Use these links to rapidly review the document
TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

RED ROBIN GOURMET BURGERS, INC.

(Name of the Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

Table of Contents

RED ROBIN GOURMET BURGERS, INC.
6312 South Fiddler's Green Circle, Suite 200N
Greenwood Village, CO 80111
(303) 846-6000



NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 21, 2020



              When:  8:00 a.m. MDT, on Thursday May 21, 2020

              Where:  Red Robin's Yummm U, located at 10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80112 for the following purposes:

      Items of Business:

    Proposal 1: To elect Anthony S. Ackil, Thomas G. Conforti, Cambria W. Dunaway, G.J. Hart, Kalen F. Holmes, Glenn B. Kaufman, Steven K. Lumpkin, Paul J.B. Murphy III, David A. Pace, and Allison Page as directors of the Company for one-year terms;

    Proposal 2: To approve, on an advisory basis, the compensation of our named executive officers;

    Proposal 3: To approve an amendment to the Company's Amended and Restated Employee Stock Purchase Plan, which would increase the number of authorized shares available for issuance;

    Proposal 4: To approve an amendment to the Company's 2017 Performance Incentive Plan, as amended, to increase the number of authorized shares available for issuance;

    Proposal 5: To ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 27, 2020; and

    To transact such other business as may properly come before the meeting.

              We intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19) pandemic and we are sensitive to the public health and travel concerns our stockholders may have and protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as soon as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at http://www.redrobin.com/eproxy for updated information. If you are planning to attend our annual meeting, please check the website one week prior to the annual meeting date. As always, we encourage you to vote your shares prior to the annual meeting.

              Record Date: Stockholders as of March 30, 2020 are entitled to vote

              Annual Report: We filed with the U.S. Securities and Exchange Commission ("SEC") an annual report on Form 10-K on February 25, 2020 for the fiscal year ended December 29, 2019. A copy of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our stockholders entitled to notice of and to vote at the annual meeting. In addition, you may obtain a copy of the annual report on Form 10-K, without charge, by writing to Red Robin Gourmet


Table of Contents

Burgers, Inc., Attn: Stockholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111.

              Who Can Attend: All stockholders as of the record date, or their duly appointed proxies, may attend the meeting

              Date of Mailing: This Notice of Annual Meeting of Stockholders and related proxy materials are being distributed or made available to stockholders beginning on or about April 10, 2020

> YOUR VOTE IS IMPORTANT

              Whether or not you plan to attend, it is important that your shares be voted at the meeting. Please refer to your proxy card or Notice Regarding the Availability of Proxy Materials for more information on how to vote your shares at the meeting and return your voting instructions as promptly as possible. Thank you for your continued support of Red Robin.

    By Order of the Board of Directors,

 

 

GRAPHIC

 

 

Michael L. Kaplan
Secretary

Greenwood Village, Colorado

April 8, 2020

Neither the Securities and Exchange Commission nor any state securities regulatory agency has passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.


Table of Contents

A MESSAGE FROM OUR INDEPENDENT CHAIRMAN

Dear Fellow Stockholders,

              Red Robin has proudly been serving our Guests for over 50 years and operates in over 550 locations today. The Company has achieved this longevity not by staying the same, but rather by continuing to evolve and build our brand to serve our Guests, stockholders, and communities.

              2019 was a year of foundational change for Red Robin. Led by Paul Murphy, our new CEO, with the full support of our board, we outlined and began executing on a strategic plan that we are confident will accelerate our turnaround, enhance our competitive positioning, deliver for our Guests, improve our financial performance, and drive value for all stockholders.

              During 2019 and early 2020, decisive actions were taken to reposition Red Robin for disciplined growth, substantial value creation, and responsible governance. These actions included:

    Paul J. B. Murphy III was appointed President and CEO and named as a director on our board. Paul is a deeply experienced restaurant executive with a strong track record of successfully executing turnarounds and driving growth, including during his tenure as Executive Chairman of Noodles & Company, and CEO of Del Taco Restaurants.

    Mr. Murphy quickly outlined a four-point plan based on Guest-led research to accelerate the Company's turnaround:

        o    Recapture the Soul of Red Robin
        o    Deliver the Promise to Our Guests
        o    Tell Our Story
        o    Accelerate Profitable Growth

    Red Robin made significant investments in the business in support of this plan, resulting in improved performance with positive comparable restaurant revenue growth and consistent operating improvements as we exited 2019.

    Our board was refreshed with six new directors, bringing a diverse set of relevant skills and experiences in the restaurant, consumer, and retail industries. Multiple new board members bring a track record of success leading public company transformations and creating stockholder value. 27% of our board members are women.

    We continue to rely on a foundation of leading governance practices, including an independent board chair, annual director elections, majority voting, and 10% special meeting rights to support management's focus on our brand, service model, and messaging.

              The foundational work initiated in the business in 2019 to reset the course of Red Robin has been positive and sustainable as we enter 2020, and was driving steady stock price appreciation prior to the recent coronavirus (COVID-19) impact on the market. While the impact of COVID-19 is still evolving, we are confident that Red Robin's plan will deliver significant long-term value for all our stockholders. As the environment continues to shift, we will continue to engage with our stockholders and remain open to all input on how additional value can be created.

              We look forward to providing you updates on our continued progress.

Sincerely,

GRAPHIC

David A. Pace,
Chairman of the Board of Directors


Table of Contents


TABLE OF CONTENTS

 
  Page
 
PROXY SUMMARY     1  

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

7

 

HOW OUR DIRECTORS ARE SELECTED, QUALIFIED, AND ELECTED

 

 

7

 
Selecting Nominees for Director     8  
Directors and Nominees     8  
Vote Required     13  
Board Recommendation     13  

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

14

 
Governance Principles     14  
Director Compensation     24  

COMPENSATION DISCUSSION AND ANALYSIS

 

 

28

 

EXECUTIVE SUMMARY

 

 

28

 
Named Executive Officers     28  
Business Performance     28  
2019 Compensation Outcomes     29  
2020 Compensation Changes     29  

BUSINESS UPDATES

 

 

30

 

OUR COMPANY

 

 

30

 
2019 Leadership Appointments     30  
Strategy Updates     31  
2019 Company Operational and Performance Highlights     32  
2019 Compensation Highlights     32  

COMPENSATION PHILOSOPHY

 

 

34

 
Compensation Philosophy     34  
Pay Objectives     34  
Pay for Performance Alignment     34  

COMPENSATION DECISION PROCESSES

 

 

34

 
Overview     34  
Compensation Setting     35  
Consideration of Prior Say-on-Pay Votes     35  
Benchmarking     35  

2019 EXECUTIVE COMPENSATION

 

 

38

 
Overview     38  
Key Components     39  
Summary of 2019 Compensation Activity     41  

2020 COMPENSATION PROGRAM

 

 

47

 

GOVERNANCE OF EXECUTIVE COMPENSATION

 

 

48

 
2019 Executive Compensation Tables     51  
Employment Agreements, Separation Arrangements, and CIC Plan     60  
CEO Pay Ratio     69  

PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

 

71

 
Vote Required     71  
Board Recommendation     71  

PROPOSAL 3: APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

 

 

72

 
Introduction     72  
Summary Description of the ESPP     72  
Vote Required     76  
Board Recommendation     76  

i


Table of Contents

 
  Page
 

PROPOSAL 4: APPROVAL OF THE AMENDMENT TO THE 2017 PERFORMANCE INCENTIVE PLAN

 

 

77

 
Introduction     77  
Vote Required     85  
Board Recommendation     85  

PROPOSAL 5: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

86

 
Evaluation of Auditor     86  
Principal Accountant Fees and Services     86  
Vote Required     87  
Board Recommendation     87  

VOTING PROCEDURES

 

 

89

 

VOTING INFORMATION

 

 

89

 

VOTES REQUIRED FOR EACH PROPOSAL

 

 

91

 

DELIVERY OF PROXY MATERIALS

 

 

93

 

"HOUSEHOLDING" OF PROXY MATERIALS

 

 

93

 

ADDITIONAL INFORMATION

 

 

93

 
Other Business     93  
Stock Ownership Information     93  
Equity Compensation Plan Information     97  

APPENDIX A: EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED

 

 

A-1

 

APPENDIX B: AMENDED AND RESTATED 2017 PERFORMANCE INCENTIVE PLAN

 

 

B-1

 

ii


Table of Contents

 


PROXY SUMMARY

 
MEETING AGENDA, VOTING MATTERS, AND BOARD VOTING RECOMMENDATIONS
 

 

Proposal
  Board's Voting
Recommendation

  Page Reference
(for more detail)

1   Election of Directors   FOR All nominees   7

2

 

Advisory Vote to Approve Executive Compensation

 

FOR

 

71

3

 

Amendment to the Company's Amended and Restated Employee Stock Purchase Plan, to increase shares available for issuance

 

FOR

 

72

4

 

Amendment to the Company's 2017 Performance Incentive Plan, as amended, to increase shares available for issuance

 

FOR

 

77

5

 

Ratification of Independent Auditor

 

FOR

 

86

ELECTION OF DIRECTORS

              In 2020, ten of our current directors are standing for election. Of those ten, five are new Independent Directors appointed in 2019 and 2020 as part of a board refreshment. As previously announced, Director Stuart I. Oran has decided not to stand for re-election at the 2020 annual meeting of stockholders. Following Mr. Oran's retirement from the board as of the date of the 2020 annual meeting of stockholders, we expect that the board size will be reduced to ten members. Mr. Oran will continue his service as a member of the audit committee and the nominating and governance committee until his retirement.

    9 of 10

nominees are independent

      30%

of nominees are women

      50%

of Board committees are chaired by women

      7 of 10

nominees have CEO or CFO experience

      5 of 10

nominees have turnaround experience

   

Table of Contents


Director Nominee
  Age
  Director Since
  Principal Occupation
  Independent
  Committee Assignments

Anthony S. Ackil

  45   2020   CEO of Streetlight Ventures, a retail support platform for small business and real estate brokers     (1)

Thomas G. Conforti

   
61
 

2019

 

Former Senior Advisor, Executive Vice President and CFO, Wyndham Worldwide

 

 

*FC, AC

Cambria W. Dunaway

 

57

 

2014

 

Chief Marketing Officer, Duolingo

 

 

*NGC, CC

G.J. Hart

   
62
 

2019

 

Chief Executive Officer, Torchy's Tacos

 

 

CC, FC

Kalen F. Holmes

 

53

 

2016

 

Former Executive Vice President (Human Resources), Starbucks

 

 

*CC, NGC

Glenn B. Kaufman

   
52
 

2010

 

Managing Member, D Cubed Group investment firm

 

 

FC, NGC

Steven K. Lumpkin

 

65

 

2016

 

Consultant, Former Executive Vice President, CFO and director, Applebee's

 

 

*AC, FC

Paul J.B. Murphy III

   
65
 

2019

 

President and Chief Executive Officer, Red Robin

       

David A. Pace

 

60

 

2019

 

Former Chief Executive Officer, Jamba Juice

 

 

(C), CC

Allison Page

   
35
 

2020

 

Co-Founder and President, SevenRooms

 

 

NGC

 

AC   Audit Committee   (C)   Denotes Chair of the Board

CC

 

Compensation Committee

 

*

 

Denotes Chair of the Committee

NGC

 

Nominating and Governance Committee

 

 

 

 

FC

 

Finance Committee

 

 

 

 

(1)
Mr. Ackil joined the board in March 2020 and has not yet been appointed to a committee.

2


Table of Contents

BOARD LEADERSHIP SKILLS

Experience / Skills
  David A.
Pace
(Chairman)

  Paul J.B.
Murphy III
(CEO)

  Anthony S.
Ackil

  Thomas G.
Conforti

  Cambria W.
Dunaway

  G.J.
Hart

  Kalen F.
Holmes

  Glenn B.
Kaufman

  Steven K.
Lumpkin

  Allison
Page

Public C-Suite Experience       ¨     ¨     ¨   ¨     ¨

Restaurant / Hospitality Executive Leadership

 


 


 


 


 

¨

 


 


 


 


 


Accounting / Financial Expertise

 


 


 


 


 

¨

 


 


 


 


 


Business Transformation

 


 


 

¨

 


 

¨

 


 


 

¨

 

¨

 

¨

Technology Strategy

 


 

¨

 


 


 

¨

 


 

¨

 

¨

 


 


Marketing / Consumer Insights

 


 


 

¨

 


 


 


 

¨

 


 


 


M&A Experience

 

¨

 

¨

 

¨

 


 

¨

 

¨

 

¨

 


 


 


Value Creation

 


 


 


 


 

¨

 


 

¨

 


 


 


Diversity

 

¨

 

¨

 

¨

 

¨

 


 

¨

 


 

¨

 

¨

 


Governance / Legal

 


 

¨

 

¨

 

¨

 


 

¨

 


 


 

¨

 

¨

CORPORATE GOVERNANCE HIGHLIGHTS

    Declassified board of directors
    Independent chair of the board of directors
    All directors are independent other than our CEO
    All committee members are independent
    Majority voting standard for uncontested director elections
    Plurality voting standard for contested director elections
    Board members have diverse backgrounds, expertise, and skills
    Robust board, committee, and director evaluation process completed annually instead of age or term limits
    Board of directors and each committee regularly meet in executive session without members of management
    Frequent engagement with institutional investors
    Added a finance committee in 2019 to provide guidance on long-range planning, budget and capital allocation, and stockholder engagement
    Annual review of our succession plan and talent development plan
    Directors receive regular governance updates to stay well-informed and evaluate governance trends
    Limits on outside board service for board members
    Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors
    Directors regularly engage in in-boardroom and outside director education
    Increased focus on environmental stewardship

3


Table of Contents

STOCKHOLDER INTERESTS AND RIGHTS

    Ability for stockholders to call special meeting
    Input from stockholder outreach incorporated in decision-making process
    Prohibition of hedging and pledging of our common stock

STOCKHOLDER ENGAGEMENT

              We believe that strong corporate governance includes engagement with our stockholders and considering their views. This past year, we reached out to or held meetings and discussions with stockholders representing more than 90% of our institutional stockholder base. We greatly value the feedback received from our stockholders, which is promptly shared with the board. This engagement provides valuable insight that informs the work of both management and the board.

RRGB Participants

Types of Engagement

Topics Covered

Independent Directors

Executive Management

 

Stockholders (portfolio managers and corporate governance departments)

Investor conferences

Earnings conference calls

Proxy advisory firms

Prospective stockholders

 

Key value drivers and competitive differentiators

Capital structure and capital allocation priorities

Key strategic initiatives and opportunities

Financial performance and goals

Board composition: qualifications, diversity, skills, and leadership structure

ESG risks and opportunities

Risk management

Executive compensation policies and design

Shareholder rights plan

 

 
COMPANY HIGHLIGHTS
 
    Iconic, niche brand founded in 1969 in Seattle, WA
    556 casual dining restaurants in 44 states and Canada
    454 company-owned locations (~80% of the portfolio)
    The Gourmet Burger Authority™ with burger sales mix of ~66% of entrée sales
    One of the largest industry loyalty programs with more than 9 million members
    New CEO and independent board focused on creating long-term value for stockholders, Guests, Team Members, and communities

              Over the past year, our board has taken decisive actions to ensure we have the right leadership team and board members in place to position the Company for long-term success. In October 2019, Paul J.B. Murphy III was appointed as President and Chief Executive Officer. Mr. Murphy is a highly

4


Table of Contents

accomplished restaurant executive with significant turnaround and brand repositioning experience. During the past six months, the Company has appointed six new highly qualified directors to the board, five of whom are independent—Anthony S. Ackil, Thomas G. Conforti, G.J. Hart, David A. Pace, and Allison Page—along with Mr. Murphy. These individuals possess significant restaurant, consumer, and retail experience relevant to the Company's business, as well as track records of leading successful business transformations to create stockholder value.

              At the same time, the board and management team have remained focused on executing our strategic plan, accelerating Red Robin's turnaround, and transforming the business to drive value for all stockholders. We continue to make progress toward our goals, as demonstrated by 2019 improvements in comparable restaurant revenue, customer satisfaction scores, manager staffing levels, and hourly turnover, among other key metrics.

              During fourth quarter 2019, we delivered our second consecutive quarter of comparable restaurant revenue growth, despite significant discounting practices from the prior-year period. We attribute these positive results to benefits reaped from our focused execution of the early stages of our turnaround plan in 2019, including staffing, operational, and marketing improvements.

 
SUSTAINABILITY
 

              Red Robin's strategy is closely tied to the communities in which it operates. Our ability to deliver long-term value for all of our stockholders is loosely connected to the strength and long-term sustainability of each state and the overall economy and environment. This is why our board and management team are focused on collaborating with our communities to further a sustainable future.

Corporate Responsibility: Environmental, Social, and Governance (ESG)

              Red Robin's sustainability practices are focused on environmental stewardship, our Team Members, supply chain integrity, and supplier initiatives. Each year we track our progress, review our performance, and set new targets to achieve our long term goals.

    Increased focus on environmental stewardship. Red Robin (i) switched to energy-efficient LED lighting in all restaurants, (ii) piloted the use of solar panels in select restaurants, (iii) actively manages energy usage, and (iv) expanded its recycling and waste reduction efforts.
    Supply chain integrity. Red Robin has high quality ingredients and food quality and safety standards and seeks suppliers that promote humane farming.
    Supplier initiatives. Red Robin has high quality standards for our suppliers and our growers help maintain the sustainability and integrity of our supply chain. We recognize and celebrate our suppliers for their sustainability progress.

5


Table of Contents

EXECUTIVE COMPENSATION HIGHLIGHTS
 
    Pay for performance-focused executive compensation structure, with a significant portion of pay "at-risk"
    Independent compensation committee approves executive compensation structure and performance goals
    Independent compensation consultant advises the compensation committee
    Double trigger required for cash severance and equity vesting upon change in control (other than certain performance awards)
    Meaningful stock ownership guidelines for executives and board members
    Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors
    Clawback policy for the return of certain cash and equity executive incentive compensation in the event of a financial restatement
    No excessive perks
    No incentivizing of short-term results to the detriment of long-term goals and results
    Compensation practices are appropriately structured to avoid incentivizing excessive risk taking
    No excise tax gross ups for change in control related situations
    No repricing of underwater options without stockholder approval
    Achievement against targets on the performance-based portion of the 2017-2019 long-term incentive program resulted in minimal award
    Only a 33% payout of the annual incentive compensation program based on slightly above threshold achievement of the performance goals

6


Table of Contents


PROXY STATEMENT

              The Board of Directors ("board" or "board of directors") of Red Robin Gourmet Burgers, Inc. ("Red Robin" or the "Company") is providing this proxy statement to stockholders in connection with the solicitation of proxies on its behalf to be voted at the annual meeting of stockholders. The meeting will be held on Thursday, May 21, 2020, beginning at 8:00 a.m. MDT, at Red Robin's Yummm U, located at 10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80112. The proxies may be voted at any time and date to which the annual meeting may be properly adjourned or postponed.


PROPOSAL 1:
ELECTION OF DIRECTORS

HOW OUR DIRECTORS ARE SELECTED, QUALIFIED, AND ELECTED

              Because Company board meetings are rarely conducted in public, it is sometimes difficult for stockholders to assess the strength of a board's decision-making and actions. But that is not the case for Red Robin's directors; their leadership has been made apparent via many actions, including:

    effective management of a CEO succession process—one of the most important and difficult tasks any board faces
    design and oversight of compensation plans that have excellent internal and external pay parity and that align our executives' interests with stockholders
    creation and maintenance of good governance principles and practices, including an independent board chair, that get high scores from leading ESG third parties
    steady refreshment of their own membership—also a difficult practice for many boards

              As of the date of this proxy statement, our board of directors consists of eleven directors, all of whom are independent except our CEO. Therefore, currently, 91% of our board is independent. Following the annual meeting, if all director nominees are elected, all ten continuing directors will be independent, except our CEO.

              On February 6, 2020, we increased the size of our board of directors to ten members and appointed Allison Page to fill the resulting vacancy and on March 26, 2020, we increased the size of our board of directors to eleven members and appointed Anthony S. Ackil to fill the resulting vacancy. As previously announced, Director Stuart I. Oran has decided not to stand for re-election at the 2020 annual meeting. Following Mr. Oran's retirement from the board as of the date of the 2020 annual meeting of stockholders, we expect that the board size will be reduced to ten members. The board may decide at a later time to add one or more directors who possess skills and experience that may be beneficial to our board and the Company. All of our directors are elected on an annual basis for a one-year term.

              The directors elected at this annual meeting will serve in office until our 2021 annual meeting of stockholders or until their successors are duly elected and qualified. Each of our nominees has consented to serve if elected and we expect each of them will be able to serve if elected. If any of our nominees should become unavailable to serve as a director, our board of directors can name a substitute nominee, and the persons named as proxies in the proxy card, or their nominees or substitutes, will vote your shares for such substitute nominee unless an instruction to the contrary is written on your proxy card.

              The board recommends that you vote FOR all of the board's nominees to serve as directors of the Company.

7


Table of Contents

Selecting Nominees for Director

              Our board has delegated to the nominating and governance committee the responsibility for reviewing and recommending nominees for director. The board determines which candidates to nominate or appoint, as appropriate, after considering the recommendation of the committee.

              In evaluating a director candidate, the nominating and governance committee considers the candidate's independence, character, corporate governance skills and abilities, business experience, industry specific experience, training and education, commitment to performing the duties of a director, and other skills, abilities, or attributes that fill specific needs of the board or its committees. While there is no policy for consideration of diversity in identifying director nominees, our board is committed to diversity and the nominating and governance committee considers diversity in business experience, professional expertise, gender, and ethnic background, along with various other factors when evaluating director nominees. The nominating and governance committee will use the same criteria in evaluating candidates suggested by stockholders.

              The nominating and governance committee is authorized under its charter to retain, at our expense, outside search firms and any other professional advisors it deems appropriate to assist in identifying or evaluating potential nominees for director.

Directors and Nominees

              Below, you can find the principal occupation and other information about each of our director nominees standing for election at the annual meeting. Information related to each of our director nominee's key attributes, experience, and skills, as well as their recent public company board service is included with each director's biographical information. Our board is comprised of a highly diverse array of leaders with relevant experience and leadership in each of the key areas of greatest importance to our financial and more general sustainability. Our board has a shorter average tenure and a younger average age than the mean. Our board is also steadily refreshed, has an independent board chair, and has three women among its ten director nominees. In a steadily evolving sector such as ours, these are attributes that are core to our ability to be nimble and take advantage of opportunities as they arise.

 
    Anthony S. Ackil, 45

Director Since: March 2020

Other Board Service:
B.Good (2004-present)
Project Bread (2018-present)
b.good Family Foundation (2014-present)
 

Currently serves as CEO of Streetlight Ventures, a retail platform for small businesses and real estate brokers, having founded the company in 2019.

From 2004 to 2018, served as CEO of B.Good, a healthy fast casual brand that grew to over 80 locations under his leadership.

Earlier in his career, he worked as a consultant for IBM, focusing on internet strategy and corporate structure, and as a consultant at PricewaterhouseCoopers.

Brings to the board of directors more than 15 years of executive experience in the restaurant industry, among other skills and qualifications.

Holds a B.A. in government from Harvard University.

Based on the foregoing, our board of directors has concluded Mr. Ackil should continue as a member of our board.

   
   

8


Table of Contents

 
    Thomas G. Conforti, 61

Director Since: August 2019

Current Committees:
    Finance (Chair)
    Audit
 

From 2017 to 2018, served as Senior Advisor to Wyndham Worldwide, where he advised on strategic transactions.

From 2009 to 2017, served as Executive Vice President and Chief Financial Officer for Wyndham Worldwide, during which time the company's TSR significantly outperformed the market and where Mr. Conforti had direct responsibility for finance, technology, real estate, and purchasing functions.

From 2002 to 2008, served as the Chief Financial Officer for IHOP/Dinequity.

Earlier in his career, he held leadership positions at PepsiCo, Inc., KB Home, and The Walt Disney Company, among others.

Brings to the board of directors more than 30 years of experience in financial, strategic, and operational roles across multiple industries, including restaurant, retail, consumer, and hospitality, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Conforti should continue as a member of our board.

   
   
    Cambria W. Dunaway, 57

Director Since: June 2014

Current Committees:
    Nominating and Governance (Chair)
    Compensation

Other Public Company Board Service:
Planet Fitness Inc. (2017-Present)

Other Board Service:
Go Health (2017-present)

Recent Past Public Company Board Service:
Nordstrom FSB (2014-2017)
Marketo (2015-2016)
Brunswick Corporation (2006-2014)
 

Since 2018, has served as Chief Marketing Officer for Duolingo, a language education platform.

Since 2017, has served as a Director of Planet Fitness, during which time the company's TSR has significantly outperformed the market.

Previously was a private consultant supporting organizations with strategic initiatives to accelerate growth and innovation, and coached leaders on how to achieve maximum results, impact, and enjoyment.

From 2010 to 2014, served as the U.S. President and Global Chief Marketing Officer of KidZania, an international location-based entertainment concept focused on children's role-playing activities.

From 2007 to 2010, served as Executive Vice President for Nintendo, with oversight of all sales and marketing activities for the company in the United States, Canada, and Latin America.

From 2003 to 2007, was Chief Marketing Officer for Yahoo!

Previously at Frito-Lay for 13 years in various leadership roles in sales and marketing, including serving as the company's Chief Customer Officer and as Vice President of Kids and Teens Marketing.

Holds a B.S. in business administration from the University of Richmond and an M.B.A. from Harvard Business School.

Brings to the board of directors more than 20 years of experience as a senior marketing and general management executive, launching and growing consumer businesses in entertainment, media, consumer electronics, and packaged goods, including experience in marketing strategy, communications, data analytics, loyalty, digital transformation, and governance, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Ms. Dunaway should continue as a member of our board.

   
   

9


Table of Contents

 
    G.J. Hart, 62

Director Since: August 2019

Current Committees:
    Compensation
    Finance

Other Board Service:
Make A Wish Foundation (2012-present)
Portillo's (2014-Present)
James Madison University of Business (2005-Present)
The Hart School (2006-Present)

Recent Past Public Company Board Service:
Texas Roadhouse (2004-2011)
 

Since 2018, has served as Chief Executive Officer for Torchy's Tacos, a privately-held fast-casual restaurant concept.

From 2011 to 2018, served as Executive Chairman and Chief Executive Officer of California Pizza Kitchen.

From 2000 to 2011, served as President of Texas Roadhouse Holdings, LLC, and as Chief Executive Officer and member of the board from 2004 to 2011, during which time the company's TSR outperformed the market and the company increased revenues from $63 million to over $1 billion.

Earlier in his career, held leadership positions at TriFoods International, New Zealand Lamb Company, and Shenandoah Valley Poultry, among others.

Brings to the board of directors more than 35 years of experience in the food and beverage industry driving growth and innovation, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Hart should continue as a member of our board.

   
   
    Kalen F. Holmes, 53

Director Since: August 2016

Current Committees:
    Compensation (Chair)
    Nominating and Governance

Other Public Company Board Service:
Zumiez Inc. (2014-Present)
1Life Healthcare, Inc. (2017-Present)

Other Board Service:
Pacific Northwest Ballet, Advisory Board (2019-Present)
 

Since 2017, has served as a Director of 1Life Healthcare, during which time the company has significantly grown its revenues, members, and launched its Initial Public Offering.

From 2009 until retirement in 2013, served as Executive Vice President of Partner Resources (Human Resources) at Starbucks Corporation.

From 2003 to 2009, held a variety of leadership roles with human resources responsibilities for Microsoft Corporation.

Previously held leadership roles in a variety of industries, including high-tech, energy, pharmaceuticals, and global consumer sales.

Holds a B.A. in Psychology from the University of Texas and a M.A. and Ph.D. in Industrial/Organization Psychology from the University of Houston.

Brings to the board of directors more than 20 years of experience as a senior human resources executive, experience with management of executive and compensation programs, and management across multiple industries including retail, technology, and consumer products, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Ms. Holmes should continue as a member of our board.

   
   

10


Table of Contents

 
    Glenn B. Kaufman, 52

Director Since: August 2010

Current Committees:
    Finance
    Nominating and Governance

Other Board Service:
KEH Holdings, LLC (2012-Present)
Trading Company Holdings LLC
(2014-Present)
KPS Global LLC (2015-Present)
 

Since 2011, has been a Managing Member of the D Cubed Group, a private-market investment firm. At D Cubed, in addition to leading the firm and its investment committee, chairs the boards of KEH Holdings, Trading Company Holdings, and KPS Global.

From 2009 to 2010, consulted for boards and senior executives of operating businesses and private investment firms.

Previously spent 11 years as a Managing Director at American Securities Capital Partners as a Managing Director; spearheaded the firm's investing in the restaurant, food service and franchising, and healthcare sectors.

Previously served as Chairman or a Director of Potbelly Sandwich Works, El Pollo Loco, Press Ganey Associates, Anthony International, and DRL Holdings.

Spent four years as an attorney at Cravath, Swaine & Moore and worked in the small business consulting group of Pricewaterhouse.

Holds a B.S. in Economics from the Wharton School of Business of the University of Pennsylvania and a law degree from Harvard University.

Brings to the board of directors valuable strategic, finance, budgeting, and executive leadership experience, as well as an extensive understanding of restaurant operations, direct/omni-channel marketing, and franchising, among other skills and qualifications.

Has approximately 20 years of experience as an active, engaged, private market investor and extensive restaurant, food service, franchising, healthcare, and retail expertise, as well as legal and business consulting expertise.

Based on the foregoing, our board of directors has concluded Mr. Kaufman should continue as a member of our board.

   
   
    Steven K. Lumpkin, 65

Director Since: August 2016

Current Committees:
    Audit (Chair)
    Finance

Other Board Service:
Hodgdon Powder Company (2015-Present)
Trading Company Holdings, LLC (2015-Present)
Trabon Companies (2013-Present)
Fiorella Jack's Stack Restaurant Group (2009-Present)

Recent Past Public Company Board Service:
Applebee's International, Inc. (2004-2007)
 

Currently serves as Principal of Rolling Hills Capital Partners, a consulting firm.

From 1995 until retirement in 2007, served in various executive positions at Applebee's International, Inc., including as Chief Financial Officer and Treasurer from 2002 to 2007, during which time the company's TSR outperformed the market, and Director from 2004 to 2007.

Previously served as Executive Vice President and Director at Kimberly Quality Care, Inc.

Holds a B.S. in Accounting from the University of Missouri—Columbia and is a CPA.

Brings to the board of directors more than 30 years of experience in the management consulting, health care, and restaurant industries, among other skills and qualifications.

Has extensive M&A and management experience for franchise operations and an accounting and finance background.

Based on the foregoing, our board of directors has concluded Mr. Lumpkin should continue as a member of our board.

   
   

11


Table of Contents

 
    Paul J.B. Murphy III, 65

Director Since: October 2019

Recent Past Public Company Board Service:
Noodles & Company (2017-2019)
Del Taco Restaurants, Inc. (2014-2017)
 

Since October 2019, has served as our President, Chief Executive Officer, and Director.

From 2017 to 2019, served as Executive Chairman of Noodles & Company where he was responsible for 459 restaurants across 29 states and led a business turnaround that delivered 4 consecutive quarters of positive comparable restaurant sales growth on revenues of $457 million.

From 2009 to 2017, served as CEO and a member of the board of directors of Del Taco Restaurants, Inc., where he was responsible for 543 company-operated and franchised restaurants with revenues of $470 million and led a successful brand repositioning that resulted in 17 consecutive quarters of company-operated comparable restaurant sales growth and 11 consecutive quarters of system-wide comparable restaurant sales growth.

From 1996 to 2008, held various roles with Einstein Noah Restaurant Group, Inc.; joined as Senior Vice President, Operations and was promoted to Executive Vice President, Operations in 1998, and to Chief Operating Officer in 2002. In 2003, he was appointed President and CEO and a member of the board of directors.

Has significant experience in both operational and executive leadership in the restaurant industry, including leading companies through successful business transformations.

Brings to the board of directors over 20 years of experience in operational and executive leadership in the restaurant industry, including leading companies through successful business transformations, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Murphy should continue as a member of our board.

   
   
    David A. Pace, 60

Director Since: August 2019 (Board Chair since November 2019)

Current Committee:
    Compensation

Other Board Service:
Dallas Stars Ownership Advisory Board (2017-Present)

Recent Past Public Company Board Service:
Jamba Juice (2012-2018)
 

From 2012 to 2018, served as Director of Jamba Juice and as CEO from 2016 to 2018, during which the company delivered 8 consecutive quarters of comparable store sales growth that exceeded the industry benchmark, exited non-core and underperforming business units and successfully merged with Focus Brands.

From 2014 to 2016, served as President of Carrabba's Italian Grill, and as Executive Vice President and Chief Resource Officer of Bloomin' Brands from 2010 to 2014.

Previously held executive positions with Starbucks Coffee Company, PepsiCo, and Yum! Brands, Inc.

Brings to the board of directors more than 30 years of leadership and turnaround experience in a range of industries including food and beverage retail, consumer products, entertainment, and ecommerce, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Pace should continue as a member of our board.

   
   

12


Table of Contents

 
    Allison Page, 35

Director Since: February 2020

Current Committee:
    Nominating and Governance

Other Board Service:
SevenRooms, Inc.
Pillsbury Institute of Hospitality
Entrepreneurship at Cornell University
 

Co-Founder and President of SevenRooms, a data-driven operations, marketing, and guest engagement platform that empowers hospitality operators to maximize revenue, build brand loyalty, and enable personalized experiences across the guest journey.

Since SevenRooms' founding in 2011, has been responsible for driving product innovation, defining the company's product roadmap, vision and strategic positioning, growing the company to over 150 employees across 4 global offices and scaling the platform to over 250 cities worldwide.

From 2009 to 2011, served as an Associate at Hodes Weill & Associates, and was a founding member of the independent real estate and advisory business.

Began career in investment banking at Credit Suisse.

Holds a B.S. in Finance and Real Estate from The Wharton School, University of Pennsylvania.

Brings to the board of directors more than 10 years of leadership experience as an entrepreneur in the hospitality industry and in launching, building, and commercializing high-growth technology platforms at scale across global restaurant, hotel, and entertainment brands, among other skills and qualifications.

Brings extensive knowledge in the areas of technology, guest experience, guest engagement, CRM, marketing, loyalty, data analytics, and consumer trends; was named one of Hospitality Technology's 2019 "Top Women in Restaurant Technology."

Based on the foregoing, our board of directors has concluded Ms. Page should continue as a member of our board.

   
   

Vote Required

              Proposal No. 1 requires the approval of a majority of the votes cast for each director. Abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the outcome of the vote.

Board Recommendation

              OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE DIRECTOR NOMINEES.

13


Table of Contents


CORPORATE GOVERNANCE AND BOARD MATTERS

GOVERNANCE PRINCIPLES

              The board of directors has created and oversees corporate governance guidelines which can be viewed on our website at www.redrobin.com. These guidelines include:

Executive Development and Management Succession

              Under the Company's corporate governance guidelines, the board maintains a policy and plan for the development and succession of the CEO and senior management that includes:

    criteria that reflect the Company's ongoing business strategies;
    identification and development of potential internal candidates;
    formal assessment processes to evaluate such potential internal candidates and their development; and
    an emergency succession component to address the unforeseen loss of the CEO or other key executives.

              The nominating and governance committee:

    works closely with the board and management to ensure development and succession are anticipated, planned for, and addressed in a timely manner;
    works closely with our CEO and each of the other executive officers conduct annual succession planning activities;

    o
    this process includes annual performance reviews, evaluations, and development plans of the CEO and executive officers, who also conduct evaluations and development of their direct reports; and

    at least annually, and when otherwise necessary, reviews, makes recommendations for, and reports to the board on programs that have been implemented by management for executive and leadership team development and succession planning.

              Mr. Murphy regularly meets with the full board on his performance, and the CEO's annual performance evaluation is conducted under the oversight of the compensation committee. Our CEO conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.

Stockholder Communication with our Board

              The board and management believe the Company's relationships with our stockholders and other stakeholders are an important part of our corporate governance responsibility and recognize the value of continuing communications. In 2019, we reached out to engage with all of our top 20 stockholders, representing over 90% of our outstanding shares.

              This approach has resulted in our receiving important input and perspectives that have informed our decision making and resulted in the addition of new independent directors. Throughout the year, we proactively engage with our stockholders directly, through individual meetings, attendance at investor conferences, issuance of press releases, and quarterly conference calls, as well as other stockholder communications. We discuss topics of importance to both our Company and stockholders, including value creation, strategy and performance, board refreshment and leadership changes, capital structure and allocation, and governance matters.

14


Table of Contents

              The board values stockholder communication and provides many means for it to occur, including attending the annual meeting, voting, engaging, and writing, by sending a letter to the director, the board of directors, or the committee addressed to: Board of Directors, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111, or by sending an e-mail to the board's dedicated email address: Board@redrobin.com. Our finance committee and full board is involved in overseeing stockholder engagement.

              With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, director of internal audit, or the compliance officer in the manner provided in the Company's Problem Resolution and Whistleblower Policy and Reporting Procedures. Both the Code of Ethics and the Problem Resolution and Whistleblower Policy and Reporting Procedures may be found on the corporate governance section of the investor relations tab of our website at: www.redrobin.com.

15


Table of Contents


Red Robin follows the Investor Stewardship Group's (ISG)
Corporate Governance Framework for U.S. Listed Companies

    ISG Principle     Red Robin Practice  
         
    Principle 1:
Boards are accountable to stockholders.
     

Declassified board structure with all directors standing for election annually

Majority voting in uncontested director elections, plurality voting in contested elections, and directors not receiving majority support must tender their resignation for consideration by the board

   
 
    Principle 2:
Stockholders should be entitled to voting rights in proportion to their economic interest.
     

No dual class structure; each stockholder gets one vote per share

   
 
    Principle 3:
Boards should be responsive to stockholders and be proactive in order to understand their perspectives.
     

Management and board members engaged directly with investors owning approximately 70% of shares outstanding in 2019

Engagement topics included value creation, Company strategy and performance, board refreshment and leadership changes, capital structure and allocation, compensation philosophy and goal setting, and governance

   
 
    Principle 4:
Boards should have a strong, independent leadership structure.
     

Strong independent board chair

Board considers appropriateness of its leadership structure at least annually

Strong independent committee chairs

Proxy discloses why board believes current leadership structure is appropriate

   
 
    Principle 5:
Boards should adopt structures and practices that enhance their effectiveness.
     

Board members have diverse backgrounds, expertise, and skills

Currently, 91% of board members are independent

Robust board annual evaluation process and regular board education instead of arbitrary age or term limits

Active board refreshment plan; five new independent board members through refreshment in last year

Directors attended over 75% of combined total board and applicable committee meetings in 2019, and all directors attended the 2019 annual meeting

Limits on outside board service for board members

Independent directors meet regularly in board and committee executive session without members of management present

Annual review of succession plan and talent development plan

Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors

   
 
    Principle 6:
Boards should develop management incentive structures that are aligned with the long-term strategy of the company.
     

Executive compensation program received approximately 90.7% stockholder support in 2019

Compensation committee annually reviews and approves incentive program design, goals and objectives for alignment with compensation and business strategies

Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives

   
 

16


Table of Contents

Board Leadership Structure

              The board recognizes one of its key responsibilities is to evaluate and determine the optimal leadership structure to provide independent oversight of management. Accordingly, at this time, we believe it is appropriate for our board to maintain the separation of the roles of board chair and chief executive officer. David Pace currently serves as chair of the board because of his significant leadership experience, especially in the food and beverage retail industry, among other reasons.

              The separation of the roles of board chair and chief executive officer allows our chief executive officer to focus on managing the Company's business and operations, and allows Mr. Pace to focus on board matters, which we believe is especially important in light of the high level of regulation and scrutiny of public company boards. Further, we believe the separation of these roles ensures the independence of the board in its oversight role of evaluating and assessing the chief executive officer and management generally.

              In 2019, our prior board chair, Ms. Moore, was appointed as our interim president and chief executive officer. She temporarily served in that position until the board appointed Mr. Murphy as president and chief executive officer. Mr. Pace succeeded Ms. Moore as chair of the board in November 2019. Ms. Moore retired from the board in December 2019.

Board Role in Risk Oversight

              Our executive officers have the primary responsibility for enterprise risk management within our Company. Our board actively oversees the Company's risk management and regularly engages in discussions of the most significant risks the Company faces and how these risks are being managed. The board receives regular reports on enterprise risk areas from senior officers of the Company, including the areas of food safety and data security. The board delegates certain risk oversight functions to the audit committee. Under its charter, the audit committee is responsible for oversight of the enterprise risk assessment and management process framework and ensures the board or a designated committee is monitoring the identification, assessment, and mitigation of all significant enterprise risks. The audit committee oversees policies and guidelines that govern the process by which major financial and accounting risk assessment and management may be undertaken by the Company. The audit committee also oversees our corporate compliance programs and the internal audit function. In addition, the other board committees receive reports and evaluate risks related to their areas of focus. The committees regularly report to the full board on the assessment and management of these risks. The board believes the work undertaken by the audit committee, together with the work of the other committees, the full board, and the senior officers of the Company, enables the board to effectively oversee the Company's risk management.

Selection of Nominees for the Board

              A key role of the board is to ensure that it has the skills, expertise, and attributes needed in light of the Company's strategy, challenges, and opportunities. The board believes that there are skill sets, qualities, and attributes that should be represented on the board as a whole but do not necessarily need to be possessed by each director. The nominating and governance committee thus considers the qualifications and attributes of incumbent directors and director candidates both individually and in the aggregate in light of the current and future needs of the Company. The nominating and governance committee assists the board in identifying and evaluating persons for nomination or renomination for board service or to fill a vacancy on the board. The nominating and governance committee's evaluation process does not vary based on whether a candidate is recommended by a stockholder, a board member, a member of management, or self-nomination. Once a person is identified as a potential director candidate, the committee may review publicly available information to assess whether the

17


Table of Contents

candidate should be further considered. If so, a nominating and governance committee member or designated representative for the nominating and governance committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background; his or her specific skills, experience and qualifications for board service; and any direct or indirect relationships with the Company. In addition, one or more interviews may be conducted with nominating and governance committee and board members, and nominating and governance committee members may contact one or more references provided by the candidate or others who would have first-hand knowledge of the candidate's qualifications and attributes.

    In evaluating the qualifications and attributes of each potential candidate (including incumbent directors) for nomination or re-nomination or appointment to fill a vacancy, the committee considers:

    o
    the candidate's qualifications, consisting of his/her knowledge (including relevant industry knowledge), understanding of the Company's businesses and the environment within which the Company operates, experience, skills, substantive areas of expertise, financial literacy, innovative thinking, business judgment, achievements, and other factors required to be considered under applicable laws, rules, or regulations;
    o
    the candidate's attributes, comprising independence, personal and professional integrity, character, reputation, ability to represent the interests of all stockholders, time availability in light of other commitments, dedication, absence of conflicts of interest, diversity, appreciation of multiple cultures, commitment to deal responsibly with environmental and social issues and stakeholder concerns, and other factors that the committee considers appropriate in the context of the needs of the board;
    o
    familiarity with and respect for corporate governance requirements and practices;
    o
    with respect to incumbent directors, the evaluation of the individual director, his or her current qualifications, and his or her contributions to the board;
    o
    the current composition of the board and its committees; and
    o
    intangible qualities of the candidate, including the ability to ask difficult questions and, simultaneously, to work constructively with members of the board, as well as to work effectively with management.

              The board considers the recommendations of the nominating and governance committee and then makes the final decision whether to renominate incumbent directors and whether to approve and extend an invitation to a candidate to join the board upon appointment or election, subject to any approvals required by law, rule or regulation.

The Board's Role in Management Succession Planning

              The board, led by its nominating and governance committee, is actively engaged in succession planning and talent development, with a focus on the CEO and senior management of the Company. The board and the nominating and governance committee consider talent development programs and succession candidates through the lens of Company strategy and anticipated future opportunities and challenges. At its meetings throughout the year, the nominating and governance committee reviews progress of talent development and succession programs and discusses internal and external succession candidates, including their capabilities, accomplishments, goals, and development plans. The full board also reviews and discusses talent strategy and evaluations of potential succession candidates. In addition, potential leaders are given frequent exposure to the board, which enables the board to select successors for the senior executive positions when appropriate.

18


Table of Contents

Board Membership and Director Independence

              Our board of directors has determined that each of our directors, except our CEO, Mr. Murphy, qualifies as an independent director under the rules promulgated by the SEC and The Nasdaq Stock Market® ("Nasdaq") listing standards. Therefore, 91% of our current directors are independent. Pursuant to these rules and standards, only independent directors may serve on the board's audit committee, compensation committee, and nominating and governance committee. All members of all board committees are independent in accordance with SEC rules and Nasdaq listing standards. There are no family relationships among any of our executive officers, directors, or nominees for directors.

              Our board is committed to diversity and includes three women and directors with a diverse set of backgrounds, experience, and skills, including.

 

Executive leadership

Business transformation

Technology strategy

Marketing and consumer insights

Governance

 

Accounting

Talent and organizational development

Finance, investor relations, strategic transactions, and M&A

Restaurant executive leadership

Value creation

Director Attendance

              The board of directors held eighteen meetings in 2019, including four in-person meetings. Each of our current directors who served in 2019 attended at least 75% of the aggregate total of meetings of the board of directors and committees during their period of service in 2019. The non-management directors of the Company meet at least quarterly throughout the year and as necessary or appropriate in executive sessions at which members of management are not present.

              The board of directors strongly encourages each of the directors to attend the annual meeting of stockholders. All of our directors serving at the time attended our 2019 annual meeting.

Committees of the Board

              Our board of directors currently has four standing committees: an audit committee, a compensation committee, a finance committee, and a nominating and governance committee. We added the finance committee in 2019 to provide guidance on long-range planning, budget and capital allocation, and extraordinary stockholder engagement, among other matters. Each standing committee generally meets at least once each quarter. In addition, other regular and special meetings are scheduled as necessary and appropriate depending on the responsibilities of the particular committee. Each committee regularly meets in executive session without management present. Each board committee operates pursuant to a written charter. The charter for each committee is available on the corporate governance section of the investor relations tab of our website at www.redrobin.com. Committee charters are reviewed at least annually by the respective committee to revise and update its duties and responsibilities as necessary.

19


Table of Contents

 
    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2019

         
    Audit Committee       Committee Members:    
   

Oversees our financial reporting activities, including our annual report and the accounting standards and principles followed.

Reviews earnings releases and annual and quarterly reports, including use of any non-GAAP disclosures.

Oversees the disclosure process, including understanding and monitoring of the Company's disclosure committee.

Selects and retains the independent auditor.

Participates in the process to rotate and select the lead audit partner at least every five years.

Reviews scope and results of audit to be conducted by the independent auditor.

Evaluates performance and monitors independence, commitment to objectivity, and skepticism of selected independent auditor.

Approves the budget for fees to be paid to the independent auditor for audit services and non-audit services; evaluates fees for reasonableness and fairness based on benchmarking.

Oversees the Company's internal audit function, scope and plan, and the Company's disclosure and internal controls.

Oversees the Company's ethical and regulatory compliance.

Provides oversight of the Company's enterprise risk management.

Regularly meets with independent auditor in executive session.

Participates in the evaluation of independent auditor and lead audit partner.

      Steven K. Lumpkin GRAPHIC GRAPHIC

Thomas G. Conforti GRAPHIC

Stuart I. Oran


GRAPHIC Chairperson

GRAPHIC Determined by the board to be an audit committee financial expert as defined under SEC rules

Number of Meetings in 2019:

The audit committee held eight meetings in 2019, of which two were in-person meetings.

   
 

20


Table of Contents


 
    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2019

         
    Compensation Committee       Committee Members:    
   

Develops and performs an annual performance evaluation of our chief executive officer.

Approves salary, short-term, and long-term incentive compensation programs for the CEO and all executive officers.

Reviews and adopts employee benefit plans.

Reviews and approves compensation for directors.

May engage, at our expense, compensation consulting firms or other professional advisors to assist in discharging its responsibilities, as necessary.

      Kalen F. Holmes GRAPHIC

Cambria W. Dunaway

G.J. Hart

David A. Pace


GRAPHIC Chairperson

Number of Meetings in 2019:

The compensation committee held six meetings in 2019, of which two were in-person meetings.

   
 
    Nominating and Governance Committee       Committee Members:    
   

Identifies, evaluates, and recommends to the board of directors, candidates for appointment or election to the board and their independence.

Determines whether to recommend to the board to include the nomination of incumbent directors in the proxy statement.

Considers candidates to fill any vacancies that may occur.

At least once a year, considers whether the number of directors and skill sets is appropriate for the Company's needs and recommends to the board any changes in the composition of the board.

Evaluates and recommends to the board committee structure and membership.

Develops and oversees the Company's corporate governance policies.

Oversees the Company's litigation and insurance coverage.

Oversees the process to assess the performance of the board and its committees.

      Cambria W. Dunaway GRAPHIC

Kalen F. Holmes

Glenn B. Kaufman

Stuart I. Oran

Allison Page


GRAPHIC Chairperson

Number of Meetings in 2019:

The nominating and governance committee held six meetings in 2019, of which three were in-person meetings.

   
 

21


Table of Contents


 
    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2019

         
    Finance Committee       Committee Members:    
   

Participates in and provides guidance to the board of directors and management on:

o

material acquisitions and dispositions;

o

long range planning;

o

annual budget;

o

capital allocation (including share repurchase programs and 10b5-1 plan);

o

adjustments to capital structure; and

o

extraordinary stockholder engagement.

      Thomas G. Conforti GRAPHIC

G.J. Hart

Glenn B. Kaufman

Steven K. Lumpkin


GRAPHIC Chairperson

Number of Meetings in 2019:

The finance committee held five meetings in 2019, of which one was an in-person meeting.

   
 

Limits on Outside Board Service

              As provided in our corporate governance guidelines, without specific approval from our board, no director of the Company may serve on more than four public company boards (including the Company's board) and no member of the audit committee may serve on more than three public company audit committees (including the Company's audit committee). Any audit committee member's service on more than three public company audit committees will be subject to the board's determination that the member is able to effectively serve on the Company's audit committee.

Stockholder Submission of Director Nominees

              A stockholder may submit the name of a director candidate for consideration by the nominating and governance committee by writing to: Nominating and Governance Committee of the Board of Directors, Red Robin Gourmet Burgers, Inc., 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111.

              The stockholder must submit the following information in support of the candidate: (a) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such stockholder's notice by, or on behalf of, such stockholder and such beneficial owner, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Company, the effect or intent of which is to mitigate loss to, manage risk of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Company, and (iv) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the

22


Table of Contents

percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees.

Certain Relationships and Related Transactions

              For 2019, we had no material related party transactions which were required to be disclosed in accordance with SEC regulations.

              The board of directors recognizes transactions between the Company and certain related persons present a heightened risk of conflicts of interest. To ensure the Company acts in the best interest of our stockholders, the board has delegated the review and approval of related party transactions to the audit committee. Pursuant to our Code of Ethics and the audit committee charter, any related party transaction required to be disclosed in accordance with applicable SEC regulations must be reviewed and approved by the audit committee. In reviewing a proposed transaction, the audit committee must:

    satisfy itself that it has been fully informed as to the related party's relationship and interest, and as to the material facts of the proposed transaction; and
    consider all the relevant facts and circumstances available to the committee.

              After its review, the audit committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and our stockholders.

Compensation Committee Interlocks and Insider Participation

              During the last completed fiscal year, Cambria W. Dunaway, G.J. Hart, Kalen F. Holmes, Glenn  B. Kaufman, Aylwin B. Lewis, and David A. Pace each served as members of the Company's compensation committee for all or a portion of such period. None of the members of the compensation committee is, or at any time has been, an officer or employee of the Company. None of our current executive officers serves as a director of another entity that has an executive officer who serves on our board.

23


Table of Contents

DIRECTOR COMPENSATION

              The compensation program for our directors is set forth in the table below. The director compensation program is evaluated annually by the compensation committee's independent consultant to assess the program's alignment with the market. As a result of the analysis, no changes to the compensation program were made in 2019.

                      
                      
                      
     Annual Retainer     Each non-employee director of the Company receives an annual cash retainer of $70,000, payable in substantially equal quarterly installments. In addition, the chair of the board and each board committee chair receive annual retainers in substantially equal quarterly installments:    

  

 


 


 

                Chair of the board

 

$85,000

 

 

 

 

  

 


 


 

                Chair of audit committee

 

$15,000

 

 

 

 

  

 


 


 

                Chair of compensation committee

 

$12,500

 

 

 

 

  

 


 


 

                Chair of nominating and governance committee

 

$7,500

 

 

 

 

  

 


 


 

                Chair of the finance committee

 

$10,000

 

 

 

 

  

 

 

 


 

In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the board of directors 2020 compensation in order to meaningfully reduce costs. In March 2020, the Company temporarily reduced the annual cash retainer and committee chair fees by 20%.

 

 
                      
                      
                      
   
                      
                      
                      
     Equity Awards     Each non-employee director receives an annual grant of restricted stock units with a grant date value of approximately $110,000 and a vesting term of one year or the date of the next annual meeting of stockholders, whichever is earlier. The vesting term is consistent with the Company's declassification of its board of directors with annual elections for one-year terms (until the next annual meeting) in accordance with governance best practices.    

  

 

    

 


 

    

 

 

 

 

 

 
                      
                      

24


Table of Contents

2019 Director Compensation

              The following table sets forth a summary of the compensation earned by our non-employee directors in fiscal 2019.

Name
  Fees Earned
or Paid
in Cash
($)
  Stock
Awards
($)(1)
  All Other
Compensation
($)(2)
  Total
($)

Current Directors*

               

Thomas G. Conforti(3)

  51,829   91,642   -   143,471

Cambria W. Dunaway

  77,500   109,995   -   187,495

G.J. Hart(3)

  47,274   91,667   -   138,941

Kalen F. Holmes

  82,500   109,995   -   192,495

Glenn B. Kaufman

  70,000   109,995   -   179,995

Steven K. Lumpkin

  85,000   109,995   -   194,995

Stuart I. Oran

  70,000   109,995   -   179,995

David A. Pace(3)

  83,113   91,642       174,755

Former Directors

 
 
 
 
 

 

 
 

Pattye L. Moore(4)

  24,544   109,994   -   134,538

Aylwin B. Lewis(5)

  41,250   109,995   -   151,245

*
Does not include Directors Allison Page and Anthony Ackil who were appointed in 2020 and therefore did not receive any compensation for 2019.
(1)
Each director was awarded 3,562 restricted stock units in May 2019. The fair value of such restricted stock units was computed in accordance with the guidance for accounting for stock compensation at $30.88 per share for all directors. All such restricted stock units are subject to vesting in full one year from the date of grant, or the date of the next annual meeting of stockholders, whichever is earlier.
(2)
The aggregate amount of all other compensation paid to each director in fiscal year 2019 did not exceed $2,500 per director.
(3)
Messrs. Conforti, Hart, and Pace joined the board in August 2019.
(4)
Ms. Moore served as the Company's interim chief executive officer commencing April 3, 2019 through October 3, 2019. Ms. Moore did not receive any compensation as a director during her tenure as interim president and chief executive officer, other than continued vesting in her restricted stock units granted in May 2018.
(5)
Mr. Lewis retired and concluded his board service on November 1, 2019.

25


Table of Contents

              As of the end of the fiscal year 2019, the aggregate number of options and restricted stock units outstanding for each non-employee director is set forth below. Options are considered outstanding until exercised and restricted stock units are considered outstanding until vested and paid.

Director
  Options   Restricted
Stock Units

Thomas G. Conforti

  -   2,788

Cambria W. Dunaway

  5,000   3,562

G.J. Hart

  -   2,811

Kalen F. Holmes

  5,000   3,562

Glenn B. Kaufman

  -   3,562

Steven K. Lumpkin

  5,000   3,562

Stuart I. Oran

  5,000   3,562

David A. Pace

  -   2,788

Former Directors

 
 
 
 

Pattye L. Moore

  -   3,373

Aylwin B. Lewis

  3,542   -

Board Meetings in 2019

              In 2019, there were six regular meetings and twelve special meetings of the board. All directors who served on the board in 2019 attended at least 75% of the combined total number of meetings of the board and board committees on which they served during the year.

Board Attendance at Annual Meetings

              All of the Company's incumbent directors who served on the board at the time of the 2019 annual meeting attended the 2019 annual meeting. The Company encourages all directors to attend each year's annual meeting.

Board Evaluations

              The board conducts annual evaluations to determine whether it and its committees are functioning effectively. As part of the evaluation process, each member of the audit, compensation, nominating and governance, and finance committees annually evaluates the performance of each committee on which he or she serves. Each director up for reelection also evaluates his or her own performance. The directors also periodically complete peer evaluations of the other directors. The evaluation process is overseen by the nominating and governance committee, in consultation with the board chair.

Director Stock Ownership Guidelines

              The compensation committee has stock ownership guidelines in place for non-employee directors which require non-employee directors to own Company securities with a cumulative cost basis of at least five times the director's annual retainer. Based on the current annual retainer for non-employee directors, that dollar amount is $350,000. The value of the director's holdings is based on the cumulative cost basis of securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. New non-employee directors have five years from the time the director joins the board to reach the minimum ownership threshold. Non-employee directors may not sell, transfer, or otherwise dispose of common stock that would

26


Table of Contents

decrease such director's cumulative cost basis below the ownership guideline amount. All of our directors are currently in compliance with the guidelines. In addition, a majority of directors have not sold any of their awarded shares and a majority of directors have purchased shares of Company stock.

Indemnification of Directors

              The Company has entered into agreements to indemnify its directors, executive officers, and certain other key employees. Under these agreements, the Company is obligated to indemnify its directors and officers to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys' fees, judgments, fines, and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer. The Company believes these agreements are necessary in attracting and retaining qualified directors and officers.

27


Table of Contents


COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

NAMED EXECUTIVE OFFICERS

              In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation derived from this program by our executive officers, including our "named executive officers." For 2019, our named executive officers were:

    Paul J.B. Murphy III, President and Chief Executive Officer
    Lynn S. Schweinfurth, Executive Vice President and Chief Financial Officer
    Jonathan A. Muhtar, Executive Vice President and Chief Concept Officer
    Michael L. Kaplan, Executive Vice President and Chief Legal Officer
    Dean Cookson, Senior Vice President and Chief Information Officer

              Former officers included as Named Executive Officer for 2019 as required by SEC rules are:

    Denny Marie Post, Former President and Chief Executive Officer(1)
    Pattye L. Moore, Former Interim President and Chief Executive Officer(2)
    Guy J. Constant, Former Executive Vice President and Chief Operating Officer(3)

(1)
Ms. Post retired as President and Chief Executive Officer of the Company effective as of April 3, 2019.

(2)
Ms. Moore served as Interim President and Chief Executive Officer of the Company from April 3, 2019 until October 3, 2019.

(3)
Mr. Constant served as our Executive Vice President and Chief Financial Officer during fiscal year 2018 and during fiscal year 2019 until January 28, 2019, at which time Mr. Constant transitioned to the role of our Executive Vice President and Chief Operating Officer until his termination on January 7, 2020.

BUSINESS PERFORMANCE

              Over 2019, we achieved Adjusted EBITDA of $101 million, off-premises sales of almost $160 million, overall guest satisfaction of 67.7%, and 17.52% of cash return on invested capital (CROIC).

              Our board and management team have remained focused on executing our strategic plan, accelerating Red Robin's turnaround, and transforming the business to drive value for all stockholders. We continue to make progress toward our goals, as demonstrated by 2019 improvements in comparable restaurant revenue, customer satisfaction scores, manager staffing levels and hourly turnover, among other key metrics.

              During fourth quarter 2019, we delivered our second consecutive quarter of comparable restaurant revenue growth, despite significant discounting practices carried over from the prior-year. We attribute these positive results to benefits reaped from our focused execution of the early stages of our turnaround plan in 2019, including staffing, operational, and marketing improvements.

28


Table of Contents

2019 COMPENSATION OUTCOMES

              Our incentive programs demonstrate our commitment to a pay for performance compensation philosophy. The Company's 2019 performance impacted the named executive officer's compensation as follows:

    Only 33% payout of the annual incentive program based on slightly above threshold achievement of the performance goals.
    Minimal payout of the 2017-2019 long-term incentive program based on below target achievement of the performance goals. In addition, the second tranche of the 2018-2020 performance-based awards and first tranche of the 2019-2020 performance-based awards earned a minimal level of payout that does not vest until the end of the applicable three-year cycle.

              See "Compensation Discussion and Analysis—Key Components of our Executive Compensation Program—Incentive-Based Compensation" for further information on the annual corporate incentive and long-term incentive program.

2020 COMPENSATION CHANGES

              As informed by the addition of two new Independent Directors to the compensation committee in November 2019, the Company made multiple positive changes to its compensation program beginning in 2020:

    The annual incentive plan for 2020 will include performance targets related to strategic initiatives in addition to the Adjusted EBITDA goal.
    The long-term incentive program will consist of 50% weighted in PSUs, 25% weighted in non-qualified stock options, and 25% weighted in RSUs for the named executive officers, which further increases the portion of executive compensation "at risk".
    The long-term incentive program was revised to include the setting of a pre-established performance target for a multi-year performance period, instead of setting targets annually for each year of that period. In addition, the target for the two remaining tranches of the 2019 PSU award has been set to align with the achievement of Adjusted EBITDA for 2020 and 2021.

              In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the 2020 compensation program in order to meaningfully reduce costs and to select a metric for the PSU awards that was most appropriate given the uncertainty and challenges in projecting other metrics at this time.

    Base salaries of our named executive officers have been temporarily reduced by 20% effective March 30, 2020.
    The compensation committee has selected a relative total shareholder return (TSR) metric to be measured over a multi-year performance period through 2022 for PSU awards.
    Given the accelerated depletion of the remaining share reserve under the 2017 Plan as a result of the decline in the Company's stock price and the preference for utilizing equity compensation over cash to further align our executives with stockholders, the Company is asking stockholders to approve a proposed increase in shares under the 2017 Plan (see Proposal 4—Approval of the Amendment to the 2017 Performance Incentive Plan).

29


Table of Contents

 


BUSINESS UPDATES

OUR COMPANY

              Red Robin Gourmet Burgers, Inc., together with its subsidiaries, primarily operates, franchises, and develops full-service restaurants in North America and is famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to Guests of all ages.

              As of December 29, 2019, we owned and operated 454 restaurants (and another 102 were owned and operated by franchisees); these restaurants stretch across 44 states and one Canadian province. On that date, we had 24,586 employees, of whom 24,228 were Team Members at company-owned restaurants.

Red Robin at a Glance

    Iconic, niche brand founded in 1969 in Seattle, WA
    Revenues of $1.3 billion TTM ending Q3 2019
    556 casual dining restaurants in 44 states and Canada
    454 company-owned locations or over 80% of portfolio
    The Gourmet Burger AuthorityTM with burger sales mix of ~ 66% of entrée sales
    One of the largest industry loyalty programs with more than 9 million members

Significant Brand Affinity and Value Proposition

    2019 Top 5 casual dining brand for:
    o
    Intent to Return
    o
    Treats me Like a Valued Customer
    o
    Quality of Loyalty Program Points / Rewards

    2019 NRN consumer pick for:
    o
    Best Full Service Burger
    o
    Best Full Service French Fries

2019 LEADERSHIP APPOINTMENTS

              Over the past year, our board has taken decisive actions to ensure we have the right leadership team and board members in place to position the Company for long-term success.

    Paul J.B. Murphy III appointed as President, Chief Executive Officer, and Director, a highly accomplished restaurant executive with significant turnaround and brand repositioning experience, including at Noodles & Company, Del Taco Restaurants, Inc., and Einstein Noah Restaurant Group, Inc.
    Lynn S. Schweinfurth appointed as Executive Vice President and Chief Financial Officer, an experienced CFO with over two decades in the restaurant industry, who is responsible for leading all financial disciplines including accounting, strategic and financial planning, operations analysis, treasury and investor relations, real estate and facilities, and overseeing the supply chain function.
    Thomas G. Conforti, G.J. Hart, and David A. Pace, named as new Independent Directors in 2019, highly experienced and seasoned industry veterans with turnaround experience.

30


Table of Contents

    Allison Page, named as a new Independent Director in 2020, bringing deep and current expertise in technology implementation, marketing, guest engagement, guest experience, consumer trends, and modernizing the restaurant industry.
    Anthony S. Ackil, named as a new Independent Director in 2020, bringing additional deep restaurant industry experience.
    Two new Independent Directors were added to the compensation committee.
    The newly constituted compensation committee made improvements to the Company's 2020 Compensation program—See "Compensation Discussion and Analysis—2020 Compensation Changes" for a summary of changes made to our compensation program beginning in 2020.

              These individuals possess significant restaurant, consumer, and retail experience relevant to the Company's business, as well as track records of leading successful business transformations to create stockholder value.

STRATEGY UPDATES

              In the third quarter 2019, and following Mr. Murphy's appointment as President and Chief Executive Officer, we commissioned comprehensive Guest-led studies that provided data-driven, actionable information that identified opportunities to better align the Red Robin experience to our Guest's expectations. We identified clear opportunities to strengthen our brand, improve our service model, and clarify our messaging. Under new leadership, we developed a compelling plan to quickly drive improved Guest experiences, business performance, and stockholder value. Our plan includes the following four fundamental elements:

              Recapture our Soul.    Delivering memorable moments of connection for our Guests through guest engagement and sharable foods like our all-you-can-eat Bottomless Steak Fries®, and offering our Guests the "The Gift of Time" to determine the pace of their experience based on their occasion while enjoying our family friendly and playful atmosphere.

              Deliver the Promise.    We are accountable for consistently delivering our brand promise to our Guests. We are focused on implementing a new service model to enhance our Guest experience, rationalizing our menu offerings, and investing in technology to drive incremental visits and additional off-premise sales. We continue to emphasize and support Team Member engagement. We strive to achieve best-in-class retention levels from General Manager to hourly Team Members. Our culture fosters improved Guest satisfaction and the development of great leaders.

              Tell Our Story.    Our new "All the Fulls" Omni-channel brand campaign launched in the third quarter 2019 which emphasizes the emotional appeal of our brand promise of driving memorable moments of connection, and reinforces key aspects of our brand, including Americana, family friendly atmosphere, and shareable menu items. This has aligned our messaging from price driven to brand driven, and we expect this to drive continued growth of Guest engagement and grow restaurant traffic.

              Accelerate Profitable Growth.    We seek to accelerate profitable sales growth through our focus on the initiatives that will drive significant top and bottom line results. These initiatives include growth of our off-premise and catering business, including the launch of our "last mile" delivery where Guests order directly from Red Robin and have the ability to utilize our loyalty program; menu enhancement, including the rollout of Donatos®, a high quality pizza brand "nested" inside of Red Robin restaurants that we expect to drive incremental top-line sales and gross margin.

              We believe these strategic initiatives provide the foundations for a turnaround of the business and sustainable long-term growth, profitability, and increased stockholder value.

31


Table of Contents

2019 COMPANY OPERATIONAL AND PERFORMANCE HIGHLIGHTS

              Our updated strategy, enhanced focus on store-level operations, and increased attention on our Team Members has yielded benefits. The turnaround that we have been executing over several quarters began taking hold, leading to significant improvements in our business. In 2019, these improvements included:

    Improvements in staffing, training, and retaining our Team Members, especially General Managers, which has led to turnover approaching best-in-class levels for the casual dining industry
    Improved operating metrics—faster ticket times, fewer guest walkaways, and shorter wait times
    Aligned operations priority initiatives to address areas that deliver higher guest satisfaction, affinity, and visit frequency
    Improving overall guest satisfaction scores with our focus on offering a great Guest experience at a compelling value
    Implementation of core initiatives to help simplify and improve execution, including headsets in restaurants and server handheld point-of-sale devices
    Brand and insights driven menu evolution, including core product innovation and quality improvements, menu design enhancements, and the addition of Donatos® pizza category nested in our restaurants
    Our accentuation of brand attributes through the "All the Fulls" creative campaign, a new omni-channel creative strategy and targeted marketing reinforcing emotional connection with the brand over price point-driven messaging to drive guest engagement launched in Q3 2019
    Growth in off-premise business of 28% in 2019
    Profitable sales catalysts in process supported by test market results, including a new service model, technology improvements, and the rollout of Donatos® pizza

2019 COMPENSATION HIGHLIGHTS

    The compensation committee did not make significant structural changes to our executive compensation program for 2019. We believe this is consistent with the wishes of our stockholders, who have expressed overwhelming support (greater than 90% of votes cast) for our executive compensation program at each of our last three annual "say-on-pay" advisory votes.

    2019 was a transitional year. The Company had multiple changes in leadership and executive compensation. During 2019, we had three different CEOs and two of our four compensation committee positions were refreshed.

    o
    Following their appointment, new Independent Directors Mr. Pace and Mr. Hart joined the compensation committee.
    o
    Mr. Murphy was appointed as our CEO in September 2019. Pursuant to his employment agreement, Mr. Murphy receives an annual base salary of $900,000; an annual bonus target of 120% of base salary; a sign-on cash bonus of $500,000, payable in two installments: $275,000 upon the board's approval of an annual operating plan for 2020, and $225,000 payable on the one-year anniversary of Mr. Murphy's start date (subject to proration if employment is terminated as set forth in the agreement); a sign-on equity award of RSUs with a grant date fair value of $1.6 million that cliff vests on the third anniversary of the start date; a long-term incentive plan grant with a target value equal to $3.0 million, along with

32


Table of Contents

        eligibility to participate in the Company's standard benefit plans for senior executives, all of which is aligned with market data and his level of experience.

      o
      Ms. Moore served as Interim CEO from April 3, 2019 to October 3, 2019. She received a base salary of $167,000 per month during her tenure as Interim CEO. In her Interim CEO capacity, Ms. Moore was not eligible to receive annual performance-based cash incentives or long-term incentives.
      o
      In addition to the foregoing, and because of the uncertainty created by the CEO transition and in order to retain the executive leadership team believed to be critical to the ongoing operation of the Company during the CEO transition, the compensation committee considered and approved one-time cash retention grants to Messrs. Constant, Muhtar, Kaplan, and Cookson in March 2019 as well as a one-time retention grant of RSUs to Ms. Schweinfurth in April 2019 with a grant date fair value of $100,000 and a three-year ratable vesting schedule on each of the first, second, and third anniversaries of the grant.

    Based on our total compensation philosophy and peer compensation levels as well as individual performance, the compensation committee approved a salary increase for one named executive officer in the beginning of 2019.

    o
    Mr. Kaplan's salary increased from $365,000 to $400,000.

    The basic structure and primary metric (Adjusted EBITDA ) of our annual performance-based cash incentive program remained the same in 2019 (70% weight). The 2019 bonus was also based on off-premise sales (15% weight) and overall guest satisfaction (15% weight).

    o
    Because we achieved the minimum pre-set Company Adjusted EBITDA goals for 2019, our named executive officers received only a 33% payout of their annual performance-based cash incentive for 2019.
    o
    None of our named executive officers' annual performance-based cash incentive targets as a percentage of salary were changed in 2019. The individual targets are based on market competitiveness, individual performance and growth in roles, and serve to increase stockholder alignment, and place a portion of pay "at risk".

    The structure of our long-term incentive program opportunities remained the same in 2019 for named and other executive officers, except for a change in mix to remove options and become more heavily weighted in performance stock units (PSUs).
    o
    Because we met only minimal performance measures for the three-year 2017-2019 long-term incentive cash award, our named executive officers received a minimal payout (30.99%) for that award.
    o
    None of our other named executive officers' long-term incentive targets as a percent of salary were changed in 2019. The individual targets are based on market competitiveness, individual performance and growth in roles, and serve to increase stockholder alignment, increase the portion of "at risk" pay, and enhance retention.

33


Table of Contents


COMPENSATION PHILOSOPHY

COMPENSATION PHILOSOPHY

    Our executive compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company strategic and financial goals. It encourages our executive officers to think and act like owners, because they are owners and as such are compensated in significant part based on the performance of the Company.

PAY OBJECTIVES

    Our compensation objectives are designed to link incentives and rewards with current and long-term sustained achievement of these goals:

    o
    Attracting, retaining, and motivating the best possible executive talent who have the experience and leadership skills capable of driving performance and top-line growth in sales;
    o
    Creating value for our stockholders by linking executive compensation to the achievement of measurable corporate objectives; and
    o
    Paying for superior results through a program that incentivizes and rewards achievement of both short-term and long-term organizational and functional objectives with a mix of compensation elements that place a significant portion of cash and equity compensation at risk.

PAY FOR PERFORMANCE ALIGNMENT

              Our compensation program is designed to pay for performance and is comprised of performance-based short-term and long-term awards. Such compensation varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved or our stock price declines. Financial measures used for the annual and long-term cash incentive grants are reviewed and approved by the compensation committee. Restricted stock units and stock options vest ratably over multiple years, the value of which is dependent, in whole or in part, on an increase in the Company's stock price.


COMPENSATION DECISION PROCESSES

OVERVIEW

    Executive compensation decisions are made by our compensation committee, which is comprised solely of independent directors.

    When making compensation decisions, our compensation committee receives input from its independent compensation consultant and recommendations from our CEO for the CEO's direct reports. Our compensation committee reviews benchmarking data of a peer group of restaurant companies as one input into the pay decision process. Other factors that influence pay decisions include, but are not limited to Company performance, individual performance, succession planning, and retention.

34


Table of Contents

COMPENSATION SETTING

              The compensation committee approves target total direct compensation levels for named executive officers by establishing base salaries and setting annual and long-term incentive compensation targets. When appropriate, the committee also approves special awards and relatively modest perquisites. The Company makes pay decisions based on a variety of factors, including:

    Company performance
    Company strategy and alignment of incentives
    Benchmarking data for our restaurant peer group for target total direct compensation (base salaries, short-term incentives, and long-term incentives), based on disclosure in peer proxy statements and other applicable survey data
    Individual performance and areas of responsibility relative to the market data
    Compensation relative to other executive officers in the Company
    Advice from the committee's independent compensation consultant
    The CEO's recommendations with respect to the compensation of the executives who report directly to the CEO, including the other named executive officers
    Whether our compensation program encourages unnecessary or excessive risk taking
    Results of the Company's say-on-pay advisory votes in prior years
    Management succession planning and retention

CONSIDERATION OF PRIOR SAY-ON-PAY VOTES

              At our 2019 annual meeting of stockholders, 90.7% of votes were cast to approve the advisory "say on pay" vote on the 2018 compensation of our named executive officers. This is the third consecutive year of over 90% support for our "say on pay" proposal, with 99.3% of stockholders voting to approve our "say on pay" proposal in 2018 and 98.5% in 2017.

              We believe the level of support we received from stockholders for the last three years was driven in part by our commitment to a pay for performance philosophy and our linking incentives to current and long-term sustained achievement of Company strategic goals. The compensation committee did not make significant structural changes to our executive compensation program for 2019. The compensation committee considered the results of the advisory vote when setting executive compensation for 2019 and will continue to do so in future executive compensation policies and decisions.

BENCHMARKING

Restaurant Peer Group

              Restaurant peer group companies were selected and approved by the compensation committee upon the recommendation of management and the committee's independent compensation consultant and are based on their similarity to us with respect to several criteria, including revenue, size, business model, and scope. The peer group used for 2019 compensation benchmarking consists of the 17 restaurant companies identified in the chart below.

              In 2019, the compensation committee evaluated and updated its peers to the "New Peer Group" identified in the chart below. The Company's compensation consultant recommended adding two restaurant companies to the peer group to increase the robustness of market data and with the expectation that there could be further consolidation within the industry. Dave & Buster's Entertainment, Inc. and Chuy's Holdings, Inc. were added to the peer group because of similarities in revenues and restaurant operations that include company-owned models. In addition, Sonic Corp. was

35


Table of Contents

removed from the Company's peer group due to its 2018 acquisition. No other changes were made to the Company's peer group in 2019. The New Peer Group will be used for setting 2020 compensation.

2019 Peer Group
 
2020 New Peer Group
Biglari Holdings, Inc.   Biglari Holdings, Inc.
BJ's Restaurants, Inc.   BJ's Restaurants, Inc.
Brinker International, Inc.   Brinker International, Inc.
Carrols Restaurant Group, Inc.   Carrols Restaurant Group, Inc.
The Cheesecake Factory, Inc.   Chuy's Holdings, Inc.
Cracker Barrel Old Country Store, Inc.   The Cheesecake Factory, Inc.
Denny's Corporation   Cracker Barrel Old Country Store, Inc.
Dine Brands Global, Inc.   Dave & Buster's Entertainment, Inc.
Domino's Pizza, Inc.   Denny's Corporation
Fiesta Restaurant Group, Inc.   Dine Brands Global, Inc.
Jack in the Box, Inc.   Domino's Pizza, Inc.
Noodles & Company   Fiesta Restaurant Group, Inc.
Papa John's International, Inc.   Jack in the Box, Inc.
Ruth's Hospitality Group, Inc.   Noodles & Company
Sonic Corp.   Papa John's International, Inc.
Texas Roadhouse, Inc.   Ruth's Hospitality Group, Inc.
The Wendy's Company   Texas Roadhouse, Inc.
    The Wendy's Company

              2019 Compensation Setting.    The compensation committee uses competitive compensation data from the annual total compensation study of peer and other restaurant companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the compensation committee uses multiple reference points when establishing targeted compensation levels. The committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business unit, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning.

INDEPENDENT COMPENSATION CONSULTANT

              In 2019, Meridian Compensation Partners, LLC ("Meridian") again served as the compensation committee's independent compensation consultant. The independent compensation consultant assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and acts as an advisor to the compensation committee on compensation matters as they arise. The compensation consultant also advises the compensation committee on compensation for the board of directors. The compensation committee evaluated Meridian's independence as its compensation consultant by considering each of the independence factors adopted by Nasdaq and the SEC. Based on such evaluation, the compensation committee believes no conflict of interest exists that would prevent Meridian from independently representing the compensation committee.

36


Table of Contents

RISK MITIGATION

              The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking. The factors considered by the committee include:

    the general design philosophy of our compensation policies and practices for employees whose behavior would be most affected by the incentives established by our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;
    our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;
    how our compensation policies and practices relate to the realization of risks resulting from the actions of employees in both the short term and the long term;
    our policies regarding adjustments to our compensation programs and practices to address changes in our risk profile; and
    material adjustments we have made to our compensation policies and practices as a result of changes in our risk profile.

              The compensation committee believes it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because:

    payouts under our annual and long-term incentive compensation plans are capped;
    the compensation committee has the ability to reduce payouts under our annual incentive compensation plans in its discretion;
    executives are subject to robust stock ownership guidelines;
    executives are subject to anti-hedging policies with respect to our common stock;
    the performance goals under our incentive programs relate directly to the business plan approved by the board of directors; and
    there is an appropriate balance between our annual operating achievements and longer-term value creation, with a particular emphasis on longer-term value creation for our executives.

              The compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes the risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

37


Table of Contents


2019 EXECUTIVE COMPENSATION

OVERVIEW

              Our 2019 executive compensation program was comprised of three primary elements: (i) base salaries, (ii) annual performance-based cash incentives, and (iii) long-term incentives that include performance share units (PSUs) based on three-year performance intervals and restricted stock units. We believe financial metrics used for both the annual performance-based cash incentive and long-term incentive grants drive stockholder value. The goals for our incentive plans are linked to the Company's financial and strategic business plans.

              By design, "at-risk" pay (incentive pay subject to forfeiture or partial or complete loss of value) comprised 82% of total target compensation for the CEO, Paul Murphy, and 64% of total target compensation for the other named executive officers who were employed at the end of the year as a group. The amount of compensation "at risk" for the CEO was calculated by annualizing Mr. Murphy's 2019 compensation because we think it is more representative of CEO total target compensation. The charts below reflect the portion of our named executive officers' 2019 total target compensation that is considered at risk.


CEO

GRAPHIC


Other Named Executive Officers

GRAPHIC

38


Table of Contents

KEY COMPONENTS

Base Salary

              Base salary provides a minimum level of remuneration to our named executive officers for their efforts. The compensation committee sets base salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually as part of the benchmarking process and adjusts them from time to time to account for relevant factors such as market changes. The compensation committee also considers the CEO's evaluation of each executive's performance and reviews the CEO's salary recommendations for our executives.

Incentive-Based Compensation

              Annual Performance-Based Incentive.    Annual performance-based cash incentives are intended to reward achievement of annual financial performance that drives long-term, sustained creation of stockholder value. Our annual incentive goals are established with reference to the annual portion of our multi-year strategic plan. The annual performance metrics are financial-based measures the compensation committee believes are aligned with our goals described above. The compensation committee continually evaluates the measures against which we gauge our performance and may incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.

              Each of our executives participates in the annual incentive plan under which the compensation committee uses earnings before interest, taxes, depreciation, and amortization, or EBITDA, as the primary metric. EBITDA may be further adjusted under the 2017 Plan to remove the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring, or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if applicable, and is referred to herein as "Adjusted EBITDA." The Adjusted EBITDA (70% weight) measure was selected because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors, and other matters. In addition, in 2019, the annual performance-based incentive plan included off-premise sales (15% weight), and overall guest satisfaction (15% weight) to incentivize and reward improvements in these strategically important areas. The Company grants annual performance-based incentive awards and cash incentive awards, if any, under the 2017 Plan.

              The compensation committee approves any payouts earned under the annual incentive program following review of actual results at the end of the year. The corresponding dollar payout value varies up or down depending on the actual performance level versus threshold, target, and maximum goals that are set at the beginning of the year. The compensation committee sets the target ranges each year based on performance expectations and other factors. We believe our performance goals require "stretch" performance and encourage superior performance.

              No payouts are earned if the threshold goals are not achieved. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes of awarding annual incentive compensation.

39


Table of Contents

              Long-Term Performance-Based Incentives.    The compensation committee determines the long-term incentive grants for the executive officers, including the named executive officers, by reviewing peer group market data analysis from its compensation consultant, impact of share usage and affordability, internal equity, and recommendations from the CEO, among other factors. The compensation committee believes the current mix of performance and service-based incentives aligns the interests of executive officers with our stockholders and was appropriate for 2019.

              The 2019 long-term incentive grants for named executive officers consisted of a mix of equity awards in the form of a long-term performance-based incentive component payable in performance stock units, or PSUs (67%), and restricted stock units (33%). These awards are designed to focus management on our strategy of driving consistent, sustainable, achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation (including performance targets measured annually over a three-year period beginning in 2017) is designed to ensure the execution of our evolving strategic plan, consider appropriate risks and returns and allow for initiatives that span several fiscal years.

              Beginning in 2017, the long-term performance-based incentive component became payable if annual targets selected by the committee are achieved for that tranche within the three-year performance period. When the performance measure has been met and approved by the compensation committee for a particular tranche during the three-year period of the award, that portion of units is determined but remains subject to a service-vesting requirement until the three-year period has concluded. That determined portion of units is considered "earned," but is not considered vested and will not be delivered until the applicable three-year period has concluded subject to continued employment on such date. The annual metrics are independent of each other. For the third tranche of the 2017 long-term incentive grant, the second tranche of the 2018 grant, and the first tranche of the 2019 grant, the compensation committee selected an earnings metric (Adjusted EBITDA) and a cash return on investment capital metric (CROIC) in the design to achieve a balance between earnings and return on investment and to effectively reward both. For the second tranche of the 2017 long-term incentive grant and the first tranche of the 2018 long-term incentive grant, the compensation committee selected an earnings metric (Adjusted EBITDA) and an operational metric (Relative Guest Traffic) in the design to achieve a balance between earnings, growth, and driving Guest traffic relative to the restaurant industry (not limited to casual dining) and to effectively reward both. For the first tranche of the 2017 long-term incentive grant, the compensation committee selected Adjusted EBITDA and a return on invested capital metric (ROIC) in the design to achieve a balance between earnings, growth, and return on investment and to effectively reward both. Like the goals in our annual performance-based plan, the goals used in our long-term performance-based incentive component (Adjusted EBITDA, CROIC, ROIC, and Relative Guest Traffic) are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance.

              The temporary transition to annual goals measured and assessed over a three-year period reflects the challenges of multi-year forecasting in the current volatile restaurant operating environment, which continues to be impacted by changes in traditional consumer dining behavior, including a shift from traditional dine-in consumption to increased off-premise dining activity and the use of technology-based food ordering systems. Beginning in 2020, the compensation committee is returning to setting goals over a multi-year period.

              The 2017 Plan permits the compensation committee to make adjustments, in its discretion, for non-cash, non-recurring, or unusual items. While there is overlap with one of the metrics in our annual performance-based cash and long-term performance-based incentive awards (Adjusted EBITDA), the compensation committee believes this is appropriate because the annual performance-based incentive is focused on earnings in a particular year, whereas the individual annual Adjusted EBITDA targets within long-term performance-based incentive are focused on year-to-year progress over the three-year performance period. The compensation committee believes the longer-term nature of the PSUs links performance to our multi-year strategic plan, stockholders and growth objectives while encouraging management's collaboration on strategic initiatives. In 2019, all long-term performance-based incentive awards were granted under the 2017 Plan.

40


Table of Contents

Employee Benefits

              We also provide certain other customary retirement and health and welfare benefits and other ancillary compensation to executives, which are in line with those offered to other groups of our employees, and which comprise a modest portion of our named executive officer compensation.

Modest Perquisites

              We offer a limited number of modest perquisites to our named executive officers, which include a car allowance, phone allowance, and in-restaurant meal discounts. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements on relocation. We review the perquisites we offer to our executives and compare them to those offered by our competitors from time to time.

Summary of 2019 Compensation Activity

Base Salary

              Named executive officer salaries for 2019, along with any corresponding increases from their 2018 salaries, are set forth below. The compensation committee considers various factors when setting base salaries including peer compensation practices, market competitiveness, the Company's performance, individual contributions, growth in roles, retention, CEO recommendations for the CEO's direct reports, and other relevant matters. Amounts below are annualized for those that served in role for partial year.

Named Executive Officer
  2018 Salary   2019 Salary   % Change  

Paul J.B. Murphy III
President and Chief Executive Officer

    (1)   $ 900,000     0 %

Lynn S. Schweinfurth
Executive Vice President and Chief Financial Officer

    (1)   $ 450,000     0 %

Jonathan A. Muhtar
Executive Vice President and Chief Concept Officer

  $ 425,000   $ 425,000     0 %

Michael L. Kaplan
Executive Vice President and Chief Legal Officer

  $ 365,000   $ 400,000     9.5 %

Dean Cookson
Senior Vice President and Chief Information Officer

  $ 340,000   $ 340,000     0 %

Denny Marie Post
Former President and Chief Executive Officer

  $ 800,000   $ 800,000     0 %

Pattye L. Moore
Former Interim President and Chief Executive Officer

    (2)     (2)     0 %

Guy J. Constant
Former Executive Vice President and Chief Operating Officer

  $ 515,000   $ 515,000     0 %
    (1)
    Mr. Murphy and Ms. Schweinfurth commenced employment with the Company during fiscal year 2019. The 2019 amounts above are annualized.

    (2)
    Ms. Moore served as Interim President and Chief Executive Officer from April 3, 2019 through October 3. 2019. As Interim President and Chief Executive Officer, Ms. Moore received a base salary of $167,000 per month. In her Interim CEO capacity, Ms. Moore was not eligible to receive annual performance-based cash incentives or long-term incentives.

41


Table of Contents

Incentive-Based Compensation

              2019 Annual Performance-Based Cash Incentives. For the primary component (70% weight) of our 2019 annual performance-based cash incentive program, actual payouts were determined by comparing the Company's fiscal year Adjusted EBITDA to a target level of Adjusted EBITDA for the year established by our compensation committee. Potential payout amounts ranged from 0% to 200% of the executive's target opportunity based on achievement of Adjusted EBITDA ranging from 80% to 115% of the target level of Adjusted EBITDA for the year. In early 2019, at the time performance targets were set, the compensation committee temporarily extended the EBITDA threshold achievement level from 90% to 80% of target. The Committee made this change because the threshold requirement of 90% of target was more requiring than typical market practices as well as the fact that the committee desired to engage participants and drive EBITDA performance in the face of declining business conditions. The committee believes the 2019 EBITDA goals were rigorous and demonstrated our commitment to a pay for performance philosophy. We believe the overall stretch of our 2019 performance goals is reflected in the below target payout as further discussed below.

 
     Adjusted EBITDA Target and Preliminary Annual Incentive %
 
 
          Proportion of Adjusted EBITDA Target Achieved       Payout as a
% of Target
   
 
    Minimum       80%       25%    
 
    Target       100%       100%    
 
    Maximum       ³115%       200%    
 

              In addition, in 2019, the annual performance-based incentive plan included secondary metrics of off-premise sales (15% weight), with potential payout amounts determined using the same payout scale that applies for Adjusted EBITDA performance, and overall guest satisfaction, or OSAT, (15% weight), with potential payout amounts ranging from 25% to 200% based on achievement, each of which is earned only if the target goal is achieved.

 
     Off-Premise Sales Target and Preliminary Annual Incentive %
 
 
          Proportion of Off-Premise Target Achieved       Payout as a
% of Target
   
 
    Minimum       80%       25%    
 
    Target       100%       100%    
 
    Maximum       ³115%       200%    
 

 

 
     OSAT Target and Preliminary Annual Incentive %
 
 
          Proportion of OSAT Target Achieved       Payout as a
% of Target
   
 
    Minimum       97%       25%    
 
    Target       100%       100%    
 
    Maximum       ³106%       200%    
 

              For 2019, named executive officers achieved slightly above minimum Adjusted EBITDA threshold and just below target for off premise sales. Achievement for overall guest satisfaction was

42


Table of Contents

below the minimum threshold. Based on actual performance during fiscal 2019, the total annual corporate bonus percentage earned by our NEOs was 33.04%.

 

  

 

2019 Annual Performance-Based Cash Incentive Goal, Achievement, and Payout


 
 

 

 

Bonus Component


   



Target
Performance
(dollars in
thousands)




   



Actual
Performance
(dollars in
thousands)




   

Achievement
Percentage


   



Payout
Achieved
(before
weighting)




   
Weighting %

   



Actual
Bonus
Percentage
Earned




 

 

 

Adjusted EBITDA

    $ 125,812.0       $ 101,291.5         80.51 %       26.91 %       70 %       18.84 %  
     

 

 

Off-Premise Sales

    $ 161,900.0       $ 159,600.0         98.58 %       94.67 %       15 %       14.20 %  
     

 

 

Overall Guest Satisfaction Indexed to Target

      100 %       96.71 %       96.71 %       0 %       15 %       0.00 %  
     

 

 

Total

                                              100 %       33.04 %  
 

              Each of our named executive officers has a target opportunity expressed as a percentage of the executive's salary and is set based on, among other factors, market and peer comparisons, and internal equity. The actual amounts of our 2019 annual performance-based cash incentives paid to our named executive officers in March 2020 for fiscal 2019 performance are as follows:

Named Executive Officer(1)
  2019
Annualized
Salary
  Target
(% of
Actual
Salary)
  $ Amount
at Target
  2019
Actual
Payout
 

L. Schweinfurth

  $ 450,000     70 % $ 315,000(2)   $ 211,000  

J. Muhtar

  $ 425,000     75 % $ 318,750   $ 105,315  

M. Kaplan

  $ 387,885     70 % $ 271,520   $ 90,021  

D. Cookson

  $ 340,000     60 % $ 204,000   $ 67,402  

Former Executives

   
 
   
 
   
 
   
 
 

D. Post

  $ 800,000     120 % $ 960,000   $ 81,910(3)  

G. Constant

  $ 515,000     75 % $ 386,250   $ 127,617(4)  

(1)
Mr. Murphy and Ms. Moore are not included in the above table because they were not eligible to receive an annual performance-based cash incentive in 2019.

(2)
Ms. Schweinfurth is entitled to a minimum bonus of at least $211,000 for fiscal year 2019, her initial year of employment with the Company, pursuant to her Employment Agreement.

(3)
Ms. Post received a pro-rated bonus based on time in position prior to retirement pursuant to her retirement agreement.

(4)
Mr. Constant received a 2019 bonus based on completion of the performance period prior to termination pursuant to his employment agreement.

              2019 Long-Term Incentive ("LTI") Program. The 2019 LTI grants made to named executive officers consisted of 67% payable in PSUs and 33% payable in RSUs.

43


Table of Contents

              2019 Long-Term Incentive Grants. In March 2019, the Company made the following annual grants to our named executive officers:

Named Executive Officer(1)
  Total Long-Term
Incentive
Target Value ($)
  Long-Term
Incentive
PSUs ($)
  Time-Based
Restricted
Stock Units
($)
 

L. Schweinfurth

    540,000     361,800     178,200(2)  

J. Muhtar

    595,000     398,650     196,350  

M. Kaplan

    328,500     220,095     108,405  

D. Cookson

    238,000     159,460     78,540  

Former Executives

   
 
   
 
   
 
 

D. Post

    2,320,000     1,554,400     765,600  

G. Constant

    849,750     569,332     280,418  

(1)
Mr. Murphy and Ms. Moore are not included in this chart because they did not participate in the 2019 Long-Term Incentive Program.

(2)
Ms. Schweinfurth received her Restricted Stock Units in February 2019 in accordance with her employment agreement.

              The amounts listed in the table above represent the target intended value of the grant and amounts may differ from the accounting values provided in the Summary Compensation Table below. The fair value of the restricted stock units and performance stock units is based on the grant date market value of the common shares.

              Long-Term Performance-Based PSUs. In 2019, the 67% long-term incentive component for executive officer compensation was comprised of equity grants in the form of PSUs, as follows:

Named Executive Officer(1)
  Long-Term
Incentive PSUs
  Grant Date
Fair Value
($)(2)
 

L. Schweinfurth

    12,306     361,796  

J. Muhtar

    13,559     398,635  

M. Kaplan

    7,486     220,088  

D. Cookson

    5,423     159,436  

Former Executives

   
 
   
 
 

D. Post

    52,870     1,554,378  

G. Constant

    19,365     569,331  

(1)
Mr. Murphy and Ms. Moore are not included in this chart because they did not participate in the 2019 Long-Term Incentive Program.

(2)
Target PSUs are rounded down to the nearest whole share and therefore may differ slightly from the target award value.

              In 2019, the long-term performance-based incentive metrics for the PSUs were Adjusted EBITDA and CROIC. No PSUs are earned if threshold performance objectives are not met and up to 200% of the target number of PSUs will be earned if maximum performance objectives are achieved. From 2017 to 2019, the long-term performance-based incentive targets were set annually as a result of the current volatile restaurant operating environment, but no payout can be earned until the end of the

44


Table of Contents

three-year performance period. In 2020, the long-term performance-based incentive targets are contemplated to be set over a multi-year time period.

              For purposes of the fiscal 2019 component or tranche of awards under our long-term performance-based incentive, potential payout amounts ranged from 0% to 200% of the executive's target opportunity based on achievement of Adjusted EBITDA and CROIC ranging from 80% to 115% of the target level of Adjusted EBITDA for the year.

    2019 Tranche Payout Scale: Adjusted EBITDA & CROIC Target and Preliminary Payout %
           Target Achieved       Payout as a
% of Target
   
    Below Minimum       <80%       0%    
    Minimum       80%       25%    
    Target       100%       100%    
    Maximum       ³115%       200%    

              Based on actual performance during fiscal 2019, the long-term performance-based incentive percentage earned in respect of the fiscal 2019 component or tranche of outstanding long-term performance-based incentive awards was 13.46%.

 

 

2019 Tranche Long-Term Incentive Performance-based Incentive Goal, Achievement, and Payout


 

  

 

LTI Component


   



Target
Performance
Goal
(in thousands)




   


Actual
Performance
(in thousands)



   

Achievement
Percentage


   



Payout
Achieved
(before
weighting)




   
Weighting %

   



Actual
Bonus
Percentage
Earned




 
 

 

 

Adjusted EBITDA

    $ 125,812.0       $ 101,291.5         80.51 %       26.91 %       50 %       13.46 %  
     

 

 

CROIC

      22.19 %       17.52 %       78.95 %       0.00 %       50 %       0.00 %  
     

 

 

Total

                                              100 %       13.46 %  
 

              2017-2019 Long-Term Performance-Based Incentives.    At the end of 2019, the Company completed a three-year performance cycle for the long-term incentive portion of the LTI plan. The performance period covered fiscal 2017 through fiscal 2019, with targets set annually. Based on Adjusted EBITDA and ROIC performance in 2017, Adjusted EBITDA and relative guest traffic in 2018, and Adjusted EBITDA and CROIC performance in 2019, our executive officers earned a minimal payout, as reflected in the table below.

 

 

2017-2019 Cumulative Long-Term Incentive Performance Achievement


 

  

 

Tranche


 
Weight

  Metrics/
Weighting


 

Award
(% of Target)


 

 

 

Tranche #1 (Fiscal 2017)

      33.33 %     Adjusted EBITDA (50%)
ROIC (50%)
        36.25 %  
     

 

 

Tranche #2 (Fiscal 2018)

      33.33 %     Adjusted EBITDA (50%)
Rel. Guest Traffic (50%)
        43.25 %  
     

 

 

Tranche #3 (Fiscal 2019)

      33.33 %     Adjusted EBITDA (50%)
CROIC (50%)
        13.46 %  
     

 

 

Total

      100.00 %               30.99 %  
 

45


Table of Contents

              As illustrated in the table above, the compensation committee varied the performance metrics for each year of the 2017-2019 Long-Term Performance-Based Incentives. This decision was made to keep executives focused on key metrics that aligned with the business objectives for that year. EBITDA and profitability has been a steady and key metric to measure management performance and create stockholder value. The other metrics were identified key initiatives for that particular year. We believe all of the chosen metrics support our management team's alignment with stockholders. Further, we believe the below target payouts demonstrate requiring goal setting and our commitment to a pay for performance philosophy.

              Restricted Stock Units. The restricted stock units granted in 2019 vest ratably over four years on each anniversary date of the grant.

Retention Awards to Executive Officers

              Because of the uncertainty created by the CEO transition and in order to retain the executive leadership believed to be critical to the ongoing operation of the Company during the CEO transition, on March 30, 2019, the compensation committee considered and approved the award of one-time cash retention awards (each, a "Retention Bonus") to each of Messrs. Constant, Muhtar, Kaplan, and Cookson in the following amounts: $250,000, $200,000, $200,000, and $150,000, respectively. Payment of the Retention Bonuses is subject to the executives' continued employment with the Company in good standing through the final payroll date of the 2019 fiscal year. In addition, the executives will also be entitled to their Retention Bonuses if the executive's employment is terminated without Cause (as defined in the Change in Control Plan) prior to the end of the 2019 fiscal year.

              The compensation committee also considered and approved a retention award of RSUs to Ms. Schweinfurth on April 3, 2019 for the same purpose. The award consisted of RSUs having a grant date fair value of $100,000 and a three-year vesting schedule of one-third on each anniversary of the date of grant.

Deductibility of Executive Compensation

              The compensation committee considers the tax impacts of material elements of our executive compensation program. These factors alone do not drive our compensation decisions, but rather they are considered along with other factors such as the cash and non-cash impact of the program, and whether the program is consistent with our compensation objectives.

              Historically, compensation committee has generally intended to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m) of the Internal Revenue Code, provided additional requirements are satisfied. The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million would no longer be deductible.

              Despite the compensation committee's efforts in the past to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m), because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)'s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact will. Further, while we consider deductibility as one factor in determining executive compensation, in some cases we may decide it is either not possible or desirable to satisfy all of the conditions of Section 162(m) for deductibility and still meet our compensation needs. Accordingly, we may pay compensation that is not deductible under Section 162(m) from time to time.

46


Table of Contents


2020 COMPENSATION PROGRAM

              The Company continually assesses our compensation program to ensure it supports our business strategy and situation. The board added two new Independent Directors to the compensation committee in 2019, which led to positive changes to the Company's compensation program beginning in 2020.

              For 2020, the annual incentive plan includes performance targets related to major strategic initiatives in addition to the Adjusted EBITDA goal. The long-term incentive program mix was adjusted to consist of 50% weighted in PSUs, 25% weighted in non-qualified stock options, and 25% weighted in RSUs for the named executive officers, which further increases the portion of executive compensation based on stockholder return. The long-term incentive program was revised to include the setting of pre-established performance target goals for a multi-year performance period, instead of setting targets annually for each year of that period. In addition, the target for the two remaining tranches of the 2019 PSU award have been set to align with the achievement of Adjusted EBITDA for 2020 and 2021.

              In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the 2020 compensation program in order to meaningfully reduce costs and to select a metric for the PSU awards that was most appropriate given the uncertainty and challenges in projecting other metrics at this time.

    Base salaries of our named executive officers have been temporarily reduced by 20% effective March 30, 2020.

    The compensation committee has selected a relative total shareholder return (TSR) metric to be measured over a multi-year performance period through 2022 for PSU awards.

    Given the accelerated depletion of the remaining share reserve under the 2017 Plan as a result of the decline in the Company's stock price, and the preference for utilizing equity compensation over cash to further align our executives with stockholders, the Company is asking stockholders to approve a proposed increase in shares under the 2017 Plan (see "Proposal 4—Approval of the Amendment to the 2017 Performance Incentive Plan").

47


Table of Contents


GOVERNANCE OF EXECUTIVE COMPENSATION

    Pay for performance focused executive compensation structure, with a significant portion of pay "at-risk"

    Independent compensation committee approves executive compensation structure and performance goals

    Independent compensation consultant advises the compensation committee

    Double trigger required for cash severance and equity vesting upon change in control (other than certain performance awards)

    Meaningful stock ownership guidelines for executives and board members

    Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors

    Clawback policy for the return of certain cash and equity executive incentive compensation in the event of a financial restatement

    No excessive perks

    No incentivizing of short-term results to the detriment of long-term goals and results

    No excessive risks; compensation practices are appropriately structured and avoid incentivizing excessive risk taking

    No excise tax gross ups

    No repricing of underwater options without stockholder approval

Executive Stock Ownership Guidelines

              Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. The compensation committee believes that executive stock ownership requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to achieve during the term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. The current ownership guidelines require our CEO to own five times base salary, three times base salary for executive vice presidents, and two times base salary for senior vice presidents. Pursuant to the guidelines, the value of the executive's holdings is based on the cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to achieve the guidelines from their effective date of employment or promotion date. An executive officer may receive additional time to achieve his or her minimum requirement if the officer's requirement is increased, calculated based on the additional incremental amount, and the committee may otherwise exercise discretion in extending the time for compliance in other circumstances. All of our executive officers are currently in compliance or on track to be in compliance with their guidelines.

48


Table of Contents

Compensation Clawback Policy

              The Company's board of directors maintains a compensation clawback policy for its executive officers that provides for the recoupment by the Company of certain excess incentive compensation paid to the officers under certain circumstances. In the event of a restatement of the Company's previously issued financial statements as a result of either (i) material non-compliance with financial reporting requirements under the securities law or (ii) intentional misconduct by an executive, the Company may recover, to the extent permitted by law, certain incentive compensation, including equity and cash awards, received by the executive that was in excess of what would have been paid in the absence of the incorrect financial statements. If additional clawback rules are approved by the SEC, the Company will review and revise its clawback policy to comply with the new rules.

Pledging and Hedging Transactions in Company Securities

              The board has a policy prohibiting hedging and pledging of Company securities by executive officers and directors.

Anti-Hedging Policy

              Hedging transactions may permit an executive officer or director to continue to own the Company's securities obtained through an employee benefit plan or otherwise, but without the full risks and rewards of ownership. When this occurs, the executive officer or director may no longer have the same objectives as the Company's other stockholders. Therefore, executive officers and directors are prohibited from engaging in any hedging transactions with respect to the Company's securities, including, without limitation, through the use of financial instruments, such as prepaid variable forward contracts, equity swaps, collars, and exchange funds.

Anti-Pledging Policy

              Pledging of Company securities by an executive officer or director as collateral for a loan or holding such securities in a margin account may result in the executive officer or director having interests that are no longer aligned with the long-term interests of the Company's other stockholders because of such executive officer or director potentially being immune to the economic exposure to the pledged securities. Additionally, if pledged securities were forced to be sold, potentially without the consent of an executive officer or director due to a failure to meet a margin call or the default on a loan, there may be a violation of the Company's Insider Trading Policy if the foreclosure or margin sale happens at a time that the executive officer or director is aware of material non-public information or otherwise prohibited from trading. Also, any such sale may result in a possible violation of Section 16 of the Securities Exchange Act of 1934, as amended, as well as subject the Company to negative publicity. Accordingly, executive officers and directors are prohibited from making pledges of Company securities as collateral for a loan, or otherwise holding Company securities in a margin account.

Executive Employment Agreements

              Each of Mr. Murphy, Ms. Schweinfurth, Mr. Muhtar, and Mr. Kaplan has an employment agreement with the Company, described below under "Executive Employment Agreements." Except for Mr. Murphy's, the employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the agreements. The agreements provide for severance payments upon certain terminations of employment. The compensation committee believes the terms of these agreements together with the Change in Control Plan are in line with market standards and are an important means to allow management to continue to focus on running the business of the Company in the event of a pending or actual change in control event or other event potentially

49


Table of Contents

affecting their employment. More detailed information concerning these severance payments appears below under the caption "Potential Payments upon Termination or Change in Control."

Compensation Committee Report

              The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the Company's management. Based on this review and discussion, the compensation committee recommended to the Company's board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

THE COMPENSATION COMMITTEE

Kalen F. Holmes, Chair
Cambria W. Dunaway
Glenn B. Kaufman
G.J. Hart
David A. Pace

50


Table of Contents

2019 EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

              The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, principal financial officer, and each of our three other most highly compensated executive officers who were serving as executive officers at the end of fiscal year 2019 (collectively, the named executive officers), for fiscal years 2017 through 2019:

Name and Principal Position
  Year   Salary
($)(6)
  Bonus
($)(7)
  Stock
Awards
($)(8)
  Option
Awards
($)(9)
  Non-Equity
Incentive
Plan
Compensation
($)(10)
  All Other
Compensation
($)(11)
  Total
($)

Paul J.B. Murphy III(1)

  2019   180,000   275,000   1,599,996   -   -   8,162   2,063,158

President and Chief Executive Officer

                               

Lynn S. Schweinfurth(2)

 
2019
 
398,077
 
311,000
 
939,934
 
-
 
-
 
110,570
 
1,759,581

Executive Vice President and Chief Financial Officer

                               

Jonathan A. Muhtar

 
2019
 
425,000
 
200,000
 
594,968
 
-
 
170,424
 
24,610
 
1,415,002