As new CEO David Pace, who started in April, visited Red Robin stores over the last three months, he encountered a similar position. Employees felt they knew what the brand needed to do to compete, but they needed help. They wanted a value offering; the ability to fix restaurants and address long-standing maintenance and repair issues; and technology and tools within units to execute more efficiency and deliver the improved operating performance being asked of them through recent evolutions.
Pace said each problem was examined through a “lens of our guest perceptions.”
“By taking this approach and listening closely to the input from our restaurant teams, our operators see that we’re in this together, and we’re working by their sides to support them and give them the tools that they need to win and deliver the results that we are asking for,” said Pace, who succeeded G.J. Hart, and formerly led Jamba as CEO and served as president of Carrabba’s.
Starting with the opening point, Red Robin spent the previous couple of years implementing a five-point “North Star” turnaround under Hart that covered everything from improving 85 percent of the menu to adding flat-top grills to reloading labor at moments of service. That quality foundation is one Pace wants to “Hold Serve” on as part of his “First Choice” plan unveiled about 30 days ago.
However, the restaurant landscape has been unrelenting in terms of value and flurrying promotions.
Applebee’s plans to add a new entrée into its 2 for $25 value platform every quarter this year—same-store sales turned positive at 4.9 percent in Q2 for the first time in two years. Chili’s, in headline-grabbing fashion, has busted segment expectations going on two years now. Its latest 23.7 percent comps gain was fueled in part by “menu innovation and advertising that highlights our industry-leading value and encourages guest trial,” the company said, with the 3 for Me, starting at $10.99, continuing to go head-to-head with fast-food chains. Outback also has a three-course platform starting at $14.99 aiming to drive trial.
“Drive Traffic,” along with “Hold Serve,” “Find Money,” “Fix Restaurants,” and “Win Together” comprise the cogs of Red Robin’s “First Choice” outline. The company’s same-store sales in Q2 decreased 3.2 percent as net menu price rose 4.4 percent and guest traffic fell 5.5 percent. CFO Todd Wilson said transactions decelerated throughout the quarter, which it attributed to “further increases in competitive promotional activity and our intentionally reduced selling expenses as we developed our new marketing strategy.”
Zeroing on the “Drive Traffic” lever, Pace said Red Robin understands it needs to build sustainable traffic so it doesn’t become overly reliant on LTOs or aggressive discounting, as it has at times in the past. It wants to respond to the macro picture and need-states of guests.
And that won’t be a single initiative, but rather “traffic-driving layers.”
“We believe getting these layers to work in unison will be the key to our success in long term,” Pace said.
But it had to begin with what Pace called, “our week competitive positioning and price point value offers.”
Looking around casual dining, it became clear to Red Robin it needed something under $10 to break through the clutter and drive trial and consideration.
So on July 21, the “Big Yummm Burger Deal” landed for $9.99. It features a Double Tavern Burger, choice of Bottomless Side, and Bottomless Beverage.
For some comparative perspective, Chili’s 3 for Me includes a bottomless drink, chips and salsa, and an entrée.
Customers can also upgrade Red Robin’s deal with specialty items like milkshakes, root beer floats, burger add-ons, or garlic parmesan and sweet potato fries. Pace said it was thoughtfully structured on trade-up opportunities to help mitigate check pressure while still delivering strong value.
Although early days, the deal lifted traffic relative to Red Robin’s Q2 exit rate—the figure has been down about 4 percent so far in Q3. “At the same time,” Pace said, “we’re capturing significant insights that will feed into the next phase of our marketing approach.”
Roughly 9 percent of customers have picked the Big Yummm deal since it arrived. Wilson expects a 1 percent drag on restaurant-level profitably the remainder of the year as a result—a trade-off, he said, “we’re making to incent guests to come in and obviously then, in turn, come back in future quarters and future years.”
About half of that drag is labor. The rest spreads throughout the P&L.
Nine percent of customers tapping a value option for Red Robin translates to a 2–3 percent slide on per-person average. “That’s a baseline that we work up from as we get more messaging out on Big Yummm. We’re certainly optimistic that we can build up from there,” Wilson said.
Red Robin plans to invest deeper into marketing this year and expects selling expenses to total roughly $32 million. And it’s planning to hit the higher end of its prior CapEx guidance of $30 million.
Red Robin expects same-store sales to decline 3–4 percent for the rest of 2025 and for the company to end with 386 corporate stores in operation. Also, restaurant-level operating profit of 12–13 percent and adjusted EBITDA of $60 million to $65 million.
Total revenues in Q2 were $283.7 million, a decrease of $16.5 million, year-over-year, and net income was $4 million versus a net loss of $9.5 million in the prior-year period. Restaurant-level operating profit rose to $40.5 million from $34.7 million. Margin on that line was 22.5 versus 13.6 percent, a 270-basis-point boost entirely driven by 300 basis points of labor improvements. Pace said this hasn’t come at the expense of guest satisfaction scores, which have maintained or improved of late.
Adjusted EBITDA was $22.4 million Q2, an increase of $8.8 million thanks to cost efficiency gains, again, particularly through labor, the benefit of menu price increases, and reduced selling expenses.
The brand should be at 4.5–5 percent of price in Q3 and 2–2.5 percent in Q4.
Red Robin ended Q2 with 397 company restaurants after four closed. There were 90 franchises as well—a number expected to rise with an ongoing refranchising effort ignited last month with Brookwood Associates. Currently, Red Robin is roughly 80 percent company-owned. After transactions, it will likely be closer to 65 to 70 percent.
The brand’s total store count of 478 was a decrease from 503 this time a year ago
It also repaid $20.3 million of debt in the first half of the year.
Going back to what Pace heard on the front lines during his early travels, a “state-of-the-art” data-driven approach is on deck. Red Robin projects to start its rollout late Q3.
This incorporates micro-targeting capabilities Pace said will enable Red Robin to engage customers more personally, precisely, and efficiently than traditional broad-based messaging. It deploys a proprietary mix of tools, analysis, and competitive strategy to understand guest decision-making behaviors, he added.
In the end, Red Robin wants to deliver personalized tactics to place itself “as the first choice in our guest consideration set.”
“Effectively competing with larger, more resourced brands in our space will not be successful by just mirroring their strategies,” Pace explained. “Our approach will leverage these proprietary analytics that will help level the playing field at the restaurant level in a highly efficient manner.”
He added traffic trends won’t turn overnight. It’s more an effort to build a foundation for sustainable, profitable growth through a combination of immediate value offerings and long-term analytical capabilities.
The other ask brought up—to address stores—is falling under the “Fix Restaurants” element. As noted, Red Robin invested in upgrades over the past two years in food and hospitality to elevate guest experience. Now, it’s time to improve assets to align atmosphere with modern-day standards, Pace said, and achieve parity or better with the broader casual-dining field.
So Red Robin is putting funds toward critical deferred maintenance, including flooring, internal finishings, furniture repairs, and external improvements, such as paint, lighting, and landscaping that directly impact guest perceptions and the experience of visiting a Red Robin.
Pace cautioned it will take time to address the entire fleet, but the company is taking a strategic approach to piloting refreshes across about 20 locations in four markets ahead of its “First Choice” marketing launched sated for later this year.
This will allow the company to understand the impact of packages and fine-tune where to spend additional capital before it goes system-wide.
And continuing its response, during the last two quarters, Red Robin completed “multiple” new technology investments, Pace said, with more to come.
The best way Pace could describe what’s ahead is “a holistic approach” to stepping up experience. Coming messaging will reflect that. As will upgrading facilities and tech decisions (Red Robin is doing due diligence on handhelds and next-generation table tops).
“The turnaround of iconic brands takes time, but with the right strategy, the right team and the right focus on execution, I’m confident we will deliver on our promise to restore Red Robin to its rightful place in the industry,” Pace said.
