Texas Roadhouse, Inc. (TXRH) Q3 2016 Earnings Report, Transcript and Summary

Good evening and welcome to the Texas Roadhouse Third Quarter 2016 Earnings Conference Call. Today's call is being recorded. All participants are now in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to introduce Scott Colosi, President and Chief Financial Officer. Please go ahead.

Thank you very much, Vicky, and good evening, everybody. By now you should have access to our earnings release for the third quarter ended September 27, 2016. It may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These forward-looking 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 for a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. And if applicable, reconciliations of the non-GAAP measures to the GAAP information can be found under the Investors section of our website. On the call with me today is Kent Taylor, our Founder and CEO; and Tonya Robinson, our Senior Director of Financial Reporting and Investor Relations. Following our remarks, we will open the call for questions. Now I'd like to turn the call over to Kent.

Thanks, Scott, and good evening, everyone. We are pleased to report another quarter of traffic growth, restaurant margin expansion and double digit diluted earnings per share growth. Our results continue to be driven by the opening of new restaurants and positive comparable restaurant sales, along with continued commodity deflation. Comps in the third quarter were up 3.4% with traffic growth of 2%. Our strong sales momentum has continued into the fourth quarter with comps increasing approximately 3.8% in October, including an over 2.5% traffic growth. The fourth quarter is busy with 10 additional company restaurants scheduled to open, four of which are already up and running. In addition, we are preparing to rollout a menu price increase of approximately 1% later this month. We believe it is important to maintain our conservative approach on pricing at this time, given the competitive consumer environment. We will have an opportunity to reevaluate our pricing actions in the first half of 2017 when we roll out new menus to add calorie counts in accordance with FDA regulations which are required to be implemented in May. Our 2017 development pipeline is in good shape with 24 of our 30 expected company openings either in permitting or under construction. Our growth next year will continue to be focused on Texas Roadhouse restaurants. However, we currently expect to open seven to eight Bubba's 33 restaurants in 2017. Finally I want to thank all of our operators to continuing to do great job, taking care of our guest and building sales. It was great to see many of you all over the last several weeks during our annual fall tour. Now, Tonya will walk you through our financial update.

Thanks Kent, and good evening everyone. For the third quarter of 2016, net income increased 24.9% over the prior year period to $25.7 million or $0.36 per diluted share. Revenue growth of 9.9% during the quarter was driven by a 7.6% increase in store weeks and a 2.5% increase in average unit volume. For the quarter, comparable restaurant sales increased 3.4% comprised of 2% traffic growth and a 1.4% increase in average check. Comps during the third quarter were positively impacted by approximately 40 basis points due to the shift of the July 4 holiday. By month, comparable sales increased 3.7%, 3.3%, and 3.1% for our July, August, and September periods respectively. As Kent mentioned, comp sales for the first four weeks of the fourth quarter were up approximately 3.8%. Restaurant margin as a percentage of sales was up 155 basis points over the prior year period to 18.1%, driven by improvement in cost of sales. For the quarter, food cost deflation was approximately 4.2% driven by beef, bringing the year-to-date deflation to approximately 4.1%. Partially offsetting the cost of sales decrease was a 65 basis point increase in labor as a percentage of sales, driven by wage rate inflation along with higher turnover. Below restaurant margin, depreciation expense increased $3.1 million year-over-year to $20.9 million or by 27 basis points to 4.3% of revenue. G&A costs were up $4.2 million in the quarter and included a $1.2 million charge related to a legal settlement that we discussed earlier this year. As a result, G&A costs increased 43 basis points as a percentage of revenue to 5.4% for the third quarter. Pre-opening costs decreased 0.7 million on a year-over-year basis, primarily due to fewer restaurant openings this quarter compared to the prior year period. Moving to the balance sheet and cash flow, we ended the quarter with $82 million in cash and $53 million in debt. During the quarter, we generated $46 million in cash flow from operations, incurred capital expenditures of $44 million, and paid dividends of $13 million. As a result, our cash balance decreased $14 million during the quarter. For the full year 2016 we now expect commodity deflation of approximately 3.5%. We currently have prices locked for approximately 75% of our commodity basket for the remainder of the year. A few housekeeping notes as we finish out 2016. We expect December sales to be negatively impacted by a point to a point-and-a-half due to the Christmas holiday shifting from a Thursday- Friday last year to a Saturday-Sunday this year. In addition, we will be lapping approximately $1.5 million of credits reported in the fourth quarter of last year related to labor costs, specifically health insurance and payroll taxes. Looking ahead to 2017, in addition to approximately 30 company restaurant openings and low-single digit food cost deflation, we expect mid-single digit labor inflation, including increases from wage rates as well as from regulatory changes related to overtime pay. Our initial expectations for the year also include an income tax rate of 30% to 31% and capital expenditures of approximately $170 million. Now I'll turn the call over to Scott for final comments.

Thank you, Tonya. We're very pleased with the results for the third quarter, particularly our sales growth in this difficult environment. Positive comparable restaurant sales growth has combined with food cost deflation to drive significant margin expansion so far this year. While we expect further commodity deflation next year, we will continue to be challenged by increasing labor inflation and changes in how we pay our employees. Additionally, as Kent mentioned, we believe it's best to stay conservative on any price increases given the current consumer and industry environment. While this may make restaurant margin expansion more challenging next year, we still remain focused on doing the right things to ensure the long-term success of Texas Roadhouse. These things may include a tweak or two on our menu; they'll also include continuing to reinvest in our existing restaurants including added parking and the addition of seats primarily via bump-outs. We will also keep evaluating our restaurant portfolio for relocation opportunities, including as many as two next year after the relocation of one restaurant this past quarter. Our capital allocation strategy remains the same and will be focused on new restaurant openings, dividends, share repurchases, and potential franchise acquisitions. On the technology front, the most significant item we are working on is our new mobile app. We are expanding the testing of the app and are encouraged by the positive effect so far. Finally, I'd like to reiterate Kent's thanks to our operators. You all are truly doing a fantastic job in a very competitive environment and we all cannot thank you enough. Vicky, that concludes our prepared remarks, so please open the lines for questions.

Thank you. We will take our first question today from Jeff Bernstein with Barclays. Please go ahead.

Great, thank you very much. A couple of questions; one, just on the pricing and related cost outlook, I think you said you'll take 1% later in November. I am wondering if you can give some color in terms of the testing range and maybe the feedback you are hearing from franchisees when you consider the labor headwind you talked about. And it would seem like that's not the norm, for you guys to consider maybe another increase in the first half of 2017. So I'm just wondering – just the broader thought process on the pricing, the potential pricing power? And then I had one follow-up.

This is Kent. As we look at our competitors and their negative traffic, we'd rather be conservative out of the gate and hopefully let our traffic speak for us. Remember, 1% in traffic equals about 6% in earnings per share growth. So we'd like to see if our operators can make up that shortfall before we jump onto the second part of pricing. And Scott, if you have any additional thoughts on that?

No, I think that's right on, Kent. It's actually – the philosophy is to be a little more conservative as best we can our protect the value of what's going on the plate.

Got it. And then just from a unit perspective, I know last quarter you talked a little bit about the elevated investment cost going in. I'm just wondering, as you think about your openings for 2017, how you expect that to play out? If you are comfortable with the balance of the sales you are seeing versus the investment costs, or any tweaks that might be made on that front in terms of unit openings into 2017?

Jeff, this is Scott. We are pretty comfortable with our – we think our average investment cost in both Roadhouses and Bubba's will probably be pretty close to 2017 as to what we think they'll shake out in 2016. If there's any one particular type of real estate investment we may try to stay away from, it's really developing raw dirt from scratch. That's probably the biggest risk when it comes to developing restaurant real estate versus leasing or buying real estate in a planned development if you will. That'd be the only tweak, is just doing fewer of those raw dirt type of deals.

Got it. And just lastly, just to clarify what you said about the restaurant margin for next year. Just based on the current 1% pricing that are you taking to close out 2016, you were saying that expansion is going to more challenging. Are you at this point assuming with 1% price increase in the sales you are running that we would see margin contraction or are you just trying to temper the expectation versus the outsize maybe we are seeing in 2016?

I think it all depends on traffic growth, and ultimately, do we take any other pricing actions in the spring with the next set of menus coming out with calories. We just know we were expecting to have quite a bit of headwinds – despite really good food cost inflation we're expecting to have quite a bit of headwinds on the labor front.

This is Kent. Sorry, go ahead Scott.

Go ahead, Kent.

Yeah, I mean, with live cattle starting this year at $1.30 down at $0.99 and lean hog starting at $0.60 down to $0.49, I mean, we don't know 100% of what our food costs would be next year, so we had to factor that in as well.

Great. Thank you.

And we will go to Brett Levy with Deutsche Bank. Please go ahead.

Good afternoon. Can you please walk us through a little bit more on what you are seeing across the competitive landscape? And also, are you at all concerned that the same store sales trend, while still outpacing many of your peers seemed to have been a little bit softer in terms of you versus the industry and market share, but also to your stacks over the course of this year?

Hey Brett, this is Scott. I would say on the sales, we're very happy with the sales growth that our operators continue to generate for us. See on a two-year, we've slowed a little bit, but I tell you, on a three-year, its been very consistent. So at some point you look two years, three years, one year, four years, I don't know, but we see a lot of folks in casual dining with significant negative traffic. Our traffic's positive, and our margins are up this year. So we are very pleased with the momentum that we have in our business and we feel very good about heading into 2017.

This is Kent. And as I discussed our pricing with all 50 of our market partners, I mean, they basically said to me, this is all the pricing we want at this time and we own it that we're going to increase traffic and we're not going to settle until we take care of that. So I have full faith in our people to take care of the traffic that we need to make up. Thanks.

And if you could just offer a little bit of color on what you are seeing across the country by region?

Yeah, as far as for Texas Roadhouse, really no change from what we've been seeing over the course of the year. Most of the regions are pretty much – it's still performing as they have been. You see a little bit of improvement in Texas, but it's still pretty much the same across the country and nothing really stands out.

Thank you very much.

Karen Holthouse with Goldman Sachs is next. Gregory Lum - Goldman Sachs & Co.: Hi. Good afternoon. This is actually Greg Lum on for Karen today. I had couple of questions on the to go business. First, just wondering what the current mix of to go sales are? And then secondly, what are the longer-term targets? And then lastly, just what do you think that to go will benefit from the rollout of the mobile app?

This is Scott. Our to go business historically is around 3%. It has been pretty stable for a long time. Some restaurants, quite a bit higher than that; obviously some a little bit lower, because it has been just the average. We don't have any specific goal to drive to goes up to some level. So we definitely don't want to drive people from inside the four walls where we provide legendary service and a great atmosphere outside the four walls. We have seen other concepts go down that road and it seems like they just take people from inside the restaurant and send them outside the restaurant, where the experience quite frankly just isn't as strong. However, for those guests that do want to do to go, we want to give them the best experience possible, and certainly the app and online ordering does make it a heck of a lot easier for them to place their orders, pay for their orders, ultimately have a better experience with us. Gregory Lum - Goldman Sachs & Co.: Thank you.

Next is Jason West with Credit Suisse. Jason West - Credit Suisse Securities (USA) LLC (Broker): Yes. Thanks guys. A couple questions; one, as you are looking at the pricing in the first half of next year, can you talk about what you are going to be focused on there to drive that decision? Are you kind of looking at maybe potential legislation that may come down the pipe on minimum wage or tip wage or are you just kind of looking at the overall wage environment or your commodity outlook? Kind of, what's the big focus going to be if you guys were making that decision?

Well, this is Scott. It's a little bit of everything; everything you just said, then probably a few more things. We will look at everything and take it at that time. I think what's important is, we just don't take any of our sales success for granted and that's why we take the position that we do on our pricing. What we've always done, and that's what's worked for us historically. And so we'll continue to do that. And I am sure we'll personally talk to every one of our market partners and they'll talk to their managing partners at that time about how they are feeling about their respective businesses and what they are comfortable with doing if anything.

Yeah, this is Kent. We fully intend to make that call at the end of the first quarter. Jason West - Credit Suisse Securities (USA) LLC (Broker): Okay, that's helpful. And then just one quick follow-up. The quarter-to-date number in October was very strong, particularly relative to the industry. Didn't know if there was any benefit in there on the Halloween shift that we should be aware of or was that non-material? Thanks.

Yeah, Jason, it's Tonya. Yeah, there wasn't anything in there for that. It wasn't material to the results for Halloween. Jason West - Credit Suisse Securities (USA) LLC (Broker): Yeah, Halloween was after the reporting period I believe.

Yeah actually Halloween was in – it's not in October, it's in our November period. So there wouldn't be anything in October for it. Jason West - Credit Suisse Securities (USA) LLC (Broker): Okay, so the shift out of the – I guess moving to a Monday didn't show up in that number then?

No, it's not in that number. And we don't anticipate it to have any effect on Q4. We expect it to be very immaterial. Jason West - Credit Suisse Securities (USA) LLC (Broker): Got it. Thanks a lot. Congrats on the great quarter.

Thank you.

Thank you.

We'll go to Will Slabaugh with Stephens Incorporated.

Hey, good afternoon guys. This is actually Billy on for Will. One quick housekeeping question. Could you clarify the impact from the July holiday shift that you said in your prepared comments?

Yeah, so the benefit from July 4 shift was 0.4% on the quarter.

Got you. Thank you. And then – so wanted to ask on Bubba's again and see if there's anything you are willing to share around new market selection as we kind of look to accelerate growth there, maybe in the context of what you've learned from the markets that you are already in, especially those less urban locations and how we should be thinking about the new market strategy going forward?

This is Kent. I would say, most of our Bubba's are in secondary markets as most of the Texas Roadhouses are. What we have seen, which is a positive is, we took about 1200 square feet out of our building and the sales that we generate out of 1200 less square feet equals to about the same sales we were doing on a larger building. So we think that's a good thing as it relates to our investment costs moving forward. But from a regionality standpoint, there's really no big areas that stand out that are doing extremely poorly or extremely good.

Thanks. And one last one if I could. Could you just provide us a little bit more color on the assumptions built into your food cost outlook for next year and whether you are willing to share what percentage of your beef needs you have contracted for 2017?

Yeah. Billy, this is Tonya. We are really not ready to share those details right now, but I'm sure we'll have more color on that in February when we release. But I can tell you right now, we're about 50%, 55% locked on the overall basket, commodity basket for 2017. So I can't share that with you.

Great. Thanks. That's helpful. Appreciate it.

Next is John Glass with Morgan Stanley.

Hi. This is Chris on for John. So could you please provide some additional detail in unit volumes in the stores less than six months old? I think historically, at least in the past few years, the stores in this cohort posted weekly sales greater than the comp base. But that wasn't the case this quarter. So any color there would be great.

Sure. Chris, this is Tonya. Yeah, actually we've been seeing that trend for several quarters now. Actually it's – typically, historically what happens is that those stores do perform below the comp sales average. Beginning in Q1 that gap got a little bigger. It continued in Q2, and actually this quarter it tightened a little bit. I think it's around $8,000 difference, versus it was up at $10,000 and $11,000 in Q1 and Q2. So nothing really changing there that we're seeing versus what we've talked about before as far as the stores that are rolling through there. Nothing at this time that kind of sends up a big red flag for us. But we're continuing to monitor it very closely and make sure that that continues to be the story.

Okay. Thanks.

This is Kent. Also, when you look over time, our stores every year are comping positive. So that's why you would see the new stores maybe not comping over the base, because even our first store in Clarksville is doing a couple million bucks over what it did way back when. So that's one of those reasons.

Okay. Thank you.

We'll go to Alex Marty with Raymond James.

Good afternoon, guys. This is Alex Marty filling in for Brian Vaccaro. Real quick on the labor inflation; you guys mentioned mid to single digit inflation. I was wondering how much of that was related to the new overtime rule, and qualitatively what steps are you guys doing to specifically address that number?

Yeah, Marty, this is Tonya. I can tell you that from a labor perspective we've been seeing about 3% to 3.5% labor inflation pretty consistently this year. And we don't think that necessarily is going to change heading into next year just driven by the tightening job market, driven by higher turnover, higher wage rates, things like that. So we feel like that's going to pretty much stay with us, especially given what we are seeing out there with states doing various things, raising the wage rates next year potentially. So then you look for the what could – what we expect to see perhaps from the DOL, the overtime changes. And we are still working through those numbers, but it could be – it could easily bump that number up a bit. So that's kind of where you get that mid-single-digit inflation number.

That's real helpful. Thank you. And one last one; can you guys go through the monthly comps again for the quarter?

Yeah. The monthly comps were 3.7%, 3.3%, and 3.1% for July, August, and September.

Perfect. That's all I had. Thank you.

And we will go to Sam Beres with Robert W. Baird. Please go ahead. Sam J. Beres - Robert W. Baird & Co., Inc. (Broker): Hi. Good afternoon. Maybe to ask a prior question a little bit differently. Assuming that you don't take more pricing next year and around 1% for the whole year, based on the commodity and labor inflation outlooks you provided, Scott, what level of traffic growth do you think you'd need to see in that scenario in order to hold restaurant level margin flat?

This is Kent. By the way, you said commodity inflation, we don't provide commodity... Sam J. Beres - Robert W. Baird & Co., Inc. (Broker): Sorry, deflation, correct. Sorry for that.

Okay. Thank you. All right. Scott, take it away.

Yeah. I don't think we are going to give you that exact number of what it would take, because again we're telling you, so we're giving you ranges for everything. So I think there'd have to be some obviously range of positive traffic growth to hold our margins where they are if we got mid-single digit labor inflation, but it's a big wide range of outcome, which is, the reality that we face. So, I wouldn't give you an exact number. But it would be a pretty good bit of traffic growth to keep margins flat. Sam J. Beres - Robert W. Baird & Co., Inc. (Broker): That's helpful. Thanks. And maybe just towards development again, I think in terms of the Bubba's 33 developments for 2016 you are now talking about as many as nine prior expectations versus seven, so assuming a little less Texas Roadhouse openings this year from the company's side. Any perspective to provide there? And then maybe again on the Bubba's 33 unit returns, any perspective you can provide just on the types of sales volumes you've been seeing? Had there been divergences between some of the openings you had to date or has it been a pretty tight range?

This is Kent. I would – you have various stores that will open stronger or less, and then six months later you might be surprised that they are going up or surprised that they are going down. But with this few amount of stores, it's really hard to get a consensus of what a lot of stores might look like. But the fact that we are continuing to grow them, I would think tells you that we're feeling pretty good about it. But if – Scott, if you want to add some more details in it.

I think as far as the first part of your question on getting to nine Bubba's and couple less our Roadhouses, that's really just timing and the development pipeline. Sometimes a couple deals end up getting permitted and constructed quite frankly a little faster than you expected. Some deals take a little bit longer. So you may have a couple more of something this year and couple less next year, and the reverse for the other concept; a couple fewer this year, but a couple more next year. So a lot of that is just typical in the business when you are trying to estimate again how fast things get through permitting and get constructed and also depends what part of the country and weather and all sorts of things get into the whole development process. Sam J. Beres - Robert W. Baird & Co., Inc. (Broker): Thank you.

Next is John Ivankoe with JPMorgan.

Hi. Thank you. Scott, you said something that caught my attention in your prepared remarks where you said you might do a tweak or two on the menu; I guess that means for fiscal 2017. What might that mean? I mean, is it more premium products, more value products? Are there any price points that you might want to roll some current menu pricing back to? If you could elaborate on that comment, maybe what you meant to say by that?

Well, it's really small changes to the menu, John. I mean for example, we're testing a smaller sized salmon. Eight ounce salmon today, we are testing a 5 ounce salmon and putting a salad version of that which would both be a smaller portion size benefit for a guest, but also a lower price point for a guest. And another example would be a smaller size New York Strip. So similar kind of thing; more portion size per guest, but also a lower price point for the guest as well. So couple of things that I don't want to talk about at this point, but that just gives you a couple examples of a couple items that could, depending upon how they check out with our testing could end up on our menu next year or – early next year, maybe not even until late next year.

And is that something that the customers and the operators have been asking for? Is this more lower price points in general, and does that also match with other customers that maybe want more premium products as well?

It's a little of both, John. And you've got -our P-Mix by the way typically stays very, very consistent. So our guests per se are not (29:38) necessarily asking one or the other. But we know when we've introduced some premium priced items like our Bone-I Ribeye that's been very, very well received, our higher priced Porterhouse, very well received on our menu price points that we didn't think we would sell much of, but we have. But likewise, the value price point items where it's high single digit, i.e., the $9.99s and the low-teen price points are absolutely the bread and butter of the concept. And so any time you have an opportunity to add to that part of the menu, we're going to take advantage of that.

Okay. Thank you. And the final one from me. Do you have the estimated number of bump-outs for 2017?

Don't have that number off – at hand, John. But we are probably going to do, I think we're going to end up 35-ish this year, maybe as much as 40. More than I thought at the beginning of the year. I would probably assume roughly 25 for next year. That would be a typical assumption for us going into the beginning of the year. Our folks do request them throughout the year, and we do look at them every month. There's a group of us that look at them every month. They are approved, or not approved. Bump-outs, I'd probably assume 25 right now.

Thank you.

Andrew Strelzik with BMO Capital Markets is next.

Hey. Good afternoon, everyone. Last quarter, you mentioned that you were seeing some negative mix and didn't really have a good handle on why that was playing out that way. Wondering if you are still seeing that, and do you have any greater insights maybe to explain why that's happening or you think it's just generally the consumer environment?

No, I think the negative mix we're seeing, it's kind of spread out across a lot of different areas, whether it's entrées, apps, alcohol, soft beverages. It's kind of spread out across those categories. So we did – we put some pictures, changed some pictures up on the menu. Last November, we introduced some different combo items. So you saw some positive benefit from that in the entrées, but it was offset by some changes in some other areas because of the combos that we put together. So nothing there that I would point out as being anything that we are watching.

Okay. And you have a couple of your peers – your steak peers that are shifting away from couponing as a value player in the steak segment. It seems like you guys might be fairly well positioned to pick up some of that traffic. Do you think that that is an opportunity or could be contributing to some of the better traffic trends that you are seeing in addition to just the general operations?

This is Kent. I think people just come back – might leave us, go to some of these folks when they coupon, and then they come back because of the quality of our food and the level of our service. That's just one person's view.

Okay. And one more if I could. The last couple quarters I think you have been asked about the impact at Food-at-Home pricing and deflation there has on restaurant industry trends and your comps in particular. I don't think you said that you believe it has much of an impact historically. Wondering if you still share that view or has your thinking around that changed at all as you see maybe a little bit of softness, particularly on the two-year trends?

This is Kent. Go ahead, Scott.

Well, I would tell you, the two-year trends, while they are softer, the three-year trends are still hanging in there. I don't buy into the Food-at-Home argument. I don't think the price differences are that significant in what it costs to go out and eat today versus a year ago relative to what it cost to go to the grocery store today versus a year ago, that's – that big of an influence in people's decision-making now; there may be other things that are impacting them. Again, we are still bringing more people in the door. So I think if you're consistent – and one thing, we talk a lot about the food and the price of the food, but I'll tell you one big thing that we think makes a big difference for us is service. And we continue to staff our restaurants as if we're on offense. And we're ready to grow sales and take care of the guests in a very attentive manner, and we're a very labor-intensive business and as minimum wage has continued to go up or healthcare has been implemented or whatever it is, we haven't changed the basics of our labor philosophy. So I think we like to say we're the friendliest place in town, and a lot of people that's the first thing they tell us, is how friendly we are before they get to the food. So, the big part of our success is continuing to believe in that and invest in that. And that's why you see us, despite facing some pretty big labor inflation, we are not changing our basic labor model.

This is Kent. And I am kind of like, you want to sit at home and turn on the TV and be depressed, eat a mediocre meal, or come into our place and have a great meal, interact with our employees and kind of get energized and feel better about life. That's the way I look at it.

Great. I appreciate the thoughts. Thank you very much.

And at this time there is one name remaining in the roster. So if there are any additional questions And we will now go to John Zolidis with Buckingham Research.

Hey, I appreciate that. Some people can make non-mediocre food at home as well, but a question on the calories going on to the menus next year. Do you believe that that will have an impact on mix? And then in addition to that, do the calorie counts also go on for the alcoholic beverages and do you think that that will cause any change in consumer behavior for that category? Thanks.

Well, this is Scott. We've got a few restaurants that already have calories on the menu and we've seen virtually no change in mix in those restaurants relative to our other Texas Roadhouses. And we think we have a lot items on our menu where we actually look pretty good. Certainly, anything fried has a lot of calories, but we have a lot of things that aren't fried on our menu that are pretty good on the calorie count side. So we are pretty optimistic that we are not going to see much of a change if any in our P-Mix once the calories get rolled on the menu, whether it be normal entree items or alcoholic beverages.

And this is Kent. That we'll be bringing eight folks over to your house tomorrow night. Do you want us there at seven or eight?

Excellent. I'll let my wife know.

Thank you.

On the – one just follow-up if I may since I'm the last person here in the queue. On the Bubba's 33 versus the Texas Roadhouse concept, is there a difference in alcohol penetration there and how does that affect the overall potential for the restaurant level margin in your opinion? Thank you.

This is Kent. Bubba's, we run about 30% liquor mix versus a Texas Roadhouse, about 11%.

Okay. Thanks a lot and good luck for the next quarter.

Thank you.

And there are no other questions. I'd like to turn it back to Tonya Robinson for any additional or closing remarks.

Just want to say, thank you all for being with us tonight. If you have any other questions, please feel free to follow up. Have a great night.

Thank you very much. That does conclude our conference for today. I'd like to thank everyone for your participation. Have a great evening.