In This Article:
Red Robin Gourmet Burgers, Inc. RRGB is benefiting from operational enhancements, off-premise sales and other digital initiatives. However, dismal traffic due to the social-distancing protocols along with high labor and restaurant operating expenses remain concerning. In the past three months, shares of the company have declined 18.5% against the industry’s 11.7% growth
Let’s delve deeper into the factors that substantiate its Zacks Rank #3 (Hold).
Catalysts
Red Robin’s off-premise sales have increased sharply compared with the pre-COVID-19 levels. During the second quarter of 2020, off-premise sales increased 208.7% and accounted for 63.8% of total food and beverage sales. Notably, the increase was primarily attributed to its focus on all off-premise sales channels, carry-out, third-party and Red Robin delivery (or last mile). Also, reductions in menu along with refined operating processes resulted in timely pickup and delivery.
Meanwhile, the company’s initiative of moving call-in ordering to a centralized call center is yielding positive results and is thus slowly expanding its reach to ensure quality experience.
Apart from brand revitalization efforts, Red Robin has been investing significantly in technology and data infrastructure. The company is set to grow off-premise, online-ordering business via carry-out, delivery and catering. On the delivery front, the company has partnered with Amazon, DoorDash and GrubHub. In fact, the company is working with each provider to better integrate into its POS and KDS systems, and ease the intricacy in operations teams.
Red Robin continues to focus on three areas — revenue growth, expense management and efficient capital deployment — to drive profitability. On the expense front, the company is focusing on a new supply chain management software, replacing its older manual system. This might result in improved control of waste and cost of goods, significantly reducing inventory levels at its restaurants. It would also allow restaurant managers to interact more with guests, resulting in enhanced guest experience.
With dining rooms reopened, the company has accelerated the implementation of its new hospitality model, TGX or Total Guest Experience, to better customer experience. Moreover, to boost sales from its dine-in services, restaurant operators have initiated the opening and expansion of patios around the perimeter of its restaurants to attract more guests. Notably, the initiative enables the company to increase its seating capacity and serve more guests, while maintaining social-distancing protocols.
Furthermore, the company intends to reduce costs and improve efficiency at both the restaurant and corporate levels as well as redesign its restaurant prototype and remodel to enhance the off-premise experience.