Red Robin’s CEO search is over, and it’s not being sold, either. The 562-unit burger brand announced Thursday morning that it’s tapped Paul Murphy as chief executive and president, ending a lengthy search that began with Denny Marie Post’s retirement in April. The company also said its board unanimously rejected an unsolicited, conditional proposal made July 18 by Vintage Capital Management to acquire all of the outstanding shares of Red Robin for $40 per share. The activist investor still owns roughly 12 percent of Red Robin and suggested a similar $461.4 million deal earlier in the year.
Murphy succeeds Pattye Moore, who served as interim CEO since Post’s departure. Moore, also Red Robin’s board chair, plans to retire following “an appropriate transition period,” the company said.
Murphy has directed fast casual Noodles & Company as executive chairman since 2017, where he was responsible for 459 locations across 29 states. The brand posted four consecutive quarters of positive same-store sales growth on revenues of $457 million, delivering one of the more compelling turnarounds in quick service over the past couple of years.
Before, Murphy was CEO of Del Taco Restaurants from 2009–2017, overseeing 543 stores with revenues of $470 million. Like Noodles, Del Taco engineered a brand fix that resulted in 17 consecutive quarters of company-operated same-store sales growth and 11 straight periods of systemwide comps gains. Additionally, he took the company public in 2015.
Other roles include leadership positions at Einstein Noah Restaurant Group, Inc. for 11 years, including as president, CEO, and board director from 2003–2008. At the top post, he led 593 restaurants with revenues of $390 million.
“The board is confident Paul is the right leader to drive the continued transformation of Red Robin and restore the Company to sustainable growth and profitability,” Moore said in a statement. “Paul brings a multi-decade-long track record of substantial shareholder value-creation, as well as a unique combination of operational, brand-positioning and turnaround expertise, making him ideally suited to lead Red Robin.”
“I am honored to join Red Robin at this pivotal moment in the company’s transformation,” Murphy added. “Red Robin is an iconic American brand with tremendous potential, and I am excited to work with the board and management team as we execute on our significant opportunities to drive improved financial results.”
Red Robin recently added three new independent board directors and announced the pending retirements of three existing members—Aylwin Lewis, Moore, and Stuart Oran, who will not stand for re-election in 2020. The three additions were: Tom G. Conforti, the former CFO at IHOP, Torchy’s Tacos CEO G.J. Hart, who also led Texas Roadhouse previously, and David A. Pace, former president of Carrabba’s and CEO of Jamba.
Red Robin is coming off a second quarter, announced in late August, where same-store sales declined 1.5 percent as traffic dropped 6.4 percent. It marked the fifth straight period of negative comps, although the best performance since Q1 2018.
- Q2 2019: –1.5 percent
- 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
Red Robin outlined a strategic plan “to restore the company to sustainable growth and profitability,” Thursday.
The five strategic priorities included:
- Stabilizing dine-in revenue by reinforcing Red Robin’s compelling value proposition
- Continuing to build the To-Go and Catering businesses
- Improving the Guest experience and recapturing Red Robin’s known-for “Gift of Time” convenience
- Implementing digital platforms and restaurant technology solutions
- Selectively refranchising and reassessing the company’s real estate portfolio
Red Robin said Vintage’s proposal was carefully reviewed and considered, and found to be “not in the best interests of all shareholders, as the strategic plan currently being implemented by Red Robin positions the company to deliver greater long-term value to its shareholders.”
Evercore is serving as financial adviser to Red Robin and Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as its legal counsel.