Texas Roadhouse Just Raised Its Prices

Texas Roadhouse has been seeing record popularity in 2023 and is growing faster than any other restaurant brand, but that doesn't mean the steakhouse chain has been immune to the issues plaguing the restaurant industry. With costs for food, labor, and other commodities soaring in recent years, many restaurant chains have raised their prices to help offset those pressures. This includes Texas Roadhouse, which announced this week that it had boosted prices 2.2% at the start of the second quarter of the year.

This price increase doesn't come as a complete surprise, since Texas Roadhouse CEO Jerry Morgan previewed the chain's plans to start charging more in February.

"We recently completed menu pricing calls with our operators and will be taking a 2.2% menu price increase," Morgan said during a February earnings call. "We believe this level of pricing sets us up to achieve a solid year of sales and profit growth, while furthering our industry-leading value. As many of you know, this approach has consistently rewarded our guests and shareholders over the past 30 years."

Michael Bailen, senior director of investor relations and financial analysis at Texas Roadhouse, confirmed in a new earnings call this week that the company went through with that 2.2% increase at the start of the second quarter.

Though 2.2% may not seem like a massive change, any price increase for a chain known for its low prices and affordable steaks is still notable, and customers seem to be adjusting their spending habits as a result. Bailen said that guests have been doing some "check management," and some customers visiting Texas Roadhouse for the first time have also been starting on the value side of the menu.

However, Bailen doesn't believe this is a result of their prices, and noted that guest volumes have been stellar. In fact, Morgan announced during the earnings call that Texas Roadhouse saw record guest counts in the first quarter of the year.

The company attributed this strong showing to factors like better staffing levels and technological advancements like Roadhouse Pay, which gives guests the option of paying with a tablet at their tables and allows Texas Roadhouse to cycle customers in and out even faster.

Not all of Texas Roadhouse's takeaways from the quarter were positive, however. Despite the record guest counts and double-digit increases in same-store sales, restaurant-level profits were actually down about 0.5 points from last year. This is due, at least in part, to the double-edged sword of increased staffing levels. Having more employees means that Texas Roadhouse can serve more customers and better execute its labor-intensive menu, but it also means handing out more paychecks at a time when wage inflation is high. Costs for beef, a key component of the Texas Roadhouse menu, are also still elevated.

The company has a positive outlook on these issues looking forward. Bailen said the company expects general inflation and labor inflation to moderate through the course of the year. But until Texas Roadhouse's financial pressures ease more, customers may have to make their peace with paying a little extra for their steaks and massive margaritas.