E Casual Dining Caution: Is "Labor Lite" Workable?

Brand decisions decades earlier have a way of showing up and serve to constrain companies at the worst possible time. For example, at some earlier time Red Robin made the decision to de-emphasize alcohol and bar sales. It has a very low alcohol sales mix, despite having a bar; they would love to get to 10% sales mix, which itself is not a good number. They are well south of that, and no mention of bar initiatives showed in the investor day presentation, unlike in prior years.

A Better Opportunity?

One other interesting fact seen that the Red Robin off-premise sales average ticket is less than the dine-in average ticket. That generally varies much worse from its casual dining peers. How to build ticket size?

Red Robin Earnings Call, Nov. 6 2017,   Guy J. Constant - Red Robin Gourmet Burgers, Inc.

In terms of off-premise mix and how it impacts overall, the average check for off-premise is lower, which is almost completely due to the lower beverage incidence that you see with off-premise. So actually, overall it results in a lower average ticket than you might see for dine-in traffic

There are good people at Red Robin, and everyone knows the struggle that casual dining has become. But I have to say I would have looked anywhere else for cost savings first—such as the $100 million in projected G&A run rate[3]. Darden (DRI) CEO Gene Lee addressed this at the ICR Conference, by noting “there is no service model….there is no piece of equipment” that will dramatically revolutionize the casual dining service model. What can be done is to have great, distinctive food and deliver it in a wonderful experience, go after profitable new sales platforms, and take advantage of system efficiencies. 


[1]  My words and characterization.

[2]  Piper Jaffray 2017 Cookbook, Actual values may vary minutely due to calendarization. 

[3]  $100 million 2017 guidance verified on Q3 earnings call, November 6 2017. The press reported on Red Robin G&A cuts on January 11, 2018.

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Disclosure: The author has no positions in any stocks mentioned.

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