Texas Roadhouse Franchise Cost

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Texas Roadhouse was founded on February 17, 1993, at the Green Tree Mall in Clarksville, Indiana; across the Ohio River from Louisville. Founder W. Kent Taylor lived in Colorado and worked at nightclubs and restaurants there, having aspirations to attend a culinary school. In 1990, Taylor returned to his hometown of Louisville. He began work as a Kentucky Fried Chicken manager, and had dreams to open a Colorado-themed restaurant.

Former Kentucky Governor John Y. Brown, Jr. helped Taylor fulfill his dream by backing him with $80,000. In 1991, Taylor opened Buckhead Hickory Grill, the chain that would eventually become Buckhead Mountain Grill. Taylor was his own executive chef. Brown invested more money and wanted to open a second store in Clarksville, but complications in the partnership caused it to fall apart.

Brown had elected to pursue another steak concept without Taylor, leaving Taylor with the decision to either stay committed to Buckhead, or attempt to start a new business. He decided to go with the latter, however, he had trouble finding investors to help him launch the new concept. Taylor was turned down by many potential investors and found himself wondering if his idea for a new concept was a mistake.

Finally, Taylor met someone while he was managing at Buckhead through Scott Canfield that seemed interested in investing. Dr. John Rhodes became interested in Taylor’s proposition of the new steak restaurant concept that Taylor showed to him through drawings on papers and cocktail napkins.

Taylor was able to convince Dr. Rhodes and several of his colleagues to invest $100,000 each in 1992. A year later in 1993, the first Texas Roadhouse in Clarksville, Indiana opened its doors.In 1994, Taylor sold his shares in Buckhead Mountain Grill to focus solely on Texas Roadhouse.

Today, Texas Roadhouse is publicly traded and is famously know for its buckets of peanuts and free rolls. The brand has more than 500 locations across the US.

And speaking of those rolls … if you haven’t heard or eaten these rolls. This guy knows about the rolls.

Are you interested in getting into a Texas Roadhouse Franchise but wondering the investment cost? We reviewed the Franchise Disclosure Document and found the initial estimated investment for a new Texas Roadhouse Franchise to be a range from $2,790,500-$4,963,500. This amount must be capitalized with equity of not less than $800,000 or 25% of the total estimated project cost, whichever is higher and includes an initial franchise fee of $40,000.

How Much Money Can you Make as a Texas Roadhouse Franchisee?

So you decide that you have the capacity to drop $3M-$4M on a new Texas Roadhouse Franchise store but wondering how much money you will make. Well, the average Texas Roadhouse does $4.25M in sales and runs approximately 12.3% EBITDA margins, so you can expect to make about $522,000 per location.

Is Texas Roadhouse a good franchise investment? Well, that depends. If you invest $3.5M and get a return just north of $500,000, that equates to a 14.2% return on investment. You will want to discuss this with a financial adviser to see if this is a good investment for your particular situation.

A little more commentary on these volumes and profits below:

  • Average Unit Volumes (AUVs): Estimated at $4,250,000. This volumes run about 25% higher than the Casual dining category, so that is good!
  • Average EBITDA (Earnings before interest, taxes, depreciation, and amortization): 12.3%. Therefore $522,000 of EBITDA on a new store that you build. These profit margins run about 1.5% lower than the casual dining category. Sometimes lower margins (better prices for consumers) can drive more customer visits which could be evident from the higher average volumes in the stores.

Estimated Initial Investment

  • Franchise Fee: $40,000
  • Leasehold/Building Improvements: $750,000-$1,500,000 (new build out)
  • Architectural engineering / site inspection: $95,000-$200,000
  • Builders Risk: $5,000-$12,000
  • Performance Bonds: $14,000-$38,000 (2-2.5% of leasehold improvements)
  • Furniture, Decor, Fixtures: $180,000-$220,000
  • Equipment: $800,000-$915,000
  • Signs: $39,000-$90,000
  • Insurance: $40,000-$80,000
  • Initial Inventory: $38,500-$62,000
  • Supplies: $20,000-$35,000
  • Smallwares: $37,000-$55,000
  • Computer Hardware: $55,000-$75,000
  • Marketing/Promo: $1,000-$5,000
  • Training Costs: $90,000-$110,000
  • Licenses: $7,000-$80,000
  • Liquor Licenses: $2,000-$500,000
  • Utility and Telephone Deposits: $5,000-$50,000
  • Other Pre-Opening Costs: $130,000-$255,000
  • Additional Funds: $442,000-$641,500
  • Totals Initial Investment:: $2,790,500-$4,963,500

Royalties, Advertising, and Other Ongoing Costs?

For your advertising and marketing dollars, you may even get some Willie Nelson:

The typical ongoing costs for any franchise typically include royalties and contribution to some sort of advertising fund. Here are some of these costs associated with being a franchisee.

  • Royalty: 4% of Gross Sales
  • Local Marketing: $2% of Gross Sales
  • Cooperative Marketing: 2% of Gross Sales
  • Marketing Fund: 0.3% of Gross Sales (Regional and National Marketing, capped at 2.5%)
  • Marketing Fee: 0.5% of Gross Sales
  • Service Coach: $7,500 annually for markets w/ 0-10 restaurants
  • Product Coach: $7,500 annually for markets with 0-10 restaurants
  • Opening Training Materials: $1,900 or more
  • Opening Trainer T-shirts and gifts: $1,650 or more, based on quantity

Revenues and Profitability

  • Average Unit Volumes (AUVs): Estimated at $4,250,000. This volumes run about 25% higher than the Casual dining category, so that is good!
  • Average EBITDA (Earnings before interest, taxes, depreciation, and amortization): 12.3%. Therefore $522,000 of EBITDA on a new store that you build. These profit margins run about 1.5% lower than the casual dining category. Sometimes lower margins (better prices for consumers) can drive more customer visits which could be evident from the higher average volumes in the stores.

Franchisor Executive Experience

W. Kent Taylor – Chairman and CEO

Mr. Taylor founded Texas Roadhouse in 1993. He resumed his role as Chief Executive Officer in 2011, a position he held between May 2000 and October 2004. He was named Chairman of Texas Roadhouse and the Board in October 2004. Before founding Texas Roadhouse, Mr. Taylor founded and co-owned Buckhead Bar and Grill in Louisville, Kentucky. Mr. Taylor has over 35 years of experience in the restaurant industry.

Scott Colosi – President

Mr. Colosi was appointed President in August 2011. Previously, Mr. Colosi served as our Chief Financial Officer from September 2002 to August 2011 and again resumed his role as the acting Chief Financial Officer from 2015 to May 2018. From 1992 until September 2002, Mr. Colosi was employed by YUM! Brands, Inc., owner of KFC, Pizza Hut and Taco Bell brands. During this time, Mr. Colosi served in various financial positions and, immediately prior to joining Texas Roadhouse, was Director of Investor Relations. Mr. Colosi has over 30 years of experience in the restaurant industry.

Tonya Robinson – Chief Financial Officer

Ms. Robinson was appointed Chief Financial Officer in May 2018. Since joining Texas Roadhouse in 1998, she has held the positions of Controller, Director of Financial Reporting and Vice President of Finance and Investor Relations. Ms. Robinson is a licensed Certified Public Accountant and has over 20 years of experience in the restaurant industry.

Celia Catlett – General Counsel and Corporate Secretary

Ms. Catlett was appointed as our General Counsel in November 2013. She joined Texas Roadhouse in 2005 and has served as Associate General Counsel since 2010 and Corporate Secretary since 2011. Prior to joining Texas Roadhouse, Ms. Catlett practiced law in New York, New York. Ms. Catlett has over 15 years of legal experience, including over 10 years of experience in the restaurant industry.

Chris Jacobsen – Chief Marketing Officer

Mr. Jacobsen was appointed Chief Marketing Officer in February 2016. Mr. Jacobsen joined Texas Roadhouse in January 2003 and has served as Vice President of Marketing since 2011. Prior to joining us, Mr. Jacobsen was employed by Papa John’s International and Waffle House, Inc. where he held various senior level marketing positions. He has over 20 years of restaurant industry experience.

Doug Thompson – Chief Operating Officer

Mr. Thompson was appointed Chief Operating Officer in August 2018. Previously, Mr. Thompson was employed by Texas Roadhouse as a Market Partner from 2002 to 2005 and then was promoted to Regional Market Partner and served in that capacity until his appointment as Chief Operating Officer. Mr. Thompson has over 30 years of experience in the restaurant industry

Training Program

The Managing Partner must begin the initial training program no later than one year before the Restaurant begins operations. All other managers must be hired at least 6 months prior to the date on which the Restaurant opens. No later than 180 days before the Restaurant begins operations, your Operating Principal, Market Partner (if you must have one), and three to four additional Managers must begin the initial training program.

Training must be completed to our satisfaction no later than 45 days before you open the Restaurant. If your Operating Principal does not serve as your Managing Partner, one of the additional Managers must be your Managing Partner. A total of four to five people must be trained to manage the new Restaurant. We, or someone we designate, conduct the initial training program at a Restaurant operated by one of our affiliates or at another location we select using MIT Training Materials, and Final Exam Materials and Legendary Learning Materials and training videos, which you must purchase (see Item 6). Training requires 16 to 18 weeks and covers operational training, management training, kitchen management and general management.

Training Coordinator

Your training will be coordinated and administered by Laura Cobos, Senior Director of Training and Service and Lisa Dwelly, Senior Director of Training and New Concepts. Ms. Cobos and Ms. Dwelly both have over 20 years of experience with Texas Roadhouse. Currently, our trainers include Directors and Training Managers who have approximately 4 to 20 years of experience with us. We also draw upon the experience of our Managing Partners and other employees of the Restaurant at which the training is conducted.

Availability of Training

The initial training program is offered as needed during the year depending on the number of new franchisees entering the System, the number of other personnel needing training and the scheduled opening of new Texas Roadhouse Restaurants.

The materials used in training include the Manuals as well as videos, workbooks, development books and study guides.

Training program for Texas Roadhouse including baking, cold prep, hot prep, and salads
Training for Texas Roadhouse including Fry, Meat cutting, broiler, point pull, bartending, hosting, food service, DMO prep and administrative

Marketing and Advertising

You must spend 2% of the Gross Sales of the Restaurant each month on marketing for the Restaurant in its Area of Primary Responsibility. All of yoru marketing must be approved by Texas Roadhouse corporate before you use it.

Costs and expenditures you incur for any of the following cannot be included in your expenditures for local marketing unless approved in writing:

1. The cost of honoring any coupons;
2. Research expenditures;
3. Salaries and expenses of your employees, including salaries or expenses for attendance at marketing meetings or activities;
4. Charitable, political or other contributions or donations;
5. In-store materials consisting of fixtures or equipment;
6. Seminar and educational costs and expenses of your employees; and
7. Specialty items like T-shirts, premiums, pins and awards

Number and Location of Outlets

Number and location of Texas Roadhouse locations, both franchised and company-owned

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