The chain reported a rough Q1 to get the fiscal year started, with guest traffic dropping 5.5 percent as same-store sales declined 3.3 percent. Net income sank 85.4 percent, year-over-year, to $639,000. Revenues of $409.87 million compared to last year’s $421.52 million figure. According to Zacks Consensus Estimate, Red Robin has underperformed revenue estimates for four consecutive quarters.
It was Moore’s first quarterly assessment since taking the position in April. Denny Marie Post, who joined Red Robin in 2011 and held the top title since 2016, retired, which went into effect immediately. Moore was a director at Red Robin since 2007 and its board chair for the past nine years. She also previously served as board member and president at Sonic Corp.
She said Thursday Red Robin is working with The Elliot Group to assist in its CEO search and the interview process is underway. Additionally, the company continues to actively work with The Cypress Group on a refranchising initiative targeting about 100 locations for sale. At quarter’s end, 483 of the company’s 579 locations were corporate run.
What’s going wrong, and what’s changing
The comeback effort at Red Robin is four-pronged, Constant said. Target No. 1: staffing, particularly at the general manager level.
Constant said Red Robin enjoyed reductions in its hourly manager and GM turnover from Q4 to Q1. The company brought manager staffing levels to 96.8 percent.
Red Robin’s staffing has been a trial lately. Efforts to trim labor costs ended up slowing table turns and bottlenecking wait times. Peak business suffered especially. Red Robin tried to cut two positions and put table-clearing duties on servers’ plates. The host position was asked to handle not just dine-in guests, but carryout orders as well. Last August, this issue spiked as Red Robin’s weekend walkways increased about 85 percent, year-over-year. Total ticket times out of the kitchen hiked about a minute on average, and so did wait times. Tables weren’t being cleaned efficiently and customers turned around when they saw the line stuff into the lobby.
“We know we can improve the overall guest experience, shorten wait times, reduce walkaways, have cleaner dining rooms, and effectively identify and resolve potential issues by continuously getting our managers on the dining room floor and at the host stand during peak hours,” Constant said.
Overall satisfaction scores improved throughout Q1, he added, reversing a trend that carried throughout all of last year and hit a low point at the end of Q4. Dine-in traffic declined 4.2 percent to close the year.
Here’s a look at how comps have tracked, which paints a challenging picture:
- Q1 2019: –3.3 percent
- Q4 2018: –4.5 percent
- Q3 2018: –3.4 percent
- Q2 2018: –2.6 percent
- Q1 2018: –0.9 percent
- Q4 2017: 2.7 percent
- Q3 2017: –0.1 percent
- Q2 2017: 0.5 percent
- Q1 2017: –1.2 percent
- Q4 2016: –4.3 percent
- Q3 2016: –3.6 percent
- Q2 2016: –3.2 percent
- Q1 2016: –2.6 percent
Constant said, year-over-year, walkways are down 4.2 percent, “wait times are shorter, guest complaints on cleanliness and wait times have declined meaningfully, and guests have told us that they've seen marked improvements in problem resolution when there is an issue.”
He added Red Robin shifted its labor investment from overstaffed “shoulder” hours during the day to understaffed peak periods. This boosted throughput for busy shifts and helped Red Robin capture sales without making an incremental investment in labor expense.
Constant said getting to a higher staffing level came down to “peaking the peaks” and then having those extra employees cover remaining shifts during the week.
“We, like many other organizations, have been battling staffing challenges for some time,” he added. “And we've been kind of leveling out and been at the same point for quite a while. So we made a conscious effort at the start of 2019 to say that we wanted to get to better manager staffing levels, and we've seen that progress happen throughout the first quarter.”
There are a few other triggers. Red Robin reduced its menu size by about 10 percent over the past couple of years so it can focus on core items, like burgers, chicken, and steak fries. More simplification is coming in the second half of the year, chief concept officer Jonathan Muhtar said.