Red Robin closes stores as traffic continues to slide

The casual chain’s comps slipped 3.3% on a 5.5% drop in transactions in Q1.
Photograph: Shutterstock

Red Robin Gourmet Burgers said it is closing 10 underperforming restaurants after guest traffic at the grill and bar chain slid 5.5% during the first quarter ended April 21, hammering down same-store sales by 3.3%. 

Net income dropped 85.4%, to $639,000. Revenues ebbed 2.8%, to $409.9 million.

As our financial results demonstrate, there is still much work to be done on the turnaround, and we are moving with urgency,” acting CEO and chairman Pattye Moore said in a statement announcing the franchisor’s Q1 results. The chain finished the period with 572 stores in operation.

The chain has been struggling since operational changes intended to cut labor costs and speed service had the unforeseen effect of slowing table turns and increasing the wait times for seating on the brand’s busiest nights. The key element of the plan was cutting two positions and shifting table-clearing duties to servers, part of a switch to a team service approach. Tables went uncleaned, and would-be customers bolted when they heard how long they’d have to wait to be seated. 

The situation led to the departure of COO Carin Stutz late last summer. CEO Denny Post announced her retirement in early April.

Red Robin is pursuing remedies such as increasing staffing at selected units, outfitting servers with handheld devices and stepping up training. 

It has also sought to win back patrons with value-oriented deals, while aiming to boost checks by varying the prices of burgers on an everyday value menu instead of setting the same charge for all of the options.

Moore said in her statement that Red Robin had contracted an executive placement service to find Post’s successor. 

Seven of the 10 restaurants tagged for closing are located inside malls, which are suffering from consumers' shift to online shopping and watching movies at home instead of trekking to a theater. The mall units generated a collective loss of $1.9 million on a pretax basis for Q1, according to Red Robin CFO Lynn Schweinfurth.

Their discontinuation will leave Red Robin with 66 mall locations.

"Not all mall locations are bad locations," Schweinfurth said. "In other cases we may just naturally exit [the site] upon the expiration of the term. But we will proactively look at exiting those locations that may make sense to do so."

She revealed that some of the 66 stores are negotiating rent concessions. "In other cases, we may just naturally exit upon the expiration of the term," Schweinfurth said. "But we will proactively look at exiting those locations that may make sense to do so."

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