The burger line has been one of the casual-dining chain's most successful product launches to date
Touting the success of the Tavern Double platform introduced earlier this year and buoyed by margin improvements, Red Robin Gourmet Burgers, Inc. on Thursday reported an 11.6 percent increase in second-quarter profits.
The Tavern line has been one of the casual-dining chain’s most successful product launches to date, and has set the stage for long-term traffic building as an “everyday value” option that will allow the casual-dining chain to compete with the growing number of better-burger fast-casual concepts, said Steve Carley, Red Robin’s chief executive, in a call with analysts following the second quarter report. The burger platform was designed for profitability, with a starting price point of $6.99 and the option for guests to add on upgrades for $1 more.
Carley noted that the Tavern Double platform was driving trial and will build frequency over time as guests realize the $6.99 price point for a double-patty burger and bottomless fries won’t be going away.
Recently introduced styles, such as the Fiery Ghost with ghost pepper sauce and both fresh and fried jalapenos, as well as the Cry Baby with ghost pepper ketchup and fresh and fried onions, have attracted a lot of social media attention, earning Red Robin a bit of “indie cred and swagger,” said Denny Marie Post, senior vice president and chief marketing officer — though she said it’s not clear yet whether the platform is attracting new or lapsed customers.
More innovation with the Tavern platform and the menu overall is on deck, according to Post. Red Robin also plans to test “a ton” of initiatives this fall as part of an overall brand transformation, including a remodel of restaurants, Carley said.
The company is also looking to build the chain's positioning as a place where adults can gather for a drink while hanging on to its family-friendly reputation.
For the quarter ended July 8, Red Robin’s bar sales mix grew to 7.2 percent, up from 6.5 percent a year ago.
The Greenwood Village, Colo.–based company recorded net income of $7.7 million, or 52 cents per share, compared with $6.9 million, or 44 cents per share, a year ago, including executive transition and severance expenses during the 2011 quarter. Excluding those costs, the company’s second quarter net income last year was $7.5 million.
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Revenues increased 3.7 percent to $223.7 million, including company-owned restaurant revenues and franchise royalties. Systemwide restaurant revenues were $306.6 million for the quarter, up from $298.9 million last year.
Same-store sales rose 0.8 percent for company-operated restaurants, which included a 0.9 percent increase in traffic offset by a 0.1-percent decrease in average check during the quarter.
Year-to-date, same-store sales rose 0.8 percent, driven by a 2.5-percent increase in average check, partially offset by a 1.7-percent decrease in guest counts.
Stuart Brown, Red Robin’s senior vice president and chief financial officer, warned that the chain saw a dip in sales during the weeks of the Olympics, so same-store sales may turn negative in the third quarter.
Brown said a “national slowing” may be somewhat to blame, but the sales decline has been specifically during the period since the Olympics opening ceremony. “Everybody’s sitting at home watching TV,” he said.
Red Robin finished the quarter with 331 company-owned restaurants and 131 franchise locations. The company opened one new location of its smaller-format Red Robin’s Burger Works during the quarter, and closed a company-owned restaurant in San Diego because the lease was up.
Red Robin lowered its guidance for the year, saying same-store sales will be up about 0.5 percent, down from prior estimates of up 1 percent. The chain will end the year with 14 new company-owned restaurants, including four Burger Works.
The company also in July hired Rob Geresi as vice president of operations for the Burger Works concept, which the company plans to grow.