Dive Brief:
- Red Robin closed one location during the fourth quarter and is considering closures for about 70 underperforming restaurants locations, the company said Wednesday in an earnings release.
- The restaurants in question had store-level operating losses of about $6 million last year, which exerted a 210-basis-point drag on the company’s restaurant-level operating profit, President and CEO G.J. Hart said during a Wednesday earnings call.
- A majority of the underperforming restaurants are expected to close over the next five years upon the expiration of their leases. In 2025, the company expects to close 10 to 15 units, Hart said.
Dive Insight:
Other chains, including Denny’s and Wendy’s, have also been closing underperforming locations to improve the health of their entire systems. Denny’s expects to shutter 70 to 90 restaurants this year and closed 88 last year. Wendy’s cut 276 poor-performing restaurants last year.
Red Robin’s struggling restaurants aren’t representative of the overall system — more than 300 company-owned units continue to perform well, Hart said. The expected closures will help strengthen the casual chain’s remaining portfolio and free up cash that can be reinvested in the company or used to repay debt, Hart said. The company could also explore other avenues to accelerate this process and will provide updates on this in the near future.
Red Robin is two years into its North Star plan, which was established under Hart, and saw a 600-basis-point improvement in traffic from Q1 2024 to Q4 2024. Including the impact of deferred loyalty revenue, comparable restaurant revenue was up 1.8%. For the year, however, comparable revenue was down 1.2%.
Red Robin's comparable restaurant revenue Q1 2023 to Q4 2024
“While financial results for 2024 fell well below our original expectations, we've made substantial improvements to the guest experience and believe we still have a significant opportunity ahead of us to reach the full potential of our iconic brand,” Hart said in the press release.
The company made gains in sales, with operators setting 1,400 sales records in the past two years. Its Red Robin Royalty program relaunch attracted 1.5 million new members over the course of the year, and the program now has 14.9 million members, which helped boost traffic with new and lapsed customers, Hart said. This year, Red Robin will make more effective use of this program by integrating guest data capabilities to create personalized marketing and promotions.
Improvements to menu and food quality and emphasis on value and dining promotions helped boost traffic last year. In 2025, the chain plans to add new menu items throughout the year, including limited-time offers and new salad options, while prioritizing its value proposition with offers like $10 Cheeseburger Tuesday and Kids Night Wednesday promotions.
With its Managing Partner Compensation Program now in place across its system, managers now function as partner and owner of their restaurants, creating a “unified goal of driving both traffic and profit dollars,”Hart said.
“We’re expecting to see continued benefits from the program as we move through 2025,” he said.
