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A fake social media post accusing Texas Roadhouse workers of racist behavior hurt business at the chain in the third quarter.
Same-store sales rose 4.3% year over year, while traffic increased 0.7% — an unusually muted performance for the typically high-flying brand. Through the first five weeks of the current quarter, same-store sales were up 1.5% year over year.
Executives said sales and traffic trends started the third quarter off strong. Same-store sales were up 5.9% in July and 6.8% in August. But they plunged to 1% in September after a now-deleted Facebook post began making the rounds online.
In the post, a user named Nancy Smith wrote that employees at Texas Roadhouse and Logan's Roadhouse were planning to tamper with Black diners' food, and alleged that a group of 400,000 people were involved in the scheme.
The post sparked outrage from many social media users, some of whom said they planned to stop eating at Texas Roadhouse.
The company launched an investigation, including an outside forensic review, and quickly concluded that the post was a hoax .
Executives said business is already starting to recover. Sales and traffic improved every week in October, and that has continued into the beginning of this month, though they declined to provide specific numbers.
"Maybe the recovery has taken a little bit longer than some would have expected, but our operators are out there busting their butts and they've doubled down on everything they're doing," said VP of Investor Relations Michael Bailen.
In addition to refocusing on operations, CEO Jerry Morgan said operators are making a point to connect with their communities and "shaking hands with folks we might not have seen in a little while and trying to engage."
"Will we lean into other avenues if we need to? Absolutely," Morgan said. "We are definitely business people, but the trends and the signs show that we believe that those were false accusations and that absolutely, our sales are coming back."
The company reiterated its expectations for positive same-store sales growth this year. Through the third quarter, same-store sales were up 5.9% compared to the same period in 2025.
Texas Roadhouse stock was down 5.10% in pre-market trading Friday morning.
The company made some rare menu news in the quarter. It added Chicken Alfredo Pasta to more than 600 locations and expects it to be in the remaining 100 or so by this spring.
Morgan said operators had been asking for a new menu item and that initial tests of the pasta were a hit with both customers and staff.
"It's probably not going to be one of our top 10 mix entrée items that we offer, but it rounds out the menu and it's a great choice for somebody who wants something a little bit different," Bailen added.
Texas Roadhouse is also continuing to see demand for its mocktails and dirty sodas and is now testing "energizer" drinks at all three of its brands (Texas Roadhouse, Bubba's 33, and Jaggers).
The company got some relief on inflation in the quarter. Commodity inflation was 2%, on the low end of its expected range, and its outlook for the fourth quarter has improved. It's maintaining its full year commodity inflation guidance of 5%, and is expecting 4% for 2027.
Beef inflation is easing, Bailen said, but the costs of some other items such as seed oils and produce are rising due to tariffs and freight costs.
Labor inflation was 4.1%, in line with expectations. The company narrowed its labor inflation guidance to 3.5% to 4% and set next year's outlook at 3%.
Restaurant-level margins improved by 30 basis points in the quarter, to 14.6%, after a series of declines due to high beef prices.
Total revenue was $1.6 billion, an increase of 9.5% year over year. Net income was $89.4 million, up 6.2%.
The company opened five company-owned restaurants and three franchised locations in the quarter. It expects to have opened 35 new restaurants by year's end with another 35 on deck for next year across its three brands.
