Good evening and welcome to the Texas Roadhouse second quarter earnings conference call. Today's call is being recorded. All participants are now in listen-only mode. After the speaker's 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 one on your telephone keypad. Should anyone need assistance at any time during the conference, please press star zero and an operator will assist you. I would now like to introduce Michael Balin, 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 undue 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 Jerry Morgan, Chief Executive Officer of Texas Roadhouse, and Mike Lenahan, 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 one question? Now, I would like to turn the call over to Jerry.

Thanks, Michael, and good evening, everyone. We're 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're especially pleased that our second quarter average weekly sales exceeded $175,000 for the first time in our company's 33-year history. There's 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 want to 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 $183,000. 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 location 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 $129,000 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, Jagger's also continues to perform well. In the quarter, weekly sales exceeded $76,000, 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 four company openings this year. On the topic of development, we remain on track for approximately 35 company-owned openings this year. nine of these occurred in the second quarter including five texas roadhouses three bubba's 33 and one jaggers as we mentioned last quarter our openings this year are heavily weighted toward the end of the year at this time six are scheduled for the third quarter the remainder of the 2026 openings are planned for the fourth quarter on the franchise side our partners opened one international Texas Roadhouse during the second quarter, we expect as many as five more international openings as well as two 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 three legs of what we call our triple crown. 90% of our restaurants set daily sales records this year on one of those three days and a handful of our restaurants really crushed it with single day sales exceeding one hundred thousand dollars on one of those holidays the trust that our guests show our restaurants on the most important dining occasions is one 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. Sales and mixed 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 five weeks of the third quarter, with comparable sales up 6.2% and our restaurants averaging weekly sales of $168,000. 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 and 7 percent to approximately 5 percent. 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 percent of comparable traffic growth. On the topic of our capital position, we ended the quarter with $202 million of cash. Cash flow from operations for the second quarter was $180 million, which was offset by $191 million dollars of capital expenditures dividend payments and share repurchases our guidance for 2026 capital expenditures remains unchanged at approximately 400 million dollars as always our capital allocation framework prioritizes new restaurant development and maintaining our existing restaurants and now michael will provide the second quarter financial entry 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 $177,000, with to-go representing more than $25,000, 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 $29,000. 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 $800,000 this year as compared to $300,000 of additional expense last year. Moving below restaurant margin, GNA 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 team 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 and 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'm 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 u.s hosted world cup matches it was amazing to see the social media posts 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 of 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 one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one 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's on the pricing philosophy going forward. So thank you for the update on what you're 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, you know, moderates more meaningfully? I know Texas Roadhouse has had a long history of pricing below inflation and it's served you well, but the last year or two, you've 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've had to make adjustments over the last several years. And 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. And, you know, we're going to go into it. We're going to talk to our operators. We really want to see what's 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've 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. But understanding that we have a conservative approach, we believe that that strategy and philosophy has paid very well over the years. And we'll 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. 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.

Good evening. I want to ask you a question about labor productivity a bit. You know, one 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, and it doesn't look like it's going to stop, but I don't want to take it for granted, so I was just wondering if you could give us a sense of what you're seeing, you know, that you've talked about things like digital kitchens and guest management systems, you're testing handhelds, perhaps it's giving you a little bit of confidence to lean into to go, So just want to give you some sense of will this hot streak continue and what are some of the things going on behind the scenes and thanks.

Yeah, hey, David, it's 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's a beneficial beneficial part of the technology investments that we've made importantly the managing partners 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 uh you know importantly it's not a metric that we target our operators with um and so while we like what we see we don't target them on it um and we we do hope that it

will uh continue based on the trends we're seeing thank you your next question comes from the line of zach fathom with wells fargo zach your line is open please go ahead hi good afternoon could Could we start with the food and beverage margin bridge in terms of commodity impact versus check impact versus entree mix? And in terms of that entree 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, exactly. It's Michael. So, I mean, certainly, if I understand your question correctly, I mean, we do see a benefit to our traffic. We're 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, come down? Will we see, you know, a change in our traffic trends? Hard to know. I think we've certainly over, you know, quite a number of years through, you know, multiple beef cycles seeing very strong traffic performance. We do, like I said, tend to outperform in a time of this inflationary deep environment, but I certainly would not expect that we won't be able to continue to grow in a lower inflationary environment. Times like this, it introduces new people to Texas Roadhouse, and we believe once they've come in, they're going to want to come back. Thanks for the time.

Thank you.

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

Great. Thank you guys so much. I had a two-part question on the reduced commodity inflation. First, what did you attribute to 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 contracted are you the back half of the year with commodities and relative to, you know, how contrast you were a year ago at this time for your back half 25?

Hey, Zach, it's, you know, Michael. So our second quarter commodity inflation, it 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 surloin prices really start to move lower and, you know, and some declation there. And that's really been the biggest benefit to, you know, our commodity expectations. So expecting to, you know, see, you know, much lower inflation in the third quarter than we had originally anticipated, now expecting 2% to 3% inflation in Q3 before it's stepping back up to approximately 5% in the fourth quarter. So sirloin is the biggest driver of that improvement. As far as contracted, on our overall commodity basket, we're about 80% locked for Q3 and about 40% unlocked for Q4, and that's not much different than you would have seen us having at this time last year for 2025.

That's great. Thank you, Michael.

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

Yeah, thanks. Hi, guys.

I guess, Jerry, you know, you started just by talking about, you know, the pipeline and development what could you talk a little bit about just some of the you know the recent openings where you've been you know finding success kind of size of the pipeline in in 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 um you know i mean we've got a full pipeline for 26 27 28 we're really working into 29 so uh with that and deal so working a lot of deals um you know we we uh continue to have success uh i'll tell you we wherever we go we're focused on our food our service and you know open our restaurant and the volume that we're at is really just hats off to these operators at every level, the single unit, the multi-unit, 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're new to the community, there are expectations. And I'm 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 Silverman with Deutsche Bank. Lauren, your line is open. Please go ahead.

Thank you very much and congrats on the great results. This is a clarifying question. My 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. I mean, your fifth quarter of double-digit growth has been amazing. What do you think is driving the momentum? Anything that you're doing differently? And then can you remind us how the labor model works with to-go and, like, what capacity the restaurants have with the current labor?

Hey, Lamar, I'll start with the commodity, you know, questions. So, again, third quarter right now we you know we are seeing uh some some good benefit on on the sirloin side uh you know we do think again you know these these cuts as one moves one way and the other another you know doesn't move quite as much that will that does change how the retailers uh look about what what they're going to buy and what they're going to market so we do think uh that you know as sirloin prices fall that may, you know, then lead them to purchase more of that into the fourth quarter as something, you know, that they will put, you know, put into their store. So, it's our current, you know, it's based upon what we have logged, what we're lapping, and how we believe the cuts will move over time. And, you know, also factoring in, you know, what's going on with supply.

Hey, Lauren, this is Jerry. Just on the overall sales growth, I mean, we obviously are continuing to have momentum on traffic, which means to me that we're opening or operating quality shifts and that we're 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 focusing 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're 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 own dining room tables, they have everything that they need. So I think it's just all of us putting this energy in and 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's 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.

Good afternoon, guys. As it relates to the 1% pricing that you're going to take, can you just confirm, does that put you around 3% for 4Q? Q, and can you guys talk about the mix trends that you're seeing, maybe in 2Q, and how you're anticipating mix to impact average check as we go into 3 and 4Q?

Yeah, hey, Brian, it's Mike. I'll start with the first on pricing, and Mike will jump in on mix. So with the 1%, in Q4, we will have 2.9%, and in Q1 of next year, we'll also have that same 2.9%.

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

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

Yeah, Dennis, yeah, happy to do that. Not sure necessarily that much has changed of recent, you know, there from what we've spoken about, you know, last several quarters. Supply is still very tight and we'll likely see, you know, a tight fourth quarter with regards to, you know, beef and cattle supply. Demand overall for beef is still very strong. there's certainly at retail still been some you know movements and trade to other proteins uh and trade within the beef category to some extent uh as well you know trends that we talked about uh you know you know before uh you know there's there's been the talk you know the announcement of the mexican border reopening you know later this quarter but that's more of an opportunity, if any, for next year. It takes a while. One, it's going to 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 Stevens. Jim, your line is now open. Please go ahead.

Good afternoon. Thanks for taking our question. I was hoping you could provide some incremental color on the continued traffic outperformance. You know, as 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 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 kind of break out that, that frequency versus new household drivers.

Hey, Jim, it's Jerry. I don't 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 made from scratch food and pressed baked bread and hand cut steaks and all of the things that we do is just kind of the word gets out and we continue to exceed people's expectations. And I think that's really what we focus on. We do have a first time guest program. So we absolutely identify guests in the 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 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 and just say thank you for coming to our restaurant and and providing us with an opportunity to serve them so i think that's really how we focus on driving traffic and and again on the to go side it's just a focus and emphasis on making sure that the guest has everything that they need when they get home and they unpack our our bag and our food for their family at their dining room table it's just our operators do an incredible job of building a strong relationship you know we're a nationally known company but 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.

I appreciate your thoughts, I'll pass it on.

Thanks, Jim.

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

Thank you. I have one clarification, hopefully that doesn't count as some question, and then a question. The clarification is, I think, you know, the negative mix, you were saying, Michael, effectively, there's a little bit of pressure on mix from to-go because the average check is lower. So, I want to confirm that's true, and maybe, you know, should we expect that, you know, 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, you know, Gary, you mentioned a line of sight for Texas Roadhouse even into perhaps 2029. Do 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.

Thanks, Sarah. I'll kick off on the, you know, we have upped it a couple of years ago to approximately 900 restaurants. I don't think we're going to change anything at this time. We feel confident in what we are game plan currently. We're focused on that 20th restaurants a year being highly successful openings. So we won't update that guidance at this time, but we are very confident that America wants more Texas Road Houses out there serving them high-level hospitality and legendary food.

And Sarah, I'll 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 the rising uh you know to go mix uh quarter to date q3 overall mix is flat and uh dining room has gotten more positive and the to-go mix has actually gotten a little bit uh better even though the to-go is still growing thank you your next question comes from the line of gregory frankfort with guggenheim partners gregory your line is open please go ahead Yeah, thanks.

You could add two or three restaurants in Bergen County, New Jersey. I would love that. But I appreciate that. My questions on the smaller brands and just Bubba's, the comps have been okay. But I think the new stores the last six months have just been phenomenal, just what you're seeing there. And Jaggers, I think the reason to keep it franchise has been because maybe there wasn't a lot of QSR talent in the organization existing at Roadhouse. And, Mike, I guess I'm wondering with you coming in, do you think about maybe changing that into maybe a company-operated model going forward or just any other thoughts in terms of your experience from QSR and bringing it into the Jagger space? Thanks.

Yeah, I'll start off and we'll let Mike answer that last 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've got the right leadership. We've got the focus on the food and the service model. Just being consistent about it is that component. I do think that there's a lot more competition for Bubba's 33. It's not as well known, so we've got to 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 theme, 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. And Jaggers, you know, I think we have had some franchise partnerships. We've really learned a lot with them. We like that learning from that standpoint, and so we'll continue to look at building the company out, as well as our few franchise partners having continued success and growing that side of the business, and then Mike might have a continent. Yes, sir.

Listen, on Jaggers, I agree. I think there's a place for both franchise partners and company ownership with where the brand sits in its life cycle. I think importantly, just to piggyback on Jerry's comments around the operating DNA that exists in Jaggers because it's part of the Texas Roadhouse family, our franchisees are very, very strong operators and we're 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 Reach 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, any sort of learnings from that test that you would be able to share today?

Thank you very much. Like I said, it is a micro-test of four stores. It is first-party delivery. We do third-party at Jagger's and at Bubba's and also at our new Rochelle location. I think most importantly is having a few conversations with folks is that we want to get educated. We view the test as beneficial to fact-finding purposes. We also know there's some operational complexities that we want to know about in case any of our operators ever get curious about it. So I think the micro test is still very early on. I can't say that we've got a lot of learnings to be able to share at this time, but it is a micro test of four 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 Holthaus on for John. Thanks for taking the question. I wanted to dig a little bit into the Bubba's same-store sales performance and maybe if there's, 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 the current prototype to be versus the ones that are not. trying to get a better sense of like if you're going to isolate the part of that system that's the closest to kind of where you want it to be is that chunk out comping the total system yeah hey karen it's mike i i think with bubba's i think again where it is in its life cycle with uh

you know 60 restaurants you know the 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 that we've 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's 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 and wondering if that brand exposure inspires you to accelerate international franchising.

Yeah, hey, Jim, it's Mike again. I think from a sales impact in Q2, we didn't really see anything significant across the system as a whole. We saw certain father's 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 to some of the conversations we're having with some of the folks that posted those internationally and some of our sales efforts there.

All right. No, just one follow-up question. Any expectations of purchasing franchised restaurants here in the U.S. that you can talk about?

Yeah, I mean, we've 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 they know when they're ready to step back that we're ready to step forward.

All right. Thank you.

Your next question comes from the line of Peter Sala with U.S. Bancorp BTIG. Peter, your line is open. Please go ahead.

Great. Thanks, guys. Jerry, a few minutes ago you mentioned the brand is a national brand, but you'd like to keep it more on the local level.

Just wondering, historically, your marketing, advertising is very much on the local side. you guys don't spend a ton on the percentage of sales um on marketing is there any thoughts about changing that or any increasing the contribution or any any change in strategy or uh going forward on the marketing side yeah thanks peter um no we uh have not ever spent any um money on national tv We absolutely believe that local store marketing grassroots 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've always taken that approach to, you know, legendary food, legendary service, and just high-level community engagement and involvement. If they need us to do something to help them out in some way, shape, or form, we just want to be a go-to in that deal. And whether it be local hotels, schools, churches, we want to be their partners on any of their needs. And that's really been our approach, you know, again, just keeping it as a locally owned and operated business. That's just always been our approach, and it's worked very well.

Thank you very much.

Your next question comes from the line of Brian Vaccaro 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 in 26, I'm curious, was there any change in your non-beef basket inflation for the year?

Hey, Brian, it's Michael. There's a little bit of an uptick in produce with everything that's gone on there, but nothing significant. Kim.

Okay. Okay. And then the question I had was, you know, Jerry, you start off talking about the long-term growth opportunity that remains in front of you for the core Texas Roadhouse brand. I'm curious how California factors in to that future growth. I think you only have about 20 stores in that market. You've been buying those stores in, in recent years, making them company owned. Are you spending more time and focus mapping out California?

And maybe we could see a rising mix within your pipeline over the next three to five years thanks again oh thank you um yeah and we have 20 open i think we have six in development um you know we continue to identify markets in california and exercise um where we want to go there we know that there is uh a lot of sales opportunities in california we've got some really high volume stores we believe that Over the time, we've learned how to manage and control business and work in California, even with all of the complexities that it consistently challenges businesses. But we do know people love to eat and all across there. And there's 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're going to be available to serve. Thank you.

Your next question comes from the live. component. Your next question comes from the line of John Avanco with JPMorgan. John, your line is open. Please go ahead. Hi, thank you. This is Crystal 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 and 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 uh you know no concerns about uh our ability to staff our existing restaurants staff new restaurants um you know we new managers uh for new locations you know you know we don't feel will be an issue, you know, whether that's 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 don't 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. thank you we have reached the end of the q a session i will now turn the call back to jerry morgan for closing remarks uh 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