Fake Facebook Post Slowed Texas Roadhouse Sales in September

Same-store sales at Texas Roadhouse grew 4.3% year over year in the third quarter, but a fake Facebook post cut September growth to 1% after monthly gains of 5.9% in July and 6.8% in August. Traffic rose just 0.7% for the quarter, an unusually muted result for a chain that routinely outperforms the steakhouse category.

The now-deleted post, written by a user named Nancy Smith, alleged that employees at Texas Roadhouse and Logan's Roadhouse planned to tamper with Black diners' food as part of a scheme involving 400,000 people. The claim spread quickly. Some social media users said they would stop eating at the chain. The company launched an internal investigation and an outside forensic review, and concluded the post was a hoax.

Is the business recovering?

Executives said yes, with a caveat. Sales and traffic improved every week in October, and the trend continued into early November, though the company declined to provide specific figures. Through the first five weeks of the current quarter, same-store sales were up 1.5% year over year.

VP of Investor Relations Michael Bailen said: "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."

CEO Jerry Morgan said operators are reconnecting with their communities, "shaking hands with folks we might not have seen in a little while and trying to engage." He left the door open to further action: "Will we lean into other avenues if we need to? Absolutely. 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 guidance for positive same-store sales growth this year. Through the third quarter, same-store sales were up 5.9%. Investors were less patient: the stock fell 5.10% in pre-market trading Friday.

What changed on the menu?

The chain made rare menu news, adding Chicken Alfredo Pasta to more than 600 locations, with the remaining 100 or so expected to carry it by spring. Operators had requested a new item, and initial tests won over both customers and staff.

Bailen set modest expectations for the dish: "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."

Beverage demand is also shifting. Mocktails and dirty sodas continue to sell, and the company is testing "energizer" drinks across all three brands — Texas Roadhouse, Bubba's 33, and Jaggers.

What did costs do?

Commodity inflation ran at 2% for the quarter, the low end of expectations. The company held full-year guidance at 5% commodity inflation and forecast 4% for 2027. Beef inflation is easing, Bailen said, but tariffs and freight costs are pushing up seed oils and produce.

Labor inflation came in at 4.1%, in line with plan. The company narrowed full-year labor guidance to 3.5% to 4% and set next year's outlook at 3%.

Restaurant-level margin improved 30 basis points to 14.6%, reversing a series of declines driven by beef prices. Total revenue reached $1.6 billion, up 9.5%, and net income rose 6.2% to $89.4 million.

The company opened five company-owned restaurants and three franchised locations in the quarter. It expects 35 new restaurants by year-end across its three brands, with another 35 planned for next year. The September episode shows how fast a fabricated claim can dent a 14.6%-margin operator; the weekly October recovery suggests the damage was temporary.