GJ Hart, a 35-year veteran of the restaurant industry, believes the burger chain should focus on a barbell menu strategy, increased selection, and optimized in-store leadership.
GJ Hart has been CEO of Red Robin not even eight weeks, so admittedly, he's still learning a lot.
But this isn't his first rodeo. Firstly, he's served on the board since August 2019. Beyond that, Hart has spent 35 years working in the restaurant industry for public and private companies, including most recently as CEO of fast casual Torchy's Tacos. Before that, he worked as chief executive of California Pizza Kitchen for more than seven years and led Texas Roadhouse through an IPO as president and chief executive.
"Through those experiences and others, I believe that I have demonstrated my commitment to profitable growth and the ability to drive long-term shareholder value," Hart told investors during Red Robin's Q3 earnings call.
So far, Hart has spent his first few weeks meeting the executive team, visiting restaurants, and digging into the business. Within his studies, he found opportunities for improvement, starting with what Red Robin is known for—gourmet burgers.
"I'm challenging the team, are we producing a gourmet burger that we all are very, very proud of?" the new CEO asked. "Or is it just average or is it better than average? We want to be the best that we can be. So, really challenging the norm. We do a great job when our burgers are prepared today, but I think we can improve upon that."
Hart also insisted on implementing a stronger barbell menu strategy, which to Red Robin's credit, is a current point of focus. At the end of June, the chain announced a $10 Gourmet Meal Deal comprising a gourmet burger, bottomless steak fries, and bottomless beverage. The deal is available every day for dine-in only. The value-conscious promotion is driving incremental profitable traffic and positive value sentiment that exceeds the category, Hart said. Red Robin also recently launched $4.99 margaritas and is testing value offers around specific dayparts, like Happy Hour, which is in one-third of stores. On the other end of the barbell, Red Robin released a limited-time Cheese Lovers Remix lineup, featuring the Pretzel Bacon Beer-Cheese Burger, Cheesy Bacon Fondue Burger, and Beer Cheese Fondue.
Hart wants a wide range of menu items, from appetizers to entrées.
"We've got a pretty limited entrée section," the new CEO said. "Today, it's really about fish and chips. We have three items in total. And I think we need to expand that. And we have some room relative to some of the work we've done on the menu itself so that we can potentially take some menu items off and allow us to put some entrées back on. So, we'll be testing that in the near future as well to see how that shakes out. We want to go back to owning shakes as an example. And so, we're looking at how do we improve our shakes. And we do a good job today. I want to do a great job relative to that."
Additionally, the executive hopes to address workplace decisions "this company has suffered from and continues to suffer from." That includes taking bussers out of the restaurant and opting for two salaried managers. Hart believes one solution may be going to four or five managers with specific responsibilities, like the kitchen, as opposed to two managers covering 14 shifts.
"I think those things will result in some good learnings and what we can do going forward," Hart said. "So, it's things like that, that we're going to take a look at that will allow us and allow the restaurant management teams to execute at a higher level, have better throughput, and thus grow sales and give our guests what they expect."
Red Robin's same-store sales grew 5.3 percent in Q3 year-over-year and surpassed the casual-dining segment in sales and traffic, according to Black Box Intelligence. The growth was driven by a 9 percent increase in average check, offset by a 3.7 percent decrease in guest traffic. The bigger average check was fueled by 7.7 percent pricing, 2.5 percent menu mix, offset by a 1.2 percent decrease from higher discounts.
Comps rose 5.9 percent versus 2019, marking the third straight quarter of positive growth against pre-pandemic comparisons. Stores with Donatos Pizza outperformed non-Donatos restaurants by 10.1 percent when matching up with 2019. That's an increase from 8 percent in Q2 and 5 percent in Q1.
Off-premises sales dollars were more than double pre-pandemic levels for the 10th straight quarter; third-party delivery accounted for 53.5 percent, followed by to-go (34.9 percent), catering (7.5 percent), and Red Robin Delivery (4.1 percent). Much of that is thanks to digital growth, including a new website, mobile app, and enhanced loyalty platform. The new app has 1 million downloads, and the loyalty program has more than 11 million members, up from 800,000 at the end of 2021.
Costs of good sold increased 180 basis points year-over-year, driven by 16 percent commodity inflation, offset by pricing and favorable mix shift. Labor costs decreased 130 basis points, fueled by sales leverage, lower hiring costs, and lower management incentive compensation costs, offset by 7 percent wage rate inflation. Operating profit was 12.6 percent, a 10-basis-point upgrade from 2021, thanks to restaurant revenues climbing $12.2 million to $282.4 million.
Red Robin finished Q3 with 525 stores, including 424 company-owned and 101 franchises.