SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains statements about future events and expectations that constitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are based on our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently
available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the
expectations of future results we express or imply in any forward-looking statements. In addition to the other factors discussed under "Risk Factors" elsewhere in this report, factors that could
contribute to these differences include, but are not limited to:
- •
- our ability to raise capital in the future;
- •
- our ability to successfully execute our growth strategy;
- •
- our ability to successfully open new restaurants, acquire franchise restaurants or execute other strategic transactions;
- •
- our ability to increase and/or maintain sales and profits at our existing restaurants;
- •
- our ability to integrate the franchise or other restaurants which we acquire or develop;
- •
- the continued service of key management personnel;
- •
- health concerns about our food products;
- •
- our ability to attract, motivate and retain qualified employees;
- •
- the impact of federal, state or local government regulations relating to our employees or production and the sale of food
and alcoholic beverages;
- •
- the impact of litigation, including negative publicity;
- •
- the cost of our principal food products;
- •
- labor shortages or increased labor costs;
- •
- inflationary increases in the costs of construction and/or real estate;
- •
- changes in consumer preferences and demographic trends;
- •
- increasing competition in the restaurant industry;
- •
- our ability to successfully expand into new domestic and international markets;
- •
- risks associated with partnering with franchisees or other investment partners in markets with whom we have no prior
history and whose interests may not align with ours;
- •
- the rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure
to support our growth initiatives;
- •
- negative publicity regarding food safety, health concerns and other food or beverage related matters;
- •
- our franchisees' adherence to our practices, policies and procedures;
- •
- potential fluctuation in our quarterly operating results due to seasonality and other factors;
- •
- supply and delivery shortages or interruptions;
- •
- inadequate protection of our intellectual property;
- •
- volatility of actuarially determined insurance losses and loss estimates;
- •
- adoption of new, or changes in existing, accounting policies and practices;
- •
- adverse weather conditions which impact guest traffic at our restaurants; and
- •
- adverse economic conditions.
The
words "believe," "may," "should," "anticipate," "estimate," "expect," "intend," "objective," "seek," "plan," "strive" or similar words, or the negatives of these words, identify
forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors.
Other
risks, uncertainties and factors, including those discussed under "Risk Factors," could cause our actual results to differ materially from those projected in any forward-looking
statements we make.
We
assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new information becomes available in the future.
PART I
ITEM 1—BUSINESS
Texas Roadhouse, Inc. ("Texas Roadhouse" or the "Company") was incorporated under the laws of the state of Delaware in 2004. The
principal executive office is located in Louisville, Kentucky.
General Development of Business
Texas Roadhouse is a growing, moderately priced, full-service, casual dining restaurant chain. Our founder, chairman and
chief executive officer ("CEO"), W. Kent Taylor, started the business in 1993 with the opening of the first Texas Roadhouse in Clarksville, Indiana. Since then, we have grown to 365 restaurants in 47
states. In addition, we opened our first international franchise-owned Texas Roadhouse in Dubai, UAE in 2011. Our mission statement is "Legendary Food, Legendary Service®." Our operating
strategy is designed to position each of our restaurants as the local hometown destination for a broad segment
of consumers seeking high quality, affordable meals served with friendly, attentive service. As of December 27, 2011, we owned and operated 294 restaurants and franchised or licensed an
additional 72 restaurants. Of the 294 restaurants we owned and operated at the end of 2011, 291 operated as Texas Roadhouse restaurants, while three operated under the name of Aspen Creek. All of our
planned restaurant growth in 2012 will be Texas Roadhouse restaurants.
Financial Information about Operating Segments
We consider our restaurant and franchising operations as similar and have aggregated them into a single reportable segment. The
majority of the restaurants operate in the U.S. within the casual dining segment of the restaurant industry, providing similar products to similar customers. The restaurants also possess similar
pricing structures, resulting in similar long-term expected financial performance characteristics. We operate each of our 294 company-owned restaurants as a single operating segment.
Narrative Description of Business
Texas Roadhouse is a full-service, casual dining restaurant chain. We offer an assortment of specially seasoned and aged
steaks hand-cut daily on the premises and cooked to order over open gas-fired grills. In addition to steaks, we also offer our guests a selection of ribs, fish, seafood,
chicken, pork chops, pulled pork and vegetable plates, and an assortment of hamburgers, salads and sandwiches. The majority of our entrées include two
made-from-scratch side items, and we offer all our guests a free unlimited supply of roasted in-shell peanuts and made-from-scratch yeast
rolls.
The
operating strategy that underlies the growth of our concept is built on the following key components:
- •
- Offering high quality, freshly prepared food. We place a
great deal of emphasis on ensuring our guests receive high quality, freshly prepared food. We hand-cut almost all of our steaks and make all of our sides from scratch. As part of our
process, we have developed proprietary recipes to provide consistency in quality and taste throughout all restaurants. We expect a management level employee to inspect every entrée
before it leaves the kitchen to confirm it matches the guest's order and meets our standards for quality, appearance and presentation. In addition, we employ a team of product coaches whose function
is to provide continual, hands-on training and education to our kitchen staff for the purpose of assuring uniform adherence to recipes, food preparation procedures, food safety standards,
food appearance, freshness and portion size.
- •
- Offering performance-based manager compensation. We offer
a performance-based compensation program to our individual restaurant managers and multi-restaurant supervisors, who are called "managing partners" and "market partners," respectively. Each of these
partners earns a base salary plus a performance bonus, which represents a percentage of each of their respective restaurant's pre-tax net income. By providing our partners with a
significant stake in the success of our restaurants, we believe that we are able to attract and retain talented, experienced and highly motivated managing and market partners.
- •
- Focusing on dinner. In a high percentage of our
restaurants, we limit our operating hours to dinner only during the weekdays. By focusing on dinner, our restaurant teams have to prepare for and manage only one shift per day during the week. We
believe this allows our restaurant teams to offer higher quality, more consistent food and service to our guests. In addition, we believe the dinner focus provides a better
"quality-of-life" for our management teams and, therefore, is a key ingredient in attracting and retaining talented and experienced management personnel. We also focus on
keeping our table-to-server ratios low to allow our servers to truly focus on their guests and serve their needs in a personal, individualized manner.
- •
- Offering attractive price points. We offer our food and
beverages at moderate price points that are as low as or lower than those offered by many of our competitors. Within each menu category, we offer a choice of several price points with the goal of
fulfilling each guest's budget and value expectations. For example, our steak entrées, which include the choice of two side items, generally range from $9.49 for our 6-ounce
sirloin to $24.99 for our 23 oz. Porterhouse T-bone, which is currently available in approximately one-third of our restaurants. The per guest average check for the Texas
Roadhouse restaurants we owned and operated in 2011 was $14.89. Per guest average check represents restaurant sales divided by the number of guests served. We considered each sale of an
entrée to be a single guest served. Our per guest average check is higher as a result of our weekday dinner only focus.
- •
- Creating a fun and comfortable atmosphere. We believe the
atmosphere we establish in our restaurants is a key component for fostering repeat business. Our restaurants feature a rustic southwestern lodge décor accentuated with
hand-painted murals, neon signs, and southwestern prints, rugs and artifacts. Additionally, we offer jukeboxes, which continuously play upbeat country hits, and in-house
entertainment such as line dancing and birthday celebrations.