Q3 2024 Red Robin Gourmet Burgers Inc Earnings Call
Good afternoon everyone and welcome to the Red Robin Gourmet Burgers Incorporated 3rd quarter 2024 earnings call. This conference is being recorded.
Dring Management Presentation and in response to your questions, they will be making forward looking statements about the company's business outlook and expectations.
and the State Minutes, the State Minutes, and all other statements that are not historical facts or select management's beliefs and predictions as of today. And therefore our subject to risks and uncertainties as described in the company's SEC filings.
Speaker Change: Management will also discuss non-gap financial measures as part of today's conference call. These non-gap measures are not prepared in accordance with the generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful.
Speaker Change: Reconciliation of the non-gap financial measures to the mostly directly comparable gap measures can be found in the earnings release. The company has posted its third quarter 2020 for earnings release on its website at IR.redrobin.com.
By Black box intelligence and included guest traffic that has closed a 500 basis points GAAP and is now in line with the industry.
With this progress we believe we will meet or exceed the industry average on traffic through the remainder of the year.
Before I dive into more specifics I'd like to extend a heartfelt. Thank you to all of our more than 20000 team members around the country.
Our dedication to improving everyday and every shift is what drives our success and is key to the revitalization of our beloved brand.
Over the course of the past several quarters, we've witnessed the impact of inflation on the consumer.
As businesses were forced to raise prices to cover rising input cost the consumer found their hard earned dollars did not go as far as they had and had to make trade offs within their budget, including visits to restaurants as a result, black box intelligence measures a four 5% <expletive>.
Klein in casual dining guest traffic through the first three quarters of 2024.
The response across the industry to this traffic decline has been an array of promotions that offer the same food and experience to the consumer at a discounted price.
Red Robin's journey and our approach is somewhat different you may recall when I started as CEO. We did the work to understand why Red Robin's performance had been so challenged for so many years prior.
What we found was the value equation that was broken due to a well intended but misguided cost cutting that degraded the guest experience.
Back in 2022 prior to my arrival Red Robin was engaged in deep discounting as a means to bring the price down to match the level of food and service. This approach and this cycle. It creates does not lead to success.
When I arrived we made a decision to step away from the deep discounts and went to work doing the heavy lifting to improve the guest experience and rebuild the value proposition for our guests.
<unk> talked extensively about the investments we have made to improve the quality of our food and service from introducing flat top grills to upgrading over 85% of our menu to deliver a true gourmet burger experience to adding team members to deliver great hospitality.
I am so proud of what our team has accomplished and the great food and experience our guests now receive.
Our next step then is to find ways to bring guests into our restaurants to experience. These upgrades.
We are confident in our data continues to confirm that when a guest experiences the new red Robin there are very likely to come back.
Recall, we tested higher levels of traditional marketing spending in the first half of this year.
The team did great work to prepare this test and we measured a traffic lift as a result, but our reality is that we do not have the resources to spend at the same level of some of our competitors.
That means we have to be more creative more nimble and deliver a better experience than our competition.
During the first half of 2024, we are also prepared and tested other tactics beyond traditional marketing spending to drive guest visits.
<unk> is our successful loyalty relaunch that I'll talk about more in a moment second is what we like to call appointment dining. These are selective and targeted promotional offers and currently include Monster Monday, where we serve monster sized items at reduced prices, including a $2 monster Burger Patty upgrade.
A $4 monster milkshake and $5 Margarita.
On Tuesdays guests can enjoy a $10 gourmet cheeseburger with bottomless sides and on Wednesdays Kids' meals are 50% off and include Entre bottomless side and a drink.
Youll quickly noticed that these promotions have a few things in common first the promotion targets days of the week that are less busy and we can drive incremental traffic second the promotions target our ability to upsell additional items to drive average check and introduced new favorites and third and most importantly.
The promotions are largely dining only this allows guests to fully experience all those investments that we've made over the past 18 months overall, we're pleased with the clear traction in guest traffic from this strategy and we expect to continue this approach through the fourth quarter.
While these types of offers come with a near term investment I would draw a clear distinction between our approach and that of our competitors.
While they are reducing price for the same food and experience. Our approach is designed to encourage new and lapsed guests to give us a try and experience a truly gourmet burger and an overall dining experience.
We believe driving guests into experience the new Red Robin will accelerate the curve as we drive to return to traffic growth in 2025.
Turning to marketing we continue to be pleased with the efficiency of our marketing spend that we spoke about last quarter.
Through a mix of dynamic digital social earned media and harnessing the power of our relaunch loyalty to point out program to reach the right guest at the right time, we've proven that an effective marketing strategy can drive traffic into red Robin.
And we've continued to build on this momentum for the third quarter.
We have invested in marketing capabilities, including our own customer data platform.
And more dynamic storytelling, and our web based own channels.
We have thoughtfully chosen to communicate and promote the great value already in our menu such as our under $11 rents double Tavern Burger served with a choice of bottomless sides and targeted messaging to promote the key appointment dining periods I mentioned earlier.
In addition, our recent creative menu innovations and limited time promotions have drove a trial breakthrough media and social Buzz.
Perhaps most notable was our triple Patty gold metal Burger challenge time to correspond with the 2024 Olympic Summer games.
And we featured our spicy new Burger the jalapeno heat wave a flavor profile thats trending with Gen Z guests at chain first which introduced thousands of guests influencers and celebrities to our brand in New York, and Los Angeles, and earn millions more impressions and press and social media.
We expect to continue deploying a strategic combination of efficient paid media creative earned media and our own channels to allow us to effectively share whats new with current and new guests build upon a foundation of compelling value menu innovation.
And brand storytelling.
Yes.
Now turning to loyalty in May we launched loyalty to <unk>, which continues to exceed our expectations.
We're signing up more loyalty members, they're visiting more frequently and spending more on each visit.
Loyalty two <unk> as a major factor in how we design our value promotions and marketing strategy as well.
We know that when guests sign up for loyalty they value their ability to immediately earn points and score us consistently higher on value service and quality.
Through segmentation behavioral triggers and personalization, we're able to drive effective messaging to these guests designed to accelerate the frequency curve.
As a reminder, the new program was redesigned top to bottom to be a long term traffic driver under loyalty to point out. The members earned one point for every dollar spent.
After earning 100 points members receive a $10 reward good for both dine in as well as online orders. This allows members to earn a reward much faster than the previous program and encourages more frequent visitation to capitalized on their earned rewards.
The 90 day redemption window for earned rewards provides added incentive for return visits.
And a free appetizer with your first purchase incense sign ups by giving members and immediate reward and providing our server and easy way to communicate the value of the program.
I'd like to share some highlights since the launch of loyalty to point out.
The elevated level of new member sign ups I shared last quarter has continued and demonstrates the interest is more than just a new program honeymoon. We've averaged 150000 sign ups per four week financial period during the third quarter nearly doubling our prior run rate.
<unk> member transactions increased 141% as compared to the third quarter of last year.
Including all loyalty members the number of members transacting two times or more has increased 12% with the largest increase in members typically visiting three to five times per year.
Loyalty members continue to spend more than non loyalty members. Finally over 400000 previously lapsed loyalty members.
Re engaged with us as part of loyalty to point out.
These previously lapsed guests accounted for approximately 20% of oil loyalty member visits from the launch of loyalty to <unk> in may through the end of the third quarter.
We expect these metrics to continue to improve as our guests get more familiar with the new program and our operators get even more experience driving sign ups and reaping the benefits.
In addition, we are beginning to unlock the full power of our new customer data capability to drive visitation with our guests. This.
This includes our ability to now send much more personalized communications and trigger messaging based on each member's unique visitation habits and menu preferences.
As we continue to deepen our connection with new and existing guests alike, we're adding gamification.
Remember exclusives and other tactics to drive engagement and demonstrate the value of being a loyal red Robin guests.
With the continued success of our new program. Our total membership is over $14 5 million guests at the end of the third quarter, an increase of approximately 400000 since last quarter and we expect that figure will continue to grow.
We continue to be pleased with the progress of loyalty and remain highly confident in our ability to use it as a key driver of traffic growth for our business.
Finally, I'd like to share an update on our restaurant portfolio.
When we launched our North Star plan in January of 2023, I shared key performance metrics.
By quartile that highlighted the strength and performance of our top quartile restaurants as compared to the challenges of our bottom quartile.
While many of our top 300 restaurants continue to perform very well and we have succeeded in improving financial performance and some of the bottom quartile restaurants. Approximately 70 restaurants remained that are not generating positive restaurant level profitability on a trailing 12 month basis.
Performance in these 70 restaurants creates a drag of approximately 215 basis points on the total company restaurant level operating profit.
Speaker Change: We are actively working to support the operating teams in these 70 restaurants as they execute their operating plan and seeks to demonstrate the long term viability of each of these restaurants.
We plan to share periodic updates as this effort progresses.
Overall.
Speaker Change: I am proud of our team and we continue to execute on the things we can control such as loyalty and we continue to position Red Robin for long term success, our value messaging and marketing is working and we're thrilled our guests are validating the investments we've made over the past 18 months to vastly improve the <unk>.
Speaker Change: Across all facets and with that I'll turn the call over to Todd to walk you through the financial performance before I add some closing thoughts.
Todd: Thank you Jay and good afternoon, everyone in the third quarter total revenues were $274 $6 million versus $277 6 million in the third quarter of fiscal 2023 the decline is.
Speaker Change: Due primarily to the closure of nine restaurants over the past year. This was partially offset by a comparable restaurant revenue increase of 0.6% led by an increase in guest check average outweighing a decline in guest traffic.
Speaker Change: I would note our guest traffic trends have sequentially improved in each quarter of 2024 and are now in line with the casual dining benchmark as G J referenced earlier.
Speaker Change: We attribute this improving traffic trend to the successful implementation of Northstar plan, the traction of loyalty to point out and the traffic driving success of the appointment dining promotional offers we executed in the third quarter.
Speaker Change: Restaurant level operating profit as a percentage of restaurant revenue was 9% a decrease of 210 basis points compared to the third quarter of 2023.
Speaker Change: The decline was primarily due to lower guest counts and discount levels debt increased approximately 190 basis points as compared to last year.
Speaker Change: Our team continues to do great work pursuing and capturing thoughtful cost savings that maintain our commitment a parity or better for the guest experience.
Speaker Change: Cost savings in 2023, and 2024 to date had been primarily captured through our efforts to optimize the supply chain.
Speaker Change: While we continue to see further opportunity in that area. In addition, we are now actively pursuing operating efficiencies to drive an increase in restaurant level profitability.
Speaker Change: We expect these efficiencies to come from the reboot of our actual versus theoretical food cost measurements and reporting that we launched earlier this year and a similar relaunch of our hot schedules labor management tool in the third quarter.
Speaker Change: While the North Star plan included an intentional investment in labor that has successfully elevated the guest experience achieving our objectives requires that we deliver these efficiencies.
Speaker Change: We are encouraged with the initial traction of our operators have demonstrated over the past several weeks delivering on both more efficiently.
Speaker Change: And maintaining our elevated guest satisfaction scores.
Speaker Change: General and.
Speaker Change: Administrative costs were $28 million as compared to $18 $5 million in the third quarter of 2023.
Speaker Change: We held our managing partner conference during the third quarter. This year and did not hold a conference in 2023 the.
Speaker Change: The gross cost of the conference is recorded in G&A and is partially offset by vendor contributions that are recognized as credits primarily in cost of goods as required by GAAP.
Speaker Change: Selling expenses were $5 5 million a decrease versus the prior year of $4 million.
Speaker Change: The decrease results primarily from a reduction in media in the quarter.
Speaker Change: And intentionally reallocated dollars to support funding the traffic driving promotional discounts.
Speaker Change: Adjusted EBITDA was $2 1 million in the third quarter of 2020 for the $4 $7 million decline.
Speaker Change: Versus the third quarter of 2023 was driven by lower guest counts.
Speaker Change: Increased discounts and promotional offers higher labor costs and occupancy costs related to our sale leaseback transactions.
Speaker Change: We ended the third quarter with $22 million of cash and cash equivalents $8 3 million of restricted cash and $20 million available borrowing capacity under our revolving line of credit at.
Speaker Change: At quarter end, the outstanding principal balance under the credit agreement was $187 9 million.
Speaker Change: On November 4th we executed a third amendment to the credit agreement.
Speaker Change: This third amendment builds on the second amendment that we executed back in August.
Speaker Change: The third amendment increases our compliance leverage ratios in the fourth quarter of 2025 and first quarter of 2026.
Speaker Change: And continues the revolver expansion from 25 million to $40 million through the first quarter of 2026 that was previously scheduled to expire in the third quarter of fiscal 2025.
Speaker Change: This additional financial flexibility supports our efforts executing north Star plan.
Speaker Change: We appreciate the great partnership from our lender group led by fortress.
Speaker Change: And offer a thank you to everyone who contributed to completing this work.
Speaker Change: Turning now to our 2024 guidance, we have updated our guidance to the following.
Speaker Change: Total revenue of approximately one $2 5 billion.
Speaker Change: Restaurant level operating profit of at least 10, 5% inclusive of investments in the guest experience and rent expenses related to the sale leaseback transactions.
Speaker Change: Adjusted EBITDA of 35 million to $37 $5 million.
Speaker Change: As a reminder, as is historical practice for Red Robin our reported adjusted EBITDA and our adjusted EBITDA guidance do not add back non cash stock based compensation expenses, which we estimate will total approximately $7 million in 2024.
Speaker Change: We are evaluating reporting adjusted EBITDA with stock based compensation added back in $2025 to better align with the adjusted EBITDA used in our credit agreement and peers in the industry.
Speaker Change: Finally capital expenditures, we expect approximately $25 million.
Speaker Change: The change to the restaurant level operating profit and adjusted EBITDA guidance is driven by the additional discounting we now anticipate related to the promotional offers Gee Jay discussed earlier.
Speaker Change: While we've been very encouraged by the improving comparable traffic and sales trajectory. We anticipate the offers will carry a net cost in the near term.
Speaker Change: In the longer term, we believe they will help achieve our goal of returning traffic positive growth in 2025 and drive increased profitability.
Speaker Change: Our expectations for the fourth quarter are as follows.
Speaker Change: We anticipate three key components will drive our comparable restaurant sales, we expect traffic will decline approximately 4%.
Speaker Change: PPA will increase approximately 6%.
Speaker Change: And a reduction in deferred royalty revenue will be a one 5% headwind.
Speaker Change: Notably the traffic and PPA expectations are grounded in the results that we have seen during the first four weeks of the fourth quarter.
Speaker Change: As it relates to deferred loyalty revenue recall in the second quarter of this year, we reported a notable increase due to the timing of the launch of loyalty to point out.
Speaker Change: A large portion of that revenue was accelerated from its more typical fourth quarter timing.
Speaker Change: As a result, we anticipate approximately $4 $5 million reduction in royalty revenue in the fourth quarter of 2024 as compared to 2023.
Speaker Change: As we've shared previously our fiscal calendar reverts to a 52 week fiscal year in 2024 as compared to 53 weeks in 2023.
Speaker Change: This change occurs in the fourth quarter with our more typical 12 week quarter in 2024 versus a 13 week quarter in 2023.
Speaker Change: We expect this will result in an approximate $25 million reduction in restaurant sales and $3 million reduction in adjusted EBITDA as compared to 2023.
Speaker Change: We expect gift card breakage will decline approximately $2 million as compared to the fourth quarter of 2023 based on redemption rates now stabilizing after declines for the past several quarters.
Speaker Change: We expect favorable factors to offset a portion of these headwinds the PPA benefit of 6% I mentioned earlier represent the net impact we expect from menu price increases and discounts.
Speaker Change: We anticipate a combined reduction of approximately $11 million in selling and G&A expenses as compared to the fourth quarter last year.
Speaker Change: And we expect to continue to capture cost savings and supply chain and in our operations as I mentioned earlier.
Speaker Change: While there are different moving parts with our near term expectations and modeling the key financial takeaways. Our first guest satisfaction continues to demonstrate guests and value of the upgrades to our food and hospitality.
Speaker Change: Second we have demonstrated an ability to drive guest traffic back into our restaurants with both our loyalty relaunch and promotional offers.
Speaker Change: The team is focused on increasing restaurant level profitability through both topline growth and operating expense management.
Speaker Change: Fourth the credit agreement.
Speaker Change: The amendment supports our financial flexibility to execute the North Star plans.
Speaker Change: All of these factors along with the dedication I see everyday from our operators and support center team members make me confident in our direction and the comeback of this iconic brands.
Speaker Change: With that I'll turn the call back over to Jay.
Jay: Thank you Todd.
Jay: In closing.
Speaker Change: We remain confident in our North Star plan and the direction of this brand.
Speaker Change: While the macroeconomic backdrop has made our comeback more challenging it will only make us stronger as we come out on the other side or.
Speaker Change: Our team has remained focused on what we can control, which is centered around delivering a great guest experience to every guest through our high quality gourmet burgers and our family friendly atmosphere.
Speaker Change: With the positive proof points showcasing that guests are beginning to give us credit for the new Red Robin. We believe we are on the right path to drive sustainable long term growth and return this great brand to the prominence in the industry.
Speaker Change: We're now happy to take questions. So operator, please open the lines.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset.
Speaker Change: Before pressing the star keys, one moment, please while please poll for questions.
Speaker Change: The first question is from Todd Brooks from the Benchmark Company. Please go ahead.
Todd Brooks: Hey, Thanks, and good evening everyone.
Todd Brooks: Two quick questions for you.
Speaker Change: Hey, guys two quick questions if I may one.
Todd Brooks: Sorry.
Speaker Change: Cheeseburger day Triple.
Speaker Change: Triple play so that Tuesday promotions now expanding too.
Speaker Change: Monday, and Wednesday, as well is that stacking on top of the existing kind of monster Mondays.
Speaker Change: The 50% off for kids on Wednesdays when does that kind of that incremental discounting that you're factoring into the guidance. That's question one question.
Speaker Change: Question. Two is just a quick one on loyalty too to point out.
Speaker Change: Based on the timing of the launch we're kind of through our first 90 day exploration window potentially for gifts just wondering what the experience was around triggering.
Speaker Change: Triggering return visits and frequency with expiring gifts coming up and your excitement about that as a lever that you didn't have any old problem going from the old program going forward. Thanks.
Speaker Change: Yes, the answer to the first question Todd is yes. It is stacked on top of that Monster, Mondays and Tuesdays and Wednesdays.
Speaker Change: Yeah on on question two taught hate is done on question two I would say overall you heard the headlines from DJ on the call, but we are exceedingly pleased with what we've seen out of loyalty. So far we've seen obviously the return visits that we quoted the stats around I think you're referring to kind of the reward.
Speaker Change: <unk> redemption, as well and I would say that that has frankly been ahead of our internal modeling in terms of what we expected. There. So we really couldnt be happier with what we've seen out of the loyalty program.
Speaker Change: Yeah, just clarifying on that one Todd what I was referring to is I thought there was a 90 day exploration window once points earned.
Speaker Change: And if we launched in May we should have in the quarter gotten through our first.
Speaker Change: Exploration cycles I'm, just wondering about the success and triggering visitation that you had by messaging listen we don't want to lose your points.
Speaker Change: Come back into the restaurant today and.
Speaker Change: And redeem them.
Speaker Change: Yes, sorry, Todd I'll try to expand.
Speaker Change: That's the piece it really across the board, but including on that piece in terms of our guests when they earn a reward are they using them. They absolutely are on the whole we're seeing a small amount of breakage I think in fairness, we probably want to give it a little bit longer before we kind of share a deeper number there.
Speaker Change: But I'd say in total we want to see people using and benefiting from those rewards and on the whole we very much are.
Speaker Change: Okay, great. Thank you Beth.
Speaker Change: Yep.
Speaker Change: The next question is from Alex Slagle from Jefferies. Please go ahead.
Alex Slagle: Alright. Thanks.
Alex Slagle: Congrats on the improving trends.
Alex Slagle: Very nice to see.
Speaker Change: I wanted to ask on the level of discounting where you are now versus say pre COVID-19 kind of where you think it should be or whats an appropriate level for the brand at this point.
Alex Todd: Yes, Alex Todd here I'll start.
Alex Todd: I will go back up maybe prior to the North Star plan.
Speaker Change: Just given I wasn't here prior to Covid I think the world did change a little bit there, but if you go back to 2021 2022, the brand was generally around 4%.
Speaker Change: Discounts as a percent of sales.
Speaker Change: And we have taken steps to frankly pull that down a little bit as we stepped away from the discounts did the hard work that TJ referenced.
Speaker Change: So we actually saw that come down a little bit for a while there, but I think in part due to the strategic reasons that G. J referenced of look we want to get people and we know if we get them in and they're going to have a great experience and certainly partially in response to the competitive environment, we felt like.
Speaker Change: Taking a step back into that was the right thing to do to get people in get trial, and then confident our operators are going to earn their business to bring them back in the future.
Speaker Change: Got it.
Alex Slagle: Makes sense definitely having an impact.
Alex Slagle: On the.
Alex Slagle: The 70 underperforming units that you are taking a look at any.
Alex Slagle: Color on the math of what.
Alex Slagle: With that is to annual EBITDA.
Alex Slagle: Frame that up.
Alex Slagle: Yes.
Alex Slagle: We gave the.
Speaker Change: The 215 basis point drag in the prepared comments, Alex I'm sure you picked that up if you just look at those 70 restaurants on a trailing 12 month basis.
Speaker Change: The restaurant level <unk>.
Speaker Change: <unk> Financial's point to a loss of a little over $6 million. That's in terms of the income statement. There is obviously capex that is allocated to those restaurants as well and so that's one that we're looking at we believe in those restaurants in some cases.
Speaker Change: And challenged geography are challenged locations I should say.
Speaker Change: But we believe in our operators there were supporting them as they execute a plan to turnaround those restaurants, but it is one that obviously, we're keeping a close tab on.
Speaker Change: Alright, thanks very much.
Alex Slagle: Okay.
Speaker Change: The next question is from Mark Smith from Lake Street Capital. Please go ahead.
Mark Smith: Hey, guys you got al extending from the life remarks that today first one for me.
Mark Smith: Just wondering if you could give any more breakdown on the comps here in the first couple of weeks in Q4, just traffic price and then also.
Alex Slagle: Any changes in consumer behavior, you are seeing any additional color you can give us would be great.
Todd Brooks: Yeah, Hey, Alex Todd here.
Alex Slagle: Point you to the.
Alex Slagle: Comments I had in my script.
Alex Slagle: Our prepared remarks of really our guidance for Q4 is very much grounded in what we've seen in the first four weeks, meaning over these first four weeks of the quarter traffic has been down about 4% and the overall PPA, meaning inclusive of menu prices and discounts has been up about 6% for a net 2%.
Alex Slagle: Through the first four weeks now keep in mind that deferred loyalty impact that I've talked about but in terms of business trends.
Alex Slagle: PPA in traffic.
Alex Slagle: That is very much reflective of what we've seen in the first four weeks here.
Speaker Change: Yes, I would say that we haven't seen any major changes in consumer behavior.
Speaker Change: But we are very optimistic given what we've talked about here on the loyalty platform.
Alex Slagle: Repeat visits the frequency that's going up.
Alex Slagle: We're really pleased with those numbers. So we do anticipate that we will continue to build momentum and I think now that the elections behind US I think we will we will start to see some stability and some confidence come back into consumers. So we're somewhat optimistic in terms of the rest of this quarter.
Speaker Change: Got it that's helpful and then last one for me.
Speaker Change: Just in terms of the restaurant level margins on a forward looking basis, just curious on the challenges that you're seeing but also curious on any lenders do you think you can pull we can see these margins go higher into 2025.
Speaker Change: Yes so.
Speaker Change: Well first and foremost driving positive traffic is going to improve sales. So that's first and foremost we're continuing to we made comments around our productivity relative to labor and we are very optimistic with our relaunch of HUD schedules with the teams the operating teams really drilling down.
Speaker Change: Getting more trained from where we were on a lot of the hiring and the investments we made over the last 18 months. So we're happy with those trends. We'll so we'll continue to see improvement there in terms of controllable expenses. We continue to monitor every single line item. We've done a really really good job in our supply chain group of reducing cost things.
Speaker Change: Like utility costs et cetera, and a fairly inflationary environment. So we're pleased that we believe we still have some room around that.
Speaker Change: Also optimistic around our third party business, we've learned that how we need to invest to make sure that we're getting the right placement within the third party providers, we're seeing big improvement. There. So we think that will help us as well.
Speaker Change: Then lastly is just continuing to be very prudent and diligent around our G&A expenses and being very very careful in terms of how we invest our marketing dollars, making sure that we have an ROI associated with that so all of those things said, we're optimistic and again, we mentioned that we need to see improvement in those bottom 70 restaurants because there.
Speaker Change: Pulling down the system 215 basis points. So you put all that together and we think we've got a nice nice way and pathway to improve margins pretty significantly.
Speaker Change: Excellent. Thank you guys.
Speaker Change: Thank you.
Speaker Change: The next question is from Jeremy Hamblin from Craig Hallum Capital Group. Please go ahead.
Speaker Change: Hey, guys move for us where again in for Jeremy today.
Speaker Change: I guess looking ahead to the holiday season, what is the typical seasonality in Q4.
Speaker Change: In terms of business that comes before Thanksgiving.
Speaker Change: Versus those last five weeks of the holiday period.
Speaker Change: Yeah, Hey will it's certainly youre alluding to it clearly in your question, it's certainly a back loaded quarter, meaning the vast majority of the certainly the profitability comes in that final call. It Thanksgiving to Christmas window, or really new year's window.
Speaker Change: We are in a period that for our business at least our seasonality is one that really does trough in Q3. So we are coming back up out of that but.
Speaker Change: But it really does kick in and those last 456 weeks of the year as I say that you may be alluding to Thanksgiving is obviously late this year and I know thats been a topic across retail as we look back at us.
Speaker Change: Not one that that we feel like is a significant shift for our business, but it is something we've looked at.
Speaker Change: Great and then.
Speaker Change: In regards to the loyalty program kind of from a marketing perspective.
Speaker Change: How does.
Speaker Change: How does this impact your kind of overall marketing budget.
Speaker Change: Yes.
Speaker Change: Well, it's all part of.
Speaker Change: The overall spend within the marketing budget, but it's certainly a much more efficient because we have the ability to be very targeted in our messaging, which we historically have not been able to do we talked about that in our prepared comments and so.
Speaker Change: It's certainly more efficient than doing the more traditional media type work.
Speaker Change: Great. Thanks.
Speaker Change: Thank you.
Speaker Change: The next question is from Andrew Wolf from C. L. King. Please go ahead.
Andrew Wolf: Great. Thank you good afternoon.
Andrew Wolf: I just wanted to follow up on the same store sales.
Speaker Change: Improvement.
Speaker Change: And trend.
Speaker Change: Good evening.
Speaker Change: Heard from others.
Speaker Change: Food service channels.
Speaker Change: More recently there has been some strengthening in their trends versus earlier in the October to now.
Speaker Change: Is that the case for Red Robin or was it your the number you are giving us a little more smooth between to.
Speaker Change: At the beginning of the quarter fourth quarter, and where you are.
Speaker Change: Where things are now.
Speaker Change: No we're seeing the same thing.
Speaker Change: Okay. Good.
Speaker Change: Would you care to expand how much differential there is on that.
Speaker Change: Or just what you said.
Speaker Change: Hey, Andy Todd here, I think probably at this point I would say, we're we're pleased to see the first four weeks up 2% in terms of same store sales again, excluding that loyalty adjustment I talked about I don't want you to miss that.
Speaker Change: I think we're pleased to see.
Speaker Change: Up to and look we'll take it one day at a time one step at a time and we'll talk to unit and a couple of months here, but we're optimistic with the path that we're on for Q4.
Speaker Change: Okay.
Speaker Change: Could you just expand a little on the operations changes in the restaurants.
Speaker Change: Like how you are measuring.
Speaker Change: Efficiency or savings are.