Red Robin Gourmet Burgers Inc. is overhauling its operations, redefining service, adding off-premise alternatives and reconsidering mall locations as it faces a challenging casual-dining market, executives said. At the Greenwood Village, Colo.-based company’s first investor day in more than three years, Red Robin executives said many of its restaurants share the traffic declines in big-box retail and entertainment, as more consumers shop online and get entertainment streamed into their homes. “I’m here to tell you casual dining peaked, and it’s not coming back,” Denny Marie Post, Red Robin’s CEO, told analysts. “It is not going to be the reigning concept ever again to the extent that it was. It had its moment. “It had its moment when we were all discovering big-box stores and going out to movie theaters and doing lots of stuff, of which casual dining was part of that occasion,” Post said. “We were never a destination, or a very few were. We were part of something else.” Red Robin executives said they are reconsidering where they locate restaurants and are also testing off-premise channels like catering and delivery. Alexander Slagle, an analyst with Jefferies LLC, said Red Robin is showing “early signs of improvement.” In a note to investors, Slagle said the company’s “efforts to improve ops in the restaurants, build awareness in high-penetration markets using incremental local media and drive frequency via renewed focus on everyday value seem to be moving the needle.” Slagle also noted that the company was keeping it unit growth modest, with emphasis on markets it had already penetrated, “allowing it to better leverage its scale and awareness in those regions.” Les Lehner, Red Robin’s chief development and procurement officer, said the brand halted mall development in 2015. He said about 17 percent of Red Robins locations are in malls, and they tend to lag other units in revenue. “Everybody is aware that malls are struggling right now and face a very difficult path,” he said. Post pointed out, however, that some mall locations do especially well, including Red Robin’s highest volume restaurant, with $6 million annually, at the Northgate Mall in Seattle. “We’re either seeking an exit strategy, because we don’t believe that the redevelopment plans and programs that the landlords had in place are going to work, or we’re trying to find some creative ways to create incremental revenue streams out of these models,” Lehner said. Jonathan Muhtar, the head of Red Robin’s marketing and off-premise programs, said the company hopes to tap its 6.6 million loyalty program members with more focused messaging and to look at delivery and carryout, which survey indicate would increase frequency among half the brand’s guests. The company is looking at various delivery possibilities, as well as introducing this summer a new “Burger Bar” packaging for large orders. “This has really developed with an eye toward catering as well, where we have the ability to provide many different toppings and ingredients, keep those fresh and display [them] in a way that’s appealing to our guests, while also protecting the hot product,” he said. Post said Red Robin is also looking at other service models. While only about 8 percent of sales are in alcoholic beverages, she said the brand would look at possibilities such as self-service “beer walls.” “There’s a point at which we might turn that into an experience where the guest can help themselves, and not make it a takeaway but in fact that guest will probably step back and appreciated the chance of sample variety and if you seen those kind of beer walls that really very, very effective,” she said. Carin Stutz, Red Robin’s chief operating officer, said the brand is testing six new service models in various locations, adding that two seemed to provide the “frictionless and hassle-free service” that would work in the future. For the first quarter, Red Robin said its income declined 18.7 percent, to $11.6 million, or 89 cents per share, from $14.2 million, or $1.03 per share, the previous year. Revenue increased 4.1 percent, to $418.6 million, from $402.1 million the previous year. Red Robin said same-store sales fell 1.2 percent in the first quarter ended April 16. That reflected a 1.7-percent decline in traffic and a 0.5-percent increase in average check, the company said. As of April 16, Red Robin had 556 restaurants, including 469 company-owned locations and 87 franchised units. – Source: NRN.
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