Texas Roadhouse Is Raising Its Prices For The Third Time In Under A Year
The Instagram bio of Texas Roadhouse's official social media account promises "Legendary Food, Legendary Service." It does not, however, promise legendary value. Texas Roadhouse raised its prices by 2.7% last October. Now, the chain is already gearing up to do it again, making this the third price increase in less than a year. (We love the Cactus Blossom as much as the next foodie, but this is getting a little ridiculous.)
This time, menu prices are slated to increase by 2.2%, which could occur sometime near the end of March. Considering the 2.2% menu price hike in April 2023, Texas Roadhouse will be 7.1% more expensive in April 2024 compared to just one year prior. A fourth price hike doesn't seem to be outside of the realm of possibility, either.
During an earnings call with investors on February 15, Texas Roadhouse CFO Chris Monroe explained that this third menu price increase is all about combating inflation. Monroe also cited other economic stressors like state-mandated minimum wage increases (a growing national trend and a huge victory for low-wage workers in America), competitor restaurant prices, and consumer traffic patterns. Raking in a little extra money per tater skin or sirloin steak, says Monroe, will help offset the effects of inflation on the steakhouse. (Inflation-weary customers, meanwhile, might wonder when their reprieve is coming.) Although, notably, these supposed motivators for the menu price hike haven't seemed to slow the company's growth any.
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Relying On Customers' Wallets To Defend The Bottom Line
Fiscal Q4 saw better-than-expected same-store sales (9.9% over a projected 8.5%), and Texas Roadhouse demonstrated year-over-year revenue growth of 15.36% from Q4 2022 to Q4 2023 with a gross profit margin of 15.87%. Shares are up 40% over the past 12 months, and after the February 15 earnings call, stock rose 10% to $147.15 in morning trading. The chain also expects cattle inflation prices to cool this year, which means lower operating costs. Perhaps this will ease some pricing pressures as the chain continues expanding, which has also increased costs. Texas Roadhouse even opened its largest-ever restaurant in early 2023, boasting 12,000 square feet.
Wendy's caught backlash for becoming the most expensive fast food chain in 2022 following a series of price hikes that made the menu 35% more expensive than in 2021. Admittedly, 7.7% might not be a hugely perceptible leap for a sit-down restaurant like Texas Roadhouse. The same steak dinner that might have cost you $40 last year will now set you back $42.84. Still, this consistent price raising is representative of a larger economic crisis. Inflation shot up to record heights in recent years. While it isn't increasing as intensely as it once was, it's just staying put, high, and unaffordable. Now, as state legislatures are stepping in to secure higher wages for workers, the businesses who sign those workers' paychecks could cite this as another reason to drive menu prices higher and higher.
Read the original article on Tasting Table.
