UPDATE: This story has been updated to reflect that the activist investors increased their stake in Red Robin on Oct. 14.
A pair of activist investors have taken a 14.7% stake in Red Robin Gourmet Burgers, according to documents filed jointly with the Securities and Exchange Commission.
JCP Investment Management and Jumana Capital Investments now own roughly 10% and 5% of Red Robin’s shares, respectively. The companies took an initial combined stake of 11.6% last week and upped it to 14.7% on Monday. Both firms are based in Houston, and JCP has a history of activism in the restaurant industry.
According to the first filing, the firms believe Red Robin’s stock is undervalued. It was trading at around $4.70 on Oct. 9, the day of the filing, and has risen more than 20% since then. But its price remains noticeably lower than that of other casual-dining chains. BJ's Restaurants was trading for about $33 on Monday, shares of The Cheesecake Factory were going for about $39, and Chili's owner Brinker International was up to $86.
The filing did not indicate how JCP and Jumana plan to wield their newfound influence at Greenwood Village, Colorado-based Red Robin. Activists will often work with a company’s board or management to make changes to capital strategy, operations or leadership with the goal of improving value for shareholders.
Red Robin is just the latest chain to find an activist in its midst as restaurants struggle to generate traffic and stock prices reflect that. Over the past year, activists have emerged at Bloomin’ Brands, BJ’s Restaurants and Starbucks. All three companies named new CEOs after activists bought up shares.
But the 500-unit burger brand is different from those three in that it is already in the midst of a transformation campaign under CEO GJ Hart, who took over in late 2022. Under the turnaround specialist’s North Star plan, the chain has made changes to its menu, operations and labor model in an effort to bring customers back.
The changes have yet to make a real dent on Red Robin’s earnings results. Same-store sales declined 0.8% in its most recent quarter, for instance, and the company dimmed its outlook for the rest of the year. But the chain has said internal metrics such as customer satisfaction scores are up and it has seen promising results from a new loyalty program.
JCP is a serial activist with ties to the restaurant industry. In 2020, it urged Applebee’s parent Dine Brands to spin off its IHOP business, arguing that Applebee’s was holding the pancake concept back. Shareholders voted against the motion.
The firm is run by James Pappas, the son of Chris Pappas, the former CEO of Luby’s Cafeteria and current CEO of Pappas Restaurants, owner of Pappasito’s Cantina, Pappadeaux Seafood Kitchen and other full-service brands.
Jumana Partners did not appear to have any other current restaurant investments. According to its website, it specializes in partnering with entrepreneur-led companies to help them grow.
Neither company had responded to a request for comment as of publication time.
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