Financing

At Red Robin, dine-in thrives while delivery dives

Price-conscious guests and the loss of MrBeast Burger took a bite out of delivery sales. But the chain is more focused on the dining room, anyway.
Delivery check size shrunk by 12% at Red Robin. | Photo: Shutterstock

Red Robin is doing a lot less delivery these days. And it might be OK with that.

To-go sales fell more than 4% at the chain in the second quarter, and delivery check size was down 12% as price-conscious guests spent less, executives said during an earnings call Thursday.

“Like many in the industry, we experienced year-over-year sales declines in the off-premise portion of our business,” said CFO Todd Wilson, “and the third-party delivery segment in particular.”

Delivery, which often comes with marked-up menu prices as well as extra fees and tip, has become harder for some consumers to justify given the rising cost of everything else.

Adding to those declines was Red Robin’s decision late in the second quarter to stop using the MrBeast Burger virtual brand chainwide, saying it had become too complex to operate.

“In fact, that whole business over time has become even more complex," CEO G.J. Hart told analysts. “And margins have continued to deteriorate in terms of what their expectations were.”

Nonetheless, MrBeast Burger was apparently an important source of sales for Red Robin. On Thursday, the chain lowered its annual same-store sales growth expectations to 1% to 3%, down from 2% to 4%, largely due to the loss of MrBeast Burger revenue.

The damage would likely be greater if it were not for a resurgent dine-in business at the 500-unit chain. On-premise same-store sales rose 5.9% in Q2, while the chain’s overall comp growth was just 1.5%. 

This makes sense, as the dining room has been central to Red Robin’s turnaround efforts under Hart. “Dine-in is where most guests experience the improvements we have made to hospitality and food,” he said. 

The chain has reinvested in staffing, for instance, bringing back positions that had been cut, like bussers and expos, and giving servers fewer tables to reduce wait times. It has also worked to improve both the quality and presentation of its burgers, which are now cooked on flat-top grills and are served on plates rather than in a basket.

Guests seem to be noticing the changes. The chain’s internal guest satisfaction scores rose 3 points year over year, and aggregated sentiment across review sites like Google and Yelp was up 13%. And in surveys of the chain’s most loyal guests, 44% agreed that Red Robin’s burgers had improved, and 46% agreed that its service and hospitality had improved, Hart said. 

The greatest gains, he added, have come at Red Robin’s worst-performing locations. 

Another bright spot in the chain’s quarterly update came on the bottom line. Its earnings before interest, taxes, depreciation and amortization (EBITDA) for the first half of the year totaled $51.5 million, which was almost as much as it generated all of last year combined.

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