What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 133 added, 147 removed, 321 unchanged (47% of the section changed)

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The Company is a growing restaurant company operating predominately in the casual dining segment.

Our founder, chairman and chief executive officer, W.

Our late founder, W.

Kent Taylor, started the business in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana.

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Narrative Description of Business

Of the 537 restaurants we owned and operated at the end of 2020, we operated 503 as Texas Roadhouse restaurants, 31 as Bubba’s 33 restaurants and three as Jaggers restaurants.

Throughout this report, we use the term "restaurants"

to include Texas Roadhouse and Bubba’s 33, unless otherwise noted.

Of the 566 restaurants we owned and operated at the end of 2021, we operated 526 as Texas Roadhouse restaurants, 36 as Bubba’s 33 restaurants and four as Jaggers restaurants.

Texas Roadhouse is a moderately priced, full-service, casual dining restaurant concept offering an assortment of specially seasoned and aged steaks hand- cut daily on the premises and cooked to order over open grills.

In addition to steaks, we also offer our guests a selection of ribs, seafood, chicken, pork chops, pulled pork and vegetable plates, and an assortment of hamburgers, salads and sandwiches.

The majority of our entrées include two made-from-scratch side items, and we offer all our guests a free unlimited supply of roasted in-shell peanuts and fresh baked yeast rolls.

The majority of our entrées include two made-from-scratch side items, and we offer all our dine-in guests a free unlimited supply of roasted in-shell peanuts and fresh baked yeast rolls.

Bubba’s 33 is a family-friendly, sports restaurant concept featuring scratch-made food, ice cold beer and signature drinks.

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Jaggers is a fast-casual restaurant concept offering burgers, hand-breaded chicken tenders and chicken sandwiches served with scratch-made sauces.

In addition, we offer fresh salads that are chopped and tossed when ordered and served with homemade dressings.

In addition, we offer fresh salads that are tossed when ordered and served with homemade dressings.

Jaggers offers drive-thru, carry-out, and dine-in service options.

Our first Jaggers restaurant opened in December 2014 in Noblesville, Indiana.

Financial Information about Operating Segments

We consider our restaurant and franchising operations as similar and have aggregated them into a single reportable segment.

The majority of the restaurants operate in the U.S.

within the casual dining segment of the restaurant industry, providing similar products to similar customers, and possessing similar pricing structures, resulting in similar long- term expected financial performance characteristics.

Each of our 537 company restaurants is considered an operating segment.

COVID-19 Impact

On March 13, 2020, the novel coronavirus ( "

COVID-19 ") pandemic (the "

pandemic "

) was declared a National Public Health Emergency.

Shortly after the national emergency declaration, state and local officials began placing restrictions on restaurants, some of which allowed To-Go or curbside service only while others limited capacity in the dining room.

By late March, all of our domestic company and franchise restaurants were under state or local order which only allowed for To-Go or curbside service.

Beginning in early May 2020, state and local guidelines began to allow dining rooms to re-open, typically at a limited capacity.

While all of our dining rooms were able to open in some capacity, many were required to close again in areas more severely impacted by the pandemic.

As of December 29, 2020, 82% of our company restaurants had their dining rooms operating under various limited capacity restrictions.

Our remaining restaurants were limited to outdoor and/or To-Go or curbside service only.

In response to the impact of the pandemic on our restaurant operations, we have developed a hybrid operating model that accommodates our limited capacity dining rooms together with enhanced To-Go, which includes a curbside and/or drive-up operating model, as permitted by local guidelines.

This includes design changes to our building to better accommodate the increased To-Go sales and the expansion of outdoor seating areas where allowed.

We also have installed booth partitions in all of our restaurants as an added safety measure for our guests.

In addition, we have increased our already strict sanitation requirements, are conducting daily health and temperature checks for all employees before they begin their shift and are requiring personal protective equipment to be worn by all restaurant employees at all times.

As we work through the local regulations at each of our locations, the safety of our employees and guests remains our top priority.

As a result of the dining room restrictions and temporary closures, we have experienced a significant decrease in traffic which has impacted our operating results.

While the majority of our dining rooms have re-opened, a significant portion continue to operate under capacity restrictions that severely limit the number of guests we can serve.

In addition, while we have seen significant sales growth in our To-Go program, even with dining rooms re-opened, we currently do not expect these sales will generate a similar profit margin and cash flows to our normal operating model.

We expect our operating results to continue to be impacted until at least such time that all state and local restrictions are lifted, and our dining rooms can operate at full capacity.

We cannot predict how long the pandemic will last, how long it will take until all state and local restrictions will be lifted, or the extent to which our dining rooms will have to close again.

In addition, we cannot predict the overall impact on the economy or consumer spending habits.

The impact on our operating results as well as the operational and financial measures we have implemented in response to the pandemic have been included throughout this report.

In response to the pandemic, the Company and our Board of Directors implemented the following measures in 2020 to enhance financial flexibility:

● Decreased the number of planned new restaurants for 2020;

● Suspended all quarterly cash dividends occurring after March 27, 2020;

● Suspended all share repurchase activity;

● Expanded the capacity of the revolving credit facility and increased the borrowings by $240 million;

● Decreased compensation including voluntary reductions of salary and bonus for the executive and leadership teams to make relief grants available for restaurant employees.

Each non-employee member of the Board of Directors also volunteered to forgo their director and committee fees along with any cash retainers effective April 1, 2020 and continuing throughout fiscal 2020.

Effective March 27, 2020, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed to benefit companies that were significantly impacted by the pandemic.

Throughout this report, we use the term "restaurants"

to include Texas Roadhouse and Bubba’s 33, unless otherwise noted.

Segment Information

We manage our restaurant and franchising operations by concept and as a result have identified Texas Roadhouse, Bubba’s 33, Jaggers and our retail initiatives (including our online store and royalty-based licensing arrangements) as separate operating segments.

In addition, we have identified Texas Roadhouse and Bubba’s 33 as reportable segments.

COVID-19 and Related Impacts

The Company has been subject to risks and uncertainties as a result of the COVID-19 pandemic (the “pandemic”).

These include federal, state and local restrictions on restaurants, some of which have limited capacity or seating in dining rooms while others have allowed to-go or curbside service only.

As of December 28, 2021, all of our domestic company and franchise locations were operating without restriction.

As of December 29, 2020, all of our domestic company and franchise locations were operating their dining rooms under various limited capacity restrictions or were limited to outdoor and/or to-go or curbside service only.

As a result of these restrictions, we developed a hybrid operating model to accommodate our dining room restrictions together with enhanced to-go.

We continue to see sales in our to-go program higher than pre-pandemic levels, even with dining rooms operating without restriction.

We cannot predict how long we will continue to be impacted by the pandemic, the extent to which our dining rooms will have to close again or otherwise have limited

seating, or if the increased sales in our to-go program will continue.

The extent to which the pandemic impacts our business, results of operations, or financial condition will depend on future developments which are outside of our control.

This includes, without limitation, the efficacy and public acceptance of vaccination programs and/or testing mandates in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may prove resistant to currently approved vaccines, and new or reinstated restrictions or regulations on our operations.

As a result of a significant increase in sales, the lingering impact of the pandemic, and other supply constraints, we have experienced and expect to continue to experience commodity cost inflation and certain food and supply shortages.

The commodity cost inflation, which primarily relates to beef, is due to increased costs incurred by our vendors related to higher labor, transportation, packaging, and raw material costs.

To date, we have been able to properly manage any food or supply shortages but have experienced increased costs.

If our vendors are unable to fulfill their obligations under their contracts, we may encounter further shortages and/or higher costs to secure adequate supply and a possible loss of sales, any of which would harm our business.

In addition, as our dining rooms have returned to operating without restriction, our ability to attract and retain restaurant-level employees has become more challenging due to an increasingly competitive job market throughout the country.

We have also experienced periodic staffing shortages due to employees testing positive or having to quarantine due to exposure to the virus.

To the extent these challenges persist, we could continue to experience increased labor costs and/or decreased sales.

As a result of the pandemic, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed in 2020 to benefit companies that were significantly impacted by the pandemic.

This legislation allowed for the deferral of the social security portion of the employer portion of FICA payroll taxes from the date of enactment through the end of 2020.

Amounts are required to be repaid in equal installments at the end of 2021 and 2022.

As of December 29, 2020, the Company had deferred $47.3 million in payroll taxes with the amount due in 2021 included in accrued wages and payroll taxes and the amount due in 2022 included in other liabilities in our consolidated balance sheets.

In total, we deferred $47.3 million in payroll taxes, of which $24.3 million was repaid in 2021 and $23.0 million is required to be repaid by the end of 2022.

The amount due in 2022 is included in accrued wages and payroll taxes in our consolidated balance sheets.

The CARES Act also allowed for an Employee Retention Credit for companies severely impacted by the pandemic to encourage the retention of full-time employees.

This refundable payroll tax credit was available for any company that had fully or partially suspended operations due to government order or experienced a significant decline in gross receipts and had employees who were paid but did not actually work.

The Company provided various forms of relief pay for hourly restaurant employees throughout the year, a significant portion of which qualified for this tax credit.

For the year ended December 29, 2020, we recorded $7.0 million related to this credit which is included in labor expense in our consolidated statements of income and comprehensive income.

Finally, the CARES Act provided for small business loans that were forgivable if certain criteria were met.

The Company did not pursue any of these loans on behalf of company restaurants as we believe we have sufficient alternatives for raising capital if needed.

Since the onset of the pandemic, the Company has provided various forms of relief pay for hourly restaurant employees, a significant portion of which qualified for this tax credit.

For the years ended December 28, 2021 and December 29, 2020, we recorded $1.2 million and $7.0 million, respectively, related to this credit which is included as a reduction to labor expense in our consolidated statements of income and comprehensive income.

Operating Strategy

Although a significant portion of 2020 required us to focus on adapting our business to account for the impacts of the pandemic, we remain committed to our core operating strategy that has defined and grown our brand.

The operating strategy that underlies this growth is built on the following key components:

The operating strategy that underlies the growth of our concepts is built on the following key components:

● Offering high quality, freshly prepared food.

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● Focusing on dinner.

In a high percentage of our restaurants, we limit our operating hours to dinner only during the weekdays with approximately one half of our restaurants offering lunch on Friday.

In nearly all of our Texas Roadhouse restaurants, we limit our operating hours to dinner only during the weekdays with approximately one half of our restaurants offering lunch on Friday.

By focusing on dinner, our restaurant teams have to prepare for and manage only one shift per day during the week.

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At our Bubba’s 33 restaurants, our entrées range from $9.99 for our Classic Cheeseburger to $21.49 for our 16-inch Meaty Meaty pizza .

The per guest average check for the Bubba’s 33 restaurants we owned and operated in 2021 was $18.94.

● Creating a fun and comfortable atmosphere with a focus on high quality service.

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We design our restaurant prototypes to provide a relaxed atmosphere for our guests, while also focusing on restaurant- level returns over time.

Our current prototypical Texas Roadhouse restaurants consist of a freestanding building with approximately 7,600 square feet of space constructed on sites of approximately 1.5 to 2.2 acres or retail pad sites, with seating of approximately 58 to 68 tables for a total of 270 to 300 guests, including 18 bar seats, and

parking for approximately 160 vehicles either on-site or in combination with some form of off-site cross parking arrangement.

Our current prototypical Texas Roadhouse restaurants consist of a freestanding building with approximately 7,600 to 8,400 square feet of space constructed on sites of approximately 1.5 to 2.5 acres or retail pad sites, with seating of approximately 58 to 68 tables for a total of 270 to 325 guests, including 18 bar seats, and parking for approximately 180 vehicles either on-site or in combination with some form of off- site cross parking arrangement.

Our current prototypes are adaptable to in-line and end- cap locations and/or spaces within an enclosed mall or a shopping center.

Our current prototypical Bubba’s 33 restaurants consist of a freestanding building with approximately 7,500 square feet of space with seating for approximately 270 guests.

In response to the pandemic, we made building modifications to a number of existing restaurants.

These changes were made to better accommodate the increase in our To-Go sales and/or expand our outdoor dining arrangements.

We are currently evaluating the possibility of integrating these changes into our prototypical Texas Roadhouse and Bubba’s 33 restaurant designs.

Our current prototypical Bubba’s 33 restaurants consist of a freestanding building with approximately 7,200 to 8,800 square feet of space constructed on sites of approximately 1.5 to 2.5 acres or retail pad sites.

This includes seating of approximately 55 to 59 tables for a total of 270 to 330 guests, including 26 to 46 bar seats.

Some locations include patio seating with an additional 10 tables and up to 60 seats.

Parking is targeted for approximately 180 vehicles either on-site or in combination with some form of off-site cross parking arrangement.

In response to the pandemic, we made building modifications and/or expansions to a number of existing restaurants.

These changes were made to better accommodate the increase in our to-go sales and/or alternative dining arrangements.

We also installed booth partitions in all of our restaurants as an added safety measure for our guests.

As of December 28, 2021, we leased 418 properties and owned 148 properties.

Our 2020 average unit volume for all Texas Roadhouse company restaurants open before June 25, 2019 was $4.6 million.

The time required for a new Texas Roadhouse restaurant to reach a steady level of cash flow is approximately three to six months.

For 2021, the average capital investment, including pre-opening expenses and a capitalized rent factor, for the 23 Texas Roadhouse company restaurants opened during the year was $5.7 million, broken down as follows:

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This cost varies based on the licensing requirements in each state.

For 2021, the average capital investment, including pre-opening expenses and a capitalized rent factor, for the five Bubba's 33 company restaurants opened during the year was $7.4 million, broken down as follows:

Furniture and Equipment

Pre-opening costs

(1) Represents 10x’s initial base rent in the event the land is leased or the average cost for land acquisitions.

(2) Includes site work costs.

For 2021 and 2020, our average capital investment for the Texas Roadhouse restaurants was $5.7 million and $6.3 million, respectively.

The increase in our 2020 average capital investment was primarily due to higher land and building costs.

The higher land costs were due to increased rent amounts at several sites.

The higher building costs were due to higher material costs and construction delays related to the pandemic.

We expect our average capital investment for restaurants to be opened in 2021 to be approximately $5.5 million.

The decrease in our 2021 average capital investment was primarily due to lower land and building costs.

The higher land costs in 2020 were due to increased rent amounts at several sites.

The higher building costs in 2020 were due to higher material costs and construction delays related to the pandemic as well as sites located in more expensive areas.

We expect our average capital investment for restaurants to be opened in 2022 to be approximately $6.3 million due to increased supply costs.

Our average capital investment for the Bubba’s 33 restaurants opened in 2021 and 2020 was $7.4 million and $7.3 million, respectively.

The increase in our 2020 average capital investment for our Bubba’s 33 restaurants was primarily due to higher building costs, in particular at one site in a more expensive area.

The increase in our 2021 average capital investment for our Bubba’s 33 restaurants was primarily due to higher rent costs.

We expect our average capital investment for restaurants to be opened in 2022 to be approximately $7.3 million.

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Our capital investment (including cash and non-cash costs) for new restaurants varies significantly depending on a number of factors including, but not limited to:

the square footage, layout, scope of required site work, geographical location, type of construction labor (union or non-union), local permitting requirements, our ability to negotiate with landowners and/or landlords, cost of liquor and other licenses and hook-up fees.

the square footage, layout, scope of required site work, geographical location, supply chain costs, type of construction labor (union or non-union), local permitting requirements, our ability to negotiate with landowners and/or landlords, cost of liquor and other licenses and hook-up fees.

Site Selection

We continue to refine our site selection process.

In analyzing each prospective site, our real estate team, as well as our restaurant market partners, devotes significant time and resources to the evaluation of local market demographics, population density, household income levels and site-specific characteristics such as visibility, accessibility, traffic generators, proximity of other retail activities and competitors, traffic counts and parking.

In analyzing each prospective site, our real estate team and our restaurant market partners devote significant time and resources to the evaluation of local market demographics, population density, household income levels and site- specific characteristics such as visibility, accessibility, traffic generators, proximity of other retail activities and competitors, traffic counts and parking.

We work actively with experienced real estate brokers in target markets to select high quality sites and to maintain and regularly update our database of potential sites.

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We offer a broad assortment of specially seasoned and aged steaks, all cooked over open grills and all but one hand- cut daily on the premises.

We also offer our guests a selection of ribs, seafood, chicken, pork chops, pulled pork and vegetable plates, and an assortment of hamburgers, salads and sandwiches.

We also offer our guests a selection of ribs, seafood, chicken, pork chops, pulled pork and vegetable plates, and an assortment of burgers, salads and sandwiches.

Entrée prices include unlimited peanuts, fresh baked yeast rolls and most include the choice of two made-from- scratch sides.

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menu for children at our Bubba’s 33 restaurants that includes a selection of items, including a beverage, at prices generally between $4.49 and $6.99.

In addition, our full menu is available through our mobile apps or on-line which allows for To-Go pickup.

Most of our restaurants feature a full bar that offers an extensive selection of draft and bottled beer, major brands of liquor and wine as well as made in-house margaritas.

In addition, our full menu is available through our mobile apps or online which allows for to-go pickup.

Most of our restaurants feature a full bar that offers a selection of draft and bottled beer, major brands of liquor and wine as well as made in-house margaritas.

Managing partners are encouraged to tailor their beer selection to include regional and local brands.

Alcoholic beverages at our Texas Roadhouse restaurants accounted for 8.6% of restaurant sales in fiscal 2020.

As a result of the significant increase in To-Go sales due to the pandemic, we sold fewer alcoholic beverages compared to fiscal 2019.

Alcoholic beverages at all company restaurants accounted for 10.8% of restaurant sales in fiscal 2021.

We always strive to maintain a consistent menu at our restaurants.

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To maintain our high levels of food quality and service, we generally remove one menu item for every new menu item introduced to facilitate our ability to execute high quality meals on a focused range of menu items.

During 2021, we began working with a third-party vendor to help customers identify known allergens in each of our menu items.

This information is currently available for Texas Roadhouse restaurants and we plan to implement it for Bubba’s 33 and Jaggers restaurants in 2022.

Food Quality and Safety.

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We employ a team of product coaches whose function is to provide continual, hands- on training and education to the kitchen staff in our restaurants for the purpose of reinforcing food quality, recipe consistency, food preparation procedures, food safety and sanitation standards, food appearance, freshness and portion size.

The product coach team supports substantially all restaurants system-wide.

The product coach team supports substantially all domestic system-wide stores.

Food safety and sanitation is of utmost importance to us.

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To maximize adherence to food safety protocols, we have incorporated Hazard Analysis Critical Control Points principles and critical procedures (such as hand washing) in each recipe.

All restaurant managers are required to complete the American National Standards Institute Certified Food Manager training.

All restaurant managers are required to complete the American National Standards Institute Certified Food Manager

In addition, most of our product coaches and food team members have obtained or are in the process of obtaining their Certified Professional-Food Safety designation from the National Environmental Health Association.

We also implemented additional sanitation requirements in the current year in response to the pandemic.

This included adding a sanitation coordinator position at each location who is responsible for cleaning high touch areas, adding hand sanitizer stations at each restaurant, and supplying each restaurant with a chemical sanitation sprayer.

These requirements are in addition to the daily health and temperature checks for all employees before they begin their shift as well as the requirement for personal protective equipment to be worn by all restaurant employees at all times.

During 2020, we began participating in the Ecolab Science Certified Inspection program.

We also implemented additional sanitation requirements in response to the pandemic.

This included adding a sanitation coordinator position responsible for cleaning high touch areas, adding hand sanitizer stations at each restaurant and supplying each restaurant with chemical sanitation sprayers.

We also participate in the Ecolab Science Certified Inspection program.

This program evaluates our restaurants on COVID-19 cleaning procedures as well as food safety, general cleanliness and safety procedures.

As of December 29, 2020, over 75% of our domestic system-wide stores had been certified under this program with the remainder expected to be certified in early 2021.

As of December 28, 2021, all of our domestic system-wide stores had been certified under this program.

Our purchasing philosophy is designed to supply fresh, quality products to the restaurants at competitive prices while maximizing operating efficiencies.

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We employ a team of service coaches whose function is to provide consistent, hands- on training and education to our managers and service staff in our restaurants for the purpose of reinforcing service quality and consistency, team work and staff attentiveness and manage interaction in the dining room.

The service coach team supports substantially all restaurants system-wide.

The service coach team supports substantially all domestic system-wide stores.

Guest Satisfaction.

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Management Personnel.

Each of our restaurants is generally staffed with one managing partner, one kitchen manager, one service manager and one or more additional assistant managers.

Each of our restaurants is generally staffed with one managing partner and a combination of operations, kitchen and service managers, as well as assistant managers.

Managing partners are single restaurant operators who have primary responsibility for the day-to- day operations of the entire restaurant.

Kitchen managers have primary responsibility for managing the kitchen staff and overall kitchen operations including food preparation and food quality.

Service managers have primary responsibility for managing the front of house staff and overall dining room operations including service quality and the guest experience.

The assistant managers support our managing partners, kitchen, and service managers.

Operations managers support the managing partner in overall operations including both departments for kitchen and service.

Kitchen managers have primary responsibility for managing the kitchen staff and overall kitchen operations including food production, preparation, execution and quality standards.

Service managers have primary responsibility for managing the front of house staff and overall dining room, bar and to-go operations including service quality and the guest

Assistant managers support our managing partners, operations managers, kitchen and service managers.

All managers are responsible for maintaining our standards of quality and performance.

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Our comprehensive training program emphasizes our operating strategy, procedures and standards, including responsible alcohol service, and is typically conducted individually at our restaurants or in groups in Louisville, Kentucky.

As a result of the pandemic, this training is currently being done virtually.

As a result of the pandemic, this training was completed virtually in 2021 and resumed to in-person training in 2022.

Our managing and market partners are generally required to have significant experience in the full-service restaurant industry and are generally hired at a minimum of nine to 12 months before their placement in a new or existing restaurant to allow time to fully train in all aspects of restaurant operations.

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A significant portion of our marketing fund is spent communicating with our guests inside our restaurants through point of purchase materials.

We believe special promotions such as Valentine’s Day and Mother’s Day drive notable repeat business.

We believe special promotions such as Valentine’s Day, Mother’s Day and Veterans Day drive notable repeat business.

Our eight-week holiday gift card campaign is one of our most impactful promotions.

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As of December 28, 2021, we had 25 franchisees that operated 101 Texas Roadhouse restaurants in 23 states and ten foreign countries.

Domestically, franchise rights are granted for specific restaurants only, as we have not granted any rights to develop a territory in the United States.

We are currently not accepting new

domestic franchisees.

Domestically, franchise rights for our Texas Roadhouse restaurants are granted for specific restaurants only, as we have not granted any rights to develop a territory in the United States.

We are currently not accepting new domestic Texas Roadhouse franchisees.

Approximately 75% of our franchise restaurants are operated by ten franchisees and no franchisee operates more than 16 restaurants.

Our standard domestic franchise agreement has a term of ten years with two renewal options for an additional five years each if certain conditions are satisfied.

Our standard Texas Roadhouse domestic franchise agreement has a term of ten years with two renewal options for an additional five years each if certain conditions are satisfied.

Our current form of domestic franchise agreement generally requires the franchisee to pay a royalty fee of 4.0% of gross sales.

We may, at our discretion, waive or reduce the royalty fee on a temporary or permanent basis.

In 2020, we waived royalties of $0.4 million for international franchisees in countries that were significantly impacted by the pandemic.

We also made royalty deferral arrangements for many of our domestic and international franchisees.

In 2021 and 2020, we waived royalties of $0.2 million and $0.4 million, respectively, for international franchisees in countries that were significantly impacted by the pandemic and also made royalty deferral arrangements for many of our domestic and international franchisees.

The majority of these royalty waivers and deferral arrangements were provided in the periods most significantly impacted by the pandemic.

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means the total selling price of all services and products related to the restaurant.

Gross sales do not include:

Gross sales, without limitation, do not include:

● employee discounts or other discounts;

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● adjustments for net returns on salable goods and discounts allowed to guests on sales.

Domestic franchisees are currently required to pay 0.3% of gross sales to a national marketing fund for system-wide promotions and related marketing efforts.

Domestic Texas Roadhouse franchisees are currently required to pay 0.3% of gross sales to a national marketing fund for system- wide promotions and related marketing efforts.

We have the ability under our agreements to increase the required marketing fund contribution up to 2.5% of gross sales.

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A franchisee’s total required marketing contribution or spending will not be more than 3.0% of gross sales.

Our standard domestic franchise agreement gives us the right, but not the obligation, to compel a franchisee to transfer its assets to us in exchange for shares of our stock, or to convert its equity interests into shares of our stock.

Our standard Texas Roadhouse domestic franchise agreement gives us the right, but not the obligation, to compel a franchisee to transfer its assets to us in exchange for shares of our stock, or to convert its equity interests into shares of our stock.

The amount of shares that a franchisee would receive is based on a formula that is included in the franchise agreement.

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We currently have signed franchise and/or development agreements in nine countries in the Middle East as well as Taiwan, the Philippines, Mexico, China, South Korea, Brazil and Puerto Rico.

As of December 29, 2020, we had 15 restaurants open in five countries in the Middle East, four restaurants open in Taiwan, five in the Philippines, two in South Korea and one each in Mexico and China for a total of 28 restaurants in ten foreign countries.

As of December 28, 2021, we had 15 restaurants in five countries in the Middle East, five restaurants open in the Philippines, four in Taiwan, four in South Korea, two in Mexico and one in China for a total of 31 restaurants in ten foreign countries .

For the existing international agreements, the franchisee is generally required to pay us a franchise fee for each restaurant to be opened, royalties on the gross sales of each restaurant and a development fee for our grant of development rights in the named countries.

We anticipate that the specific business terms of any future franchise agreement for international restaurants might vary significantly from the standard terms of our domestic agreements and from the terms of existing international agreements, depending on the territory to be franchised and the extent of franchisor-provided services to each franchisee.

Any of our franchise agreements, whether domestic or international, may be terminated if the franchisee defaults in the performance of any of its obligations under the development or franchise agreement, including its obligations to develop the territory or operate its restaurants in accordance with our standards and specifications.

A franchise agreement may also be terminated if a franchisee becomes insolvent, fails to make its required payments, creates a threat to the public health or safety, ceases to operate the restaurant, or misuses the Texas Roadhouse trademarks.

In 2021, we entered into our first area development agreements for Jaggers, our fast-casual concept.

These agreements allow for the development and operation of restaurants in specific territories in Texas, Oklahoma, and North Carolina.

As part of these agreements, the franchisees are required to pay us a franchise fee for each restaurant to be opened, royalties on the gross sales of each restaurant and a development fee for our grant of development rights in the named territories.

No franchise agreements have been entered into and no corresponding restaurants have been opened yet related to these area development agreements.

Any of our area development or franchise agreements, whether domestic or international, may be terminated if the franchisee defaults in the performance of any of its obligations under the development or franchise agreement, including

its obligations to develop the territory or operate its restaurants in accordance with our standards and specifications.

Franchise Compliance Assurance.

We have various systems in place to promote compliance with our systems and standards, both during the development and operation of franchise restaurants.

We actively work with our franchisees to support successful franchise operations as well as compliance with the Texas Roadhouse standards and procedures.

We actively work with our franchisees to support successful franchise operations as well as compliance with our standards and procedures.

During the restaurant development phase, we consent to the selection of restaurant sites and make available copies of our prototype building plans to franchisees.

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Finally, on an ongoing basis, we conduct reviews on all franchise restaurants to determine their level of effectiveness in executing our concept at a variety of operational levels.

Our franchisees are required to

follow the same standards and procedures regarding equipment and food purchases, preparation and safety procedures as we maintain in our company restaurants.

Our franchisees are required to follow the same standards and procedures regarding equipment and food purchases, preparation and safety procedures as we maintain in our company restaurants.

Reviews are conducted by seasoned operations teams and focus on key areas including health, safety and execution proficiency.

Management Services.

We provide management services to 24 of the franchise restaurants in which we and/or our founder have an ownership interest and five additional franchise restaurants in which neither we nor our founder have an ownership interest.

We provide management services to 24 of the franchise restaurants in which we have an ownership interest and five additional domestic franchise restaurants in which we have no ownership interest.

Such management services may include accounting, operational supervision, human resources, training, and food, beverage and equipment consulting for which we receive monthly fees of up to 2.5% of gross sales.

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All of our company restaurants utilize computerized management information systems, which are designed to improve operating efficiencies, provide restaurant and Support Center management with timely access to financial and operating data and reduce administrative time and expense.

With our current information systems, we have the ability to query, report and analyze this intelligent data on a daily, weekly, monthly, quarterly and year-to-date basis and beyond, on a company-wide, regional, market, or individual restaurant basis.

With our current information systems, we have the ability to query, report and analyze this intelligent data on a daily, weekly, monthly, quarterly and year-to-date basis and beyond, on a company- wide, concept, regional, market, or individual restaurant basis.

Together, this enables us to closely monitor sales, food and beverage costs and labor and operating expenses at each of our restaurants.

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See Risk Factors in Item 1A of this Form 10-K for a discussion of risks associated with breaches of security related to confidential guest and/or employee information.

As a result of the significant increase in To-Go and curbside service, we made several digital enhancements to improve the guest experience and better support our increased volumes.

As a result of the significant increase in to-go and curbside service, we have made several digital enhancements to improve the guest experience and better support our increased volumes.

These enhancements include a new, fully customized digital experience that allows our guests to get on the waitlist or order pickup or curbside service.

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We also face competition from meal kit delivery services as well as the supermarket industry.

In addition, improving product offerings of fast casual and quick-service restaurants and better execution of off-premise sales, together with negative economic conditions could cause consumers to choose less

expensive alternatives.

In addition, improving product offerings of fast casual and quick- service restaurants and better execution of off-premise sales, together with negative economic conditions could cause consumers to choose less expensive alternatives.

Although we believe that we compete favorably with respect to each of the above factors, other restaurants and retail establishments compete for the same casual dining guests, quality site locations and restaurant- level employees as we do.

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Each of our restaurants is subject to permitting and licensing requirements and regulations by a number of government authorities, which may include, among others, alcoholic beverage control, health and safety, sanitation, labor, zoning and public safety agencies in the state and/or municipality in which each restaurant is located.

The development and operation of restaurants depends on selecting and acquiring suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations.

The development and operation of restaurants depends on selecting and acquiring suitable sites that satisfy our financial targets, which are subject to zoning, land use, environmental, traffic and other regulations.

In addition to domestic regulations, our international business exposes us to additional regulations, including antitrust and tax requirements, anti-boycott legislation, import/export and customs regulations and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act.

We are subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling.

In 2018, federal regulations went into effect under the Patient Protection and Affordable Care Act of 2010 ("PPACA") requiring new menu nutritional labeling requirements.

As a result, we include calorie information on our menus and make additional nutritional information available at our restaurants and on our websites.

Federal regulations under the Patient Protection and Affordable Care Act of 2010 require that we include calorie information on our menus and make additional nutritional information available at our restaurants and on our websites.

Future regulatory action may occur which could result in further changes in the federal nutritional disclosure requirements.

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statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

Consistent with industry standards, we carry liquor liability coverage as part of our existing comprehensive general liability insurance as well as excess umbrella coverage.

In fiscal 2020, the sale of alcoholic beverages accounted for 8.6% of our Texas Roadhouse restaurant sales.

As a result of the significant increase in To-Go sales due to the pandemic, we sold fewer alcoholic beverages compared to fiscal 2019.

Consistent with industry standards, we carry liquor liability coverage as part of our

existing comprehensive general liability insurance as well as excess umbrella coverage.

Alcoholic beverages at all company restaurants accounted for 10.8% of restaurant sales in fiscal 2021.

Our restaurant operations are also subject to federal and state labor laws governing such matters as minimum and tipped wage requirements, overtime pay, health benefits, unemployment taxes, workers’ compensation, work eligibility requirements, working conditions, safety standards, and hiring and employment practices.

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Further regulatory action may occur which could result in changes to healthcare eligibility, design and cost structure.

A significant number of our hourly restaurant personnel receive tips as part of their compensation and are paid at or

above a minimum wage rate after giving effect to applicable tips.

A significant number of our hourly restaurant personnel receive tips as part of their compensation and are paid at or above a minimum wage rate after giving effect to applicable tips.

We rely on our employees to accurately disclose the full amount of their tip income.

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As a result of the pandemic, certain state and local jurisdictions have enacted various health, safety and other regulations that have impacted our restaurants.

Compliance with these regulations has led to decreased sales, increased costs, and operational complexity.

We expect our operating results to continue to be impacted until at least such time that these regulations are lifted.

Compliance with these regulations, during the periods in which they were effective, led to decreased sales, increased costs, and operational complexity.

All capacity restrictions had lapsed by July 2021.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit protection and fraud.

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Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease.

Beginning in March 2020, our quarterly operating results were severely impacted by the pandemic which resulted in significant fluctuations between quarters.

We expect that our quarterly operating results will continue to fluctuate until such time that all dining room restrictions related to the pandemic are lifted.

Human Capital Management

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We value and welcome employees of all walks of life to share their gifts and strengths while working in our restaurants and the Support Center, as we strive to reflect the communities we are proud to serve.

As a result, we are committed to attracting, retaining, engaging and developing a workforce that mirrors the diversity of our guests and is committed to upholding our shared values.

As a result, we are committed to attracting, retaining, engaging and

developing a workforce that mirrors the diversity of our guests and is committed to upholding our shared values.

Performance-based Compensation and Benefits .

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As a result of the pandemic and the impact on restaurant operating results, we guaranteed a portion of these performance bonuses in the periods that were the most significantly impacted.

By providing our partners with a significant stake in the success of our restaurants, we believe that we are

able to attract and retain talented, experienced and highly motivated managing and market partners.

In addition to salaries, these programs (which vary by employee level) include, among other items, bonuses, stock awards, retirement savings plans, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, paid parental leave and various employee assistance programs.

By providing our partners with a significant stake in the success of our restaurants, we believe that we are able to attract and retain talented, experienced and highly motivated managing and market partners.

In addition to salaries, these programs (which vary by employee level) include, among other items, bonuses, stock awards, retirement savings plans, healthcare and insurance benefits, health savings and flexible spending accounts, tuition reimbursement, paid time off, paid parental leave and various employee assistance programs.

As a result of the pandemic, we provided increased benefits to our employees in the form of enhanced sick pay and accrued vacation benefits and also provided a premium holiday on health insurance.

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In response to the pandemic, we implemented changes at our restaurants to help protect our employees and guests.

This included providing personal protective equipment for our employees, adding a sanitation coordinator position at each restaurant who is responsible for cleaning high touch areas, adding hand sanitizer stations at each restaurant, and supplying each restaurant with a chemical sanitation sprayer.

In addition, the majority of our Support Center employees continue to work remotely.

For the employees that continue to work on-site in our Support Center, we have implemented additional measures to ensure their safety including enhanced sanitation efforts and daily health and temperature checks.

This included providing personal protective equipment for our employees, adding a sanitation coordinator position at each restaurant responsible for cleaning high touch areas, adding hand sanitizer stations at each restaurant, and supplying each restaurant with chemical sanitation sprayers.

In addition, we have allowed our Support Center employees to maintain a work schedule that allows for working remotely on a periodic or full-time basis depending on the prevalence of the virus.

For the employees that continue to work on-site in our Support Center, we have implemented additional measures to ensure their safety including enhanced sanitation efforts.

We believe we have been able to preserve our business continuity without sacrificing our commitment to keeping our employees safe during the pandemic.

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There are no family relationships among any of our executive officers.

Chairman and Chief Executive Officer

President and Chief Executive Officer

Chris Jacobsen

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Chief Financial Officer

Chief Operations Officer

Taylor founded Texas Roadhouse in 1993.

He resumed his role as Chief Executive Officer in August 2011, a position he held between May 2000 and October 2004.

He was named Chairman of the Company and Board in October 2004.

Before his founding of our concept, Mr.

Taylor founded and co-owned Buckhead Bar and Grill in Louisville, Kentucky.

Taylor has over 35 years of experience in the restaurant industry.

Morgan was appointed President in December 2020.

He assumed this role from Mr.

He joined Texas Roadhouse in 1997 and has held a number of positions, including Managing Partner, Market

Partner and Regional Market Partner.

Christopher C.

General Counsel and Corporate Secretary

Chief Learning and Culture Officer

Chief Information Officer

Morgan was appointed Chief Executive Officer in March 2021 and President in December 2020.

Morgan joined Texas Roadhouse in 1997, during which time he has held the positions of Managing Partner, Market Partner and Regional Market Partner.

Morgan has more than 35 years of restaurant management experience with Texas Roadhouse, Bennigan’s Restaurants and Burger King.

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Jacobsen joined Texas Roadhouse in January 2003 and has served as Vice President of Marketing since 2011.

Prior to joining us, Mr.

Jacobsen was employed by Papa John’s International and Waffle House, Inc.

where he held various senior level marketing positions.

He has over 25 years of restaurant industry experience.

Jacobsen has more than 30 years of restaurant marketing experience with Texas Roadhouse, Papa John’s International and Waffle House, Inc.

Robinson was appointed Chief Financial Officer in May 2018.

She joined Texas Roadhouse in December 1998, during which time she has held the positions of Controller, Director of Financial Reporting and Vice President of Finance and Investor Relations.

Robinson joined Texas Roadhouse in December 1998, during which time she has held the positions of Controller, Director of Financial Reporting and Vice President of Finance and Investor Relations.

Robinson has over 20 years of restaurant industry experience.

Thompson was appointed Chief Operating Officer in August 2018.

He joined Texas Roadhouse in 2002 as a Market Partner and has served as our Vice President of Operations since 2015.

Before joining the Company, Mr.

Thompson was a single and multi-unit operator with both Outback Steakhouse, Inc.

and Bennigan’s Restaurants.

Thompson has over 30 years of restaurant industry experience.

Christopher C.

Colson was appointed General Counsel in March 2021 and Corporate Secretary in August 2019.

Colson joined Texas Roadhouse in 2005, during which time he has held the positions of Senior Counsel, Associate General Counsel and Executive Director of the Global Development Group.

Colson has over 20 years of restaurant industry experience with Texas Roadhouse, Frost Brown Todd LLC (serving as outside counsel to Texas Roadhouse), YUM!

and as assurance staff at KPMG LLP.

Tobin was appointed Chief Learning and Culture Officer in June 2021.

Tobin joined Texas Roadhouse in 1996, during which time she has held the positions of Managing Partner, Market Partner, and Vice President of Training.

Tobin has over 25 years of restaurant industry experience.

Mujica was designated as Chief Information Officer in June 2021.

Mujica joined Texas Roadhouse in January 2012 as Vice President of Information Technology and was subsequently promoted to Chief Information Officer.

Prior to joining Texas Roadhouse, Mr.

Mujica held senior management positions at The Home Depot and Arthur Andersen.

Mujica has over 30 years of experience in both industry and consulting roles.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business