The chain introduced the Prime Chophouse Burger one year ago, putting it on the menu at the discount price of $5.99 (most of its specialty burgers are priced from $9.29 to $9.99). Along with it, the chain featured a Southwest Grilled Chicken Salad, also at $5.99.
Beginning next week, the Prime Chophouse Burger (with horseradish-sautéed mushrooms, steakhouse sauce, Provolone cheese, onion straws and Country Dijon spread on an onion bun) is back. It will debut in the $9 range, but after two weeks the price drops to a more appealing $6.99, then moves back to $9 for the final two weeks of the promotion (which ends April 17). Sort of inverse bell-curve pricing. The LTO will get TV advertising support, via agency Periscope, for a portion of the promotional schedule.
Red Robin confirmed the burger’s return next week to BurgerBusiness.com but declined to offer guidance on pricing plans.
Red Robin has been trying to signal consumers that it has more than just burgers, so the flanker additions for this promotion will be a Spicy Avocado Chicken Wrap, Arctic Cod Fish and Chips and a new dessert, Cheesecake Bites.
The Prime Chophouse was a hit last year, so the pressure surrounding it isn’t about consumer acceptance. Instead the edge comes from the unease brought on by the Jan. 24, 2011, letter to Red Robin Chairwoman Pattye L. Moore from stakeholder Chicago-based Oak Street Capital Management LLC. The investment group called on Red Robin management—including Moore and recently hired CEO Steve Carley—to remove poison pill provisions barring takeovers; to reduce corporate overhead; suspend new-unit development until sales and profit margins strengthen; redirect cash flow to buy back shares; and put Oak Street members on the board. The letter concludes that “we believe that the market has lost confidence in the Board’s ability to effectuate positive change.”
Moore responded with her own letter to shareholders outlining changes in its shareholder-rights plan “designed to allow the board and our new CEO the time to comprehensively identify and evaluate a strategic direction for the business against a challenging consumer environment.” Management will report full year 2010 results on Feb. 17 and hold an earnings call that same day.
The pressure on the Prime Chophouse promotion (planned long before the Oak Street confrontation began) to succeed will be even greater if Red Robin reports results that Wall Street—or Oak Street Capital Management—consider disappointing. Results for the third quarter, ended Oct. 3, 2010, were positive. Restaurant revenues were up 4.2%, same-store sales at company stores rose 0.9% and guest counts were up 2.6%. Red Robin needs strong sales to continue to blunt Oak Street’s pitch to shareholders for management changes.
Since Carley became CEO in September, Red Robin has been evaluating a number of improvements to build sales and enhance the brand. One was the systemwide rollout last month of the Red Royalty frequent-diner program. Members receive extras throughout the year, including a free entrée on cardholders’ birthdays.
Additionally, Red Robin now is offering Happy Hour specials at about 60% of company-owned restaurants on weekdays, the chain confirmed. The chain says the idea is to increase awareness of Red Robin’s full-service bar. According to sources, Red Robin this spring will introduce an all-new drink menu with new specialty cocktails.
Promoting high-margin cocktails through Happy Hour promotions is an increasingly appealing tactic for casual-dining chains. Ruby Tuesday EVP Kimberly Grant told analysts during the chain’s recent earnings call that its investments in bar programs are helping it move alcohol sales from 9% of tthe total to its goal of 12%. Technomic recently forecast a 2.3% sales increase for cocktails this year.
Separately, P.F. Chang’s is rolling Happy Hour to its restaurants, and Chili’s is testing the idea at several units in Western Michigan.