With the slogan "Legendary Food, Legendary Service,"
Texas Roadhouse is all about delivering top-notch dishes at attractive price
points. But did you ever wonder just how they manage to serve so much for so little?
We did, too: And here's what we found out about everything from menus to footfalls.
To say that Texas Roadhouse is hugely popular is an understatement.
With close to 600 locations across the world — each serving around 5,000 guests
per week — Texas Roadhouse is a steakhouse powerhouse. In fact,
the chain serves a whopping 300,000 meals per day, which is a lot even for a franchise.
That said, it's little surprise that the Texas Roadhouse butchers
cut around $1 million worth of meat per store annually.
While the numbers stand testament to the restaurant's popularity,
and no doubt keep the chain's prices down, the chain's popularity has its downsides.
At dinner hours, guests can expect a 15 to 45 minute wait. Luckily,
the restaurant's call-ahead seating service can cut this waiting time.
Motivated employees are a huge part of making it in the restaurant business.
And this includes restaurant managers whose enthusiasm can inspire those working below them.
To increase personal involvement, and turnover,
Texas Roadhouse offers its managers a long-term reward scheme. Texas Roadhouse describes it:
"In exchange for 10% of the profits, Managing Partners are required to put down a $25,000
deposit and sign a five-year employment contract."
And the scheme appears to be paying off. With a direct interest in boosting profitability,
outlet managers are frequently seen approaching tables to ensure that
diners are having the best possible experience.
This high level of personalized service can go a long way to increasing customer loyalty.
"I've taken a picture of every steak I've ever eaten there."
Around 70% of Texas Roadhouse guests are repeat customers, and that's impressive.
With the restaurants making more money, so are the managers. According to Investor's Business Daily,
over time many have earned between $100,000 to $200,000 due to these personal investments.
Texas Roadhouse has managed to stay ahead of the chain steakhouse pack by utilizing a model
that attracts customers who are looking for a great deal, then asking them if they would
like to add high-profit items, like drinks and appetizers. According to a review by one employee,
the company's upselling strategy is an important part of the work culture:
"As servers, we play games almost every shift and compete with each
other to see who can upsell certain items. Winner gets cool prizes."
It's not all roses and butterflies, however. Some employees and customers haven't been quite
as excited about the restaurant's upselling strategy. One employee complained on Reddit
that the Texas Roadhouse management bases employee value on how much they can upsell,
"[...] and runs stats on these for every server every night."
Some customers have also expressed annoyance with the steakhouse's
upselling tactics. A TripAdvisor reviewer has described the chain's upselling as,
quote, "shady" after a server upsold her unsuspecting 82-year-old mother-in-law with
a Margarita "kicker," or more specifically "an extra shot of tequila in a test tube."
While the Texas Roadhouse menu has been designed with a wide range of tastes in mind,
it rarely changes. And it doesn't really have to. According to Texas Roadhouse representatives,
the steakhouse offers different choices within
menu categories that fulfill each patrons' expectations and budget.
This win-win formula not only lowers the costs associated with introducing
new menu items but keeps recipe consistency across
outlets to ensure that guests always get the dishes they know and love.
Let's take the chain's number one selling item,
the 6-ounce sirloin. That's been served at the restaurant since its opening some 30 years ago.
Menu changes are only ever made with consideration of customer feedback
and operational and economic consequences. And for every new item added to the menu,
one is removed to enable the chain to maintain its high standards of service and food quality.
"Wow, first try, every time. Thumb-sucking good!"
Just like other chain restaurants, Texas Roadhouse's hourly wages leave much to be
desired. Hostesses and hosts at the restaurant earn between $2 and $12
an hour, with the average wage clocking in at $8.52 per hour.
To make matters worse, hostesses and hosts generally don't make tips. This is low,
even when compared to the average hourly wage in the fast food industry, which is $9.36 an hour.
Looking at this another way, if a Texas Roadhouse server works 40 hours a week,
52 weeks a year, their annual salary will stand at
$19,568, substantially lower than the average U.S. wage of $41,950 per annum.
Texas Roadhouse's payment structure has come under fire in the past. In 2016,
Texas Roadhouse employees were awarded a $700,000 class action settlement. The two waitresses who
initiated the action claimed that the franchise forced them to put their tips into a tip pool,
which was then divided between wait staff and employees who didn't serve customers.
According to the lawsuit, this violated the minimum wage law
since the waitresses were paid $2.13 an hour — well under the minimum wage of
$7.25 per hour — while the restaurant claimed tip credit under federal law.
Texas Roadhouse keeps its costs down by not serving lunch on weekdays.
This approach keeps real estate costs down as it means that the restaurant outlets
don't have to be in what are called "high-traffic business districts."
According to Investor's Business Daily, the decision to only serve lunch on weekends hasn't
hurt the steakhouse chain one bit. In 2018, Texas Roadhouse averaged $5.2 million per
restaurant while competing outlets that serve lunch averaged under $3 million per location.
The no weekday lunch policy is also the chain's way of ensuring a better work/life
balance for its managers and employees. This makes sense when you consider that
typical restaurant managers work between 50 and a ridiculous 80 hours per week.
While many franchises spread their message on the national media, Texas Roadhouse
doesn't rely on paid advertising. In fact, the franchise spends very little on advertising.
According to Market Watch, the chain spends a 0.3 percent portion of sales on its
advertising fund. This is practically nothing compared to the restaurant's
competitors who put aside between 3 and 5 percent of their revenue for advertising.
So how does Texas Roadhouse promote its fare? Instead of spending bundles on advertising,
the franchise relies on local-level promotions and word of mouth,
as former Texas Roadhouse CEO Kent Taylor explained to Investor Business Daily:
"Our free hot bread and free peanuts are our best advertisements."
A part of this strategy involves community involvement,
loyalty programs, and organic promotion on social media.
The fact that Texas Roadhouse is open about its mediocre desserts may come as a bitter surprise
to some. After all, many of us love to linger over a cake or a pastry after a satisfying meal.
Well, this is precisely what Texas Roadhouse doesn't want its guests to do.
Former Texas Roadhouse CEO, Kent Taylor,
explained the somewhat unusual strategy to Investor's Business Daily:
"We don't want our guests to stay for dessert. We like the table turns."
That kind of makes sense, from a business point of view:
so keep that in mind the next time you're tempted to scoff at their so-so
offerings of the Big Ol' Brownie, Granny's Apple Classic, and the Strawberry Cheesecake.
Since beef makes up 45% of Texas Roadhouse's offerings — this figure stands at 33% for its
competitors — the franchise is hypersensitive to rising beef prices. To prevent any sudden cost
increases, the restaurant has a policy of signing 24-month contracts with its beef suppliers.
While long-term contracts usually translate to higher beef prices at the outset,
they are a smart strategy in a climate of rising beef prices: Particularly because according to
ABC7 News, beef prices increased by 20% between November 2020 and November 2021. Locking in beef
prices and quantities can also help restaurants deal with any supply-chain disruptions, such
as those that took place in the U.S. after the outbreak of the COVID-19 pandemic in early 2020.
According to USDA, American restaurants lose $162 billion
on food waste annually. And this doesn't make customers happy, with 72% of U.S.
diners saying that they care about how restaurants deal with their food waste.
With the motto "Waste Not, Want Not," Texas Roadhouse's commitment to minimizing wastage
isn't only good for the planet but also is a great cost-cutting measure. The philosophy is
supported by the franchise's made-from-scratch model, where all of its meals — including sides
and even dressings and bacon bits — are made on the premises to reduce waste.
Each Texas Roadhouse outlet has its own butcher, or meat cutter,
who hand trims each steak in a 34-degree Fahrenheit cooler.
This not only ensures high-quality steaks but it also helps prevent wasted meat.
Meanwhile, the steakhouse's in-house bakers prepare the franchise's famous yeast rolls
from scratch — they come out piping hot from the oven every five minutes.
These are then served with homemade cinnamon butter right after guests are seated.
Just like many other chain restaurants, Texas Roadhouse relies on attracting its
guests with its main offerings — in this case steaks — and increasing revenue by
selling higher-margin products such as drinks. It's a pretty common way for
restaurants to make money, and Texas Roadhouse has it down to a science.
As such, most Texas Roadhouse restaurants boast a full bar with a wide range of bottled and draft
beer, as well as big brand wines and liquors. This strategy seems to be working. According
to Market Watch, alcohol made up 10.8% of the chain's sales in the fiscal year 2021.
One of the restaurant's specialties is the Margarita. In fact, the chain
has 15 different versions of the cocktail. The cocktails come with an upsell option,
affectionately named the "kicker," which consists of tequila and triple sec.
"And a Cadillac margarita…?
"Hey, it's 5am somewhere, right?"
"A.M.??"
The choice of pushing their margaritas isn't an accidental one. The Beverage Director at
Quiote in Chicago, Jay Schroeder, told El Restaurante that Margaritas are the
perfect cocktails when it comes to high-profit margins. He explained:
"With the classic, you are not looking at using a lot of different expensive liqueurs,
or multiple pieces of produce. At its core, it is a recipe for a cost-effective
cocktail ... even when you are using the best expression of those ingredients."
In addition, Texas Roadhouse also serves the typical range of soft drinks,
which can generate a 90% profit margin. And who doesn't have a drink with their steak?
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