Texas Roadhouse Inc.

Company Overview

Business Model: Texas Roadhouse, Inc. operates as a growing restaurant company primarily within the casual dining segment, managing three distinct concepts: Texas Roadhouse, Bubba’s 33, and Jaggers. The core value proposition centers on offering high-quality, freshly prepared, affordable meals with friendly, attentive service in a fun and comfortable atmosphere. Revenue is primarily generated through company-owned restaurant sales, complemented by royalties and franchise fees from franchised locations, and retail initiatives leveraging its intellectual property. The company emphasizes an owner-operator partnership model to drive restaurant-level performance and community engagement.

Market Position: Texas Roadhouse, Inc. positions its restaurants as local hometown favorites. As of December 30, 2025, the company operated 816 restaurants across 49 states, one U.S. territory, and ten foreign countries. The Texas Roadhouse concept is a moderately priced, full-service casual dining steakhouse. Bubba’s 33 is a moderately priced, full-service casual dining concept featuring burgers, pizza, and wings with a sports and music theme. Jaggers is a fast-casual concept offering burgers, chicken, and salads with drive-thru, carry-out, and dine-in options. The company competes in an intense restaurant industry against a diverse group of chains and independent operators, as well as meal kit delivery services and supermarkets.

Recent Strategic Developments:

• Restaurant Expansion: Opened 28 company restaurants in 2025 (20 Texas Roadhouse, 7 Bubba’s 33, 1 Jaggers) and 4 franchise restaurants (3 international Texas Roadhouse, 1 domestic Jaggers).
• Franchise Acquisitions: Acquired 20 domestic franchise Texas Roadhouse restaurants in 2025 for $107.5 million, net of cash acquired, consistent with a long-term strategy to increase net income and EPS.
• Digital Enhancements: Implemented a customized digital platform for waitlists, pickup/curbside orders, and payments. Deployed texting systems for dine-in guests, new contactless payment options, digital kitchen display systems, and a digital guest management system in all domestic restaurants.
• Retail Initiatives: Expanded beverage offerings with handcrafted mocktails and $5 all-day beer/margarita specials. Included branded food and retail products (frozen rolls, whipped buttery spreads, beef jerky, steak sauces/seasonings) available online and in select retailers, and branded bagged peanuts in stadiums.
• Support Center Acquisition: Purchased its Louisville, Kentucky Support Center facility for $22.8 million in 2025.
• Leadership Changes: Michael S. Lenihan appointed Chief Financial Officer in December 2025. L. Paul Marshall appointed Chief Growth Officer in August 2025.

Geographic Footprint: As of December 30, 2025, Texas Roadhouse, Inc. operated 816 system-wide restaurants:

• Company-owned: 714 restaurants (648 Texas Roadhouse, 56 Bubba’s 33, 10 Jaggers) across 49 states.
• Franchised: 102 restaurants (36 domestic Texas Roadhouse, 5 domestic Jaggers, 60 international Texas Roadhouse, 1 international Jaggers) in 15 states, one U.S. territory (Puerto Rico), and ten foreign countries (Bahrain, China, South Korea, Kuwait, Mexico, Philippines, Qatar, Saudi Arabia, Taiwan, United Arab Emirates).
• Approximately 21% of company restaurants are concentrated in Texas (101) and Florida (50).

Financial Performance

Revenue Analysis

(1) Calculated as Restaurant and other sales minus Food and beverage costs. (2) Net income attributable to Texas Roadhouse, Inc.

Profitability Metrics:

• Gross Margin: 64.9% (2025) vs. 66.6% (2024)
• Operating Margin: 8.1% (2025) vs. 9.6% (2024)
• Net Margin: 6.9% (2025) vs. 8.1% (2024)

Investment in Growth:

• R&D Expenditure: Not separately disclosed; R&D focus is on technology and innovation.
• Capital Expenditures: $388.0 million in 2025 (expected $400 million in 2026).
  • New company restaurants: $180.8 million
  • Refurbishment or expansion of existing restaurants: $135.8 million
  • Relocation of existing restaurants: $43.6 million
  • Capital expenditures related to Support Center: $27.8 million
• Strategic Investments: $107.5 million for franchise acquisitions in 2025.

Business Segment Analysis

Texas Roadhouse

Financial Performance:

• Revenue (Restaurant and other sales): $5,475.8 million (2025)
• Operating Margin (Restaurant margin as % of sales): 15.6% (2025) vs. 17.3% (2024)
• Key Growth Drivers:
  • Store weeks increased by 5.0% (company restaurants).
  • Comparable restaurant sales increased by 5.0% YoY, driven by a 2.8% increase in guest traffic counts and a 2.1% increase in per person average check.
  • Average unit volume was $8.687 million (2025).
  • Restaurant margin dollars decreased by $13.4 million or 1.5% in 2025, primarily due to higher food and beverage costs (commodity inflation) and lapping the benefit of an additional week in 2024, partially offset by higher sales.

Product Portfolio:

• Broad assortment of specially seasoned and aged steaks, hand-cut daily on premises and cooked to order.
• Selection of ribs, seafood, chicken, pork chops, pulled pork, vegetable plates, hamburgers, salads, and sandwiches.
• Entrées include two made-from-scratch side items, free unlimited roasted in-shell peanuts, and fresh baked yeast rolls for dine-in guests.
• Specialty appetizers include "Cactus Blossom" and "Rattlesnake Bites."
• "12 & Under" menu for children.
• Full bar with draft/bottled beer, liquor, wine, made in-house margaritas, and signature cocktails (8.8% of restaurant sales in 2025). Handcrafted mocktails and $5 all-day beer/margarita specials.

Market Dynamics:

• Moderately priced, full-service, casual dining concept.
• Focus on being a neighborhood destination with local store marketing.
• Strong brand awareness and guest engagement through in-restaurant marketing and digital platforms.

Bubba’s 33

Financial Performance:

• Revenue (Restaurant and other sales): $335.2 million (2025)
• Operating Margin (Restaurant margin as % of sales): 14.7% (2025) vs. 15.6% (2024)
• Key Growth Drivers:
  • Store weeks increased by 2.8% (company restaurants).
  • Comparable restaurant sales increased by 2.8% YoY.
  • Average unit volume was $6.283 million (2025).
  • Restaurant margin dollars increased by $2.8 million or 6.0% in 2025, primarily due to higher sales, partially offset by higher food and beverage costs (commodity inflation), increased general liability insurance expense, and lapping the benefit of an additional week in 2024.

Product Portfolio:

• Features scratch-made food including burgers, pizza, and wings.
• Wide variety of appetizers, sandwiches, and dinner entrées.
• Extensive selection of ice-cold draft beer and signature cocktails.
• "12 & Under" menu for children.
• Open for daily lunch and dinner service, with delivery offered at a majority of locations.

Market Dynamics:

• Moderately priced, full-service, casual dining concept with a rock 'n' roll, ice-cold beer, and signature cocktails theme.
• Walls lined with televisions playing sports events and music videos.

Other (Jaggers and Retail Initiatives)

Financial Performance:

• Revenue (Restaurant and other sales): $36.2 million (2025)
• Operating Margin (Restaurant margin as % of sales): 13.5% (2025) vs. 13.8% (2024)
• Key Growth Drivers:
  • Jaggers had 1 company opening and 1 domestic franchise opening in 2025.
  • Increased royalties related to royalty-based retail products rolled out in 2024.

Product Portfolio:

• Jaggers: Fast-casual concept offering burgers, hand-breaded chicken sandwiches and tenders, made-to-order fresh salads, and hand-spun milkshakes. Offers drive-thru, carry-out, dine-in, and delivery.
• Retail Initiatives: Branded food and accessories (non-royalty based), licensing arrangements for frozen rolls, whipped buttery spreads, beef jerky, and steak sauces/seasonings. Branded bagged peanuts in stadiums.

Market Dynamics:

• Jaggers: Fast-casual segment, competing with quick-service and fast-casual restaurants.
• Retail Initiatives: Diversification into consumer packaged goods and branded merchandise to leverage brand recognition.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $150.0 million (869,007 shares) repurchased in 2025. As of December 30, 2025, $380.0 million remained authorized under the stock repurchase program approved on February 19, 2025, with no expiration date.
• Dividend Payments: $180.3 million paid in 2025. Quarterly dividend of $0.68 per share declared in 2025, an increase from $0.61 per share in 2024. A quarterly dividend of $0.75 per share was declared on February 18, 2026.
• Dividend Yield: Not explicitly stated, but can be calculated from dividend per share and stock price.
• Future Capital Return Commitments: The $380.0 million remaining under the authorized stock repurchase program.

Balance Sheet Position:

• Cash and Equivalents: $134.7 million as of December 30, 2025.
• Total Debt: No outstanding borrowings under the credit facility as of December 30, 2025.
• Net Cash Position: $134.7 million (Cash and Equivalents - Total Debt).
• Credit Rating: Not disclosed.
• Debt Maturity Profile: The revolving credit facility has a maturity date of April 24, 2030. No outstanding borrowings as of December 30, 2025.

Cash Flow Generation:

• Operating Cash Flow: $730.1 million in 2025.
• Free Cash Flow: $342.1 million in 2025 (Operating Cash Flow of $730.1 million - Capital Expenditures of $388.0 million).
• Cash Conversion Metrics: Not explicitly detailed, but the company notes it operates with negative working capital due to cash sales and trade credit for purchases, reducing the need for incremental working capital.

Operational Excellence

Production & Service Model:

• Food Preparation: Emphasis on freshness and quality. Texas Roadhouse restaurants feature trained meat cutters who hand-cut steaks daily and prepare side items and yeast rolls from scratch. Individual kitchen employees are assigned to specific food items for quality, consistency, speed, and safety.
• Quality Control: Management-level employees inspect every entrée. Product coaches provide continual, hands-on training for kitchen staff on food quality, recipe consistency, preparation, safety, and appearance.
• Service Delivery: Service coaches provide consistent, hands-on training for managers and service staff on service quality, teamwork, responsible alcohol service, and guest interactions.
• Food Safety: Utilizes Hazard Analysis Critical Control Points (HACCP) principles, electronic checklists, digital temperature monitoring, and cooling automation. All managers are ANSI Certified Food Managers. Product coaches and food team members obtain Certified Professional-Food Safety designation. Health department reports are reviewed for trend analysis.

Supply Chain Architecture: Key Suppliers & Partners:

• Food & Beverage: Negotiates directly with suppliers for substantially all food and beverage products. Strives to qualify more than one supplier for all key food items. Beef is primarily purchased from four suppliers in the United States or Canada, representing a significant portion of the total beef marketplace.
• Quality Assurance: Primary food items are purchased from qualified vendors regularly audited by outside inspection services for compliance with USDA and FDA guidelines.
• Vendor Partner Expectations: Suppliers are expected to comply with Vendor Partner Expectations outlining standards for food safety, business conduct, employee treatment, and legal compliance.
• Distribution: Most food products are distributed to individual restaurants through national distribution companies.

Facility Network:

• Manufacturing: Not applicable, as food preparation is done on-site at restaurants.
• Research & Development: R&D efforts are integrated into menu development and operational improvements, supported by product and service coaches.
• Distribution: Centralized procurement with direct shipments to domestic restaurants.
• Restaurant Prototypes:
  • Texas Roadhouse: Freestanding building, approximately 8,000 sq ft, seating for 270-325 guests, parking for ~180 vehicles.
  • Bubba’s 33: Freestanding building, approximately 7,600 sq ft, seating for 270-330 guests, some with patio seating for ~60. Parking for ~180 vehicles. A smaller 6,700 sq ft prototype is expected in 2026.
• Support Center: Owned facility in Louisville, Kentucky, comprising approximately 133,023 sq ft on 7.8 acres.
• Restaurant Ownership: 158 company restaurants on owned sites, 556 on leased sites (487 land leases, 69 land and building/in-line space leases).

Operational Metrics:

• To-go Sales: 13.6% of restaurant sales in 2025, with average weekly to-go sales of $21,973.
• Store Weeks Growth: Approximately 5.0% across all concepts in 2025. Expected 5% to 6% in 2026.
• Comparable Restaurant Sales Growth: 4.9% for company restaurants in 2025.
• Commodity Inflation: 6.1% in 2025, primarily due to higher beef costs. Expected 7% in 2026.
• Wage and Other Labor Inflation: 3.7% in 2025. Expected 3% to 4% in 2026.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Company-owned restaurants serve guests directly.
• Channel Partners: Franchisees operate Texas Roadhouse and Jaggers restaurants domestically and internationally.
• Digital Platforms: Fully customized digital platform for waitlists, pickup/curbside orders, and payments. Online ordering, contactless payment options, and online waitlists.
• Local Store Marketing: Managing Partners and local store marketers participate in community-based marketing, promotional activities, and contributions to charitable events. Marketing coaches support market-level strategies.
• In-restaurant Marketing: Point-of-purchase materials, special campaigns (Valentine’s Day, Mother’s Day, Father’s Day, Veterans Day), and an eight-week holiday gift card campaign.
• Advertising: Relies on earned local media (television, print, radio features), permission-based email loyalty programs, social media, and digital marketing.

Customer Portfolio: Enterprise Customers: Not applicable; primary customers are individual consumers. Strategic Partnerships: Franchisees are key partners for market expansion. Customer Concentration: Not applicable; diverse customer base across numerous locations.

Geographic Revenue Distribution:

• Domestic Focus: Predominantly in the United States.
• Key Markets: Approximately 21% of company restaurants are located in Texas and Florida.
• International Exposure: Franchised restaurants in one U.S. territory and ten foreign countries.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The restaurant industry is intensely competitive, characterized by a large and diverse group of restaurant chains and individual operators. Competition is based on taste, quality, price, value, service, atmosphere, location, and take-out/delivery options. The industry is influenced by consumer preferences, discretionary spending, and macroeconomic conditions. Industry Trends: Faced with competition from meal kit delivery services, the supermarket industry, and improving product offerings from fast-casual and quick-service restaurants. Negative economic conditions can cause consumers to choose less expensive alternatives.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: A large and diverse group of restaurant chains and individual restaurants, ranging from independent local operators to well-capitalized national restaurant chains. Emerging Competitive Threats: Meal kit delivery services, supermarket industry, improving product offerings of fast-casual and quick-service restaurants, and alternative food service providers. The rapid evolution and increased adoption of AI technologies may intensify cybersecurity risks and competitive dynamics.

Competitive Response Strategy:

• Growth: Consistently evaluates opportunities to develop new restaurants in new and existing markets, including smaller prototypes for Bubba's 33.
• Operational Excellence: Focus on high-quality, freshly prepared food, consistent service, and a fun atmosphere. Utilizes product and service coaches for training and quality control.
• Value Proposition: Offers everyday value to appeal to a broad segment of consumers.
• Technology Adoption: Implements digital enhancements to improve guest experience, manage higher volumes, and increase efficiency (online ordering, contactless payments, digital kitchen systems).
• Brand Protection: Devotes resources to protecting trademarks, service marks, trade dress, and other intellectual property rights.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Growth Strategy Execution: Inability to open new profitable restaurants, delays in openings, intense competition for suitable sites, new markets having different conditions/tastes, lower initial sales/higher expenses in new markets, negative impact on existing nearby restaurants.
• Food and Supply Costs/Availability: Increases in food prices (especially beef), supply constrictions, inflationary cycles (6.1% commodity inflation in 2025, 7% expected in 2026), weather, food safety concerns, global pandemics, product recalls, global market/trade conditions, government regulations (tariffs). Dependence on four primary beef suppliers.
• Comparable Restaurant Sales Fluctuations: Influenced by consumer awareness, business strategy effectiveness, ability to sustain off-premise sales, competition, menu price increases (without impacting traffic), economic conditions, weather, seasonal trends, new menu items, access rights, negative publicity.
• Consumer Preferences and Discretionary Spending: Shifts in consumer preferences (e.g., health concerns about beef, impact of GLP-1 agonists), reliance on discretionary spending, economic downturns, high inflation, higher interest rates, fuel costs, labor inflation, unemployment, consumer debt, tax changes, market volatility.
• Brand Reputation: Negative publicity (food quality/safety, illness, tampering, poor health inspections, supply chain issues, facility conditions, guest complaints, alcohol incidents, litigation, security breaches, employee relations, alleged misconduct, regulatory violations), actions of third parties (suppliers, franchisees, licensees), rapid dissemination of information via social media.
• New Concept Development/Acquisition: Bubba’s 33 and Jaggers may not be as successful as Texas Roadhouse, lower brand awareness, higher initial investment, lower average check, diversion of capital/management attention, longer ramp-up, lower margins, failure to achieve returns.
• Franchisee Actions: Franchisees are independent third parties; failure to operate according to standards could harm brand image and reputation.
• Geographic Concentration: Approximately 21% of company restaurants in Texas and Florida, making the company susceptible to adverse trends, economic conditions, and natural disasters in those states.
• International Expansion: Economic, political, and regulatory risks; need to adapt concepts culturally; new competition; staffing/managing foreign operations; product sourcing difficulties; currency exchange rate fluctuations; political/social unrest; compliance with local laws, tariffs, FCPA, and other international trade regulations.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: High dependence on four beef suppliers; inability to fulfill obligations could lead to shortages or higher costs.
• Capacity Constraints: Not explicitly mentioned as a risk, but the company is expanding dining room and parking capacity, and relocating older locations to larger sites, suggesting a proactive approach to managing capacity.

Financial & Regulatory Risks

Market & Financial Risks:

• Cash Flow and Credit Access: Decreased cash flow from operations or inability to access credit could negatively affect business initiatives, growth opportunities, or compliance with credit facility covenants.
• Debt Covenants: Credit facility limits additional debt and requires maintaining financial covenants; failure to comply could restrict financing.
• Long-term Leases: Subject to long-term non-cancelable leases; obligations continue even if restaurants close. Inability to renew leases on acceptable terms could force relocation or closure.
• Impairment Charges: Estimates and projections for long-lived assets and goodwill are subject to judgment; if actual results differ, significant impairment charges could be required.
• Litigation and Government Enforcement: Subject to increasing legal complexity, class actions, administrative proceedings, government investigations, personal injury claims, employment matters (wage/hour, discrimination), immigration, landlord/tenant disputes, franchisee disputes, data privacy, IP claims. "Dram shop" statutes pose a risk for alcohol service.
• Insurance Coverage: Self-insures a significant portion of losses (employee health, workers’ compensation, general liability, employment practices liability, cybersecurity, property); third-party insurance has varying retention levels. Unanticipated changes in claims experience or actuarial assumptions could increase expenses.
• Tax Laws: Changes in federal, state, and local tax laws, valuation of deferred tax assets/liabilities, and outcomes of tax audits could adversely affect financial results.
• Corporate Responsibility Matters (ESG): Increased attention to ESG matters (packaging, waste, animal welfare, human rights, diversity, climate change, energy/water use) leading to pressure for expanded disclosures, targets, and potential costs. Opposing views on ESG could lead to boycotts, negative publicity, litigation, and reputational harm.

Geopolitical & External Risks

Geopolitical Exposure:

• International Operations: Exposure to economic, political, and regulatory risks in foreign markets.
• Trade Relations: Impact of tariffs, trade barriers, and international trade regulations.
• Sanctions & Export Controls: Compliance requirements and business limitations due to sanctions.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Digital Platforms: Fully customized digital platform for waitlists, pickup/curbside orders, and payments.
• Operational Technology: Texting systems for dine-in guests, contactless payment options, digital kitchen display systems, and a digital guest management system.
• Information Security: Detailed policies and procedures based on NIST frameworks, managed by a Head of Information Security and Chief Technology Officer, supported by external cybersecurity experts.
• Innovation Pipeline: Continually reviews menu for enhancements, introduces new items after guest feedback and operational/economic study. Evaluates potential technological enhancements.

Intellectual Property Portfolio:

• Patent Strategy: Not explicitly detailed for patents, but relies on ownership and use of trademarks, service marks, trade dress, and other intellectual property rights.
• Licensing Programs: Licensing arrangements for frozen rolls, whipped buttery spreads, beef jerky, and steak sauces/seasonings as part of retail initiatives.
• IP Litigation: Risk of third parties claiming infringement; any such claim could be costly and time-consuming.

Technology Partnerships:

• Partners with a third-party vendor to manage an online tool for nutritional and allergen information.
• Partners with a vendor to support compliance with Food Safety Modernization Act traceability requirements.
• Relies on third-party cloud, hosting, content delivery, and telecommunications providers.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Managing partners and market partners are required to sign multi-year employment agreements. The company focuses on attracting, motivating, and retaining key officers, employees, and managers. Board Composition: The Board has authorized the Finance and Audit Committee to oversee the company’s cyber, data, privacy, and AI risks. The committee receives regular updates from internal risk subcommittees and Board members receive specific cybersecurity training.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 101,000 people as of December 30, 2025.
• Geographic Distribution: Employees are located across the company's operational footprint in 49 states, one U.S. territory, and ten foreign countries.
• Skill Mix: 935 executive and administrative personnel, 4,059 restaurant management personnel, and the remainder are full and part-time hourly restaurant personnel.
• Diversity Metrics (as of December 30, 2025):
  • Support Center: 54% Women, 13% People of Color
  • Restaurant Managers: 40% Women, 25% People of Color
  • Hourly Restaurant Employees: 57% Women, 45% People of Color

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focuses on attracting and retaining a broad range of talent and experience through multiple channels, maintaining a "People-First" culture.
• Retention Metrics: Not explicitly disclosed, but the company emphasizes competitive benefits, health programs, and a performance-based compensation program.
• Employee Value Proposition: Competitive wages, comprehensive benefits (retirement savings with employer matching, healthcare, insurance, HSA/FSA, tuition reimbursement, paid time off, parental leave, restaurant discounts, EAP/wellness programs). Thousands of employees share in financial success through bonuses and stock awards.

Diversity & Development:

• Development Programs: Provides training and development opportunities through in-person and virtual programs for all employee levels, designed for continuous learning, networking, growth, and advancement. Offers pathways from entry-level to management roles.
• Culture & Engagement: Committed to "Core Values of Passion, Partnership, Integrity, and Fun with Purpose." Values diverse thoughts and feedback, utilizing focus groups, large-scale surveys, and annual "Fall Tour" listening sessions.
• Health and Safety: Top priority, with specific protocols and standards deployed to restaurants.

Andy’s Outreach: A non-profit organization providing financial support to Texas Roadhouse employees and their families during severe hardship or crisis. Funded by employee payroll contributions, a domestic franchise store, and fundraising efforts. Assisted over 25,000 employees and distributed over $33 million since inception.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Not explicitly detailed with specific emissions targets or carbon neutrality commitments in the provided text. Renewable Energy: Not explicitly detailed in the provided text.

Supply Chain Sustainability:

• Supplier Engagement: Committed to building long-term partnerships with suppliers dedicated to delivering safe, high-quality ingredients and products. Suppliers are expected to comply with Vendor Partner Expectations, including adherence to food safety standards, ethical business conduct, employee treatment, and all applicable laws and regulations.
• Responsible Sourcing: Focuses on improving quality, enhancing visibility, eliminating waste, creating redundancy, and driving productivity in the supply chain through collaboration with suppliers.

Social Impact Initiatives:

• Community Investment: Mission to "leave every community better than we found it." Managing Partners are encouraged to participate in creative, community-based marketing, contributing time and complimentary meals to charitable, civic, and cultural events.
• Product Impact: Not explicitly detailed in terms of accessibility or digital divide, but the company's mission of "Serving Communities Across America and the World" implies a broader social benefit.
• Employee Well-being: "People-First" company culture, comprehensive benefits, training and development, and Andy's Outreach program for employees in need.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Business is subject to seasonal fluctuations. Historically, sales in most restaurants have been higher during the first half of each year.
• Economic Sensitivity: Holidays, changes in weather, severe weather, and similar conditions may impact sales volumes seasonally in some operating regions.
• Industry Cycles: Not explicitly detailed, but the company acknowledges that results for any one quarter are not necessarily indicative of results for any other quarter or for any year, and comparable restaurant sales for any particular future period may fluctuate.

Planning & Forecasting: The company's operating strategy and restaurant development process consider local market demographics, population density, household income levels, and site-specific characteristics.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Permitting & Licensing: Subject to federal, state, local, and international laws, including permitting and licensing requirements for alcoholic beverage control, health and safety, sanitation, labor, zoning, and public safety.
• Food Safety: Laws and regulations relating to the preparation and sale of food, including product safety, nutritional content, consumer protection, and menu labeling.
• Labor Laws: Federal and state wage and hour laws (minimum wage, overtime, meal/rest breaks, exempt classification, child labor, tip handling), health benefits, unemployment taxes, workers’ compensation, work authorization, working conditions, safety standards, equal employment opportunities, anti-discrimination, harassment, and reasonable accommodation.
• Alcohol Service: Subject to alcoholic beverage control regulations and "dram shop" statutes. Focuses on responsible alcohol service training and carries liquor liability coverage.
• ADA Compliance: Must comply with Americans with Disabilities Act of 1990 (ADA) and related state accessibility statutes, providing equal access to goods and services for disabled guests and adhering to ADA Standards for Accessible Design for construction/remodeling.

Trade & Export Controls:

• International Compliance: International business operations are subject to antitrust and tax requirements, anti-boycott legislation, import/export controls and customs requirements, potential tariffs or trade barriers, other international trade regulations, the USA Patriot Act, and the Foreign Corrupt Practices Act.
• Export Restrictions: Not explicitly detailed, but compliance with international trade regulations is a general requirement.

Legal Proceedings:

• Occasionally a defendant in litigation arising in the ordinary course of business, including "slip and fall" accidents, employment-related claims, dram shop statutes, and claims alleging illness, injury, or food quality/operational concerns.
• As of the report date, not party to any litigation believed to have a material adverse effect on the business.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: Decreased to 13.8% in 2025 from 15.3% in 2024, driven by an increase in the impact of the FICA tip tax credit.
• Geographic Tax Planning: Primarily subject to federal, state, and local income and other taxes in the United States. State taxes in Florida, Texas, Illinois, Pennsylvania, Virginia, Michigan, Kentucky, New Jersey, Indiana, Arizona, Maryland, and Tennessee made up the majority (greater than 50%) of the state tax effect in 2025.
• Tax Reform Impact: Not explicitly detailed, but the company monitors changes in tax laws.
• Future Outlook: Expects an effective tax rate of 14% to 15% in 2026 based on forecasted operating results.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Self-insures a significant portion of expected losses related to employee health, workers’ compensation, general liability, employment practices liability, cybersecurity, and property claims.
• Self-Insurance: Utilizes a wholly-owned captive insurance company to cover certain lines of coverage.
• Risk Transfer Mechanisms: Uses third-party insurance with varying retention levels to limit exposure to significant losses. Carries liquor liability coverage as part of comprehensive general liability insurance and excess umbrella coverage.
• Enterprise Risk Management: Has a cross-functional risk subcommittee focused solely on responsible alcohol service. An internal risk committee evaluates information governance risks, including AI-related risks, and is briefed on cybersecurity incidents. A crisis response team oversees responses to various crises, including cybersecurity incidents.