Red Robin Gourmet Burgers & Beers calls its ongoing remodeling effort a “Brand Transformation,” but the transformation is encountering a few negative side effects. For Q4, the chain reported a 4.6% decline in customers, which a 2.6% increase in average check (1.9% from price) couldn’t cover, resulting in a 2% decrease in same-store sales for the quarter. Additionally, upscaling the menu has led to a 55-minute ticket time for the average order, hurting service times, table turns and dining room efficiency. Finally, while Red Robin concedes it has fallen behind casual-dining competitors in value marketing, to-go sales and alcoholic-beverage sales. On the plus side, however, earnings per share were up 24.8%, so analysts were happy.
Perhaps Red Robin needs voodoo to recover lost ground, and indeed it has jumped on the loaded fries bandwagon with Voodoo Fries (below), an LTO combo of steak fries tossed in blackened seasoning and topped with cheese sauce, bacon, fried jalapenos and fiery ghost chili sauce.
Chief Concept Officer Denny Marie Post, who has been promoted to the additional title of Red Robin president, allowed that the chain totally caught off-guard by the level of competitive marketing in Q4 by bar & grill and fast-casual chains. “We should have been prepared” to meet that challenge, but the chain was not, Post told analysts today. Red Robin had “no go-to tactic” or value-priced menu news it could use to respond.
The chain tried to make news with a contest to name a new upscale chicken burger (the winner was Marco Pollo) and invented a “Wedgie Burger” LTO: a 6-ounce beef patty topped with bacon, guacamole, tomato and red onion and served inside of a lettuce wedge “bun.” To appeal to diners who choose destinations more on price than brand—an audience Post said it hasn’t competed for well enough—Red Robin created the “Double Tavern Double Plus,” a casual-dining version of the bundled-meal value deals that QSRs did in 2015’s second half. Red Robin’s bundled two Tavern Double burgers with its Bottomless Fries plus an appetizer or dessert for $15.
A new advertising campaign will break in Q2 and the chain is reassessing its media-buying strategy, Post said.
The road map for to rebuild sales as Red Robin continues its brand transformation is the Red2 program that CEO Steve Carley outlined for analysts. Its three components are Revenue, Expenses and Capital Deployment. Revenue gains will come addressing the seating/table turn problem and from initiatives like “12 +12 Brews,” which will bring a dozen draft and dozen bottled beers, both national and local brands, to restaurants. Red Robin’s approximately 8% of sales from alcoholic beverages significantly lags behind casual-dining competitors.
The chain also admits it is far behind others in to-go sales, with just 4% of sales coming from that opportunity. Red Robin has no online ordering capabilities, which will change under the Red2 program. The chain also will address catering and delivery opportunities. The Expense portion of Red2 includes investment in cook-timing technologies to help kitchen staff. The addition of the thicker, slower-cooking Finest burgers and smaller, fast-cooking Tavern burgers has complicated getting all meal components cooked and ready to serve at the same time, Carley said.
Red Robin opened a record 11 new restaurants in Q4. In 2016 it expects to open 25 and remodel an additional 75 according to CFO Stuart Brown, who was promoted to EVP this week.