Texas Roadhouse Inc (TXRH) 2018 Q1 法說會逐字稿

Good evening, and welcome to the Texas Roadhouse First Quarter 2018 Earnings Call. Today's call is being recorded. (Operator Instructions) .

I would now like to introduce Scott Colosi, President and Chief Financial Officer. You may begin your conference.

Thank you, Don, and good evening, everyone. By now, you should have access to our earnings release for the first quarter ended March 27, 2018. It may also be found on our website at texasroadhouse.com in the Investor section. Before we begin our formal remarks, I need 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. [Refer] all of you to our earnings release and our recent filings with the SEC for 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. And 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 Kent Taylor, our Founder and CEO; and Tonya Robinson, our Vice President of Finance and Investor Relations.

Following our remarks, we will open the call for questions.

Now I would like to turn the call over to Kent.

Thanks, Scott. We're pleased with our top lateral minim and operating performance in the first quarter with sales growth of 10.8% and comparable restaurant sales growth up 4.9%, including 4% higher guest counts. Our momentum continued in the first 4 weeks of the second quarter with comparable restaurant sales up 8.5%. We've been busy in 2018 working on our basics that will continue to move us forward. Nothing revolutionary are radically different from what we have done in the past instead simply challenging ourselves to execute even better on the fundamentals that we now have gotten us here today. In late March, we implemented a menu price increase of approximately 0.8% to go along with the 0.3% menu price increase that we took in mid-December. This quarter, we also raised our annual managing partner base pay, which has not changed since 1993 by approximately 10%. Savings from tax reform certainly helps offset the cost of our investments and labor, while continuing to keep our prices low. We also will continue to look at other ways to reinvest in our people as we move through the year. Our new restaurant development is on track with 11 restaurants opened so far this year. We have another 10 sites currently under construction and they are well on our way to opening approximately 30 company locations in 2018. In addition, our franchise partners have opened 2 restaurants this year including our first location in Mexico. In closing, I want to congratulate Dave Eubanks of Mesquite, Texas for being named our 2017 Managing Partner of the Year at our recent conference in California. It was great to be together with our operators and partners celebrating another successful year in our 25th anniversary. Now Tonya will walk you through our financial update.

Thanks, Kent, and good evening, everyone. For the first quarter of 2018, net income increased 59% over the prior year to $54.5 million or $0.76 per diluted share. Our Q1 2018 reported net income included the benefit of a lower tax rate compared to the prior year period, which contributed $0.11 to diluted earnings per share this quarter. In addition, our Q1 2017 net income included a $14.9 million pretax charge, which impacted the diluted earnings per share by $0.13 in the prior year period. Revenue growth of 10.6% during the quarter was driven by a 6.5% increase in store weeks and a 4.4% increase in average unit volumes. For the quarter, comparable restaurant sales increased 4.9%, comprised of 4% traffic growth and a 0.9% increase in average tax. By month, comparable sales increased 5.7%, 3.7%, and 5.3% for our January, February and March periods respectively. As Kent mentioned, comparable sales increased 8.5% for our April period. In Q1 2018, we implemented the new revenue recognition accounting guidance and made certain reclassifications within our income statement. The reclassifications had no impact on net income, and the comparative financial information has not been reinstated. Before I move to the discussion of restaurant margin performance, I will provide details surrounding the changes. This quarter in conjunction with the implementation, we reduced sales by $1.8 million for gift card fees, net of gift card breakage income and increased other revenue $0.7 million for franchise-related items.

In addition, as a result of the reclassifications, cost of sales decreased $1.5 million or 14 basis points, other operating costs decreased $1.5 million or 20 basis points and G&A increased $1.9 million or 32 basis points. No reclassifications were made in labor, however, the change in sales resulted in an increase of 9 basis points to labor as a percentage of total sales. We currently expect the ongoing 2018 impact of the reclassifications related to the implementation to be similar as a percentage of total sales or as a percentage of total revenue to those just quantified. Now I move on to a discussion of restaurant margin, which decreased 75 basis points to 19.2% as a percentage of total sales compared to the prior year period. Cost of sales as a percentage of total sales decreased 12 basis points compared to the prior year period. The impact of approximately 1% commodity inflation was more than offset by the benefit of average tax in the impact of the reclassifications. For the full year, we have updated our commodity cost forecast to approximately 1% inflation from previous guidance of relatively flat food cost. Labor as a percentage of total sales increased 126 basis points to 31.5%, and labor dollars per store week were up 8.1% compared to the prior year period. The main drivers are wage and other inflation of approximately 4.7%, including the impact of increasing managing partner base pay, and growth in hours of approximately 3.5% including the impact of higher guest counts. We continue to expect labor dollars per store week growth to be in the mid-single-digit range excluding the impact of higher guest counts. Our labor expectation includes an estimate of increases due to mandated stage wage rates, ongoing market pressure, restaurant-level compensation increases and growth in labor hours due to certain hiring initiatives. Lastly, other operating costs as a percentage of total sales decreased 36 basis points compared to the prior year period, primarily due to the impact of the reclassification and lower costs associated with incentive compensation and general liability insurance. The decrease was partially offset by higher dining room supplies expense related to new to-go packaging, rolled out in late 2017. We currently expect other operating costs to be approximately $1.5 million to $2 million higher for the remainder of 2018 due to changes in to-go packaging.

Moving below restaurant margin, G&A cost as a percentage of revenue decreased 227 basis points or $10.1 million in the quarter. The $14.9 million pretax charge in the prior year period resulted in a 262 basis point improvement this quarter, which was partially offset by the increase related to the reclassification. Just a reminder, the G&A expense in the second quarter of 2018 will include the cost of our Annual Managing Partner Conference held in San Diego this year, which we expect will be approximately $2 million to $3 million higher than the prior year. Our 2019 conference will return to Florida, so cost will be lower next year. Depreciation expense increased $1.9 million year-over-year to $24.5 million or 3.9% as a percentage of revenue, which was a 7 basis point decline. Finally, our tax rate for the quarter came in at 13%, compared to the 26.5% rate in the prior year period. Our first quarter rate is lower than our full year tax rate guidance of 15% to 16% due to the impact of excess tax benefits recorded from a significant amount of equity compensation awards but that's during the period. Our balance sheet remain strong as we ended the quarter with $198 million in cash and $52 million in debt. In April, after the end of the first quarter, we used some of our cash to pay off our outstanding credit facility balance of $50 million. During the quarter, we generated $107 million in cash flow from operations, incurred capital expenditures of $35 million and paid dividends of $15 million. We continued to project capital expenditures of approximately $165 million to $175 million, excluding any cash used for franchise acquisition.

Now I'll turn the call over to Scott for final comments.

Thank you, Tonya. Our sales are off to a great start in 2018 with comp sales for the first 4 months of the year of 5.8% at our company restaurants. Our strong topline performance is definitely a credit to our operators and their persistence in sticking to the basics and their commitment to always getting better. In this quarter, the 407 Texas Roadhouse restaurants in our comparable restaurant sales base generated average weekly sales of almost $105,000, which is up 4.9% versus last year. Even more impressive, our 18 newest restaurants that are less than 6 months old, generated over $106,000 a week on average and the financial returns are in line with our expectations. No doubt, our operating performance has been pressured by continued labor inflation and investments. But we're confident that we're doing the right things for the long-term health and success of our brand. We believe that investing in staffing and in our people will take us to the next level in providing legendary food and service, which as always will position us for continued strong topline growth down the road. We all look forward to continuing to build upon the foundation that Kent started 25 years ago. As Kent said, it was great to be together at conference to celebrate not only our past successes but also what the future holds for our company. Special congratulations again to our Managing Partner of the Year, Dave Eubanks. And also, to Alex Marroquin of Bedford, Texas, who became our national meat-cutting champion for the third time, awesome job, Alex. Don, that concludes our opening -- prepared remarks. So please, open the line for questions.

(Operator Instructions) And we'll take our first question from Brian Bittner with Oppenheimer.

Couple of questions. Just first, are you just starting to see a big, kind of broad-based overall pickup in consumer behavior here as you're in the second quarter? Is there something else in April that's really helping drive this real strong 8.5% comp that you've been pointing us to?

Brian, this is Scott. Obviously, we're very happy with 8.5%, could it be some consumer pickup, we really don't know. Admittedly, we would tell you, we were lapping a month from last year, that was amongst one of our easiest comparisons, so that's probably part of it. But no doubt, we're thrilled with the sales that we're seeing.

Okay. Well, just -- second and last question, you talked on -- in your prepared comments, about upgrading your packaging for the to-go business, where are you guys on the to-go business as a percentage of sales now? And how fast is that business growing?

This is Kent. We're approximately 7% in to-go, whereas a year ago, we were like 6.2% and the year before that 5.7%.

We'll take our next question from David Tarantino with Baird.

Just a couple of questions on the margins. First Tonya, I think you mentioned something about other operating expense being up $1.5 million to $2 million for the rest of the year. Could you just clarify what you meant by that? Like what are you comparing that to? Is it what we saw in the first quarter? And is that for each quarter going forward, could you just clarify what you meant by that?

Well, there were a couple things going on in other operating costs. I'm not sure which one in it, there is a decrease expected, we had it in Q1. It was a decrease of about $1.5 million relating to the reclassifications that we made in conjunction with the new accounting guidance. So that was about a 20 basis point benefit on the other operating line. However, we are seeing an impact of the dining room, to-go supply is being up. And that -- I think that for the quarter probably ran about 10 basis points or so. And that's what we were talking about when we said, cost would be up for the remainder of the year. I think we said, $1.5 million to $2 million. So we're talking about -- if they were up in Q1 and we expect $1.5 million to $2 million through the rest of the year, primarily in Q2 and Q3 as we began that rollout in Q4 last year.

Okay, got it. And then, I guess, my broader question on the margin outlook is just the overall philosophy you're taking on price increases. I know that traffic result certainly speak for themselves, but I guess, at what point does it make sense to laying out a little bit more on pricing, given the inflation you're seeing? You had a great same-store sales in Q1, and the restaurant dollars per operating week were flat according to our map. So I guess, at what point does it, sort of, get frustrating for the operators to see flat profit with such strong same-store sales?

Well, David, this is Scott. As you know, because you've covered this for a long time, we view the approach to running the business as definitely a marathon and not a sprint. And so, we will continue to take pricing over time, we will continue to closely monitor our margins over time, we will continually closely monitor our -- the compensation of all of our operators and folks by our company over time. As Tonya mentioned and Kent mentioned I believe, we did just increase the compensation -- the base compensation for our managing partners, which is the first change ever. On that standpoint, obviously, their bonuses has grown quite a bit over the last 25 years as of the profits of our restaurants have grown. But certainly, we have adapted to their program and they've had significant increases in their compensation for many years now. So again, it's a marathon, not a sprint, we're going to continue to be very competitive on our pricing, that sort of got us here to this point, you don't dance with the one that bring you here. If somebody might have said that at somewhere else in the world, and that's what we're going to continue to do.

Fair enough. And just so I can confirm, there is no plans for further pricing actions for the rest of the year, so what you've done so far is what you expect in the balance of the year?

There are no plans currently.

We'll take our next question from John Glass with Morgan Stanley.

On your acceleration you experienced in April on sales, I know you talked about it being broad-based, but are there any clues as to what's happening either geographically, for example, or in menu mix? Or these new customers have never visited? Is it just your existing base coming more? Are there any clues that kind of give you a sense of what's changed in your business at least with respect to the consumer?

John, this is Kent. When I open my Christmas presents at Christmas, and I get something nicer than I expected, I'm just like happy to see it, so that's kind of where we're at.

Okay, I understand. And maybe, Tonya, for you. On the -- just want to be clear, on the $1.5 million to $2 million of incremental expenses on packaging. That's cumulative? Or is that per quarter that you were talking about?

That will be the -- for the remainder of the year. So Q2, Q3, part of Q4 is what we expect to see in addition to what we saw in Q1.

In total?

In total.

Correct. Okay. And then you talked about giving the managing partners a 10% raise. And that was part of reinvesting the tax, the benefits from tax reform. Is that what you're going to do? Or do you plan other similar investments in labor or something else along the way that you may be haven't decided on yet?

John, we're always looking at -- like any company, always looking at how we compensate our people, and the managing partner piece is something we've been talking about for a while, because that base fees hadn't changed for so long. There have been other things along the way that we've done to enhance their compensation program and this was just another step I guess in that journey. And certainly, the tax change helps with that this particular year amongst other things, but we've made other changes to other compensation for other management folks, both in our restaurants and outside of our restaurants. So it's kind of across the board. And there could be more coming, I don't think anything is big as this for the remainder of the year, likely not, for the most part, our situation is pretty set.

And this is Kent. And we had raised our service managers and kitchen managers last year. So we actually did that before we knew that this was going through.

We'll go next to Jeffrey Bernstein with Barclays.

Two questions. Just one, we haven't heard the name Bubba mentioned yet on this call. So I'm just wondering if there are any new learnings to move the needle more or I guess, less favorable as you think about growth of that brand over the long term as Texas Roadhouse potentially slows down?

Jeff, this is Scott. We're still on track to open possibly 7 Bubba's for the year. I can tell you that now that we've got 22, I believe, opened to date, we're starting to get a better track record of what the weekly sales are. And just as importantly -- more importantly, what the margins are, because part of the Bubba's story has always been that the margins were a bit higher than on the Roadhouse side, and they've proven to be quite a bit higher than on the Roadhouse side.

And so the returns have been pretty good on the Bubba's side. So we've had a pretty big variability in sales. On Bubba's, which we're still working on, trying to have a better understanding of that aspect of it but the margins have continued to be very strong on the Bubba's side. Now one thing that has been encouraging this year, is we started to see some positive momentum in Bubba's sales growth. So in the restaurants that we have open, we're starting to see a high percentage of those restaurants start to grow sales, some at a pretty high clip. So we'll continue to watch those very closely as we continue to open a handful of restaurants more this year, we'll see next year, not ready to give you a number, you don't know how many we're going to open next year, won't be a huge number. But certainly, we're very encouraged by the weekly sales trends and the growth that we're seeing in that concept.

That sounds quite encouraging. My other question was just around, well, the G&A this quarter. I'm just wondering, or how we're spending by G&A for the full year. I know there was some unusuals in the line from last year. But, like, it was up significantly if you strip that last year's unusual, just wondering what -- how you expect G&A to play out the remaining quarters of 2018, perhaps relative to revenue growth or however, you want to look at that?

Jeff, this is Tonya. If you look at G&A and you back out that $14.9 million, you do -- G&A was basically flat year-over-year. I think we'll see it, Q2 will be at a little bit higher than last year with the conference expenses I talked about, and then it will probably normalize in the back half of the year is what I would expect to see, so those are really the Q1 charge and the conference expense in Q2, I don't think if I probably call out related to 2018 being different.

I got it. And is there anything -- color to share on international, I know that doesn't get much discussion either, but it would seem like, I don't know, whether I'm interpreting it correctly that the international comps, perhaps, were weaker this quarter than they had been, I wasn't sure if there is anything unusual going on there?

Jeff, this is Scott again. So yes, our international continues to grow and we've already opened -- our partners have opened a couple of stores this year, we expect them to open a few more as the year goes on. We did open our first restaurant in Mexico this year. And -- but we are seeing -- most of our restaurants are in the Middle East. And certainly, the Middle Eastern economies have been hit pretty hard. And that has hit our sales. So we've had some tough sales trends in the Middle East. That said, our partner in the Middle East continues to develop restaurants, we're very happy with the concept, very bullish on the concept. So like we see a lot of times internationally, there tend to be some pretty numerous and sometimes big swings in economic momentum in various parts of the world that I think we just experienced that now. So we think it'll come back, it'll come back pretty strong, when it does.

We'll take our next question from Will Slabaugh with Stephens.

Well, I want to ask on real estate. I'm assuming you're getting well on to 2019 at this point, so I'm curious as we move toward the end of this year of 2018. Curious how's that shaping up? And then any glimpse in the 2019 would be helpful as well.

This is Kent. I've actually already approved 27 sites for next year, of which 9 are already in permitting, which is pretty early. So we feel very good about hitting around 30 again.

And then I want to ask you about a comment, I think Tonya you may have made about growth in labor hours due to hiring initiatives, is it simply just hiring more bodies to handle the incoming traffic that's picking up? Or is there something else going on in terms of initiatives inside of the stores?

Yes, it's a little bit more than that. So we've been really working with operators on making sure they feel comfortable with the number of servers they have on their bench and in their lineups. So in doing that, they're training more people, they're hiring a few more people to kind of get up to those levels of what that next sales goal is. So that's a piece of what's going on, and it's starting a piece of that growth in hours.

We'll go next to Jeff Farmer with Wells Fargo.

I might have missed it, I apologize. But did you guys make any comments on Easter, whether or not that impacted the April number at all?

No, there was no impact from Easter. It was all in our April period and no impact.

Okay. And then as of the first quarter, that 130 basis points of pressure on the labor line. As we think about 2Q, 3Q, 4Q, is it reasonable to think that we could see 3 more quarters of a similar level of labor pressure?

Yes, I think so, Jeff, I mean, if you look at the inflation numbers, mid-single digit kind of incorporates that. You can kind of lands within that range and get to something pretty similar. I think the difference will be the amount of traffic there is to offset that any benefit we get from traffic growth to help offset a little bit of that.

Okay. And then last question. Following up on the couple of other questions that were asking about the same-store sale strength. One of your casual dining periods noted last week that some of the credit card data they've been looking at suggested that the middle-income consumer was finally increasing their casual dining spending, so was it -- a super specific comment. But I'm just curious, if you have any data or even internal customer data that suggests something similar where that middle-income consumer is finally beginning to increase their frequency?

Jeff, this is Scott. We don't have any of that data. We're not -- like Kent said, we're just happy to feel like all the effort we're putting into the business and executing the basics continues to get people to come back.

We'll go next to Peter Saleh with BTIG.

I just wanted to ask about the labor line. I know last year, you had made some investments in the hiring process to try and reduce the labor turnover. Where do you stand on labor turnover? And are you seeing any of those investments kind of bear out some fruit?

Peter, this is Scott. Well, later -- labor turnover is up a little bit for us, not a whole lot year-over-year. I mean some of that is partially just the economy and law and employment. And so part of it we know, it takes a while for some of these actions that we're taking, meaning accelerating or hiring for those to pay off. So what I mean by that is, when you are in a position of strength, which means you're fully staffed, even more than fully staffed. You have an opportunity to let go some of your underperformers, it's easier for you to have performance management when you're fully staffed and when you're not, so that's part of it. Secondarily, when we're so busy and we're hiring a lot of people and there's a really good economy some of our people find we're just a hard place to work at because we're so busy. So there is, as we're hiring so many people, some will work out, some won't. And it's a continual process for us to keep banging away at it until we get an overall average stronger team and stronger bench at each restaurant.

Okay, great. And then just last question for me on commodities. How much of your basket is contracted at this point, given now that you've raised the inflation target just slightly?

Yes, we are at lock on about -- I think it's about 50%, maybe 50% to 65% of our basket is locked up on price, that's the whole basket.

Sorry, you said 50% to 60%?

Yes.

We'll take our next question from Karen Holthouse with Goldman Sachs.

Could you just -- on the manager's salary increase, is that something that was fully in effect this quarter? Or something we should think about as, sort of, incremental to the cost line just going forward?

No, it was effective at the beginning of the year, so it was in effect the whole time -- the whole quarter.

And then, I apologize as I've missed it, but what was the per hour labor inflation this quarter?

The per store week?

You'd usually given a number that's -- like the average increase in hourly wages?

The average increase in hourly wages was about 3.3% on a weighted basis.

We'll go next to Andrew Strelzik with BMO Capital Markets.

I actually have 2. First, on the change in the commodities -- the food basket guidance. What was the driver of the increase there, it looks like the underlying commodities have actually been trending pretty favorably, so is that freight or is that just the underlying commodity driving that? Number one. Number two, kind of a broader question on labor additions, particularly on the headcount side, is there an upper bounds to headcount additions where even if you're growing traffic you feel like you're optimally staffed. And you would just -- not see the additional headcount come on? Maybe you're seeing that on some of your higher volume units, just wondering, how you're thinking about on that side?

Sure, Andrew, this is Tonya. On your commodity cost question, the primary change was on the beef line. So we walked up a bit more on our beef and decide uptick just a little bit, which moved from relatively flat -- moved our guidance from relatively flat to 1%. So outside of the rest of the basket, the rest of the basket stayed pretty benign, it was really more on the beef side.

And this is Scott, on the labor part, I would say, I'm not so sure we figured out what the upper bound is, because we haven't figured out what the upper bound of our sales are yet. And certainly, the more guest we serve, you've got to have the people to serve them. Certainly, the kitchen would be tougher to fit more bodies in the kitchen, no doubt. But out-front, certainly, we could always use more folks and even though, we had a basically 3-table station model, a number of our folks will do 2-table stations at certain times. So -- and there's always a need for more hosts and busters and food runners and so forth. And so I'm not sure there is an upper bound to it. But no doubt, we would expect beyond the staffing initiatives and general inflation and wage rates to get labor efficiencies as our sales grow over time.

So I guess, are you adding labor hours at the same rate in your highest volume units as you are in kind of your average unit?

We're challenging all of our restaurants to add any volume to add labor. So it's not a high volume, you're doing it, you're where you need to be exactly, low volume, you're not where you need to be. It's everybody -- just about everybody has an opportunity to increase the levels of their staffing to build a stronger bench and be in a greater position of strength to manage their respective teams.

This is Kent. We found that our stores that have over a certain level of servers, on the high end, have stronger comps than those that have seen amount of servers on the low end, which have lesser comps, so that basically tells you that when you're properly staffed, life looks a little better.

We'll go next to Stephen Anderson with Maxim Group.

Thank you for answering most of my questions. I do have one of a follow-up question. Recently, of course, you talked about you're basically still doing a few bump outs but most of them in the dollar rate, but wanted to also ask about some of the changes in the kitchen, you talked some of the changes maybe we can figure out in some case scenarios, so just want to talk about that?

Yes, I'm not sure I understand the question. Well, we -- in the past, we debated bumping out some kitchens, we haven't done really that per se, we've had a few folks, have done some bump outs where they have added more storage space both refrigerated and unrefrigerated storage base, more grill space, that kind of things, we haven't done very much of that. We're still doing a number of bump outs though. I think, we're still doing anywhere from 15 to 25 a year, basically depending upon permitting and just general approvals and get them done. We're still occasionally buying more parking for our restaurants, we've done one reload this year already. So we're still doing some of those other things. But we have no big plan on back a house or kitchen expansions.

Now in terms of like they're trying to optimize the space you already have, I mean has it -- have used a bit or maybe changing some of the equipment that you're using to maybe get some more efficiency in the kitchens?

This is Kent. Basically, we've found that we have a push and a pull in our kitchen, and we just reallocated some of the duties to those people and added up third body in that role, and that's how we've been able to maximize kitchen efficiency.

Yes, the other thing too, just for everybody as we have -- some of our restaurants have added some to-go rooms, so they've done sort of very small bump out where they've added a dedicated to-go rooms that are off the main drag, I'll call it where our host area is.

(Operator Instructions) We'll go next to John Ivankoe with JP Morgan.

I was hoping for a little bit of insight on, I guess, the beef market generally and the state market more specifically, just in terms of what you see from new supply that's coming on the market looking at the features curve, what have you -- as you look at, what you're currently paying relative to what you could be paying maybe 6 and 12 months from now, understanding that some of this is contracted. I mean, what do you think the general outlook is for the beef market is, let's just say over the next 18 months or so?

John, this is Scott. I would -- we're not prepared for competitive and other reasons to get too specific on the beef markets. I'll just say this, that we feel that the beef markets are in pretty good shape, and we're not very concerned about beef-related issues going into the remainder of this year and into next year at this point, granted it's only the end of April, so there's a long ways to go in this particular year. But we're more concerned if anything, we just don't take the next day sales for granted. And we're always more concerned about our guest counts and keeping our folks coming into the restaurants every day.

And I do understand that, but there is an amount of cows, for example, that are on pasture before they come into the feed loss, so just -- maybe if you can just educate us overall just in terms of -- if you can, what do you think the propensity of steak cost are up or down? Can you help us with that?

I wouldn't tell you right now that there's anything that's making us think they would be materially up or materially down at this point right now. It's just, again, 8 months before beginning of the year, there's a lot of different things that can happen, and we talk to a number of suppliers. And again, for competitive reasons that's all on the liberty to discuss at this point.

We'll take our next question from Chris O'Cull with Stifel.

Tonya, was the increase in the commodity price inflation guidance caused by what you experienced in the first quarter? Or an expectation that it's going to be higher prices going forward? And I know that the quarterly commodity inflation can vary based on what you paid last year and what you're floating? So can you give us any color on what we should be expecting on a quarterly basis as well?

Chris, I would tell you it's a little bit of both -- it was a little bit higher in Q1 than we would've expected, not too significant. And then some of the costs that we ended up locking up for some of the remainder of the year were perhaps a little bit -- maybe a little bit higher than maybe what we were locked at last year. So again, nothing overly significant, I know it's relatively flat to 1%, seems like a big change. But at the end of the day, relatively flat, there's some rounding going on and things like that. So it just wasn't that big of a change for us, nothing that was -- you could hang a hat on one certain thing that was driving it.

Any color on quarterly? What we should expect quarterly?

I think quarterly it stays pretty consistent if I remember off the top of my head. I think it's just pretty consistent throughout the year. It may be a little bit higher in Q2, but otherwise I think, it's pretty consistent throughout the year.

And then lastly, could you remind us and I apologize if I missed this, what the average price increase was in the first quarter and what we should expect now that you've taken the last one of the year for each of remaining quarters?

Sure. So we had pricing at about 1% in the menu this quarter. So there was about 13 basis points, 10 basis points of negative next to get to the 90 basis point check number. And then Q2 will be of the highest quarter of the year, we think that will come in about 1.3%, because you have the amount rolling off in May. So you get the benefit of that for a little bit of time. And then it'll drop more like to back to 1% Q3, Q4. And then pretty much a 1% number, maybe a little 1.1% on a full year basis.

We'll take our next question from Andy Barish with Jefferies.

One clarification and then just one financial question on the labor side, Tonya, I thought you had mentioned that wages were up close to 5% and hours were up 3-ish percent. I just wanted to make sure that was the case. And then the second question is, on the franchise fee royalty and fee number kind of popped up about $1 million, kind of the first time I've seen it over $5 million is -- did that have something to do with any of the revenue rep changes or anything else going on in that line we should be aware of?

Yes, so on the first question, Andy, wage and other inflation, so kind of all inflation on that labor line weighing about 4.7%. So that had about 3.3% wage inflation in it, there was about 70 basis point relating to the increase in the managing partner compensation. And then the reps was kind of like other lines, group insurance, things like that being up a bit this year over last. So that's the components of that. And then on the other revenue line, yes, that would've been -- it wasn't -- there was some reclassifications and things made in conjunction with the revenue guidance. So that's what caused that to be up. We raised -- I think, there was about a $0.7 million increase in that other revenue line relating to the revenue reps implementation.

I know it's small but does that continue as well through the year at higher levels?

We expected to be pretty similar throughout the year. We're not overly franchised, so we don't have quite the pop maybe you've heard others talk about, it's pretty nominal.

We'll go now to Brian Vaccaro with Raymond James.

Unless mine has been asked, but I just wanted to circle back on the quarter-to-date strength and someone suggested that the shifts may be in school or in spring break calendars may have benefited the industry. So I guess just wanted to ask beyond just the day of Easter, do you think this has been a benefit or have you seen broader may be more stable strength through the quarter-to-date?

Brian, this is Tonya. We really thought across all weeks, it wasn't something that you really saw one week or the other, a day of the week pops, that we didn't really see that. I think part of it is just, again, operators doing the right things and we're happy about that. And as Scott mentioned, when you look at our comps last year, it was one of the easier compares.

Okay. And then on the Bubba's, you talked about sales, I think it was in recent months or maybe it was in the last couple of quarters, Scott, you were referencing, but you said, you're encouraged by sort of the existing store sales were encouraged. I guess, what do you attribute that to? Is that just time in the market for awareness to build? Or are there specific initiatives on local marketing? Or getting the right managers in the stores? What do you attribute that strength to?

This is Kent. I think as we found with Roadhouse over the years that, like you'd already mentioned that the longer you are in a market the more the comps tend be more positive.

We'll go next to Robert Derrington with Telsey Group.

Scott, a lot of times we get into trouble looking at 2-year same-store sales trends. And April, I guess, last year was your weakest month of the quarter, up 2.6%. But still on a 2-year basis, it looks like comp trends for the month of April on a 2-year were up 11.1%. Is there any reason why we shouldn't think in terms of that directionally being a 2-year trend as we go through the balance of the year?

Well, I certainly hope so. But we're not changing anything at what we're doing except we hope to continue to execute at a better level each and every day, I know that just sounds kind of big chase I guess but that's kind of what we talk about is just trying to get better and better. And take care of our guest and take care of our people, just the basics, blocking and tackling every day and it's really nothing more than that. And just staying on top of it and keep grinding and just bringing people back in. You got to ask a lot of questions about pricing. I mean, this is one of those things that why we're so aggressive on our pricing, and people ask us about how much pricing power do we have and all this. And we kind of don't really talk about in terms of pricing power. We just say what's -- what we think is part of bringing the guest back. And it's all these little pieces add up to this deal where we get people to come in.

Is there anything within the menu that -- as you look out towards the balance of the year that we should think about either having a positive or negative move on the check average mix?

By the way, this is Kent. I think as our competitors continue to maybe shave a little labor here and there and we don't. I think that might be helping us in our various locations.

And Bob, on the menu, there's nothing on the menu that we would tell you is a big deal.

Yes, we do have the smaller -- the 2 smaller portions that we added in May. So we'll add that in May, so I wouldn't be surprised to see the negative -- the negative mix maybe climb a little bit, maybe back to 20, 30 basis points. But outside of that, nothing that I would point out.

(Operator Instructions) We'll take our next question from Brett Levy with Deutsche Bank.

If we could talk a little bit about -- you've done a great job in terms of driving sales and as you've proven, you were definitely a place that people want to work. If we turn the -- turn from the people side to the tech side, are there more things that you can do either in equipment, or beyond just the front-of-house table management, other areas of technology where maybe you can help to drive up some efficiencies or maybe drive down some costs?

This is Kent. One example would be our online to-go, our app to do -- to-go. A year ago, that represented 6% of our to-go orders, and today, it's 22% of our to-go orders, and 2 years ago, it was 0. So that's one initiative that's scored pretty well for us.

Brett, this is Scott. Probably, the biggest item that I think maybe is a little different with Texas Roadhouse than some other chains would be kitchen display systems. And our folks at Roadhouse, almost overwhelmingly, when we asked them about that it would rather stay with our existing ticket system. And many of them have come from environments where there were kitchen display system. So they're like a ticket system, so we're not pushing it on the kitchen display but that would probably be the single biggest thing in the back of house that might be different now. I wouldn't be surprised if you saw us digitize a lot of our recipes and training materials. Because so much of our food is so recipe-detailed intensive, it continues to be so to this day and have those materials or those TV screens would have you on the various locations in the back of house. I could see that happening for some of the technology perspective. But we already do -- we already have guest management system in the front. We've experimented a little bit with pay at the table. I'm sure we'll continue to experiment with -- on that front but some type of device of some sort of that maybe the server brings it to the table, maybe not. I don't necessarily see us doing tablets on tables, I don't see that happening for us, and we've been down that road once before. But you never know.

And we also use HotSchedules, which is a big benefit for our folks at workforce.

Yes, we use the HotSchedules and I think a lot of folks, other restaurant companies use that same product and particularly a lot of the hourly employees love using it because they can access a lot of their schedules on their phones and communicate to the management teams through their phones. So there's a lot that we do. I wouldn't say that we are uneducated in any way, shape or form. We stay very educated, very close to what's going on and typically, when vendors ask us if they can come talk to us about almost anything, we invite them to come in and come talk to us and tell their stories. So we don't just refuse to see anybody. We're very open-minded.

That concludes today's question-and-answer session. At this time, I'll turn the conference back to Tonya Robinson for any closing remarks.

I just want to say, thanks everybody for joining us tonight. If you have any other questions, please feel free to reach out. Have a great night.

This does conclude today's conference. Thank you for your participation. You may now disconnect.