Red Robin says its turnaround efforts are working

Better operations and food are helping the burger chain win back guests. Now it’s focusing on marketing, including a new loyalty program.
Red Robin's same-store sales are up 0.3% in the current quarter. | Photo: Shutterstock

Same-store sales at Red Robin inched into positive territory in May, a sign that the casual-dining chain’s year-and-a-half-long turnaround campaign is taking hold.

They were up 0.3% through the first five weeks of the current quarter, driven by a 5% price increase as well as improving traffic, executives said Wednesday.

The growth came after a first quarter in which same-store sales declined 6.5% year over year, a result of bad weather, difficult comparisons to last year and the loss of revenue from virtual brands, which Red Robin stopped using.

Since last January, the 500-unit burger brand has worked to win back guests by improving its operations and menu. It added more staff to its restaurants and began cooking its burgers on flat-top grills rather than conveyor belts.

Customers seem to be noticing: In the first quarter, Red Robin’s guest satisfaction scores rose to the industry average for the first time since 2016, and the number of guest complaints declined nearly 20% year over year.

With those foundations in place, Red Robin is turning its attention to marketing. Its strategy includes a new slate of advertising and a revamped loyalty program designed to get customers to visit more often.

An ad campaign encouraging guests to “leave room for fun” at Red Robin has resonated, as has messaging around the chain’s more than 30 bottomless sides, CEO G.J. Hart told investors Wednesday. Tests of the marketing in five markets yielded a 2% traffic increase compared to markets that weren’t seeing the ads.

“While the results of 2% may not be exactly what we wanted, they still were a good improvement, and that's why we were very encouraged in terms of going into the future here,” Hart said, according to a transcript from financial services site AlphaSense.

Customers have been especially receptive to Red Robin’s free refill policy, which applies to 34 items including fries, mac and cheese, salads and a range of beverages. It comes as virtually the entire industry is promoting value to appeal to price-sensitive consumers.

“What we're seeing is our overall value scores go through the roof. I mean, substantially through the roof” when customers order a bottomless side, Hart said. 

A second layer to Red Robin’s marketing push is a new loyalty program, launched on May 22, that allows customers to earn and redeem points faster than before. They will get one point for every $1 they spend, and 100 points unlocks a $10 reward.

Red Robin Royalty already boasted nearly 14 million members, but has historically been more of a discount program than a business driver, Hart said. In spite of that, the brand has actually seen loyalty members visiting more frequently this year, with 8% of new signups showing up three times within the first 90 days, compared to twice a year ago. It believes the redesigned program with faster redemptions will only accelerate that trend.

“It just tells us that our guests want it. It screams value to them,” Hart said. “In fact, in some surveys, I will tell you, it's more important than burgers.”

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