The immediate change is a $10 bundle that’s being offered to just dine-in guests. Customers can order a gourmet burger, choice of bottomless side, and a bottomless beverage. By the percentages, it’s a pretty strong offer. If a guest ordered the El Ranchero Burger at $11.49 and added a $3 beverage, it would run $14.49 (bottomless fries are typically included). The deal is available all day.
Post said the bundle test drove incremental and profitable dine-in traffic. If it’s successful on a broader scale, Red Robin will add it to its national toolkit for Q2.
“We aren't doing any in-restaurant marketing of this, so the prospect of trade down has been limited, and what we're seeing is it is bringing guests in,” Post said.
Value, however, is about more than price, Post noted. Red Robin’s sweet spot remains middle-income families. Getting the message to them, and to new and lapsed guests, will be critical after a difficult year where some customers may have lost touch.
Red Robin expects, no later than the end of Q2, to launch a fresh campaign that will “return Red Robin to its unique place, among restaurant options, for our core targets,” Post said. The old message became “decidedly functional and a bit generic over the last two years,” she added.
The new campaign is fueled by fundamental research that looked into capturing differentiated value on a more meaningful level.
Additionally, Red Robin invested considerable resources to move its loyalty program to a new digital platform by mid-2019. When completed, the company will be able to precisely target offers based on recent purchase behavior, Post said. There are more than 8.6 million members in the platform.
A focus on operations
Constant said Red Robin saw improvements in the back-end of fiscal 2018. Sales performance accelerated as the quarter progressed, but so did “some of the service underpinnings to drive ongoing improvement as highlighted by some of the leading metrics.”
As the quarter moved along, Red Robin witnessed steady reductions in the number of walkaways, guest complaints tied to the time waiting to be seated, and issues related to table cleanliness—two areas the chain identified as needing improvement. “And even as weekly guest counts increased through the fourth quarter due to typical holiday seasonality, we were able to hold kitchen time steady, and we were able to slow the growth in year-over-year wait times,” he said.
“If we do a better job with throughput and addressing wait time issues, there is traffic to capture,” Constant added later. “The second piece is a little bit longer term, which is for those guests who may not have had a good experience in Q2 or Q3 when we weren't operating well. We'll take time to build up the trust that we can deliver on the promises of better execution and performance. That, I think, is the second wave of benefit we'll receive from operating on a more consistent and more elevated basis.”
Red Robin’s 2018 overall hourly labor productivity improved about 9 percent versus 2017 as well. Regardless of the progress, Constant said, there’s plenty of work to be done.
It breaks down by five categories:
Constant said Red Robin deserved some of the blame for these pillars slipping.
“In order to observe the significant change they experienced last year, the operators were sometimes forced to get creative to try and deliver on our promise to the guests,” he said. “By putting them in this position, we drifted away from the consistency and standards that are the hallmark of high-performing operations-driven organizations.”
On the training note, Constant said Red Robin isn’t looking to increase its investment; rather it wants to reprioritize current spend toward training on the basics of restaurant execution and the fundamentals of leadership. That includes training Red Robin’s host and off-premises specialist and managing the dynamic of multiple revenue streams at the front door. Also, reinforcing the new skill sets needed for servers and helping heart-of-house employees adapt to kitchen changes and new tasks.
“I understand that what I've laid out may not be groundbreaking or exciting, but it's these basics and fundamentals that will help us to reinforce the trust that our team members and guests have placed in Red Robin and will help us to build the reliable, predictable and sustainable business that we desire,” he said.
Off-premises, not to be forgotten
Red Robin has grown its off-premises business from 5.4 percent in 2016 to 9.9 percent in 2018. Post said the chain believes it can double again in the next three years.
By the third quarter, Red Robin will launch a new online ordering system that is far more intuitive than the current one, Post said. The goal being to increase the volume of online orders and improve conversion.
Red Robin also plans to invest in curbside service and explore new meal bundles that make it easier to feed a busy family.
The chain’s 2019 capital expenditures are expected to range between $50 million and $60 million, and includes facilities improvements and investments to support off-premises business.
“Technology, capital investments, include among other things, improving the experience and usage of our website for desktop and mobile online ordering and improving hardware and software back-office stability that we believe will lead to less downtime, lower system maintenance cost, higher guest and team member satisfaction and better results once in place,” Schweinfurth said.