Texas Roadhouse Franchise in 2024: Costs, Fee & FDD
Explore the investment potential of a Texas Roadhouse franchise, from costs and fees to earnings insights. Discover what makes this brand stand out in the casual dining industry and whether it’s the right fit for you.
Table of Contents:
Texas Roadhouse is a well-known American restaurant chain that was founded in 1993 by Kent Taylor in Clarksville, Indiana. The franchise has carved out a significant place in the casual dining industry, offering a unique blend of a Western-themed dining experience and high-quality steaks. Kent Taylor’s vision was to create a place where people could enjoy hearty, hand-cut steaks at an affordable price, in a lively atmosphere filled with music and the sound of peanuts being cracked. This vision has resonated with millions, making Texas Roadhouse a beloved destination for families and steak enthusiasts alike.
The core of Texas Roadhouse’s menu is its hand-cut steaks, fall-off-the-bone ribs, and made-from-scratch sides. They also offer a range of other American favorites, including burgers, chicken, and seafood, ensuring there’s something for everyone. The fresh-baked bread with cinnamon butter has become an iconic part of the dining experience. The restaurant primarily attracts families, couples, and groups of friends who are looking for a lively, satisfying meal in a warm, welcoming environment. Their focus on quality, consistency, and value has helped them build a loyal customer base across the United States.
As of now, Texas Roadhouse boasts over 600 locations in the United States and internationally, with a presence in several countries. The brand continues to expand, driven by its strong reputation for quality and its ability to deliver a consistent dining experience. On average, a Texas Roadhouse location serves several hundred customers daily, and the brand’s popularity continues to grow. Their unique blend of casual dining with a focus on high-quality food has positioned them as a leader in the full-service restaurant industry.
The franchise support system at Texas Roadhouse is robust, offering comprehensive training programs for new franchisees, including hands-on experience at an existing location. This ensures that every new franchisee understands the brand’s standards and operations. Additionally, Texas Roadhouse provides ongoing support in areas such as marketing, supply chain management, and customer service, helping franchisees succeed in a competitive market. Their commitment to maintaining a strong brand identity while supporting franchisees makes them an attractive option for potential investors.
Texas Roadhouse Franchise Insights
- Texas Roadhouse serves over 300,000 meals per day across its global locations, with each restaurant typically preparing over 200 hand-cut steaks daily, showcasing their commitment to fresh, high-quality ingredients.
- The company prides itself on its fun and lively atmosphere, and each location employs a “Legendary Service” philosophy that includes line dancing staff and on-site butchers, creating a unique dining experience that contributes to its high customer retention rate.
- The brand’s commitment to community involvement is strong, with each location encouraged to support local charities and events, helping to foster a loyal customer base and strong local ties.
Texas Roadhouse Franchise Key indicators
Growth YOY (%)
-9%
vs industry 1%
Total U.S. Franchised Units
56
3-Year Failure Rate
2%
vs industry 11%
Sales-to-Investment ratio
1.1:1
How much does it cost to open a Texas Roadhouse franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Texas Roadhouse franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Texas Roadhouse franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). You can see a breakdown of the costs to open a Texas Roadhouse below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Franchise Fee | $40,000 | $40,000 |
| Leasehold/Building Improvements | $1,400,000 | $3,300,000 |
| Architectural/Engineering/Site Evaluation | $190,000 | $280,000 |
| Builders Risk and OCP Insurance | $5,000 | $12,000 |
| Performance Bonds | $12,000 | $38,000 |
| Furniture, Decor, and Fixtures | $290,000 | $370,000 |
| Equipment | $700,000 | $1,300,000 |
| Signs | $80,000 | $150,000 |
| Insurance | $60,000 | $140,000 |
| Initial Inventory | $38,500 | $62,000 |
| Supplies | $20,000 | $35,000 |
| Smallwares | $50,000 | $70,000 |
| Computer Hardware/Software; POS System | $220,000 | $250,000 |
| Marketing and Promotional Materials | $1,000 | $10,000 |
| Training Costs/Opening Assistance | $90,000 | $139,500 |
| Licenses, Permits, Incorporation | $120,000 | $300,000 |
| Liquor Licenses | $1,000 | $300,000 |
| Utility and Telephone Deposits | $5,000 | $50,000 |
| Other Pre-opening Costs Not Listed Above | $130,000 | $255,000 |
| Additional Funds (3 months) | $442,000 | $800,000 |
| Total Estimated Initial Investment | $3,894,500 | $7,901,500 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
To open a Texas Roadhouse franchise, the required capital involves both the initial investment costs and a net worth requirement set by the franchise.
- Initial Investment The total estimated initial investment for a Texas Roadhouse franchise typically ranges from $3.89 million to $7.9 million. This includes all startup costs such as the franchise fee, real estate, construction, equipment, initial inventory, and additional funds for operating expenses. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Liquid Assets Requirement Texas Roadhouse usually requires franchisees to have a minimum of $500,000 in liquid assets. This ensures that the franchisee has sufficient funds to handle any unforeseen expenses and to maintain financial stability during the startup phase.
- Net Worth Requirement The overall net worth requirement for a Texas Roadhouse franchise is generally recommended to be at least $3,000,000. This includes the value of assets like real estate, investments, and personal property, minus any liabilities.
How much does a Texas Roadhouse franchise owner make?
Calculating the salary of a Texas Roadhouse franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Texas Roadhouse franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Texas Roadhouse Revenue & Gross Sales
Unfortunately, Texas Roadhouse has not disclosed financial performance representations in recent years. However, in 2021 Texas Roadhouse franchises achieved a median gross sales of $6,236,577, reflecting a remarkable 32% increase from the previous year, likely due to a bounce back from COVID-19 lockdowns. While this data isn’t the most recent, it highlights the brand’s strong consumer demand and potential for significant returns for franchisees.
Which key factors impact the average revenue performance of Texas Roadhouse franchisees?
The growth in U.S. franchisee median gross sales revenue for Texas Roadhouse in 2021 can be attributed to several key factors. The pent-up consumer demand following the challenges of 2020 led to increased foot traffic, as people were eager to return to dining out. Texas Roadhouse’s operational efficiency, including enhanced takeout and delivery services, allowed the brand to meet this demand effectively. Additionally, menu innovations and value-driven promotions resonated well with customers, boosting ticket sales. The brand’s strong loyalty and commitment to community engagement further solidified its customer base, while the broader economic recovery provided more disposable income for dining out, all contributing to the significant revenue growth.
Texas Roadhouse Franchise Operational Costs
When considering opening a Texas Roadhouse franchise, it’s important to be aware of the key ongoing operational costs that will impact your business’s financial health. These costs are essential to maintaining the high standards and service quality that Texas Roadhouse is known for, and they can vary depending on location and market conditions. Here are the primary ongoing operational costs you should consider:
- Staffing and Payroll Employee wages, benefits, and training costs are a significant portion of ongoing expenses, especially given Texas Roadhouse’s emphasis on a well-trained, customer-focused staff.
- Food and Beverage Costs The cost of ingredients, including the high-quality steaks and fresh produce that Texas Roadhouse is known for, as well as inventory management to reduce waste, are critical ongoing expenses.
- Rent and Utilities Leasing a suitable location that meets the brand’s requirements, along with paying for utilities like electricity, water, and gas, are significant fixed costs.
- Marketing and Advertising Ongoing local and national marketing efforts, as well as promotions to attract and retain customers, are important to maintain the restaurant’s visibility and customer base.
- Maintenance and Repairs Regular upkeep of the restaurant, including kitchen equipment, dining area, and exterior, as well as any unforeseen repairs, are necessary to keep the operation running smoothly.
- Franchise Royalties and Fees Texas Roadhouse requires franchisees to pay ongoing royalties and fees based on a percentage of gross sales, which contribute to the brand’s overall support and development.
- Insurance Adequate insurance coverage, including property, liability, and worker’s compensation, is essential to protect the business from potential risks and liabilities.
These ongoing costs are crucial to budgeting effectively and ensuring the long-term success of your Texas Roadhouse franchise. Properly managing these expenses will help you maintain profitability and provide a consistent, high-quality experience for your customers.
Texas Roadhouse Franchise Fees
When considering the ongoing fees associated with owning a Texas Roadhouse franchise, it’s important to understand the financial commitments beyond the initial investment. These fees contribute to the overall support and marketing efforts provided by the franchisor, but they also represent a regular financial obligation that you must plan for. Here’s a breakdown of the relevant ongoing fees:
- Royalty Fee 4% of Royalty Sales, due on the 10th of each month for the preceding month. This fee is a standard cost of doing business under the Texas Roadhouse brand and contributes to the continued support and growth of the franchise network.
- Local Marketing 2% of Royalty Sales, due monthly. This fee helps fund local marketing efforts, but the franchisor may allocate this expenditure to a Cooperative or Marketing Fund. The total required contribution for Local Marketing and other related fees will not exceed 3% of your Royalty Sales.
- Cooperative Marketing 2% of Royalty Sales, unless a higher fee is agreed upon by the members of the Cooperative. If Cooperatives are established, contributions may be required, but they will be credited against your Local Marketing requirement. The total contribution, including Local Marketing, will not exceed 3% of your Royalty Sales.
- Additional Fees There may be other fees required, depending on specific circumstances or agreements, which should be taken into account when planning your budget.
Understanding these fees is crucial for effective financial planning and ensuring that your Texas Roadhouse franchise operates smoothly while benefiting from the brand’s support and marketing initiatives.
Texas Roadhouse Franchise Earnings
Based on the data from 2021, Texas Roadhouse franchises achieved median gross sales of $6,236,577, reflecting a significant 32% increase compared to the previous year. For an owner-operator, the earnings from this level of gross sales were approximately $623,658, also showing a 32% year-over-year increase. This suggests that an owner-operator could potentially expect earnings around 10% of gross sales.
For semi-absentee owners, the earnings were slightly lower at $436,560, which is still a strong return on investment considering the reduced time commitment. This data highlights the potential profitability of owning a Texas Roadhouse franchise, particularly with strong operational management and a well-chosen location.
How to Open a Texas Roadhouse Franchise
Becoming a Texas Roadhouse franchisee involves a comprehensive process designed to ensure that franchisees are well-prepared to represent the brand successfully. Here’s an overview of the steps involved:
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Application If your initial inquiry is accepted, you’ll be invited to complete a more detailed application. This application will ask for comprehensive information about your personal and professional background, financial status, and reasons for wanting to become a Texas Roadhouse franchisee.
- Discovery Day You may be invited to a Discovery Day event, where you’ll visit Texas Roadhouse headquarters or a franchise location. This event allows you to meet the corporate team, learn more about the brand’s operations, and ask any remaining questions you might have.
- Interview Process Following Discovery Day, you may undergo a series of interviews with Texas Roadhouse representatives. These interviews assess your alignment with the brand’s values, your business acumen, and your ability to successfully operate a franchise.
- Approval and Franchise Agreement If you pass the interview process, you’ll receive approval to move forward as a franchisee. At this stage, you’ll sign the franchise agreement and pay the initial franchise fee, formalizing your commitment to the brand.
- Site Selection and Approval With guidance from Texas Roadhouse’s real estate team, you’ll begin searching for a suitable location for your restaurant. The site will need to meet specific criteria and receive approval from the corporate team before proceeding.
- Training Program You and your management team will participate in a comprehensive training program. This training covers every aspect of running a Texas Roadhouse franchise, from day-to-day operations to customer service and food preparation standards.
- Construction and Build-Out After securing your location, the next step is to construct and outfit the restaurant. Texas Roadhouse’s design and construction team will help ensure the restaurant meets brand standards, including the interior design, kitchen setup, and overall atmosphere.
- Pre-Opening Preparation As the construction phase nears completion, you’ll focus on pre-opening preparations. This includes hiring and training staff, setting up supply chains, and planning marketing strategies to ensure a successful launch.
- Grand Opening Once your restaurant is fully equipped and staffed, you’ll host a grand opening. Texas Roadhouse provides support to help ensure your opening is a success, with ongoing assistance in marketing and operations.
- Ongoing Support After the grand opening, you’ll receive continuous support from Texas Roadhouse’s corporate team. This includes marketing assistance, operational guidance, and regular evaluations to ensure your franchise’s long-term success.
Pros & Cons
Pros
Strong Brand Recognition: Texas Roadhouse is a well-established and popular brand with a loyal customer base, which can lead to consistent foot traffic and sales.
Quality Menu Offerings: The brand is known for its high-quality steaks and made-from-scratch dishes, which attract a broad customer base looking for value and quality in their dining experience.
Community Involvement: Texas Roadhouse encourages franchisees to engage with their local communities, which can build strong local ties and customer loyalty.
Resilient Business Model: The franchise’s ability to bounce back and grow even after challenging periods (such as during the pandemic) highlights the resilience of its business model.
Cons
High Initial Investment: The initial investment required to open a Texas Roadhouse franchise can be quite high, making it less accessible for some investors.
Ongoing Fees: The franchise requires ongoing payments for royalties, marketing, and other fees, which can impact overall profitability.
Operational Demands: Managing a Texas Roadhouse franchise requires hands-on involvement and a significant time commitment, particularly if you’re an owner-operator.
Market Saturation: Depending on the location, the market for casual dining franchises may be saturated, which could impact your ability to stand out and attract customers.
Economic Sensitivity: The casual dining industry can be sensitive to economic downturns, which may affect sales during periods of reduced consumer spending.
Competitive Landscape: The restaurant industry is highly competitive, with numerous other casual dining options available to consumers, which means consistent efforts are required to maintain and grow your customer base.
