In November, Red Robin hired Chief People Officer Wayne Davis, who is leading strategies to drive application flow and working with a third party to elevate recruitment. In addition to constantly monitoring compensation policies, the chain completed a discovery initiative to understand what matters to employees and how it can improve their quality of life.
The brand incurred $3.2 million in transitory labor and other operating expenses in Q4, including hiring and training costs, substitute products, temporarily outsourced janitorial costs, and one-time bonuses and overtime pay. Hourly wage increases were in the high-single digits.
“Staffing remains our No. 1 priority, and it goes hand in hand with creating a compelling team member value proposition,” Murphy said. “Having properly-staffed restaurants in turn enables us to deliver a quality guest experience, which leads both to higher sales and supports our team members in a manner that prioritizes their satisfaction and retention.”
In tandem with labor, commodities continue to pressure Red Robin, with inflation rising 9 percent year-over-year in the fourth quarter. To mitigate costs, the chain took 3.6 percent pricing in 2021.
For 2022, Red Robin expects mid-to-high single-digit commodity and restaurant labor cost inflation and pricing in the mid-single digits. Margin pressures should continue through 2022, but eventually change trajectory as dine-in sales and staffing increase and transitory costs decline. The brand believes it will achieve 2019’s restaurant-level operating profit margin in 2023.
Along with staffing, Red Robin is investing heavily in digital. In the fourth quarter, the company soft launched its new iOS and Android mobile apps and integrated them into its Royalty program, which includes more than 10 million members. The program was enhanced with segmentation and personalized messaging that have resulted in “all-time-high levels of engagement,” Murphy said.
Almost 250,000 customers joined in Q4, and Royalty’s sales mix grew 2.4 percent against 2019 to roughly $41.7 million. Average check is about $3.90 higher than a non-Royalty member. For a year, Red Robin sees $134 in sales per guest from Royalty members and in the mid-$40 range for non-Royalty users.
“It is a real driver for the brand,” Murphy said. “I think what both the app and the Royalty program do is allow us to better communicate with that Royalty member to get to know them better. And in the new app, the Royalty program is live on that app, so it just gives them another reason to be a part of the Royalty program.”
“It was a soft launch,” he added. “It’s really in this month moving forward, that we’re going to begin to be more aggressive in introducing it to the marketplace. Very happy with the impact, both top line and bottom line so far, but we think that much more to come as we get aggressive about, frankly, marketing it and doing a lot of our initiatives through the app and the loyalty program.”
In the fourth quarter, off-premises mixed 31.4 percent, meaning Red Robin more than doubled pre-pandemic levels for the seventh consecutive quarter. The company opened a new prototype in Q4 that increases space for off-premises orders through building modifications. The restaurant is seeing more than $80,000 in average weekly sales, remaining on track for a $4 million AUV. The system average is $2 million.
Red Robin finished 2021 with 531 stores systemwide, including 430 company-owned and 101 franchised.
