Texas Roadhouse, Inc.

Now Keith will provide some thoughts. Thanks, Jerry. During the second quarter, we saw our positive traffic trends accelerate from what we experienced in the first quarter. Also, our mixed trends in the second quarter remain similar to what we have seen the last several quarters. These traffic and mixed trends show that our guests continue to appreciate the high quality food, experience, and value that all three of our brands provide. As for commodities, our second quarter inflation was in line with our expectations. Looking ahead, we have increased our guidance for full year inflation to approximately 5%, primarily due to higher than previously forecasted beef inflation, particularly in the third quarter. This guidance includes approximately 30 basis points of full year 2025 inflation related to tariffs, which remains consistent with our initial estimates from last quarter. Labor inflation in the second quarter was also in line with our expectations. Our operators continue to do a great job staffing their restaurants as labor hours grew at approximately 40% of comparable traffic growth. With greater visibility into inflationary trends for the year, we have lowered our guidance for full year wage and other labor inflation to approximately 4%. With regards to capital allocation, we ended the second quarter with $177 million of cash. Cash flow from operations was $128 million, which was offset by $148 million of capital expenditures, dividend payments, and share repurchases, as well as $16 million for the three franchise restaurant acquisitions. As Jerry mentioned, we will be acquiring our support center buildings in the third quarter for a net purchase price of approximately $23 million. We are maintaining our full year of capital expenditure guidance at approximately $400 million, inclusive of this transaction. Going forward, our capital allocation philosophy remains unchanged. Our first priority remains the funding of new restaurant development and taking care of our existing restaurant base. We also expect our dividend will continue to increase annually at a measured rate. And at a minimum, we will repurchase shares to offset deletion. Beyond that, we will continue to look at opportunities to acquire additional domestic Texas Roadhouse franchise restaurants, as well as repurchase additional shares as appropriate. And now, Michael will walk us through the second quarter results.

Thanks, Keith. For the second quarter of 2025, we reported revenue growth of 12.7%, primarily driven by a .3% increase in average weekly sales and .2% store week growth. We also reported a restaurant margin dollar increase of .1% to $257 billion and a diluted -per-share increase of 4% to $1.86. Average weekly sales in the second quarter were over $167,000, with ToGo representing approximately $22,000, or .3% of these total weekly sales. Comparable sales increased .8% in the second quarter, driven by 4% traffic growth and a .8% increase in average check. By month, comparable sales grew 4.3%, 7.2%, and .8% for our April, May, and June periods, respectively. And comparable sales for the first five weeks of the third quarter were up 5.3%, with our restaurants averaging sales of over $158,000 per week during that period. In the second quarter, restaurant margin dollars per store week decreased 1% to over $28,500. Restaurant margin as a percentage of total sales decreased 108 basis points year over year to 17.1%. Food and beverage costs as a percentage of total sales were 34% for the second quarter. The 131 basis point year over year increase was driven by .2% commodity inflation, combined with shifts within the entree category, which was partially offset by the benefit of a .8% check increase. Labor as a percentage of total sales increased six basis points to .9% as compared to the second quarter of 2024. Labor dollars per store week increased .4% due to wage and other labor inflation of .8% and growth in hours of 1.6%. Other operating costs were .5% of sales, which was 32 basis points better than the second quarter of 2024. The improvement was driven by leverage on operator bonuses as well as the year over year change in our quarterly reserve for general liability insurance. These insurance adjustments include $300,000 of additional expense this year as compared to $2.1 billion of additional expense last year. Moving below restaurant margin, G&A dollars grew .9% year over year and came in at .2% of revenue for the second quarter. Our effective tax rate for the quarter was 14.9%. Based on our outlook for the remainder of the year, we are updating the guidance for our full year 2025 income tax rate to approximately 15%. Now I will turn the call back over to Jerry for final comments.

Thanks, Michael. I am so proud of our operators and support center roadies who work together as one team to deliver great results. I'm also excited to spend time with our managing partners on our annual fall tour. As always, we look forward to getting feedback on how we can better support them or remove any obstacles so they can focus on partnering with roadies, serving their guests, and growing the business.

That concludes our prepared remarks. Tamika, please open the line for questions.

At this time, if you would like to ask a question, press star 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star 1. Your first question is from the line of Sarah Senator with Bank of America.

Oh, thank you very much. Obviously, very strong top line results. I just wanted to ask about maybe the inflation. I know last year commodity inflation, beef inflation, kind of consistently surprised the downside. This year it seems to be surprising the upside. I was wondering if you could maybe talk about some of the dynamics there. I know in the past, the retail, what's happening in retail and groceries has been a big impact. But there may also be, obviously, the supply has been coming down consistently. And then within that, I know you said 3Q perhaps was the peak in terms of relative to your expectations. So is any of this maybe timing or quarter to quarter? So I know there's a lot in there, but you always have good insight into the cycle.

Thanks, Sarah. This is Michael. I'll do my best to cover those questions. Yeah, I think we obviously updated our guidance. And it's a combination of demand, specifically retail demand for beef, has remained resilient. So we're seeing strong demand out there. And the supply situation, which we knew was going to be tight as we move through the year, saw some additional pressure on the production side from the beef suppliers cutting back on how much they were producing, given some of their margin commentary that we've probably heard. So we saw a further tightening of supply, which certainly drove the cost higher in June. And so we are expecting, as that beef ages, to see the impact of that here in the third quarter. We have about 80% of our beef locked for the third quarter and about 50% locked for the fourth quarter. So our team continues to monitor the situation, and we'll update you all accordingly.

Thank

you. Your next question is from the line of David Palmer with Evercore ISI.

Thank you. Just a couple of line item questions that maybe there's some insights behind. When I look at the mix effects for over two years now, and initially I was thinking this would make a lot of sense that mix would be negative coming out of COVID. There was a lot of check growth during those, particularly the letter stages. People had some money. But now, two and a half years of a slightly negative mix. I wonder how you're thinking about that. Maybe what are the behaviors that's driving that? Maybe it's some of the alcohol dynamics, or maybe it's just the cautious consumer. But anything that maybe drives your strategy as you think about pricing, for example. And then secondly, you did really well with labor leverage this quarter. Obviously, traffic accelerated. That's a good way to get that. Does it really come down to that if you're doing a very nice traffic number like this quarter? Is the labor leverage, that gap of two points, just much more possible than cutting back on hours? I'd love to hear yourself on that. Thanks.

Hey, David. It's Michael. On the mix front, I'll tell you, all of the negative mix pressure is coming from the alcohol category. We are actually continuing to see positive entree mix. The guest is actually trading up still to bigger stakes or more often ordering a steak from us. And we're seeing positive mix in the mocktail categories. So really no downward pressure overall from our menu pricing actions. It's all in that alcohol category, which a lot of that we've talked about before is societal and not just a roadhouse specific item. And that's what drove us partly to introduce mocktails, which have been well received by the guests. So I think we feel very good about how the guest is using our menu and where they're trading on the menu. As far as the labor question, yes, certainly more traffic helps on the labor line. But our operators are doing a very good job of staffing their restaurants. And they're also benefiting from lower turnover in their restaurants. And a longer tenured employee is a more productive employee. And some of that can go to our digital kitchen investments and just the overall way we're running those restaurants. So we are definitely encouraged by those labor productivity trends that we've seen. And we're cautiously optimistic that those can continue throughout the year.

Thank you. Your next question is from the line of David Tarantino with Baird.

Hi, good afternoon. Maybe two questions I'm going to cheat here. But Michael, can you just give us a sense of what the inflation in Q3 and Q4 is going to look like based on your current outlook? And I just want to make sure everybody's on the same page. And then I guess my real question is, you mentioned the step up in BABA's openings for next year. And I just wanted to get your thoughts on what that means for the total enterprise and your overall growth rate. I know you said in the past you're pretty comfortable with 30 or so openings. But does this allow you to push higher than that as you think about next year and future years? Thank you.

Yeah, David, I'm assuming you're talking about beef inflation and our expectations there. And as we said, as of now, we expect that highest pressure in the third quarter. And that could be as much as 7% commodity inflation in the third quarter. And then the expectation is it would probably come down from there more in the 4% to 5% range in the fourth quarter would be our current expectations. And remember, we are feeling some additional negative impact on the cost of sales line in addition to that inflation coming from the guest trading more often to stake. So that's something we've seen in the last several quarters and would expect to see in the third quarter as well.

And David, this is Jerry. On the growth above us, yeah, we've got seven openings slated that will happen this year. And the pipeline for 26 looks very solid. We are approaching that double digit count. And so we obviously have said around 30 or 30-ish, approximately 30. So it could be a little bit on the high side of that approximate 30 with the escalation above us growth. So we are excited about the results that we're getting in the investment and the brand in itself. So I think we could see a little tick up on that.

Right, thank you.

Thank you.

Your next question is from the line of Lauren Silberman with Deutsche Bank.

Thank you so much. On the comp side, the monthly cadence, any additional color you can provide on what drove some of the monthly differences? I think broadly, the industry's seen some choppiness. So just wondering if there's anything you're saying that's different than typical consistency.

Yeah, Lauren, it's Michael. Obviously, we were pleased with the overall performance that we have seen. I guess the July period probably had about a 70 basis point negative impact from the timing of Easter. And the five week period that we gave for the beginning of the third quarter has about 60 basis points of negative pressure from the calendarship for the 4th of July.

Sorry, is 2Q is a 70 basis point negative impact?

That was on just our April period. From the quarter, it was about 20 basis points. Yes, just April to 70.

Understood. Anything you can provide on comp performance or differences that you're seeing across region days?

Yeah, I'll tell you, when we look at that, and this has been the case for a while, we're seeing solid growth seven days a week through all day parts of each day, both in our dining room and to go. And when you look at it regionally, strong performance in all areas. So nothing really to call out as a specific area of weakness or of outside strength. So we're very pleased with what we're seeing across the board.

Great. Thank you very much.

Your next question is from Dennis Geiger with UBS.

Great. Thanks, guys, and appreciate all the color on the cost inflation pieces. Maybe just one more in thinking about restaurant margins for the back half of the year. Just as far as the other OPEC line, thinking about that, and if there's any differences 3Q and 4Q as we think about how the labor set up might play out, and anything that's a highlight there to kind of fully fill in the pieces for us in thinking about 2H restaurant margins. Thank you.

Yeah, again, it's Michael. I think you guys are both labor and other OPEC. And I would see, obviously, part of it will be based on your assumption for traffic growth. But if you're assuming that we continue with some modest level of traffic growth, and I think that other OPEC line could continue to get a similar level of leverage that it's been getting the last two quarters. So you could see that again in Q3 and Q4. And the labor line, again, with some traffic growth, is probably in that flat to maybe a little potential for a little bit of leverage as we move into the back half of the year.

Great. Thanks, Michael. Appreciate it.

Your next question is from Brian Harbor with Morgan Stanley.

Hi, this is Kelly Merrill on for Brian. Thank you for taking our question. Obviously, I saw some commodity inflation in the second quarter with the expectation of that continuing into 2H. Could you just provide some color on what's driving that, obviously beef, but is there anything else inflationary outside of that? And could there be any offsets to beef on the commodity side? And then on labor, is there anything to explore there just from an efficiency standpoint as you look to offset the commodity inflation? Thank you.

Yeah, it's Michael. It really is the beef that is driving that inflation for commodities, with it being over 50% of our basket. And there really not being another item that's large enough to make a serious impact on the overall numbers. I'd say the rest of the proteins maybe are slightly inflationary, getting a little bit of offset, maybe a little benefit on the produce area. But really, all the pressure is coming from beef. And on the labor side, our operators are always looking to run efficient restaurants. We aren't mandating any kind of scheduling for them. And they do what is appropriate for their restaurants, for staffing for the sales they have and the sales they want in the future. And so they're always looking at that to see if there is opportunity. But I don't believe there are any levers to be pulled that will dramatically change our approach to labor. Thank

you so much.

Your next question is from the line of Jim Saylor with Stevens.

Guys, good afternoon. Thanks for taking our question. Wanted to dig in a little bit on Bubbous 33, you guys crossed 50 units, mainly concentrated in Texas. But just thoughts around how do we continue to scale that and maybe regional attack plan and where we should anticipate to see new units in the strategy for engaging new guests as that brand becomes more and more visible?

Yeah, thanks, Jim. This is Jerry. Yeah, like we said, we're in 16 states. And we're continuing to focus typically in our program. We have a multi-unit operator that lives in a certain area and we try to build out that turf. And as we continue to expand and bring on more market partners and get into a new turf or two demographic areas, we'll continue to grow. We're having good success on the openings. We're kind of spread out over those 16 states. And we'll probably keep that philosophy. But the big thing really has been getting stable on the leadership side, clearly focusing on our menu and our execution. And we've always felt great about the look of the building and the energy that the restaurant provides between the entertainment and the sports and the food is incredible. But as we continue to just settle in and really start executing at a high level, I think we'll continue to be able to develop it at a higher rate than we have in the last few years. So exciting times for sure. Great, thanks. I'll back into you. Thank you.

Your next question is from Jeff Bernstein with Barclays.

Hi, this is Amisha Dat on for Jeff Bernstein. I wanted to ask about value. How has the mix of value-oriented sales evolved at both Texas Roadhouse and Bubblers compared to historical levels? And do you have plans to further emphasize value offerings in coming quarters, particularly to support lower income guests? Thank you.

Yeah, I'll start with that. On the value side, we've always believed that there's a lot of value built into our menu. And there's the country dinners. And because we offer multiple cuts of beef, you can pick how much you want to spend. From six ounces to 16 ounces. So I think from that side of it, we've got an early dine feature. All of those things have been in play for a very long time. And we really see people picking and choosing how they want to have their dining experience. And we like it that way. We want people to spend as much money as they like or to be as much very conscious as they want to be too. But you get a protein and two free sides and bread and butter and all of the things that go with it, the peanuts. So it's just like I said, the value is really built into it. I think in the last year, we leaned into more on a $5 beverage mix menu. So offering some value pint beer and a value 10 ounce margarita. And our mocktails are $5, which is really new to us. So there's a lot of things that are very reasonably priced with great quality. And I think that's what's always been the big driver for our success on the top line and our operators executing at a high level and acting like owners. They're all owners in the business and they grow their sales, they control their costs, and they run a great business, and they get rewarded by driving that top line. So I hope that answered your question.

Great, thank you.

Thank

you. Your next question is from the line of Peter Saleh with BTIG.

Great. Thanks for taking the question. Just a couple of quick ones on my end. In the past, you guys have, when we've seen beef inflation, sometimes you see a highly promotional retail environment which kind of contributes to those elevated beef prices. Are you seeing any of that today or is this mostly a function of the shorter or tighter supply? And then second on construction costs going forward, are you seeing any elevated costs or anything that's been dislocated, anything with tariffs that may be impacting the construction costs going forward? Thank you.

Hey, Peter, it's Michael. First on the beef comments, I think that certainly beef is being offered at retail, but I don't think the retailers are being irrational in their pricing. They are not using it as a loss leader to drive people into their stores, but they are marketing beef at a pretty high level. And what we've seen this year is the consumer willing to pay for that. So I think that's really been part of what's driven the pressure is a consumer who's willing to keep spending and a supply that has been very tight.

Yeah. And then, Peter, this is Keith. On the construction side, we really aren't seeing any impact yet from tariffs. We had a lot of inventory for all of our builds for the year. So like I said, we just really haven't seen anything yet. And we're still evaluating that to see how that's going to affect us going forward.

Thank you very much.

Your next question is from the line of Jeff Farmer with Gordon Haskett.

Thanks. Just shifting gears a bit, I'm just looking for an update on the Roadhouse mobile app. Specifically, can you guys share the number of active users, how quickly that's growing and how you guys have been leveraging that customer database?

Yeah, I mean, obviously it is out there. I don't know that we know the exact amount of users, but I mean, there is a large percentage of folks that are obviously placing their to-go orders, getting on our wait list, the efficiency of being able to really do that. We did upgrade our mobile app to have more pictures when you are kind of ordering the side items. So we continue to look at the mobile app on making it easier to navigate and place your order. And then we're executing at the restaurants at a much higher level on how we grade, making sure we don't have missing items, that the order is ready when you get there. And all of those little details that really do matter when you're an off-premise orderer and the consistency of the product and the food. And obviously, we believe the mobile app is really widely used in a lot of ways, and it's been a game changer in a lot of ways since early on coming out of the pandemic from that. And we continue to upgrade and find ways to make it easier for our guests to get that order placed. And then again, at the restaurant level, we're executing at a higher level than we ever have, and we're continuing to find ways to improve that experience at the pickup window. Okay. Thank you. Thank you.

Your next question is from the line of Andrew Strozek with BMO Capital Markets.

Hey, thanks for taking the question. Obviously, a lot of focus on the discussion of value in the industry these days. And I'm curious, you know, where now are your price gaps against your competitive set versus either the last several years or historical levels? Is there anything that has changed? And also, can you remind us over the next several quarters, and especially with the 1.7 coming in in the fourth quarter, where your price will trend? Thank you.

Thanks, Andrew. I believe we still always look at where we're positioned. I think we look at ourselves first and make sure that we're comfortable with our pricing. And then we fact check a little bit against some of our competitors just to make sure that we feel comfortable with that gap. And it has changed over the years and in different items for different reasons. But I think in general, we're very happy with the value that's built into the menu, the gap that we have between our competitors. And some of that gap, is it really just about the dollar or is it about the ability to execute? Is it the portion size? There's so many components that are built into value. And with getting a protein in two sides and free butter and bread and peanuts and all of that, I think that's all built into the value component. And then you had the question on the... Michael's got the other side of that question.

The other side of the question was on our pricing and how much pricing I'll have in the menu. We'll have .3% pricing in the menu here for the third quarter. And then we'll have .9% that rolls off when the 1.7 rolls in. That'll leave us with a .1% pricing for the fourth quarter of this year and the first quarter of 2026.

Great. Thank you very much.

Thank you.

Your next question is from the line of Brian Vaccaro with the Raymond James.

Hi. Thanks and good evening. I have a question on California. And I think you said you're requiring the remaining five franchise units in that state. And it's a state, I think, with only around 20 roadhouse units. So I'm just curious how you think about the growth opportunity there and if you're setting the table, so to speak, to maybe accelerate growth there over the next few years.

Thanks, Brian. This is Jerry. Yeah, we're very excited. We obviously were able to get an acquisition done on the Northern California group. And now through some great partnership and hard work through both our company and our great franchise group down in Southern California have been able to come to terms. We're very excited to have them in the family. And that is a very special unit to us. Obviously, that group has been with our organization for a very, very long time. And we're really proud of that partnership. And it's a little bittersweet, but we are happy for Steve and his family and happy for the roadhouse family. And as we look at owning all the stores in California in our growth strategy, we are meeting as a group and really discussing from a real estate team to an operations team on how do we look at California. We know there's a lot of folks there that love great food. And we've had a lot of success there with our 19 stores open and we will continue to see our presence in California grow. We believe that people of California are loving legendary food and high level hospitality. And that's what Texas Roadhouse provides. Absolutely.

All right. Well, thank you. Michael, just a quick follow up. What's a reasonable expectation for GNA spend this year?

Oh, yeah, this is Keith. I'll take that one. Yeah. On GNA, I'd say for the rest of the year, you can expect us to get some leverage. I'd say especially in the fourth quarter as we're laughing the 53rd week. And then, you know, just one thing to mention with us purchasing the support center on an annual basis, we're going to be saving about two and a half million dollars in rent. And so you'll see a little, you know, a pro rated benefit of that for this year also in the back.

Very helpful. Thank you.

Your next question is from the line of Jim Sanderson with North Coast Research.

Thanks for the question. I was hoping you could talk a little bit more about how you expect corporate store margin to evolve as you start to look more closely at developing Bubba's and then how you foresee mix of company versus franchise as you target that 200 unit gross goal.

Yeah. Hey, Jim, it's Michael. I guess I'll take the second part first. So that 200, you know, number I assume this is a question about Bob is Bob is is all you company plan to be company development at this time. So that is that is all company and really most of our growth for Texas Roadhouse and Bob is domestically is is company growth. Jaggers will be a mix of company and franchise and international is a franchise business. You know, we expect above us over time will deliver similar margins to a Texas Roadhouse. Now, obviously, Roadhouse sales are a little bit higher, which which helps on the margin side. But, you know, Bob is is is proving that it can do a very strong performance as well. So over time, we would expect to continue to drive strong margins out of both brands. All three. All

right. All right. Thank you very much.

Your next question is from the line of Gregory Frank, Frank, for with Guggenheim.

I know it's a bit of a tongue twister. I blame my parents. The I the question I had, Jerry, is margin profile. And I know you guys have said for a long time that 17 to 18 is the right place to be kind of. But maybe between the beef cycles in twenty twenty four, you got kind of just over 17. And I guess we're probably headed lower with this level of inflation. As I look back five or six years, I think your AUVs are up 10 to 15 points more than your development costs are up. And so I wonder if that 17 to 18 is going to be 16 and a half to 17 and a half. Or you still think 17 to 18 is the right place to be. Thanks.

Yeah. And thank you. And we do believe that internally that obviously the world has to cooperate to and and the beef cycle does have to turn for us. But, you know, I want to always challenge ourselves to be a strong balance when we're talking about financial results and and for our organization to believe that over the years and 32 years or or so. You know, that that's a great spot for us to be. But again, things have to work out. And so we are not changing that. As of right now, we did get our chin over the bar last year and we were very happy with that. And that's a great spot for us to be. And so I think that the current situation that we're in, it had been growing and the momentum had been building up to that point. And obviously, we're fighting some inflation this year, which we thankfully didn't have as much of last year. And that helped us through there. But I believe that as of right now, we're going to continue to focus on that top line and do everything we can to control that cost and be very balanced when it comes to fiscal responsibility for our roadies, our guests and for our shareholders. And and we'll continue if we ever did feel like that was unreasonable, we would have some internal discussions. But as of now, we still believe that we can get our chin over that bar at some point.

Thank you very much.

Thank you.

Your next question is from Jake Bartlett, which was securities.

Great. Thanks for taking the question. I had one and then I had a follow up. You know, the question is about your off-premise sales and this might build on the answer about about your app. But over the last four quarters, off-premise sales for operating week have have been growing much faster than than than on-premise and has been a driver of your comps. The question is, what is driving that? Is it just really just spill over and people kind of peeling out of the line and taking it home? Or is it something operationally that you've done? Is it the app? And then, I guess, most importantly, how sustainable do you think that is?

Yeah, Jake, this is Jerry. Thanks for the question. I truly believe it's a combination of all those things. The convenience of us putting in windows for folks to be able to walk up and get their order, the mobile app, the easier that it is to order and navigate through that app. We're seeing a more completion rate through that. You know, and then the missing items is really the biggest thing. And we've just gotten better at it. We focus on it. We've got ways of it's really the operators, in my opinion, that are executing at a very high level. The guest is rewarding us because when they get home, they have their items, they're opening our food in their dining room table with their families, and they've got everything that they need. And we've heard it over and over again. If you focus on something, you put energy on it, then the result improves. And I think that's what we're seeing from that standpoint. So it is exciting to see it continuing to grow. But I really believe it's the app, it's the ease of pickup, and it's the operators delivering a great experience to our consumer.

Great. Great. And the follow up was on building on your comments. And I just want you to kind of maybe say it again, or I just want to make sure I'm hearing it right. But the idea that as you increase the number of BABAs, you also talked about some company owned Jaggers in 26. You've been very consistent about kind of about keeping the total number of units about 30 because of operational limitations or just making sure you execute very well. Is that changing? I mean, it seems like you have the capacity of getting bigger. I just want to make sure I'm hearing it right so we didn't get over my skis as we look at your ability of maybe sustain the pace of Roadhouse openings and then add to that with these other concepts.

Yeah, Jake, I am encouraged by our ability to get that approximately 30. I think you will see us a little on the high side of that the next couple of years. The pipeline for Roadhouse is still strong. We are pressing on the gas with BABAs a little bit. And you'll see, as we mentioned, Jaggers coming into the fold also. So I really want to get into the next year and be have that confident before I move that number up. But we are clearly starting to tip our head over the skis in that direction.

That's great to hear. Thank you.

Thank you.

Your next question is from the line of John Tower with Citigroup. John, your line is open.

Hi, this is Karen Holt House. I'm John. Thank you for that question. Taking a little bit on the off premise questions. You know, I understand there's your state argument state doesn't travel well and some things like that. But would you consider, you know, doing kind of doing delivery on a unit by unit basis. You know, managing partners were asking for it. You know, it was maybe a unit in a denser marketplace or they're tacking your tack or back a house limitations to doing that.

Yeah, thanks for the question. We you know, we have resisted the temptation of going that route as of now. We do do it at the Jaggers concept and above us. And we have one store that's in a very urban market in New Rochelle, New York that we do delivery at. And then I will continue to have conversations with operators. But as of right now, you know, I think we're holding the line on not doing delivery and the rest of the concept, unless there's a real reason to do it individually. We will have some conversations. But as of right now, we have resisted going that route. We're focused on providing our guests a great experience in the dining room and through our off premise through our pickup system and through the app and and all of that. That's where we'd really like to continue to focus as of right now.

Great. Thank you.

Your next question is from the line of Zachary for them. Well, Wells Fargo.

Hey, good afternoon. I'm not on tray mix shifting more to be looks like it's been about a 30 basis point headwind on the food and beverage line, assuming that held in Q2 curious if you view this more cyclical or a structural phenomenon. And as you think about the impact in the second half is the 30 that's still the right impact or would you expect it to step down?

Hey, Zach, it's Michael and it was around 30 basis points in the first quarter. It probably stepped down to about 25 basis points in the second quarter and maybe it holds in that 20 to 25 level in the third quarter would be my expectation. And then I think would step down a little bit more in the fourth quarter as we laugh it. So I kind of view it as a one year change in behavior and whether whether that means it'll change back and we will see something else occur. You know, we'll have to wait and see on that. But I do think what's driving a lot of it is the value on the menu in the state category and the and the guest appreciating, you know, the price they can pay with Texas Roadhouse for for a stake. And that helps our top line growth, but you feel a bit more pressure right now on the COGS line from that. But as a steakhouse, we love seeing people wanting to try our steaks. We think that is great for our long term success.

Thanks for the time.

Your next question is from Todd Brooks with Benchmark Company.

Hey, thanks. I'm going to keep the off premise train rolling here. So it looks like off premises been mixing in kind of that mid 13 percent range recently. I think there was one point is the rollout of KDS was happening and it brings that additional efficiency and and come to the kitchen that there might have been a theory that more off premise demand could be met out of the kitchens and that managers would be more comfortable. Going after and servicing that demand. Has that been the case? Is that still on the common? If you look at maybe your best quartile stores with off premise, how high is their mix versus the 13 percent train wide?

Thanks. Hey, Todd, this is Jerry. Yeah, I believe it is definitely one of the components probably helping us be able to have a little more capacity through the to go business. So I think you're right. And we're almost 80 percent done of having all the concept on the digital kitchen at this point. Then as we get finished this year and we continue to learn from each other about how we can utilize that technology to help us bigger, faster and stronger and improve our guest experience as well as our roadie experience in the back of the house. We believe that the digital kitchen will have some components that will will play into our ability to be faster and to be focused on taking great care of our guests. So I do believe it is a component of that increase for sure.

Yeah, Todd, there are definitely restaurants that do higher levels of to go on a dollar basis and a percentage basis don't have all those numbers at our fingertips. But, you know, we definitely have stores that are examples to others that you can do even more to go in your restaurant. So we think there still is a lot of opportunity.

OK, thank you both. Thank you.

At this time, there are no further audio questions. I will now hand today's call over to Jerry Morgan for closing remarks.

Thank you all. I want to close with a special shout out to our Jaggers team in Lexington, Kentucky, which represents our 800 system wide restaurant. Great job on delivering high level hospitality and creating raving fans. Let's go TXRH. Good night, y'all.

This concludes today's call. Thank you for joining. You may now disconnect your lines.