Customer Loss Cripples Red Robin Q1

Customer Loss Cripples Red Robin Q1
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The new advertising agency handling Red Robin Gourmet Burgers and Brews has its work cut out. The burger chain says it has selected that agency, succeeding Vitro, but wouldn’t share the name during today’s Q1 earnings call.

Instead, Red Robin CEO Steve Carley and President Denny Marie Post, outlined the chain’s marketplace problems that caused it to lose 0.7% in share in Q1. Foremost is a continuing loss of customers. Customer counts dropped an alarming 4.6% in Q4 2015 and were down 4.1% for the quarter ended April 17, 2016. A 1.5% boost in price/check helped offset that somewhat.

Red Robin tried two unusual-bun burgers during Q1, neither of which appear to have helped bring new customers. One was the Wedge Burger, served in a lettuce wedge; the other, introduced at the end of the quarter, was the ramen-bun Red Ramen Burger (shown at the bottom of the page).

Post told analysts the chain erred by following the herd into discounting. Red Robin offered $15 Tavern Double Plus Deal that bundled two of its entry-price burgers plus one appetizer or dessert. It tested well and the chain’s Red Royalty loyalty-programs liked it. But TV advertising for it “failed to break through,” she said.

RedRobin_2+1 Deal.2016

“Playing in the sea of sameness does not support our special brand,” Post said of the discounting rampant in casual dining. The Red Robin offer was seen as a me-too deal, similar to the $20 meal deals from Applebee’s, Chili’s and others.

Rather than discount, Red Robin will focus on “everyday value,” especially the $7 Tavern Double burger rather than the $13-and-up Finest burger line at the top of the price spectrum. Value is going to bring new customers at a time when consumers are careful about spending and the competitive environment is highly promotional, Carley said. Still the chain forecast negative customer traffic through the rest of 2016.

Red Robin also will work to get into online ordering and to-go business, which Post called “the only growing [business] segment in casual dining.”

The chain announced the hiring of industry veteran Carin Stutz (past president at McAlister’s Deli and Così) as EVP-Chief Operating Officer. Red Robin has several operations initiatives in the works, including new table-management and supply-chain management software plus cost-saving projects. Red Robin will complete remodeling of company-owned units this year.

Red Robin Ramen Burger

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