While Red Robin took steps to improve its service and marketing strategy during the third quarter, the results were still disappointing for the company, even with new training and systems in place. Chief executive Denny Marie Post said, “for now, we are, by no means, pleased with our performance through Q3, we are heartened by the energy and commitment of our teams as we have reengaged all of our frontline leaders and team members to regain our operational edge.”
During the third quarter, dine-in sales, check totals, and traffic continued to slow across the company. Red Robin’s chief financial officer, Guy Constant, noted total company revenues decreased 3.5 percent to $294.9 million, which is down $10.8 million from this time last year. A 1.5 percent decline in average guest check and a 1.9 percent decline in guest traffic contributed to a 3.4 percent decline in same-store sales.
After a disappointing second quarter, 574-unit Red Robin took a look at the overall operational strategy of the company to see exactly where the weak points existed. Managers, servers, and hosts all underwent training to improve customer experience on both the dine-in and off-premises front.
“We increased in-store training using our new learning management system,” Post said. “Our servers were trained on the basics of greeting, one-stop ordering and three-level bussing. Our hosts are being trained via the new system on dine-in seating and to-go standards.”
“To be both a preferred destination and a source of customizable gourmet burgers, we must be great at dine-in and off-premises service,” she added.
The push to become competitive on the off-premises side of business resulted, in some ways, in Red Robin losing focus on its dine-in strategy and execution.
In Q2, Post estimated that 75 percent of its loss in dine-in traffic came from peak hours. Red Robin’s total ticket times out of the kitchen increased about a minute on average. Wait times were up about a minute. Post said they added up at peak to a “much more significant walkaway rate.”
“What’s really startling is our walkaways increased, what 850 basis points, or up about 85 percent, year-over-year,” Post said at the time.
Although Post points out ticket times, wait times, and walkaways are down year-over-year and guest satisfaction is up, the weekends remain a weak point for the company. During the weekend, Red Robin continues to struggle with dine-in traffic. Long ticket times and slow table turns during weekend hours are still causing customers to walk away from the restaurant before being seated. Constant said walkaways year-over-year compared to last year are down about 2 percent.
“The team is very much focused on capturing that peak hour potential and that requires that we turn those tables and see it appropriately and I think the teams are in a far better position to do that than we were coming into this quarter,” Post said.
Let’s take a look at Red Robin’s comp sales trends:
- 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
In Q3, carryout, delivery, and catering appreciated a healthy increase. Off-premises sales increased to 10.1 percent of total food and beverage sales. However, it wasn’t enough growth during Q3 “to maintain the year-over-year overall traffic outperformance we have delivered for eight consecutive quarters,” Post said. In order to stay competitive with other brands, Red Robin needs to balance both sides of the business, Post added.
“In our race to bill to-go we lost some focus on what made Red Robin Red Robin,” Post said. “While we seek to serve the growing demand for carryout, we also must turn tables at peak times for those guests who choose to dine-in with us, so that they can take full advantage of our Bottomless Fries and beverages.”
Here’s a look at how off-premises sales as a percentage of gross food and beverage sales have steadily grown at Red Robin:
- Q3 2018: 10.1 percent
- Q2 2018: 9.6 percent
- Q1 2018: 9.4 percent
- Q4 2017: 8.3 percent
- Q3 2017: 7.6 percent
- Q2 2017: 7 percent
- Q1 2017: 6.3 percent
- Q4 2016: 5.7 percent
- Q3 2016: 5.4 percent
Along with a shift in service strategy, Red Robin also refreshed its marketing direction during the third quarter. Toward the end of the quarter, Red Robin switched TV marketing promotions, stepping away from the five $6.99 Tavern Burger specials. Going into the fourth quarter, the menu will include more limited time-only burgers, shakes, and appetizers for customers to choose from.
“Red Robin has long been the envy of other full-service operators for our 50/50 lunch and dinner mix and we are committed to hold that daypart advantage,” — Denny Marie Post, Red Robin CEO.
Red Robin launched the $6.99 new Haystack Tavern burger and bottomless fries combination at the beginning of Q4. Red Robin wants to take advantage of this value combo as a way to draw in customers. Compared to other burgers at different chains where a combo like this is around $11.68, Red Robin’s $6.99 and $8.99 burger lineup is an attractive deal, Post said.
“Also at the beginning of the fourth quarter, we took three other popular Tavern; the Smokey Jack, Taco, and Cowboy Ranch to $7.99 with a new menu layout, which gave us the chance to take a modest overall 1 percent price increase. The new layout also features our appetizer and beverage lineups more prominently,” Post said.
The company also hopes to draw customers into the restaurants by continuing $1.99 kids meals on Wednesday nights. Post said this deal makes it possible for parents to enjoy a night out with a family without breaking the bank.
While dinner traffic hasn’t been doing well, Red Robin continues to improve its lunch business. A new Monday to Thursday lunchtime bundle featuring any gourmet burger, bottomless fries, broccoli, or salad, and a bottomless drink for $10 was introduced into restaurants last week.
“Red Robin has long been the envy of other full-service operators for our 50/50 lunch and dinner mix and we are committed to hold that daypart advantage,” Post said. “This is a hot offer on our most popular burgers and the perfect choice for a quick lunch during the week.”
The new changes in marketing and improving service strategy will lay a foundation for future growth and improved sales within the company, Post said, but the results will be seen in the future, not by the end of the year.
“We firmly believe we can get back to where we all want and need to be, although how long that will take is not entirely clear,” Post said. “As it stands, we do not expect to see meaningful same-store sales trend improvement in Q4 over Q3.”
As far as growth with new units, the company opened its last new unit during the third quarter for some time. The company is shifting its focus to refranchising and developing a new prototype throughout 2019 as it halts growth. Red Robin is in the middle of a refranchising initiative to help improve overall dine-in guest experience.
“Our current effort is centered on markets that include approximately 100 existing Red Robin locations and that represents significant development opportunity for a potential partner,” Constant said. “This effort, when complete, would take our franchise mix up to 30 percent.”
Red Robin is currently exploring ways to incorporate more technology within the restaurants. Diners can find Robin, an electronic dining companion that allows guests to play games and pay when they’re ready to go, on tables across the company. Servers have been trained on new point-of-sale systems and the company is looking to put more technology into the hands of servers moving into 2019.
The new technology will likely improve the speed of service and attentiveness to guests, and in the end, help the brand improve table turnover, wait times, and overall guest experience.
“We really feel like there’s an opportunity for us to invest on the technology side,” Constant said. “A lot of that will be a lot more guest facing now that we’ve done that foundational work that we’ve done in 2018. I would expect in 2019 we’ll have a significant focus on technology that the guests will be able to see. And so, while that certainly won’t come close to what we’ve spent on new unit growth.”
“Over time, we expect to put even more of the dining experience in the guests’ control through innovative new digital offerings on the development roadmap,” Post added.