Red Robin Gourmet Burgers Inc. (RRGB), a chain of casual dining restaurants, is set to debut its first unit in Miami area, Florida, shortly. The new restaurant will be located at The Falls and will offer gourmet burgers served with Bottomless Steak Fries, a variety of salads, entrees, soups and wraps made with fresh ingredients. In Florida, the company already has six more restaurants.
Given customers’ inclination toward a fresh organic menu as well as concerns about nutrition these days, we believe integrity in ingredients will be a crucial factor for traffic growth. Apart from this, there will be other sales enhancement initiatives like a guest loyalty program called Red Royalty.
However, Seattle-based Red Robin will likely face stiff competition in that area because of the presence of several renowned eateries like Panera Bread Co. (PNRA), T.G.I. Friday’s, and PF Chang’s China Bistro Inc. (PFCB).
Red Robin currently operates more than 460 restaurants across the United States and Canada. The company is also expanding through its franchise strategy. Currently, the restaurant chain is 70% company operated and 30% franchised.
The company expects to roll out 13 to 15 restaurants in 2012, including both full-sized restaurants and smaller prototype units. Small-size restaurants will likely drive growth in non-traditional locations and also improve return on invested capital. Red Robin’s units are mostly located in California, Colorado, North Carolina, Ohio, Virginia, and Washington. The company expects to open around 50% of its targeted restaurants in 2012 in these states. While the company seems comfortable expanding in familiar ground, we also foresee management expanding in relatively new markets to avoid market saturation.
Red Robin targets investment in the range of $50–$60 million in 2012 toward unit development. It also plans to increase investments in equipment and store remodeling.
Red Robin currently has a Zacks #1 Rank, which implies a Strong Buy rating over the short term. We reiterate our long-term Outperform recommendation on the stock.
More From Zacks.com