Red Robin's 2011 Growth on Track - Analyst Blog
October 06 2011 - 6:09AM
Zacks
Colorado-based Red Robin Gourmet Burgers Inc.
(RRGB), which currently operates more than 450 restaurants across
the United States and Canada, is set to open a new restaurant in
Baltimore, Maryland on October 10, 2011.
The new restaurant will come up at 8200 Perry Hall Blvd, in the
White Marsh Mall. The White Marsh Mall is one of the largest malls
in the Baltimore area, with 5 anchor stores and 142 specialty
shops. Given the strategic location of this new restaurant, we
believe it will drive significant growth in the coming days. Apart
from its popular offering of gourmet burgers, entrees, salads and
beverages, the menu will offer an interesting variety for
children.
Apart from Red Robin, other major restaurant operators including
Buffalo Wild Wings, Inc (BWLD), The
Wendy’s Company (WEN) and Ruby
Tuesday, Inc (RT) have units in the White Marsh Mall.
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 (Oct 10 to
16). Red Robin will donate 50 cents from each burger sold in the
week to NCMEC to support its child safety initiatives.
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 and increasing customer frequency by
providing dining benefits. The company will further undertake a
Limited Time Offer (LTO) strategy supported with television
advertising to drive traffic and create brand recognition.
The burger chain is increasing its company-owned unit expansion
based on improving unit-level economics. It opened 11 company-owned
restaurants in fiscal 2010 and plans to open 12 full-size units in
2011. For 2012, the casual dining restaurant operator anticipates
to launch 12 to 15 restaurants (up from previous estimate of 5),
which would include both full-sized restaurant footprint and
smaller prototype units.
Red Robin plans to open its first smaller prototype restaurants
in the fourth quarter of 2011. The smaller prototype restaurants
will likely span 2,000 to 4,000 square feet. The new format will
provide additional flexibility including a modified menu and
service format. Management believes that small-size restaurants
will accelerate growth into non-traditional locations and also
improve return on invested capital.
Red Robin is also making efforts to expand through franchises,
as it reduces capital requirement of the company and ensures a
stable growth profile. Currently, the restaurant base is 70%
company-operated and 30% franchised. To encourage franchising, the
company will also charge less franchisee fee from existing
franchisees if they build new restaurants. In 2011, the franchisee
expects to open 3 to 4 new restaurants.
Red Robin currently has a Zacks #3 Rank, which implies a Hold
rating over the short term. We also reiterate our long-term Neutral
recommendation on 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, commodity cost pressure and an uncertain economic
environment resulting in lower traffic and stiff competition from
peers such as BJ’s Restaurants Inc. (BJRI) and
The Cheesecake Factory Inc. (CAKE) remain
headwinds for the company.
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
RUBY TUESDAY (RT): Free Stock Analysis Report
Zacks Investment Research
BJs Restaurants (NASDAQ:BJRI)
Historical Stock Chart
From May 2024 to Jun 2024
BJs Restaurants (NASDAQ:BJRI)
Historical Stock Chart
From Jun 2023 to Jun 2024