Texas Roadhouse, Inc. (TXRH) Q2 2026 Earnings Report, Transcript and Summary

Good evening, and welcome to the Texas Roadhouse second quarter earnings conference call. Todd's call is being recorded. All participants are now in listen only mode. After the speakers remarks, there will be a question-and-answer session. At that time, if you would like to ask a question, please press star then the number 1 on your telephone keypad. Should anyone need assistance at any time during the conference, please press star 0 and an operator will assist you. I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference.

Thank you, Holly, and good evening. By now, you should have access to our earnings release for the second quarter ended June 30, 2026. It may also be found on our website at texasroadhouse.com in the investor section. I would like to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore, reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide 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. If applicable, reconciliations of the non GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Gerry Morgan, Chief Executive Officer of Texas Roadhouse; and Michael Lenihan, our chief financial officer. Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, could everyone please limit yourself to 1 question? Now, I would like to turn the call over to Gerry.

Thanks, Michael, and good evening, everyone. We are excited with our second quarter results as revenue approached $1.7 billion We continued our top line momentum with same store sales increasing 6.2%. Including 3% traffic growth. We are especially pleased that our second quarter average weekly sales exceeded $175 thousand for the first time in our company's 33-year history. there is a lot to be proud of across our portfolio of restaurants. Each of our brands is at a different point in their journey. And I wanna take some time to talk about the potential growth each brand has going forward. Texas Roadhouse ended the second quarter with 755 system wide locations across the United States and 10 foreign countries. Average weekly sales at company restaurants were over $183 thousand. We are confident in our operators' ability to continue driving sales through traffic growth. The sales volume and consistent growth that our restaurants have delivered over the long term are a testament to the strength of the brand, and the commitment of the best operators in the industry. This year, we expect to open approximately 20 Texas Roadhouse restaurants spread throughout the country. With the momentum in our existing locations, and a full pipeline of sites under development, the future continues to be incredibly bright for Texas Roadhouse. Bubba's 33 ended the quarter with 59 restaurants in 16 states. And just last week, we celebrated the opening of our 60th location which is our first in the state of Iowa. Average weekly sales for the brand were over $129 thousand in the second quarter, and our recent openings continue to perform very well. Our expectation is to open at least 10 Bubba's 33 restaurants this year and maintain this low double digit pace of openings for the next several years. Lastly, Jaggers also continues to perform well. In the quarter, weekly sales exceeded $76 thousand and we opened our 11th company location. The remainder of this year's growth of the company side will be focused in our existing markets. We expect a total of 4 company openings this year. On the topic of development, we remain on track for approximately 35 company owned openings this year. 9 of these occurred in the second quarter including 5 Texas roadhouses, 3 Bubba's 33, and 1 Jaggers. As we mentioned last quarter, our openings this year are heavily weighted toward the end of the year. At this time, 6 are scheduled for the third quarter, The remainder of the 26 openings are planned for the fourth quarter. On the franchise side, our partners opened 1 international Texas Roadhouse during the second quarter. We expect as many as 5 more international openings as well as 2 domestic Jaggers franchise openings in the second half of 2026. Moving on to menu pricing. We remain committed to maintaining our everyday value while also continuing to deliver on legendary food with high level hospitality. Based on recently completed discussions with our operators, we will take a menu price increase of 1% at the beginning of the fourth quarter. We believe this level of pricing strikes an appropriate balance between helping to offset structural inflation and maintaining our everyday value position. During the first half of 2026, our operators continued to deliver on our mission of providing legendary food and legendary service. In the second quarter, we saw tremendous demand on Mother's Day and Father's Day. Which along with Valentine's Day are the 3 legs of what we call our triple crown. 90% of our restaurants set daily sales records this year on 1 of those 3 days. And a handful of our restaurants really crushed it with single day sales exceeding $100 thousand on 1 of those holidays. The trust that our guests show our restaurants on the most important dining occasions is 1 of our competitive advantages. This trust is earned and something we will not take for granted. Now, Mike will provide some thoughts.

Thanks, Jerry. During the second quarter, guests continued to reward us for their overall experience at our restaurants. Same-store and mix trends within our dining rooms were both positive. And we maintained an impressive growth rate in our to go business during the quarter. These trends continued into the first 5 weeks of the third quarter with comparable sales up 6.2% and our restaurants averaging weekly sales of $168 thousand. Moving on to commodities. While the overall beef supply outlook remains dynamic, given a variety of factors, our second quarter commodity inflation came in at 7%, which was at the bottom end of our forecasted range. As previously stated, our second half inflation outlook remains lower than our first half inflation. And based on our updated forecast, we are reducing our full year 2026 commodity inflation guidance from between 6-7% to approximately 5%. We will provide an initial outlook on 2027 commodity inflation during our quarterly call in November. With regards to labor, second quarter inflation of 3.9% was in line with our expectations. And we are maintaining our full year 2026 wage and other labor inflation guidance of 3% to 4%. Labor productivity continued its positive trend with labor hours growing at approximately 25% of comparable traffic growth. On the topic of our capital position, we ended the quarter with $2.2 million of cash. Cash flow from operations for the second quarter, $180 million, which was offset by $191 million of capital expenditures dividend payments, and share repurchases. Our guidance for 2026 capital expenditures remains unchanged at approximately $400 million As always, our capital allocation framework prioritizes new restaurant development and maintaining our existing restaurants. And now Michael will provide the second quarter financial update.

Thanks, Mike. For the second quarter of 2026, we reported revenue growth of 11.1% driven primarily by a 5.9% increase in average weekly sales and a 5% increase in store weeks. We also reported a restaurant margin dollar increase of 6.9% to $275 million and a diluted earnings per share decrease of 0.7% to $1.85 Average weekly sales in the second quarter were over $177 thousand with To Go representing more than $25 thousand or 14.3% of these total weekly sales. Comparable sales increased 6.2% in the second quarter driven by 3% traffic growth and a 3.2% increase in average check. By month, comparable sales grew 6.2%, 6.7%, and 5.7% for our April, May, and June periods, respectively. In the second quarter, restaurant margin dollars per store week increased 1.9% year over year to over $29 thousand. Restaurant margin as a percentage of total sales decreased 66 basis points to 16.4% as compared to the same period last year. Food and beverage costs as a percentage of total sales were 35.4% for the second quarter. The 136 basis point year over year increase was primarily driven by 7% commodity inflation, The inflationary pressure was partially offset by the benefit of a 3.2% check increase. Labor as a percentage of total sales improved 40 basis points to 32.5% as compared to the second quarter of 2025. Labor dollars per store week increased 4.7% due to wage and other labor inflation of 3.9% and growth in hours of 0.8%. Other operating costs were 14.2% of sales, which was 28 basis points better than the second quarter of 2025 The leverage was a result of higher sales, combined with a $1.1 million net benefit to our quarterly reserve for general liability insurance. This insurance benefit included a credit of $800 thousand this year as compared to $300 thousand of additional expense last year. Moving below restaurant margin, G&A dollars increased 15.4% as compared to the second quarter of 2025 and came in at 4.3% of revenue, for the second quarter. For full year 2026, we continue to forecast a low double digit percentage increase in our total G&A dollar expense. Depreciation expense increased 15% year over year in the second quarter and came in at 3.5% of revenue. For full year 2026, we continue to expect a low teen percentage increase in our total depreciation dollar expense. Our effective tax rate for the quarter was 13.5%, At this time, we are updating our guidance for the full year 2026 income tax rate from between 14-15% to approximately 14%. Lastly, we want to highlight the likely negative impact to same store sales growth in the fourth quarter from several holiday shifts. Year over year, Halloween is shifting from a Friday to a Saturday and Christmas day is shifting from a Thursday to a Friday. In total, we estimate an approximately 75-basis point negative impact to fourth quarter same store sales growth from these shifts. Now, I will turn the call back over to Jerry for final comments.

Thanks, Michael. In September, we will begin our annual fall tour where we visit with approximately 800 managing partners across the country. I am looking forward to listening to the best operators in the business and learning how we can better support them and help them continue to grow our legendary company. Finally, over the last several months, the world was watching as The US hosted World Cup matches. It was amazing to see the social media post from visitors who experienced Texas Roadhouse for the first time. These guests fell in love with our high-level hospitality legendary food, especially our fresh baked bread, and those free peanuts. These experiences inspire us further as we continue with our purpose of serving communities across America and the world. Let's go, roadhouse. That concludes our prepared remarks. Holly, please open the line for questions.

We will now begin the question-and-answer session. Please limit yourself to 1 question. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Tarantino with Baird. David, your line is open. Please go ahead.

Hi. Good afternoon. My question is on the pricing philosophy going forward Thank you for the update on what you are planning for the start of Q4. But my bigger picture question is, how do you think you and the system will approach price increases in a scenario where inflation moderates more meaningfully? I know Texas Roadhouse has had a long history of pricing below inflation, and it served you well. But the last year or 2, you have absorbed quite a bit of inflation. So just maybe explain maybe how you might recapture some of that absorption, if you will. As we move forward?

Hey. Thanks, David. This is Jerry. You know, I think we always go into these pricing conversations with a conservative approach and we have had to make adjustments over the last several years. And I think we look at it from an over an annual basis on what are we facing structurally. And then what do we feel like will change. You know, we are going to go into it. We are going to talk to our operators. We really wanna see what is going on not only in their communities, but maybe in their state. And then try to match it up to what we believe that the company needs. So I think we have always had that approach to keep value into our menu is absolutely critical for us. As we continue to try to take care of our staff and our guests and our shareholders from understanding that we have a conservative approach We believe that strategy and philosophy has paid very well over the years, and we will continue to look at it on a biannual basis. Have great conversations with our operators. And then make that decision at that time. Great. Thank you. Thank you. Best wishes to you.

Your next question comes from the line of David Palmer with Evercore ISI. David, your line is open. Please go ahead.

Thanks. Good evening, I want to ask you a question about labor productivity, Abed. 1 could say you guys have been on a hot streak since the fourth quarter of 23 with labor hours growing less than half percent, half as fast as traffic since then. Wondering you know, it does not look like it is going to stop, but I do not wanna take for granted. So I was just wondering if you could give us a sense of what you are seeing that you have talked about things like digital kitchens and guest management systems, your testing handhelds. Perhaps it is giving you a little bit of confidence to lean in to go. So just wanted to give you some sense of, you know, will this hot streak continue? And what are some of the things going on behind the scenes? And thanks.

Yeah. Hey, David. it is Mike. Thanks for the question. You know, it is you hit on it. Nicely. It is a number of items that are continuing to build on themselves on a quarter to quarter basis. That is driving that momentum A quieter kitchen is a factor. That is a that is a beneficial part of the technology investments that we have made Importantly, the managing partner staffing for the level of sales that they want. You know, the other thing that helps with that ratio for us is tenure. Of our roadies. Being as high as it is. And also the continued growth of the to go business, all of those are working in concert. And so you know, importantly, it is not a metric that we target our operators with. And so while we like what we see, we do not target them on it. And we do hope that it will continue based on the trends we are seeing. Thank you.

Your next question comes from the line of Zachary Fadem with Wells Fargo. Zachary, your line is open. Please go ahead.

Hi. Good afternoon. Can we start with the food and beverage margin bridge in terms of commodity impact versus check versus on trend mix? And in terms of that Entre mix, grocery prices are starting to peak for beef. So maybe we could talk through what that typically means for entree mix as well as, traffic. As grocery prices retrace.

Yeah. Hey, Zachary, it is Michael. So, I mean, certainly, if I understand your question correctly, we do see a benefit to our traffic. We are seeing a benefit to the state category, given the high price of beef at retail? What may happen in a world where, you know, beef prices, you know, you know, come down? Will we see you know, a change in our traffic trends? Hard to know. I think we certainly over, you know, quite a number of years through, you know, multiple beef cycles, seeing very strong traffic performance. We do, you know, like I said, tend to outperform in a time of this inflationary beef environment, but I certainly would not expect that we will not be able to continue to grow in a lower inflationary environment. Times like this, you know, it introduces new people to Texas Roadhouse and believe once they have come in, they are going to want to come back. Thanks for the time.

Thank you. Your next question comes from the line of Andrew Charles with TD Cowen. Andrew, your line is open. Please go ahead.

Great. Thank you guys so much. I had a 2 part question on the reduced commodity inflation. First, what did you attribute the favorable commodity inflation in the quarter versus your forecast? You guys were about 80% contracted. And then curious on how much visibility you have, how contracts are already in the back half of the year with commodities, and relative to how contracted you were a year ago at this time for your back half 2025?

Hey, Zachary, it is Michael. So our second quarter commodity inflation was only slightly better than, you know, what we were you know, maybe internally modeling. So it was not you know, because we were, you know, well informed on that going into the last call. We did see a continuation or, like, you know, in June, we saw sterling prices really start to move lower and, you know, and some deflation there. And that is really been the biggest benefit to, you know, our commodity expectations. So expecting to, you know, see, you know, much lower inflation in third quarter than we had originally anticipated. Now expecting 2% to 3% inflation in Q3 before it steps back up to approximately 5% in the fourth quarter. So sirloin is the biggest driver of that improvement. As far as contracted, we are about 80% on our overall commodity basket, About 80% locked for Q3. And about 40% locked for Q4. And that is not much different than you would have seen us having at this time last year for 2025? that is great. Thank you, Michael.

Your next question comes from the line of Brian Harbour with Morgan Stanley. Brian, your line is open. Please go ahead.

Yeah. Thanks. Hi, guys. I guess, Jerry, you know, you started just by talking about the pipeline and development. What could you talk a little bit about just some of the, you know, the recent openings where you have been, you know, finding success kind of size of the pipeline and, you know, how you feel about Texas Roadhouse unit growth specifically?

Yeah. Thanks. Yeah. So, I mean, the pipeline is obviously, we continue to focus on that 20 ish a year in openings that continue to be very successful. All across the country. So, you know, I mean, we have got a full pipeline for 2026, 2027, 2028. We are really working into 2029. So with that, deal so working a lot of deals. You know, we continue to have success. I will tell you, we wherever we go, we are focused on our food, our service, and, you know, open our restaurant at the volume that we are at is really just hats off to these operators at every level, the single unit, the multiunit, the regionals. Everything, the commitment, all the coaches and the training managers that it takes to really make a first impression in every community that we open up at. And when you have your reputation out there, even if you are new to the community, there are expectations. And on really proud of the team and all of our operators that get out there and open the doors and hustle to show, our guests and our community what legendary food and legendary service is about. But the pipeline is strong. We continue to focus. And we have great success at the openings.

Your next question comes from the line of Lauren Silberman with Deutsche Bank. Lauren, your line is open. Please go ahead.

Thank you very much, and congrats on the great results. Just a clarifying question, then actual question, the clarifying is just on the commodity inflation Why is it stepping up in Q4? Just help me understand that. And then the actual question is on average weekly sales. Sean, first quarter of double digit growth has been amazing. What do you think is driving the momentum? Anything that you are doing differently? And then can you remind us how the labor model works with To Go and like what capacity the restaurants have? The current labor?

Hey, Lauren. I will start with the commodity you know, question. So, again, third quarter right now, we, you know, we are seeing some good benefit on the sirloin side. You know, we do think again, you know, these cuts as 1 moves 1 way and the other another move, you know, does not move quite as much, that will that does change how the retailers look about what they are gonna buy and what they are gonna market. So we do think that you know, as sirloin prices fall, that may you know, did not lead them to purchase more of that into the fourth quarter. As something know, that they will put, you know, put into their stores. So it is our current act you know, it is based upon what we have locked, what we are lapping, and how we believe the cuts will move over time. And, you know, also factoring in, you know, the, you know, what is going on with supply.

Lauren, this is Jerry. I will just on the overall sales growth, I mean, obviously are continuing to have momentum on traffic. Which means to me that we are we are opening or operating quality shifts and that we are finding ways to get more people through the dining room and you know, all of the components of pay at the table, our guest management system upgrade, the digital kitchen, Our operators just really focus in on a high level you know, in the peak times and even in the non peak times. So it just tells me not only growing dining room sales, we are growing our to go traffic. Because of the ease to order, the ease to pick up, Our operators are focused on making sure that we have all the items that the guest has ordered so that when they get home, and they open up our food at their at their own dining room tables, they have everything that they need. So I think it is just all of us putting this energy and in towards getting a great experience for our guests. And whether it be through the to go side of it or to the dining room, But just being energetic when it comes to serving people. I think, is really what is paid off for us for a long time. Thank you. Thank you.

Your next question comes from the line of Brian Bittner with Oppenheimer. Brian, your line is open. Please go ahead.

Thanks. Good afternoon, guys. As it relates to 1% pricing that you are gonna take, can you just confirm, does that put you around 3% for April? And can you guys talk about the mix trends that you are seeing? Maybe in 2Q and how you are anticipating mix to impact average check-in as we go into Q3 and Q4?

Yeah. Hey, Brian. it is Mike. I will I will start with the first on price and, Michael will jump in on mix. So with the 1%, in Q4, we will have 2.9%. And then 2.9%. Yeah.

And, Brian, as far as, you know, you know, mix is concerned, you know, in the in the second quarter, we definitely saw improving trends as we as we moved through the quarter. You know, still about 40 basis points negative overall. For mix within the dining room. You know, MichaelX turned you know, positive which was, you know, very good to see. And I will tell you here, you know, in the first 5 weeks, the third quarter, we have seen a continued improvement in those mixed trends with the vast majority of our pricing flowing through it. So that is certainly, you know, beneficial you know, to you know, profitability when that happens. We will see if those trends continue, but so far looking very positive. Thank you.

Your next question comes from the line of Dennis Geiger with UBS. Dennis, your line is now open. Please go ahead.

Great. Thank you, guys. Just wondering if you could touch a little more on beef. Michael, you spoke to a good amount a couple of minutes ago. But just anything more on what the team is seeing as far as supply demand dynamics? I know you kind of gave the output of what supply, you know, has meant, but just anything more on the dynamics that the team's observing. Thank you.

Hey, Dennis. Yeah. Happy to do that. Not sure necessarily that much has changed of recent you know, there from what we have spoken about you know, over the, you know, last several quarters. Supply is still very tight, and we will likely see, you know, a tight fourth quarter. With regards to, you know you know, beef and cattle supply. Demand overall for beef is still very strong. They are certainly at retail. Still been some, you know, movements in trade to other proteins. And trade within the beef category to some extent. As well, you know, trends that we had talked about before, You know, there is there is been the talk you know, the announcement of the Mexican border reopening, you know, later this quarter, but that is more of a opportunity if any, for next year. It takes a while 1, it is gonna be a very small reopening, and that takes a while before you would see any benefit from that. Thank you very much.

Your next question comes from the line of Jim Salera with Stephens. Jim, your line is now open. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking our question. Just hoping you can provide some incremental color on the continued traffic outperformance. You guys continue to deliver very robust traffic gains, we see the industry with traffic down. You know, low single digits. And I wonder if you can help us kind of disaggregate how much is increased guest frequency versus new house households coming to the brand? I recognize not everyone might know about Texas Roadhouse, but I feel just the prominence at this point, especially you mentioned some of the World Cup visibility. Would allow for most people to at least know that Texas Roadhouse in their area exists. So just wondering if you could help us kinda break out that frequency versus new household drivers.

Hey, Jim. it is Jerry. I do not know that we measure it necessarily like that. I mean, we focus on trying to give guests great experience They by word-of-mouth, they tell others, and then we get to try them. But I think once they get in and, you know, when you try, make from scratch food and fresh baked bread and hand cut steak and all of the things that we do is just kind of where the word gets out and we continue to exceed people's expectations. And I think that is really what we focus on. We do have a time guest program, so we absolutely identify guests in a restaurant. And we try to really create a relationship with all of our guests. And especially on their first time in, just letting them tell on our story, who we are, how we do business, and how we approach things. And, you know, we just try to knock their socks off with legendary food and high level hospitality and just put a smile on their face. I mean, the worlds are complicated. Our job is to fill their bellies with legendary made from scratch food and, put a big smile on their face to just say thank you for coming to our restaurant and providing us with an opportunity to serve them. So I think that is really how we focus on driving traffic and again, on the to go side, it is just a focus and emphasis on making sure that the guest has everything that they need. When they get home and they unpack our bag and our food for their family at their dining room table. there is just our operators do an incredible job of building a strong relationship You know, we are a nationally known company, but we like to be known as locally owned and operated. Our partners really see them owning their communities and food service and community partnership has always been the key to our success. Appreciate your thoughts. I will pass it on. Thanks, Jim.

Your next question comes from the line of Sara Senatore with Bank of America. Sara, your line is now open. Please go ahead.

Thank you. I have 1 clarification. That does not count as some question, and then a and then a question. The clarification is I think, you know, the negative mix, you were saying Michael, effectively, there is a little bit of pressure on mix from to go because the average check is lower. So I wanna confirm that is true, and maybe you know, should we expect that as to go continues to build as it has nicely as a percentage of sales? Maybe you see that a little bit continue But the question actually is about Jerry, you mentioned a line of sight for Texas Roadhouse even into perhaps 2029. Does that you have any sort of different thoughts on how many units you think the market can support? I mean, as your volumes keep going up, it would seem that the density you could support would be higher, but I was just curious where that stands. Thank you.

Thanks, Sara. I will I will kick off on the you know, we have upped it a couple of years ago to approximately 900 restaurants. I do not think we are gonna change anything at this time. We feel confident in what we our game plan currently. We are focused on that twentieth restaurants a year being highly successful openings. So we will not update that guidance at this time, but we are very confident that America wants more Texas roadhouses out there serving them high level hospitality and legendary food.

And, Sara, I will clarify on the mix. In the second quarter, we did have about 40 basis points of overall negative mix. In the dining room, mix was just slightly positive. Offset by, you know, the rising you know, to go mix. Quarter to date, Q3, overall mix is flat. And dining room has gotten more positive. And the to go mix has actually gotten a little bit better even though the to go is still growing. Thank you.

Your next question comes from the line of Gregory Francfort with Guggenheim Partners. Gregory, your line is open. Please go ahead.

Yeah. Thanks. You could add 2 or 3 restaurants in Bergen County, New Jersey. I would love that. But I would-- come on. I appreciate that. My question's on the smaller brands and just Bubba's the comps have been okay, but I think the new stores the last you know, 6 months have just been phenomenal. Just what you are seeing there and Jaggers, I think the reason to keep it franchise has been because maybe there was not a lot of QSR talent in the organization existing at Roadhouse and, Mike, I guess I am wondering with you coming in, do you do you think about maybe changing that into maybe a company operated model going forward? Just any other thoughts in terms of your experience from QSR and bringing it into the Jaggers space. Thanks.

Yeah. I will start off, and we will let Mike answer that. in part. You know, on the Bubba 33, we continue to focus on the food and the experience, and we feel really, really good about the brands, all the openings these last couple of years have done extremely well. We continue to work on it. We have got the right leadership. We have got the we have got the focus on the food and the service model. Just being consistent about it, is that component. I do think that there is a lot more competition for Bubba's 33. it is not as well known. We gotta continue to work hard on our local store marketing side, but we absolutely have great food and the same service model, a lot of excitement and energy around there. You know, we focus on the burgers, the pizzas, the rock and roll, the energy, the sports team, and all of those things are components of what we believe long term Bubba's 33 will continue to have tremendous success in that competitive set. In Jaggers, I think we have had some franchise partnerships. We really learned a lot with them. We like that learning from that standpoint. And so we will continue to look at building the company out, as well as our few franchise partners having continued success in growing that side of the business and then Mike might have a comment Yes, sir.

Listen. On Jaggers, I agree. I think there is a place for both, franchise partners and company ownership with where the brand sits in its life cycle. Think importantly, just to piggyback on, Jerry's comments around the operating DNA that exists in JAGGARS because it is part of the Texas Roadhouse family, Our franchisees are very, very strong operators, and we are learning just as much from them as in our own company restaurants. So for the time period, it is a very beneficial mix for us to have both.

Your next question comes from the line of Logan Reich with RBC Capital Markets. Logan, your line is open. Please go ahead.

Hey. Good afternoon. Thanks for taking my question. I wanted to ask on the fact finding delivery test you guys did at a couple stores, recently. Just any sort of learnings from that test that you would be able to share today? Thank you very much.

We you know, like, said, it is a micro test of 4 stores. It is first-party delivery. We do third party at Jaggers and at Bubba's. And also at, our new Rochelle location. I think most importantly is having a few conversations with folks who is at we wanna get educated. We view the test as beneficial to fact finding purposes. We also know there is some operational complexities that we want to know about. In case any of our operators ever did get curious about it. So I think the micro test is still very early on. I cannot say that we have got a lot of learnings to be able to share at this time, but it is a microtest of 4 restaurants across different parts of the country. Got it. Very helpful. Thank you. Thank you.

Your next question comes from the line of John Tower with Citi. John, your line is now open. Please go ahead.

Hi. This is Karen Ann Holthouse on for Jon, for taking the question. I wanted to dig a little bit into the Bubba's same store sales performance. And maybe if there is, you know, ways to decompose that a little bit into maybe some older legacy units, more recent units, more recent markets, you know, units that are closer to where you want current prototype to be versus the ones that are not. Trying to get a better sense of, like, if you could isolate the part of that system that is the closest to kind of where you want it to be, is that chunk out-comping the total system?

Yeah. Hey, Karen. it is Mike. I think with Bubba's I think, again, where it is in its life cycle with, you know, 60 restaurants, you know, the metric that we are more focused on as it relates to performance are some of the newer restaurants because they embody some of the learnings that we have got there and then applying it backwards. I think the other, really important thing to consider with Bubba's is that we are very much taking it with a long term approach and not a quarter to quarter approach. When we do that and we measure where Bubba's is at 60 restaurants, and compare it to where Texas Roadhouse was at 60 restaurants, some of the metrics are extremely encouraging. So with that approach and applying some of the learnings to the new ones, that is that is where we believe the better focus is on same store sales. Great. Thanks for taking the question.

Your next question comes from the line of Jim Sanderson with North Coast Research. Jim, your line is open. Please go ahead.

Hey. Thanks for the question. I wanted to go back to same store sales in the second quarter. Any benefit or impact from the World Cup? I noticed that you had said June decelerated a little bit. I am wondering if that brand exposure inspires you on to accelerate international franchising.

Yeah. Yeah. Hey, Jim, it is Mike again. I think from a from a sales impact in Q2, we did not we did not really see anything significant. Across the system as a whole. We did see certain of our restaurants have a bigger impact on an individual basis. On game days, but nothing really measurable in the quarter across the portfolio. You did hit on a really positive impact that the World Cup had on us. And that was the social media that we got from people experiencing it. For the first time. And, you know, it is very helpful some of the conversations we are having with some of the folks that posted those internationally and some of our sales efforts there.

Alright. No.

Just 1 follow-up question. Any expectations of purchasing franchised restaurants here in The US that you can talk about?

Yeah, I mean, we have got-- we have got about 31 franchise locations left on the Roadhouse side. And we have roll up rights for the majority of those sites. We talk all the time with our franchisees. And, you know, they know when they are ready to step back that we are ready to step forward. Alright. Thank you.

Your next question comes from the line of Peter Saleh with BTIG. Peter, your line is open. Please go ahead.

Great. Thanks, guys. Gerry, a few minutes ago, you mentioned, you know, the brand is a national brand. But you like to keep it more on the local level. Just wondering, you know, historically, your marketing advertising is very much on the local side. You guys do not spend a ton on the percentage of sales. On marketing. Is there any thoughts about changing that or any increasing the contribution or any change in strategy or going forward on the marketing side?

Yes. Thanks, Peter. No. We have not ever spent any money on national TV advertising. We absolutely believe that local store marketing grass roots kind of approach, getting out into the local communities, shaking people's hands, delivering some fresh baked bread and just talking about Texas Roadhouse and what we can do for them, for their business, for their family. So we have always taken that approach to you know, legendary food, legendary service, and just high level community engagement and involvement that they need us to do something to help them out in some way, shape, or form. We just wanna be a go to in that deal. And whether it be local hotels, schools, churches, we wanna be their partners on any of their needs. And that is really been our approach. You know? And, again, just keeping it as they locally owned and operated business that is just always been our approach, and it is worked very well. Thank you very much.

Your next question comes from the line of Brian with Raymond James. Brian, your line is open. Please go ahead.

Thanks. Good evening. Just a quick clarification. On the lower commodity guide, for the year of 2020 and 2026, I am curious, is there any change in your non beef basket inflation for the year? Hey, Brian. it is Michael. there is a little bit of an uptick in produce. With everything that is, you know, gone on there, but nothing significant. Okay. Okay. And then the question I had was, Jerry, you started off talking about the long term growth opportunity that remains in front of you for the Texas Roadhouse brand. I am curious how California factors into that future growth? I think you only have about 20 stores in that market. You have been buying those stores in recent years, making them company owned. You spending more time and focus mapping out California? And maybe we could see a rising mix within your pipeline over the next 3 to 5 years?

Thanks again. Thank you. Yeah. And we have 20 open. I think we have 6 in development. You know, we continue to identify markets in California and exercise where we wanna go there. We know that there is a lot of sales opportunities in California. We have got some really high volume stores We believe that over the time, we have learned how to manage and control business and work in California, even with all of the complexities that it presents to challenge his business. But we do know people love to eat and all across there, and there is a lot of folks in California that love hand cut steaks and fresh baked bread and ice cold beer and a legendary margarita, and we are gonna be available to serve them. Your next question comes from the line

Component. Your next question comes from the line of John Ivankoe with JPMorgan. Your line is open. Please go ahead.

Hi. Thank you. This is Krystal on for John. I wanted to ask on your labor. So as you keep expanding towards your TAM, how are you thinking about labor ability in both at the store level and especially at the managing partner pipeline. do you see any need to, like, revisit your compensation plans or incentivize your incentives to strengthen the pipeline and ensure that you have enough high quality operators to support growth?

Yeah. This is Michael. On the labor side, we have, you know, no concerns about our ability to staff our existing restaurants, staff new restaurants. you know, we you know, new managers, for new locations, you know, you know, we do not feel will be an issue. You know, whether that is bringing people, promoting from within or, you know, bringing in people who are already living in the community that we may expand into. And I do not think we foresee any needed change in our compensation plan. We have a very strong managing partner program and feel very good about that. So no expected changes at this time. Got it. Thank you.

We have reached the end of the Q&A and will now turn the call back to Jerry Morgan for closing remarks.

Thank you all very much. Just wanted to say thanks to Roadie Nation for all they do to make our company just stronger and stronger every single day. So have a great summer. Enjoy your evening. Yeehaw, roadhouse.

This concludes today's call. Thank you for attending. You may now disconnect.