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spk04: Q4 without any additional pricing would be 4.1. And then on the labor turnover, yep, sure. On the turnover side, turnover continues to be high at the hourly level. I think that's just the dynamic we're probably going to live with for a little while. Staffing has gotten better. But, you know, the training costs, things like that, will probably, you know, stay up a little bit as we continue. We're very focused on the turnover as far as providing good training to our employees, development, holding on to them past that 90 days, tends to sometimes be kind of the point that they leave. And then on the management side, you know, our turnover, it sticks up a little bit from our very low levels where we were. And I think we continue to see that kind of hang in, maybe be a little lower as we continue throughout. So not really any change on the turnover side, I would tell you, from kind of what we've done before.
spk11: Yeah, I'd say we're pretty flat to where we were. We definitely haven't peaked or gone any higher. And I actually think it's starting to come down just a hair, but that's a good sign. So we're going to hope for the best on that. But people are settling in, staying put.
spk06: Thank you very much. Thank you.
spk01: Our next question comes from Brett Levy with MKM Partners. Please go ahead.
spk06: Great. Thanks for taking the question. You started to say that you were getting optimistic about development, and it sounds like now that you have a little bit more skin in the game with Jagger's and Bubba's is showing some momentum. How are you thinking about what a realistic next level is? We'll say not just the next three years, but maybe the next five to ten years. Where do you think you can go? You used to use a 750 number. And then separately, with respect to all of the technology and equipment rollouts, can you give us a rundown in where you are in terms of what's been implemented and what you expect to see over the course of the year, both in implementation as well as any kind of cost or sales productivity? Thanks.
spk04: Yep, sure. On the technology side of things, the roadhouse pay we talked about, which we talked about before, that's in tests, being rolled out, not in a lot of stores right now, about 100, I think. And the goal would be to get that for the most part, rolled out to all stores by the end of the year is kind of what we're targeting. So that test has been going really well. You know, we've done a test with handheld to order at the table. That's going a little bit slower being tested. We'll continue to keep an eye on that. On the KDS systems, we've implemented that in one new restaurant for Texas Roadhouse. And we have an implementation in an existing restaurant coming up later this year. So going a little slower with that one. We'll see how that goes. And then the Jaggers app has been pretty recent, the upgrade to that, which is really cool, and adding that loyalty program. So that's been implemented, rolled out, and we'll continue to see how that drives forward. So the wait list technology that we talked about, digital wait lists and The Aqua Texas Shirt House, that's been rolled out for a while. It's been implemented. So it's good to see that data coming in and see that being very successful for sure.
spk11: And then on the growth side, you know, I believe that we are optimistic about some of the smaller towns that we've been able to go in and have success. So on the roadhouse side, that gives us confidence that we can continue on the larger areas. But now we can also expand to maybe smaller communities that – we would fit into and feel good about. Bubba's, obviously, we're committed to Bubba's and growing it and continuing to see success there with Vision. And then Jagger's is still very exciting. You know, we really are confident we have the two franchise partners that are signed. One will get a store open this year. One should be very early next year. We continue to work on company stores to get that growth going. And so, you know, we are excited. We are behind them. and really setting a lot of things up for them to contribute at a much bigger level than they are right now.
spk06: Thank you.
spk01: Our next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.
spk02: Great, thank you. Just looking for a little bit of detail on the wage rates. Specifically, how does your wagering so they should compare in the front of the house versus the back of the house.
spk04: Yes, so wage rates are going to be up a bit more in the back of the house. That's primarily where that wage inflation is going to live. Simply because front of house here, you know, for most of them are on a tipped wage. So there is a, you know, in states where you're seeing tipped wages go up, that's impactful. But most of the time you're looking at the minimum wage going up, and that's definitely more impactful in the back of house than the front. Overall, you know, it was wage inflation was a bit higher in Q1 as expected because of the volumes that, you know, the sales volume change and what we were lacking from Q1. We expect that, you know, now with a shift more from that to go to dining room, it should moderate a little bit on the wage labor side throughout the year and more wage inflation side throughout the year is our expectation right now.
spk02: All right, that's helpful. And then just one more. So a lot of investor focus on your commodity basket. I think beef was roughly 50% of the... the spend or the basket cost in 2021. But then again, investors are looking to dive a little bit more deeply beyond that. So once you get past beef, what are the next three or four largest commodity exposures for a roadhouse? And can you help us understand how you contract or do not contract for those exposures?
spk04: Yes, sure. Yeah, beef is, you know, just a little over, it's kind of in that 45 to 50% range is where that lands a little closer to 50. Your other proteins, so pork, chicken, seafood, you're getting around 15% of the commodity basket. And then grocery, which is your bread mixes, oils, things like that, includes soft-bev. That runs... call it another 10% to 12%. Produce is about 8% of the basket. And dairy, another five. I think all those add up, Jeff, I hope. We're getting pretty darn close to the total 100%. But that's kind of how we are there. On the other proteins, I believe we have quite a bit of those locked up. I mean, primarily you're looking at pork and chicken. Seafood is a little bit smaller piece of that basket. So that's something we treat very similar to beef. We like to be as locked as we can on those prices and on supply. Grocery, you know, sometimes we'll be locked on some of those items, oil, bacon. We kind of put that in that grocery bucket. Produce, not as much. We don't lock up as much of our produce from a price perspective. So we focus on locking up supply but not as much on price. So that's really kind of the way we look at it, the entire commodity basket from that perspective. I hope that's kind of what you were looking for.
spk02: Yeah, yeah, exactly what I was looking for. Thank you, guys.
spk01: And our next question will come from Andy Barish with Jeffrey. Please go ahead.
spk10: Hey, guys. Just two follow-ups. You know, the cadence of
spk09: You know, commodities, I mean, is it kind of a, you know, a steady decline down from these first quarter levels, you know, given what you know today and what the laps were from last year?
spk04: Yeah, I would say it's pretty steady. I mean, the 17% for Q1 came in a bit softer than we expected. As you all remember, we were guiding to 17% for the first half of the year. So our expectation would be that Q2 would be a bit lower, and then you would see even a bit lower than that in Q3-4. because that's when we start lapping the higher costs last year, really started at the beginning of Q3. So that would kind of be, you know, how we build out to get to that 12% to 14% in that range.
spk10: Gotcha.
spk09: And then can you just tell us, Tanya, on the seasonality of the business over the next couple of months just as we go into the slower summer? I mean, there's You know, the 135,000 a week in April is still phenomenal. But does May and June typically slow down a little bit?
spk04: Yeah, it does typically slow down a little bit. And, you know, it's interesting that last year you didn't see that slow down. If you look back at average weekly sales throughout the year, we didn't really see as much seasonality on the period. But Mother's Day is in May. That's usually a big time for us. And you do see some softening in the summer months, and then it kind of picks back up again in Q4.
spk11: Yeah, and then we've got Father's Day, obviously, in June. And, you know, we have seen an interesting, you know, a lot of times when the school season or session is in, but we're really, we were, you would slow up during Monday through Thursday and be busier on the weekend. So I guess with some of the kids still not completely schools wide open, that we're probably not seeing that same slowdown during the week. And we're really continuing to see that progress through the weekend and And then in the summertime, we really do get busier during the week. And maybe the weekends slow up a little bit when the weather is good. But it can hold mostly and probably until we get back to the school season in late August and September when it really softens.
spk09: Yeah, I would imagine, Jerry, those special occasions have been, you know, and holidays have been really strong as well, I would think, compared to, you know, historical levels.
spk11: Yeah, as we are here in Louisville anticipating the kickoff of the Triple Crown, we kind of, in the restaurant world, we call Valentine's Day, Mother's Day, and Father's Day our Triple Crown. So we not only get to do the first leg here in Louisville, and then we get to do the second leg in the restaurant because Mother's Day is Sunday. Don't you all forget that. You better get her a gift card to Texas Roadhouse. you know, or take her there yourselves personally would be awesome.
spk09: And then the Derby on Saturday. Have a good one. Thanks, guys.
spk11: Yeah, what a weekend it's going to be.
spk01: Our next question will come from Jim Sanderson with North Coast Research. Please go ahead.
spk03: Hey, thanks for the question, and congratulations on a great quarter. Just wanted a little bit of help on understanding how historically the U.S. consumers reacted during really intensely inflationary times. I'm looking at higher gas prices, higher food costs, higher mortgage expense, rental expense. Just how does, based on your experience in the past, how do you expect the consumer to navigate all of this and continue to dine out at Texas Roadhouse? Thank you.
spk11: Well, what we can look back on was probably 08, 09, and I think our commitment to heaping sides and keeping our portions strong and making sure that that food that we deliver on that plate is our reputation and not wavering from any portion sizes, not wavering from any execution, and just continue. That's what really, when we look back and discuss, How do you get through difficult times? You deliver on your promise, and I think that we are committed to that. We're going to continue to put every portion that we have on that plate, our heaping sides, our smoking hot steaks, and just everything that we do. We believe that that's what will carry us through because we don't know how difficult it's going to be. But what we want the consumer to rely on is our ability to consistently deliver on what they want when they come in that door. So that's really what we can live on is just do the best that we can at what we do.
spk03: Understood. And just a quick follow-up question. I think you mentioned your to-go sales had declined slightly. But I'm wondering if that's primarily consumers swapping a to-go order for a dine-in order, and if your delivery portion of those to-go sales are relatively stable, if you can kind of speak to how that delivery portion has held up or not.
spk04: Yeah, well, we don't do any delivery per se. You know, the guest comes to the restaurant to get the food. So we really don't have that piece. I think, you know, we see sales very stable, over 18,000 a week. And that gives us a lot of confidence that those to-go sales continue to be sticky. Even though the percent of sales comes down, we actually like that because that means the dining room is going up. And that's a good thing. So all of that continues to look. even though you are, you know, you are seeing a little of that as we wrap all of the restrictions from last year, you know, and things like that.
spk03: All right. Thank you very much.
spk01: Our next question comes from John Tower with Citi. Please go ahead.
spk07: Thanks for taking the question. I appreciate it. Just a few, if I may. You know, Jerry, you mentioned the idea that you're having success penetrating these smaller towns with the Texas brand. And I'm curious to know, are you doing anything to the footprint of the stores to accommodate potentially smaller volumes or perhaps even reconfiguring the kitchens at all, such that the overall footprint of the store might remain the same, but you're getting a little bit more square footage in the dining rooms at all? Anything you're doing that way with these stores in the smaller markets?
spk11: Yeah, we haven't changed our footprint. We tried that once, and we called it a small-town prototype. And within a year and a half, we had to do two add-ons to it. So we feel like that our prototype, we just need to execute and know that we're going to satisfy the consumer in those markets. Because a lot of those times, they're coming from other counties. They will drive a little further to get to someplace else. that they feel very confident in. And fortunate for our reputation, people will drive. And even if we look back at one of our very early restaurants, Ashland, Kentucky, it's one of our highest volume stores forever. And in a town of 40,000 people, but they come from all over just because of that reputation. So maybe Ashland taught us 28 years ago that we could go to small towns as long as we execute and deliver well. on our promise of legendary food and legendary service, they will come find us.
spk07: Got it. Thank you. And then thinking about, you made the comment earlier about lower permitting issues, such that growth next year may improve. Can you give us a read on how you're doing that? What specifically you're doing to ensure that the speed of opening these stores is picking up?
spk11: Well, we're hopeful from what our real estate team is telling us that permitting has been a little delayed recently, or I say the last couple of quarters. And it does look like they are starting to process things a little quicker. So we're optimistic that we're a little ahead of the game, knowing that they're running a little behind. So we're actually being a little more aggressive in the front than we normally would be to ensure that we're not having deals pushed ahead. because of delays in permitting and some of that side of it. So I guess we're anticipating a little better and actually being a little more proactive, which is giving us a little confidence that we'll be able to get these things done closer to on time. Nothing seems to be completely on time right now, but we're getting closer.
spk04: And some of it, too, John, is just building the pipeline out a little bit more so you have some choices and can be flexible. If you do have something pushed, you can, you know, replace it with a different deal and things like that. So some of it is that, too. Okay.
spk07: Makes sense. And then just lastly for me, on pricing power, obviously. Demand for your brand is phenomenal right now, and, you know, it doesn't sound like so far there's any pushback on recent pricing. So can you discuss how you look at pricing power for the brand in that, you know, are you looking against competitors, the at-home occasion, you know, how you really index your pricing power? And then really, you know, when thinking about the check sizes, how much more pricing power do you think you have as a brand and if and when you feel necessary to take it?
spk04: Yeah, John, I can tell you just since I've been, we really don't talk about pricing power or talk about it in terms of pricing power. When you talk about, you know, what kind of pricing do we have to take given the inflationary environment, what's going on, what's, as Jerry mentioned earlier, what's the right thing for the operator and the guest, trying to take as little pricing as we have to, regardless of what pricing power really kind of is. I think that's That's really worked to our benefit recently as we've, with the inflationary environment, had to go a little bit higher than normal because we allowed ourselves to be able to do that a little bit more because we have been so disciplined on what we've taken. But we absolutely, when we talk about pricing with the operators, we're looking at competitors. We want to make sure we're maintaining a good gap. We're understanding that in each and every market. It's really important in the process for sure.
spk07: Great. And do you look at home, you know, state prices at all, what you're seeing in the retail channel as also a niche market?
spk04: Not a whole lot because that changes fast. So we just don't tend to really watch that one too much for that reason.
spk07: Okay. Cool. Thanks for taking the questions. Thank you.
spk01: Our next question comes from Brian Vaccaro with Raymond James. Please go ahead.
spk08: Brian Vaccaro Thanks, and good evening. I was hoping to start with a quick follow-up on commodity inflation, and I just wanted to confirm, you're up 12 to 14 percent annual inflation outlook. I understand you're left locked on beef in the second half, but you've penciled in, is it right that you've penciled in a year-on-year increase on beef in the second half within that annual guidance?
spk04: Yes, that is true. Yeah, because you sequentially continue to see beef prices go up. And they're going up versus what we saw last year, not to the same, you know, trend that we've been seeing, not the same, you know, level of it.
spk08: And then on labor, I know you said hours are up 7%. percent year on year, I believe. And I think that might be a one, one and a half, something like that, if our math is right, versus 2019 levels, if it's relevant to measure against that anymore. But I assume there's some impact of Omicron within your hours for the quarter. But could you just give us a sense of where hours are trending more recently in March, April? maybe versus 19 or however you'd like to compare that, and then just the degree to which you see hours building as traffic continues to recover.
spk04: Sure, Brian. You know, it's really tough to say kind of what the expectation is going to be on that because a lot just depends on what traffic levels are as far as what those growth in hours are. But you're absolutely right. I mean, the numbers should be coming down. I can't speak to April and May, what we're seeing today. But our expectation would be that, you know, growth in hours probably comes down a little bit more driven by the mixed change between to-go and dining room because, you know, the to-go is a higher cost. higher wage costs, but a lower hours amount on the to-go. So that's kind of how that we probably would think about that changing. So other than that, it's really that's a tough one to nail down, to pin down. Right now, as you all saw, growth in hours was 7% pretty much in line with traffic for Q1, but that would not be our expectation moving through the rest of the year. You do have training hours in there, too, that kind of, you know, help elevate that a little bit just depending on what staffing levels need to be. But otherwise, you know, it's going to depend on traffic and that dining room to-go mix and things like that.
spk08: Understood. Okay. And then I also just wanted to touch on the other operating cost line in the quarter. It looked like costs picked up a bit versus the last few quarters. And is that just broader inflation creeping in, or perhaps there were some temporary pressures in there we should be aware of?
spk04: No, I don't think there's anything in there that I would call out on a temporary or one-time basis. Really what we're seeing is just that inflationary pressure continue on supplies and, you know, utilities, things like that, laundry and linen, those types of categories.
spk08: Okay, great. I'll pass it along. Thank you.
spk04: Thank you.
spk01: Our next question comes from Rahul Crow with J.P. Morgan. Please go ahead.
spk05: Hi, guys. This is Rahul for John Ivanko. Thanks for taking my question. I just have a quick question on the inflation regarding the construction costs. Like, so far into the year, can you give us some color on what you have been seeing? I mean, the last year I've seen the numbers in your report are around, like, $6 million for the Lordos or, like, $7.5 million for the Jaggers. I'm just trying to understand like going forward, like if you're seeing any inflationary pressures affecting your overall cost, like not just 22, but like going forward, any color there would be helpful.
spk04: Yeah, I mean, you always have a little bit of inflation on, you know, the building cost. Obviously, we're seeing it a bit more here in 22 for sure. And, you know, whether how long that lasts or, you know, is that a base of it in the future, I think that's going to be really hard to tell when that might happen. So, you know, we're looking, you know, when we look at the cost increase on roadhouse that we're expecting between 22 and 21, a portion of it is driven by building and site work. Really not as much on the furniture and equipment, things like that. And then you see, you know, a little bit of it just on, you know, the rents being up just a touch. So that's kind of what we're seeing. And the same thing is happening at Baba's, although we're saying those costs probably remain flat. 22 to 21. So that is really just the nature of some of the deals we did in 21. But we are beginning to, as I mentioned earlier, implement some savings there on the building side with Bubba. So I think that we'll continue to keep an eye on that and see what's happening. But definitely seeing inflation on the building cost side of things.
spk05: Got it. That's helpful. And just a quick follow-up on the labor side. Regarding the turnover, you guys said you did see some higher turnover recently. I'm just curious if there are any specific initiatives you guys are planning to mitigate that or even do something better what the industry hasn't done before. I'm just curious if you have any thoughts to share there.
spk04: Well, on the turnover side, you know, the increase really hasn't been as recent. It's been over the last couple years that, you know, through the pandemic and everything that we've seen a bit more of that. And we've made a lot of investments, you know, from a benefit side for folks. And a lot of it's just inside the four walls of the restaurant. helping the operator, you know, when it comes to hire rate, train rate, treat rate. So providing development opportunities, talking about really great training, providing great training to our employees. Because going in to work for a Texas Red Hat is a little different than maybe other restaurants because it's so busy, the volumes are so high. So it just requires a little more training from that perspective for them to kind of understand how that, you know, just how to execute that.
spk05: Got it. That's helpful. Thanks for taking my question, guys.
spk01: Sure. And our next question comes from Lauren Silberman with Credit Suisse.
spk00: Thank you very much. Thank you so much. I wanted to ask about just the steak segment more broadly. It's had a very strong performance and clearly consistently outperformed. But any thoughts on why you think the fake segment is so strong and outperforming sort of brought our full service, just as we think about the resiliency of the category in any consumer environment?
spk11: I can only speak for us, but I do believe that our made-from-scratch philosophy, we work a little harder to make sure that that plate that we deliver to you has got really good flavor, and it's served us very well. Everybody that's out there, I'm sure, is trying to fight for some reason for the consumer to pick them. Our made-from-scratch philosophy has served us very well. We will continue to do that, but I think the steak is a big part of our menu, but we have a lot of other offerings that are very popular also. But I really do think it is about the consumer wanting a quality product at a reasonable price, and that's what really has driven our success. And the ability for us to execute. Our people are amazing.
spk00: Thank you so much for that. And then just another one. As we think through beef costs over the next few years, any expectations on the herd size and willingness for ranchers to increase supply? Just trying to sort of think about the puts and takes there.
spk04: I mean, that would certainly be the hope if there's some motivation for them to continue to grow, to add to the herd sizes and things like that. There's so many inputs that go into that, though, Lauren, with the cost of grain and the prices that they're getting with the packers. So we would hope to see that happening. Don't really have any insight into if that will happen or when it could happen, but You know, I remember back when we went through such a big cycle of beef inflation for about five years or so, and that was driven by a really big drop in the supply of cattle. I mean, I don't know even today that we are back at the same levels of cattle supplies as we were back then. So something we feel, I just say that from the standpoint of something we feel we can manage for sure and manage through, but I don't. don't know you know how that'll play out here over the next couple years thank you very much and that will conclude today's question and answer session i'd now like to turn the call back over to tanya robinson for closing comments all right just want to say thank you guys for joining us i hope everyone's doing well if you have any additional questions feel free to reach out to us have a great night thank you all
spk01: And this will conclude today's conference. Thank you for your participation, and you may now disconnect.
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