Earnings Call Transcript - TXRH Q2 2025

Operator, Operator

Good evening, and welcome to the Texas Roadhouse second quarter earnings conference call. Today's call is being recorded. I would now like to introduce Michael Bailen, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

Michael Bailen, Head of Investor Relations

Thank you, Tamika, and good evening. By now, you should have access to our earnings release for the second quarter ended July 1, 2025. It may also be found on our website at texasroadhouse.com in the Investors 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 Keith Humpich, our Interim 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.

Gerald L. Morgan, Chief Executive Officer

Thanks, Michael, and good evening, everyone. We are pleased with our second quarter results and the continued top-line momentum of the business. Strong traffic growth throughout the quarter drove a 5.8% increase in same-store sales. As a result, our revenue for the quarter grew to over $1.5 billion for the first time in our history. We are especially encouraged to see that all three brands contributed to our second quarter traffic and sales growth. Texas Roadhouse averaged approximately $172,000 in weekly sales for the second quarter. The brand continues to benefit from a relentless focus on food, service, hospitality, and value. This is why Texas Roadhouse once again earned top recognition from external surveys for guest experience and satisfaction in the casual dining segment. Bubba's 33 average weekly sales exceeded $128,000 in the second quarter. In addition to solid performance from our same-store sales group, we are also seeing strong sales at our most recent openings. We believe Bubba's 33, which currently has 53 locations in 16 states, has a sound infrastructure and a seasoned management team in place who can execute our road to 200 locations strategy. This could include double-digit openings next year. We are equally excited about Jaggers. We delivered average weekly sales of nearly $76,000 in the second quarter. New store openings have been limited as we have been building the growth strategy for the brand. With our plan in place, we could open as many as eight company and franchise locations next year. We recently completed discussions with our operators regarding menu pricing. Based on those conversations, we will take a menu price increase of approximately 1.7% at the beginning of the fourth quarter. We feel confident this is the right level of pricing to maintain our everyday value while offsetting some of the inflationary pressures we are facing. On the development front, we recently opened our 800th system-wide restaurant. This milestone is a testament to the appeal of our brands, our operational excellence, and the effectiveness of our growth strategy. During the second quarter, we opened four company-owned restaurants, including two Bubba's 33 locations, and we remain on track to open approximately 30 company-owned restaurants this year. Our franchise partners opened one Jaggers location in the second quarter, and we currently expect they will open four international Texas Roadhouse restaurants in the second half of this year. During the second quarter, we completed the acquisition of three franchise restaurants, bringing the total number of franchised restaurants acquired this year to 17. We also have plans in place to acquire three more franchise locations in the fourth quarter. Additionally, we will be purchasing our remaining five California franchise restaurants at the beginning of 2026. We are also excited to share we entered into an agreement to purchase our support center. The purchase of these two buildings, which we previously leased solidifies space planning for the future and reflects our long-term commitment to our hometown of Louisville, Kentucky. We remain rooted in our community and look forward to growing our presence in Louisville for many years to come. As to our future, I am fully confident in the strength of our operations and the commitment of Roadie Nation. While there are always challenges, we will continue to focus on what we can control for the long-term health of our business. Through it all, we will remain a people-first company that delivers on its mission of providing legendary food and legendary service to every guest. Now Keith will provide some thoughts.

Keith V. Humpich, Interim Chief Financial Officer

Thanks, Jerry. During the second quarter, we saw our positive traffic trends accelerate from what we experienced in the first quarter. Also, our mix trends in the second quarter remained similar to what we have seen in the last several quarters. These traffic and mix trends show that our guests continue to appreciate the high-quality food, experience, and value that all three of our brands provide. As for commodities, our second quarter inflation was in line with our expectations. Looking ahead, we have increased our guidance for full-year inflation to approximately 5%, primarily due to higher than previously forecasted beef inflation, particularly in the third quarter. This guidance includes approximately 30 basis points of full-year 2025 inflation related to tariffs, which remains consistent with our initial estimates from last quarter. Labor inflation in the second quarter was also in line with our expectations. Our operators continue to do a great job of staffing the restaurants as labor hours grew at approximately 40% of comparable traffic growth. With greater visibility into inflationary trends for the year, we have lowered guidance for full-year wage and other labor inflation to approximately 4%. With regards to capital allocation, we ended the second quarter with $177 million of cash. Cash flow from operations was $128 million, which was offset by $148 million of capital expenditures, dividend payments, and share repurchases, as well as $16 million for the three franchise restaurant acquisitions. As Jerry mentioned, we will be acquiring our support center buildings in the third quarter for a net purchase price of approximately $23 million. We are maintaining our full-year capital expenditure guidance at approximately $400 million inclusive of this transaction. Going forward, our capital allocation philosophy remains unchanged. Our first priority remains the funding of new restaurant development and taking care of our existing restaurant base. We also expect our dividend will continue to increase annually at a measured rate. And at a minimum, we will repurchase shares to offset dilution. Beyond that, we will continue to look at opportunities to acquire additional domestic Texas Roadhouse franchise restaurants as well as repurchase additional shares as appropriate. And now Michael will walk us through the second quarter results.

Michael Bailen, Head of Investor Relations

Thanks, Keith. For the second quarter of 2025, we reported revenue growth of 12.7%, primarily driven by a 5.3% increase in average weekly sales and 7.2% store week growth. We also reported a restaurant margin dollar increase of 6.1% to $257 million and a diluted earnings per share increase of 4% to $1.86. Average weekly sales in the second quarter were over $167,000, with To-Go representing approximately $22,000 or 13.3% of these total weekly sales. Comparable sales increased 5.8% in the second quarter, driven by 4% traffic growth and a 1.8% increase in average check. By month, comparable sales grew 4.3%, 7.2%, and 5.8% for our April, May, and June periods, respectively. And comparable sales for the first 5 weeks of the third quarter were up 5.3%, with our restaurants averaging sales of over $158,000 per week during that period. In the second quarter, restaurant margin dollars per store week decreased 1% to over $28,500. Restaurant margin as a percentage of total sales decreased 108 basis points year-over-year to 17.1%. Food and beverage costs as a percentage of total sales were 34% for the second quarter. The 131 basis point year-over-year increase was driven by 5.2% commodity inflation combined with shifts within the entree category, which was partially offset by the benefit of a 1.8% check increase. Labor as a percentage of total sales increased 6 basis points to 32.9% as compared to the second quarter of 2024. Labor dollars per store week increased 5.4% due to wage and other labor inflation of 3.8% and growth in hours of 1.6%. Other operating costs were 14.5% of sales, which was 32 basis points better than the second quarter of 2024. The improvement was driven by leverage on operator bonuses as well as the year-over-year change in our quarterly reserve for general liability insurance. These insurance adjustments include $300,000 of additional expense this year as compared to $2.1 million of additional expense last year. Moving below restaurant margin, G&A dollars grew 7.9% year-over-year and came in at 4.2% of revenue for the second quarter. Our effective tax rate for the quarter was 14.9%. Based on our outlook for the remainder of the year, we are updating the guidance for our full-year 2025 income tax rate to approximately 15%. Now I will turn the call back over to Jerry for final comments.

Gerald L. Morgan, Chief Executive Officer

Thanks, Michael. I am so proud of our operators and support center Roadies who work together as one team to deliver great results. I'm also excited to spend time with our managing partners on our annual fall tour. As always, we look forward to getting feedback on how we can better support them or remove any obstacles so they can focus on partnering with Roadies, serving their guests, and growing the business.

Michael Bailen, Head of Investor Relations

That concludes our prepared remarks. Tamika, please open the line for questions.

Operator, Operator

Your first question is from the line of Sara Senatore with Bank of America.

Sara Harkavy Senatore, Analyst

The top line results have been very strong. I wanted to inquire about inflation, particularly since last year we saw commodity and beef inflation consistently underperform. This year, however, it appears to be exceeding expectations. Could you discuss the dynamics at play? In the past, the situation in retail and grocery has had a significant impact, but it also seems like supply has been decreasing. You mentioned that the third quarter might have been the peak relative to your expectations. Is there a possibility that this is related to timing or varies from quarter to quarter? I realize there’s a lot to unpack, but you typically provide good insights into the beef cycle.

Michael Bailen, Head of Investor Relations

Thanks, Sara. This is Michael. I will address those questions. We have updated our guidance based on strong retail demand for beef, which remains resilient. The supply situation, which we anticipated would be tight this year, has faced additional pressure due to beef suppliers reducing their production in response to margin concerns. This led to a further tightening of supply, driving costs higher in June. As the beef ages, we expect to see the effects of this in the third quarter. Currently, we have about 80% of our beef secured for the third quarter and around 50% for the fourth quarter. Our team is closely monitoring the situation and will provide updates as needed.

Operator, Operator

Your next question is from the line of David Palmer with Evercore ISI.

David Sterling Palmer, Analyst

I have a couple of questions about specific line items that might provide some insights. Looking at the mix effect over the past two years, I initially thought it made sense for the mix to be negative coming out of COVID, given the significant growth in checks during that period as people had some extra money. Now, after 2.5 years of slightly negative mix, I'm curious about your thoughts on this. What behaviors do you think are influencing this trend? Could it relate to alcohol dynamics or perhaps consumer caution? How does this affect your pricing strategy? Additionally, you performed well with labor leverage this quarter, and traffic improved significantly, which likely contributed to that. Does achieving such strong traffic numbers make it easier to achieve labor leverage, rather than simply reducing hours? I would like to know your perspective on this.

Michael Bailen, Head of Investor Relations

David, it's Michael. Regarding the mix, the negative impact is solely from the alcohol category. We continue to see a positive entree mix, with guests opting for larger steaks or ordering steak more frequently. We're also seeing positive trends in the mocktail categories. Overall, our menu pricing actions haven’t led to any downward pressure; it's specific to the alcohol category, which reflects broader societal trends rather than being unique to our Roadhouse. This context motivated us to introduce mocktails, which have been well received. We feel positive about how guests are engaging with our menu offerings. On the labor front, increased traffic certainly helps, and our operators are effectively staffing their restaurants while benefiting from lower employee turnover. More tenured employees are more productive, and this ties back to our investments in the digital kitchen and the overall management of our restaurants. We're encouraged by the trends in labor productivity we've observed and remain cautiously optimistic that this will continue throughout the year.

Operator, Operator

Your next question is from the line of David Tarantino with Baird.

David E. Tarantino, Analyst

Maybe two questions I'm going to cheat here. But Michael, can you just give us a sense of what the inflation in Q3 and Q4 is going to look like based on your current outlook? And I just want to make sure everybody is on the same page. And then I guess my real question is, Jerry, you mentioned the step-up in Bubba's openings for next year. And I just wanted to get your thoughts on what that means for the total enterprise and your overall growth rate? I know you said in the past, you're pretty comfortable 30 or so openings, but does this allow you to push higher than that as you think about next year and future years?

Michael Bailen, Head of Investor Relations

Yes, David, I believe you're referring to beef inflation and our expectations on that front. Currently, we anticipate the highest pressure in the third quarter, with commodity inflation reaching up to 7%. After that, we expect it to decrease to a range of 4% to 5% in the fourth quarter. Additionally, we're experiencing extra negative impact on our cost of sales due to customers opting for steak more frequently. This trend has been evident over the past few quarters, and we expect it to continue into the third quarter as well.

Gerald L. Morgan, Chief Executive Officer

And David, this is Jerry. Regarding the growth of Bubba's, we have seven openings planned for this year, and the pipeline for 2026 looks very promising. We are nearing the double-digit mark. We previously mentioned around 30 or so, and with the increase in Bubba's growth, we could be slightly above that approximate number. We are enthusiastic about the results we're achieving and the investment in the brand itself. I believe we may see a slight increase in that.

Operator, Operator

Your next question is from the line of Lauren Silberman with Deutsche Bank.

Lauren Danielle Silberman, Analyst

On the comp side, the monthly cadence, any additional color you can provide on what drove some of the monthly differences? I think broadly, the industry has seen some choppiness. So just wondering if there's anything you're seeing that's different than typical consistency?

Michael Bailen, Head of Investor Relations

Lauren, it's Michael. Obviously, we were pleased with the overall performance that we have seen. I guess, the July period, you probably had about a 70 basis point negative impact from the timing of Easter. And the 5-week period that we gave for the beginning of the third quarter has about 60 basis points of negative pressure from the calendar shift for the fourth of July.

Lauren Danielle Silberman, Analyst

Sorry, is 2Q is a 70 basis point negative impact?

Michael Bailen, Head of Investor Relations

That was on just our April period. On the quarter, it was about 20 basis points. Yes, just April was 70.

Lauren Danielle Silberman, Analyst

Understood. Anything you can provide on comp performance or differences that you're seeing across region, days?

Michael Bailen, Head of Investor Relations

Yes, when we examine the situation, we have been experiencing steady growth every day of the week in both our dining room and To-Go services. Regionally, we are seeing strong performance in all areas, with no specific weaknesses or unusually strong segments to point out. We are very satisfied with the overall results.

Operator, Operator

Your next question is from Dennis Geiger with UBS.

Dennis Geiger, Analyst

I appreciate all the color on the cost inflation pieces. Maybe just one more in thinking about restaurant margins for the back half of the year. Just as far as the other OpEx line, thinking about that and if there's any differences 3Q and 4Q as we think about how the labor setup might play out? Anything to there to kind of fully fill in the pieces for us in thinking about 2H restaurant margins?

Michael Bailen, Head of Investor Relations

It's Michael. In response to your question about both labor and other operational expenses, it will depend on the assumption you make regarding traffic growth. If you expect continued modest traffic growth, the other operations line could maintain a similar level of leverage as it has over the last two quarters. You may see that trend continue in the third and fourth quarters. Regarding labor costs, with some traffic growth, we anticipate that they will remain flat or possibly see a slight leverage improvement as we progress into the latter half of the year.

Operator, Operator

Your next question is from Brian Harbour with Morgan Stanley.

Kelly Anne Margaret Merrill, Analyst

This is Kelly Merrill on for Brian. Obviously, saw some commodity inflation in the second quarter with the expectation of that continuing into 2H. Could you just provide some color on what's driving that? Obviously, beef, but is there anything else inflationary outside of that? And could there be any offsets to beef on the commodity side? And then on labor, is there anything to explore there just from an efficiency standpoint as you look to offset the commodity inflation?

Michael Bailen, Head of Investor Relations

Yes. It's Michael. It really is the beef that is driving that inflation for commodities, with it being over 50% of our basket, and there really not being another item that's large enough to make a serious impact on the overall numbers. I'd say the rest of the proteins maybe are slightly inflationary, getting a little bit of offset, maybe a little benefit on the produce area, but really all the pressure is coming from beef. And on the labor side, our operators are always looking to run efficient restaurants. We aren't mandating any kind of scheduling for them, and they do what is appropriate for their restaurants for staffing for the sales they have and the sales they want in the future. And so they're always looking at that to see if there is opportunity, but I don't believe there are any levers to be pulled that will dramatically change our approach to labor.

Operator, Operator

Your next question is from the line of Jim Salera with Stephens.

James Ronald Salera, Analyst

I wanted to dig in a little bit on Bubba's 33. You guys crossed 50 units, mainly concentrated in Texas, but just thoughts around how do we kind of continue to scale that and maybe regional attack plan and where we should anticipate to see new units in the strategy for engaging new guests as that brand becomes more and more visible?

Gerald L. Morgan, Chief Executive Officer

Yes, thank you, Jim. This is Jerry. We're currently operating in 16 states and are maintaining our focus on our program. We typically work with a multiunit operator in a specific area to develop that region. As we expand and engage new market partners, we plan to grow into new areas and demographics. Our recent openings have been successful, and we will likely maintain our current strategy. A key aspect has been stabilizing our leadership, while concentrating on our menu and execution. We take great pride in the appearance of our buildings and the vibrant atmosphere created by our entertainment, sports, and food offerings. As we solidify our operations and enhance our performance, I believe we can expand at a faster rate than we have in recent years. It’s an exciting time for sure.

Operator, Operator

Your next question is from Jeff Bernstein with Barclays.

Anisha Datt, Analyst

This is Anisha Datt on for Jeff Bernstein. I wanted to ask about value. How has the mix of value-oriented sales evolved at both Texas Roadhouse and Bubba's compared to historical levels? And do you have plans to further emphasize value offerings in coming quarters, particularly to support lower-income guests?

Gerald L. Morgan, Chief Executive Officer

Yes, I'll begin with that. When it comes to value, we’ve always believed there’s significant value in our menu options, especially with our country dinners, as they feature various cuts of beef and allow customers to choose their portion size from 6 ounces to 16 ounces. We also have an early dine feature, and these elements have been part of our offerings for quite some time. We appreciate that customers enjoy customizing their dining experiences. We want them to spend as much or as little as they wish. Each meal includes a protein, two free sides, bread and butter, and additional items. Overall, the value is intrinsic to our menu. In the past year, we've introduced a $5 beverage menu, offering items like affordable pint beers, 10-ounce margaritas, and $5 mocktails, which are new for us. Many items are reasonably priced yet high quality. This has always been a key factor in our success. Our operators are performing at a high level and treating the business as their own. They focus on increasing sales, managing costs effectively, and running efficient operations, which ultimately benefits their earnings through higher sales. I hope that addressed your question.

Operator, Operator

Your next question is from the line of Peter Saleh with BTIG.

Peter Mokhlis Saleh, Analyst

Great. Just a couple of quick questions from my end. In the past, we have observed beef inflation, and sometimes a highly promotional retail environment contributes to those elevated beef prices. Are you noticing any of that today, or is it primarily a result of the tighter supply? Additionally, regarding construction costs going forward, are you experiencing any increased costs or any dislocations, possibly related to tariffs that might be affecting construction costs in the future?

Michael Bailen, Head of Investor Relations

Peter, it's Michael. First, on the beef comment, I think that certainly, beef is being offered at retail, but I don't think the retailers are being rational in their pricing. They are not using it as a loss leader to drive people into their stores, but they are marketing beef at a pretty high level. And what we've seen this year is the consumer willing to pay for that. So I think that's really been part of what's driven the pressure is a consumer who's willing to keep spending and a supply that has been very tight.

Keith V. Humpich, Interim Chief Financial Officer

Yes. And then Peter, this is Keith. On the construction side, we really aren't seeing any impact yet from tariffs. We had a lot of inventory for all of our builds for the year. So like I said, we just really haven't seen anything yet, and we're still evaluating that to see how that's going to affect us going forward.

Operator, Operator

Your next question is from the line of Jeff Farmer with Gordon Haskett.

Jeffrey Daniel Farmer, Analyst

Just shifting gears a bit. I'm just looking for an update on the Roadhouse mobile app. Specifically, can you guys share the number of active users, how quickly that's growing? And how you guys have been leveraging that customer database?

Gerald L. Morgan, Chief Executive Officer

Yes. I mean, obviously, it is out there. I don't know that we know the exact amount of users, but I mean there is a large percentage of folks that are obviously placing their To-Go orders and getting on our wait list. The efficiency of being able to really do that, we did upgrade our mobile app to have more pictures when you are kind of ordering the side items. So we continue to look at the mobile app on making it easier to navigate and place your order, and then we're executing at the restaurants at a much higher level on how we grade, making sure we don't have missing items and that the order is ready when you get there. And all of those little details that really do matter when you're an off-premise orderer and the consistency of the product in the food. And obviously, we believe the mobile app is really widely used in a lot of ways, and it's been a game-changer in a lot of ways since early on coming out of the pandemic, and we continue to upgrade and find ways to make it easier for our guests to get that order placed. And again, at the restaurant level, we're executing at a higher level than we ever have, and we're continuing to find ways to improve that experience at the pickup window.

Operator, Operator

Your next question is from the line of Andrew Strelzik with BMO Capital Markets.

Andrew Strelzik, Analyst

Obviously, a lot of focus on the discussion of value in the industry these days. And I'm curious, where now are your price gaps against your competitive set versus either the last several years or historical levels? Is there anything that has changed? And also, can you remind us over the next several quarters and especially with the 1.7% coming in for the fourth quarter where your price will trend?

Gerald L. Morgan, Chief Executive Officer

Thanks, Andrew. We always assess our position first to ensure that we are comfortable with our pricing. We also check against some of our competitors to confirm that we are at ease with our price difference. This gap has evolved over the years and varies by item for various reasons. Overall, we are pleased with the value represented in our menu compared to our competitors. The gap isn't solely about the dollar amount—it also involves our ability to deliver on quality, portion sizes, and other value components. With offerings like proteins, two sides, and free items such as butter, bread, and peanuts, all contribute to our overall value. As for your other question, Michael will address that.

Michael Bailen, Head of Investor Relations

The other side of the question was on our pricing and how much pricing we have in the menu. We'll have 2.3% pricing in the menu here for the third quarter. And then we'll have 0.9% that rolls off when the 1.7% rolls in, that will leave us with a 3.1% pricing for the fourth quarter of this year and the first quarter of 2026.

Operator, Operator

Your next question is from the line of Brian Vaccaro with Raymond James.

Brian Michael Vaccaro, Analyst

I had a question on California. And I think you said you were acquiring the remaining five franchise units in that state. And in this state, I think it's only around 20 Roadhouse units. So I'm just curious how you think about the growth opportunity there? And if you're setting the table, so to speak, to maybe accelerate growth there over the next few years?

Gerald L. Morgan, Chief Executive Officer

Thank you, Brian. This is Jerry. We are very excited about our recent acquisition of the Northern California group. Through strong partnerships and hard work from both our company and our fantastic franchise team in Southern California, we have successfully come to an agreement. We are thrilled to welcome them into our family, as this unit holds a special significance to us given their longstanding relationship with our organization. We take pride in this partnership. While it carries a bittersweet feeling, we are happy for Steve and his family as well as the Roadhouse family. As we focus on owning all the stores in California as part of our growth strategy, we are collaborating as a group—including our real estate and operations teams—to evaluate our approach to California. We understand there are many people there who appreciate great food, and we have seen success with our 19 existing stores. We anticipate continuing to grow our presence in California, as we believe that the community enjoys the legendary food and high-level hospitality that Texas Roadhouse offers.

Keith V. Humpich, Interim Chief Financial Officer

Yes, this is Keith. On G&A, I'd say for the rest of the year, you can expect us to get some leverage, especially in the fourth quarter as we're lapping the 53rd week. And then just one thing to mention with us purchasing the support center. On an annual basis, we're going to be saving about $2.5 million in rent. And so you'll see a little prorated benefit of that for this year also in the back half.

Operator, Operator

Your next question is from the line of Jim Sanderson with Northcoast Research.

James Jon Sanderson, Analyst

I was hoping you could talk a little bit more about how you expect the corporate store margin to evolve as you start to look more closely at developing Bubba's? And then how you foresee mix of company versus franchised as you target that 200-unit growth goal?

Michael Bailen, Head of Investor Relations

Jim, it's Michael. I guess I'll take the second part first. With that 200 number, I assume this is a question about Bubba's. Bubba's is all planned to be company development at this time. So that is all company. And really most of our growth for Texas Roadhouse and Bubba's domestically is company growth. Jaggers will be a mix of company and franchise, and international is a franchise business. We expect Bubba's over time will deliver similar margins to a Texas Roadhouse. Now obviously, Roadhouse sales were a little bit higher, which helps on the margin side. But Bubba's has proven it can do a very strong performance as well. So over time, we would expect to continue to drive strong margins out of both brands.

Operator, Operator

Your next question is from the line of Gregory Francfort with Guggenheim.

Gregory Ryan Francfort, Analyst

I know it's a bit of a tongue twister. I blame my parents. The question I had, Jerry, is margin profile. And I know you guys have said for a long time that 17 to 18 is the right place to be kind of but maybe between the beef cycles in 2024, you got kind of just over 17 and I guess, we're probably headed lower with this level of inflation. As I look back 5 or 6 years, I think your AUVs are up 10 to 15 points more than your development costs are up. And so I wonder if that 17 to 18 is going to be 16.5 to 17.5 or you still think 17 to 18 is the right place to be?

Gerald L. Morgan, Chief Executive Officer

Yes. And thank you. And we do believe that internally that, obviously, the world has to cooperate too and the beef cycle does have to turn for us. But I want to always challenge ourselves to be a strong balance when we're talking about financial results. And for our organization to believe that over the years, in 32 years or so, that's a great spot for us to be. But again, things have to work out. So we are not changing that as of right now. We did get our chin over the bar last year, and we were very happy with that, and it had been growing, and the momentum has been building up to that point. And obviously, we're fighting some inflation this year, which we thankfully didn't have as much of last year, and that helped us through there. But I believe that as of right now, we're going to continue to focus on that top line and do everything we can to control that cost and be very balanced when it comes to fiscal responsibility for our Roadies, our guests, and for our shareholders. And we'll continue. If we ever did feel like that was unreasonable, we would have some internal discussions. But as of now, we still believe that we can get our chin over that bar at some point.

Operator, Operator

Your next question is from Jake Bartlett with Truist Securities.

Jake Rowland Bartlett, Analyst

I had one and then I had a follow-up. The question is about your off-premise sales, and this might build on the answer about your app, but over the last 4 quarters, off-premise sales per operating week have been growing much faster than on-premise and has been a driver of your comps. The question is what is driving that? Is it just really just spillover and people kind of peeling out of the line and taking it home? Or is it something operationally that you've done? Is it the app? And then I guess, most importantly, how sustainable do you think that is?

Gerald L. Morgan, Chief Executive Officer

Yes, Jake, this is Jerry. Thanks for the question. I believe it's a combination of several factors, including the convenience of our window service for customers to pick up their orders, the mobile app, and how user-friendly it is for ordering. We are seeing a higher completion rate with that, and the most significant factor is that we've improved our handling of missing items. We've concentrated on this area, and the operators are executing at a very high level. Customers appreciate it because when they get home, they find their orders complete, enjoying our food together with their families. We've repeatedly experienced that when you commit energy to something, the results improve, and that’s what we’re observing. It’s exciting to see this growth continue, and I truly believe it’s due to the app, the convenience of pickup, and the exceptional service from our operators.

Jake Rowland Bartlett, Analyst

Great. And the follow-up was building on your comments, and I just want you to kind of maybe say it again. I just want to make sure I'm hearing it right. But the idea that as you increase the number of Bubba's, you also talked about some company-owned Jaggers in '26. You've been very consistent about kind of keeping the total number of units about 30 because of operational limitations or just making sure you execute very well. Is that changing? I mean it seems like you have the capacity you've gotten bigger, you could. I just want to make sure I'm hearing you right, so we didn't get over my skis as we look at our ability to maybe sustain the pace of Roadhouse openings and then add to that with these other concepts.

Gerald L. Morgan, Chief Executive Officer

Yes, Jake, I am encouraged by our ability to get that approximately 30. I think you will see us a little on the high side of that the next couple of years. The pipeline for Roadhouse is still strong. We are pressing on the gas with Bubba's a little bit. And you'll see, as we mentioned, Jaggers coming into the fold also. So I really want to get into the next year, and we have that confidence before I move that number up. But we are clearly starting to tip our head over the skis in that direction.

Operator, Operator

Your next question is from the line of Karen Holthouse with Citigroup.

Karen Ann Holthouse, Analyst

This is Karen Holthouse standing in for Jon. Building on the previous questions about off-premise options, I understand that steak doesn’t travel well. However, would you consider offering delivery on a unit-by-unit basis since managing partners are requesting it? Perhaps in a denser market? Are there technological or back-of-house constraints that would prevent this?

Gerald L. Morgan, Chief Executive Officer

Yes. Thanks for the question. We have resisted the temptation of going that route as of now. We do do it at the Jaggers concept and at Bubba's, and we have one store that's in a very urban market in New Rochelle, New York that we do delivery at. I will continue to have conversations with operators. But as of right now, I think we're holding the line on not doing delivery in the rest of the concept, unless there's a real reason to do it. Individually, we will have some conversations but as of right now, we have resisted going that route. We're focused on providing our guests a great experience in the dining room and through our off-premise, through our pickup system and through the app, and all of that, that's where we'd really like to continue to focus as of right now.

Operator, Operator

Your next question is from the line of Zachary Fadem with Wells Fargo.

Zachary Robert Fadem, Analyst

On the entree mix shifting more to beef, it looks like it's been about a 30 basis point headwind on the food and beverage line, assuming that held in Q2, curious if you view this more cyclical or a structural phenomenon? And as you think about the impact in the second half, is the 30 bps still the right impact? Or would you expect it to step down?

Michael Bailen, Head of Investor Relations

Zach, it's Michael. And it was around 30 basis points in the first quarter. It probably stepped down to about 25 basis points in the second quarter and maybe it holds in that 20 to 25 level in the third quarter would be my expectation. And then I think it would step down a little bit more in the fourth quarter as we lap it. So I kind of view it as a 1-year change in behavior and whether that means it will change back and we will see something else occur, we'll have to wait and see on that. But I do think what's driving a lot of it is the value on the menu in the steak category and the guest appreciating the price they can pay with Texas Roadhouse for a steak, and that helps our top-line growth, but you see a little bit more pressure right now on the COGS line from that. But as a steakhouse, we love seeing people wanting to try our steaks. We think that is great for our long-term success.

Operator, Operator

Your next question is from Todd Brooks with The Benchmark Company.

Todd Morrison Brooks, Analyst

I'm going to keep the off-premise train rolling here. So it looks like off-premise has been mixing in kind of that mid-13% range recently. I think there was one point is the rollout of KDS was happening, and it brings that additional efficiency and calm to the kitchen that there might have been a theory that more off-premise demand could be met out of the kitchens and that managers would be more comfortable going after and servicing that demand. Has that been the case? Is that still on the common? If you look at maybe your best quartile of stores with off-premise, how high is their mix versus the 13% chain-wide?

Gerald L. Morgan, Chief Executive Officer

Todd, this is Jerry. Yes, I believe it is definitely one of the components probably helping us be able to have a little more capacity through the To-Go business. So I think you're right, as we're almost 80% done of having all the concept on the digital kitchen at this point. Then as we get finished this year, and we continue to learn from each other about how we can utilize that technology to help us bigger, faster, and stronger and improve our guest experience as well as our Roadie experience in the back of the house, we believe that the digital kitchen will have some components that will play into our ability to be faster and to be focused on taking great care of our guests. So I do believe it is a component of that increase for sure.

Michael Bailen, Head of Investor Relations

Yes. And Todd, there are definitely restaurants that do higher levels of it to-go on a dollar basis and a percentage basis, don't have all those numbers at our fingertips, but we definitely have stores that are examples to others that you can do even more To-Go in your restaurants. So we think there still is a lot of opportunity.

Operator, Operator

At this time, there are no further audio questions. I will now hand today's call over to Jerry Morgan for closing remarks.

Gerald L. Morgan, Chief Executive Officer

Thank you all. I want to close with a special shout out to our Jaggers team in Lexington, Kentucky, which represents our 800th system-wide restaurant. Great job on delivering high-level hospitality and creating raving fans. Let's go TXRH. Good night, you all.

Operator, Operator

This concludes today's call. Thank you for joining. You may now disconnect your lines.