Attempts to fix traffic-eating service problems came too late in the third quarter to pull Red Robin out of its sales slide, with comps falling 3.4% on a 1.9% decrease in guest counts.
The casual-dining chain also continued to struggle with guests trading down to lower-priced menu items. The system’s average check fell 1.5%, and the portion of sales coming from Red Robin’s Tavern Menu, a list of everyday bargains, rose to 17%, up from 13%.
The negatives were offset by a 22.7% jump in off-premise business, which pushed up the contribution of takeout, delivery and catering to 10% of total sales.
Executives characterized Q3 as a period of diagnoses and the start of treatment. Among the problems addressed during the period was a spike in customer walkaways on weekend nights. Because of slow table turns, some customers left rather than wait a stretch to be seated. The slower turns, management had earlier found, stemmed from a change in the duties of front-of-house staff. The employees were expected to work in a team to offset the elimination of a busser and a back-of-house position.
Management expected the team to bus tables when necessary, but the staff didn’t rise to the task, according to management. They attributed the problem to insufficient training and poor monitoring of guest feedback, and set out at the start of the quarter to address it.
“We were fully prepared to add back labor hours if needed,” said Denny Post, CEO of the 574-unit chain. “It wasn’t about scheduling more hours, it was about scheduling them with more precision.”
Through some experimentation, she explained, management discovered that it could turn tables faster and cut wait times through short-term ramp-ups and redeployments of staff. Walkaways declined 2% on a year-over-year basis, according to CFO Guy Constant. Red Robin has already revealed plans to move Constant into the role of COO once a replacement as CFO can be found.
Red Robin attempted to wean guests off $6.99 burgers, the lowest-priced of the several dozen on the concept’s menu, by adding a new half-pound selection, the Master Cheese. It also raised the prices of several burgers on the $6.99 Tavern Menu by $1.
But it has continued to add bargain-priced items, including a new $6.99 Tavern option, the Haystack Tavern Double. It also recently introduced a Monday-through-Thursday lunch deal: a burger, unlimited servings of fries and a beverage for $10. Post noted that Red Robin’s lunch business is as strong as its dinner trade, a 50-50 split rare in casual dining, and that she intends to keep it that way.
Overall, Red Robin posted a net income of $1.7 million, a 37% nosedive from a year ago, on revenues of $294.9 million, a decline of 3.5%.