 8, 11 or 16, so that you have options on how much you want to spend and how much you want to eat. And I really do believe that that's always been our philosophy, and it's really served us extremely well.

And Jacob, this is Michael. When I look at our mix trends from the third quarter and the first part of the fourth quarter, I'm really not seeing anything different than what we've been seeing all year. We don't spend a lot of time separating out income or consumer by cohorts. But there's nothing in there that tells me that we aren't continuing to see a guest that appreciates the value that we're offering. When I look -- by region, I'm seeing strong results. When I look 7 days a week, I'm seeing strong results. And when I look by daypart, I'm seeing strong results, and that goes for both our dine-in business and our to-go business. So we're very happy with what we're seeing from consumer and believe that just goes to the value that we offer and the overall experience that we're offering in the desktop still is enjoying what they're getting from us.

Our next question comes from David Palmer from Evercore ISI.

Great. Congratulations, Michael, on the promotion, Crazy, well deserved. Yes, two questions, Jerry. I was just wondering philosophically about pricing. And I'm wondering how you weigh the potential impact of pricing or not pricing or underpricing the inflation on a managing partner pay. You were one in the past and you manage a ton of them now. And then if this is going to be a year where we're getting a spike in beef, and I'm not saying you should chase that with pricing because it won't last forever, but I do wonder how you manage that in a year like what we might be having in '26? And then separately, I just wanted to ask about Bubba's. The same-store sales it decelerated a bit, 2.5 points or so, not a massive slowdown, but obviously, Texas Roadhouse really didn't slow at all and actually accelerated a little bit. So any theories about why those would have been different in terms of the sequential growth.

Thanks, David. Yes, I'll -- as far as the MP compensation, it really has been built around that partnership side of it in you grow your sales, you grow your profits, you grow your paycheck. And I think that philosophy works very well. And when we look at store restaurant store margin, those dollars are what they get paid off of. So we continue to monitor and reach that. But again, if you're running a healthy business and you're executing at a high level and you're growing your sales and your profits and your people, then you're going to get compensated for that. And I think that's been a great philosophy for us. If there are people in our system that might be struggling for whatever reason, then we will continue and have great conversations with them if there's any adjustments. But the overall system works extremely well. When you got skin in the game and you've got ownership and partnership. And we just came off of fall tour, and we talked about they all have their own individual challenges and problems and how can we help them solve them, whether it be sales profits or people and helping them run a healthy business for the long term. And there are ups and downs in business, and that is part of a partnership. We're not going to be able to fix everything for you every time, but we will work with you to help you grow that side of the business.

And as far as Bubba's is concerned, I think we are still very excited. There's been a lot of work put in Bubba's in the last few years from a leadership standpoint, from a menu engineering standpoint. There's a lot of things going on in their competitor set. So what we feel have a lot of confidence in what Bubba's is doing in the offerings that we have with our burgers and pizzas and wings and all of those things that go in there, the sports, the rock and roll, Michael, would say that again for me?

Rock and roll.

Yes. So we like what we got going on in Bubba's. It's always been a great. It's our second brand. We believe in it completely. So we'll continue to watch and see if there's anything we need to do differently. But we still have a lot of faith and confidence in Bubba's 33.

Our next question comes from David Tarantino from Baird.

I wanted to follow up on the last question about the restaurant profit dollars. And if I look at restaurant profit dollars per location or per operating week, which is, I guess, a proxy for the metric that you pay, the store managers on -- it's been a really long time since that metric has declined in 2 consecutive years. So this year looks like a year where we're going to see a decline. So I'm just wondering Jerry, if you could comment specifically on the appetite for letting that decline in 2026, given all this inflation or perhaps is there a thought to around the time you make your next pricing decision to price in a manner that would protect that line specifically so that you don't have 2 years in a row of declines in pay?

Yes, David, thank you. I think we'll continue to look at our philosophy on pricing. We've always tried to have a conservative approach, and we do believe that protects that top line and that consumer and we do understand that the beef is driving a lot of those other results. So -- but as we look at it, we just started our pricing for the fourth quarter. We took the 1.7%. And as we get closer to the end of the year, our next pricing will be in period 4, which is the start of April. We'll start having conversations with our company and within ourselves and within all of the operators and seeing what they're going up against when their competitive set in their own communities. And then we'll make that decision from that standpoint. So I think, again, we always try to have a conservative approach, and I think it's paid us very well overall. And we want to talk to our partners before we make a decision like that.

And David, this is Michael. Our partners take a long-term view just like we do. And we were -- we look back and know that those restaurant margin dollars per store week are still approximately 35% higher than they were in 2019. So yes, maybe we've given a little bit back. We need to watch and see what happens next year, but where those profit dollars have gone over the last 5 or 6 years is still very impressive.

Our next question comes from Brian Bittner from Oppenheimer.

Clearly, you're seeing really resilient traffic trends in an environment where most are seeing choppier or softer trends and that's not surprising based on your track record. But my question is, based on the data and insights you guys have, do you see new customers coming through the door? Are you picking up new customers right now? And if so, where are you stealing those customers from? Are they trading up from QSR? Are you stealing them from the grocery store? How would you frame that up?

I'll kick it off, but it's hard. We don't really measure it that way. We we try to get a great reputation in a community and be the talk of the town to some degree. And that's what really drives the excitement around. When you drive into a Texas Roadhouse and the parking lot is full and the energy is going on and the lights are so bright. I mean, that is our attraction. And if you drive to another business and maybe they don't have same the activity, but I think we're drawing from everyone, whether it be a higher-end steakhouse, whether it be QSR, whether it be -- I mean, we got quality made from scratch food. We cut our own steaks and we've got this energy and the survive in these restaurants. So I think the American consumer or the consumer across the world is just saying they like what we're doing from an energy standpoint, a hospitality standpoint and the quality of our food always has been in our respect and reputation in the communities all across America and the world is something to be really proud of, and we are extremely proud. And we work really hard to deliver a great experience our employees and for our guests.

Our next question comes from Peter Saleh from BTIG.

Maybe 2 quick questions. Just one on the beef side. Just curious if you can comment a little bit on how much of this beef is already locked for next year, if we do see a rolling over, which I don't think anybody expects of beef. Could there be some moderation in your inflation targets for 2026? And then just secondly, on the KDS, 95% of the units now have it. Can you talk about what you're seeing on table turns and just how you try and balance speed of going fast, maybe getting a couple of table turns, but not going too fast and not destroying the overall guest experience?

Peter, this is Michael. I'll definitely take the first one. On the commodity basket, I will tell you that the overall commodity basket is approximately 40% locked in the first half of the year for competitive reasons, we're not going to get into specifics on what percent of the beat has been locked, but I think it's fair to say if there's moderation or a change in expectations, then that could certainly move the needle on our forecast for overall inflation in 2026.

And then on the digital kitchen, I think as like you said, we'll be completely rolled out with the digital kitchen, the guest management system upgrade by the end of the year. There are indicators that show that it does give us more information so that we can make great decisions. We want to balance how fast that we are. We still see the guest experience at about 54 minutes and that's a good spot for us to be. You want them to feel important and that we're hustling but not rushed. And so I think all of this does is give us some more information about how to make sure that we balance a great experience when it comes to your drinks, to your appetizer, salads, your entrees and your -- and obviously, the Roadhouse pay or the pay at the table has been a huge component where our guests can pay and leave when they're ready and they're wanting not waiting on us or we're not waiting on them kind of thing. So I think all of technology, if it enhances the guest experience, then we're all about it. And if we learn things once the whole system is on it, then we will share that with our operators and make some decisions on how do we increase speed of service, if needed.

Our next question comes from Jeffrey Bernstein from Barclays.

Great. My question is on the uses of cash. I guess it's a 2-part question. The first part, just on the franchise acquisitions it seems like a clear ramp in activity over the past few years. Just wondering what those conversations are like presumably, these are very profitable units. I'm just wondering how many are still outstanding, which could be potential targets for 2026. And then to balance that, I guess, on the CapEx side, I think you mentioned for '26, it's going to be $400 million, which is similar to '25, but we know you're opening up more new units, and I'm sure there's inflation on the cost to build and it's larger boxes. So I'm just wondering the offset there, why we're not seeing an increase in that CapEx, whether it's -- you found a way to be more efficient with the openings or maybe Bubba's is a little much lower cost to build? Just trying to figure out the balance of CapEx between the 2 years despite greater openings.

Yes, Jeff, this is Keith. Thanks for the question. On the franchise acquisition side, after we complete the California acquisition at the beginning of the year, we will have approximately 30 franchises left. I think it's actually 31 is the exact number. And we just continue to have ongoing conversations with all of our franchise groups. We still have, I'd say, 3 large franchise groups left after this. and we continue to have ongoing conversations with them. And I think you can expect to see other franchise acquisitions in the future. On the CapEx, I think you have to factor in that this year, we had the support center acquisition was part of our number. So I think you kind of have to back that out. And when you do that, I think the numbers become a little bit more comparable.

How much is that acquisition?

$23 million.

Our next question comes from Brian Harbour from Morgan Stanley.

I guess I think the beef side is pretty clear. I guess I'm just curious, as you think about sort of labor lines, OpEx lines, which were a bit favorable in the quarter, G&A as well. Is that something you still expect to continue in 4Q? And some of those, I assume, were affected by the extra week. So how should we think about that?

Brian, it's Michael. I'd say, yes, that the fourth quarter, we should still be able to -- if the top line trends continue the way they have for the first 5 weeks, I would expect to see leverage on all those on labor, other op and G&A. And those are also lines that potentially could see some leverage into 2026, again, if the top line trends continue. Our operators are doing a great job in staffing the restaurants. And so that those labor hour growth relative to traffic has been very favorable. Other op again, we continue to see some leverage on that. And G&A, we'll see how that plays out.

Our next question comes from Brian Vaccaro from Raymond James.

Congrats, Michael. Wanted to ask you this sort of the sticker shock effect in the grocery store. In my local market, rebuy is over $23 a pound. And I think for maybe $6 or $7 more, I could have you guys cook it and not burn it like I do at home and have great service, and you'll leave and do the dishes for me. I mean -- so I guess the question is, even anecdotally, are you hearing that from your customers? And do you think that, that's adding some incremental top spin to your comps? Is there any way to flesh that out in your data or any demand destruction you're seeing in the grocery store? I don't think I've ever seen it that pronounced is sort of my point, even 10, 12 years ago. It just seems quite intense that effect.

Brian, it's Michael. I certainly do think that people are aware of what it cost to buy beef in the grocery store. And while maybe we weren't seeing as much retail demand degradation over in the second quarter, in third quarter, we've heard that maybe you're seeing a little bit more of that now. And we certainly have seen this year that more of our gas when they come in or getting a steak when they order from Texas Roadhouse than what we had seen in years past. I think they are recognizing the value of our stake offerings relative to what they can do at home. And as a company that prepares the tremendous steak that creates loyal guests for us for years to come. So we are aware of that, and I think it is helping us.

All right. That's helpful. And then just on the unit growth side, I was going to touch on maybe both Jaggers and Bubba's. But Bubba's is opening 10 units, and I think you said 5 on Jaggers. But on Bubba's specifically, maybe, can you talk about any new markets that you're going into? Or is it mostly existing markets maybe just elaborate on sort of the growth and how it's accelerating at Bubba's?

Yes, Brian, this is Jerry. We I think this year, we'll get 7. And the year prior -- a couple of years, we got 4, a handful. And we've been able to work the pipeline. We are trying to stay primarily with the market partners that we have. We're continuing to look at the future growth. But I would say most of that growth is in pretty existing markets from that standpoint. And Jaggers, we have a homeland or strategy here of the Heartland, and it's really Ohio, Indiana, Kentucky, Tennessee, Georgia. So our company side stores will be kind of close to the Louisville base. And that's the strategy for now. And -- but we're very excited about the growth. We will be going into Tennessee or in Nashville area and then start looking in a little south of that, but -- and try to even break into Ohio. So that's kind of the strategy that we have with Jaggers to stay close to Kentucky and maybe the 2 states north and south from that. We call that the Heartland strategy for the company side.

Our next question comes from Dennis Geiger from UBS.

Great. Michael, I'll echo the congrats well deserved. I always appreciate all of your help for sure. Great detail on the inflation on your key cost items for -- just curious if you would comment at all on thinking about that other line item looking to '26 G&A. Any notable call-outs there? I know the other OpEx has a gazillion buckets in it, and we're not in '26 yet, but any call-outs on those other items as we're just kind of trying to get a full picture of the P&L looks in the next year?

Den, this is Michael. I appreciate the kind comments. It's certainly early, but as we think about other operating for next year, it could look grow in a similar fashion to what we've seen this year, low single-digit growth in other operating dollars per store week. We have heard that utility costs are going up and tariffs would be something that maybe flow through there. But not expecting anything dramatic on that line as we know it right now. So assuming our top line continues to grow at a healthy traffic pace. Right now, I'm expecting low single-digit dollar per store week growth.

Our next question comes from Andy Barish from Jefferies.

Did want to level set on the quarter-to-date? I mean, with the pricing you took, it looks like traffic, we don't know all the variables, but it looks like traffic is probably running half the rate of the 3Q. Is that in the ballpark? And what may explain that other than maybe comparisons or something else out there?

Yes. Andy, it's Michael. Yes. So we reported a 5.4% for those first 5 weeks. I will tell you that the timing of Halloween moving from a Thursday to a Friday had over a 60 basis point negative impact on that number. So I would say if you were to adjust for that, we would be running over 6%. But within that 5.4%, you do have pricing that's probably running in the -- a little over 2.5%. And so you are seeing traffic that's over 3% at this point. But that -- that 3% will probably be over 3.5% ex the Halloween adjustment.

Okay. So your menu price kind of layered in through the month?

Well, no, the 3.1% pricing was fully -- that was fully in effect as of day 1, but we still have some negative mix, call it, 50 to 60 basis points. So you're running 2.5%, 2.6% check increase and the remainder is traffic.

Okay. Got it. Got it. And then yes, with the beef side of things, I mean, 2015 was your previous high on COGS at 36%. Is that kind of the analog with hopefully, the peak in the cattle cycle, at least the low in the cattle cycle driving peak prices for 2026 at least what we know today in terms of what you've laid out.

Andy, it's Michael again. It's hard to pull. You are right, 2015, I think it was 35.9% and that was the end of the cycle and the next year when things did turn, we were 200 basis points lower. So we do obviously expect that percentage to increase in 2026. We will see what happens beyond that. But again, we know when the cycle does turn and you get that year of less inflation or deflation that, that COGS line does improve very quickly. And so that's why we're remaining patient. But too early for us to guide and predict what will happen beyond 2026.

Our next question comes from Lauren Silberman from Deutsche Bank.

A couple of follow-ups. I wanted to also ask on the quarter-to-date side. There's been a lot of noise around October industry-wide, it's been pretty volatile in recent weeks. It sounds like things have slowed given pressure from the government shutdown outside of what you saw with the Halloween, are you seeing any volatility in trends at all more recently? Or it's been pretty stable?

Lauren, this is Michael. I would say, as I look at each week of the October period, outside of Halloween, it was very stable and consistent. So we saw a strong performance throughout the month of October.

That's great. And then on the commodity guide, are you guys actually in being a step up in underlying costs on a dollar basis in '26? Or is it more about compares I guess I'm just thinking through commodities up 8%, 9% in the second half of '25. And I guess your guide would imply close to mid-single digit in the back half of next year as well. So just trying to understand that point.

It is a mixture of that. I mean does go through cycles or prices or there seasonality in the prices. So it is not on every cut that the dollar cost is going straight up from where it was in the third quarter. In some cases, it may be lower in the fourth quarter and then it could go higher and some things move around. So it is not a linear assumption in there. Our procurement experts in the beef area spend a lot of time thinking about how this will play out and it varies by cut. So a lot of this inflation, certainly in the first half of the year is simply the fact that formula-based pricing was much lower and really escalated in the back half of the year. So some of this is just the year-over-year lap even if it comes down from where we were in the third quarter.

Our next question comes from John Ivankoe from JPMorgan.

I actually had to remind myself when your IPO was, which I think was in 2004, correct me on that. But shortly after, your unit growth obviously significantly accelerated as a public company. And sometimes in this industry, our 20-year-old restaurants, can one kind of lead to a lease renewals. So just kind of comment if there are any kind of step-ups in rent as you go from the first 20 years to the second. And then the question just kind of on -- as you think about the asset itself, do you have an opportunity? Or is there a need to kind of comment and say, okay, you can only remodel a restaurant kind of cosmetically to an extent where it actually makes sense to go back and do some more major work for the next 20 years of the restaurants life. Is that something that we should consider as part of the future CapEx cycle?

Yes, John, it's Michael. First on the rent. We do straight line on the rent. So we were we report similar rent numbers, and so there wouldn't be the step up there. It is certainly possible if we came to the end of the negotiated lease term with a restaurant, whether that's 20 or 30 years or with the landlord, excuse me, that there is a reset that could be higher, but that was going to be on a smaller number of stores, so probably wouldn't have a huge impact on that rent number. As far as the need for investing in our restaurants. I mean, we continually maintain our restaurants. And certainly, there have been some that we have relocated that maybe in the early days that Texas Roadhouse wasn't the first restaurant to be in that building, and it wasn't something where you could not continue to just take care of the building and we did relocate. And you'll have cases like that, but the fact that we take care of these restaurants, I think prevents us from having any major concern about a huge step-up in the CapEx needs because we're taking care of them year in and year out.

And John, this is Keith. I would just add on the CapEx side, we do have an aging restaurant base now. And that is why you have seen kind of the uptick in the last couple of years as all the projects that we have been doing to maintain our restaurants. So I think you can expect to see it kind of like the level that we've been at going forward.

Our next question comes from Andrew Strelzik from BMO.

I had a follow-up and then a question. The follow-up is on the mix shift to larger entrees and steaks and things like that. Can you quantify how much of a margin headwind that created is number one. And number two, on the pricing side, your price increases that you've been taking for the last couple of rounds here have been stepping up a little bit. Not [ that's undeveloped ], but a little bit. And at the same time, your wage growth expectations have actually been coming down from 4% to 5% to 4% to 3% to 4%. So in your conversations with the operators, what are they pointing to that's driving that larger price increase over the last couple of rounds?

Andrew, I'll start on the mix shift. Certainly, the higher percentage of guests ordering a stake has had a little bit of a negative impact on our food and beverage as a percentage of sales, maybe 20 to 30 basis points of impact on that percentage. But I'll tell you it's net neutral by and large, to our profit dollars. Those states tend to be -- or larger entrees come at a higher sales price, so we get more sales dollars and their profit dollars are probably equal to what the guests maybe would have ordered otherwise. So from a margin dollar standpoint, not having a huge impact, but you definitely do see a little bit of extra pressure on the food and bev percent line.

And Andrew, yes, this is Jerry. On the pricing, I think we have really candid conversations about what's going on in their local community, what's going on in their state whether it be labor or continued commodity and utilities and all the other factors that come into running a profitable business and then make those decisions based off of that. And sometimes it is about a store or a market or a state, but overall for the company, it's what we feel comfortable with. And it is a little bit about what our competitors are doing. We try to get as educated as possible when we make those decisions twice a year. on where we're at and what we're comfortable with. We're not going to be able to price for every beef inflation as of right now. But we want to make sure that we protect the value side of our business in our menu and our perception.

Our next question comes from Jim Salera from Stephens.

Jerry, if you're looking for a place for new Jaggers in Ohio, I recommend the west side of Cleveland if the real estate team needs some site selection help. I wanted to -- I wanted to ask a little bit about the retail piece of the business that you guys had mentioned earlier. Do you be able to quantify how much of an impact that is? I would think given the really strong brand equity that you have, that can potentially be a way to access kind of a whole new group of consumers, what I would think is a decent margin for you. But just any color you can offer there? And if you have any thoughts around maybe the potential size of that business?

Well, thanks for the -- obviously, all of our retail initiatives are about the brand awareness and being on the grocery store and our consumer, they see that logo and they put a smile on their face and they think about their local Texas Roadhouse. And all we're trying to do in all of that. Now with that said, the -- obviously, the inspired by roles are really a hit and they are really selling well at the retail outlets out there. And we are extremely happy and so is our vendor partner. So it's still just early on as we wrap up the year and we see what kind of revenue that it provides. But I would tell you there is a demand for that particular product. And so we're excited about it. And we will continue to look at making sure that it's available to folks, and we've had a tough time keeping up with it, but it's exciting to see Texas Roadhouse and fired by many roles flying off the shelf like they are. So we're very proud of that. And I'll let the real estate team know about that selection.

Our next question comes from Zach Fadem from Wells Fargo.

So on the inflation front, you see competitors trying to shift the mix to chicken or less inflationary items, either via promo or other avenues. So philosophically, curious if there's a point where beef inflation gets to so high where you would consider either a menu pivot at the core business or Bubba's, et cetera. Any thoughts there?

Yes. We're kind of a steakhouse and I think that it would be hard. We have a lot of offerings with our chicken and pork and in salmon and the country dinners with our country fried chicken and all of those things. So I think we have a lot of other offerings, but America really does believe that we cook a great steak. We serve a great stre and we provide a great steak. And that's what they create. So we're not going to take that away from them.

Our last question comes from Jake Bartlett from Truist Securities.

Mine was on your pace of development and nice to see the increase in '26 and kind of putting a number on that, really driven by the Bubba's 33. My question was on the growth at Texas Roadhouse. You've always been very disciplined not wanting to stretch the team, but your 20 openings would be the least amount that you've opened since I guess, since COVID or just post COVID and on the low end of your historical range. So the question is why have it so low? Are there any sort of headwinds or anything to think about of why that couldn't be a little higher I know bandwidth is something you're very conscious about. But I think -- I would think as you open different brands, the bandwidth is more on a kind of a per concept basis. But any comments there would be helpful.

Yes. I think we said approximately. So that gives us some wiggle room. Some of these deals take a little longer. But I'll tell you, I feel great about the pipeline for '26 and '27 for Texas Roadhouse, for Bubba's and Jaggers. We obviously know that, that Roadhouse is what drives a big part of the business. So we feel very comfortable at approximately 20. I can't commit too far past that. It's a little early, but I do believe that we will be north of that number.

We have no further questions. I would like to turn the call back over to Jerry Morgan for any closing remarks.

Thank you everyone. Congratulations, Michael, for all your hard work with everyone, and we appreciate the support. It's been a heck of a year. And let's go Roadhouse.

This concludes today's conference call. Thank you for your participation. You may now disconnect.