How Texas Roadhouse defies negative traffic trends

Third-quarter earnings reports were mostly positive for restaurant companies based on sales metrics. Price increases averaging 8.5% will eventually lead to such elevators.

However, below the surface, traffic remains a challenge — a problem because this metric tends to better symbolize demand. Traffic in October fell 2.6% year over year, according to Revenue Management Solutions, marking the eighth consecutive month of decline in traffic in the industry. These numbers illustrate the balance operators are trying to protect their margins in an inflationary environment without turning away too many guests. It’s certainly a delicate balance, and silver bullets seem largely elusive. However, there were some bright spots. For example, during the company’s Q3 conference call, First Watch executives pointed to increased traffic, citing seasonal menus and alcohol as critical factors. McDonald’s also saw a traffic lift this quarter, thanks in large part to a highly successful marketing cadence.

Then there’s Texas Roadhouse, which also saw positive attendance — half a point overall, with dining room attendance up 3.3%. The casual dining chain is now enjoying 10 straight years of positive traffic growth, with no limited-time offers or flashy marketing campaigns in sight. For the company to maintain such a winning streak through its own price hikes and the segment’s overall challenges is somewhat unusual. During a meeting earlier this week, Travis Doster, vice president of communications, said the company’s development is driven simply by consistency and value.

“The reason I’m bullish about our brand is because we’re values-based. Two homemade side dishes and bread? That’s a lot of food,” he said, referring to the free offerings that come with an appetizer order. “And we will never market our experience. We pride ourselves on baking our own bread, cutting vegetables and making potatoes every day. We mean it when we say we have to win every customer,” said Doster.

In other words, Texas Roadhouse is serious about directing traffic. It’s part of the brand culture, which is also a certain differentiator. During a recent tour of the headquarters in Louisville, Kentucky, this culture was showcased on every possible inch of wall space—murals of the original investors, Texas flags, American flags, Andy Armadillo (the chain’s mascot) and his friend Iggy, framed photos of musicians and athletes and jerseys, neon guitars, margarita-style knick-knacks and so much more, including a scale replica of a bar and kitchen. The building also includes a hive room, where a beekeeper tends to tens of thousands of honey bees that produce the company’s honey, including its signature cinnamon honey butter. A giant poster with a photo of founder Kent Taylor, who passed away last year, is signed by all employees with notes like “We miss you, but we won’t forget the mission.”

Throughout the tour, there were several references to Taylor’s book, Made From Scratch, as a guide to the chain. The book follows the chain’s journey from its beginnings nearly 30 years ago. Not much has changed since then.

“I’ve worked at this company for a long time and what impresses me most about Texas Roadhouse is our consistency. I’m not the only one who’s been here a long time. We’re able to stick to the plan because we’ve consistently focused on our mission of legendary food and service. We don’t have a lot of new people trying to change that,” Doster said.

Undoubtedly, “value” is defined differently these days, and Texas Roadhouse could be a case study of how. Gone are the dollar menus and deep discounts that further erode operators’ already thin margins. In the current economy, value means affordability, but also experience, quality, service and comfort. The NPD Group recently echoed this shift, reporting that consumers are benefiting less from restaurant offerings than they did during the Great Recession. NPD noted that foodservice deal opportunities fell 1% year over year and non-deal orders fell 2% in the quarter. Additionally, the major restaurant chains that expanded their deal offerings in September didn’t outperform those that didn’t. Overall, according to the NPD, the top-performing chains had consistently high customer satisfaction scores based on friendly service, quality food, food taste, and affordability.

Of course, convenience also plays a role now. Despite its refusal to deviate from its founding principles, Texas Roadhouse has embraced off-premises business and technology out of necessity. Doster said this shift has allowed more customers to discover the brand during the pandemic, which has also helped boost traffic.

“People got tired of cooking and driving, I think, and that worked in our favor,” he said.

For comparison, take-out was between 5% and 8% for the chain before the pandemic and is now up to 20% in some locations, even with a strong return to dine-in. Doster reckons this mix will endure as more operators and consumers embrace technology-enhanced efficiency and convenience.

“During our last annual fall tour with managing partners, more questions about the technology came up than ever before. Our partners want to make it easier for customers and better for employees with technologies such as kitchen display systems and roadhouse pay (pay-at-the-table). We also all know that we will not look at anything that would detract from our legendary food and service mission,” Doster said.

One of the biggest challenges in maintaining this mission is that the Texas Roadhouse model requires a large amount of work. It’s hard work building these pages from scratch every day, but Doster notes that the team believes that “people can taste effort,” and as such, work won’t be something the chain will cut corners on. As such, Texas Roadhouse offers scheduling flexibility, tuition reimbursement, a managing partner model, and more.

“We focus on culture and that includes flexibility and quality of life. This means that we get additional staff so that you can take time off. It starts with our executive partner model, which makes us proud and ensures the consistency we want,” said Doster. “We earn our customers with every plate. Some might say it’s a cliché, but we’ve proven it works.”

It is perhaps worth noting that Texas Roadhouse has been ranked #1 in the US Customer Satisfaction Index for the past few years in a row.

Contact Alicia Kelso at [email protected]