GREENWOOD VILLAGE Colo. Red Robin Gourmet Burgers Inc., facing the daunting pressures within the casual-dining segment, said Wednesday it would streamline expenses by cutting expansion plans, freezing corporate bonuses and giving franchisees a break on royalty payments.
The company also said it began on Wednesday a cash tender offer for employee stock options.
To reduce capital outlays, the casual-dining company said it plans to open between 15 and 16 units this year, instead of original estimates to open up to 20 locations. Currently, Red Robin boasts 454 corporate or franchised restaurants.
Red Robin also expects to save $1.2 million by not paying corporate executives performance-based bonuses for fiscal 2008, which ended Dec. 28.
Compensation expenses will be further reduced through a cash tender offer for stock options held by about 550 employees, including about 218 restaurant general managers. The company said it would spend about $3.7 million to purchase up to 1.65 million eligible options. The buyouts will reduce future compensation expense on tendered unvested options as well as the overhang, or share dilution, related to “outstanding options that are no longer an effective incentive,” the company said.
The options eligible would be those with an exercise price at or above $32 per share. Red Robin’s shares closed Wednesday at $12.57.
The company added that equity incentives remain a major component of its long-term compensation philosophy. Red Robin will take a one-time charge of up to $4.5 million during the current first quarter for the cash offer.
Finally, to help restaurant operators, both franchised and corporate stores will now contribute 0.25 percent of restaurant sales, rather than 1.5 percent, to the chain’s national advertising fund. The royalties will be directed to national online advertising, direct mail campaigns and local store marketing, the company said. Red Robin does not plan to run any national cable advertising this year.
