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Red Robin Gourmet Burgers, Inc. RRGB is benefiting from robust delivery program, off-premise sales, strategic plan and strong digital initiatives. Moreover, increased focus on Donatos bodes well. However, dismal comps due to the pandemic remain a concern. Let’s delve deeper.
Red Robin continues to strengthen its delivery program to drive off-premise sales. The company recently announced the rollout of three new delivery-only brands — Chicken Sammy's, The Wing Dept. and Fresh Set. The brands will provide items from Red Robin as well as new products that are not available on the menu. The company is planning to invest more in these virtual brands and add more menu items in the future.
The company has been gaining from robust off-premise sales amid the coronavirus pandemic. Its off-premise sales have increased sharply compared with the pre-COVID-19 levels. During the second, the third and the fourth quarter of 2020, off-premise sales soared 208.7%, 127.2%, and 131.8%, respectively. The off-premise sales comprised 63.8%, 40.7% and 43.9% of total food and beverage sales in the second, the third and the fourth quarter of 2020, respectively. Notably, the upside can primarily be attributed to its process and technology enhancements, coupled with the implementation of triple check accuracy program. Also, reductions in menu and refined operating processes resulted in the accuracy of timely pickup and delivery. During the fourth quarter, order accuracy improved by 40% year over year, while overall off-premise guest satisfaction scores increased 50% year over year.
The company is also focusing on strategic plan to drive growth. On the expense front, the company is focusing on a new supply chain management software, replacing its older manual system. During the fourth quarter, the company reported annual savings of more than $2 million, in terms of house labor and reduced waste. Moreover, to boost sales from its dine-in services, restaurant operators have initiated the opening and expansion of patios around the perimeter of its restaurants to attract more guests. Notably, the initiative enables the company to increase its seating capacity and serve more guests, while maintaining social-distancing protocols.
Red Robin, which shares space with Brinker International, Inc. EAT, Jack in the Box Inc. JACK and Chuy's Holdings, Inc. CHUY, still considers Donatos as an substantial growth catalyst. During fourth-quarter 2020, Red Robin restaurants offering Donatos outperformed the non-Donatos restaurants (with similar indoor dining restrictions) by over 500 basis-points. Going forward, the company anticipates Donatos to generate annual company pizza sales of more than $60 million and profitability in an excess of $25 million by 2023. In 2021, the company is likely to add Donatos to nearly 120 restaurants.
Red Robin’s fiscal fourth-quarter revenues and comps declined sharply. The company reported quarterly revenues of $201.1 million, which lagged the consensus mark of $205 million. Moreover, the top line declined 33.6% year over year on account of limited dining room capacity operations at re-opened restaurants due to the coronavirus pandemic.
Comparable restaurant revenues slumped 29% year over year on account of a decline of 28.8% and 0.2% in guest count and average guest check, respectively. The decrease in average guest check can be attributed to a 2.9% fall in menu mix and 0.3% increase in discounts, partially offset by a 3% rise in pricing. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social-distancing protocols.
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