Value meals and catering helped Red Robin win back some lost traffic last quarter.
Same-store sales at the casual-dining chain declined 1.2% year over year in the period ended Oct. 5, and traffic was down 3%. But traffic improved dramatically over the course of the quarter, entering at negative 7% and exiting at negative 1.4%. Overall, traffic was 250 basis points better than in the previous period.
The chain’s new Big Yummm value meals helped turn the tide. Launched on July 21, the meal offers a Red's Double Tavern Burger plus a bottomless side and drink, and has helped Red Robin attract more price-conscious consumers. It’s accounting for about 8% of the chain’s total sales.
“It did what we had hoped it would do,” CEO David Pace said during an earnings call Monday, according to a transcript from financial services site AlphaSense. “It got traffic. It gave people a reason to come in. It got trial again.”
The Big Yummm is one of a slew of value meals in the casual-dining market that have proven effective this year, including Chili’s 3 for Me, BJ’s Pizookie Meal Deal and Applebee’s 2 for $25 menu.
It is part of Red Robin’s recently announced First Choice turnaround plan, which is focused on driving traffic, stabilizing the company’s finances, strengthening culture and fixing up its restaurants. And Pace said the meal could help pave the way for other changes to Red Robin’s menu.
“We're taking a much more strategic look at the entire menu and how we package it together,” he said.
While Big Yummm is bringing customers into Red Robin’s restaurants, catering helped boost business outside of its four walls. Off-premise sales made up a quarter of Red Robin’s sales in the period and generated a 2.9% traffic increase, driven largely by “a significantly expanded approach to catering.”
Executives did not go into further detail about the catering strategy, but Pace said the company plans to grow off-premise aggressively going forward.
On the bottom line, Red Robin’s restaurant-level operating margins improved 90 basis points, to 9.9%, thanks to operational improvements.
The company is also making progress on restaurant refreshes and repairs, touching 20 of its 480 locations in the quarter. These focused on floors, finishes, furniture and lighting as well as exterior signage, paint, lighting and landscaping.
The updates correlated with “measurable improvements” in sales and traffic at those locations, Pace said.
“These results further support our thesis that well-executed improvements that enhance the guest's first impression and overall dining atmosphere can deliver measurable results relatively quickly,” he said.
In the fourth quarter so far, Red Robin's traffic has cooled compared to where it was at the end of the third. Executives pointed to an intentional shift in Red Robin’s marketing spend out of October, which tends to be its slowest month of the period, as well as the effects of the government shutdown on consumer spending.
Currently, Red Robin is expecting same-store sales and traffic to be negative 3% in the period, in line with its prior guidance. And it expects traffic to ramp up as more marketing kicks in.
“October is the softest month. November picks up a little bit. And then December is when we really make hay,” Pace said of the chain's usual fourth quarter cadence.
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