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Red Robin (RRGB) Expands Partnership With Donatos Pizza

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Red Robin Gourmet Burgers, Inc. RRGB recently announced the expansion of its partnership with Donatos Pizza. However, the financial terms of the deal have been kept under wraps. The current deal is a testament to the company’s continuous focus on strengthening its off-premise sales.

In 2018, Donatos Pizza partnered with Red Robin, offering its famous pizzas as part of Red Robin's menu offerings. Following success in early launch markets, the two companies are adding more locations this year.

Red Robin is planning to add Donatos pizza to nearly 120 additional restaurants by the end of this year, which will take the count to more than 200 locations. In second-quarter 2021, the company added Donatos to 41 restaurants, which includes restaurants in six new states — Idaho, New Mexico, Utah, Nevada, Oregon and Washington. The company also added Donatos pizza to its Arizona locations.

In third-quarter 2021, the company will add Donatos pizza to several East Coast Red Robin restaurants in Maryland and Virginia. In the later part of 2021, the company will add Donatos pizza to its California locations. Following the expansion, Red Robin customers can enjoy freshly prepared premium pizzas with edge-to-edge toppings along with gourmet burgers, brews and shakes.

Red Robin is very optimistic about the success of this partnership. It anticipates annual sales of pizza to be more than $60 million and profitability to be above $25 million by 2023. Jonathan Muhtar, Red Robin executive vice president & chief concept officer said, “Our Donatos locations consistently out-perform our non-pizza restaurants and we continue to be pleased with sales in our newest markets.”

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Price Performance

In the past six months, shares of the company have surged 53.2%, compared with the industry’s rally of 8.3%. It is benefiting from robust off-premise sales. Notably, Red Robin has been investing more in technology and data infrastructure. The company is set to grow its off-premise, online-ordering business via carry-out, delivery and catering. The growing demand for off-premise orders is resulting in higher traffic.

Zacks Rank & Other Key Picks

Red Robin currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the same space include Dine Brands Global, Inc. DIN, Texas Roadhouse, Inc. TXRH and Dave & Buster's Entertainment, Inc. PLAY. While Dine Brands and Texas Roadhouse sport a Zacks Rank #1, Dave & Buster's carries a Zacks Rank #2.

Dine Brands’ 2021 earnings are expected to surge 269.3%.

Texas Roadhouse has a three-five year earnings per share growth rate of 10%.

Dave & Buster's earnings in fiscal 2021 is likely to witness growth of 73.2%.

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Zacks Investment Research