BJRI BJs Restaurants Inc

Colorado-based Red Robin Gourmet Burgers Inc. (RRGB), which currently operates 450 restaurants across the United States and Canada, is set to open a new restaurant in Woodland, California on April 25, 2011.  

The company, in order to drive revenue at the new location, intends to implement a guest loyalty program called Red Royalty, focused on retaining guests by providing dining benefits. The company will further use a Limited Time Offer (LTO) strategy supported with television advertising to drive traffic and create brand recognition.

As a part of its social commitments, Red Robin has partnered with the National Center for Missing & Exploited Children (NCMEC) to host a fundraiser during its opening week (April 25 to May 1). Red Robin will donate 50 cents from every burger sold in the week to NCMEC to support its child safety initiatives.

In order to explore new development opportunities and optimize mix between company-owned and franchised locations, the company has slowed down its company-owned unit expansion. It opened 11 company-owned restaurants in fiscal 2010 and 15 in 2009.

In fiscal 2011, the company plans to open 10 new company-owned restaurants followed by 5 in 2012. Red Robin is now making efforts to expand through franchises, as it reduces capital requirement of the company and ensures a stable growth profile. In 2011, the company expects to open 3 to 4 franchised restaurants.

We believe that with the opening of new restaurants in fiscal 2011, Red Robin is trying to regain market share following a gradual improvement in the restaurant industry, which faced extreme challenges due to the economic turmoil.

Red Robin currently has a Zacks #1 Rank, which implies a Strong Buy rating over the short term. We also reiterate our long-term Neutral recommendationon the stock, given the company’s efforts to turn around its business in 2011 by focusing on revenue growth, expense control by cost-cutting initiatives and capital deployment.

However, higher input cost and fierce competition from other peers such as BJ’s Restaurants Inc. (BJRI) and California Pizza Kitchen Inc. (CPKI) remain headwinds for the company.

 
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
 
CALIF PIZZA KIT (CPKI): Free Stock Analysis Report
 
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
 
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