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Red Robin Comps Do a Big Melt

Red Robin’s Big Melt Bacon Burger LTO was a hit but the marketing for it fell short.

The Big Melt Bacon Burger didn't draw customers.

That was the explanation Red Robin Gourmet Burgers executives offered today for the company’s disappointing 0.5% increase in same-store sales for the first fiscal quarter, ended April 15, 2012 (see full financial results here). Comps in the previous quarter had been up 3.1%. Average check in Q1 was up 4.1% for the quarter, but guest counts fell 3.6%, a drop the executives said took them by surprise. The Big Melt “struggled to break through the clutter and provide the [sales] performance expected,” said CEO Steve Carley.

The new Tavern Double is a permanent addition.

Chief Marketing Officer Denny Post said buy-in for the $6.99 Big Melt was slightly better than for the earlier Prime Chophouse burger LTO. But the Big Melt “didn’t drive incremental customer traffic,” Post said, meaning current customers simply traded down to the Big Melt.

The new Tavern Double burger also is priced is at $6.99 (with Bottomless Steak Fries), but with add-on “Styles” (for example, extra bacon and bacon aïoli  with the “Pig Out Style” build) at $1 each to improve its profit margin. The Tavern Double, a permanent menu addition, provides “a $6.99 starting point every day to trade up from,” Post said. The new burger also gives Red Robin another competitively priced burger to promote at lunch, where rivals’ discounting has hurt Red Robin.

Post said that competitors’ pricing “did hurt us disproportionately at lunch. They came down and played in at our $5.99, $6.99 price point.” She noted Applebee’s $6.99 Pick ‘N Pair lunch deal; Chili’s new Lunch Break at $6 and up, and others.

The Tavern Double burger is a platform and not just a one-off creation, Post said. The chain plans to add additional “Style” add-ons to keep the product fresh. “It’s a very easy way for us to add news [to the menu] and get buzz [on social media],” she said.

While providing “everyday affordability” is one current focus for management, the other is to reimage Red Robin’s bar area to make it more adult and sophisticated in perception. This is part of the chain’s ongoing “Take Back the Bar” program to build high-margin alcoholic beverage sales. In line with this goal, the chain named Donna Ruch to the new post of master mixologist this week.

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