Red Robin initiates a fresh phase with an enticing $9.99 value meal offer
Red Robin Gourmet Burgers has announced a new strategic plan, named First Choice, aimed at building upon the success of its previous North Star plan and accelerating progress in key areas such as guest traffic, financial discipline, and value delivery.
The primary focus of First Choice is to drive traffic, improve the balance sheet, and invest in restaurant upgrades. The plan, which emphasises growth acceleration, financial flexibility, and delivering everyday value, is a response to Red Robin's acknowledgement of lagging in these areas in recent years.
CEO Dave Pace, who replaced G.J. Hart in April, describes First Choice as preserving the operational gains and culture established by the North Star plan while increasing the speed and scale of initiatives to generate sustainable guest growth, profitability, and free cash flow.
The First Choice plan differs from the North Star plan in its increased urgency and aggressive approach. While North Star focused on foundational operational turnaround and cost control, First Choice aims to go further and faster, especially in driving guest traffic, refreshing restaurants quicker, aggressively managing costs, and implementing a refranchising strategy.
As part of the refranchising strategy, Red Robin plans to sell some corporate-owned restaurants to franchisees, aiming to operate between 65% to 75% of locations. This move is expected to generate proceeds to pay down debt, with between 25 to 75 locations changing hands by early next year.
To achieve its goals, Red Robin will look to carve out savings elsewhere, including streamlining the supply chain, using technology, and cutting costs at the corporate level. The company also plans to invest more in marketing to break through with customers, as it historically has not spent enough on marketing.
One of the key initiatives under First Choice is the launch of a $9.99 combo meal called Big Yummm. This meal, which includes a Red's Double Tavern Burger, bottomless fries, and a drink, is designed to attract more customers. Red Robin began testing Big Yummm in select markets last year and saw a few percentage points increase in traffic without a significant impact on margins.
The First Choice plan also includes a broader reimaging program, which is likely to happen down the road. In addition, the plan aims to find money through operational efficiencies and cost savings, fix restaurants by improving food quality and service, and win together by creating a high-performance work environment for team members.
Red Robin's stock soared due to strong profits in recent months, and the stock was up more than 8% on Tuesday afternoon following the announcement of the new plan. The company currently has total liabilities of over $686 million, according to financial filings.
Other casual-dining chains, such as Chili's, Applebee's, and BJ's Restaurants, have also introduced similar priced combo meals, including 3 for Me, Applebee's Really Big Meal Deal, and BJ's Restaurants Pizookie Meal Deal. Red Robin's Big Yummm takes the discounting strategy up a notch from its weekday specials.
In conclusion, Red Robin's new strategic plan, First Choice, aims to position the chain as the "first choice" for guests, employees, and investors by focusing on growth, financial discipline, and delivering value. The plan builds upon the chain's existing North Star plan, which was initiated in 2023, and includes initiatives such as the launch of Big Yummm, refranchising, and a broader reimaging program.
The 'First Choice' plan, a response to Red Robin's lagging performance in guest traffic, financial discipline, and value delivery, aims to drive traffic, improve the balance sheet, and invest in restaurant upgrades through initiatives such as the launch of Big Yummm combo meal, refranchising, and a broader reimaging program. Furthermore, Red Robin will seek financial flexibility by streamlining supply chain, using technology, and cutting costs at the corporate level.
