Texas Roadhouse CEO W. Kent Taylor Reveals 2012 Plans

While the return of W. Kent Taylor to the post of chief executive at Texas Roadhouse may yield a few changes for the brand, the casual-dining chain's founder says he's never moved too far away from the daily operations of the concept he launched back in 1993.

Following the resignation of former chief executive G.J. Hart, who left Louisville, Ky.-based Texas Roadhouse Aug. 14 to become CEO of California Pizza Kitchen, Taylor resumed the role he had held at Texas Roadhouse from 2000 to 2004.

Since then, the brand introduced its first international location in September in Dubai and recorded a 13-percent increase in profit for the third quarter of 2011.

Taylor, who remained chairman of the company during Hart's tenure as CEO, said Texas Roadhouse's recent success has much to do with the brand fundamentals he has advocated from the beginning, with a compensation structure and local-store marketing focus that makes the brand's managing partners and market partners more entrepreneurial.

Texas Roadhouse will open 25 new restaurants in 2012, including a few more units in the Middle East, Taylor said.

"We've had a solid 2011, and there are many more challenges ahead for 2012, but we're not scared," Taylor told Nation's Restaurant News. "We're ready to tackle 2012 like we did with 2011."

Since you're stepping back into the CEO role, what has the transition period entailed for Texas Roadhouse?

I've never relinquished real estate [site selection], I've always done the menu and the menu pricing, and I've always had my hand involved in our company conference. I have been there to protect the brand from ourselves and make sure we don't make changes from [our differentiators like] three-table stations, cutting our meat in-house and making our items from scratch. Those are the type of things that a lot of companies transitioning from one leader to another tend to screw with and mess up. We've never had a market partner, who is like an area manager, quit. I'm very proud of that

We had a transition plan put in place about two years ago, so when G.J. announced he was leaving, we got the board together and pushed the "go" button. I would say that with me back in the saddle, I may view some things differently from G.J., but I don't think fundamentally you're going to see a shift in the business. What's going to happen with me more engaged is you're going to see my personality and my style reflected in certain parts of our business.

As an example, in marketing I really want to push social media, whereas we weren't as directed that way before. For me, being on Papa John's board of directors, I see how they leverage social media, and I would say there are a lot of things I'm picking up from them that we could take advantage of.

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What have you learned so far from opening in Dubai?

I fought in the Middle East hard and long to be more like we are in the United States. A lot of times when you go international, whatever their view of what you should be over there for their people — and I had to stand my ground — once you open up and they see how well your concept works there, those conversations all get forgotten. It's not really ever the partner's problem; it's more the landlord's. Alshaya [our Middle East franchisee] got it, but it's the landlords who think they have a more upscale mall and that the brand needs to be more upscale. Once they open up the mall and see how well the brand translates, then they get it. Lines out the door are still lines out the door.

The chain's new U.S. restaurants are averaging higher weekly sales than more mature locations. Why?

We have a smaller square footage building that has more seats. We've shrunk the kitchen in favor of adding square footage to the front-of-the-house, which, when you're on a wait Thursday through Sunday, translates into additional sales. But it wouldn't happen if our kitchen wasn't able to handle that additional flow, and it does. We've had that going for more than a year.

With commodity costs expected to be high in 2012, how are you planning to balance price increases with engineering the menu between value and higher-margin items?

I'm in the middle of that process now, and I have about 20 calls left to make on pricing. What I do every year is find out where the commodities are going, and then we send out a low, medium and high menu to our market partners, and on the phone we discuss their viewpoints of where they would like to see pricing go in their markets, as well as prices on specific individual items.

Our decisions on pricing really are more regionalized, and yet we'll report a number for the price increase across the board. But we'll really have about 30-plus menus across the country because certain parts of the country are more price-sensitive than others. That's maybe where we differ from some of our competitors who have somebody in accounting say this is the price increase that will work. We have a lot more menus because certain areas have higher or lower unemployment, or they're more bullish on the economy, or certain areas are more pessimistic.

Even as Texas Roadhouse grows, will it continue to forgo national advertising in favor of local-store marketing?

I don't know about way in the future, but I don't see any changes for the year coming up. That's always been my philosophy. Usually when new people join the company and bring their backgrounds related to increasing marketing, I just tell them they're on probation for two years. When they get out of probation, I'll let them know if they can start paying more for national marketing, but usually after two years they figure out that they can't.

Social media is free, and our public-relations department gets exposure through cooking show appearances and the like. We want the monkey to be on the operator's back, and too many times when you have national ad campaigns the operators sit and wait for the marketing to bring the business in, and when the business isn't there it's easy to blame marketing. But we don't give them that excuse. The monkey's squarely on their back — they own it and it's their job to deliver.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN