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Red Robin to Enter St. Petersburg

Zacks Equity Research

Seattle-based casual dining restaurateur, Red Robin Gourmet Burgers Inc. (RRGB) which operates as many as 482 units in the U.S. and Canada, is geared to expand its presence in the lucrative domestic market.

Recently, Red Robin declared that it is set to unveil a restaurant in St. Petersburg, Fla. The restaurant, positioned at Tyrone Mall, marks the company’s entry into the St. Petersburg market.

We believe that the spacious unit with its signature food offerings like Royal Red Robin Burger and Red Robin's Freckled Lemonade will add to the company’s sales.

In the past few years, Red Robin strengthened its presence in the markets of California citing plenty of opportunities. However, it is now venturing into other potential markets to avoid market saturation. Within the under-served locations, Florida needs a special mention where Red Robin boasts only 13 restaurants while it operates 70 units in California.

The restaurant industry in Florida is considered as one of the largest in the U.S. High demand and high spending ability in Florida, one of the most populous and wealthiest states in the U.S., are favorable to the sector’s growth. According to the National Restaurant Association, the state’s restaurants are expected to record $33.3 billion in sales in 2013. We consider this opening favorable for Red Robin’s further expansion plans in the state.

Apart from Florida, the company unveiled a restaurant in another underserved market of Maryland where it operates only 15 units. The restaurateur remains on track to open 20 units in the U.S. in 2013, out of which nine have already been opened.

Red Robin holds a Zacks Rank #1 (Strong Buy). Other players in the restaurant industry that look attractive at the current levels include AFC Enterprises Inc. (AFCE), Jack in the Box Inc. (JACK) and CEC Entertainment Inc. (CEC). All these restaurateurs carry a Zacks Rank #2 (Buy).

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