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Red Robin wrestles with delivery/dine-in balance

Brand works to reduce wait times, capture peak-hour traffic

Delivery orders are denting dine-in traffic, and Red Robin Gourmet Burgers Inc. is wrestling with the shift, executives said Tuesday.

“The first and primary issue facing us today is … the decline of dine-in traffic,” said Denny Marie Post, Red Robin CEO, in a second-quarter earnings call. “Analysis of hourly sales data points to declining performance during peak time period, disproportionate decline particularly on the weekend.”

The Greenwood Village, Colo.-based casual-dining brand had earlier warned that same-store sales in the quarter declined 2.6 percent and guest traffic was off 0.7 percent compared to the same period last year.

“The growing complexity of our business has put pressure on our hosts to handle dine-in and carryout guests,” Post said. “Hosting was traditionally an entry-level position where your primary role was to greet and seat. Today, these hosts are asked to do much more as our check-out and third-party delivery businesses grow. We are moving rapidly forward with required new host training and improved selection criteria.”

Post said Red Robin had seen increases in both wait times and the number of potential guests walking away without being seated.

She said the Red Robin operations teams was narrowing its focus to fix those times.

“We are also making targeted investments in peak-hour labor to capture the unmet demand we see in our restaurant lobbies,” Post said.

“And while this is a small investment, compared to the productivity improvements we have made over the past 12 months, this added labor support will help reduce wait times and improve those peak-hour sales,” she said. “Dine-in declines are even more pronounced in mall locations, those having at least one entrance onto the mall. Those locations make up about 16 percent of our base, and they are disproportionately represented in the bottom performers on dine-in traffic and off-premise sales.”

Post said catering sales continue to grow, and the company was pushing resources into that area of sales.

The company is also looking at its value messaging and loyalty offers.

The current five choices in the $6.99 Tavern Double Burgers offer may have gone too far in pricing, Post said, with more guests trading down to that promotion and reducing the per-person check average.

“This offer had a greater negative impact on PPA than we predicted,” she said. “To address this issue, we will vary pricing on our tavern line up from now on. We will add new Tavern Double Burgers less often and likely remove another when we do so.”

For the second quarter ended July 15, Red Robin swung to a loss of $1.9 million, or 14 cents a share, from a profit of $6.9 million, or 53 cents a share, in the same period last year.

Revenues slipped 0.6 percent to $315.4 million, from $317.3 million in the same quarter last year.

“We are confident we have identified the key issues that led to our misses and are putting solutions in place to improve through year-end,” Post said. “Now, it is up to our entire team, home office and field, to deliver.”

As of July 15, Red Robin had 572 restaurants, with 484 company-owned and 88 franchised units.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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