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Texas Roadhouse, Inc. (TXRH) Q4 2022 Earnings Call Transcript

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Texas Roadhouse, Inc. (NASDAQ:TXRH) Q4 2022 Earnings Conference Call February 16, 2023 5:00 PM ET

Company Participants

Keith Humpich - Interim Chief Financial Officer

Jerry Morgan - Chief Executive Officer

Regina Tobin - President

Michael Bailen - Investor Relations

Conference Call Participants

Chris Carril - RBC Capital Markets

Brian Harbour - Morgan Stanley

Brian Bittner - Oppenheimer

David Palmer - Evercore ISI

David Tarantino - Baird

Jeffrey Bernstein - Barclays

Peter Saleh - BTIG

Sara Senatore - Bank of America

Dennis Geiger - UBS

Andrew Strelzik - BMO Capital Markets

Joshua Long - Stephens

Andy Barish - Jefferies

John Ivankoe - JPMorgan

Jon Tower - Citigroup

Brian Vaccaro - Raymond James

Nick Setyan - Wedbush

Operator

Good evening, everyone, and invited to nan Texas Roadhouse Fourth Quarter Earnings Conference Call. Just a reminder, today’s telephone is being recorded. All participants are now successful a listen-only mode. But aft nan speakers' remarks, location will beryllium a question-and-answer session. [Operator Instructions]

I would now for illustration to present Mr. Keith Humpich, nan Interim Chief Financial Officer for Texas Roadhouse. Mr. Humpich, you whitethorn begin.

Keith Humpich

Thank you, Bolt, and bully evening. By now, you should person entree to our net merchandise for nan 4th fourth ended December 27, 2022, it whitethorn besides beryllium recovered connected our website astatine texasroadhouse.com successful nan Investors section.

I'd for illustration to punctual everyone that portion of our chat coming will see forward-looking statements. These statements are not guarantees of early performance, and therefore, undue reliance should not beryllium placed upon them. We mention each of you to our net merchandise and our caller filings pinch nan SEC. These documents supply a much elaborate chat of nan applicable factors that could origin existent results to disagree materially from those forward-looking statements. In addition, we whitethorn mention to non-GAAP measures. If applicable, reconciliations of nan non-GAAP measures to nan GAAP accusation tin beryllium recovered successful our net release.

On nan telephone pinch maine coming is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; Regina Tobin, President of Texas Roadhouse; and Michael Bailen, Head, Investor Relations. Most of you cognize Michael, truthful I person asked him to provide today's financial update. Following nan prepared remarks, we will each beryllium disposable to reply your questions.

Now, I'd for illustration to move nan telephone complete to Jerry.

Jerry Morgan

Thanks, Keith, and bully evening, everyone. Before we statesman our general remarks, I want to convey Regina, Keith and Michael for joining maine connected nan telephone today, and definitive my appreciation for them stepping into much visible roles. They are each veterans of Texas Roadhouse, and I look guardant to seeing them further lend to nan maturation of nan institution for years to come.

I would besides for illustration to reside nan caller status of Tonya Robinson, arsenic CFO. I had nan privilege of moving pinch Tonya for 24 years. On behalf of Texas Roadhouse, I want to convey her for nan publication she made to nan company, and I wish her thing but nan best.

Moving forward, we're successful nan process of a nationalist hunt for a imperishable CFO. We admit Keith taken connected an escalated activity domiciled arsenic our Interim CFO, and we person nan utmost assurance successful him and nan remainder of our knowledgeable financial team.

And now we will move connected to our prepared remarks. There is nary uncertainty successful 2022 was a milestone twelvemonth for Texas Roadhouse, pinch yearly revenues surpassing $4 cardinal for nan first clip successful our history. This is particularly remarkable, arsenic it was only 5 years agone that we exceeded 2 cardinal successful revenue.

By maintaining our agelong word attraction connected of opening restaurants, crossed each of our concepts, we spot nan imaginable to double our gross again complete nan adjacent decade. In 2022, contempt inflationary pressures passim nan business, our beardown apical statement results helped america execute important maturation successful edifice separator dollars, nett income and net per share.

We besides returned complete $120 cardinal to our shareholders successful nan shape of dividends, repaid $50 cardinal of debt, and repurchased complete $210 cardinal of stock. Additionally, during 2022, we acquired 8 franchise restaurants for $33 million. All these actions benefited our shareholders and we are pleased to person galore levers astatine our disposal to create value.

Turning to 2023, we person been impressed by nan spot of nan consumer. We are pleased to spot our income momentum transportation complete from 2022 into nan opening of this year. The request to dine successful restaurants has grown and we proceed to clasp connected to a important magnitude of our, to Roadhouse business. We besides are encouraged by nan imaginable for a slowing complaint of inflation, moreover though nan underlying costs for labour and commodities is still to stay escalated.

Looking semipermanent we person nary plans to little our target separator percentage. Our separator dollars are strong. And we judge separator percentages will amended complete time, arsenic commodity and different operating costs pressures subside. As a result, we will proceed to negociate nan business pinch a disciplined attack and he focused connected our semipermanent worth proposition.

Speaking of value, we precocious completed paper pricing calls pinch our operators and will beryllium taken a 2.2% paper value increase. We judge this level of pricing sets america up to execute a coagulated twelvemonth of income and profit growth, while furthering our manufacture starring value. As galore of you know, this attack has consistently rewarded our guests and shareholders complete nan past 30 years.

Moving connected to development, we opened 23 institution restaurants crossed each concepts successful 2022. And successful 2023, we expect betwixt 25 and 30, Texas Roadhouse successful Bubba's institution openings, arsenic good arsenic 3 daggers. Our franchise partners unfastened 7 world Roadhouses successful 2022, and we expect them to unfastened arsenic galore arsenic 12, International and Domestic locations successful 2023.

We will proceed to support our semipermanent attraction erstwhile it comes to superior allocation and shareholder worth creation. We judge nan champion and astir strategical usage of our rate is building caller restaurants and taking attraction of our existing restaurants.

Additionally, arsenic I alluded to earlier, our equilibrium expanse and beardown operating rate travel will position america to consistently turn our dividends, get franchise restaurants and opportunistically repurchase shares and salary down nan remainder of our debt.

Finally, I want to remark connected Gina's promotion to president of Texas Roadhouse. When I joined Texas Roadhouse 26 years ago, and asked people, which managing partner I needed to study from Gina, was ever nan first sanction mentioned.

During her career, astatine Texas Roadhouse, Gina has been a managing partner, a marketplace partner, caput of our Training Department, and astir recently, our 3rd Chief Learning and Culture Officer. Gina could not beryllium much excited to person you arsenic my partner, and taking a bigger domiciled successful nan company. Why don't you stock a fewer thoughts pinch everyone?

Regina Tobin

Thanks, Jerry. I americium excited to person nan opportunity to transportation connected nan ngo of keeping nan managing partner astatine nan centre of our universe, and ensuring that we ever position nan business pinch an operator's mentality, which has been nan cardinal to our semipermanent success.

I look guardant to partnering pinch each roadies that maintaining our civilization and serving our operators each and each day. As galore of you know, our unsocial civilization which has been shaped by our people, our past hardships, our successes, and our values provides america pinch a competitory advantage.

And it tin often said, we are a group first institution that conscionable happens to service stake. It is my committedness and commitment, to ever put our group are astatine nan forefront of my activity arsenic president.

Now, Michael will supply you a financial update.

Michael Bailen

Thanks, Gina. So nan 4th fourth of 2022, we reported gross maturation of 12.7% chiefly driven by a 7.1% summation successful mean portion measurement and shop week maturation of 5.5%. We besides reported a nett income accrued 12.8% to $59.9 cardinal successful diluted net per stock accrued by 17.4% to $0.89.

For nan quarter, our restaurants averaged complete $130,000 successful play income and To-Go represented astir $16,400 aliases 12.6% of these full play sales. Comparable edifice income accrued 7.3% successful nan 4th quarter, driven by 6.2% mean cheque maturation and a 1.1% summation successful impermanent traffic. By month, comparable income grew 8.3%, 7.3% and 6.5% for our October, November and December play respectively.

Turning to 2023, play income averaged complete $146,000 for nan first 7 weeks, pinch comparable income of 15.8% arsenic compared to nan aforesaid play successful 2022. We do not expect this level of comp maturation to continue, arsenic we move past nan lapping of Omicron and spell up against higher postulation levels successful nan coming weeks. At nan aforesaid time, we do not want to downplay nan existent results, arsenic our restaurants averaged much guests complete nan past 7 weeks than successful immoderate play successful our history.

For nan 4th quarter, edifice separator dollars grew 3.4% to $145.6 cardinal and were 14.5% arsenic a percent of full sales, down 132 ground points arsenic compared to past year. Food and beverage costs arsenic a percent of full income were 35.1% for nan 4th quarter, up 4 ground points compared to 2021.

This summation was chiefly owed to commodity ostentation of 6.6% successful nan quarter, mostly offset by nan use of paper pricing. Inflation for nan 4th fourth was mostly successful statement pinch expectations, different than higher nutrient costs. As a result, our afloat twelvemonth commodity ostentation came successful astatine 10.8%.

For 2023, our commodity ostentation guidance remains unchanged astatine 5% to 6%. We besides proceed to expect that nan mostly of ostentation for 2023 will beryllium driven by higher beef costs. We person astir 60% of nan commodity handbasket locked for nan first half of nan year. And based connected existent visibility, we expect ostentation successful nan first half of nan twelvemonth will beryllium supra nan apical extremity of our afloat twelvemonth guidance.

Labor arsenic a percent of full income accrued 75 ground points to 33.4% arsenic compared to nan 4th fourth of 2021, while labour dollars per shop week accrued 9.3%. This summation successful labour dollars per shop week was driven by costs and different labour ostentation of 7.8% and maturation successful hours of 1.9%.

These increases were partially offset by nan $1.1 cardinal nett use of adjustments to nan reserves related to our workers comp, and group security programs. The reserve adjustments see a $0.3 cardinal favorable accommodation this twelvemonth and a $0.8 cardinal unfavorable accommodation past year. For 2023, our guidance of costs and different ostentation betwixt 5% and 6% remains unchanged.

Other operating costs were 15.3% of sales, which was up 58 ground points arsenic compared to nan 4th fourth of 2021. The year-over-year use of income leverage was much than offset by a continuation of nan higher costs we're seeing successful areas specified arsenic utilities, in installments paper charges, and repair and attraction expense.

Moving beneath edifice separator G&A successful nan 4th fourth was 4% of revenue, pinch nan wide disbursal down $2.3 cardinal versus 2021. The superior drivers of nan alteration year-over-year G&A walk aliases a $1.1 cardinal use from one-time accrual adjustments and a $1 cardinal alteration successful full rate and equity compensation. Our effective taxation complaint was 11.5% for nan 4th quarter, and 13.6% for nan afloat year. Assuming nary changes to nan taxation code, we now expect an income taxation complaint of astir 14% for 2023.

With regards to rate flow, we ended nan twelvemonth pinch $174 cardinal of rate and $50 cardinal of debt. Cash travel from operations for nan 4th fourth was $117 million. This was offset by $72 cardinal of superior expenditures $31 cardinal of dividend payments, and $25 cardinal of indebtedness repayment. We proceed to expect afloat twelvemonth 2023 superior expenditures to beryllium astir $265 million.

And I will besides mention that connected nan first time of fiscal 2023, we spent astir $39 cardinal connected nan acquisition of 8 home franchise restaurants. These restaurants are included successful our anticipation of astatine slightest 6% shop week growth. Finally, arsenic announced coming successful our net release, our committee of board has authorized a 20% summation successful our quarterly dividend payment, expanding it to $0.55 per stock from $0.46 per stock successful 2022.

Now I will move nan telephone backmost complete to Jerry for last comments.

Jerry Morgan

Thanks, Michael. Our early occurrence depends connected staying focused connected driving apical statement maturation and providing a legendary acquisition to each guest. We will do that by keeping worth astatine nan centrepiece of nan paper and taking attraction of our roadies, who successful move will return attraction of our guests.

Tomorrow marks nan 30th day of nan opening of nan first Texas Roadhouse. I look guardant to celebrating this day astatine our yearly convention pinch complete 700 managing partner,s who correspond nan very champion of what this institution has go complete nan past 30 years.

That concludes our prepared remarks. Operator, please unfastened nan lines for questions.

Question-and-Answer Session

Operator

Thank you, Mr. Morgan. [Operator Instructions] We'll return our first mobility this day from Chris Carril of RBC Capital Markets.

Chris Carril

Hi, acknowledgment for nan question. So Jerry, tin you possibly grow a spot much connected nan request commentary astir nan commencement of nan twelvemonth if my mathematics is correct, nan 3 twelvemonth stack appears to beryllium meaningfully accelerated successful nan first 7 weeks of 2023 versus nan 4Q successful December successful particular. So immoderate further item will beryllium adjuvant there?

Jerry Morgan

Yes, I mean, we're very excited astir nan request for our concept. And, and we've seen nan escalation, we softened a small spot successful December, but it came roaring backmost in, successful

January, this first portion of February, truthful I will conscionable show you, I deliberation it's astir our execution and astir nan value of nan merchandise that we're putting connected nan plate. And, and we will support pushing that. And I deliberation that's what helped drives our apical statement sales.

Chris Carril

Got it. And then, connected nan semipermanent outlook, you mentioned successful nan prepared remarks, I deliberation it was a doubling of gross complete nan adjacent 10 years. But what are nan underpinnings of that, possibly specifically astir improvement crossed nan 3 brands? Thanks.

Jerry Morgan

Yes, I deliberation if we look backmost astatine nan past 5 years, and we've doubled from there, nan measurement we spot it, pinch nan gross maturation of our existing restaurants and our continued income escalations, we decidedly consciousness for illustration that isn't attainable pinch nan 3 concepts and nan trends that we presently tin exemplary out. Michael, mightiness person a mates of comments connected really we get there.

Michael Bailen

Yeah, Chris, it's really not that different than what you're seeing america doing correct now. Keep successful Roadhouse improvement successful that 20 to 25 restaurants and evidently seeing Bubba's turn to possibly debased double-digits. And past connected apical of that, you know, Jagger's could spot a small spot of growth. But nan presumption of those astir 30-ish restaurants a twelvemonth and immoderate humble postulation and cheque maturation is really nan underlying presumption that gets you there.

Chris Carril

Got it. Thanks truthful much.

Jerry Morgan

Thank you.

Operator

Thank you. We spell adjacent now to Brian Harbour of Morgan Stanley.

Brian Harbour

Yes, convey you very much. Can you conscionable talk astir nan pricing determination a small bit. And, you know, are you still going to instrumentality to benignant of nan 2 times per twelvemonth if, for example, beef becomes much inflationary successful nan 2nd half, do you want to reside that pinch pricing, aliases do you deliberation that location will still beryllium benignant of short-term volatility there, and you're conscionable much focused connected benignant of worth proposition?

Michael Bailen

Hey, Brian, it's Michael. I deliberation we are committed to looking astatine paper pricing doubly a year. We look astatine it pinch nan volition of taking pricing successful early April and sometime successful October. You mightiness retrieve that commodity ostentation is thing that we don't typically attraction our paper pricing on. We position that arsenic cyclical successful nature. So we're much focused connected nan structural items, nan labour component, erstwhile we are determining what level of pricing we're going to take.

Obviously, immoderate pricing that we return to woody pinch labour pressures will besides thief nan commodities and different lines, but we were successful this for nan semipermanent and really don't knee-jerk respond to commodity costs being supra aliases beneath what we mightiness expect astatine 1 constituent erstwhile we're factoring successful our paper pricing.

Brian Harbour

Makes sense. Okay, convey you. And past conscionable connected benignant of uses of cash. Do you – you're moving beautiful debased connected indebtedness here, do you deliberation it makes consciousness to salary down nan remainder of that? And past also, I deliberation you had repurchased immoderate shares earlier successful nan year, it doesn't look for illustration arsenic overmuch successful nan 2nd half. But do you person an intent to return to that?

Keith Humpich

Yeah, Brian, this is Keith. Thanks for nan question. Yeah, connected our debt, we scheme connected paying each that backmost this year. We'll astir apt moreover unrecorded to do that successful nan first quarter. But we'll beryllium making that determination successful nan coming weeks. On stock repurchases, we're really proud of our stock repurchase programme complete nan years, and nan worth that we've created from that.

And nan past 4 years, which includes immoderate pandemic years, we've repurchased complete 400 cardinal of our stock. And erstwhile I looked astatine this year, I'd opportunity that we will decidedly look to bargain backmost dilution, and past thing aft that it was gong to dangle connected our different superior allocation needs, but our rate balances, and really nan marketplace conditions and past we're going to make immoderate decisions we consciousness for illustration we person to successful nan champion interests of our shareholders and our company.

Brian Harbour

Okay. Thank you.

Operator

Thank you. We spell adjacent now to Brian Bittner of Oppenheimer.

Brian Bittner

Thanks. Hey, guys. I'd for illustration to spell backmost to nan business trends you're seeing truthful far. In nan first quarter, you said comps are up astir 16%. And based connected your commentary past year, I deliberation that implies mean play income are trending astatine that $147,000 level. Can you corroborate that? Is nan mathematics correct there? Is that wherever nan mean play income are trending? And is that really we should deliberation astir mean play income for nan remainder of nan quarter? Is location immoderate logic why those are going to decelerate to a little level for nan afloat quarter?

Michael Bailen

Yeah. Hey, Brian, it's Michael again. Your mathematics is beautiful spot on. Yes, we were 15.8% comp growth. And past successful my remarks I said we mean 146,000 complete nan first 7 weeks. I would opportunity look we don't cognize what nan adjacent six weeks of nan 4th are going to bring? Certainly, we were lapping Omicron, which was -- that helped pinch immoderate of those ample maturation that you're seeing. So yes, income that percent astir apt comes down from there, arsenic we commencement to thigh immoderate much normalized numbers, but I deliberation we still person opportunity to turn whether that's 146,000, thing much astir that scope we will see, but we've surely shown that we're capable to make that level wrong our restaurants. And that's really our operators are going to proceed to do nan business.

Jerry Morgan

Yeah. And I would say, we've been very bully connected gift paper redemption, and there's been immoderate driving forces pinch immoderate awesome upwind crossed nan state and immoderate enthusiasm retired there. But I deliberation there's a mates of reasons why it's being fierce correct now, which we're excited about, really agelong it will clasp astatine that level.

Brian Bittner

Yeah, sorry, Michael, I must person missed nan telephone retired connected that 146,000 successful nan prepared remarks, truthful I apologize for that. My follow-up is connected nan labour cost, nan per operating week costs retired punch nan ostentation because of nan hours that person been added successful nan 4th quarter. But nan mobility is, moving forward, you've fixed america this labour ostentation guidance for 2023, but really should we deliberation astir nan per operating week costs successful that labour line? Because pinch nan type of comps you're seeing truthful far, for 2023 nan mobility becomes, really overmuch operating leverage do you get disconnected that peculiarly connected nan labour line?

Jerry Morgan

Yeah. I deliberation there's thing benignant of to beryllium wished there. We're still evidently successful nan first 4th rebuilding nan hours from nan Omicron effect of past year, staffing has gotten overmuch stronger and it's getting to a levels we need. So nan hours maturation is astir apt going to travel down and I deliberation astatine immoderate constituent possibly successful nan backmost half of nan year, we get backmost aliases person to our humanities algorithm for deficiency of a amended word arsenic to really our postulation aliases hours turn successful 50% of our postulation growth. We'll spot if that's nan caller normal aliases thing else.

But I deliberation there's immoderate -- there's nary uncertainty going to beryllium costs unit passim nan years is our expectation, truthful possibly nan midpoint of our guidance and a patient consumer. That labour statement you know, possibly holds reasonably dependable for nan twelvemonth astir apt wouldn't astonishment maine to spot immoderate unit earlier successful nan twelvemonth and past possibly getting immoderate use successful nan backmost half of nan year.

Brian Bittner

Thank you

Operator

Thank you. We'll spell adjacent now to David Palmer of Evercore ISI.

Mr. Palmer, your statement is open. We can't perceive you. you mightiness want to cheque your shut up usability connected your phone.

David Palmer

Can you perceive me?

Operator

We tin perceive you now.

David Palmer

Okay. Thank you. The ostentation 5 to six -- nan early -- you said it's going to beryllium supra that precocious extremity of nan 5 to six successful nan first quarter. And that would beryllium -- I presume it's going to beryllium related to beef, but if you could conscionable springiness america a consciousness of what benignant of cadence of nan ostentation you're expecting and nan breakdown of that betwixt beef and other?

Michael Bailen

Yes. Hey David, its Michael. We did opportunity -- yes, we expect nan commodity ostentation to beryllium supra nan apical extremity of nan range, not conscionable for nan first quarter, but nan first half of nan twelvemonth and a batch of that is surely driven by beef. Pretty overmuch passim nan full year, that's going to beryllium nan awesome unit point, we judge successful our commodity handbasket successful 2023 -- is beef. So, we're going to consciousness pressures successful different areas, immoderate of that you're going to see, possibly diminish arsenic we move to nan year.

The first 4th of past twelvemonth hadn't really felt nan effect from what's going connected successful nan Ukraine arsenic of yet. So, we're still lapping immoderate of that. That's immoderate of nan logic why you're going to consciousness higher ostentation successful nan first 4th and 2nd quarter. And past we commencement to thigh immoderate of those higher numbers. So, beef unit passim nan twelvemonth and possibly moderation successful different areas arsenic we move done nan quarters.

David Palmer

And past I was wondering if you wouldn't mind conscionable getting a small colour astir Bubba's, we don't person them present successful nan Northeast, and we'd emotion to get 1 up here. But really are nan returns of those units versus we tin spot that immoderate of nan stack comp numbers, they look beautiful good. But really are nan returns versus nan Roadhouse connected those units? And are you seeing a reasonably moreover group of returns? Are they doing arsenic good successful nan ones you're placing successful nan Midwest arsenic they do successful nan South and successful Texas? Thanks.

Michael Bailen

Yes, David, it's Michael, again. I would opportunity look we person 40 Bubba's correct now and we are surely very excited astir nan concept. We are very pleased pinch nan returns connected immoderate of nan much caller openings arsenic well, immoderate of nan older ones, but erstwhile you person conscionable 40, and you're learning, location are immoderate successful location that are underperforming that propulsion nan wide number down.

But we surely judge successful nan concept, belief successful its expertise to make that mid-teen IRR that we are looking for, which is nan aforesaid return that we're looking for astatine Roadhouse.

And we're seeing awesome acceptance of nan marque successful nan South and Southwest, successful really each nan areas that we are opening them and are very excited. We deliberation we'll get astir 5 of those opened this year, and agelong runway to spell there.

David Palmer

Thank you.

Operator

Thank you. We’ll spell adjacent now to David Tarantino pinch Baird.

David Tarantino

Hi. Good afternoon. Jerry, you mentioned that you expect edifice separator percent to retrieve complete time. And I conjecture my mobility is, is really astir benignant of nan way to getting there. And I deliberation you said, utilizing commodity costs and immoderate different items for illustration leverage connected traffic, but if you could conscionable clarify, really do you get to higher separator percentages complete time?

And past Michael, tin you remark connected whether you deliberation advancement connected that beforehand is imaginable this twelvemonth successful position of separator percent springiness it each nan puts and takes connected nan costs side?

Michael Bailen

Yes. Hey, David, it's Michael. I’ll commencement and past fto Jerry adhd in. I do deliberation let's usage nan midpoint of our guidance scope and nan presumption that nan user remains healthy. And we spot humble maturation moving to nan twelvemonth and what level of maturation that's going to beryllium up to you guys to determine. But yes, I deliberation you could spot immoderate -- connected nan percent broadside immoderate separator betterment successful 2023.

I deliberation different operating is surely possibly nan easiest way guardant for immoderate of that separator improvement. And past depending upon wherever we are, wrong our guidance ranges connected commodities and labour would facet into really overmuch possibly leverage we should get successful those areas.

And truthful I think, obviously, driving postulation is 1 way, seeing nan paper pricing flowing done is different way, but I'll show you that nan percentages are important to us, but support that apical statement maturation and support those edifice separator dollars are conscionable arsenic important if not much important.

Jerry Morgan

Yes. And I would conscionable say, arsenic we proceed to onslaught our apical statement income and proceed to watch ostentation passim our costs of goods, there's evidently that portion of it, we do dream and do present that possibly we're going to person immoderate alleviation extracurricular of protein. And past successful different controllables, from that labor, obviously, arsenic we've really emphasized getting unit this year, and making that investment, truthful that we tin grip nan income and nan measurement that we're doing.

So hopefully, we person really added to our pot, we person 82,000 people. So we are backmost above, fundamentally nan pandemic levels and to grip nan measurement that we have. So we really didn't want to utilize nan tenure of our group now. And nan expertise for them to grip that nan volume, location was a batch of ramping up to do nan sales. So I consciousness very comfortable going into this twelvemonth that we should spot immoderate alleviation and moreover make immoderate headway connected those 2 categories for sure.

David Tarantino

Great. And conscionable a clarification, Michael, is location immoderate level of postulation that you're reasoning astir that would, I guess, postulation maturation that would lead to separator description nan shares aliases a break moreover constituent that we should deliberation astir for nan year?

Michael Bailen

I don't cognize needfully if there's a break moreover versus past year, probably, connected apical of what we've already generated immoderate reasonably humble postulation maturation continuing done nan year. Obviously, pricing drives separator percents a batch much easy than does traffic, but you will astir apt request to proceed to spot postulation growth. Traffic maturation is surely going to use that labour statement and nan different operating statement and thief america get immoderate leverage there.

David Tarantino

Great. Thank you very much.

Operator

Thank you. We’ll spell adjacent now to Jeffrey Bernstein of Barclays.

Jeffrey Bernstein

Thank you very much. Two questions. One, conscionable connected nan portion broadside of things. I cognize this year, you were primitively talking astir possibly 30 openings. Now, I think, you mention to 25 aliases 30. In nan short term, conscionable wondering whether there's immoderate near-term headwinds that are benignant of still weighing connected things and that benignant of ties into nan 30 that Michael, I judge you mentioned, for nan galore years to come, you guys tin do 30 a year. I'm conscionable wondering, now pinch perchance 3 concepts still humming along, conscionable wondering what nan constraint would beryllium to, you know, going good supra 30, whether aliases not there's thing successful peculiar aliases whether that's conscionable your comfortableness area to presume 30 per year? And past I had 1 travel up.

Jerry Morgan

Yeah, Jeffrey, really are you doing, buddy? Listen, I do judge that we will proceed to attraction connected nan maturation of Roadhouse astatine that low-20s. And arsenic we footwear Bubba’s successful besides arsenic we commencement moving towards a double-digit number, and past you know, Jaggers is still a small spot early to spot what we tin put into nan pipeline. I americium excited astir it. I do judge that it will proceed to adhd to our portfolio. So I do judge that we tin get to nan high-20s and low-30s successful nan adjacent mates of years is wherever our target focuses and our pipeline.

And past I do spot it escalating from there. It will beryllium incremental, but it's not going to beryllium a large jump. But arsenic we do get much alert of what we tin do pinch Jaggers and Bubba’s, they will beryllium there. But we're very comfortable pinch wherever Roadhouse is successful nan pipeline for nan adjacent 3 years, I would say, we could beryllium astatine that number and nan different 2 will beryllium nan driver to footwear america up complete into nan 30s aliases higher. So that would beryllium nan thought location connected my side.

Jeffrey Bernstein

Got it. Is location immoderate peculiar headwind successful position of this twelvemonth aliases still ongoing delays and whatnot that would possibly temper that anterior 30?

Jerry Morgan

Yeah, I judge location is immoderate concerns connected our part. Just still a mates of things, nan modulation of spot betwixt our landlords delays things erstwhile we're successful a negotiation, we've seen a small spot of that. Permitting is getting better. But it's still a situation by cities aliases municipality. So we're anticipating getting done each of that. We besides person to beryllium cautious of what we've successful seen nan past mates of years.

Michael Bailen

Yeah. And Jeff, this is Michael, if you want to mention that accommodation from nan astir 30 down to nan 25 to 30, conscionable pinch immoderate of nan activity we were seeing. It conscionable felt for illustration nan correct point to update, but really had nary effect connected our thoughts connected nan shop week maturation for nan year. So it was you know, deals that were already expected to beryllium beautiful precocious successful nan year, but conscionable realistically look for illustration they're going to gaffe into early adjacent year, but again, would not really alteration that shop week maturation number.

Jeffrey Bernstein

Got it? Might I travel up is from nan earlier mobility connected beef. You know, I deliberation you said nan mostly of your ostentation is going to travel from Beef. Just wondering if you tin stock what you're presently contracted specifically for Beef? And possibly astatine what ostentation complaint that we're talking about. I cognize 1 of your larger peers reported earlier today, and they talked astir really they were 100% contracted for Beef, assuming mid single-digit inflation. I'm conscionable wondering really that compares, possibly it's different product, you're looking astatine a different specs, but it's 100%, thing you would look to execute aliases immoderate colour you tin supply successful position of, you know, nan outlets of beef, specifically, arsenic we move done this twelvemonth would beryllium great? Thank you.

Jerry Morgan

Yeah, we're not going to get into what percent of our Beef is locked for nan year, obviously, we person much of a locked successful nan first 4th into nan 2nd 4th than we do successful nan backmost half of nan year. And pinch it being almost half of our baskets, if we're 60% locked connected nan wide basket, beef has to beryllium benignant of successful that aforesaid wide range. And, you know, I did, you know, successful our successful our remarks opportunity that nan majority, and I deliberation you could telephone that, 80-ish percent of our commodity ostentation for nan twelvemonth is expected to travel from Beef.

So, again, if you conscionable for nan easier mathematics took nan bottommost extremity of our scope of 5% commodity inflation, that would connote that you're going to person beef ostentation successful precocious azygous digits aliases debased double digit is what's embedded successful that expectation.

And yeah, we, I can't really remark connected really different -- what others are doing, I tin conscionable show you pinch nan measurement we bargain our beef, wherever we bargain our beef from, nan truth that we property it and trim it successful our restaurants, it does require america to possibly do thing a small spot different than what others do. We person nary problem locking successful erstwhile we deliberation it's appropriate. But we're also, you know, we person immoderate beautiful smart group successful our procurement department, who cognize erstwhile is nan correct clip to beryllium bargain and when's nan correct clip to wait, and they will make those decisions connected what they deliberation will consequence successful nan champion costs for us. And, obviously, if locking successful tin beryllium done, we surely will do that.

Jeffrey Bernstein

Understood. Thank you.

Michael Bailen

Thank you.

Operator

Thank you. We’ll spell adjacent now to Peter Saleh astatine BTIG.

Peter Saleh

Great. Thanks for taking my question. I want to travel backmost to nan income performance, truthful acold this twelvemonth successful nan first 7 weeks, I noticed you saw a beautiful sizable summation successful mean play income 146,000 and nan 4th fourth was astir 130,000. Can you talk astir is that summation really mostly that you're seeing? Is that mostly traffic? Are you seeing immoderate alteration successful behaviour successful position of what consumers are spending on, is nan cheque going up? Just thing erstwhile you look nether nan hood successful those first 7 weeks, conscionable trying to understand nan user behaviour there?

Michael Bailen

Yeah. Hey, Peter, it's Michael. Of that 15.8%, we've mentioned connected nan past telephone that we were going to beryllium astir 6% pricing, successful nan first 4th we're seeing astir of that flowing through. So I would opportunity nan postulation is conscionable a tick complete 10% of that 15.8%. And nan remainder of it is cheque growth.

Peter Saleh

Great. And conscionable connected that, opportunity connected nan mean play income for a second, fixed really precocious it is and astonishing possibly nan highest that you guys person seen. How do you consciousness astir staffing levels pinch mean play income astatine this level? Do you consciousness for illustration you request to measurement up? Do you consciousness for illustration you're appropriately staffed? Should we expect nan labour hours to summation from present conscionable immoderate thief pinch that would beryllium appreciated?

Regina Tobin

Hey, Peter, this is Gina. I'll show you that overall, correct now, we are very happy pinch our existent staffing numbers; we've seen an summation successful that, our turnover is decidedly going down. And we cognize that value of group hired and retention is going to summation our productivity. And that's going to thief to thrust down nan labour percent, which is what we are presently moving connected correct now. So tenure matters and connections to our group to create that civilization and trim that turnover magnitude will proceed to beryllium worked on.

Peter Saleh

Thank you very much.

Operator

Thank you. We return our adjacent mobility now from Sara Senatore of Bank of America.

Sara Senatore

Hi, convey you. I conscionable want to spell backmost to nan portion maturation question. I deliberation you said just, benignant of, connected nan margin. Maybe we'll spot immoderate of nan units target successful nan pursuing twelvemonth successful January to December. I noticed, though nan CapEx guideline is unchanged. And I conjecture I wanted to inquire connected that, are you still seeing comparatively precocious ostentation and build costs, aliases is location benignant of a much repair aliases I should opportunity like, updating attraction CapEx that you're spending connected was immoderate of that benignant of deferred during nan pandemic?

And are related note, nan different operating expenses, for illustration you said, repair attraction were high. So, is that besides benignant of portion and parcel of what we're seeing broadly, which is benignant of immoderate of these elevated -- still elevated costs? Just trying to understand, fixed really beardown nan volumes are, whether aliases not it's benignant of nan marginal returns are higher arsenic you would deliberation they should be, aliases possibly nan costs of building has gone up sufficiently that it's offsetting immoderate of that.

Michael Bailen

Yes. Hey Sara, it’s Michael. I say, first connected nan CapEx question. We're still going to beryllium building those restaurants that are going to unfastened precocious this year. So nan main reason, for illustration nan CapEx number didn't alteration isn't because of summation successful our presumption for nan cost. It's conscionable simply that, moreover though our shop whitethorn not unfastened till January aliases February of adjacent year, it'll astir apt beryllium for nan astir portion builds by nan extremity of this year. So nan CapEx number did not astatine request to move.

As acold arsenic different operating, we proceed to consciousness those pressures successful there, a batch of services spell into nan different operating, portion of their -- portion of nan business, a batch supplies, nan utilities continued to beryllium a unit point, and repair and attraction are still elevated. And, there's besides different caller fees that spell successful location that we really haven't talked a batch astir successful nan future, and aren't immense driving forces. But, erstwhile we rotation retired caller exertion there, location are costs associated pinch that. And whether that's moving instrumentality aliases paying for installations, location are immoderate costs that proceed to unit that line.

So, pinch nan maturation successful our volumes, we're surely seeing much usage of those different different operating items. But we're besides seeing immoderate caller items introduced into that area. I'm optimistic that we won't spot it turn nan measurement it has and I'm hopeful that we won't spot it turn connected $1 per shop weeks nan measurement we person and person much imaginable connected that statement for immoderate leverage successful 2023. But we will hold and spot precisely really that each plays out.

Sara Senatore

Okay. Thanks. And then, conscionable if you tin springiness maine a small spot of consciousness connected nan CapEx, I know, it makes consciousness that nan opening -- astir of nan activity is being done earlier it opened. How overmuch ostentation person you seen connected build costs, let's opportunity versus pre-COVID? Just truthful I tin get a consciousness of like, wherever things guidelines versus possibly they were a mates years ago?

Michael Bailen

Yes. There's a fewer things that spell into that. There's evidently nan building cost. There's nan rents and everything else, but we've astir apt seen -- you can't conscionable look astatine nan full costs and do nan mathematics 1 complete nan different because, again, wherever nan restaurants unfastened 1 twelvemonth versus nan adjacent tin person an effect connected building costs and rents. But you astir apt person seen -- your ballpark 10% to 15% increases successful nan costs of building a restaurant. But we're besides embedded successful that is, we're building a bigger edifice than we person successful nan past. So, it's difficult to abstracted those 2 items out.

Sara Senatore

Understood. Thank you.

Operator

We'll return our adjacent mobility now from Dennis Geiger of UBS.

Dennis Geiger

Great, and thanks, and congrats to everyone connected your promotions and expanded roles. I want to inquire connected G&A you called retired a mates of items contributing to nan G&A levels successful nan 4th quarter. But curious, if you could supply immoderate thoughts connected G&A successful 2023, thing connected finance there? Whether it's arsenic a percent of income G&A aliases going to beryllium maturation year-over-year immoderate colour connected what to expect this year?

Keith Humpich

Yeah. Thanks, Dennis, this is Keith. Yeah, for G&A, we ever target to support G&A growth, little than our gross growth. And I deliberation successful 2023, mightiness beryllium a twelvemonth wherever we get a small spot of that leverage back. We person a mates of G&A maturation challenges successful 2023, 1 of those, arsenic we talked astir this arsenic our 30 twelvemonth anniversary, and we're getting fresh to person our yearly Managing Partner Conference. And pinch that being our 30th anniversary, it's going to beryllium rather nan event. And truthful I deliberation you tin decidedly look to spot america having elevated convention costs this year. And past that will beryllium a large driver of immoderate of that, we besides person a caller quality superior guidance strategy that's going in. So we're going to person respective non-capitalize capable costs that we've been incurring this year. So that's going to beryllium a factor.

And past nan different portion is really going to beryllium pinch nan pandemic slowdown. We've benignant of been gradually recovering connected a batch of things. But I deliberation this is going to beryllium nan twelvemonth wherever you're going to spot america afloat recovering and moreover successful immoderate cases catching up connected things for illustration recreation and training and really investing successful our group to. So I deliberation those are going to beryllium your main driver this year.

Dennis Geiger

Appreciate that color, Keith. One much speedy one, conscionable arsenic it relates to pricing, arsenic it relates to nan existent levels and what you're taking successful March conscionable funny benignant of level that disconnected and connected what nan effective pricing by 4th possibly looks for illustration complete nan adjacent mates of quarters fixed nan moves there? Thanks very much.

Michael Bailen

Yeah. This is Michael I tin – I tin thief you pinch that. So first quarter, pinch a 2.2% and assuming, we don't return immoderate pricing successful October, we will person astir 5.9% pricing for nan first 4th 5.6% successful nan 2nd quarter, 5.1% successful nan 3rd quarter, and past 2.9% successful nan 4th quarter. And again, we will beryllium looking astatine paper pricing. And, astir apt taking thing successful October, but that's nan cadence without immoderate further pricing.

Dennis Geiger

Thanks, Michael. Appreciate it.

Operator

Thank you. We spell adjacent now to Andrew Strelzik astatine BMO Capital Markets.

Andrew Strelzik

Hey, bully afternoon. Thanks for taking nan questions. I person two. The first one, I judge you said that, you're beautiful comfortable pinch nan pipeline for caller stores complete nan adjacent 3 years. But it does consciousness for illustration we perceive from almost everyone that they're looking to accelerate portion growth, moreover those that don't really turn units. I'm curious, arsenic you're building that pipeline farther out. Do you spot that show up astatine each much competition, higher costs immoderate of those types of things would beryllium nan first question? The 2nd mobility is conscionable acquired franchise units, immoderate colour astir volumes aliases margins aliases imaginable investments to get this wherever you want to beryllium comparative to your peers strategy average? Thanks.

Jerry Morgan

I'll return that first part. And I deliberation Michael, drawback that 2nd part. Yeah, I do. Obviously, there's title retired there. And I deliberation location are, but we person our targeted markets and states, and maturation areas. And we've been moving this scheme for rather a while, and it's been very successful for america for Roadhouse and Bubba's. And past obviously, arsenic we're incorporating our strategy connected really to turn Jaggers systematically, astir apt keeping it a small person to present and nan Kentucky basin aliases nan heartland and nary 1 that astir it, but location is -- there's ever competition. And there's existent property to beryllium had retired there. I think, well, I'm not judge what others are doing. But we are very focused connected our strategy. And successful our attraction connected really to proceed to do it, right. We do person immoderate relocations that we are besides incorporating into nan strategy and which is really helping america successful a different way. But that besides adds to america looking for much existent estate, different than caller shop openings, but beryllium capable to return a shop relocated, put a bigger parking spot successful and successful a bigger restaurant, which we request for our volume, whether it beryllium cooler description s aliases bump outs aliases other eating rooms, arsenic we look guardant to it. We're excited astir immoderate opportunities to do immoderate things a small bigger, arsenic they opportunity successful Texas, going forward.

Keith Humpich

Yeah, Andrew, connected those franchise acquisitions, I would opportunity those are beautiful mean performing stores from a income and profit standpoint. So I don't deliberation you're going to spot immoderate benignant of activity successful our wide institution numbers, because of that. And from a CapEx requirement, location is immoderate CapEx needed and that's built into our $265 cardinal estimate for nan year.

Andrew Strelzik

Great. Thank you very much.

Operator

We'll spell adjacent now to Joshua Long of Stephens.

Joshua Long

Great, convey you for taking my question. First one, I wanted to spot if you mightiness beryllium capable to supply a small spot much colour connected immoderate of nan underlying trends that are seeing nan beardown trends present successful nan first portion of nan year. In benignant of context, you tin supply -- if you deliberation astir Omicron effect from January leaves there's besides a almanac displacement past twelvemonth from Valentine's Day successful Super Bowl conscionable benignant of trying to get astatine nan underlying trends present for nan first portion of nan twelvemonth would beryllium my first one. And past secondarily, it sounds for illustration bully quality superior is successful a coagulated spot, but past besides conscionable reasoning astir nan maturation and each nan activity you've done to support that spread betwixt different peers successful nan industry, because everyone is really focused connected nan quality superior facet going guardant arsenic nan cardinal pillar for really they're going to get retired location growth. You've done that really well, historically. Just curious, really you deliberation astir quality superior and investments into that roadie civilization complete nan adjacent two, three, four, five, 10 years benignant of that adjacent section to get retired immoderate of that doubling of gross that you talked astir earlier successful nan call.

Michael Bailen

Hey, Josh, it's Michael, possibly I'll commencement pinch nan first mobility astir nan first 7 weeks, and really don't person a batch of numbers to telephone retired for you. I’ll say, there's ever a batch of different things going on, whether it beryllium nan lapping of Omicron. And wintertime upwind this twelvemonth aliases wintertime upwind past year, nan timing of Valentine's a Super Bowl. I'll show you, we've seen this. We've seen spot passim nan 7 weeks of nan year. So there's really not immoderate benignant of number I would telephone retired and say, hey, you request to set it upwards aliases downwards, because of something. I think, it'd beryllium unfair to return -- to person you all, adhd thing to it without backing thing off. And for illustration I said, I'd opportunity it's been a beautiful consistently beardown capacity passim nan 7 weeks.

Keith Humpich

And connected nan staffing side, I will show you that I deliberation successful nan past 18 months connected nan quality capital, truthful we are [indiscernible]. We're each that portion of it. No. So connected a staffing side, no, we person been very fierce nan past 18 months and we consciousness really bully astir our position connected nan group broadside successful our restaurants successful nan beforehand of nan house, successful nan backmost of nan house, successful our guidance team. So, that portion of it has been a large investment. So we're hoping evidently this year, arsenic we settee in. We trim our turnover, and we really attraction connected keeping our folks and connecting pinch our folks. That will beryllium -- that will beryllium an finance that we spot a return connected this twelvemonth would beryllium our hope.

Joshua Long

Thank you.

A – Jerry Morgan

Thank you.

Operator

We'll spell adjacent now to Andy Barish of Jefferies.

Andy Barish

Hi, guys, thanks. Two speedy ones for me, conscionable connected nan separator capacity successful nan 4Q, tin you thief america level set? I mean, it's different to spot margins benignant of spell down from nan 3Q to nan 4Q, was location thing astir December travel done that wasn't rather what you expected aliases immoderate thief location conscionable arsenic we, you know, we look to build disconnected of -- that 14.5% edifice level margin.

Michael Bailen

Yes, hi, it's Michael. It's really much to do pinch nan 3rd quarter. If you whitethorn aliases whitethorn not callback erstwhile we -- connected our 3rd 4th earnings, we called retired nan $6.6 cardinal a breakage use that we that we received successful our different income arsenic good arsenic a $4.4 cardinal use to our different operating for a wide liability reserve adjustments. So those 2 numbers and nan use of those successful nan 3rd 4th person caught up astir apt 1% to 1.1% use to our Q3 edifice margin. So really connected an adjusted ground we will spell retired from a people of 14.3% successful Q3 up to that 14.5% successful Q4. So it really had much to do pinch those beneficial items past quarter.

Andy Barish

Okay, convey you admit that. And past connected postulation maturation that these benignant of measurement numbers I mean, Jerry possibly and aliases Regina, I mean it's phenomenal it evidently gets a small tougher and execution -- Legendary -- Food Legendary Service continues to beryllium nan hallmark but are location different things we should beryllium reasoning about? You know, arsenic you've mentioned ace a fewer times aliases Roadhouse salary aliases remodeled bump retired -- thing you'd for illustration to telephone out, arsenic we tried to fig retired postulation maturation for 2023 and beyond.

A – Regina Tobin

Yes, well, we are – we are absolutely, ever looking astatine velocity successful our restaurants and Roadhouse salary is 1 of those items that we've precocious put successful wherever nan guests tin salary it location -- successful a timely manner, and we tin move our tables faster, which is what we've seen. We are putting KDS successful immoderate of our kitchens, which helps our summons times. So we really look astatine from a exertion standpoint, immoderate portion that tin thief nan velocity of our restaurants which evidently increases nan postulation growth. So we look astatine that.

And location whitethorn beryllium immoderate different -- arsenic our operators, we've said this -- arsenic our staffing levels person travel up, and we've gotten staffed and we get nan tenure successful our restaurants and group are much experienced, obviously, nan productivity goes up, and they go much businesslike and faster successful their roles. So each of that leads to stronger traffic.

A – Jerry Morgan

And I'll conscionable grow connected that integer room a small bit. Roadhouse salary we person been almost 615 stores now has been a immense triumph past year, we are still testing tablets, truthful that we tin do a mobile handheld ordering portion of it, we're moving connected our software. As we go, we want to make judge it's cleanable erstwhile we get it retired location to execute and past arsenic acold arsenic a Digital Kitchen, we person converted 2 of our restaurants and opened 2 caller stores, and are astir apt committed to 30 restaurants this twelvemonth moving to nan Digital Kitchen, which is evidently very exciting. We are -- we conscionable opened 1 restaurant, a high-volume shop that we relocated, and it has been very successful. The operators are excited astir it. So, we're excited to put successful nan -- and seeing immoderate existent rewards arsenic we move forward.

This will beryllium a large twelvemonth for america erstwhile it comes to opening caller stores pinch a Digital Kitchen, and moreover converting immoderate existing stores. So, benignant of, decidedly going to beryllium leaning connected immoderate exertion to thief america get faster and really, we want to complement our work pinch technology.

Andy Barish

Very helpful. Appreciate it.

Operator

We'll spell adjacent up to John Ivankoe of JPMorgan.

John Ivankoe

--250 Texas Roadhouses complete nan adjacent 10 years information numbers, I suppose. But is your tract floor plan changing? Are you seeing caller areas, wherever Texas Roadhouse tin beryllium successful, possibly moreover person to immoderate of nan awesome cities, possibly would travel astatine a higher cost, but possibly besides overmuch higher sales, conscionable really nan wide tract floor plan is emerging aliases evolving for nan adjacent chapter?

Keith Humpich

Yes, I would opportunity we'll astir apt enactment beautiful tried and existent to our accuracy of nan suburbs. But we do person a edifice successful New York City successful New Rochelle that we've looked at. We are starting to look a small spot much successful a metropolis area aliases higher traffic, which could beryllium -- truthful we've sewage a mates of those.

So, we are expanding a small bit, we've had immoderate occurrence successful immoderate smaller communities aliases lower-populated areas that we tin spell into. So, we've sewage a wide scope successful a mind and astatine looking astatine each option. And I deliberation astatine a institution our size and what we want to accomplish, we sewage to enactment true. But we person to trial and effort immoderate caller things that mightiness thief us.

And because we're looking astatine Bubba's, and we're looking astatine Jagger's, we're astir apt expanding and are looking astatine areas that would thief each 3 brands. So, I deliberation our existent property squad intelligibly understands what we're trying to do pinch each three. But we person opened nan scope of wherever we will spell and what we will try, truthful that we tin grow and person a batch of occurrence successful that broadside of it. So, there's a mates of things that we're moving on, that are a small different than what we've done successful nan past and we're excited to spot really they move retired for us.

John Ivankoe

That's great. Thank you. And secondly, and related, I suppose connected development, are location still important bump retired opportunities for nan concatenation aliases person you done fundamentally what you tin do astatine this point? You've mentioned relocations, really important of an opportunity is relocations for nan Texas Roadhouse brand?

Keith Humpich

We for illustration them, they're truthful acold proven retired beautiful well. I would opportunity that complete nan past 5 years, we astir apt person a dozen, and each 1 of them person proven to spot a existent bump successful sales. So, that's exciting.

And arsenic group move retired connected their 20-year lease, that's erstwhile we commencement looking astatine what is our opportunity to reinvest aliases to possibly relocate if nan power moved aliases some. So, I deliberation that's a smart strategy from a business standpoint. And truthful from that, arsenic acold arsenic bumped out, Michael, I deliberation has a mates of stats connected that.

Michael Bailen

Yes, John, I deliberation I bumped out. I'd opportunity location still is opportunity and really, each twelvemonth there's caller restaurants that benignant of commencement to suffice arsenic potentials -- imaginable ones for america and look astatine either they've grown their volumes capable to beryllium considered aliases they've been unfastened agelong enough.

For 2023, I wouldn't beryllium amazed to spot america unfastened 10 -- aliases bump retired 10 to 12 restaurants and we astir apt person connected apical of that, different 20 positive that are already successful nan pipeline for 2024 and beyond. Sometimes they return a small – small spot much activity connected nan ineligible broadside of getting each nan approvals to get them done. But we decidedly person a batch of restaurants still willing successful them and caller ones benignant of every, each twelvemonth that benignant of suffice and get connected our radar to beryllium considered for a period out.

John Ivankoe

Thank you.

Operator

Thank you. We spell adjacent now to Jon Tower of Citigroup.

Jon Tower

Great. Thanks for taking nan mobility and I’ll effort and make a quick. In erstwhile quarters, you talked astir a bully small operation up successful nan menu. This 4th looks for illustration operation was flat. Kind of funny to get your perspective, are you conscionable not seeing arsenic overmuch waste and acquisition up connected nan menu? Is location thing other going connected possibly successful nan 4th quarter?

Michael Bailen

Hey, John, it's Michael. Yes, it's a absorbing mobility aliases 1 that we've been looking at. I'd say, truthful acold this year, we're seeing this tremendous postulation growth. But you are right, we are seeing a small spot of antagonistic operation coming in. And what we don't cognize is we surely lapped nan move up to a higher cheque that our impermanent has chosen to do. And moreover pinch this small spot of antagonistic operation that we're now seeing, we're still good supra wherever we were pre-pandemic. But what we're still looking astatine and trying to find is what is driving a small spot of antagonistic entree operation that we're seeing correct now, because we're not seeing it successful appetizers. We're not seeing it successful different add-ons, we're not seeing it successful soft beverage. But we're seeing a small spot successful that successful that entree.

And it could beryllium immoderate of our – immoderate customers trading down a small bit. But honestly, it could besides beryllium a personification trading up to america that, now sees nan comparative worth of a Texas Roadhouse arsenic compared to going to a accelerated casual edifice for a very akin value they tin beryllium seated and waited upon. And truthful possibly immoderate of those group are now coming successful and driving immoderate of this postulation growth. But possibly they are coming successful astatine immoderate of our little value points connected nan menu.

So it's thing we're watching. But it's nan unsocial point complete nan past fistful of weeks is we're seeing it, conscionable a small spot successful nan entree category. But not successful nan remainder of nan menu. We are still seeing a small spot connected nan intoxicant mix. But we were already seeing that, that possibly group moving from intoxicant to soft bev, because we are seeing that soft bev operation move up a small bit.

Jon Tower

Got it. I admit that color. And past conscionable lastly for me, I deliberation you tapped successful connected this possibly earlier successful nan call, but caller benignant of productivity of that Roadhouse has been phenomenal. I deliberation it's up – nan mean play waste of 8% versus nan comp shop guidelines successful 2022. And possibly you answered this earlier successful nan shape of building bigger stores. But is location thing other going connected that would beryllium driving that acceleration you're seeing successful caller shop productivity versus nan past?

Michael Bailen

Yes. Nothing -- it's Michael. Nothing that I tin deliberation of that would beryllium driving that. I don't know. Gina, if there's thing you would do there?

Regina Tobin

Not. No, not, thing I tin deliberation of.

Jon Tower

All right. Thank you.

Operator

Thank you. We'll spell adjacent now to Brian Vaccaro of Raymond James.

Brian Vaccaro

Hi, thanks. Good evening. Just 2 speedy ones. First, connected labor, Gina, wherever is hourly turnover benignant of trending complete nan past fewer quarters? Can you conscionable ballpark that for us? And possibly springiness america immoderate position connected really that compares to pre-COVID levels?

Regina Tobin

Yes, sure. I will show you that we are seeing nan turnover number going down consistently complete quarter-over-quarter. We are seeing much exertion flow, which is bully for us. And arsenic we, for illustration I said before, it's nan value of group that really makes a difference. And erstwhile we get those value of group successful pinch nan experience, we tin support them longer. And that really helps pinch that turnover piece. So we proceed to spot it spell down which is which is really promising.

Michael Bailen

Yes. And Brian, this is Michael. I tin conscionable put up immoderate numbers to that. Our -- and again, remember, each institution possibly calculates turnover a small spot differently. But we've seen our number which we look astatine complete a past 12-month period. So it's a slow moving number, but we're down successful nan precocious 120s correct now, mediate of 2022, we were successful nan mid 130s. So we've decidedly seen that travel down and I would opportunity pre-pandemic. We were location astir apt successful that 105 to 110, right. So we still person a batch of room to go, but we're getting better.

Brian Vaccaro

Okay, great. That's helpful. And past conscionable past one, connected conscionable benignant of adjacent word shop separator expectations and conscionable benignant of successful nan tone of getting everyone connected nan aforesaid page successful an situation wherever income are truthful beardown successful nan first quarter, it tin beryllium a small disorienting. So I guess, could you supply immoderate guardrails connected first 4th shop separator expectation? Is location a humanities perspective, possibly versus Q4? I deliberation it's usually up astir 200 bps. Is that reasonable, aliases possibly there's thing successful nan existent situation wherever that wouldn't beryllium nan lawsuit this year?

Michael Bailen

Yes. Hey, Brian, it’s Michael. I’m not going to excessively heavy into that one. But I don't -- I deliberation what you spelled retired is surely imaginable that our separator percents are surely typically astatine their highest successful Q1 and Q2, because our income volumes are typically astatine their highest. So yeah, what you're talking about, thing that's magnitude could beryllium nan case. I'm not going to opportunity whether it's a 200 ground constituent move aliases not, but we would expect to spot immoderate higher margins successful nan first half of nan year, conscionable arsenic we saw higher margins successful nan first half of past year. And we said, hey, there's a imaginable to spot immoderate wide separator betterment year-over-year, truthful you would benignant of request thing for illustration that to happen.

Brian Vaccaro

Okay. All right. Fair enough. Thank you very much.

Operator

Thank you. And our last mobility will travel from Nick Setyan astatine Wedbush.

Nick Setyan

Thank you. Just a mates of questions for me. I conscionable want to locomotion done possibly conscionable nan existent move successful Q4 and possibly successful Q1. And if we assume, akin commodity ostentation successful Q1 arsenic we motion Q4, that's disconnected of nan little guidelines successful Q1 of 2022. So presumably, sequentially, nan costs percent should beryllium down from Q4 to Q1. Is that fair?

Keith Humpich

From Q4 to Q1?

Nick Setyan

Yes.

Keith Humpich

Is that what you said actually?

Nick Setyan

Yes.

Keith Humpich

I tin spot it being reasonably similar. Whether it's up aliases down again, it depends connected wherever wrong our numbers, but they astir apt are going to beryllium successful nan aforesaid ballpark arsenic each other, fixed nan numbers that we've called retired and wherever our costs aliases underlying costs structures are.

Nick Setyan

Okay, adjacent enough. And past conscionable punctual america historically, successful position of seasonality, what March looks for illustration successful position of mean income versus January and February?

Keith Humpich

Yeah, March thin to beryllium a very beardown period for us. If we were to spell backmost and possibly look astatine 2019, springiness maine a 2nd to propulsion that up, January play wanting to were some astir 105,000 successful play income and our March play were 110,000, 111,000 play sales. So we do thin to spot a small spot of a summation successful that March period.

Nick Setyan

Great. Thank you very much.

Operator

Thank you. That does concludes our mobility and reply convention this afternoon. Mr. Morgan, I'd for illustration to move things backmost to you for immoderate closing comments you whitethorn have.

Jerry Morgan

Yeah. Thank you very much. I conscionable want to opportunity 30 years ago, tomorrow, we opened our very first Texas Roadhouse and I couldn't beryllium much excited and proud of what this institution has accomplished arsenic we're complete 700 restaurants and 3 concepts. And we admit everyone's support and business passim this journey, but it's very breathtaking to spot what this institution has accomplished. I couldn't beryllium much proud to observe pinch each of our folks present successful Louisville tomorrow and our partners erstwhile we person our convention successful April. So convey you each for your support and partnership. We will proceed to execute astatine a precocious level.

Operator

Thank you, Mr. Morgan. Ladies and gentlemen, that will reason today's Texas Roadhouse, 4th fourth net convention call. Again I'd for illustration to convey you each truthful overmuch for joining america and wish you each a awesome evening. Thank you very much.

Editor: Naga



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