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Red Robin to explore limited-service format

Casual-dining chain testing smaller prototypes as it eyes new avenues for growth

Red Robin Gourmet Burgers Inc. said it plans to test smaller restaurant prototypes, including one with a limited-service format that could give the chain a presence in the competitive fast-casual “better burger” space.

Kevin Caulfield, senior director of communications for Greenwood Village, Colo.-based Red Robin, told NRN late Tuesday the move also would allow the 452-unit chain to pursue growth opportunities in non-traditional locations, including urban spaces, airports, universities and stadiums.

Red Robin said the smaller prototypes would range in size from 2,000 to 4,000 square feet, which compares with the casual-dining chain’s traditional 5,600-square-foot footprint.

Caulfield said the prototypes closer to the 2,000-square-foot size would lend themselves to a “fast-casual-like” format, with a limited menu that would likely focus on burgers.

“We are the gourmet burger experts,” he said. “So we will want to leverage our brand expertise.”

Fast-casual burger players such as Lorton, Va.-based Five Guys Burgers & Fries, with more than 700 units, and Denver-based Smashburger, with more than 100 locations, have been among the fastest-growing chains in recent years. Through the recession, such premium-burger concepts benefited as cash-strapped consumers traded down from casual-dining competitors.

Smashburger’s chief executive Dave Prokupek said in a recent interview that Red Robin could emerge as a national player in the better-burger field if the chain decided to explore a fast-casual format.

EARLIER: Smashburger CEO on the better-burger race

In testing a smaller footprint, Red Robin also joins other casual-dining players looking to cut square footage to better take advantage of real estate opportunities and lower opening costs.

The Cheesecake Factory, Quaker Steak & Lube and Bahama Breeze are among the casual-dining chains that have recently developed smaller prototypes.

Red Robin did not disclosed how many of the smaller prototypes it might test, but Caulfield said all will likely be in the Denver area, close to the company’s headquarters. The company expects at least one of the prototypes to open before the end of the year.

Red Robin said in a statement it would make a decision on expansion plans after evaluating the operating performance and unit-level economics of such smaller prototypes.

The company also reiterated plans to open 10 full-size Red Robins this year and said it may expand growth plans for next year based on positive results from recent openings.

For its April-ended first quarter, Red Robin reported a nearly 76-percent increase in net income for the quarter on higher revenue and same-store sales.

EARLIER: Red Robin on cutting costs and battling burger brands

During a call to analysts following the report, Red Robin chief executive Steve Carley was asked how the chain is responding to the rapid growth of fast-casual burger concepts such as Five Guys.

Carley noted that, unlike such limited-service players, Red Robin offers a bar and a full-service experience with better ambiance. But, he said, to compete “we need to hit on all aspects of the value equation.”

Earlier this year, Red Robin announced a turnaround initiative called Project RED that has included the launch of a new loyalty program, a renewed focus on building bar business and cost cutting measures such as job cuts at corporate headquarters.

In April, Red Robin unveiled a menu overhaul at corporate locations with a tri-fold format designed to emphasize how guests can customize their meals, new combination appetizer options, and a 1.5 percent menu price increase overall.

At the end of the first quarter, Red Robin operated 315 locations and franchised another 137 units.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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