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Red Robin Crafts Catch-Up Strategies

Filed under Casual Dining Burgers, Marketing

Red Robin Gourmet Burgers & Brews calls its ongoing remodeling effort a “Brand Transformation,” but the transformation is encountering a few negative side effects. For Q4, the chain reported a 4.6% decline in customers, which a 2.6% increase in average check (1.9% from price) couldn’t cover, resulting in a 2% decrease in same-store sales for the quarter. Additionally, upscaling the menu has led to a 55-minute ticket time for the average order, hurting service times, table turns and dining room efficiency. Finally, while Red Robin concedes it has fallen behind casual-dining competitors in value marketing, to-go sales and alcoholic-beverage sales. On the plus side, however, earnings per share were up 24.8%, so analysts were happy.

Perhaps Red Robin needs voodoo to recover lost ground, and indeed it has jumped on the loaded fries bandwagon with Voodoo Fries (below), an LTO combo of steak fries tossed in blackened seasoning and topped with cheese sauce, bacon, fried jalapenos and fiery ghost chili sauce.

RedRobin_voodooFries-1024x733

Chief Concept Officer Denny Marie Post, who has been promoted to the additional title of Red Robin president, allowed that the chain totally caught off-guard by the level of competitive marketing in Q4 by bar & grill and fast-casual chains. “We should have been prepared” to meet that challenge, but the chain was not, Post told analysts today. Red Robin had “no go-to tactic” or value-priced menu news it could use to respond.

Red Robin_MarcoPolloChicken

The chain tried to make news with a contest to name a new upscale chicken burger (the winner was Marco Pollo) and invented a “Wedgie Burger” LTO: a 6-ounce beef patty topped with bacon, guacamole, tomato and red onion and served inside of a lettuce wedge “bun.” To appeal to diners who choose destinations more on price than brand—an audience Post said it hasn’t competed for well enough—Red Robin created the “Double Tavern Double Plus,” a casual-dining version of the bundled-meal value deals that QSRs did in 2015’s second half. Red Robin’s bundled two Tavern Double burgers with its Bottomless Fries plus an appetizer or dessert for $15.

RedRobin_$15 Double Deal

A new advertising campaign will break in Q2 and the chain is reassessing its media-buying strategy, Post said.

The road map for to rebuild sales as Red Robin continues its brand transformation is the Red2 program that CEO Steve Carley outlined for analysts. Its three components are Revenue, Expenses and Capital Deployment. Revenue gains will come addressing the seating/table turn problem and from initiatives like “12 +12 Brews,” which will bring a dozen draft and dozen bottled beers, both national and local brands, to restaurants. Red Robin’s approximately 8% of sales from alcoholic beverages significantly lags behind casual-dining competitors.

The chain also admits it is far behind others in to-go sales, with just 4% of sales coming from that opportunity. Red Robin has no online ordering capabilities, which will change under the Red2 program. The chain also will address catering and delivery opportunities. The Expense portion of Red2 includes investment in cook-timing technologies to help kitchen staff. The addition of the thicker, slower-cooking Finest burgers and smaller, fast-cooking Tavern burgers has complicated getting all meal components cooked and ready to serve at the same time, Carley said.

Red Robin opened a record 11 new restaurants in Q4. In 2016 it expects to open 25 and remodel an additional 75 according to CFO Stuart Brown, who was promoted to EVP this week.

5 Responses to Red Robin Crafts Catch-Up Strategies

  1. Frank

    Sorry Red Robin, but you fail to realize your biggest problem…stop cutting labor! That’s the reason why your service times are slowing down and your guest traffic is declining. Haven’t had a decent experience there in years, so stopped going.

  2. Steve

    They’ve put new lipstick on the pig, but it’s still the same menu. Except portion sizes decreased and prices went up. The value I felt from years ago is gone. I’ve had the Red Robin Whiskey River BBQ Chicken Wrap on and off over several years, the last time I asked the server if it was an appetizer or lunch size, I think she thought I was joking. I wasn’t.

    Service was slow and inconsistent, honestly had no idea which of four employees was supposed to be our waiter. I know that the Government has fowled thins up with regulations, but service matters.

    Bottomless Steak Fries? Those cute silver ‘cups’ may reduce portion sizes, but when I have a total of 6 fries I call it going cheap.

    Around my neck of the woods RR has competition now, and the competition is putting a dent in things. Between places like 5 Guys and a couple or regional burger restaurants there are choices.

  3. JJJ

    Slow inaccurate service has always been their problem. Complicating the menu even more with even larger custom burgers isn’t going to help that.

  4. Akbar

    The one thing I like about RR is they’re typically located near other restaurants to which I gleefully take my business.

    RIP RR

  5. John Vrabec

    All I know is that we used to go to RR regularly when they weren’t an “adult” hamburger place. They were busy, the wait for food wasn’t bad and it was a pleasant place to go for a good burger and fries. We don’t have kids but that was ok. We liked the vibe in the dining room, people and their kids were having fun.

    Now, it’s a drag going there, service is crap, the decor sucks and the 5 or 6 fries in that little cup thing is not amusing.

    The only thing they did that I am happy about is that they made the Onion ring tower a half order. When my wife and I would order the original tower, we couldn’t finish our burgers.

    Anyway, we don’t go there anymore and I love burgers.