Texas Roadhouse (txrh) Q4 2025 Earnings Transcript

NASDAQ: TXRH

Texas Roadhouse

Market Cap

$12B

Today’s Change

(-2.32%) $4.34

Current Price

$182.53

Price as of February 19, 2026 at 4:00 PM ET

Date

Thursday, Feb. 19, 2026 at 5 p.m. ET

Call participants

• Chief Executive Officer — Jerry Morgan
• Chief Financial Officer — Mike Lenehan
• Chief Accounting Officer — Keith V. Humpich
• Senior Director, Investor Relations — Michael Bailen

Takeaways

• Total revenue — Nearly $5.9 billion, with all brands achieving both sales and traffic growth.
• Same-store sales — Increased 4.9%, with 2.8% traffic growth.
• Comparable sales growth streak — Sixtieth quarter achieved, excluding 2020 disruptions.
• New restaurant openings — 28 company-owned and 4 franchise openings, plus acquisition of 20 franchise locations for $108 million.
• Average unit volume — Over $8.4 million; average weekly sales: $166,000 for Texas Roadhouse, $122,000 for Bubba’s 33, and nearly $73,000 for Jaggers.
• Fourth quarter comparable sales — Up 4.2%, comprising 1.9% traffic increase and 2.3% increase in average check.
• Fourth quarter restaurant margin dollars — Down 15.6% to $205 million, with restaurant margin rate decreasing by 309 basis points to 13.9% due to 9.5% commodity inflation and menu mix.
• Fourth quarter diluted earnings per — Decreased 26.1% to $1.28, reflecting impacts of lapping an extra week from 2024 and commodity costs.
• To-go sales — Represented $22,000 per week, or 13.8% of fourth quarter weekly sales.
• Menu price increases — 3.1% in the fourth quarter and first quarter; planned 1.9% increase in the second quarter for a combined 3.6% menu pricing in the second and third quarters.
• Commodity inflation — 6.1% for the year, with 7% guidance for 2026 and Q2 expected to see highest rates at high single digits; beef is the primary driver.
• Labor cost inflation — 3.7% for the year, below 4% guidance; 3%-4% guidance maintained for 2026.
• G&A expenses — Down 6% in the quarter to 3.6% of revenue; forecasted to rise by low double-digit percentage in 2026, primarily from long-term equity grants and incentive pay.
• holder returns — $180 million in dividends, $150 million in repurchases, and a 10% quarterly dividend increase to $0.75 announced.
• Cash flow from operations — Exceeds $730 million for the year, with year-end cash balance over $130 million.
• First seven weeks of Q1 performance — Comparable sales rose 8.2%, with average weekly sales at approximately $170,000.
• Capital expenditures — $388 million in 2025; 2026 guidance at $400 million excluding $72 million for the five-unit California franchise acquisition, partly funded by a $50 million credit facility draw.
• Franchise system composition — Acquisition of 20 franchise restaurants in 2025 and 5 in California at the start of 2026 is increasing company-owned mix.
• Technology initiatives — Full rollout of digital kitchen and guest management systems completed; expanding tablet server pilot later in the year.
• Diversification — All three brands set sales records, with Bubba’s 33 average unit volumes at $6.4 million, and growth in both units and profitability through prototype changes and conversions.
• 2026 development plan — Approximately 35 new company-owned locations, pending franchise expansion of six international Texas Roadhouse and four domestic Jaggers units.

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Risks

• Restaurant margin percentage remains under pressure as “7% commodity inflation and the best where we end up and with the pricing that we are talking about taking and assuming that some of that, not all of it, flows through the check, I think it is going to be a challenge to get leverage on the cost of sales line.”
• Beef inflation is expected to drive “nearly all of the expected commodity inflation throughout the year,” with guidance for higher than 7% in the first half.
• First quarter G&A expenses are forecasted to increase by a low double-digit percent for the full year 2026 due to new long-term management equity grants and higher incentive compensation.
• Heightened labor and insurance cost pressures are anticipated, with management noting, “cost pressures on insurance and other employee benefits will ly trend higher.”

Summary

Texas Roadhouse (TXRH 2.32%) delivered total revenue just under $5.9 billion, supported by continued traffic and same-store sales growth across all brands. The company confirmed a 4.9% increase in same-store sales, primarily through increased guest traffic. Restaurant margin rate declined year over year, negatively affected by commodity inflation—especially beef—and the year-ago period’s extra week. Management reaffirmed 2026 guidance for commodity and labor inflation, with commodity costs expected to remain elevated in the first half of the year. Capital returns included both a dividend increase and continued repurchases, with substantial investment allocated toward development and the ongoing franchise acquisition strategy.

• Management indicated that after excluding weather and calendar shifts, early first quarter trends show sequential acceleration in comparable restaurant sales growth.
• The digital kitchen system rollout was highlighted as creating a more stable working environment and enabling higher to-go volumes, but there are no immediate plans for third-party delivery.
• Average weekly to-go sales comprised 13.8% of total restaurant weekly sales in the fourth quarter.
• Guidance for wage inflation in 2026 suggests pressure will stem from non-wage components such as benefits and insurance, while the wage component is expected to moderate.
• Bubba’s 33 is projected to benefit from continuing cost reductions, including lower new-unit build costs and conversions from existing buildings, supporting future growth and profitability.

Industry glossary

• Comparable sales (comps): Percentage change in sales for restaurants open at least 18 months, excluding new units or closures.
• Restaurant margin: Restaurant-level EBITDA divided by total restaurant sales, measuring core operating efficiency before corporate overhead.
• To-go sales: Sales generated from guests ordering food for off-premise consumption, distinct from dine-in transactions.
• Average unit volume (AUV): Average annual sales per restaurant, used as a metric for unit-level productivity.

Full Conference Call Transcript

Thanks, Michael, and good evening, everyone. 2025 was another successful year as revenue grew to nearly $5,900,000,000, and all three brands delivered positive sales and traffic growth. We also just completed our sixtieth consecutive quarter of comparable restaurant sales growth excluding 2020. That is fifteen years of sales growth going back to 2010. 2025 included a number of company milestones and accomplishments. We opened our eight hundredth 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. We also solidified our home in Louisville by purchasing our support center buildings.

Our operators continue to serve their communities by raising over $40,000,000 for local schools and non-profit organizations through their dedicated Dine to Donate fundraisers. And finally, we remain proud to honor those who have served our nation by providing 1,200,000 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 four restaurants including three international Texas Roadhouse, Inc. locations, and one domestic Jaggers. For 2026, we continue to expect approximately 35 company restaurant openings across the three brands.

2026 will also benefit from the acquisition of five 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 six international Texas Roadhouse, Inc. locations and four domestic Jaggers. For thirty-three 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. Our technology priorities in 2026 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 shifts to 2026 and beyond, we will remain relentless in our commitment to driving top-line growth, providing high-level hospitality and everyday value to our guests, and remaining a people-first company. Finally, I want to welcome Mike Lenehan, 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 has been getting to know us and beginning next week, he will start his operations training at each of our brands. Mike, please some thoughts on your experience so far.

Mike Lenehan: Thanks, Jerry. I am honored to have the privilege of joining Texas Roadhouse, Inc. As a member of the restaurant community for the last twenty-plus years, and a longtime resident of Louisville, I have witnessed Texas Roadhouse, Inc.’s incredible journey to become a leader in the industry and our community. Since joining in December, I have 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 to specifically thank Keith along with the rest of Team CFO who have made my transition seamless and special.

It has become clear that we have an incredible team and I look forward to the opportunity to lead it while helping Texas Roadhouse, Inc. on its growth journey. Finally, as Jerry mentioned, I am looking forward to spending the next several weeks in our restaurants learning from the best operators in the industry.

Jerry Morgan: And now I would 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 to welcome you and your family to Texas Roadhouse, Inc. We cannot wait to support you further in your Texas Roadhouse journey.

Keith V. Humpich: 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 $8,400,000 with average weekly sales of over $166,000 at Texas Roadhouse, $122,000 at Bubba’s 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 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 three 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 $130,000,000 of cash and cash flow from operations for the full year was over $730,000,000. With this cash flow, we funded $388,000,000 of capital expenditures as well as the acquisition of 20 franchise restaurants for $108,000,000. We also returned $180,000,000 to holders through dividends and another $150,000,000 in 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 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 ly 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 location. As such, our capital expenditure guidance of approximately $400,000,000 remains unchanged. This amount does not include $72,000,000 paid at the beginning of the year to complete the previously mentioned acquisition of five California franchise locations.

As part of funding this acquisition, we borrowed $50,000,000 on our credit facility. Also, today, we announced a 10% increase to our quarterly dividend, bringing it to $0.75 per quarter. And now Michael will provide the fourth quarter financial update.

Michael Bailen: Thanks, Keith. Before I begin the discussion of results, I want to remind everyone that the 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. For the 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 reported a restaurant margin dollar decrease of 15.6% to $205,000,000 and a diluted earnings per decrease of 26.1% to $1.28.

Average weekly sales in the fourth quarter were over $160,000 with To-Go representing approximately $22,000 or 13.8% of 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 seven 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 $222,200. 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 entrée 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 2024. Labor dollars per store week increased 4.3% 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%, which was slightly below our guidance of approximately 4%. Other operating costs were 14.9% of sales, which was four basis points better than the 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 $3,500,000 of additional expense this year as compared to $2,700,000 of additional expense last year.

Moving below restaurant margin, G&A dollars declined 6% as compared to the 2024, and came in at 3.6% of revenue for the fourth quarter. This was primarily driven by lapping $3,700,000 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%–15%. Now I will turn the call back over to Jerry for final comments.

Jerry Morgan: Thanks, Michael. I want to take a moment to thank our guests and our operators for their continued support of our recent tinnitus fundraiser in honor of our founder, Kent Taylor. This year was our fifth annual event and we raised over $1,100,000 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, thirty-three years ago, Kent opened the first Texas Roadhouse. While most milestone birthday celebrations end in a zero or a five, 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, three brands, and more than 100,000 Roadies. I will close with a happy 33rd birthday to Texas Roadhouse and all of Roadie Nation. So on the count of three, can I get a big yeehaw? One, two, three. Yeehaw.

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

Operator: Thank you. Simply press 1 again. As a reminder, please limit yourself to one question. Your first question comes from David Sterling Palmer with Evercore ISI. Please go ahead.

David Sterling Palmer: Thank you, and congrats on a great year. I wanted to squeeze, you know, 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 when a chain gets caught with slow sales late in the quarter, it is tough to adjust the labor and to sort of , you know, 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 are not wanting to make excuses, but maybe you could speak to what sort of a drag that noise or even just the fact that happened late in quarter might have had on your earnings that quarter? And then I am just wondering also, bigger picture question is just the long term when it comes to beef inflation. It feels weird this cycle where it is not getting better fast in terms of the number of cattle head out there, and the demand is remaining strong. So it feels the relief might not be as fast as it was the last time we saw one of these cycles.

And I am just wondering if your thinking is there things that you could do besides have food cost get down to 34 to get back to 17 plus? I mean, you know, you talked about the handhelds, but is there anything that you are thinking about on the labor side and effectiveness there to really offset some what might be a longer, you know, higher for longer on beef? And thank you.

Michael Bailen: Hey, David. It is Michael. Appreciate the question. I hope 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 slowdown that the entire industry saw in December certainly resulted in an elevated number there. I can tell you, you know, so far, the first quarter, we are back to sub-40%. So that does feel 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, you know, for 2026, I think we believe that we can continue to run in that sub-50% level.

As far as beef inflation, yes, we are 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, you know, beginning to expand before, you know, late twenty-seven. So, you know, in periods this, we focus on the dollars and growing the top line and, you know, that is what flows through. And certainly, more dollars can help you leverage labor. It can help you leverage other operating. We are going to stay true to who we are, and that is really going to be our approach to the business.

Operator: Your next question comes from Andrew Barish with TD Cowen. Please go ahead.

Andrew Barish: Great. Thanks. Maybe just first, if you just quantify, if you can, the impact of FERN on the quarter to date. Obviously, a very stellar number, but curious with weather, how much that impacted it. And my real question, you know, is really around now that you are focused, now that you have fully rolled out the digital kitchen, how does it allow you to go on offense in 2026? You know, can we expect more advertising around carryouts? Could a market test of third-party delivery potentially be something you are focused on? Love to learn more about now the digital kitchen is over, what this allows you to do. Thank you.

Michael Bailen: Hey, Andrew. It is Michael. I will certainly start with the question on FERN. It definitely, on the first seven weeks, 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 seven weeks was about 1.5% negative for us. And then when it relates to the digital kitchen, maybe I will start there and see if anybody else wants to join in. Certainly, it has led to that calm, required restaurant, you know, excuse me, kitchen experience. And I think it does free us up to do more to-go business.

And I think we have seen that over the last several quarters. Do not know if we are, you 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.

Jerry Morgan: Yes. 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 a delivery service at this time.

Operator: Your next question comes from the line of Sara Harkavy Senatore with Bank of America. Please go ahead.

Sara Harkavy Senatore: Great. Thank you. 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 what should we expect for pricing? What does that mean a quarterly basis pricing looks ? And then I do have a question.

Michael Bailen: Yes, Sara. It is Michael. So we have 3.1% pricing for the fourth quarter. We will have that same 3.1% here in the first quarter. And then with the 1.9% rolling on, it means we will 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.

Operator: Okay. Great. Thank you. 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 maintained your pricing kind of substantially below the competitive set? Or I guess trying to understand how you think that elasticity, because certainly the quarter-to-date trends, again, including weather, were very impressive. So just the philosophy as you think about the year ahead.

Jerry Morgan: Thanks, Sara. This is Jerry. I will start it off a little bit on the pricing. We try to be very conservative. We believe that the full-service dining segment, we are still well underneath that. So we continue to have great conversation with our operators. We look at it from the lens of our guests and our business and our holders 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 in our menu that is built in throughout everything that we have, and it has been a great strategy.

And I believe we do not 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.

Operator: Your next question comes from the line of James Ronald Salera with Stephens. Please go ahead.

James Ronald Salera: Yes. Good afternoon. Thanks for taking my question. Wanted to ask around tax refunds. There has been a lot of conversations around that potentially driving some incremental consumption, particularly in, I guess, would be more the second quarter. Do you have any historical precedent for years where there are larger than expected tax refunds? Do you see kind of an immediate flow through into the restaurants and more engagement? And if so, does that show up just purely in transactions, or do you maybe see higher attachments? Any comments you would be available.

Michael Bailen: Hey, Jim. It is 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 maybe getting these refunds will result in a benefit for us, to be determined. 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.

Operator: Your next question comes from the line of David E. Tarantino with Baird. Please go ahead.

David E. Tarantino: Hi. Good afternoon. 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 -up to that.

Michael Bailen: Yes, David, definitely, we had a negative impact from Christmas shifting and also the timing of our year end. Those two 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 am sorry, the first seven weeks is benefiting from having New Year’s Eve in the first quarter, and that has had about a little over 1% benefit to our first quarter first seven weeks. Excuse me.

David E. Tarantino: Great. That is helpful. So if I net the impacts from the calendar and the weather, it does look Q1 has accelerated pretty meaningfully on the traffic side. So I just wanted to get your thoughts on why that has occurred, I guess. You know, I know there are a lot of cross currents in the economy, but I guess, what are your thoughts on what is driving the recent strength.

Jerry Morgan: Well, thanks, David. This is Jerry. I do know there was some weather in that timeline, but I really do believe that it is just about us operating at a high level. Our operators are out there hustling. We are 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 are out there hustling. We are trying to make sure our employees have a great experience coming to work, and our guests are having a great experience dining with us. And we are very appreciative of their business.

Operator: Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Brian Harbour: Thanks. Good afternoon, guys. Could 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?

Michael Bailen: Sure, Brian. It is Michael. I would, as far as locked, we are certainly more locked. Our fixed price in the first half of the year, probably about 65% locked first half of the year, and only about 25% in the back half of the year. And that is probably not abnormal over the more recent years from that standpoint. As far as the cadence of the commodity inflation, we mentioned that the first half of the year would be probably above our 7% guidance. I would 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.

Operator: Your next question comes from the line of Peter Mokhlis Saleh with BTIG. Please go ahead.

Peter Mokhlis Saleh: Great. Thanks. 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 since 2024. It was in about 40 restaurants. So can you maybe talk a little bit about what you are 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. Thanks.

Jerry Morgan: Yes. Thanks, Peter. This is Jerry. On the handhelds, 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 have just got a couple more tweaks to make before I think we can offer it up to the operators.

There is no doubt that the handheld and technology side of it does make us a little bit quicker when it allows the server to take the order at the table, to press the send, and, obviously, from an order accuracy standpoint, there are a lot of things that we really about it. What we have to have is it to be reliable, and so we are just working through a few more things. We will 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 there is a lot of focus on it right now.

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

Operator: Your next question comes from the line of Jeff Farmer with Gordon Haskett. Please go ahead.

Jeff Farmer: Thanks. 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?

Michael Bailen: Hey, Jeff. This is Michael. Obviously, there are a lot of moving pieces. I would say, with 7% commodity inflation and the best where we end up and with the pricing that we are talking about taking and assuming that some of that, not all of it, flows through the check, I think it is 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 is really where more of our focus is right now during this cattle cycle.

Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey Bernstein: Great. Thank you very much. Jerry, just curious your updated thoughts on Bubba’s. Obviously, it is taking on a bigger role in this unit growth. And needless to say, when your big brother, Texas Roadhouse, Inc., you are results probably look as good in the short term. I am wondering, because it is in a different category, do you think that one day if you do the same focus on Bubba’s that you do on Texas, it will have the same level of resilience that Texas had? Or is Bubba’s maybe in a different category and a different position where it will never achieve something similar? Just trying to get your sense on Bubba’s outlook.

Obviously, you are accelerating that growth in a few years, but how you envision that brand long term relative to Texas? Thank you.

Jerry Morgan: Thanks, Jeff. Yes. I mean, I see Bubba’s. I really to compare it to the competitive set that it goes in. Obviously, at $6,400,000 average unit volume, we have a lot of confidence in what Bubba’s is doing and who it is competing with. And we are very excited about it. We have got a great team over there. We have 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 real proud of where we are at.

We have done a lot of great things getting some of the cost out of the building to make it a little more profitable for our operators as we go forward. And we will continue to look at ways to offset some of the inflation and other sides of it for that business. But yes, we will ramp up the growth on it. We will get approximately 10 this year, and that is what is on schedule for the ing 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.

Operator: Your next question comes from the line of Jake Rowland Bartlett with Truist Securities. Please go ahead.

Jake Rowland Bartlett: Great. Thanks for taking the question. Mine is about mix. And there are two kind of mixes here that I want to ask about. One is on COGS. Your COGS has been higher than we would think, or one would think, given the pricing and the commodity inflation. You have mentioned that is a shift towards steak. I think that differential increased in the fourth quarter. So the question is, what should we expect from that dynamic in ’26? Is there a possibility that reverses out? Should we continue to expect maybe an increased pressure on COGS from that dynamic? And then if I look at mix within check, it increased in the fourth quarter.

So a little bit kind of confusing to have that increase or get more negative, yet, you know, the cost 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? Thank you.

Michael Bailen: Yeah. Thanks, Jake. This is Michael. You know, 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 are seeing so far this year, it does seem we have lapped a lot of that trade-up to the steak category. That does not mean that it could not reaccelerate. But right now, my assumption is that it 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 moved through the year, 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 more pressure on that line. As I have looked at the beginning of this year, some of that pressure has abated. The 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 entrées, appetizers, soft beverages, mocktails. 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.

Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Please go ahead.

Jacob Aiken-Phillips: Hi, everyone. Good afternoon. So I just wanted to ask about gains. You have shown super consistent traffic strength and peers have shown less so. And I mean restaurants, food, fast casual, QSR, etcetera. What portion of the traffic outperformance do you view as structural gains versus people trading between channels or in and out? How should we view that durability if the consumer weakens further?

Jerry Morgan: Yeah, Jacob. I will start. I mean, it is hard to predict all of that. We open up our doors and we serve our guests and represent our communities all across America and the world. And I think the guest has to make a choice, and the choice is where do they get quality food, where do they get great value, and where do they get hospitality at a high level. And I do believe that is where we continue to win, and that reputation that we have in the industry for consistently providing a great service, great food, and what we call legendary food and legendary service, that just resonates with our consumer.

And they want to spend money, but they want to spend money where they are getting a great product with value. And I believe that is where we settle in nicely.

Operator: Your next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great. Thanks, guys, and welcome, Mike. Wondering if you guys could break down the G&A guidance, the G&A increase a bit more. Is that increase coming from 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 have kind of given some targets in the past for long term as a percent basis. Thank you.

Keith V. Humpich: Dennis. It is Keith. Thanks for the question. Yes. So in December, we completed our 2026 budget process. That included our 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, then also some higher forecasted incentive compensation. I can tell you that when we look at G&A as a percentage of sales, though, I think we see it coming in very, very similar and consistent to what our recent years have been, and we are comfortable at that level.

Operator: Your next question comes from the line of Todd Morrison Brooks with Jefferies. Please go ahead.

Todd Morrison Brooks: Hey, guys. One question and quick -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 table yield or wait time quotes? Or how is that kind of up and running?

Jerry Morgan: 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 are not 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 sat, and then how we accurately quote them when we are 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 are just little things that all add up to additional success. So it is about all I can on that. But it is about really being bigger, faster, and stronger. And getting more people sat accurately from that standpoint. But thank you, Andy.

Keith V. Humpich: Yeah. Very helpful. And then on the headquarters acquisition, I assume that is a benefit to G&A this year versus last, but maybe I am thinking about it wrong.

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

Operator: Your next question comes from the line of Jon Tower with Citigroup. Please go ahead. Jon, your line is open.

Jon Tower: Yeah. Thank you. Jerry, just a quick question for you. The past year, year and a half or so, you focused a lot of some time on innovating around and focusing on beverage on the menu. I think mocktails, dirty 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 know, you are not currently it is not either on the menu today or it is something that is underperforming your internal expectations, or anything you are hearing from your operators that says, hey, this would be a nice area we should be focusing more on?

Jerry Morgan: Well, thanks, Jon. Yes. I think on the beverage side, obviously, mocktails have become very popular out there. Dirty sodas, the $5 all day every day. It is about the beer, but it is really also about that margarita. And, you know, really, Roadhouse was built on an 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, we are always looking at some innovative ideas and talk 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 out there looking at things. We have some things that are out there in test. We will 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 are constantly testing and looking and talking with our operators about what we might look at on the menu. We do not 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 would really have to be a superstar to get added to it.

Operator: Your next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please go ahead.

Andrew Strelzik: Hey, good afternoon. Thanks for taking the question. Going back to the beef topic, and appreciate some of the color you gave on the cattle cycle dynamics. There has 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 have seen any evidence in any of the data that you have looked at or any of your discussions around that dynamic that maybe does offer a little bit of optimism as the year progresses? Thanks.

Michael Bailen: Hey, Andrew. It is Michael. Thanks for the question. I think we have 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 may or may not continue is hard for us to know. And we are not trying, in our forecast, we are not trying to predict what the demand side might be. So if there was 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 is what is 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.

Operator: Your next question comes from the line of Rahul Krotthapalli with JPMorgan. Please go ahead.

Rahul Krotthapalli: Good afternoon, guys. Can you update us on the build cost inflation and how it is tracking at both Roadhouse and Bubba’s and especially how we are thinking about cash-on-cash returns for both these concepts as we go forward? And I have a -up on the company versus franchise mix. I have seen this slowly pick up over time from low eighties company mix to the high eighties we are currently. Is there a conscious goal to get to a certain level over time? Can you some of your thoughts here? Thank you.

Michael Bailen: Yes. Sure. Hey. This is Michael. I will start with the investment cost. So on the Roadhouse side, we are expecting our average all-in investment cost that includes 10 times rent factor will be increasing to around $8,900,000. We think we are around $8.3 to $8,400,000 here in 2025. Some of that increase is coming from higher rents. Certainly, it is not getting any cheaper to build a building, and we also have a handful of restaurants in California that we will be opening in ’26, and that probably adds a few $100,000 to that cost for Roadhouse. On the Bubba’s side, the opposite is expected.

We are expecting to see maybe a little more than a half million dollar reduction in our investment costs going from around $9,000,000 down to $8.5 million, $8,400,000 for 2026. We have 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, and we have done two of those so far that have opened and definitely seen some cost savings by doing that. So we are hopeful and expectant that can continue with some more of these conversions.

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

Operator: Your next question comes from the line of Brian Michael Vaccaro with Raymond James. Please go ahead.

Brian Michael Vaccaro: Hi. Thanks, and good evening. Most of mine have been asked, but just two nitpicks if I could. Within the other OpEx line, I am curious what you are 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 five units, for $72,000,000, was there acquired real estate within that acquisition price? Thank you.

Michael Bailen: Yeah. Hey, Brian. I will 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 OpEx, I think certainly there is an expectation that utility costs will continue to go higher. But I do think there is still opportunity to potentially get some leverage in other OpEx in 2026. Probably low single-digit growth in dollars per store week is probably the best guidance I can give you. Do not think I have an inflationary percentage to throw out at this time.

So we do think we are going to continue to see some cost pressures, but nothing, other than utilities, too out of the ordinary.

Operator: Your next question comes from the line of Gregory Ryan Francfort with Guggenheim. Please go ahead.

Gregory Ryan Francfort: Hey. Maybe sticking with expenses, just labor inflation running under 3% this quarter. Anything that maybe there were less overtime hours just given the sales, or I guess I am trying to figure why that might ramp next year, or, I guess, this year in ’26. Thanks.

Michael Bailen: Yes. I mean, there are several components. We talk about a wage and other inflation. And so the wage component, certainly we have seen that trend down and stabilize, and that is kind of the expectation that we have into 2026. But we do think that there are 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.

Operator: Your next question comes from the line of James Jon Sanderson with Northcoast Research. Please go ahead.

James Jon Sanderson: Hey. Thanks for the question. I wanted to talk a little bit more about pricing. Given the 3.6% you will have in the second quarter, how do you see yourself positioned with respect to top competitors? Do you feel that your value gap is just as strong or compelling, and maybe if you have any consumer feedback about how the consumer perceives the brand on a value basis, if that is improving.

Jerry Morgan: Thanks, Jim. Absolutely, we will keep a close eye on any conversation that comes up. But, obviously, after these first seven weeks, as we continue to roll. But, again, we are built on a conservative approach to pricing. We still believe we are well under our competitors in full-service dining average twelve months rolling. So we will continue to look at that. But if we get feedback, we absolutely will consider and talk through that. But we really feel we have such a great value, and we are continuing to operate at a high level. And that is the approach that we will continue to take. And we feel great about it.

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

Jerry Morgan: Thank you all for your time with us tonight. And to Roadie Nation, stay focused on high-level hospitality. Let’s go, Roadhouse.

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

Stocks Mentioned

Texas Roadhouse

NASDAQ: TXRH

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