Red Robin steps up its investments to drive traffic and fix restaurants

Red Robin Photo provided by Red Robin

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Red Robin reported a decline in total revenues, same-store sales, and traffic in the second quarter reported Wednesday after market, but its stock rose by double digits, nonetheless. Analysts are optimistic about the traffic-driving initiatives put into place when Dave Pace was named chief executive officer in April, as well as the company’s profit increase and investment targets.

In the second quarter, total revenues were $283.7 million versus $300.2 million in the second quarter of fiscal 2024. Same-store sales declined 3.2%, including a 5.5% decline in guest traffic.

That said, Red Robin’s sharpened focus on operational efficiencies, including labor improvements, drove a 280-basis-point improvement in restaurant-level profit margin during the second quarter.

“Our operators have become much more disciplined in managing through a labor matrix,” Pace said. “That involves being confident and more accurate in their forecasting and then scheduling against their forecasting, which they've done effectively.”

The $9.99 Yummm value deal, launched in July, has shown early signs of progress toward Pace’s goal of driving positive traffic. The company had previously been reluctant to join the value conversation, but Pace said it is important to respond to the dynamics of the marketplace, including consumers looking for such deals.

“The first step in building these layers was to address our weak competitive positioning and price point value offers. As we surveyed the competitive landscape, it was abundantly clear that price pointed value offerings under $10 are essential to help break through the noise to drive trial and consideration in today's environment,” he said. “The Big Yummm Deal has been thoughtfully structured to offer trade-up opportunities like extra burger patties, bacon, avocado, or upgraded sides and beverages designed to help mitigate check pressure while still delivering strong value to guests.”

Chief financial officer Todd Wilson said about 9% of guests are ordering the Big Yummm deal.

“Which, from our lens, is a great thing,” he said. “It means people see the promotion, they see the value in it, and they're choosing that option.”

To further drive traffic, Red Robin is rolling out proprietary, microtargeting tools in the third quarter to engage guests “more personally, precisely, and efficiently” than traditional broad-based messaging. Pace said this strategy is critical for Red Robin to compete with larger, more resourced brands.

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“Our approach will leverage these proprietary analytics that will help level the playing field at the restaurant level in a highly efficient manner,” he said.

As part of Pace’s “First Choice” plan, Red Robin has also created a “Find Money” initiative, which has helped bolster EBITDA (earnings before interest, taxes, depreciation, and amortization) in the first half of the year, providing incremental capital to further invest in the company’s priority projects, such as driving traffic, marketing, and deferred maintenance. The company is piloting refreshes, for instance, including flooring and furniture updates, at about 20 restaurants in four markets to learn where to best invest in capital.

In the second quarter, adjusted EBITDA was $22.4 million, marking an increase of $8.8 million versus the second quarter of 2024. From its “Find Money” initiative, Red Robin projects a $3 million to $4 million benefit to G&A this year.

Notably, Red Robin plans to close fewer restaurants than it previously guided to earlier this year. After evaluating approximately 70 locations, Pace said about 20 locations have been removed from the potential closure list because of improved performance and profitability, adding that more could come.

“We’ve got a watch list of restaurants we’re still working on (and) hope we can move even more off of that list, and we’re seeing improved performance,” he said.

Red Robin expects total revenue of approximately $1.2 billion for the full year, down from its prior guidance of $1.21 billion to $1.23 billion, with the expectation that same-store sales will decline 3% to 4% in the second half.

Contact Alicia Kelso at [email protected]