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Texas Roadhouse Steakhouse
Texas Roadhouse is a chain of steakhouses with a decidedly Western theme and a robust menu of steaks, ribs, chicken and seafood. The restaurant brand has won several national cooking championships with their ribs and steaks. Texas Roadhouse takes special pride in their steaks, always fresh-cut in the restaurant, never frozen. Texas Roadhouse helps bolster its Western theme with servers who learn to line dance and perform throughout the night to popular country songs. In addition to its renowned meat dishes, Texas Roadhouse encourages customers to wash it all down with its great selection of ice cold beers or its Legendary Margarita. More about the cost of owning a Texas Roadhouse franchise below.
Facts & figures
Texas Roadhouse is a classic American casual dining restaurant franchise with over 750+ outlets across the US and several international countries, known for its commitment to quality and the motto “Legendary Food, Legendary Service”.
With a brand identity based on providing fresh food including bread baked every five minutes, sides made from scratch, and hand-cut steak, the franchise has made a name for itself as a family-friendly restaurant providing quality meals, bringing a taste of Texas to customers across the country. The restaurants serve over 5,000 guests a week on average and make over 300,000 meals a day globally.
If you want to partner with a casual dining restaurant with a distinctly American touch and a commitment to only serving freshly made food, Texas Roadhouse could be the right place for you.
However, Texas Roadhouse has specific criteria for its franchisees; it requires a significant net worth, initial investment, and a certain degree of hands-on commitment in running your restaurant.
To help you make the right decision, we are going to break down what exactly it takes to partner with Texas Roadhouse in this article. Let’s get started.
History of the company
Texas Roadhouse was founded by Kent Taylor in 1993 in Clarkesville, Indiana, with the goal to make a restaurant where everyone can enjoy a great American meal and is fun for people of all ages. The brand expanded rapidly in the late 1990s and was incorporated as a public company in 2004, expanding internationally in 2011 and opened its first restaurant franchise abroad in Dubai, U.A.E., with future plans to enter China.
- Total franchised units: 762
- Royalty: 4%
- Failure rate: 2%
Is a Texas Roadhouse franchise right for you?
Texas Roadhouse can be a lucrative business opportunity for investors looking to add a casual dining restaurant to their portfolio. However, it requires a hefty investment and requires constant production of fresh made food, contributing to higher ongoing costs.
We have outlined the pros and cons of owning a Texas Roadhouse franchise below to help you decide whether it is the right investment for you.
Pros and cons of owning a Texas Roadhouse franchise
Pros
- With affordable steaks, a great menu, and family dining, the business model draws in a significant number of customers.
- Texas Roadhouse gives you significant training and support from opening throughout the operation of your restaurant. Their trained crew provides operational support, onsite and construction evaluations, and training to your employees.
- Texas Roadhouse has strong brand recognition among its customer base, leading to loyal sales.
- Texas Roadhouse has a stress-tested business model, allowing good opportunities for bouncing back and growing even after difficult periods like the pandemic.
Cons
- Texas Roadhouse requires you (and your spouse, if you are married) to sign a personal guarantee agreement, making you personally liable for the franchise.
- In case of a buyout, Texas Roadhouse can require you to transfer your assets and equity in the business in exchange for shares in the parent company only.
- With several other competitive restaurants such as Outback Steakhouse, Logan’s Roadhouse, and LongHorn, the casual dining industry can be extremely competitive.
- Texas Roadhouse requires a high initial investment to get started.
Texas Roadhouse franchisee minimum requirements
Texas Roadhouse has set a high bar financially for becoming a franchisee. Here’s a breakdown of financial requirements.
- Net worth - An equity of $800,000 or 25% of the total estimated project cost, whichever is higher, for each approved restaurant
- Liquid capital - Franchisees need at least $500,000 of liquid assets that you can prove as yours to start a Texas Roadhouse franchise. The requirement is to ensure that the outlet is able to run smoothly during the early stages.
- Initial investment - The initial investment in Texas Roadhouse can range from $3,894,500 to $7,901,500, depending on multiple factors which vary between franchisees.
Texas Roadhouse also expects its prospective candidates to have some business and professional experience as well. However, the exact expectations can vary based on the candidate and the company’s expansion plans.
How does the Texas Roadhouse franchise model work?
Texas Roadhouse follows the standard franchise model in the quick service restaurant industry, where the franchisor licenses out their brand name and business model to the franchisee. Texas Roadhouse defines its business model to be a system including distinctive exterior and interior design, decor, color scheme, furnishing, menu and recipes, and business processes.
How much does a Texas Roadhouse cost?
The total costs of opening a Texas Roadhouse outlet can range from $4,349,500 to $6,801,500 if it's a renovation. However, if you are building a new outlet, the costs can shoot up to $5,396,500 to $7,901,500.
To understand where these costs are coming from, they can be categorized into start-up costs, ongoing costs, and additional costs.
Texas Roadhouse Start-up costs
Texas Roadhouse has significant start-up costs. Here’s an estimate of the initial costs for starting a Texas Roadhouse, extracted from the Item 7 of the Franchise Disclosure Document (FDD).
| Type of Cost | Minimum | Maximum |
Franchise Fee | $40,000 | $40,000 |
Leasehold/Building Improvements | Renovation: $1,400,000 | Renovation: $2,200,000 |
Site Evaluation | $190,000 | $280,000 |
Builders Risk and OCP Insurance | $5,000 | $12,000 |
Performance Bonds | Renovation: $12,000 | Renovation: $25,000 |
Furniture, Decor, and Fixtures | $290,000 | $370,000 |
Equipment | Renovation: $700,000 | Renovation: $900,000 |
| 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/Network Cabling Fees | $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 | Renovation: $3,894,500 | Renovation: $6,388,500 |
Ongoing costs
Your ongoing costs with Texas Roadhouse would repeat on a planned schedule. Here are some ongoing costs prospective franchisees might face:
- Royalty fee: 4% of royalty sales*
- Local marketing: 2% of royalty sales
- Cooperative marketing: 2% of royalty sales, unless otherwise approved
- Marketing fund: Current: 0.3% of Royalty Sales; Maximum: 2.5% of Royalty Sales
*Royalty sales is defined as the total selling price of all services and products and all income of every other kind and nature related to the restaurant, whether for cash or credit and regardless of collection in the case of credit. When it comes to discounts and coupons, the retail price of the items purchased is taken into account instead of the discounted amount.
Additional fees
Lastly, Texas Roadhouse might charge you extra fees depending on your specific situation, as detailed in the franchise agreement. These fees could include:
- Audit fee: Cost of audit
- Software and networking fees: To be determined
- I.T. support fee: $350/Month
- Employment fee: A reasonable amount based on expenses
- Opening training: $2,500
- Force Majeure: Minimum fee
- Attorneys fees: Will vary
- Managing partner compensation program: Will vary
- Remodeling requirements: Varies according to need
- Copyright license expense: Varies according to third party license fees assessed
- Liquidated damages: $1,000
- Transfer fee: $3,500
Texas Roadhouse requires a large upfront investment and some significant recurring fees, creating a high financial barrier to entry. With this in mind, understanding the split of costs as well as their scheduled payments can help you plan out your finances and potential profitability with the franchise better.
How much does a Texas Roadhouse owner make in a year?
Texas Roadhouse doesn’t disclose information about its franchisee’s yearly earnings, however, it can be estimated that an average Texas Roadhouse outlet makes around $3.8 million in sales annually, out of which the owner makes around 10% as profit. This translates to roughly $380,000 in profit, which is considerably higher than the average QSR franchise owner's salary of $120,000.
That said, it’s important to remember that these are estimates. To get accurate figures, it is recommended to reach out to existing franchisees with similar market conditions. Talking to as many current and previous franchisees as possible can help you clearly understand the finances of running a Texas Roadhouse.
How does the Texas Roadhouse franchise process work?
Once you’ve determined that Texas Roadhouse is the right franchise for you, here’s how you can start the process of getting your own outlet.
1. Expression of Interest through initial inquiry
The first step is reaching out to Texas Roadhouse with an initial inquiry and expressing your interest in owning a franchise outlet. You can do this yourself or hire a franchise specialist to handle the process.
2. Fill out your application
Once your initial inquiry is processed, Texas Roadhouse may ask you to fill out an application. Here, Texas Roadhouse expects you to provide your personal and financial details to prove you have the required net worth and liquid capital to support the restaurant you are expecting to franchise. You may have to provide some documentation such as proof of funds and financial statements.
3. Visit premises on Discovery Day
If Texas Roadhouse is satisfied with your application, they’ll invite you for an open day at their headquarters or another franchise location. You’ll get the opportunity to interact with their management team and learn about Texas Roadhouse’s operations and values first hand.
4. Go through the interview process
After Discovery Day, you may go through some interviews with the Texas Roadhouse corporate team, where they’ll assess your personality, fit, and alignment with the brand values.
5. Sign the franchise agreement
If Texas Roadhouse approves you for a restaurant franchise, they will offer you the opportunity to sign a franchise agreement with them. Texas Roadhouse expects you to pay a part of the franchise fee during the signing process and the rest before the restaurant opens for business.
They will share the franchise agreement and a Franchise Disclosure Document (FDD) at least 14 days before the signing date for your review. The agreement would form the basis of your relationship with Texas Roadhouse, and the FDD the terms and conditions of joining the franchise. Understanding all the terms of the agreement can help you make the right decision and we recommend that you seek a franchise attorney to help you with this step of the process.
Some of the elements to keep in mind when reviewing Texas Roadhouse’s documents are:
Personal guarantee: Texas Roadhouse states that you (and your spouse, if you are married) should sign a personal guarantee, making you financially liable for the franchise. If you are purchasing it via an LLC, they expect all principal operators of the company to sign the guarantee.
Transfer: The agreement states that Texas Roadhouse can buy back all the assets minus the liabilities of your outlet and ownership interest in your franchise for the common stock of TXRH company.
Texas Roadhouse doesn’t authorize its franchisees to disclose financial information, so reaching out to existing franchise outlet owners for details on profitability can be difficult. However, the company provides the relevant financial disclosures if you are purchasing an existing franchise.
A note on the Franchise Disclosure Document (FDD)
An FDD is a legal document with key information about the specific franchise, giving you a starting point for in-depth research. It has 23 items in it and with any franchise, this should be your starting point of research. Check out our Ultimate Franchising Guide to learn more about FDDs.
6. Prepare the site and obtain approval
After signing your franchise agreement, you are expected to work together with the Texas Roadhouse real estate team to locate a suitable location. The team will evaluate the site under certain criteria before giving you the approval to begin construction.
7. Attend a multi-week training
Before opening your store, Texas Roadhouse requires your managerial team to attend a comprehensive training program covering operational training, management training, kitchen management, and general management of running a Texas Roadhouse franchise. The training can last from 16 - 18 weeks.
8. Begin site construction
Once your training is complete, you can begin the construction of your restaurant. Texas Roadhouse will provide you with the guidelines and prototype of architectural and design plans for the construction of the premises. The franchisee is responsible for all aspects of the construction process and you must comply with all state and federal laws regarding the process.
9. Prepare for your grand opening
As the construction nears completion, you’ll have to begin the pre-opening preparations from hiring and training an employee team, to inventory management, and marketing plans.
10. Open your restaurant
Finally, you can open your Texas Roadhouse casual dining restaurant. The parent company will provide onsite assistance for 12 - 15 days to help you get started.
Texas Roadhouse, with its great sales potential and brand recognition, can be an attractive opportunity for individuals looking to add a casual dining franchise to their portfolio. However, it requires a hefty initial investment in both franchise fees and build-out, which can deter some prospective franchisees. If you are looking for a more affordable casual dining franchise, some other franchises can be a good fit.
What are some alternatives to Texas Roadhouse?
While Texas Roadhouse is a lucrative franchise, it has high barriers to entry in terms of finances, net worth, and experience. Here are some other franchises to consider
Dickey’s Barbecue Pit
Dickey's Barbecue Pit is known for its authentic, slow-smoked barbecue, particularly its smoked meats like brisket, pulled pork, ribs, and sausages. Founded in 1941, the chain prides itself on using hickory wood to smoke its meats, giving them a rich, smoky flavor. Dickey’s Barbecue Pit’s initial investment can range from $71,993 to $323,789 and they charge a royalty fee of 5% of gross sales
Muscle Maker Grill
Designed for health-conscious individuals as an alternative to traditional fast food, Muscle Maker Grill focuses on providing healthy protein without sacrificing flavor. With an initial investment ranging from $187,500 - $454,000, Muscle Maker Grill charges a royalty fee of 5% with a contribution of 3% toward local and national advertising.
Moe’s Southwest Grill
A fast-casual Mexican restaurant chain focusing on Southwestern food, Moe’s Southwest Grill can be a great choice for individuals looking for casual dining restaurants that prioritize quality. The initial investment for Moe’s Southwest Grill ranges from $474,900 - $1,109,840 and the franchise charges a royalty rate of 5% on sales.
The QSR industry is very competitive and choosing the right franchisor can set you up for success. Understanding the cost, profitability, and demand for the brand before making a final choice on your franchise can help you find the right one for you.
If you are not sure about your options, take our franchise quiz to match with your ideal franchise. Good luck!
FAQ
What is the Texas Roadhouse franchise owner salary?
A Texas Roadhouse franchise owner can make a profit of around $300,000 a year.
Is Texas Roadhouse a franchise?
Yes, Texas Roadhouse has been offering franchises since 1995. The chain has over 765 stores, mostly franchises, in 49 US states.
How much does it cost to start aTexas Roadhouse franchise?
The total costs of opening a Texas Roadhouse restaurant franchise can range from anywhere between $4,349,500 to $7,901,500, depending on whether it's a renovation or build out, inclusive of the $40,000 franchise fee.
What is the franchise fee for Texas Roadhouse?
Texas Roadhouse charges a franchise fee of $40,000, out of which $25,000 is payable on signing the agreement. The rest should be paid 4 weeks before the opening of the restaurant.
Who owns Texas Roadhouse?
Texas Roadhouse is a publicly traded company, with the majority of its shares owned by institutional investors.
