Texas Roadhouse Inc (TXRH) 2022 Q2 法說會逐字稿

Good evening, and welcome to the Texas Roadhouse Second Quarter Earnings Conference Call. Today's call is being recorded.

(Operator Instructions)

I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse. You may begin your conference.

Thank you, Emma, and good evening, everyone. By now, you should have access to our earnings release for the second quarter ended June 28, 2022. It may also be found on our website at texasroadhouse.com in the Investors 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. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements, including factors related to the COVID-19 pandemic.

In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions.

Now I'd like to turn the call over to Jerry.

Thanks, Tonya, and good evening. We are pleased with our second quarter results driven by impressive sales at our concepts. For the quarter, our restaurants averaged over $135,000 in sales per week. It was great to see that dine-in guest counts at comparable restaurants remained above both 2021 and 2019 levels throughout the quarter. It was also encouraging that our restaurants still averaged nearly $18,000 per week in to-go sales, seeing our operators generating these sales volumes both in the dining room and in to-go is why our enthusiasm for the future remains as high as ever.

In the second quarter, we saw a return to our historical seasonal sales trends, which we did not have in 2020 or 2021. As a result, we experienced a slight decline in our year-over-year total traffic as the increase in our dine-in discounts was offset by a decrease in the to-go guests. We do not believe this reflects a change in overall demand for our restaurants rather it appears that more people are getting back to their normal routines when it comes to dining habits, work schedules and vacations.

Additionally, we believe that sales and traffic performance that we saw in the first 4 weeks of the third quarter supports a continuation of this trend. Despite the decline in second quarter to-go traffic, we remain confident in our ability to execute a successful To-Go business. As our To-Go sales are settling in well above our pre-pandemic levels, we are investing in several digital and development initiatives to improve our overall long-term execution and ensure our To-Go guest receive the same legendary food and legendary service that our dining guests receive. At this time, we are evaluating our October menu pricing. As always, we will stick to our tried and true process of gathering feedback from our operators and listening to what they believe is right for their restaurants.

We are pleased that we have not seen any signs of guest pushback or negative mix from the price increases that we have taken over the last 12 months. This menu price acceptance by the guest is important because our value proposition has been and always will be one of our key differentiators. So we expect to be cautious when it comes to menu pricing, especially at a time when the consumer is feeling inflationary pressures.

On the development front, we opened 4 company-owned Texas Roadhouses and one Bubba's 33 during the second quarter, and we have already opened an additional 2 Texas Roadhouses in July. We remain on track to open approximately 25 company-owned Texas Roadhouse and Bubba's 33 restaurants this year, with all remaining unopened restaurants currently under construction.

It is worth noting that any construction or supply chain delays could push a few of them into early next year. We also expect to open 2 company-owned Jaggers and our first Jaggers franchise restaurant later this year. Lastly, our international franchise partners are on track to open 6 restaurants in 2022. Our new Texas Roadhouse restaurants continue to open with high sales and guest counts and are holding on to these volumes. The restaurants that we have opened this year and the majority of the restaurants that we expect to open going forward are larger buildings. These new prototypes are being built with a similar number of seats but more storage and cooler space in the kitchen as well as a more dedicated To-Go area. This will better support the volumes and the mix of business that we expect going forward.

While the added square footage is pushing development costs higher, our returns remain comfortably above our target due to the strong sales of these restaurants. As I said at the beginning, we are excited for the future of all 3 of our restaurant concepts. They are each at different stages of development, but combined, they provide us with a long runway for future sales and profit growth.

Now Tonya will provide a financial update.

Thanks, Jerry. For the second quarter of 2022, our revenues increased 14% compared to last year, primarily driven by store week growth of 6.4% and an increase in average unit volume of 7.4%. Restaurant margin dollars grew 6.6% to $168.7 million and net income decreased 4.1% to $72.4 million or $1.07 per diluted share. The repurchase of 2.7 million shares of stock during the first half of the year benefited EPS, offsetting most of the percentage decline in net income. For the quarter, comparable restaurant sales increased 7.6% driven by 8.4% average check growth. While guest traffic declined 0.8% overall, dining room traffic was up 3.8%.

Check growth includes positive mix of 1%, driven by year-over-year improvement in the percentage of guests choosing to dine-in as well as all guests continuing to order higher-priced entree. As Jerry mentioned, our restaurants averaged $135,000 in weekly sales in the second quarter and to-go represented approximately $17,800 or 13.1% of these total weekly sales.

While our To-Go percentage declined throughout the quarter, we are comfortable knowing that part of this decline was driven by a year-over-year increase in the number of guests dining in our restaurants. By month, comparable sales grew 8.7%, 9.6% and 5.2% for our April, May and June periods, respectively. And comparable sales for the first 4 weeks of the third quarter were up 3.9% as compared to the same period in 2021. While the comp percentages softened in June and July, we believe this is more a function of the guest count trends that we are lapping from last year rather than a significant change in the level of sequential guest demand this year.

This belief is supported by our 3-year comparable sales trends, which increased at a consistent rate of approximately 30% throughout the second quarter and July. For the second quarter, restaurant margin as a percentage of total sales was 16.6%, down 116 basis points as compared to the second quarter of 2021. We also focused on restaurant margin dollars per store week, which were approximately $22,400, up 0.3% as compared to Q2 2021.

Food and beverage costs as a percentage of total sales were 34.1% for the second quarter, up 98 basis points compared to 2021. Commodity inflation of 11.8% was the primary driver of the increase and was better than we expected as we benefited from lower beef prices later in the quarter. We have updated our full year commodity inflation guidance to approximately 12% with roughly 75% and 30% of our commodity basket secured with fixed prices for the third and fourth quarters, respectively. While spot prices for beef have been declining, our current expectation includes some elevation in beef costs in the fourth quarter.

Labor as a percentage of total sales increased 43 basis points to 32.7% as compared to Q2 2021, while labor dollars per store week increased 8.7%. This increase in labor dollars per store week was driven by wage and other labor inflation of 7.7% and growth in hours of 2.3%. These increases were partially offset by lapping $1.9 million of additional bonus and COVID-related payments to our restaurant employees as well as the $1.6 million net benefit of adjustments to the reserves related to our workers' comp and group insurance programs.

The reserve adjustments include a $0.8 million favorable adjustment this year and a $0.8 million unfavorable adjustment last year. Based on current trends, we have increased our full year wage and other inflation expectations to approximately 8%.

Other operating costs were 15% of sales, which was 21 basis points lower compared to Q2 2021. The year-over-year benefit comes from sales leverage due to higher average unit volumes partially offset by higher costs in areas such as utilities, credit card charges and repairs and maintenance expense.

Moving below restaurant margin, G&A grew year-over-year by 33.5% and came in at 4.8% of revenue. The $12.4 million growth in year-over-year G&A spend was primarily driven by costs associated with our managing partner conference that was held in April of this year. For comparative purposes, we incurred cost of approximately $8 million in total this quarter versus approximately $3 million for the abbreviated conference in the third quarter of last year.

Our effective tax rate was 13.4% for the second quarter as we continue to benefit from higher FICA tip credit. As such, we have lowered our full year 2022 tax rate expectation from approximately 15% to approximately 14%.

With regards to cash flow, we ended the second quarter with $180 million of cash, which is down $145 million from the end of the first quarter. Cash flow from operations of $111 million was more than offset by $60 million of capital expenditures, $31 million of dividend payments, $25 million of debt repayment and $128 million of share repurchases. We also acquired one franchise restaurant for $6.6 million. We continue to expect full year 2022 capital expenditures will be approximately $230 million. With the addition of the 1.7 million shares that we repurchased in the second quarter, we have now repurchased over 2.7 million shares of stock for $212.9 million this year. At the end of the second quarter, we have approximately $167 million remaining under our share repurchase program.

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

Thanks, Tonya. We are fully aware that discretionary spending is being impacted by higher prices. But history shows that during times like these, Texas Roadhouse's incredible value positions us to come through this period with increased guest satisfaction and a larger and more loyal following. As we move into the back half of the year and plan for next year, we will, first and foremost, remain focused on our legendary food and our legendary service. We will remain fanatical about maintaining both our heaping sides and our made-from-scratch food. We will also continue to ensure that our restaurants are properly staffed with friendly and attentive Roadies in order to meet all our guests' needs.

In closing, I want to thank our managing partners and their teams and also our loyal guests who drove our quarterly sales to over $1 billion for the first time in our history. We are highly confident in our operators and their ability to continue delivering strong operational results and that performance, along with a smart and disciplined capital allocation approach will create continued growth opportunities for our Roadies and position us to create additional value for shareholders over time.

Operator, please open the lines for questions.

(Operator Instructions)

Your first question comes from the line of Brian Bittner with Oppenheimer.

I wanted to ask about the cost side of the equation. It seems as though your food cost outlook is getting a little bit better than you originally were thinking when you talked to us last quarter, and that seems to be the other way around relative to your peers and how they're communicating. So I guess the exposure to beef in the near term is helping but you said you expect it to spike again in the fourth quarter. So can you talk to us about how that frames, how you're thinking about beef for 2023 on the cost side? And the follow-up to that, I'll just ask now, is we saw your COGS margin sequentially improved from the first quarter, which was nice to see. How do you want us to think about the trend in your COGS margin moving forward?

Sure. Thanks, Brian. Yes, we did -- we were able to moderate that guidance on commodities for the full year down to 12%, which felt really good. And a lot of it was driven by the fact that we were seeing beef costs soften across the second quarter. So that felt really great to see, especially after those prices spiking the way they did in Q3 and Q4. Some of that was offset too just by higher commodity prices across the basket and I think that's what you're hearing a lot of other folks talking about right now that maybe haven't experienced beef inflation are just those other line items.

We're seeing it in other proteins like pork, chicken, we're seeing on potatoes, some dairy items, bread mix, oil, things like that. It truly is spread across the basket pretty evenly. So as we look at it through the remainder of 2022, so we did think about what beef prices might be. And as we said, 70% locked on prices in Q3, only 30% locked in Q4. So there is so much risk there, some uncertainty, could go either way, but just as we're hearing about beef supply potential issues on beef cattle supply, how farmers are taking a lot of cattle to feedlots right now and things like that. We're kind of expecting there could be some -- that could just create some pressure maybe later on in Q4.

So it still remains to be seen, but that's kind of how we're thinking of it. And I can't really give you a lot of outlook into 2023 on beef than to say a lot will depend on what that beef supply looks like, how that plays out in 2023, what the timing is. Obviously, as you all know, if supplies get restricted, that can have an impact. So we'll see kind of what happens going forward.

An then I think the last question -- part of your question, Brian, was just about margin percent, especially on the COGS line heading into the back half of the year. And I'll tell, you would expect them to continue to be a little higher, much like they were last year. COGS kind of went up last year. We're coming off of those numbers and would expect to see still some pressure on that COGS line. in the back half of the year compared to maybe what we felt so far this year, is kind of the way we're looking at it. We do have a little bit of beef deflation in Q3, but we expect that to kind of flip back around in Q4.

Your next question comes from the line of Jared Garber with Goldman Sachs.

Actually kind of follows Brian's line of questioning, but more on the pricing side. Jerry, you mentioned that you're assessing your typical third quarter price increase and those conversations that you always have with your operators. It sounded like you're taking a little bit more of a measured approach just as we think about the consumer being pressured a bit more broadly with inflation. So can you just give us a little bit more color on what the conversations with the operators are like right now and how your customer may be positioned towards the back half of the year to absorb another round of price increases? Or is there a reason you're thinking that maybe -- it might be time to pump the brakes on the incremental pricing?

Yes. I think we will go into it from our side with a conservative approach as we have in the past. We will hear from our operators and see where the folks in our category are at and then really try to make the best decision that we can for our business. and for our consumer. And so we're -- like you said, we're in the early stages. We've obviously shown in the past 2 that we'll do what we have to do if we feel like it's the right thing that balances the business. And -- but we will go into it with a conservative approach and see how these next 60 days kind of shake out once we hear from everybody, and we have the data and we see where our costs are at and then try to make the best decision possible for both parties.

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

A couple of questions on the sales trends. If I look at your performance, it's holding up very well relative to what we're seeing elsewhere. And I guess my question is, are you seeing anything under the surface in your business that would make you concerned about your consumer or at least the health of your consumer at this point? I know there's a lot of cross-current. So wondering if you're seeing any signs, either trade down or otherwise that might give you a little pause at this point?

I mean I would tell you, from an operations standpoint, we really haven't -- like we said, it really has felt like we've got back to a more seasonal process. We're here at the end of July, knowing that in the next 2 to 3 weeks, people will be going back to school and changing a little bit of their routine. But I think the work habits and the vacations, it seems to have been kind of getting back to normal almost in some aspects.

So from that, obviously, the demand is still very high, which is great for us. The dining rooms are full and the consumer continues to be very hungry for our made-from-scratch and our hospitality in the restaurant. So we feel good from that aspect. Like you said, the demand is high for us, which is exciting.

I think, too, David, I'll tell you, at times the percentages can be a bit misleading because of what the noise and the cross-current as you mentioned. And when you look at average weekly sales dollars, it again, like Jerry mentioned, it just gives you some confidence because you see those continuing to grow year-over-year. So from that perspective, it feels good. And we see mix, we saw mix moderate a bit. That was a little bit more from the shift back into the dining room a bit more and to go on being down a little bit more as you would have expected. So we still got a little bit of benefit on a mix from that, but the expectation would be -- and we kind of saw it in [P6 and P7] that the mix is moderating even a little bit more, staying positive, but it's behaving as we would have expected, and we're not really seeing anything that would lead us to believe pricing isn't flowing through or that the consumer is changing their behavior.

Good to hear. And then, Jerry, my follow-up is related to this, you were CEO the last time we had a major kind of prolonged downturn in consumer spending. So I was curious just to hear your philosophy on how you would approach a downturn if we got one. Certainly, there's a lot of concerns about that environment. So just wanted to hear your thoughts on what you would do differently or not do differently if you were to get that scenario?

Yes. And I said that the thing that -- so when it did happen, I was actually a market partner running a dozen restaurants in the state of Texas. And so I saw that we stayed true to our made-from-scratch, our heaping sides, our friendly service, our -- so as long as I know that we're going to deliver on our promise, and we're going to do the things that we were born to do kind of thing. And that is to provide every guest that walks through our door with the best value, the best plate of food, the friendliest place and an experience that they will feel good about. And that's when you really have to earn it their business is when things are tough. Because when they're -- when the money is tight, they're really thinking about where to spend their money. So we really have to overdeliver on the experience so that it's worth it to them.

And I think our strategy will always be to exceed our guests' expectations. We'll have to continue to look at our cost controls. Our menu has many items, I would refer to them almost as country dinners that are very value-oriented to our consumers. So we built that into the menu from the very beginning and to focus on those items that are extreme good portion sizes and great value.

So I think we'll just continue to do the things that we do and try to overdeliver on the promise. But I don't want to get into any kind of shrinkage or a reduction of our plate and -- but I think we can focus on our value-driven menu items if we really need to go push that harder. But -- so we will overcome it. We will fight the fight and we will earn the business from our consumer.

Your next question comes from the line of Chris O'Cull with Stifel.

Jerry, you mentioned that a return to normal seasonality this summer has affected traffic. And there's been a debate as to whether seasonality or consumers choosing to spend less are the reasons for the weaker industry sales for the past several weeks. But what gives you confidence that slowdown you're seeing relates to a return to normal summer seasonality versus not having that last year? And then should we see an improvement in comp performance as school begins as we start to have like-for-like seasonal patterns, I guess?

Well, I think we -- if we go back and compare to what would be a normal year, which has been a while, typically, when school goes back in, or week days soften up and our weekends get busier. And I guess that's what we've been kind of studying over the summer is that we've actually seen both the weekdays and the weekends maintaining and holding, although a slight reduction, typically your flip, your weekends get a little softer during the summer because people are out enjoying late time and different things like that.

So we have -- it's kind of hard to really -- are we completely back to normal? I wouldn't say that. But it will be interesting to see as we go back to the school year this year with I would think most everybody 100% back in classroom. And will the consumers' routines get back to more of a normal trend? So it is to be determined, I guess, at this time, but I do know that typically, you see a softening of sales in August, September, October a little bit because of the school transition, but we've always continued to be positive sales growth over the past. So -- and we're lapping some pretty big numbers from that standpoint. So I think the big number for the average weekly sales tells us a lot. More importantly, as there's a huge demand, and we just got to live up to the expectation.

I think, too, Chris, if you look, we mentioned that 3-year stack number to kind of comparing back to 2019, which maybe was more normal, and you see a lot of consistency in that number. And so through [P7], if you assume that continues in the back half of the year, that can give you some confidence on what comps continue to be in the back half of the year. So some of it, you are losing a bit of check. Still we had that 4.1% price increase that we took in late October of '21. So some will depend on what rolls back in from the pricing conversations that we have. And we do expect mix to kind of moderate a little more in that flattish area in the back half of the year. And then it really just all comes down to traffic.

Okay. That's helpful. And then just another question, Tonya. The 10-Q last quarter stated the company expects the average investment to build and to build and open a Texas Roadhouse location this year is going to be about $1 million higher than what we spent last year. Is the company planning for this higher level of investment to continue into '23? Or are you considering changes to the prototype or something else to help reduce the investment?

Well, there's kind of a couple of things going on in that increase. You've got -- the larger prototype is a piece of it. But then there also just the inflation that we're feeling right now on equipment, building costs, labor, all of those things. So there would be some expectation that those numbers would come down as we get through that inflationary cycle and see that perhaps come back down a little bit would be the hope. We're always looking for ways there to control those costs and manage those deals, things like that. We're looking for the best deal on rent, we're looking for all of those things. But really, right now, it's really driven by inflation more than anything else.

Yes, on the Roadhouse side, the Bubba's, I think, were probably digging a little deeper on things that we could do to maybe bring some of those construction costs down. We've got a few initiatives that we're really trying to see. And I think we've got a few restaurants right now that we have opened with a couple of the initiatives, but we anticipate by the end of the year, the full package of initiatives to reduce some of that without really changing the building will be in pack.

And so then we'll know. Right now, Bubba's hasn't increased any which we've been able to kind of chew up the inflation on that cost and we'll continue to look at it and then hope for maybe some reduction in pricing as we go down that road on it. But -- so a couple of more things on the Bubba side, probably more than Roadhouse when it comes to the building change or being able to pull some costs out.

Your next question comes from the line of Jeffrey Bernstein with Barclays.

Great. First question was from the restaurant margin for the back half of the year. It seems like you have a pretty good line of sight into commodities with your tempered expectation and on the flip side, maybe a little bit more labor. And other than the pricing, which is unknown, but how do you think about restaurant margins for the second half of the year? Do you have intention to return to a certain target or better yet, just what's your expectation for the back half on that blend of all those puts and takes?

Sure. I think as we see sales return to some normal seasonality, I think margins kind of go that way too. And Q3 and Q4 are typically some of our lowest margin quarters. So I think there's kind of that starting point for the rest -- the back half of '22. And then a lot just depends on where some of these inputs land. You're continuing -- besides commodity and labor, you're continuing to see costs going up in the other operating line, utility costs, those types of things continue to rise. And I could see that, that continues to be an impact in the back half of the year. And where we land on pricing has an impact on what margins might look like and how traffic fits into that. So I think there's still a lot of moving pieces to it. .

I think margins are going to be pressured in the back half of the year, and we're going to see that continue. And so we'll just see kind of how that plays out. I still feel good, Jeff, to your point on being able to get back to 17 to 18 percent margin; that's always our goal. At some point in time, a lot of that expectation of when that happens, it's just going to be driven by the commodity outlook and labor outlook and what sales continue to look like and feels like that. I don't know if that will be a '23 possibility. It will be great if it is, but that is still definitely a goal and we think it's achievable.

Understood. And then just a follow-up. Jerry, you took the restaurant pipeline and feeling pretty good that all things are under construction, but a couple could slip, I guess, into '23, which is totally reasonable. But as you think more broadly about '23, have you seen additional available real estate that intrigue you, maybe there would be an uptick from the 25 openings between Texas and Bubba's? Or are you kind of keen to kind of stay more in that mid-20s rather than pushing 30 or higher, I'm just wondering what your early thoughts are? I know you don't have all things signed and delivered, but just your thoughts on unit openings in '23?

Yes. I would tell you the pipeline looks pretty solid. I would tell you, we'd be higher than -- right now, it looks very optimistic. We have quite a bit prepped up and ready and not including if anything, from 22 pushes. So we're focused on trying to get to that higher end in '23. There have been some really good deals out there where our guys have been working really hard to bring us some opportunities. So I feel very optimistic that -- and like you said, it's a little bit more expensive to do business. But as far as the real estate availability and where we want to go, it's available out there, and we're being aggressive on it. I can tell you that.

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

I want to come back to the conversation around consumers and the behavior there. I think in the past, maybe several quarters or so, you were seeing consumers still trading up from some of the smaller stakes to larger stakes. Just wondering if you're still seeing that or if you're seeing any signs of check management at all. Reduction in appetizers, drinks, desserts; anything of that sort would be helpful?

Yes, you are still seeing that a little bit, Peter, on the entrees. You're seeing a little bit of that shade up. Probably if you're seeing any softness on mix, maybe alcohol number, the alcoholic beverages, a little softer, but we're still seeing a bit of that, even though we're lapping some pretty strong numbers of that happening last year. So we're still seeing a bit of that, not really anything within the food categories that would signal anything happening. So that feels pretty good.

Great. And then can you just remind us, Tonya, of what the 1-year comps were last year in July, August, September, just so we have a good comparison for this year?

So you want the comp sales last year for...

July, August, September.

Broken down by month and the quarter.

Yes. Yes, please.

Yes. Let me see. Let me make sure I'm giving you the right numbers here. So -- those numbers for last year were 44.1% in July, 29.8% in August and 20.7% in September.

Your next question comes from the line of Eric Gonzalez with KeyBanc. .

I'm wondering about the off-premise business. You don't play in the third-party arena, which I believe does skew higher income, but I was wondering how the customer profile of your takeout guests might compare to that of your dining guests? And which you would say was a little bit more vulnerable to some of the macro headwinds that seems to play out across the industry? And if we were to enter a significant economic downturn, would you expect to see the takeout business slow before the dining business or vice versa? I'm just wondering how you think about that.

Yes, it's a great question. I don't know that we know yet. I think it's been interesting to see as the dining room traffic has slowed down a bit, you see more folks maybe moving from to-go back to dine-in. I think some of that is just a function of being able to get into the restaurant during the week because the wait sometimes are so long, I think that was maybe helping the consumer decide on the To-Go transaction rather than waiting to get a seat inside the restaurant.

I don't think there is a big difference between those guests as far as what they spend, the mix of what they're -- or anything like that. It seems very similar as far -- obviously, you don't have the alcohol transaction on to-go, but otherwise, it seems very similar. So from that perspective, I think all good, but I think it just remains to be seen. I think if the guest likes the convenience of to-go, it is really what we're seeing. And the technology that we've added to that transaction makes it very convenient. The way they can come to the restaurant and pick up that order is very convenient. So I think just with the way people live these days, that continues to be something they're going to look for and seek out. So it is kind of the way we would love. We're very focused on continuing to drive those to-go sales.

Yes. And Eric, just to give a little confidence on that, currently, all summer long in our restaurants, we've been working on what we call mission statement university and it's rolling out the online ordering switchboard system, which helps integrate our dining room orders or basically our To-Go orders, whether it be a walk-in, a phone or an online a little easier and smoother transition into the kitchen so that it's giving our operators a little bit more confident that they can handle more To-Go business without it affecting the dining room.

So we're very excited. We believe that this software and the education of our operators will allow us with confidence to be able to take more orders in every 15-minute segment. And so that's going on out in our restaurants right now. And obviously, we feel great about our windows and our pickup process and even our order process. This is more about our operators feeling more confident that they can handle the to-go business successfully without it affecting their dining business. So this has been an initiative that we've been doing for the last 7 or 8 weeks.

And -- we're very excited about our product coach team and our service experts that are out there teaching and coaching I just personally have witnessed 2, 1 in Connecticut and 1 in Florida and Panama City, myself. And it is just -- it is a great experience for us to watch our operators learning how to execute at a higher level when it comes to dining room business and to go-to. So we're excited from an operations standpoint that we're going to be able to execute to-go and continue to get better at that experience for our guests.

Your next question comes from the line of Chris Carril with RBC Capital Markets.

I wanted to ask about in-restaurant capacity in your existing restaurant base. You noted the larger format of restaurants in development as well as guest counts above '19 and '21 levels. And then we're seeing, I guess, off-premise mix moderating a little bit, right, shifting to on-premise. So how are you thinking about meeting demand in the restaurants today?

What's interesting when you look at the comps anyway, the -- typically -- and we continue to see this the most successful restaurants are the ones that continue to drive traffic. So they're finding ways to continue to bring guests in the door. They may be getting a bump out adding seats, that might be one way. Other ways, though they're doing it just their seat utilization and bringing folks in on the (inaudible)shoulder periods and things like that. So they continue to find ways to drive that traffic. It's always interesting to see. So I don't know that we would ever say we have a store that is maxed out capacity or anything like that, I think they continue to find great ways to do it.

Got it. And then just for my follow-up, I wanted to ask about labor costs and maybe if you could provide any additional detail on the outlook there? The wage and other labor inflation outlook is maybe a little bit higher than what you provided last quarter. So curious as to how you expect that? Are those inflationary trends to kind of play out over the remainder of the year?

Sure. Yes, most of the wage inflation that's built into that 8% guidance, a lot of it occurred in Q1 and Q2. It was over 10% in Q1, 7.7% in Q2. And so a lot of that is what really drove that guidance a bit higher for the full year. We expected as we started lapping higher wage rates in the back half of the year, we thought they might -- that growth might moderate a bit in the back half. We're now -- we still think it will moderate, but not -- maybe not as much as we were originally thinking.

So I think we have a big focus here on making sure our people are taking care of doing the right thing, staffing at the levels we need to staff at. And so for us, it's really that investment in our people is something that we want to continue to do. And that's a big focus of ours. So I think the trends in the back half, they're just -- they might be just a touch higher than what maybe we expected them to be. But more of that was really what the expectation that we saw in Q2 was a bit higher. It's really what drove that.

Our next question comes from the line of David Palmer with Evercore.

Question on the food cost, just to follow up on some of your other comments. You mentioned, Tonya, that I think that you thought that these prices might be down in the third quarter. And I think your guidance implies for overall food cost for the second half, the overall basket would be up 9%-plus, I think or something like that. So I'm trying to piece that all together. It's not often that you have a comment about your beef that's going in a different direction than your overall basket. But you did mention that things are going to come back up for beef in the fourth quarter.

So my thinking is you're really talking about very different quarters over the next 2 quarters and then that there's something else going on beyond what we would see, say, in Urner Barry with regard to the [stake] cuts in your basket, maybe distribution, the other things? So love any color about that.

Sure. Some of it, David, just has to do with what we're lapping from last year. Q3 was really where we saw that large spike and increases. On rebuy, was one of the cuts that we saw a huge increase in costs last year in Q3. So some of it is just kind of what we're lapping. Actually, you referenced about 9% in the back half of the year. That is about what we are expecting pretty equally across quarters. So even with some minimal -- it feels great to say beef deflation by the way, but it's pretty minimal. So even with some minimal beef deflation, you do have other parts of the basket that are continuing to see higher cost. Your other proteins are seeing it, all those things I mentioned earlier, bread mixes, oils, potatoes, some dairy items. So you really are seeing more across the basket outside of even beef than we've seen before, that's kind of doing that. And then the movement to a higher beef cost, again, it's pretty minimal in Q4. And it's just really based on only being locked 30% on fixed prices.

So we're just kind of anticipating that cost could get a little bit higher in Q4, just if there are any supply restrictions, things like that, that start coming into the system, kind of what we're thinking. .

And then just a follow-up on the pricing stuff. The comments that you made and the trends that you have would seem to suggest that you have pricing power, your 3-year trends are quite firm and you don't seem to be seeing any major cracks in terms of trade down. I'm just wondering about any other inputs that would make you to give you pause about raising price. Is there anything going on with the competitors, where they're discounting? Or are you just listening to the news reports about maybe what's around the corner? Anything about your mindset that would make you question your ability to raise price?

I wouldn't question at this point, I still want to really get educated as to what our costs are going to be and hear from the operator. So we go into it with a conservative mindset. We obviously look at the numbers deeply, and then we make a decision that we believe is best for the business in a balanced procedure. And obviously, it's a difficult time because you hear inflation in all of these different areas. So we will pay attention to what we believe is important to take care of our consumer. We do pay attention to what's going on in the industry and even in the grocery stores. So we have to, we will and we have. We don't want to, but I think we have -- we know that we have to do something. I just don't know where it's going to land right now.

And David, I'll tell you, we still believe in the philosophy that commodity inflation is cyclical and commodity costs are cyclical. So while you do -- we are feeling some significant inflation right now, that cycle at some point will turn. And so that philosophy hasn't changed. And that just means we may take it on the chin a little bit more during that short-term cycle and count on the guests being loyal and coming back to us. And that's what we've done in the past, and it's really benefited us.

Your next question comes from the line of John Glass with Morgan Stanley.

If I could just first ask a follow-up on the question about margins -- restaurant margins in the back half. Typically, in many years prior to COVID, back half margins were about 200 basis points below first half margins for the seasonality reasons, we have discussed. Is there any reason to think this -- I understand you make a pricing decision yet in the fourth quarter, but you kind of know what pricing is in the third quarter. So is that a reasonable starting point to think about back half restaurant margins being down a couple of hundred basis points during first half? Or is there a reason not to think that way?

No, I think that's a good starting point, John. I mean that's kind of as we head back into some normal seasonality, we're going to be looking -- we're looking at historical trends too of what does that look like from a margin perspective. So I don't think that's unreasonable to start there. And then it's just really looking at how much pricing are we going to be taking, what do we think traffic trends can continue to be, and where do we land on some of these cost inputs. So all of that, obviously, a lot of moving pieces for sure.

Yes. No, I appreciate it. It's just I don't think consensus maybe is considered there yet. Jerry, can you talk about technology more broadly. At one point, and forgive me if this is a misremembering, but KDS was something that was being tested, where are you on that, if I have that right? What are the important things, I know you talked about To-Go, but other technology pieces that you think about for the next 24 months and how they might impact the business?

All right. Well, thanks. I'll give you an update on our Roadhouse pay which we currently have over 300 stores. And the stores that have it, there's an 82% usage in the concept. So that is very exciting that the pay-at-the-table, the consumer is using it, it's helping them turn tables a little quicker because you're right there, you take care of your pay up. So we're very excited about our Roadhouse pay and the rollouts are going very well. The digital kitchen, as you know, we opened a new store in Shakopee, Minnesota, I believe, in the early part of the year. We just completed our conversion of an Austin, Texas restaurant. And right now, the feedback is very positive, food quality, kitchen times, no lost tickets, easy to train employees.

So it seems like we've got a lot of real positive feedback there. I was just talking with my chief tech guy earlier about that success and what we are going to look at for not only the fourth quarter potentially or even into 2023, so there is definitely some demand for the digital kitchen. We also, again, as we talked about the online ordering switchboard, that we are out there training in the restaurants right now. We have all of our market partners come to town next week, and we'll be doing a training session on that. And we want to be able to execute to go not only for our guests, but we want to have tools that are available to our operators that not only give them confidence to take more orders but to execute at a high level. So any time we can use technology to enhance the guest experience, those are the top 3 right now that we are currently having success with and excited about to continue going forward.

Your next question comes from the line of Lauren Silberman with Credit Suisse. .

I have one on the consumer. Are you seeing any differences in behavior with the lower income consumer specifically? And given your strong value proposition, any sense you're getting benefit from trade down from higher-cost restaurants? Any color that you can give on the demographics of your average consumer would be helpful?

Yes, Laura, I don't know if I can answer that on the lower income consumer. We really don't track at our guests that way. So it would be tough for me to comment on that. I think overall, you're absolutely right. The value on the menu, I can see being very attractive to a guest who is looking to manage their -- what they're spending.

So there's a lot of great things on the menu that fall into that wheelhouse, which is really awesome. We have the early dine, which is coming in, in those earlier hours of the day part and great options there that provide some value on the menu too. So that's really great. And I think speaks to that consumer probably, I'll tell you when we -- the last recession we had, we do believe we saw some of that trading into our -- get into our restaurants from the higher-end guests, maybe who was used to paying more of a higher PPA.

And I think when they tried us, they realized how good the food was and they didn't leave. And that really is what has helped us with that 10-year traffic growth trend that we had. And so we still believe that is possible and that happens. And so that's something definitely that we're thinking about of how we continue to speak to that guest and bring them in.

Great. And then just on dine-in, really strong growth in dine-in traffic this quarter. Where are you running on dine-in traffic versus '19 at this point?

Dine-in traffic versus '19, on a 3-year trend, I don't know that I have those numbers in front of me actually. But I think we're still seeing some really good trends. If I go back and look at kind of what traffic was for Q2 in 2019, you're looking at 4.7% up in 2019. On comps, traffic was running about 1.7%. So we were seeing probably in that 1% to 2% range of traffic growth in 2019, each quarter, kind of what we were running back then.

Your next question comes from the line of Jon Tower with Citigroup.

Great. Yes. Most of my questions have already been answered, but I guess I'll hit upon in terms of knowing right now as you've got at least potentially higher beef supply -- or excuse me, lower beef supply coming in late '22, 2023. I think the USDA is forecasting a 7% or so reduction in production. Is there anything you could do or proactively do right now with the knowledge in hand to address this, maybe it's lock-ins of supply earlier than you normally do for 2023, maybe there's some technology like you're mentioning about the (inaudible) do now knowing that prices next year might be taken off again?

Yes. From a supply perspective, I mean, you could certainly lock up additional supply. That's not necessarily going to help you from blocking up prices too much. I think there is just still so much uncertainty out there as far as what may happen in the future. So not really seeing an opportunity on price, but you could see it on supply. We have never approached higher beef prices by changing something on the menu or moving our focus away from stake on the menu. It's just really not who we are. Our menu is so tight. It's -- we don't add a lot of items. We keep things front and center. And our guests today have their favorite things. So I don't know that there was much there we would do either, John, to be honest, as far as making significant changes.

We have added things in the past, so like a salmon salad or things that we feel like give our menu some variety and things for -- to kind of avoid that veto vote. I think some of it, you just kind of have to ride it out and see kind of where things land and what the churn -- how long that cycle might last.

Got it. I will. I just want -- I'm curious if you could clarify, I think you said something about the store margins in the back half being about 200 basis points lower than first half. I am just curious if that was accurate or if I misheard something, I want to make sure that I heard that correctly?

Yes. I think the reference was to 200. If you go back to 2019, it's probably the closest date you could really see more of that normal trend. And just to give you margins by quarter from '19, it was 17.9%, 17.6%, 16.7% and then 17.1% as you look across from Q1 to Q4.

So again, you do see some of that softness in Q3. A lot is just going to depend on commodities really and where that -- you could pick up leverage if some of that supply doesn't pan out. Maybe you see some continued softening on costs. You can see traffic come in higher, pricing, all those things just come into play. So I would say it's kind of hard to read a lot into it, but there is no doubt that margins typically are softer in the back half of the year for us. That's just the typical trend.

Your next question comes from the line of Andrew Strelzik from BMO.

I had 2 development related questions, I guess. The first one. You talked about last quarter maybe some opportunities to accelerate or better navigate, I guess, the development process, the new store development process? I know there's still some delays going on, but have you been successful in realizing some of those opportunities? That's the first question. And number two, when you talked about the larger prototype having more storage and coolers to help meet demand. What are you doing in the legacy stores to kind of manage that same thing? Is there any need to, I don't know if it's investments or what have you to kind of retrofit that. But how are you going about that in the legacy stores?

Yes. I will tell you, so we continue to look at the development. We have learned a lot. We've obviously extended out our time line. I feel really good about where we're at. There is one item right now that we are concerned about because we can't open a restaurant without power. And there are some transformer concerns out there but we are having a backup plan to be able to do that. But we are on temporary power, and we can pretty much overcome a lot of obstacles. That one concerns me a little bit, but I do believe that pipeline is we are coming up with a backup plan if needed.

So I think everything else, we've kind of learned how to navigate through some of the permitting in the different extended time periods. As far as the new or the existing stores and whether it be a cooler expansion, we're looking at some of these really high-volume restaurants and evaluating what they need to be able to handle that and whether it's more seats, more cooler space, more storage. So we have some -- we've done some very cool things with some of the existing prototypes. .

We've relocated some restaurants that have had a lot of success that at the end of their lease and we moved them just in a close proximity, but they get more parking, they get a brand-new building. So relocations have been very successful. We have numerous on the book again for next year as well as this year. So we are looking at our very top high performers and what we can do to help and support them -- it's because it's just smart money to spend, no doubt because the volume is there.

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

I'll be quick, given the hour. Just 2 real quick ones. Anything you can share, Tonya, on how hourly employee tenure or turnover levels have shifted versus pre-COVID levels. So where do you guys stand now on those 2 metrics tenure and turnover versus pre-COVID?

On the hourly employees, you're actually seeing a bit of a return to normal -- more normal turnover levels, more of those precoded levels. So we had seen turnover creep up on the hourly side to 140 or so percent, and that's been coming down more in line with that 130%, high 120% range. And everybody calculates it differently, but we're pretty consistent in the way we do that, and it feels good to see those. I think we still have some work to do. Our operators would tell you, but we do feel good to see those get a little more in line with things.

So on the management side of things, you continue to see improvement there too returning, I think we've actually have gotten back to pre-COVID levels from manager turnover perspective. And most of that isn't at the MP level. Usually, that we're seeing that more at the service manager, kitchen manager level.

All right. That's helpful. And then just taking [a dive] here, but anything you can provide or any color, any sort of framework for how we should be thinking about G&A and D&A dollars in 2022 sort of finishing out the year? Big picture strokes?

Yes, we had that -- you have that mismatch of cost on the conference as we talked about. Outside of those things, it's pretty -- it should be pretty consistent from a dollars perspective across each quarter in the back half of the year. So it would be our expectation, typically, you see a little bit in '21, you see a little bit of increase in cost in Q4. A lot of times, that's being driven by bonus payouts as we get to the end of the year and paying out based on full year performance. And with '21 being so much significantly higher than '20 coming off that year, a little bit more of a pop there in Q4 of '21 than maybe what we're expecting as we head into the back half of the year. So I think you probably, Jeff, would just expect to see a little more normalized trend from a dollars perspective when you -- after you dig out that mismatch on conference.

Your next question comes from the line of Brian Mullan with Deutsche Bank.

Just a question on capital allocation. step-up in share repurchase this quarter, really this year has been notable. My question is, Tonya, how do you want us thinking about this? We know Texas Roadhouse is always going to keep a conservative balance sheet overall. But are you also in some way expressing a view that the stock is undervalued right now? And if that's the case, would you be willing to keep up this pace for a while longer?

Well, I think, Brian, what we saw was just some opportunity earlier in the quarter to really take advantage of kind of what was going on in the market. And we had some excess cash that we knew what development was going to be and what we were going to need from that standpoint. And we felt very comfortable bringing our cash balance down and net cash, $75 million in debt on the books. But I would say that is an indicated change in our principal or the way we're thinking about share buybacks. I think you'll continue to see us be -- look at dilution and shares that are being issued. We'll continue to see what we can do from an opportunistic perspective. But right now, we feel really good where we are from a balance sheet perspective, where cash is sitting and the amount of debt that's outstanding. So from that perspective, I think we feel like we're in good shape.

Your next question comes from the line of Dennis Geiger with UBS.

Just wondering if there's anything unique that you're seeing by geography or any notable difference in performance across certain markets.

Not seeing much really significant fluctuation, pretty much behaving as you would normally expect it to at this time. I know there's been talks of the COVID, spikes in COVID occurrences and things like that, but those are really hard to read across the country and what that impact might be. So we haven't really put a lot of energy in just trying to see what that might be. But pretty much the same as what it normally looks like, Dennis, as far as just how comps are growing. You've got strong stores all across the country.

Makes a lot of sense.

Your next question comes from the line of Andy Barish with Jefferies.

Wanted to go back, Jerry, to your comment, you were talking about implementing some software on to-go. Do you -- does the business put governors kind of on to-go, just given a lot of that demand comes in busy sort of Friday, Saturday nights as well? And is that what you were referring to as an opportunity to kind of free up some throughput there?

Yes. So we -- every 15 minutes, we can put a little baffle if we need to. We -- so that is a part of it. So the software helps blend or mix that in so that we can handle depending on how many tickets we have hanging from the dining room, depends on how much we can do successfully on to-go. So yes, the software helps, it mix a little smoother and easier. And just the education of we can take more orders based on the smooth transition of this, allowing the guests to -- even if they have to get pushed to another segment, it's not too far. So knowing that instead of saying no, we may have to push you to the next bucket and we have a little bit smoother transition in doing that. But it has really been working well for us given our operators more confidence that they can do more orders. .

Got it. And then, Tonya, on the beef purchasing and contracting side, I know it's gotten a little bit more opaque over the years. Is there a way just thinking about sort of '23 and the potential for higher cost there to start blending in some of that with a back half of '22 and is that informing some of your decisions or some of your discussion today on beef cost and may '23 does not feel as much of any impact as potentially could be out there?

Well, I mean, we do have some ability, just based on how we age our beef to buy if there's some opportunity to buy some things a little further out or a little sooner. We have that ability to do that. But all of our stakes are cut fresh in the store, and there's not -- we don't have any frozen meat. So from that perspective, it's hard to kind of buy ahead of time and use it later in the restaurants. I don't know if that, Andy, was what you were referencing? Or if there was -- or if I missed the question.

It was just more about contracting strategy rather than taking physical product.

Yes. Okay. I do understand that, yes. And we have never really utilized those hedging ourselves internally, we kind of rely on our suppliers and things like that. But that is something we've looked at recently to see if there is some opportunity there to utilize those strategies and maybe get ahead of things a little bit. So we'll see if that pans out.

Your next question comes from the line of John Ivankoe with JPMorgan.

Also a question on to-go, at least from what I've heard on the call, a lot of it really, the changes that you're going to make are very much focused on the operator and giving them more confidence to hit certain ticket windows. But I was hoping, I guess, if you could elaborate if there are any changes beyond that, if there are changes that the customer themselves may see or notice and you will really see how Texas Roadhouse is significantly differentiated than some of the peers?

Certainly, I'm not expecting you to get back to what you did during COVID where you're a completely unique experience relative to everyone else. But I was wondering how you could stretch remove the brand to do a takeout experience that the customer will notice that maybe others in the segment simply or not?

I don't know that there's anything magic out there right now. I think our convenience of the to-go pickup windows, probably even the ability to come in the restaurant without having to go through the host area is one of the significant changes that we made. More of what we're doing is the flow of our to-go food to get to the packers where they pack that food up so that we can become more accurate and make sure that it's critical that when that guest gets home, they have everything that they expect or wanted. And so that's more about what we want to be -- the convenience, I think we've done over that through the pandemic. The whole pickup experience, the ordering experience, I believe, is very solid.

We really have done a great job. I just want to continue to give my operators the simplification of how to get it packed right and how to make it work when you got a full dining room and to have that confidence that they can do both at a very high level.

And I think, too, John, sometimes the guest feels maybe a little frustrated because they do have to wait for that to-go order. And so what Jerry is talking about to get that food in the hands of the guests even faster by getting them kind of blended into the dining room queue with the dining room guests. So from that perspective, they should see that as far as just see when they order, they're not given an hour wait time, maybe they're getting it a little bit faster.

Your next question comes from the line Of Jim Sanderson with Northcoast Research.

Just wanted to follow up on pricing strategy. Again, do you have any feedback or a sense of how your competitors have reacted to the pricing you've taken market today? And whether that has narrowed the value gap or value position you have in the market?

I think in some ways, that's something we definitely pay attention to whenever we have our pricing decisions. Typically, we're talking about it in February, March and again in September, October, we're definitely looking at what the guest -- what the competitors are doing. And we want to make sure that, that gap that we're keeping that value and that gap with the consumer. So it is definitely something we're watching, Jim. I couldn't tell you off the top of my head, who's kind of got what pricing or anything like that. We actually guide into it a little bit more than that. And our operators kind of bring to the table the pricing in their areas and their markets because it is so different across the country. So we actually go a little deeper on it and don't look at it as much from a high-level perspective.

Okay. But not noticing anything kind of significant or meaningful that would make you want to pull back on your thoughts on pricing based on what competitors are reacting?

Yes, nothing from a competitor perspective at this time. Again, we'll dive into it more on the upcoming call. Yes, for sure.

Just a quick follow-up. I think on the 3.9% comp for July, what's the underlying traffic trend for that comp number?

Well, there's about 7.2% pricing, 7.3% pricing in the menu throughout Q3. And you can kind of use that to back into what traffic trends. We typically don't give out specific traffic trends on a monthly basis.

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

Just a real quick one on labor. I wanted to ask one on labor deployment, specifically, the average hours per store. Are you happy with current levels and able to achieve your targets for ops and the guest experience? Or do you expect to continue to add hours year-on-year moving through the second half?

I think, Brian, a lot will just depend on what that traffic growth looks like. That's always a big driver of what growth in hours is going to be. And I think the operator right now, I would tell you, they want to be staffed and they want to be staffed for any call outs and they want to, for any unexpected changes in the schedule and things like that. So they're probably going to move a little bit more towards being very well staffed. That could lead to a little more growth in hours versus what traffic looks like. But I'll tell you, me as the CFO, I'm okay with that. I like that investment in that line. And we know that, that legendary service really adds to the experience. So we want to make sure that's happening. But I think for the operator, it's tough right now from a staffing perspective and just knowing what you need and what those sales levels are going to be and things like that with just all of the kind of lumpiness that you see lapping last year. So they'll probably be a little more leaning towards growing hours a little bit more.

Your next question comes from the line of Sara Senatore with Bank of America.

Just a couple of quick clarifications. The first is on the comp trend. I know you mentioned July running around 30% versus 2019. I guess if I just track that 3.9 out through the quarter, it would imply something less than 30%. So just on a 3-year basis, July sounds like it was the toughest comparison. And so we -- as we look at that 3.9, maybe it could get better through the quarter if that 3-year stack holds? So that's just my first question. Make sure I'm interpreting it correctly.

Yes. I mean, like we've been talking about season -- from a seasonality perspective, you start to see that softness in July and Q3 tends to be where you see more of it than anywhere else. So I don't think it's unreasonable, Sara, to think that, that 3.9, it could be the low point. A lot again, will just depend on pricing pretty consistent throughout the quarter, again, at 7.3%. It some depends on our mix plans. And if we continue to see it be flattish or we get some benefit there. And then on the traffic side, dining rooms and to-go. So but I don't think you're being unreasonable in your kind of how you're looking at it. Okay.

And then, sorry, just the second question is, I'm sorry to belabor the point about the seasonality of margins. But this year seems kind of unusual to me in the sense that you have so much less inflation in the second half than the first half. So the guidance implies inflation comes down by 300 or 400 basis points sequentially. So that's pretty atypical, I guess, is what I'm asking. You wouldn't normally see that. So maybe the seasonality on margins isn't quite as relevant this year?

Well, it's really tough to say because you kind of have to -- because of the volatility, and you kind of have to look at it on a 2-year stack, I think that might help when you're kind of trying to forecast what the back half of the year margins might be. So looking at the cost to sales percentages, they're going to continue to be a bit elevated in the back half of the year. And I think the expectation would be that some of that seasonality does come into play in the back half that we typically would see with the margins being a bit lower.

Your next question comes from the line of Jake Bartlett with Truist Securities.

I'm sorry if you've answered this before, I didn't maybe register it. But I want to ask whether staffing is at all -- has been a hindrance to sales growth? And another, one of your competitors last night talked about the COVID resurgence impacting the availability of staffing people calling in sick. So I'm just wondering whether the staffing has been dampening sales maybe to a greater degree than it had in the first quarter? And then the second question is separate, and it's on Bubba's. It looks like you're opening or plan to open a handful of Bubba's stores this year. But I'm just wondering, your confidence, I know you've been working upon this for a while, and at some point, you would expect it to be kind of in the high single digits for Bubba's development. Is that something that you think we could expect for '23? Are you there in terms of kind of really starting to ramp up Bubba's growth?

Well, I'll take the first part of that question, Jake, on kind of how we're thinking about staffing. I would say staffing is probably easier today than it was back at the beginning of the year. And -- but you still would probably have operators out there telling you even today, it remains a challenge for them. So it's definitely a little bit. It's not one size fits all across the country. a lot just depends on where they are. But I think definitely it has gotten a bit easier than it was at the beginning of the year.

Yes. And I would just say that I think with our turnover lowering, that means that our people are getting more experienced, so they're able to do more, so which is great, I think, from that standpoint. So I do believe that we're in still -- this quarter were better than last quarter on the staffing side. I think it's helping all across. There are still a couple of pockets that probably need a little more attention and help. But overall, again, continue to head in the right direction through the second quarter.

And as far as Bubba's, I am very confident that -- we've got some leadership we've added, made a little change in the leadership, added some multiunit focus, have gotten a real clear vision of what we want and expect. I'm very proud of the food. I really do think that the Bubba's food is really living up to our expectations. We have a service expert that's now leading a team to help us really ramp up our level of legendary service. And so as far as building a leadership team that can help carry us into the future so that I have more confidence in building more restaurants, that is really what we've been working on for the last 9 months, and I feel really, really confident with the team going forward. They've gotten a real clear vision and focus, and they're coming together as a team, not only the managing partners, the market partners, our VP of Operations, the team is looking really good for growth. So I'm very excited about it. I do believe that I am going to be able to rely on them to produce more and to grow more in the coming years.

There are no further questions at this time. Tonya Robinson, I turn the call back over to you.

Thanks, Emma, and thanks, everybody, for being on the call tonight. As always, if you have any additional questions, don't hesitate to reach out to us. Have a great night.

That concludes today's conference call. Thank you for attending. You may now disconnect.