On the desk today · Texas Roadhouse
Every other chain franchises. This one kept the restaurants — and gave each manager a stake.
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The Anti-Franchise
That Outperformed Them All
In 1993, a 37-year-old former KFC manager in Louisville, Kentucky, had been fired from his last restaurant job and rejected by every bank he approached. He had an idea for a Texas-style steakhouse — hand-cut steaks, free peanuts, line dancing, loud music, cold beer. He sketched the layout on a cocktail napkin. Eighty investors said no. Then three Kentucky doctors — John Rhodes, James Thompson, and Wayne Thompson — put up $300,000. Kent Taylor opened the first Texas Roadhouse on February 17, 1993, in a converted car dealership in Clarksville, Indiana, just across the river from Louisville.
Three of the first five restaurants didn't survive. Sales at the original location barely cleared $2 million.
I went to a Texas Roadhouse last month. The wait was 45 minutes on a Wednesday. Peanut shells crunched underfoot. The bread — fresh, warm, served with cinnamon butter — arrived before the menus. The steaks were hand-cut in a kitchen I could see from my seat. The music was loud. The servers danced. And when I asked my wife how it compared to the Texas Roadhouse near our old house, four states away, she said it was identical. Same bread. Same butter. Same energy. Same everything.
That consistency is not an accident. It is the product of the most unusual management model in the restaurant industry.
Most restaurant chains grow through franchising. McDonald's franchises 95% of its restaurants. Subway franchises 100%. The model makes sense — the franchisee puts up the capital, takes the risk, and sends a royalty check to corporate. But Kent Taylor did the opposite. Texas Roadhouse owns and operates the vast majority of its 816 restaurants. It does not sell franchises in the United States. Instead, it gives each restaurant's general manager — the Managing Partner — a personal equity stake.
The managing partner puts up $25,000 of their own money. In return, they receive a percentage of their restaurant's operating profit — typically around 10%. The better the restaurant performs, the more the manager earns. The alignment is total. The manager isn't an employee punching a clock. They're an owner sweating the details — the food cost, the labor schedule, the guest experience — because the money comes out of their share.
In fiscal 2025, Texas Roadhouse reported $5.88 billion in revenue — up 9.4% from the year before. The company operates 816 restaurants across 49 states, one U.S. territory, and 10 foreign countries. Average weekly sales per company restaurant hit $163,071 in the first quarter of 2025. The company employs over 100,000 people. And as of 2025, it is the largest casual-dining chain in the United States.
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That managing partner model is the whole story. In most restaurant chains, the general manager earns a salary — $60,000 to $90,000 — and has no financial stake in the restaurant's performance. If the food is slow, if the floor is dirty, if a customer walks out unhappy, the manager's paycheck doesn't change. At Texas Roadhouse, it does. A managing partner running a strong location can earn $200,000 or more. A great one earns significantly more than that. The result: management turnover at Texas Roadhouse runs far below the industry average. The people running the restaurants stay — because leaving means giving up the stake.
The consistency is the pricing power. Texas Roadhouse has raised menu prices steadily for years. In the first quarter of 2025, comparable restaurant sales grew 3.5% — driven by higher per-person check averages alongside a modest increase in guest traffic. Commodity inflation ran 2.1%. Wage inflation ran 4.6%. The company absorbed it and passed some through. Customers kept coming. Average weekly sales hit $163,071. The dining room was full on a Wednesday night. The bread was warm. Nobody complained about the price of a ribeye.
Kent Taylor never stopped building. He opened restaurants year after year, in small towns and big cities, in strip malls and freestanding buildings — always with the same formula. Hand-cut steaks. Made-from-scratch sides. Fresh bread baked every five minutes. No microwaves. No heat lamps. No freezers for the steaks. In March 2021, Kent Taylor died at 65. The company carried on. Jerry Morgan became CEO. The restaurants kept opening. The managing partners kept earning. The bread kept arriving warm.
The flywheel runs on talent, not real estate. Texas Roadhouse doesn't grow by selling franchises — it grows by training managing partners. Each one goes through a rigorous development program. The best servers become managers. The best managers become managing partners. The best managing partners train the next generation. The company controls the quality because it controls the pipeline. And every managing partner, with their own $25,000 on the line, guards the brand as if it were their own — because it is.
WHY THIS WORKS
Skin in the game at every location. Each managing partner invests their own money and earns a percentage of profits. The alignment between operator and owner is total.
Company ownership preserves control. While competitors franchise and lose control over quality, Texas Roadhouse owns its restaurants and sets the standard — hand-cut steaks, fresh bread, scratch-made sides — at every single location.
$163,000 in average weekly sales. The unit economics are exceptional for casual dining. High traffic, consistent quality, and a value-oriented menu drive throughput that competitors struggle to match.
The talent pipeline is the moat. Servers become managers. Managers become partners. Partners train the next cohort. The human capital system is self-reinforcing — and nearly impossible to replicate from outside.
Kent Taylor was turned down by 80 investors before three doctors in Kentucky wrote him a check. He opened his first restaurant in a converted car dealership. Three of his first five locations failed. When the pandemic hit in March 2020, Taylor gave up his salary and his bonus — the entire amount — and donated it to frontline employees. He asked his leadership team to do the same. They did. A year later, he was gone. The company he built from a cocktail napkin sketch now does nearly $6 billion a year — not by selling franchises, not by licensing a brand, but by giving each manager a stake in the restaurant they run and trusting them to care. That trust is the product.
