Red Robin sees traction on brand transformationRed Robin sees traction on brand transformation

Red Robin Gourmet Burgers Inc. customers continued to order more appetizers, desserts and drinks in the third quarter, but traffic remained slightly negative as casual-dining competitors stepped up promotional activity, the company said Tuesday.

The Greenwood Village, Colo.-based operator said same-store sales increased 3.5 percent for the quarter, including 2.2 percent from menu pricing and 1.4 percent from the menu mix. Traffic, however, declined 0.1 percent.

Still, Red Robin CEO Steve Carley said brand transformation efforts in recent years are gaining traction. About 150 restaurants will be remodeled this year, and those units are showing sales about 3.5 percent higher than unremodeled locations.

The chain completed its rollout of Ziosk tabletop tablets across the 517-unit system in September, and the number of customers that pay at the table has exceeded expectations.

The tablets, called “Robin,” also make it easier for users to enroll in the loyalty program and track their rewards. Customers are also paying $1.99 to play “bottomless games” on the devices.

Red Robin’s alcohol sales continued to grow, reaching close to 8 percent of sales in the third quarter, an increase of 30 basis points from a year ago, but the company hopes to see that number reach the teens, said Denny Marie Post, Red Robin executive vice president and chief concept officer.

Rather than competing by discounting, Red Robin has focused on offering everyday value, like the Tavern Double burger line with bottomless fries. The menu also includes premium burgers like the Finest Line, which in the third quarter included the limited-time Oktoberfest-themed UberBurger, with candied bacon, grilled bratwurst, beer-glazed onions and Merkts beer cheese on a pretzel bun.

This year, Red Robin has focused its marketing partnership on the Seattle Seahawks, dropping three other NFL teams included in the past — a decision that may also have dampened traffic, the company said.

“Just to prove you don’t want me picking your fantasy teams,” the three dropped teams have a combined record of 20 wins to two losses, where the Seahawks have “gotten off to what could be kindly called a slow start,” Post said.

Still, she noted, “We made the decision to eliminate those three teams not as sports betters but as responsible marketers, freeing up our limited local marketing resources to spend on other programs.”

Fundamentally, the negative traffic could be blamed in part on the “very uncertain guest who simply hasn’t returned to the level they were before the recession in terms of their frequency of dining out,” Post said.

Next year, Red Robin will invest more in tools to improve productivity and speed of service, Carley said, although more detail on that initiative will be revealed during the company’s next earnings call in February 2016.

The company expects to open 25 Red Robin restaurants in 2016, mostly with the mid-sized footprint. Another four units will be relocated, and about 70 will be remodeled, Carley said.

The company is picking up speed on openings of its fast-casual Burger Works variant. The quarter ended with 10 units open, and the company plans to add another five to 10 locations in 2016.

Last week, the company rolled out the Red Robin Royalty loyalty program to Burger Works, which will allow more tracking of customer behavior between the two brands in shared markets.

For the quarter, net income increased nearly 15 percent, to $8.3 million, or 58 cents per share, compared with $7.2 million, or 50 cents per share, a year ago.

Revenues increased 6 percent, to $283.4 million.

Labor costs are expected to rise 3 percent this year, which will be offset somewhat by lower commodity inflation as the price of ground beef fall, said Stuart Brown, Red Robin senior vice president and chief financial officer.

In the third quarter, food costs fell about 3 percent, and are expected to decline about 2.5 percent to 3 percent in the fourth quarter as well.

Contact Lisa Jennings at [email protected].
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