Texas Roadhouse’s Fast Casual Signs Landmark Deal with The Saxton Group

Left to right: Hugh Carroll, president of Global Development for Texas Roadhouse; Jerry Morgan CEO and president of Texas Roadhouse; Adam Saxton, co-CEO and owner of The Saxton Group; and Matt Saxton, co-CEO and owner of The Saxton Group.

In February, Texas Roadhouse’s late CEO, Kent Taylor, spoke briefly about one of the company’s little-known corners of its business—the fact it’s not just a full-service restaurant operator. Texas Roadhouse debuted Jaggers on December 14, 2015, in Noblesville, Indiana. The fast-casual serves burgers, hand-breaded chicken tenders, and chicken sandwiches, with scratch-made sauces. Additionally, it chops and tosses salads to order.

Taylor, who passed away in March, told the Louisville Business Journal Jaggers was built around the idea of, “what if Chick-fil-A and Five Guys got married and had a kid?” While the notion was offbeat, eccentric, and ambitious—as most of Taylor’s brainstorms were—it wasn’t all that different than Texas Roadhouse. Take categories customers recognize, and try to be best-in-class in all of them.

Jaggers, which offers a drive-thru, returned Taylor to quick service for the first time in three decades (he worked at KFC after Bennigan’s), and the concept was hardly an afterthought. In fact, it was one of the reasons, along with a retail expansion and future innovation, why Taylor promoted Jerry Morgan to president in December 2020, shedding duties he shouldered since Scott Colosi’s retirement in June 2019.

Taylor also picked the first location so he could quickly drive over—a 3,000-square-foot store built atop a parking where a Texas Roadhouse once stood before relocating.

“We’ve been very successful in the full-service world, so why not retail and fast food, too?” Taylor said in February.

Last year, the third Jaggers opened, this one in Louisville (the other is in Greenwood, Indiana). The company said it opened to “rave reviews and long lines.” In Taylor’s letter to shareholders in Texas Roadhouse’s annual report, he added, “the bottom line is the store is rockin’ and we are looking at two more Louisville locations. We are seriously exploring franchise development as a potential growth vehicle as well.”

That latter point was the kicker. Of Texas Roadhouse’s 580 domestic stores as of Q2, 511 were company run (there’s 30 franchised international venues, too). Texas Roadhouse also operates 34 corporate Bubba’s 33 stores. The three Jaggers to date are all company directed.

A franchising vehicle, however, gives Texas Roadhouse something it really hasn’t had since the company’s 1993 founding: the ability to drive sales without the cost of developing sties—something that’s only gained appeal thanks to COVID-induced closures and inflationary pressures. For instance, construction costs continue to rise despite a bevy of open sites. So what Texas Roadhouse might save in rent would be offset by increases on materials, like concrete and lumber. Those realities are likely to squeeze corporate development in the coming months of the restaurant recovery. Franchising will offer a more nuanced tale.

But, near-term, it appears Taylor’s vision is fast becoming a reality. The biggest Jaggers news yet arrived Monday when the company announced it struck its first franchise agreement with The Saxton Group. Terms of the multi-year development deal call for 10 Jaggers throughout East and Central Texas, and the greater Tulsa, Oklahoma, area. There’s potential to expand into additional markets as well, the company said.

The Saxton Group is a heavy-hitter in franchising, namely for its McAlister’s Deli footprint, of which it’s one of the country’s largest operators. The 35-year-old Dallas-based company currently runs more than 85 stores in six states.

“We are incredibly impressed by the Jaggers brand and the level of professionalism evident throughout the Texas Roadhouse organization,” co-CEO and owner of The Saxton Group, Adam Saxton, said in a statement. “This is an exciting opportunity to bring a great brand to markets that we have become very familiar with over the years.”

Texas Roadhouse expects to open 26–29 company restaurants this year, including five Bubba’s and one Jaggers. “We’re very excited about the Jaggers here in Louisville and the success that it’s having and holding its sales,” Morgan, Taylor’s successor as CEO, said in July. “The food is just unbelievably fantastic.”

Texas Roadhouse managed to expand by a net 19 locations last year. Bubba’s grew by three units and Jaggers from two to three stores.

The average capital investment for those Texas Roadhouses, including pre-opening expenses and a capitalized rent factor, was $6.2 million. For Bubba’s, it was $7.3 million.

Accentuating the inflation topic, those figures for Texas Roadhouse and Bubba’s were up from $5.6 and $6.9 million, respectively, in 2019. The company credited the rise primarily to “higher land and building costs,” with increased rent amounts at several sites and higher material costs and construction delays related to COVID.

The current prototypical Texas Roadhouse restaurants consist of a freestanding building with approximately 7,600 square feet of space constructed on sites of 1.5–2.2 acres or retail pad sites, with seating of 58–68 tables for a total of 270–300 guests, including 18 bar seats, and eight parking for 160 vehicles either on-site or in combination with some form of off-site cross parking arrangement. It’s also adaptable to in-line and end-cap locations and/or spaces within an enclosed mall or a shopping center. The Bubba’s 33 today consists of a freestanding building with approximately 7,500 square feet of space with seating for 270 guests.

To put it simply, Jaggers is unlike anything Texas Roadhouse had up its growth sleeve previously. Both from a concept and startup standpoint, as well as flexibility and how quickly it could potentially come to market. And that journey is just beginning.

“We are excited about the partnership with The Saxton Group, which has deep industry knowledge and 35 years of hands-on, operational experience,” Morgan added Monday.

Texas Roadhouse is coming off a strong Q2 where same-store sales soared 80.2 percent, year-over-year, against a 32.8 percent drop in the comparable, pandemic-hit 2020 quarter. More vivid, the chain’s same-store sales were up 21.3 percent versus 2019 levels.

Texas Roadhouse posted average weekly sales of $126,442. In Q2. To-go sales mixed 16.9 percent of that average, north of $21,000 per week.

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