Red Robin Gourmet Burgers is rethinking its full-service restaurant model top to bottom—from name to service style to menu—as it also expands its fast-casual concept, Red Robin Burger Works.
Red Robin reported its Q3 results today, which include a 3.4% increase in total revenues and a 1.1% increase in same-store sales for company units. More importantly, CEO Stephen Carley said that during this current quarter, the chain has begun experimenting with “a number of transformed restaurants.” This “is not simply a remodeling project but part of our overall strategy to make the Red Robin brand more relevant to our guests and to attract them more often.” What is “transformed” at this undisclosed number of units, Carley said, can be anything from “physical space and layout of the restaurants to team-member uniforms, our service model, our menus and our food preparation.”
Additionally, the company confirmed to BurgerBusiness.com that some of the transformed restaurants will have a new logo and signage, identifying the restaurant as Red Robin Gourmet Burgers + Brews. This logo incorporates the flame motif used with the five Red Robin’s Burger Works that are open.
This name helps Red Robin’s quest to increase its appeal to adults without children and to boost alcoholic-beverage sales (now more than 7% of sales). The chain’s ongoing “Taking Back the Bar” initiative looks to further increase those sales. Red Robin’s recent introduction of the Oktoberfest Beer Milkshake promotion with Sam Adams beer signaled its interest in being more of a “burgers + brews” brand.
The desire for a more-adult image undoubtedly will result in the elimination of the current “Yummm!” advertising slogan when a new agency is named (succeeding incumbent Periscope). That will happen by the end of the year.
Carley said the test restaurants are “laboratories” that will help the company “determine what’s really important to our guests and determine the returns” on its investments in remodeled space, among other elements. A determination of what changes to make at all 471 of its full-service Red Robins will be made by Q3 of 2013, Carley said.
As for the five smaller-footprint, fast-casual Burger Works restaurants, Carley noted that they vary not only in size and trade area but also in “performance and consistency of execution. But they provide a lot of learning we can use to tweak the model.” As many as five more Burger Works will open in 2013.
Near term, Red Robin is looking at how best to balance pricing for its menu. The $6.99 Tavern Double burger has been its most successful product launch, giving it an “everyday value” entry point. It also allowed Red Robin to bring back the Oktoberfest LTO burger at full price ($9.99), rather than discount it by $3 as it did last year.
But the tradeoff in Q3 was that while customer traffic was up 0.8%, price/product mix contributed just 0.3% toward the 1.1% same-store sales gain. In 2011’s Q3, comp sales also rose 1.1% but with price/mix contributing 4.3% to offset a -3.2% debit in guest counts. Given the “challenging environment,” Red Robin is happier with increases in both price/mix and guest traffic. “Guest traffic has been hard to come by [for all restaurants] this year, particularly in the last quarter,” said SVP-CMO Denny Post.
Carley pointed out a few small measures taken that have brought significant savings. A switch in the appearance specification for chopped onions used in salsa meant a system savings of $120,000. A switch in to-go packaging has netted $275,000 and the adoption of reusable, washable kids beverage cups will save the company $500,000.
◙ Separately, Burger King Worldwide also announced results for its third quarter ended September 30, 2012. These include a systemwide same-store sales gain of 1.4% and a 1.6% increase for the U.S./Canada. That is a lower comp-sales gain than a year ago, which the company attributed to “more challenging prior-year comparisons and the loss of some value based traffic.”
That means, as the company acknowledged, that while its new higher-price menu platforms such as the BBQ sandwiches on the Summer Menu have been successful, Burger King has seen some “value” customers go elsewhere for dollar items. The current restaurant market “is highly competitive where value is a key factor in attracting guests,” said Steve Wiborg, president of BK North America.
About 30% of Burger King’s sales comes through low-price channels, including its Value Menu (9% of sales), coupons (8%) and other deals (such as price reductions, accounting for about 14%) according to Wiborg. Those numbers are roughly comparable to sales at McDonald’s and Wendy’s, he said. Burger King will continue to have limited-time budget promotions, such as $1 smoothies and $1 chicken sandwiches, to keep its value customers happy at the same time it continues to build on its premium-price platforms such as BBQ.