NASDAQ_TXRH_2019

Texas Roadhouse, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share data)

F-9

(1) Description of Business

The accompanying Consolidated Financial Statements include the accounts of Texas Roadhouse, Inc. ("TRI"), our
wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively, the "Company," "we,"
"our" and/or "us") as of December 31, 2019 and December 25, 2018 and for each of the years in the three-year period
ended December 31, 2019.

As of December 31, 2019, we owned and operated 514 restaurants and franchised an additional 97 restaurants in
49 states and ten foreign countries. Of the 514 company restaurants that were operating at December 31, 2019, 494 were
wholly-owned and 20 were majority-owned. Of the 97 franchise restaurants, 69 were domestic and 28 were international
restaurants.

As of December 25, 2018, we owned and operated 491 restaurants and franchised an additional 91 restaurants in
49 states and nine foreign countries. Of the 491 company restaurants that were operating at December 25, 2018,
471 were wholly-owned and 20 were majority-owned. Of the 91 franchise restaurants, 69 were domestic and 22 were
international restaurants.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

As of December 31, 2019 and December 25, 2018, we owned a 5.0% to 10.0% equity interest in 24 restaurants.
Additionally, as of December 31, 2019 and December 25, 2018, we owned a 40% equity interest in four non-Texas
Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China. The
unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates
are included in other assets in our consolidated balance sheets, and we record our percentage share of net income earned
by these unconsolidated affiliates in our consolidated statements of income and comprehensive income under equity
income from investments in unconsolidated affiliates. All significant intercompany balances and transactions for these
unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

(b) Fiscal Year

We utilize a 52 or 53 week accounting period that typically ends on the last Tuesday in December. We utilize a
13 week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter
contains 14 weeks. Fiscal year 2019 was 53 weeks in length. In fiscal year 2019, the 53rd week added $59.0 million to
restaurant and other sales and $0.10 to $0.11 to diluted earnings per share in our consolidated statements of income and
comprehensive income. Fiscal years 2018 and 2017 were 52 weeks in length.

(c) Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash
equivalents. Cash and cash equivalents also included receivables from credit card companies, which amounted to $22.4
million and $34.1 million at December 31, 2019 and December 25, 2018, respectively, because the balances are settled
within two to three business days.

(d) Receivables

Receivables consist principally of amounts due from retail gift card providers, certain franchise restaurants for
reimbursement of labor costs, pre-opening and other expenses, and franchise restaurants for royalty fees.

Receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is
our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the
allowance based on historical write-off experience. We review our allowance for doubtful accounts quarterly. Past due