How is Texas Roadhouse outperforming Outback Steakhouse and others?

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It's been a tough couple of years for chain restaurants, including the ones that peddle T-bones and filet mignon.

Logan's Roadhouse filed for bankruptcy protection last year. Lone Star Steakhouse is shuttering restaurants across the country. Tampa-based Outback Steakhouse, and its parent company, Bloomin' Brands, have been struggling to break the cycle of quarter after quarter of flat sales.

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So how is it that a restaurant chain known for its cheap steaks and encouraging its patrons to throw peanut shells on the floor is outperforming so many others in the casual dining category? Louisville-based Texas Roadhouse is expanding aggressively. In the past three years, Texas Roadhouse has doubled the amount of restaurants it operates in Florida. Two more are set to open this year, and dozens more could be coming soon as the company continues to scout for real estate in the area.

Texas Roadhouse was named one of the stocks to watch in 2017 by the Nation's Restaurant News after its stock prices jumped more than 35 percent last year. Texas Roadhouse has logged 26 quarters in a row of positive sales growth.

There's no secret ingredient to Texas Roadhouse's success, whose strategy has remained much the same for decades, says Brian Connors, a consultant with Fort Lauderdale-based Connors Davis Hospitality.

"There's nothing special about them, it's just a good, honest, American steakhouse," Connors said. "They aim and shoot right down Middle America. It's about meat and potatoes and ice cold beer. Now will they attract the health-conscious, city-living millennials? Probably not, but the 30-somethings with a mini van and two kids? Absolutely."

Steakhouses tend to outperform others in the casual dining category because restaurants can range from high-end concepts, like the Capital Grille or Ruth's Chris Steakhouse, to more affordable options, like a Longhorn Steakhouse. But even within the steakhouse category there are some chains, like Outback Steakhouse, that are still struggling, said Darren Tristano, president of Technomic, a Chicago-based food research firm.

"Texas Roadhouse is more on par with middle America and younger consumers than some of its competitors," Tristano said. "If you were going to compare Outback to Texas Roadhouse, the first big difference is the price. Customers can expect to spend $9.99 on a early dining special or $14 to $15 on an entree. At Outback, customers will likely pay $20 or more."

Tristano added that "Outback tends to attract an older customer whereas the Texas Roadhouse atmosphere is more energetic."

The chain is also known for its speedy and attentive service and a menu which, despite a number of fried and breaded foods, is all made from scratch. Texas Roadhouse also isn't open for lunch.

"They try to turn tables fast, so they tend to focus on a smaller ratio of servers to tables," Tristano said.

Texas Steakhouse opened its first restaurant in the college town of Clarksville, Ind., in 1993. Its second restaurant opened in Gainesville the same year. The chain opened two more restaurants in Sarasota and Clearwater in the late 90s, but both failed, said company spokesman, Travis Doster.

"After that, we didn't come back to Florida for many years," Doster said. But Florida has grown to be the chain's third largest domestic market, following Texas and Ohio. "Florida's become an important part of our growth strategy."

With only 500 restaurants in the U.S., the chain is about half the size of Outback Steakhouse. But Texas Roadhouse is valued at more than $3 billion, whereas Bloomin' Brands and its entire portfolio of restaurants — Outback, Carrabba's Italian Grill, Fleming's Prime Steakhouse & Wine Bar and Bonefish Grill — is valued at well under $2 billion. "If you look at a long history of restaurants, sometimes they grow a little faster than they should," Doster said. "We're not looking to open in larger cities. We prefer smaller bedroom communities. We've stuck to our formula and it worked."

Texas Roadhouse has restaurants in Spring Hill, Wesley Chapel, St. Petersburg, Lakeland and Bradenton, but there's plenty of room for more in the area, said Brian Bern, senior director of real estate services with Franklin Street in Tampa.

"Restaurants continue to lead the charge on expansion since we've been out of the recession," Bern said. "Tampa Bay is a good, middle of the road market. Our demographics and general income coupled with Florida's tourism and the popularity of people moving here for retirement makes Tampa Bay look like a great growth market."

Still, casual dining at chain restaurants is suffering overall. More consumers are opting to spend at independent eateries in their communities, a shift spurred by millennials that has exploded in recent years. The casual dining segment fared the worst out of any restaurant category with the poorest results in 2016, according to national data compiled by the Dallas-based firm, TDn2K. Sales overall at chain restaurants dropped 2.4 percent in the fourth quarter of 2016, the worst quarterly performance recorded in five years, according to TDn2K. Boosting both sales and the number of chain restaurants depend on a restaurant's ability to evolve to meet the needs of the changing customer base, both analysts agreed.

"A lot of restaurant chains, especially publicly traded companies, have to continue to show growth to their investors, so they may cut corners in certain aspects," Bern said. "A lot of these chains, you grew up eating at them but they just don't seem to have the same quality anymore. Maybe our palates are more sophisticated? Or we just don't get the same enjoyment out of those same experiences like we used to."

Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.

 
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