CEO GJ Hart has been with Red Robin going on eight months. But in truth, the evolution at hand is a story that dates back further. In the summer of 2018, the company reported a “blinking red light.” Dine-in traffic sank, and 75 percent of it—across one quarter—dropped from peak hours. Walkaways jumped 850 basis points, or 85 percent. Ticket times out of the kitchen climbed a minute on average, and wait time increased the same.
The culprit? It was a two-front hit, mainly: Red Robin’s expansion in off-premises orders drove complexity into the fold the company wasn’t staffed to handle. Hosts raced to serve carryout and third-party delivery orders and left walk-in guests standing in the lobby. The other drag was a decision to eliminate bussers in a goal to cut $8 million and soften labor pressure from rising wage rates. Red Robin sliced two positions and added table-clearing duties to servers’ plates. So as customers arrived, it wasn’t always a matter of there being open tables available; there was a queue of not-yet-cleaned ones that were stalling turns.
A crop of fixes, from training to expanded staffing to technology, addressed these concerns in the coming years. Yet fast forward to Hart’s arrival in July and Red Robin’s upside remained in the same realm. The former Texas Roadhouse, California Pizza Kitchen, and Torchy Taco’s CEO told investors on Wednesday that, a year ago, more than 10 percent of Red Robin’s guests reported waiting more than 15 minutes to be seated.
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Strikingly, CFO Todd Wilson added, this was an all-dayparts discussion. “Just to give an example, we would look at our data and see our guests on an extended wait randomly at 3 on a Wednesday afternoon,” he said. “We want to be on a wait when we’re full on a Friday night, right?”
That breadth caught Hart and Wilson’s attention. “When are we on waits? And is it because we’re truly at capacity?” Wilson said. “Or is it because we truly haven’t filled all of these positions yet?”
Hart revealed a full-fledged, five-point “North Star” plan in January. More than just staffing up, though, a key pillar was to staff properly. Today, Red Robin’s 10 percent alarm is down to 2 percent of guests, Hart said. Red Robin’s guest times and “false waits” declined substantially, he added, and customer satisfaction scores are up 5 percentage points compared to 2022.
Hart said Red Robin’s Q1 results—same-store sales lifted 10 percent, year-over-year, and traffic rose 0.6 percent—exceeded industry averages as measured by the Black Box Casual Dining Index. The comps growth marked its ninth consecutive quarter of positive gains. Revenues climbed 22.4 percent to $418 million and Red Robin swung a net loss of $3.1 million, which was unchanged versus the prior year.
The chain also upped comparable restaurant revenue 8.6 percent, which comprised of 0.6 percent traffic and 8 percent check (7.2 percent menu price increase and 0.8 percent menu mix).
Red Robin posted more than 700 new sales records in the quarter, Hart said. Not a typo. “In a brand that is nearly 50 years old, to set more than 700 new records is a testament to the incredible work of our restaurant teams and the overall direction of our company,” Hart said, noting they were hourly, daily, and weekly watermarks, per restaurant.
But again, Red Robin’s top-line acceleration, he said, owes to the chain’s efforts to capture sales it previously lost due to false and extended waits as much as anything else. “Where we’re really going to make progress as our staffing levels and our training is fully in place, is on a sales per hour perspective,” Hart said.
Red Robin invested roughly $3 million in Q1 to add staffing across operational roles. Additionally, incentive compensation for restaurant management teams increased more than $1 million year-over-year due to profit and sales gains. On top of guest satisfaction improvement, Wilson said, Red Robin’s ROI was clear: total labor costs, even with the added investment, declined 60 basis points thanks to leverage from added sales.
“Elevating the guest experience” is the second piece of Red Robin’s five-pronged plan. It forks in two places—staffing at hospitality levels, as Hart calls it, and food quality enhancements and breadth of menu. The hospitality model changes represent a return to an industry standard staffing approach for Red Robin and one the company used “for many years to generate great success,” Hart said. Executives refer to it internally as “hospitality here.”
Essentially, it’s a chapter before the 2018 flip, where the brand had 572 units compared to today’s 511 (down 16 year-over-year). Red Robin added back bussers, hosts, bartenders, and expo roles that were previously eliminated or reduced. Now, akin to the company’s past, there’s a more traditional view where servers have fewer tables and don’t rely as heavily on server assistance. Hart said Red Robin made “significant progress” in Q1 and is more than 50 percent complete with these additions. It expects to be substantially finished by the end of Q2.
The first pillar of that North Star agenda concerns operations and getting front-line operators involved in decision making. At the start of Q2, Hart said, Red Robin launched a market partner program for all multi-unit operators. This changed the compensation structure to reward leaders based on the profits of the restaurants they oversee (closer to how Hart’s old shop, Texas Roadhouse, historically runs its company). “By making this change, these leaders are incentivized and rewarded for driving and delivering results,” Hart said.
Learnings from the rollout will incorporate into a future single-unit operator program, which Red Robin expects to launch at the start of 2024. Hart didn’t delve deeper into what that might look like, but it’s a broad strategy rooted in a similar, focus-centric vein; Chick-fil-A and others have taken the road hoping to ensure operators dial in on operations at the store level, versus placing growth ahead of execution.
The food and menu updates mentioned earlier start with messaging, Hart said. “On the side of every one of our restaurants hangs a sign proclaiming ‘Gourmet Burgers.’ [And] the bar has been raised over the years on what it means to deliver a truly gourmet burger, and we are upping the ante,” he said.
Red Robin’s first step will be to upgrade its cooking platform from a legacy conveyor belt-driven system to a flat-top grill. This switch alone delivers customers a 20 percent larger, juicer, and more flavorful burger, Hart explained. Red Robin tested the flat-top grills in Q1 and began a system-wide rollout in April. They’re already installed in nearly 300 locations with full coverage expected in Q2.
In addition to improving the quality of burgers, Hart said, employees expressed a “greater sense of pride for their work.” Execution has been easier, too.
“Finally,” he continued, “we expect the flat-top grills will significantly reduce repair and maintenance costs, clean costs, as compared to our legacy system.”
Red Robin in February tapped Brian Sullivan as VP of culinary and beverage innovation. He spent 34 years at California Pizza Kitchen (another of Hart’s CEO posts).
Following the installation of the flat-tops, Red Robin plans to phase in upgrades to buns, bacon, mayonnaise, wine, tomatoes, and other produce, among additional changes. It will also adjust preparation to deliver more caramelized onions and salted mushrooms. Visually, Red Robin will move away from its traditional presentation of wrapping burgers in wax paper, “which fit at the time the brand was developed,” Hart said. Now, with an upgraded patty and better ingredients, Red Robin wants to introduce plateware that allows “each burger to stand tall on its own,” he said, “next to the plentiful serving of our bottomless fries and other sides.”
“Our mission is very simple, serving up awesome American food and bottomless fun,” Red Robin CEO GJ Hart said.
Red Robin recently entered the final development stages for new entrees beyond burgers as well. This included new, non-fried appetizers that focus on variety and barbell menu pricing. These upgrades, Hart said, should be implemented by October.
An important development to circle: Red Robin’s dine-in sales increased 16 percent in Q1 versus last year, and now represent 74 percent of the business. Wilson said management believes the mix now reflect a post-COVID normalization of Red Robin’s business.
To support its menu and staffing moves, Red Robin needed to refocus on removing costs and complexity (pillar three of the plan). Hart said the company restructured contracts with many of its vendors to lock in more favorable rates and Red Robin’s supply chain team continues to seek out quality product at reduced cost.
Pillar No. 4 revolves around guest engagement. The chain worked with operators to unlock direct community involvement. “Red Robin was the original leaders in local marketing,” Hart said. “And we will drive to return this to our local marketing routes.”
Red Robin’s loyalty program currently boats 11.5 million members, up 200,000 quarter-over-quarter. It’s shifting toward rewarding core users over what was primarily a discount strategy in the past. CMO Kevin Mayer joined the company in early May, coming over from Pedego Electric Bikes. Before, he worked in the same capacity, as well as chief growth officer, at BJ’s Restaurants.
Mayer’s appointment was joined by the addition of Mark Simpson as interim chief people officer and the promotion of Jason Rusk to chief business development officer. Simpson is a former Texas Roadhouse vet who retired from his position as VP of Legendary People. Rusk has been with Red Robin for 25 years.
The fifth and final lever in Red Robin’s North Star approach is driving growth in comparable restaurant revenue and unit-level profitability. “Q1 results demonstrate what we can accomplish when we have the right strategy in place and execute accordingly, and we have only just begun,” Hart said. “… our mission is very simple, serving up awesome American food and bottomless fun. We are empowering our operators and providing them tools and resources to succeed.”