Red Robin Gourmet Burgers has hired Paul Murphy away from Noodles & Co. to become its CEO and president amid an escalating battle with a disgruntled shareholder and would-be acquirer, Vintage Capital.
Simultaneous with the announcement of Murphy’s appointment, the struggling casual-dining chain rejected Vintage’s $40-per-share takeover bid as inadequate. It also stated that “the strategic plan currently being implemented by Red Robin positions the Company to deliver greater long-term value to its shareholders than Vintage’s proposal.” Vintage had said its interest in purchasing the chain stemmed in part from concerns about the chain’s turnaround plan and a belief that it had a better strategy.
It was not clear how much input, if any, Vintage may have had in the selection of Murphy as CEO. The investor, which holds about 12% of Red Robin’s stock, had demanded after the resignation of Denny Post as CEO that it have a say in the search for her successor.
Murphy was hired at a base annual salary of $900,000, with an opportunity to earn another $1.1 million in bonus. He was also awarded a $500,000 signing bonus payable in two installment. The first $275,000 will be paid upon approval of Red Robin's 2020 budget, and the remaining funds will be awarded upon Murphy's one-year anniversary, according to securities documents.
Murphy was most recently executive chairman of Noodles, the publicly owned fast-casual concept that has addressed its own traffic challenges. Before joining Noodles in 2017, he was CEO of Del Taco, where he helped to reposition the brand and take it public.
He assumes the duties at Red Robin that had been shouldered by Pattye Moore since Post’s retirement in April. Moore is also stepping down as chairman of Red Robin’s board, which is being reconfigured with the addition of three outside directors. Former Potbelly CEO Allwyn Lewis is relinquishing his board seat. Murphy will join the board, along with veteran operators G.J. Hart, David Pace and Tom Conforti.
“The board is confident Paul is the right leader to drive the continued transformation of Red Robin and restore the Company to sustainable growth and profitability,” said Moore. “Paul brings a multi-decade-long track record of substantial shareholder value-creation, as well as a unique combination of operational, brand-positioning and turnaround expertise, making him ideally suited to lead Red Robin.”
The chain’s traffic has dropped steeply since operations were tweaked to eliminate two restaurant-level positions. Service times soared, prompting many would-be guests to bolt rather than wait for a table.
The brand has been addressing the issue through stepped-up training, a focus on off-premise sales growth, and alterations to in-store operations.
Red Robin operates or holds the franchise rights to about 560 restaurants in North America.