Texas Roadhouse was founded in 1993 in Indiana, and since then, this company has managed to open more than 650 franchise units on the U.S and international locations. Even though this is a high-cost franchise, these franchises are one of the most popular investments options among entrepreneurs who want to own a steakhouse restaurant.
Currently, this company is seeking new franchisees across the whole U.S., so we decided to make a review of this business opportunity. We will reveal to potential investors how much is Texas Roadhouse franchise starting cost, fees, and potential profit is that the owner of this steakhouse restaurant can make.
How Much Does The Texas Roadhouse Franchise Cost
The total cost of starting the Texas Roadhouse franchise ranges between $2,100,000 and $6,500,000. This financial prediction includes an Initial Fee of $40,000 and all other expenses till the opening day.
The precise cost of starting a Texas Roadhouse franchise will depend on how much money franchisees will need to invest in the architectural and building improvements of the chosen location.
The investment cost by type of the building:
- Leased and renovated location: $2,100,000 to $4,685,500
- New buildout location: $3,600.000 to $6,500,000
These restaurants usually operate in a site space of approximately 7,000 to 8,200-square feet, which means construction workers will need to make many building improvements.
Investors who start the Texas Roadhouse franchise on the new build-out locations will need to spend between $1,500,000 to $3,000,000, and those who will rent real estate will have building improvement cost that is between $600,000 to 1,500,000 max.
List of Texas Roadhouse franchise starting costs:
- Initial Fee: $40,000
- Leasehold/Building Improvements: $605,000 – $3,000,000
- Work Equipment: $250,000 – $915,000
- Furniture, Decor and Fixtures : $180,000 – 220,000
- Architectural Works: $150,000 – $200,000
- Training and Opening Assistance: $90,000 – $110,000
- POS and other computer systems: $55,000 – $75,000
- Insurance: $40,000 – $80,000
- Sign Package: $39,000 to $90,000
- Initial Inventory: $38,500 – $62,000
- Smallwares: $37,000 – $55,000
- Supplies: $20,000 – $35,000
- Performance Bonds: $12,000 – $38,000
- Licenses and Permits: $7,000 – $80,000
- Builders Risk and OCP Insurance: $5,000 – $12,000
- Utility and Telephone Deposits: $5,000 – $50,000
- Liquor Licenses: $2,000 – $500,000
- Marketing and Promotional Materials: $1,000 – $5,000
- All other starting costs: $130,000 – $255,000
- Working capital for first 3 months: $442,000 to $641,500
- Estimated total investment: $2,100,000 to $6,500,000
The investors who want to start this franchise will need to meet this franchisor’s capital requirement. The franchisee applicants must own liquid capital of a minimum of $800,000 or 25% of the total estimated Texas Roadhouse franchise project cost.
Texas Roadhouse Franchise Fee
Every franchisee applicant must pay the Texas Roadhouse Initial Franchise Fee of $40,000, and ongoing services fees that charge is 5% (4% Royalty Fee + 1% Marketing Fee) of the restaurant’s monthly gross sales.
When we analyze these ongoing franchisor fees, we can see that the percentage is meager compared to other franchising concepts. Low services fees are one of the advantages of owning Texas Roadhouse because others similar franchising concepts usually have royalties that are 7 to 13% of gross sales.
Also, every Texas Roadhouse franchise owner is bound to pay a Local Marketing Fee charged 2% of the monthly gross sales. However, this fee can’t be considered an unnecessary expense because local marketing operations will result in the higher income of the franchised restaurant at the end of the month.
Texas Roadhouse ongoing franchise fees:
- Royalty Fee: 4% of the gross sales – monthly cost
- Local marketing fee: 2% of the gross sales – monthly cost
- Marketing fund fee: 0.3% of gross sales – monthly cost
- Marketing Fee: 0.5% of the gross sales – monthly cost
- Transfer Fee $3,500
- Renewal Fee: $15,000
- I.T. Support Fee: $350.00/Month
The Texas Roadhouse franchise agreement usually has a duration of ten years, and after it expires, the franchisee needs to pay the Renewal fee of $15,000. If the franchisee decides to sell its restaurant, it would be necessary to pay a Transfer Fee, which costs is $3,500.
Texas Roadhouse Franchise Profit
Texas Roadhouse franchised restaurants make an average gross sales of $3,785,488 per year with a 10-13% profit margin. It means that the owner of this franchise can expect an annual salary between $375,000 to $492,000.
According to Statista, in 2020, there were 634 Texas Roadhouse restaurants worldwide, and they all combined generated revenues of 2.4 billion U.S. dollars from sales. When we divide the number of franchise units and the total revenue, we get an average of $3,785,488 per unit per year.
However, the restaurant owner can’t expect to make more than 10-13% profit margin because meals on the menu have a low price compared to the cost of raw food materials. Still, this company’s franchises deliver margins on the franchising industry’s standard or even higher level.
So, the potential Texas Roadhouse franchise owner can anticipate that his gross restaurant sales will cover all operating costs and deliver a secure profit every year.
Suppose the owner will not operate everyday operations in person. In that case, hiring a manager who has the qualifications and experience to handle this type of business will be necessary. Because how much will be Texas Roadhouse franchise profit will depend significantly on the manager business skillset.
With the right franchise location and excellent operating manager, it is possible to make more gross sales per year than the average mentioned above is. So the owners of the Texas Roadhouse who want to earn more will need to find and hire staff who know how to fulfill these restaurants’ full profit potentials.
Company Overview
This company founder is late W. Kent Taylor, who opened the first Texas Roadhouse Restaurant in 1993 in Indiana. Since 1995 this company started expansion thru franchising, and today, they have more than 650 franchise units on worldwide locations.
Customers can find this company’s restaurants in the 49 states of the United States and ten foreign countries. This brand opened the first international restaurant in 2011 in Dubai, United Arab Emirates, and since then, this franchising opportunity has been especially popular among investors from Asia.
Countries with at least one Texas Roadhouse franchise:
- United States
- United Arab Emirates
- Saudi Arabia
- Kuwait
- Bahrain
- Qatar
- Philippines
- Taiwan
- Mexico
- China
- South Korea
Although Texas Roadhouse is a high-cost franchise, this franchising opportunity is today more popular than ever among entrepreneurs. The number of this company’s franchises is growing every year at a steady pace, and this is the result of the profit that these food outlets can deliver on an annual basis.
Also, this company has one of the most comprehensive franchisee training in the industry. So, the investor can be sure that his franchise managers and working staff will be fully equipped with the knowledge to do business immediately after opening day.
The peculiarity of these franchised restaurants is that they have a massive square feet space and offer customers a unique eating experience. The combination of excellent food with the proven business concept is a winning combination, so we can anticipate that this company’s number of franchise units will in the future grow even more.
Investors in the Texas Roadhouse franchise can expect that it will be necessary at least five years before the return on investment; this is a rapid return if we bear in mind how much starting cost is.
Summary
For investors who have a high investing capital at their disposal and want to start a steakhouse franchise, this franchisor will be one of the better choices. These franchised restaurants make high gross sales per year which means that owners can expect a high and secure everyday cash flow.
After analyzing the Texas Roadhouse franchise cost and profit ratio, we can summarize that these franchised restaurants can be a good investment. However, operating these restaurants is very demanding, so the potential franchisee of this brand must be ready to work consistently throughout the franchise agreement.