[2011 Update: The Prime Chophouse returns! Read it here.]
How does a chain bounce back from an 11.2% drop in same-store sales fueled by an 11.9% decrease in guest counts? That’s what Red Robin Gourmet Burgers (and Wall Street) asked itself after those negatives were the brand’s reality through the 40-week period ended Oct. 4, 2009.
In February, Red Robin will show what it learned from the double-digit declines by launching a Prime Chophouse Burger and other new limited-time-offer menu items at a discounted price and with the backing of a $6.7 million national cable TV advertising campaign. It’s a bold, get-up-and-dust-yourself-off response that will help determine how well this brand weathers the restaurant industry’s difficult economic landscape.
According to industry sources, the Prime Chophouse Burger launches on Feb. 17 and will be loaded up with steakhouse sauce, crispy onion straws, sautéed mushrooms and provolone cheese and served on an onion bun. Three other LTOs are included in the promotion: a Southwest Grilled Chicken Salad, Chili Chili Con Queso (a spiced up version of its Bueno Con Queso dip) and a strawberry-lemonade-flavored milkshake. Additionally, these sources say Red Robin will promote Anheuser-Busch’s Bud Light Wheat as a new addition to its beverage portfolio. Red Robin declined to confirm details of the marketing plan.
Both the Prime Chophouse Burger and the Southwest Grilled Chicken Salad will be priced at $5.99, well below its roughly $9 average burger price but reflecting the key lesson from its annus horribilis: Discounting coupled with TV advertising support moves the sales needle.
Red Robin didn’t always believe that. In March 2009, the company said it was reducing its use of TV, citing “the current economy and questionable effectiveness of television advertising in this environment.” In June, the chain used cable TV to promote Steak Sliders, and Chief Marketing Officer Susan Lintonsmith told analysts the company saw a “slight shift or lift in sales” as a result.
Then in September, Red Robin introduced its Wise Guy Burger at $9.49 systemwide but discounted it to $5.99 in 10 company markets (covering one-third of its company-owned stores) and supported the lower price with $1.1 million in TV advertising. “During the three weeks of TV media, guest counts improved more than 1200 basis points, bringing our guest counts in these 10 markets into positive territory,” Lintonsmith told investors last November, adding that “we believe the TV ads have paid for themselves.” Now the chain will couple lower price and national cable TV advertising in all its markets. Periscope, Minneapolis, was named Red Robin ad agency in August.
In a December 2009 sales and marketing guidance for Wall Street, Red Robin already disclosed some of this plan, saying it intended to use TV “over four of the eight weeks of the product promotion. The total cost to the company of the first quarter television advertising campaign is expected to be approximately $6.7 million. Additional marketing support for the spring 2010 LTO will include on-line digital media and in-restaurant promotional materials.
“Based on the results of the spring 2010 LTO promotion, television advertising may be used to support the remainder of Red Robin’s LTO promotions in 2010, but no decision on subsequent campaigns has been made,” the December guidance said.
Red Robin declined to confirm details of the Prime Chophouse LTO beyond what was supplied in the December guidance. The company said its spring marketing plans will be discussed during its fourth-quarter and full-year earnings conference call with investors on Feb. 18.