After losing $158.2 million while customers were sheltering at home, Red Robin Gourmet Burgers is reopening dining rooms with a new read on consumer preferences and how to address them.
The casual chain is responding with blatant cues about its commitment to safety, along with a smaller menu, a major overhaul of its service procedures, a commitment to providing self-delivery, and the resumption of the brand’s transformation into a chain known for pizza as well as burgers.
Research conducted to date has shown that returning patrons fall into roughly three groups, CEO Paul Murphy explained to financial analysts during the casual chain’s conference call on first-quarter results. About 20% of consumers are focused less on safety measures than on the chance to dine out again. “They're not as concerned [about] COVID, and whether it's Red Robin or restaurants in general, they would just [like to] be going out,” he said, adding that the percentage appears to be higher in the South.
The majority, or roughly 60% of the public, are not as oblivious or unconcerned, Murphy continued. That majority “want to understand your protocols, your safety procedures,” he said. “What we heard out of that group is, they don't want just to read it or hear about it, they want to see it in action in the restaurants.”
The chain has responded by designating one employee per shift who very visibly spends the whole time sanitizing touched surfaces in public areas such as bathrooms.
The remaining percentage isn’t ready yet to dine out. “That backend 20% or 25% have said, ‘Hey, it's going to take us a bit of time to feel comfortable again using a dining room--still going to participate in the off-premise world, but it's going to take us a little bit longer,’” Murphy said.
To keep those doubters as customers, Red Robin is striving to hold onto its off-premise business as dine-in service is resumed at more stores. Currently, about 270 of the franchisor’s 452 operating units have reopened a portion of their dining room. The chain also includes 102 franchised stores.
Through March, April and May, Red Robin’s off-premise business had soared to roughly three times the volume of pre-COVID days, according to Murphy. That surge has cooled in restaurants with reopened dining rooms to between 1.5 and two times the levels of January and February, he indicated.
Systemwide, about 30% of sales are being generated by third-party delivery, and 8% is coming from Red Robin’s self-delivery program.
As more units dust off their seating, the chain intends to keep the streamlined menu that was adopted during the pandemic to speed service and ease the burden on kitchens working with a skeleton staff. But it intends to resume a systemwide rollout by year’s end of Donatos pizza, a product offered through a pre-COVID alliance with the Ohio-based chain of the same name. The partners saw the arrangement as a way of expanding Donatos’ market reach beyond its Midwestern base while giving Red Robin a more delivery-friendly product than burgers and fries.
The 40 test stores that had already invested in pizza ovens appreciably outperformed the rest of the system while dining rooms were closed, with checks averaging 3.5% higher.
During the pandemic, the chain completed the systemwide introduction of a new service model known internally as TGX, for Total Guest Experience. Red Robin has revealed few details of the initiative, other than stressing that it enables servers to spend more time with guests and that it dovetails with the new streamlined menu. Murphy said it has been successful in bolstering customer satisfaction, as indicated by rising service scores.
“We're seeing it really impact the guest experience from faster cook times, higher quality food, the food is frankly hotter,” Murphy told financial analysts. In addition, “It’s impacted our waste--we're seeing a reduction on the waste side, and we believe that over time, it will help us on the supply chain side.”
Same-store sales for company-operated restaurants that have reopened their dining rooms fell 26.7% for the week ended June 7, to $37,682 per unit, compared with a decline of 39.7% at corporate stores that are still totally reliant on takeout and delivery. Those units were averaging $34,222 per week.
The chain lost $158.2 million for the first quarter ended April 19, compared with a year-ago profit of $3.4 million, on revenues of $306.1 million, down 25.3%.
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