When states began lifting restrictions, Red Robin did not rush into on-premises dining.
Instead, CEO Paul Murphy explained, the company opened stores “when we felt we were ready and that all considerations were in place so that we could do so effectively.”
But now—due to recent experiences and healthy and safety readiness—the burger brand is planning to pick up the pace and open “as soon as possible once restrictions are lifted.”
Red Robin has opened 270 company-run dining rooms, or about 65 percent of its corporate footprint. In the next 40 to 45 days, that number is expected to increase to more than 80 percent. By the end of July or early August, Murphy said close to 100 percent of dining rooms should be open.
The reopened dining rooms include Red Robin’s new hospitality model, called the Total Guest Experience. Murphy said the new service orientation “offers elevated levels of hospitality with servers dedicating more time in the dining room attending to and engaging with guests.”
THE COVID-19 ROAD FOR RED ROBIN SO FAR
Red Robin Sees Progress, but Serious Concerns Remain
Red Robin Temporarily Closes 35 Locations, Cuts Support Center Positions
Red Robin Postpones Rollout of Donatos Pizza
“We’re feeling just great about our ability to staff the restaurants at the 50 percent, at the 75 percent, and even 100 percent,” Murphy said during the company’s Q1 earnings call. “I know there’s been a lot of concern about would the team members be coming back … We have local issues in a couple of areas. But for the most part, that has been a real plus for the brand, and I think it just shows the strength of the Red Robin team members and their connection not only with the restaurants, but the communities.”
The good news for Red Robin is that most of the stores that are reopening dining rooms now are based in the West Coast and Pacific Northwest, which encompass the brand’s higher-volume restaurants. Dine-in stores are performing well; at units operating at 50 percent capacity, same-stores sales were down roughly 17 percent this past Monday.
But that’s not the only reason why Red Robin is feeling optimistic. During the pandemic, the company saw off-premises sales—at their peak—reach about three times what they did pre-COVID. Even with dining rooms open, stores have maintained roughly 1.5 to two times pre-COVID levels, representing about 40 percent of sales.
Revenue came in at $306.1 million in Q1, a decline of 25.3 percent. Comp sales fell 20.8 percent in Q1, including a 20.9 percent drop in traffic.
During the week ending June 7, restaurants with dine-in traffic saw comp sales drop 26.7 percent, compared to a 56 percent slide at units operating off-premises only.
Here’s a look at how company-run units with dining rooms open have fared:
Week ended May 10
- Same-stores sales: –37.6 percent
- Average net sales per restaurant: $27,171
- Number of units open: 65
Week ended May 17
- Same-store sales: –35.8 percent
- Average net sales per restaurant: $27,536
- Number of units open: 108
Week ended May 24
- Same-store sales: –31.6 percent
- Average net sales per restaurant: $33,835
- Number of units open: 156
Week ended May 31
- Same-store sales: –26.9 percent
- Average net sales per restaurant: $37,731
- Number of units open: 218
Week ended June 7
- Same-store sales: –26.7 percent
- Average net sales per restaurant: $37,682
- Number of units open: 270
And here’s how the 414 company-operated stores, including off-premises only, are trending:
Week ended April 26
- Same-store sales: –56 percent
- Average net sales per restaurant: $23,908
Week ended May 3
- Same-store sales: –54.7 percent
- Average net sales per restaurant: $23,994
Week ended May 10
- Same-store sales: –52.2 percent
- Average net sales per restaurant: $26,747
Week ended May 17
- Same-store sales: –47.9 percent
- Average net sales per restaurant: $28,292
Week ended May 24
- Same-store sales: –47 percent
- Average net sales per restaurant: $29,598
Week ended May 31
- Same-store sales: –43 percent
- Average net sales per restaurant: $32,239
Week ended June 7
- Same-store sales: –39.7 percent
- Average net sales per restaurant: $34,222
The most profitable off-premises channel has been takeout, which mixes 62 percent in off-premises sales, while third-party delivery accounts for 30 percent and Red Robin delivery—when customers order directly from Red Robin for third-party delivery—carries 8 percent. Third-party delivery is available across the system and Red Robin delivery is available at all corporate units. The brand’s catering business has slowed significantly, but Murphy said the chain will be in position to capitalize when social gatherings increase.
Murphy attributed off-premises success to several factors: taste of food, ease of order placement from a new enhanced website, order accuracy, speed of service, order packaging, ease of pickup, and friendliness of employees. Red Robin has seen record-high overall guest satisfaction scores as a result.
The CEO said execution of these factors has been enhanced by the company’s simplified menu, which features 55 fewer items, or a 33 percent reduction. Because of the success and little to no negative feedback, Red Robin plans to use the simplified menu as part of its ongoing business plan.
“We are navigating through these unprecedented times with tenacity and determination and have taken substantive actions that have positioned us well for the short and long-term when the impact of this virus subsides,” Murphy said. “… I am confident we will be in a strong position, both as a brand and as an organization as the recovery continues.”
Before the pandemic, Red Robin had plans to roll out Donatos Pizza systemwide, but to preserve cash, the company reduced capital expenditures and suspended the initiative. However, in restaurants where Donatos is already on the menu, average check has been 3.5 percent higher. Early in the year, the brand bought pizza equipment for the Seattle market, including roughly 40 restaurants. Red Robin plans to resume the roll out of Donatos in this market by the end of the year.
In late May, Red Robin revealed in a filing that it negotiated concessions from lenders to avoid defaulting on its credit facility. The company’s negotiations with lenders requires it raise at least $25 million by November 13. The company filed a $75 million shelf registration statement for the purpose of raising incremental capital.
“We are confident that we will meet the financing condition under our credit facility amendment,” EVP and CFO Lynn Schweinfurth said.
As of June 7, Red Robin has a total liquidity of $84 million, including $30 million in cash and $54 million available under its credit facility. Schweinfurth estimated that the company’s average cash burn rate for Q2 is between $1 million and $2 million per week, which includes estimated partial rent payments, reopening costs, one-time COVID-19 expenses, and costs associated with finalizing the amendment of its credit facility.
