Texas Roadhouse, Inc.

Good evening and welcome to the Texas Roadhouse Fourth Quarter Earnings Conference Call. Today's call is being recorded. All participants are now in a listen-only mode. After speaker's remarks, there will be a question and answer session. At the time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Should anyone need assistance at any time during the conference, please press star zero and an operator will assist you. I would now like to introduce Ms. Tonya Robinson, the Chief Financial Officer of Texas Road Health. You may begin your conference now.

Thank you, Annie, and good evening, everyone. By now, you should have access to our earnings release for the fourth quarter ended December 29th, 2020. It may also be found on our website at TexasRoadHouse.com in the investor section. Before we begin our formal remarks, I need 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, including factors related to the COVID-19 outbreak. 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 Ken Taylor, founder and chief executive officer of Texas Roadhouse, and Jerry Morgan, president of Texas Roadhouse. Following our remarks, we will open the call for questions. Now I'd like to turn the call over to Ken.

Thanks, Tanya, and thanks, everyone, for joining us. The challenges we faced in 2020 were unlike any other, and I'm very proud of how our operators worked through the uncertainty that The fourth quarter was another example of how we must stay on our toes, ready for the quick changes this pandemic throws our way. After a good start in October, our top and bottom line results were impacted by the reclosure of approximately 90 of our dining rooms, along with increased capacity restrictions and many other of our restaurants starting in mid November. More importantly, most of these dining rooms have reopened, and as of today, over 98% of our company-owned restaurants have some level of dining room capacity in place. Sales are benefiting from reopenings and the easing of restrictions, as weekly sales in limited capacity restaurants have averaged over $108,000 for the first seven weeks of 2021. The last 11 months have shown us that Texas Roadhouse brand is strong as ever and consumer demand to dine inside our restaurants remains high. In addition, our to-go sales continue to be a big part of our restaurant business. For restaurants with dining rooms open, to-go sales average just over 25,000 per week or approximately 23% of sales during the first seven weeks of 2021. Our expectation is that to-go sales will remain a significantly larger part of our business after capacity restrictions are lifted and our dining rooms fill up again. However, we are simply waiting for everything to return to normal. or we are not, I'm sorry. We are in a growth mode. In 2020, we opened 22 new company-owned restaurants across our three concepts, and our franchise partners opened four restaurants, including two international locations in Korea and Taiwan. In addition, we signed several new development agreements in the back half of 2020 for Korea, Brazil, and Puerto Rico, which is providing a pipeline of locations for 2021 and beyond. Our 2021 development plan is shaping up nicely, and we plan to open between 25 and 30 company restaurants this year, including as many as five Bubba's 33 restaurants and one Jagger's restaurant. Speaking of Jagger's, our newest location opened in early December and continues to perform way above our expectations. We have a few more company-owned locations already in the works for 2022, and we will continue to explore potential franchise opportunities. Our retail business continues to expand with two recently signed licensing agreements. The first is for a bottled version of our margarita mix, while the second is for a canned cocktail seltzer that will be offered in a variety of Texas Roadhouse branded margarita flavors. Both are expected to be in retail locations sometime during 2021. These initiatives, together with our butcher shop business, are low risk and require minimal investment. We believe over time they have the potential to generate strong returns. We are excited about our growth opportunities. However, we remain focused on the operational challenges we continue to face due to the pandemic. Just like in 2020, the safety and well-being of our guests and employees remains our top priority this year. We are also feeling the impact of inflationary pressures throughout the business, from commodities to wage rates to the cost of supplies and food packaging. Over the coming weeks, we will have conversations with our operators about menu pricing options, and based on their feedback, we could take some additional menu pricing as early as the middle of the second quarter. And we will be keeping a close eye on federal minimum and CHIP wage developments as any increases are factored into our pricing decisions. While business is certainly not back to normal, we are encouraged by the direction of the business in our current financial position. We are committed to making the right decisions for the long-term benefit of the company, making the right decisions for the existing business, while also focusing on the future growth requires strong leadership. That is why I'm pleased about the recent addition of Jerry Morgan as president of Texas Roadhouse, Jerry shares my vision and has the same passion that our entire management team has. His experience and perspective will be a great addition to our leadership team. But Jerry, why don't you give us some of your thoughts, man? Thanks, Kent. I appreciate that. This company has been a big part of my life starting back in 1997 when I joined as a managing partner at the first Texas location in Grand Prairie. I'm excited and honored to serve as the president of this amazing company that Kent created in 1993. Over the last several weeks, I've been spending time with each and every person in our support center to understand ways I can better serve and set them up for success. As I become involved in new areas of the business, I look forward to working with Kent and our leadership team to build upon our success. And before I pass it back to Kent, I would like to give a shout-out to all of our folks dealing with the weather issues across the country. We are here if you need us. Thank you for all that you do, are you doing out there, and stay safe. Kent, back to you. Thanks, Jerry. I look forward to working closely with you in your new role. With your guidance at the Support Center, as well as partnering with Doug Thompson, our COO, and our strong regional partners on restaurant operations all have even more time to focus on new ideas. For example, I've had a lot of fun the past six months working on new retail initiatives and fine-tuning Jaggers, which has set us up for future growth over the next decade. We've been very successful in the full-service world, so why not retail and fast food, too? I want to end with a big thank you to our operators and support center staff 2020 was a year filled with challenges and y'all did not hesitate in your efforts to tackle and overcome them. Without your efforts, Texas Roadhouse would not be as strong as it is and ready to get back on track in 2021. Now, Tonya, take it away.