Company Overview
Texas Roadhouse, Inc. (NASDAQ:TXRH) has established itself as a premier player in the casual dining industry, captivating diners with its legendary food, exceptional service, and vibrant dining atmosphere. As the company continues to expand its footprint, both domestically and internationally, it has consistently delivered impressive financial results, showcasing its ability to navigate various economic landscapes.
Founded in 1993 by the late W. Kent Taylor, Texas Roadhouse started with a single restaurant in Clarksville, Indiana. Over the past three decades, the company has grown to a formidable network of 784 restaurants, including 666 company-owned and 118 franchise locations, across 49 states, one U.S. territory, and ten foreign countries as of December 31, 2024. This extensive reach has solidified Texas Roadhouse's position as a dominant force in the casual dining segment.
Dining Experience and Menu
The company's success can be attributed to its unwavering commitment to providing an exceptional dining experience. Texas Roadhouse's menu features a diverse array of specially seasoned and aged steaks, complemented by a selection of ribs, seafood, chicken, pork chops, and vegetable plates. The restaurants also offer a wide range of burgers, salads, and sandwiches, all served with the brand's signature free, unlimited roasted in-shell peanuts and freshly baked yeast rolls.
Brand Portfolio
In addition to its flagship Texas Roadhouse concept, the company has expanded its portfolio to include two other restaurant brands. In 2013, Texas Roadhouse opened its first Bubba's 33 restaurant, a full-service casual dining concept featuring burgers, pizza, and wings. The following year, in 2014, the company launched its fast-casual Jaggers concept, offering burgers, chicken sandwiches and tenders, fresh salads, and hand-spun milkshakes. This diversification has allowed Texas Roadhouse to cater to a broader range of customer preferences and dining occasions.
Competitive Advantage
Despite facing challenges such as delays in opening new restaurants and navigating the competitive casual dining landscape, Texas Roadhouse has maintained its focus on providing high-quality, freshly prepared food, a fun and comfortable atmosphere, and exceptional service. This commitment has enabled the company to build a loyal customer base and maintain its leadership position in the industry.
Milestones and Recognition
The year 2024 was particularly significant for Texas Roadhouse, as it celebrated several important milestones. The company opened its 750th systemwide restaurant and launched its first international Jaggers location, further expanding its global footprint. Additionally, Texas Roadhouse was honored with the prestigious "Brand Icon" award by Nation's Restaurant News, recognizing its enduring impact on the restaurant industry. The company also marked its 20-year anniversary as a public company, highlighting its long-standing success and resilience in the market.
Corporate Culture
One of the key drivers of Texas Roadhouse's operational excellence is its people-first culture. The company's managing partners and market partners are required to sign multi-year employment agreements and make refundable deposits, fostering a strong sense of ownership and dedication to the brand. This approach has enabled Texas Roadhouse to attract and retain talented, experienced, and highly motivated individuals who are committed to delivering legendary food and service.
Financials
Texas Roadhouse's financial performance has been nothing short of impressive. In the fiscal year ended December 31, 2024, the company reported total revenue of $5.37 billion, representing a 16.0% increase compared to the prior year. This robust revenue growth was primarily driven by an 8.5% increase in comparable restaurant sales, which included a 4.4% increase in guest traffic.
The company's bottom-line performance was equally noteworthy, with net income reaching $433.59 million, or $6.47 per diluted share, in 2024. This marked a 42.5% increase in earnings per share compared to the previous fiscal year. Texas Roadhouse's strong profitability is further evidenced by its healthy restaurant-level margins, which improved to 17.1% in 2024, up from 15.4% in the prior year.
In the most recent quarter (Q4 2024), Texas Roadhouse reported revenue of $1.44 billion, up 23.5% year-over-year. Net income for the quarter reached $115.8 million, a significant increase from $83.6 million in Q4 2023. The increase in revenue was primarily driven by a 6.6% increase in comparable average unit volume and 13.7% store week growth.
Liquidity
The company's ability to generate substantial cash flow has been a key competitive advantage. In 2024, Texas Roadhouse reported operating cash flow of $753.63 million and free cash flow of $399.29 million. This robust cash generation has enabled the company to self-fund its growth initiatives, including new restaurant openings, while also returning capital to shareholders through dividend payments and share repurchases.
As of December 31, 2024, Texas Roadhouse had a strong liquidity position with $245.2 million in cash and cash equivalents. The company maintains a $300 million revolving credit facility, with an option to increase by an additional $200 million. As of the end of 2024, the company had no outstanding borrowings and $296.8 million of availability under the credit facility. The company's debt-to-equity ratio stood at 0.63, while its current ratio and quick ratio were 0.62 and 0.57, respectively.
Growth Strategy
Looking ahead, Texas Roadhouse remains focused on expanding its footprint both domestically and internationally. In 2025, the company expects to open approximately 30 new company-owned restaurants across its three concepts: Texas Roadhouse, Bubbas 33, and Jaggers. Additionally, the company's franchise partners are expected to open 7 international Texas Roadhouse restaurants and 3 domestic Jaggers locations.
Segment Performance
Texas Roadhouse operates three distinct restaurant concepts. The Texas Roadhouse segment, which is the company's core business, comprised 721 restaurants as of the end of fiscal year 2024. This segment generated $5.01 billion in restaurant and other sales in fiscal 2024, accounting for 94% of the company's total revenue. The restaurant margin for the Texas Roadhouse segment was $865 million, or 17.3% of restaurant and other sales.
The Bubbas 33 segment operated 49 company-owned restaurants as of the end of fiscal 2024. In fiscal 2024, Bubbas 33 contributed $297.61 million in restaurant and other sales and $46.42 million in restaurant margin, which was 15.6% of its restaurant and other sales.
The Jaggers segment, the company's fast-casual concept, had 14 locations as of the end of fiscal 2024. The Jaggers segment is included in the "Other" category, which also contains the company's retail initiatives. In fiscal 2024, the Other segment generated $31.54 million in restaurant and other sales and $4.36 million in restaurant margin.
Geographic Performance
Texas Roadhouse operates predominantly in the United States, with 666 company-owned restaurants across 49 states as of December 31, 2024. The company also has 118 franchise restaurants, including 57 international locations in 10 foreign countries and one U.S. territory.
Industry Trends
The overall U.S. restaurant industry has seen a compound annual growth rate (CAGR) of approximately 4-5% over the past 5 years, with the casual dining segment growing at a slightly slower pace. Texas Roadhouse has consistently outperformed the industry average, as evidenced by its strong comparable restaurant sales growth and expansion of its restaurant network.
2025 Outlook and Guidance
For 2025, Texas Roadhouse has provided detailed guidance across various metrics. The company expects wage and other labor inflation of 4-5% in 2025. Commodity inflation guidance has been updated from 2-3% to 3-4%, primarily due to tighter expected cattle supply in the back half of 2025. Capital expenditure guidance of approximately $400 million remains unchanged, not including $78 million for the acquisition of 13 franchise locations. The income tax rate guidance for 2025 remains between 15-16%.
In terms of shareholder returns, Texas Roadhouse announced an 11% increase to their quarterly dividend and a new $500 million share repurchase program, demonstrating the company's commitment to delivering value to its shareholders.
Resilience and Adaptability
Despite the challenges posed by the COVID-19 pandemic and ongoing macroeconomic uncertainties, Texas Roadhouse has demonstrated its resilience and ability to adapt to changing market conditions. The company's relentless focus on operational excellence, commitment to its people-first culture, and strategic growth initiatives have positioned it for continued success in the years to come.
Conclusion
In conclusion, Texas Roadhouse's compelling blend of culinary excellence, exceptional service, and operational efficiency has solidified its position as a premier player in the casual dining industry. As the company continues to expand its reach and deliver exceptional shareholder returns, it remains well-poised to capitalize on the growing demand for authentic, high-quality dining experiences. With a strong financial position, clear growth strategy, and proven ability to execute across its three distinct restaurant concepts, Texas Roadhouse is well-positioned to maintain its leadership in the casual dining segment and drive long-term value for its stakeholders.