Beloved chain Texas Roadhouse was founded on the idea of serving high-quality steakhouse fare at affordable prices. But, lately, those prices just keep creeping up.
CEO Jerry Morgan announced during an earnings call on Thursday that the popular restaurant group raised its menu prices earlier this month by 2.7%. It’s the second time this year that the Kentucky-based company has instituted a price hike, following a 2.2% increase back in April.
Morgan explained that the latest increase was primarily meant to offset the rising cost of labor, “including the impact of upcoming state-mandated wage increases.”
At the same time, Texas Roadhouse—like all steakhouses—is also wrangling with soaring beef costs, due to declining cattle production. While the impact is softened somewhat because other food costs are dropping, the company conceded that higher beef prices are eating away at potential profits.
Asked whether Texas Roadhouse should consider raising menu prices even higher, Morgan said he wanted to be “careful,” in order to maintain the brand’s reputation for affordability. “I want us to be seen as a value concept, as always,” he said.
Morgan expressed some hope that beef prices would eventually come down, but the company’s own forecast for 2024 offered no such relief in sight. Michael Bailen, the company’s senior director of investor relations and financial analysis, singled out beef as “the driving force of our expected inflation next year.”
Despite those challenges, Texas Roadhouse has continued to draw crowds and drive sales in stark contrast to an otherwise sluggish restaurant industry in general. The company reported over $3.4 billion in revenues so far this year, up 15% above last year’s figures. A report from analyst firm Placer earlier this month showed Texas Roadhouse generating higher foot traffic than other full-service restaurant chains.
The Kentucky-based company also announced that it’s accelerating its expansion plans, investing over $340 million into building new restaurants and updating older locations. Chief Financial Officer Chris Monroe said the plan calls for 12 new restaurant openings by year’s end and another 15 over the first half of 2024. Texas Roadhouse opened nine new restaurants over the last quarter alone, including two locations of its smaller, casual burger-centric concept, Bubba’s 33.
“The restaurant industry has always been full of challenges,” Morgan said during the call. “However, we have seen the consumer has remained resilient in their desire to dine at restaurants, especially those like ours that offer a quality product with a high level of value, service, and hospitality.”