Red Robin Gourmet Burgers is rethinking its full-service restaurant model top to bottom—from name to service style to menu—as it also expands its fast-casual concept, Red Robin Burger Works.
Red Robin reported its Q3 results October 29, which include a 3.4 percent increase in total revenues and a 1.1 percent increase in same-store sales for company units. More importantly, CEO Stephen Carley said that during this current quarter, the chain has begun experimenting with “a number of transformed restaurants.” This “is not simply a remodeling project but part of our overall strategy to make the Red Robin brand more relevant to our guests and to attract them more often.” What is “transformed” at this undisclosed number of units, Carley says, can be anything from “physical space and layout of the restaurants to team-member uniforms, our service model, our menus, and our food preparation.”
Additionally, the company confirmed to BurgerBusiness.com that some of the transformed restaurants will have a new logo and signage, identifying the restaurant as Red Robin Gourmet Burgers + Brews. This logo incorporates the flame motif used with the five Red Robin’s Burger Works that are open.
This name helps Red Robin’s quest to increase its appeal to adults without children and to boost alcoholic-beverage sales (now more than 7 percent of sales). The chain’s ongoing “Taking Back the Bar” initiative looks to further increase those sales. Red Robin’s recent introduction of the Oktoberfest Beer Milkshake promotion with Sam Adams beer signaled its interest in being more of a “burgers + brews” brand.
The desire for a more-adult image undoubtedly will result in the elimination of the current “Yummm!” advertising slogan when a new agency is named (succeeding incumbent Periscope). That will happen by the end of the year.
Carley said the test restaurants are “laboratories” that will help the company “determine what’s really important to our guests and determine the returns” on its investments in remodeled space, among other elements. A determination of what changes to make at all 471 of its full-service Red Robins will be made by Q3 of 2013, Carley said.
As for the five smaller-footprint, fast-casual Burger Works restaurants, Carley noted that they vary not only in size and trade area but also in “performance and consistency of execution. But they provide a lot of learning we can use to tweak the model.” As many as five more Burger Works will open in 2013.
Near term, Red Robin is looking at how best to balance pricing for its menu. The $6.99 Tavern Double burger has been its most successful product launch, giving it an “everyday value” entry point. It also allowed Red Robin to bring back the Oktoberfest LTO burger at full price ($9.99), rather than discount it by $3 as it did last year.
But the tradeoff in Q3 was that while customer traffic was up 0.8 percent, price/product mix contributed just 0.3 percent toward the 1.1 percent same-store sales gain. In 2011’s Q3, comp sales also rose 1.1 percent but with price/mix contributing 4.3 percent to offset a -3.2 percent debit in guest counts. Given the “challenging environment,” Red Robin is happier with increases in both price/mix and guest traffic. “Guest traffic has been hard to come by [for all restaurants] this year, particularly in the last quarter,” says SVP-CMO Denny Post.
Carley pointed out a few small measures taken that have brought significant savings. A switch in the appearance specification for chopped onions used in salsa meant a system savings of $120,000. A switch in to-go packaging has netted $275,000 and the adoption of reusable, washable kids beverage cups will save the company $500,000.
