Q1 2025 Red Robin Gourmet Burgers Inc Earnings Call
Good afternoon, everyone and welcome to the Red Robin Gourmet Burgers incorporated first quarter 2025 earnings call. This conference is being recorded during management's presentation and in response to your questions. We will be making forward looking statements about the company's business outlook and expectations. These forward looking statements.
Operator: Good afternoon, everyone and welcome to the Red Robin Gourmet Burgers Incorporated first quarter 2025 earnings call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward looking statements about the company's business outlook and expectations.
Operator: These forward looking statements and all of the statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the company's SEC Management will also discuss non-GAAP financial measures as part of today's conference. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release.
All of the statements that are not historical facts reflect.
These beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the company's SEC filings management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally generally accepted accounting principles, but are intended.
To illustrate alternative measures of the company's operating performance that maybe useful reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the car.
Our news release.
Operator: The company has posted its first quarter 2025 earnings release on its website at ir.redrobin.com.
The company has posted its first quarter of 2025 earnings release on its website at IR director.
Now I would like to turn the call over to Red Robin's, President and Chief Executive Officer database.
Dave Fahey: Now, I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Fahey. Good afternoon, everyone. And thank you for your interest in Red Robin.
Speaker Change: Good afternoon, everyone and thank you for your interest in Red Robin let.
Speaker Change: Let me begin by sharing how energized I am to be here as the CEO of Red Robin.
Dave Fahey: Let me begin by sharing how energized I am to be here as the CEO of Red Robin. Although new to the executive team, I've served as chairman of the board since 2019, and have been well versed in our turnaround plan to make this beloved brand relevant again. Under GJ's leadership and North Star plan, we made critical investments while also taking steps to reduce overall operating costs. The focus on elevating the guest experience while building a winning culture has been integral to establishing a foundation upon which we can grow.
Although new to the executive team have served as chairman of the board since 2019 and had been well versed in our turnaround plan to make this beloved brand relevant again.
Speaker Change: Under <unk> leadership in this North Star plan, we made critical investments, while also taking steps to reduce overall operating costs.
Speaker Change: The focus on elevating the guest experience while building a winning culture has been integral to establishing a foundation upon which we can grow.
Dave Fahey: I intend to continue to build upon this progress, and I'll walk through my initial priorities, an area of focus, later in the call. To that end, I want to personally thank G.J. for all that he's done for Red Robin during his tenure, both as CEO and as a member of the board. He and I have built a trusted, longstanding relationship, and I appreciate his willingness to collaborate during this transitional period to best position the company for its next chapter.
Speaker Change: We intend to continue to build upon this progress and I'll walk through my initial priorities and areas of focus later in the call.
Speaker Change: Did that end I want to personally thank TJ for all he's done for Red Robin during his tenure, both as CEO and as a member of the board.
Speaker Change: <unk> built a trusted longstanding relationship and I appreciate his willingness to collaborate during this transitional period.
Speaker Change: To best position the company for its next chapter.
Speaker Change: With that Jay will now provide a brief recap of our progress Todd will then review our first quarter results before I dive into our initial go forward thoughts and priorities for Red Robin.
G.J.: With that, G.J. will now provide a brief recap of our progress.
Todd: Todd will then review our first quarter results before I dive into our initial go-forward thoughts and priorities for Red Robin.
Jay: Thank you, Dave and good afternoon, everyone.
G.J.: Thank you, Dave.
G.J.: And good afternoon, everyone. I would also like to echo Dave's optimism for the future of Red Robin. I'm very proud of what our team has accomplished over the past two and a half years. Through their hard work and dedication, we successfully laid the foundation for our comeback journey.
Speaker Change: I would also like to Echo Dave's optimism for the future of Red Robin I'm very proud of what our team has accomplished over the past two and a half years through their hard work and dedication we successfully laid the foundation for a comeback journey.
Speaker Change: Let me quickly recap some of what we accomplished over the past two and a half years to put the company in a position to drive long term shareholder value and enhance red Robin its competitive positioning.
G.J.: Let me quickly recap some of what we accomplished over the past two and a half years to put the company in a position to drive long term shareholder value and enhance Red Robin's competitive position. First, we took steps to make Red Robin an operations-focused company through our Managing Partner Program, which incentivizes our restaurant leaders to deliver strong and balanced financial results. Second, we elevated the guest experience through investments and upgrades in both food and hospitality. From rolling out flattop grills to deliver a thicker, juicier, and more flavorful burger to upgrading our bar menu and bringing back industry best practice staffing models, we are seeing tangible proof that our guests have begun to recognize and appreciate our efforts.
Speaker Change: First we took steps to make red Robin and operations focused company, who are managing partner program, which incentivizes, our restaurant leaders delivered strong and balanced financial results.
Speaker Change: Second we elevated the guest experience through investments and upgrades in both food and hospitality.
Speaker Change: Rolling out flat top girls to deliver a thicker juicier and more flavorful burger to upgrading our bar menu and bringing back industry best practice staffing models, we are seeing tangible proof that our guests have begun to recognize and appreciate our efforts there.
G.J.: Third, we optimize guest engagement through our relaunched loyalty program in 2024, allowing our guests to earn a reward much faster and encouraging more frequent visitation to capitalize on their earned reward. The revamped Red Robin Royalty Program has continued to spur membership growth with approximately 15.3 million members at the end of the first quarter. And lastly, we drove growth in comparable restaurant revenue and unit level profitability in both the fourth quarter of 2024 and the first quarter of 2025.
Speaker Change: Third we optimized guest engagement through our relaunch loyalty program in 2020 for allowing our guests and reward much faster and encouraging more frequent visitation to capitalize on their rewards.
Speaker Change: The revamped Red Robin royalty program has continued to support our membership growth with approximately $15 3 million members at the end of the first quarter and.
Speaker Change: And lastly, we drove growth in comparable restaurant revenue and unit level profitability in both the fourth quarter of 2024, and the first quarter of 2025 on our last call in February I shared that in 2025, we expect to become meaningfully more efficient and productive with our labor costs.
G.J.: On our last call in February, I shared that in 2025, we expect to become meaningfully more efficient and productive with our labor costs. Todd will expand on this in a moment, but I'm proud of the work the team accomplished to deliver on this goal in the first quarter, and I'm confident it will continue from here.
Speaker Change: Todd will expand on this in a moment, but I'm proud of the work the team accomplished to deliver on this goal in the first quarter and I am confident that will continue from here.
Speaker Change: In closing it has truly been a privilege to lead such an iconic brand over the past two and a half years with key elements of our plan now in place and we have delivered strong financial results in the first quarter we.
G.J.: In closing, it has truly been a privilege to lead such an iconic brand over the past two and a half years. With key elements of our plan now in place, and we have delivered strong financial results in the first quarter, we have reached a natural transition point in Red Robin's transformation, and I am confident the company is in great hands with Dave to lead the next phase of this journey.
Speaker Change: We have reached a natural transition point in Red Robin's transformation and I'm confident the company is in great hands with Dave to lead the next phase of this journey.
Todd Wilson: And with that, I'll turn the call over to Todd to walk you through the financial performance. Thank you, GK, and good afternoon, everyone. In the first quarter, total revenues were $392.4 million versus $388.5 million in the first quarter of fiscal 2024. The increase is due primarily to a comparable restaurant revenue increase of 3.1%, led by a 6.8% increase in net menu price, outweighing a 3.5% decline in guest traffic. Restaurant-level operating profit as a percentage of restaurant revenue was 14.3%, an increase of 330 basis points compared to the first quarter of 2024.
Speaker Change: And with that I'll turn the call over to Todd to walk you through the financial performance.
Todd: Thank you Jay and good afternoon, everyone.
Todd: In the first quarter total revenues were $392 $4 million versus $388 $5 million in the first quarter of fiscal 2024. The increase is due primarily to a comparable restaurant revenue increase of three 1% led by a six 8% increase in net menu price.
Speaker Change: Outweighing, a three 5% decline in guest traffic.
Speaker Change: Strong level operating profit as a percentage of restaurant revenue was 14, 3% an increase of 330 basis points compared to the first quarter of 2024.
Todd Wilson: If you recall, one of our focus areas for 2025 is to become meaningfully more efficient with our labor costs. We're pleased with our results in the first quarter as our operators delivered traction faster than we expected. Congratulations to our operations team on this progress, and thank you for all of the hard work that goes into delivering these gains. General administrative costs were $27 million as compared to $25.8 million in the first quarter of 2024. Selling expenses were $9.4 million, a decrease as compared to $13.5 million in the first quarter of 2024. The decrease results primarily from a reduction in media in the quarter, overlapping a marketing test last year.
Speaker Change: If you recall one of our focus areas for 2025 is to become meaningfully more efficient with our labor costs were pleased with our results in the first quarter as our operators delivered traction faster than we expected.
Speaker Change: Graduations to our operations team on this progress and thank you for all of the hard work that goes into delivering these gains.
Speaker Change: General and administrative costs were $27 million as compared to $25 $8 million in the first quarter of 2024.
Speaker Change: Selling expenses were $9 $4 million, a decrease as compared to $13 $5 million in the first quarter of 2020 for.
Speaker Change: The decrease results primarily from a reduction in media in the quarter overlapping a marketing test last year.
Speaker Change: Adjusted EBITDA was $27 $9 million in the first quarter of 2025, an increase of $14 $5 million versus the first quarter of 2024.
Todd Wilson: Adjusted EBITDA was $27.9 million in the first quarter of 2025, an increase of $14.5 million versus the first quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains throughout the P&L, and particularly in labor, and the benefit of menu pricing.
Speaker Change: Adjusted EBITDA increased due to cost efficiency gains throughout the P&L and particularly in labor and the benefit of menu price increases.
Todd Wilson: We ended the first quarter with $24.2 million of cash and cash equivalents, $9.1 million of restricted cash, and $35 million available borrowing capacity under our revolving line of credit. As I shared on our last call, one of our financial priorities in 2025 is to position the company to refinance the term loan that matures in the first quarter of 2027. During the first quarter, we used free cash flow we generated, coupled with approximately $5.8 million of gross proceeds from monetizing three owned properties to repay approximately $17.8 million of debt. This resulted in an outstanding principal balance under the credit agreement at quarter ends of $171.7 million.
Speaker Change: We ended the first quarter with $24 $2 million of cash and cash equivalents $9 $1 million of restricted cash and $35 million available borrowing capacity under our revolving line of credit.
Speaker Change: As I shared on our last call one of our financial priorities in 2025 is to position the company to refinance the term loan that matures in the first quarter of 2027.
Speaker Change: During the first quarter, we used free cash flow, we generated coupled with approximately $5 $8 million of gross proceeds from monetizing three owned properties to repay approximately $17 $8 million of debt.
Speaker Change: This resulted in an outstanding principal balance under the credit agreement at quarter end of $171 $7 million.
Speaker Change: Turning to our outlook, we will now provide the following guidance for 2025.
Todd Wilson: Turning to our outlook, we will now provide the following guidance for 2025. First, total revenue of between $1.21 to $1.23 billion, as compared to our prior guidance of $1.225 to $1.25 billion. This incorporates expectations that annual comparable restaurant sales will be generally unchanged at approximately 0% and we will end 2025 with 393 company owned restaurants in operation. Second, restaurant level operating profit of 12 to 13% in line with our prior guidance. Third, adjusted EBITDA of $60 to $65 million, also in line with our prior guidance. And finally, capital expenditures of approximately $30 million, as compared to $25 to $30 million previously.
Speaker Change: First total revenue of between one point to one to $1 billion to $3 billion as compared to our prior guidance of one point to $251 billion to $5 billion.
Speaker Change: This incorporates expectations that annual comparable restaurant sales will be generally unchanged at approximately zero percent.
Speaker Change: We will end 2025 with 393 company owned restaurants in operation.
Speaker Change: Second restaurant level operating profit of 12% to 13% in line with our prior guidance.
Speaker Change: Third adjusted EBITDA of $60 million to $65 million also in line with our prior guidance.
Speaker Change: And finally capital expenditures of approximately $30 million as compared to <unk> $25 million to $30 million previously.
Speaker Change: While our first quarter results exceeded our expectations, we have pared back our outlook for the remainder of the year due to the broader macro and consumer environment our.
Todd Wilson: While our first quarter results exceeded our expectations, we have pared back our outlook for the remainder of the year due to the broader macro and consumer environment. Our guidance includes an expectation that guest traffic trends from the past few months continue for the remainder of the year. We've also included a cost headwind based on current tariff policy. I would note we are not planning any menu price increases in the remainder of 2025. We anticipate absorbing the current expected impact of tariffs as we prioritize maintaining value for our guests. The great work of our operators to capture cost savings greater than we initially planned supports this approach.
Speaker Change: Our guidance includes an expectation that guest traffic trends from the past few months continue for the remainder of the year.
Speaker Change: We've also included a cost headwind based on current tariff policies I would note we are not planning any menu price increases and the remainder of 2025, we anticipate absorbing the current expected impact of tariffs as we prioritize maintaining value for our guests.
Speaker Change: The great work of our operators to capture cost savings greater than we initially planned supports this approach.
Speaker Change: For the second quarter I'd like to remind everyone that with the launch of our new loyalty program last year. We received a 220 basis point benefit to our reported comparable restaurant sales in the second quarter of 2024 from changes in royalty revenue.
Todd Wilson: For the second quarter, I'd like to remind everyone that with the launch of our new loyalty program last year, we received a 220 basis point benefit to our reported comparable restaurant sales in the second quarter of 2024 from changes in loyalty revenue. We expect this not to occur in 2025, representing an approximate 240 basis point headwind for our second quarter of 2025 comparable restaurant sales. For modeling purposes, we expect comparable restaurant sales in the second quarter, inclusive of this headwind, and with less benefit from menu price increase in the second quarter than the first, will decline approximately 3%.
Speaker Change: We expect this not to recur in 2025, representing an approximate 240 basis point headwind for our second quarter of 2025 comparable restaurant sales.
Speaker Change: For modeling purposes, we expect comparable restaurant sales in the second quarter inclusive of this headwind.
Speaker Change: And with less benefit from menu price increase in the second quarter than the first will decline approximately 3%.
Todd Wilson: We do not expect loyalty revenue will have a meaningful impact on comparable restaurant sales in the third or fourth quarter.
Speaker Change: We do not expect royalty revenue will have a meaningful impact on comparable restaurant sales in the third or fourth quarter.
Dave: Before I turn the call back to Dave.
Todd Wilson: Before I turn the call back to Dave, on behalf of over 20,000 Red Robin team members across the country, I would like to extend a very heartfelt thank you to GJ. In senior leadership positions, we are stewards of the business for as long as we have the privilege to lead. I am certain the Red Robin business and our people are better for you having led this For me personally, it's been an honor to be your partner.
Speaker Change: On behalf of over 20000, Red Robin team members across the country I would like to extend a very heartfelt. Thank you to D. J.
Dave: In senior leadership positions, we are stewards of the business for as long as we have the privilege to lead.
Dave: I am certain the red Robin business and our people are better for you having led this company.
Dave: For me personally it's been an honor for your partner. Thank you.
Todd Wilson: Thanks.
Dave: Dave I'll turn the call back to you.
Dave Fahey: Dave, I'll turn the call back to you. Thanks, Todd. Well, we're pleased with the headlines of our first quarter financial results. We're far from claiming victory, and there's still more work to be done as we continue the comeback journey of Red Robin.
Dave: Thanks, Todd well, we're pleased with the headlines of our first quarter financial results were far from claiming victory and there's still more work do we don't be done as we continue to come back journey of Red Robin.
Dave Fahey: I've spent my initial four weeks meeting with the team, speaking with franchisees, visiting our restaurants, and digging into every aspect of our business. I'm confident our team is energized by the changes we've implemented in the last two years and they look forward to continuing the progress in the next chapter of transformation at Red Robin. Overall, our operational foundation is much stronger, led by the improvements the company's made in food quality and hospitality. Importantly, our overall guest satisfaction scores showcase that our guests are recognizing these improvements. That said, as I've come up to speed over the past month, I still see room for improvement in certain areas of the guest experience, and we'll work to address those quickly.
Dave: Spent by initial four weeks meeting with the teams speaking with franchisees visiting our restaurants and digging into every aspect of our business.
Dave: I'm confident our team is energized by the changes we've implemented in the last two years and they look forward to continuing the progress in the next chapter of transformation at Red Robin.
Dave: Overall, our operational foundation is much stronger led by the improvements the company has made in food quality and hospitality.
Dave: Importantly, our overall guest satisfaction scores showcase that our guests are recognizing these improvements.
Dave: That said as I've come up to speed over the past month, I still see room for improvement in certain areas of the guest experience and we will work to address those quickly are.
Dave Fahey: Our opportunity as we move ahead is to maintain the improvements we've made in the guest experience while putting strategies in place to drive sustainable growth in restaurant traffic and corresponding gains in profitability.
Dave: Our opportunity as we move ahead is to maintain the improvements we've made in the guest experience, while putting strategies in place to drive sustainable growth in restaurant traffic and corresponding gains and profitability.
Dave: Does that Ed I'd like to provide you with my initial high level priorities for Red Robin in 2025 and beyond.
Dave Fahey: To that end, I'd like to provide you with my initial high-level priorities for Red Robin in 2025 and beyond. First, it's imperative that we retain and extend the progress that's been made in our operational execution, delivering a high-quality guest experience while also improving our operating efficiency. Second, it's critically important that we return Red Robin to sustainable traffic growth, and this begins with how we engage with the guest. We must creatively cut through the noise in today's marketplace and be bold when we see opportunity. In the near term, I'm working to ensure that we have the right marketing leader and strategy in place to restore Red Robin as the first choice option for consumers.
Dave: First it's imperative that we retain and extend the progress thats been made in our operational execution delivering a high quality guest experience, while also improving our operating efficiency.
Dave: Second it's critically important that we return red Robin's sustainable traffic growth and this begins with how we engage with the guest.
Dave: Creatively cut through the noise in today's marketplace and be bold when we see opportunities.
Dave: In the near term and working to ensure that we have the right marketing leader and strategy in place to restore Red Robin. This is the first choice option for consumers.
Speaker Change: Recently, Russ client has joined our team for a one year term to help us build our marketing foundation and strategy.
Dave Fahey: Recently, Russ Klein has joined our team for a one year term to help us build our marketing foundation and strategy. Russ brings us a widely recognized track record of success in effectively reconnecting well-known brands with their customer bases, and we're happy to have him. Third, we must work to strengthen our financial position by reducing debt and increasing free cash flow generation. This will allow us greater flexibility to take advantage of the investment opportunities to drive sustainable top line growth.
Speaker Change: It brings us a widely recognized track record of success in effectively reconnecting well known brands with their customer basis, and we're happy to have them.
Speaker Change: Third we must work to strengthen our financial position by reducing debt and increasing free cash flow generation.
Speaker Change: This will allow us greater flexibility to take advantage of the investment opportunities to drive sustainable topline growth.
Speaker Change: Fourth we must reinvest back in our restaurants, so the restaurant facilities and atmosphere match the upgrades, we've made to food quality and hospitality.
Dave Fahey: Fourth, we must reinvest back in our restaurants so the restaurant facilities and atmosphere match the upgrades we've made to food quality and hospitality. To generate the resources required for these efforts, we have many levers available. I'm encouraged by the team's demonstrated success removing costs throughout the P&L. We continue to see opportunity there, and I'm confident we'll capture additional benefits through their focused action. In addition, part of my initial onboarding effort has been to work with the team to evaluate even further opportunities.
Speaker Change: To generate the resources required for these efforts we have many levers available.
Speaker Change: <unk> by the teams demonstrated success removing costs throughout the P&L.
Speaker Change: We continue to see opportunity there and I'm confident we will capture additional benefits through their focused actions.
Speaker Change: In addition, part of my initial on boarding effort has been to work with the team to evaluate even further opportunities.
Speaker Change: Underlying all of this is an understanding that red Robin's core equity is providing everyday value and great food in a family friendly atmosphere.
Dave Fahey: Underlying all of this is an understanding that Red Robin's core equity is providing everyday value and great food in a family friendly atmosphere.
Speaker Change: I've shared initial thoughts here, but it's still too early for me to share full details after only four weeks on the job.
Dave Fahey: I've shared initial thoughts here, but it's still too early for me to share full details after only four weeks of the job. The team and I have already made great progress, and I look forward to sharing additional details in the coming months. I truly believe that at its core, the Red Robin brand is full of opportunity. Through focused efforts on our key priorities, I'm confident that we'll deliver significant value to both our guests and our shareholders.
Speaker Change: The team and I have already made great progress and I look forward to sharing additional details in the coming months.
Speaker Change: I truly believe that at its core the Red Robin brand is full of opportunity through focused efforts on our key priorities I'm confident we will deliver significant value to both our guests and our shareholders.
Operator: With that, we're now happy to take questions. Operator, please open the lines. Thank you.
Speaker Change: With that we're now happy to take questions. Operator, Please open the lines. Thank you.
Speaker Change: Thank you we will now be conducting a question and answer session.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.
Speaker Change: To ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Operator: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star 2.
Todd Brooks: One moment, please, while we pull for Our first question comes from the line of Todd Brooks with the Benchmark Company. Please proceed with your question. Hey, thanks for taking my question. GJ, thanks for all you've done for the brand and Dave. Glad to get to know you as the baton gets passed for the next leg of the journey. Thank you, Todd. Thanks, Todd. I just wanted to lead off, and it's... It's a question about the profitability that you guys were able to generate in Q1. I know, Todd, you talked about some anticipated pressure from eating tariffs versus pricing for them on the menu.
Speaker Change: One moment, please pool for questions.
Speaker Change: Our first question comes from the line of Todd Brooks with the Benchmark Company. Please proceed with your question.
Todd Brooks: Hey, Thanks for taking my question a J. Thanks for all you've done for the brand.
Speaker Change: Dave.
Speaker Change: Glad to get to know us.
Speaker Change: Time gets passed for the next leg of a journey here.
Todd: Thank you Todd Thanks, Todd.
Todd: I just wanted to lead off and it's it's it's a question about the profitability that you guys were able to generate in Q1.
Speaker Change: I know Todd you talked about.
Speaker Change: Hum.
Speaker Change: Some anticipated pressure from eating tariffs versus pricing for them on the menu that is in the 12% to 13%.
Todd Brooks: That's in the 12 to 13 percent guidance range for restaurant-level margin, but obviously that's a very fluid situation as well. So I just wanted to understand the efficiency that you generated in the first quarter, but kind of maintaining that full-year guidance in the 12 to 13 percent range.
Todd: Guidance range for restaurant level margins, but obviously, that's very clear.
Todd: Fluid situation as well so.
Todd: Just wanted to understand the efficiency that you generated in the first quarter, but kind of maintaining that full year guidance in the 12%, 13% range is that purely the tariff pressure or is there something else in there as well.
Todd Wilson: Is that purely the tariff pressure, or is there something else there?
Todd: Yeah, Todd Hey, Todd Wilson here, good to talk to you.
Todd Wilson: Yeah, Todd, hey, Todd Wilson here. Good to talk to you. Yeah, a few things I think I'd call out there of, you know, one, we were really encouraged in Q1. And that's part of the way that we beat, it's frankly, the primary way that we beat our profit expectation in Q1. Our team really got after labor quickly. And we saw a lot of fast progress there faster than we expected. So that's been really encouraging. I would call it as well. We've watched guest satisfaction scores to make sure we're not giving up anything there. And our overall satisfaction scores continue very strong.
Speaker Change: Yes, a few things I think I'd call out there.
Speaker Change: One we were really encouraged in Q1, and that's part of the way that we beat its frankly, the primary way that we beat our profit expectation in Q1, our team really got after labor quickly and we saw a lot of fast progress there faster than we expected. So that's been really encouraging I would call out as well we've watched guest satisfaction scores to make sure we're not giving up.
Speaker Change: Anything there and our overall satisfaction scores continued very strong so that's very encouraging.
Todd Wilson: So that's very To your question, though, as we thought about the balance of the year, traffic, you may have seen in the press release, traffic in the first quarter was down 3.5 points. We talked about it last time. The front half of Q1 was stronger. We anticipated that. We saw that kind of normalize in the back half of Q1. And so it kind of carried forward a down 4 traffic rate through the balance of the year. That's a haircut to what we had in our original expectations. And so that's what's that plus the tariff, which you alluded to.
Speaker Change: Yes to your question, though as we thought about the balance of the year.
Speaker Change: Traffic you may have seen in the press release traffic in the first quarter was down three five points.
Speaker Change: We talked about it last time the front half of Q1 was stronger we anticipated that we saw that kind of normalize in the back half of Q1, and so it kind of carried forward a down for traffic rate through the balance of the year. That's a that's a haircut to what we had in our original expectations and so thats whats that plus the tariffs.
Speaker Change: Which you alluded to but it's really just a I think a prudent haircut on the topline that's.
Todd Wilson: But it's really just, I think, a prudent haircut on the top line that's what's driving us to hold the guidance for the year. The other piece as well is we're still early in the year, right? We've got a long way to go here. It's important to us that when we put out a number, we're confident we're going to deliver it. And so you'll see us be prudent there. But those are really the moving parts of traffic and the tariff. Okay, great.
Speaker Change: That's what's driving us to hold the guidance for the year. The other piece as well as we're still early in the year right. We've got a long way to go here. It is important to us that when we put out a number we're confident we're going to deliver it and so you'll see us be prudent there, but those are really the moving parts of traffic and the tariffs.
Speaker Change: Okay, Great and then another one for Todd if I can.
Todd Wilson: Another one for Todd, if I can. Can you walk through, you talked about menu price contribution, water falling as the year goes on. Can you walk through how that proceeds for Q2, Q3, and Q4? Yeah, Todd, we have talked about this before. And as you really kind of look at that progression through the year, we were almost seven points of contribution in Q1. And we do expect that that'll wind down through the year. As we said on the call, we don't anticipate taking any further pricing action this year. When you look at the quarterly sequencing, I'll talk in terms of just total check growth.
Speaker Change: You walked through you talked about menu price contribution water falling as the year goes on can you walk through how that proceeds for Q2 Q3 into Q4.
Speaker Change: Yeah, Todd we have talked about this before.
Speaker Change: And as you really kind of look at that progression through the year, we were almost seven points of contribution in Q1, and we do expect that that will wind down through the year.
Speaker Change: As we said on the call we don't anticipate taking any further pricing action. This year. When you look at the quarterly sequencing I'll talk in terms of just total check growth when you put price mix discounts altogether, we're looking for about 4% check growth in Q2, 4% in Q3 and then it's.
Todd Wilson: When you put price, mix, discounts all together, we're looking for about 4% check growth in Q2, 4% in Q3. And then as pricing falls off, it'll be about 2%. And Q4 is our expectation.
Speaker Change: Pricing falls off it'll be about 2% in Q4 is our expectation.
Speaker Change: Okay. Thanks, and then one more strategic question and I'll hop back in queue.
Todd Brooks: Okay, thanks.
Todd Brooks: And then one more strategic question, and I'll hop back in queue. If We're getting close to being a year into the changes in the loyalty program. If you guys look at the results so far. It seemed like really kind of encouraging results out of the gate and we've still seen growth in the program. But have the unlocks around frequency played out the way you expected or either G.J. on the way out or Dave on the way in? How much more opportunity is there to lever Red Robin Royalty more effectively in 2020?
Speaker Change: We're getting close to being a year into the changes in the.
Speaker Change: The loyalty program. If you guys look at the results.
Speaker Change: So far it seems like really kind of.
Speaker Change: Encouraging results out of the gate, we've still seen growth in the program.
Speaker Change: But happy unlocks around frequency played out the way you expected or either G. J on the way out or Dave on the way in.
Speaker Change: How much more opportunity is there to lever our red Robin royalty more effectively and 25.
Speaker Change: Yeah, Hey, Todd Yeah, I would tell you that we are we are seeing the same kind of increase that we talked about last quarter and I'll also tell you that.
Todd Wilson: Yeah, hey, Todd. Yeah, I would tell you that we are we are seeing the same kind of increase that we talked about last quarter. And I'll also tell you that, you know, some of these numbers like 22% of our visits are from lapsed users. That's a really good number in terms of our visits overall. And we're holding fairly close to new guests being 20% of our visits. So, you know, this program is really working.
Speaker Change: Some of these numbers like 22% of our visits are from lapsed users. That's a really good number in terms of our business overall, and we're holding fairly close to new guests being 20% of our visit. So this program is really working and I think as we dialed. This thing up further there's further.
Dave Fahey: And I think as we dial this thing up further, there's further opportunity here, but I'll let Dave. Yeah, let me just piggyback on I agree with him. I think there's still significant opportunity in the program, the strength of it, to grow it, and also to how we use it. I think there's an opportunity for us to, you know, be smarter about how we implement and use pieces of the program. Not that we've been bad at it. I think we're just learning and we're getting better as we go. So I think there's still significant upside there.
Speaker Change: <unk> here, but I'll, let Dave Yeah, Let me just piggyback on.
Dave: I agree with him I think there is still significant opportunity in the program and the strength of it to grow it and also to how we use it I think there is an opportunity for us too.
Speaker Change:
Speaker Change: Be smarter about how we implement and use the pieces of the program that we've been better at I think we're just learning and we're getting better as we go so I think there's still significant upside there.
Speaker Change: Okay, great. Thank you all.
Todd Brooks: Okay, great. Thank you all. Thanks, Todd.
unknown: Thanks Scott.
unknown: Thank you.
Speaker Change: Our next question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Jeremy Hamblin: Our next question comes from the line of Jeremy Hamblin with Craig Hallam Capital Group. Please proceed with your question. Hey, guys.
Speaker Change: Hey, guys. This is will on for Jeremy Thanks for taking my questions I guess I wanted to go back to the comp trends.
Will: This is Will on. Um, I guess I wanted to go back. Little weak one, stronger first half, little weaker second half. I guess, how should we think about. quarter-to-date traffic. follow up.
Speaker Change: So Q1 stronger first half a little weaker second half I guess.
Speaker Change: How should we think about.
Speaker Change: Quarter to date traffic and check and then to follow up on.
Speaker Change: Just curious on that the hot Honey L. T O and how that's kind of stacked up to you guys as expectations in testing.
Speaker Change: Hey will Todd here I'll start and then these guys will add and I'm sure yes.
Todd Wilson: Hey, Will, Todd here. I'll start and then these guys will add in, I'm sure. Yeah, as you think about the second quarter, you know, I just kind of talked through the the check side to Todd Brooks's question. You know, the traffic side, we really, we're thinking about the balance of the year on the traffic side and kind of a down four range. And that's consistent with what we saw to end Q1, as well as what we've seen to start the quarter here. So if you think about Q2, you've got that from traffic, you know, generally check will offset that.
Speaker Change: As you think about the second quarter, just kind of talk through the check side to Todd Brooks question.
Speaker Change: You know the traffic side, we really where we're thinking about the balance of the year on the traffic side and kind of a down four range and that's consistent with what we saw at the end Q1 as well as what we've seen to start the quarter here. So if you think about Q2, you've got that from traffic.
Speaker Change: Generally check will offset that.
Todd Wilson: And then I did call out on the prepared remarks, you know, the headwind from lapping some of the credits that we saw last year from the loyalty launch, right. So that's a, that's a key call out in Q2. It's more about what happened last year, but you'll see it in our reported Q2 number. So I'd say quarter to date trends are very consistent with that.
Speaker Change: I did call out on the prepared remarks, the headwind from lapping some of the credits that we saw last year from the loyalty launch right. So that's that's a key call out in Q2, it's more about what happened last year, but youll see it in our reported Q2 number so I would say quarter to date trends are very consistent with that and that's really what we based our guidance on is just kind of.
G.J.: And that's really what we based our guidance on is just kind of the real fact pattern that we're seeing right I'll jump in, in terms of the Hot Honey promotion, we're very happy with that promotion, it exceeded our expectations and feel great about it. Yeah, I'll just add to that. I think we feel good about the Hot Honey promotion, as G.J. said. That being said, I think we need to figure out ways to bend the curve on traffic. We know that, which is why we're focused on it, why it's one of the priorities that I mentioned in my remarks.
Speaker Change: The real fact pattern that we're seeing right now.
Speaker Change: I'll jump in in terms of the Adani promotion, we're very happy with that promotion that exceeded our expectations and feel great about it.
Speaker Change: Yes, I'll just add to that I think we feel good about the hot honey production as J J said that being said I think we need to figure out ways to bend the curve on traffic, we know that which is why we're focused on it. It's one of the priorities that I mentioned in my remarks.
Dave Fahey: So, you know, good work on it. But at the end of the day, we've got to bend that curve. And we know that. We're focused on how we do that.
Speaker Change: So.
Speaker Change: Good good work on it but at the end of the day, we've got to bend that curve and we know that we're focused on how we do that.
Speaker Change: Got it I appreciate the color there.
Speaker Change: And then as far as closures.
Todd Wilson: And then as far as closures, so I guess, how can we think about timing for the Yeah, Will, Todd here again. I think you heard that right. You know, I called out the 393 restaurants in the prepared remarks that we expect to end the year with. That would have us down 14 on the year in total. Yeah, the way we're thinking about it right now, we do see those relatively evenly spread through the remainder of the year. If we were to see a change there, I think it would certainly be for the better that we're able to accelerate some of these.
Speaker Change: It sounds like still expecting 10 to 15 for the year, maybe closer to that higher side of the range, but I guess, how can we think about timing for the balance of the year.
Speaker Change: Yeah, well Todd here again, I think you've heard that right I called out the 393 restaurants in the prepared remarks that we expect to end the year with.
Speaker Change: That would have us down 14 on the year in total.
Speaker Change: The way, we're thinking about it right now we do see those relatively evenly spread through the remainder of the year.
Speaker Change: If if we were to see a change there I think it would certainly be for the better.
Speaker Change: That we're able to accelerate some of these we've had some good luck.
Todd Wilson: We've had some good luck in discussions with landlords and a few cases, at least, that may give us an opportunity to move a little bit quicker there where it makes sense. But at this point, I'd say we think that that's spread throughout the remainder of the year pretty evenly.
Speaker Change: And discussions with landlords in a few cases at least that may give us an opportunity to move a little bit quicker there where it makes sense.
Speaker Change: But at this point I'd say, we think that that spread throughout the remainder of the year pretty evenly.
Dave Fahey: Let me add to Todd's point, separate from this on the 70 restaurant closures, the success that our operations team that we saw in the broad footprint of the business extended to those restaurants. And so we've made significant progress in improving the performance of many of the restaurants on that list. It's too soon to kind of say which ones are on or off, but we're encouraged by the progress that's been made and the improvement in performance. Quite a number of restaurants on that list that we've got.
Speaker Change: Let me add to Todd's point separate from this Sunday.
Speaker Change: 70 restaurant closures.
Speaker Change: <unk>.
Speaker Change: The success that our operations team that we saw in the broad footprint of the business extended to those restaurants and so we've made significant progress in improving the performance of many of the restaurants on that list. It's too soon to say, which ones are on or off but we're encouraged by the progress that's been made in the improvement in <unk>.
Speaker Change: Performance so.
Speaker Change: Quite a number of restaurants on that list that we've got so I just want to make sure we point that out.
Dave Fahey: So I just want to make sure we Understood.
Speaker Change: Yeah.
Speaker Change: Understood. Thank you guys.
Will: Thank you guys. Thanks, Will.
Speaker Change: Thanks, Paul.
Speaker Change: Thank you.
Alex Slagle: Our next question comes from the line of Alex Slagle with Jefferies. Please proceed with your question. All right, thank you. I'd like to extend my thanks to G.J. as well, and Dave, welcome to the call. Thanks, Alex. Appreciate it. What do you guys think?
Speaker Change: Our next question comes from the line of Alex Slagle with Jefferies. Please proceed with your question.
Alex Slagle: Alright. Thanks.
Speaker Change: I'd like to extend my thanks to G J as well and Dave welcome to the call.
Speaker Change: Thanks, Alex Alex Appreciate Ya man.
Speaker Change: What do you guys think like high level, we think about the handoff in leadership kind of leveraging each of your unique skill sets and yeah. We've seen a great Foundation put in place over the last couple of years, the North Star plan and as we transition Dave to your leadership at what really.
Dave Fahey: Like, high level, we think about the handoff in leadership, kind of leveraging each of your unique skill sets, and, you know, we've seen a great foundation put in place over the last couple of years, the North Star Plan, and as we transition, Dave, to your leadership, what really changes, or anything we should think about from this point forward? Yeah, I mean, I'll start off and I'll let GJ jump in. We're both smiling because it's, you know, we have a pretty close philosophy on how we think about restaurants. And so this has been a pretty smooth transition all the way around.
Speaker Change: Really change is there anything we should think about from this perspective going forward.
Speaker Change: Yeah, I mean, I'll start off and I'll, let Jay jump it we're both smiling because it's.
We have a pretty close philosophy on how we think about restaurants and so this has been a pretty smooth transition all the way around I want to say again, thanks to <unk> for the collaboration and the work we've done together on this.
Dave Fahey: I want to say again, thanks to GJ for the collaboration and the work we've done together on this. I think it's tonality, I think it's focus. I mean, G.J. came in and did the right things that this business required when he came in. It needed a reset on labor and operations focus, and he did that. He needed a reset on food, and he did that, and he needed a reset on culture, and he did that. He put all those things in place that anyone coming in would love to have as a foundation to build on, and I think that's how I look at it.
Speaker Change: I think its totality I think its focus I mean GJ came in and did the right things that this business required when he came in and it needed.
Speaker Change: Research on labor and operations focus and he did that he needed to.
Speaker Change: A reset on food and you did that and he needed a reset our culture and he did that he put all those things in place that that anyone coming in would love to have them as a foundation to build on it and I think that's how I look at it in terms of you know my areas of focus the things, we talked about and I don't think they're dramatically different from where G. J.
G.J.: In terms of my areas of focus, it's the things we talked about, and I don't think they're dramatically different from where G.J. was going, right? We're gonna figure out how to bend the curve on traffic. We're gonna hold serve on operations. We're gonna look to be the first choice for consumers when they wanna go out and have a burger. We're gonna give ourselves some financial flexibility on the balance sheet, and then we're gonna use some funds to fix the restaurants, and I think those are not a lot different than what you would have seen from G.J., and I think we can continue that ball forward and keep moving this business back, but I think those are the important points, and the way we got after them, I think, are the right sequence.
Speaker Change: Going right, we're going to.
Speaker Change: We're going to figure out how to bend the curve on traffic where in a hold serve on operations, we're going to look to be the.
Speaker Change: First choice for consumers when they want to go out and have a burger.
Speaker Change: We're going to give ourselves some financial flexibility on the balance sheet and then we're going to use some friends to fix the restaurants and I think.
Speaker Change: Those are not a lot different than what you would've seen from G. J and I think we can continue that ball forward and keep moving this business back, but I think those are the important points and the way we got after them I think are the right sequence.
G.J.: And I would just say, Alex, that, you know, Dave's been chair, he and I came on this board the very same day. And, you know, he's been along this ride and putting this North Star plan and certainly been in dialogue with him every week throughout my tenure here. So, as Dave said, I think we're, you know, we're not dramatically changing anything here. There's some additional focuses that he's going to have. But I think it's a it's a great place. And I think this transition is pretty special one. And it's worked out really, really well. That's helpful.
Alex Slagle: And I would just say Alex that.
Speaker Change: Dave has been chair Eni came on this board the very same day and.
Speaker Change: He has been along this ride in putting this north star plan and certainly been in dialogue with him every week throughout my tenure here. So as Dave said I think we're.
Speaker Change: We're not dramatically changing anything here theres. Some additional focuses that he's going to have but.
Speaker Change: I think it's a great place and I think this transition is pretty special wanted it's worked out really really well.
Speaker Change: Great that's helpful.
Dave Fahey: So what, what are your operator partners asking for lately?
Speaker Change: So what what are your operator partners asking for lately, just sort of what's the next big thing or big change they they'd like to see sort of the top of their list.
Dave Fahey: Just sort of what's the next big thing or big change they they'd like to see sort of top of their I'll take a shot at that first, since I just finished the tour not long ago. I think it's just continued investment in our facilities, which, you know, we continue to work on. And as we generate free cash flow, that's certainly a priority. And the second one is just continued investment in technology. As you know, we've been continually replacing and updating technology. And probably the one thing that they've asked for the most that we need to focus on, which is next on our priority list, which is server handhelds.
Speaker Change: I'll take a shot at that first since I just finished a tour.
Speaker Change: Long ago, I think it's just continued.
Speaker Change: Investment in our facilities, which we continue to work on and as we generate free cash flow that is certainly a priority and the second one is just continued investment in technology. As you know, we've been continually replacing and updating technology and probably the one thing that they've asked for the most that we need to focus on which is next on our <unk>.
Dave Fahey: Dirty list, which is server handhelds and Thats. The one area that I think is is would be most helpful to them to our server servers as well as to the company in total.
Dave Fahey: And that's the one area that I think would be most helpful to them, to our servers, as well as to the company in total.
Speaker Change: Yeah, I would echo that I was I also spent some time in restaurants in the first few weeks.
Dave Fahey: Yeah, I would echo that. I also spent some time in restaurants in the first few weeks. Those are some of the things that I heard operators, you know, want, they want, give them the tools to be successful. The tools to be successful included the things that they've been given, which are getting the labor and the hospitality right and getting the food right, giving me the technology that I need to run my restaurants, give me a good-looking restaurant that I'm proud to bring people into, and figure out how to connect with our consumers with compelling messaging and offers that drive traffic.
Speaker Change: Those are some of the things that I heard operators, what they want give them the tools to be successful the tools to be successful included the things that they've been given which are getting the labor and the hospitality right and getting the food right.
Speaker Change: The technology that I need to run my restaurants give me the a good looking restaurants at a proud to bring people into and figure out how to connect with our consumers with a compelling messaging and offers that drive traffic. That's what operators want they want to be successful and I think the other thing on that is to build on that.
Dave Fahey: That's what operators want. They want to be successful. And I think the other thing on that is to build on that is I think the output of the partner program that was put in place is that they'll be rewarded for that. They'll get the benefit of success if we give them the tools to be successful. Great. Thanks. Thanks for the color. I'll take that out.
Speaker Change: I think that the output.
Speaker Change: The partner program that was put in place is that there'll be rewarded for that they'll get the benefit of success, if we give them the tools to be successful.
Speaker Change: That's great. Thanks, Thanks for the color.
Speaker Change: Thanks, Ed.
Speaker Change: Thank you.
Mark Smith: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question. Hi guys. First off, any outlook on selling expenses and kind of your expected media spend through the rest of the year?
Speaker Change: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.
Mark Smith: Hi, guys.
Speaker Change: First off any outlook on selling expense sales didn't come to your expected media spend through the rest of the year.
Speaker Change: Yeah, Hey, Mark Todd here I'll take that.
Todd Wilson: Yeah, hey, Mark, Todd here. I'll take that. Yeah, I'd say, you know, our original guidance for the year was $30 million in selling, or it included $30 million in selling. And I would tell you that's generally unchanged. You know, with the Dave commented on it in his prepared remarks with Russ coming in to lead the team.
Speaker Change: Yeah.
Speaker Change: Our original guidance for the year was $30 million and selling or it included $30 million in selling and I would tell you that's generally unchanged.
Speaker Change: With the Dave commented on it in his prepared remarks with Russ coming in to lead the team as we think about the balance of the year. There is I'd say, a little bit of a breath to take so to speak to let him get and understand the opportunities in our business and really kind of reassess the marketing plan, but as we've modeled it we.
Todd Wilson: Yeah, as we think about the balance of the year, there's, I'd say a little bit of a breath to take, so to speak, to let him get in, understand the opportunities in our business, and really kind of reassess the marketing plan. But as we've modeled it, we think it's pretty consistent quarter to quarter from here. There may be some ebb and flow as kind of naturally happens in that line item.
Speaker Change: It's pretty consistent quarter to quarter from here, there may be some ebb and flow as kind of naturally happens in that line item, but we see getting to roughly that $30 million on the year pretty consistently through from Q2 through Q4 from here.
Mark Smith: But we see, you know, getting to roughly that $30 million on the year pretty consistently through from Q2 through Q4, Okay, and then please just remind us just what we have left as far as potential restaurant sales, how many that you guys own out there, and then, you know, in that same vein, just kind of your confidence in refinancing that debt and kind of maybe an outlook or timeline around when you think that could happen.
Speaker Change: Okay, and then just remind us just what we have left as far as potential restaurant sales, how many that you guys own out there and then.
Speaker Change: And that same thing just kind of your confidence in refinancing that debt and kind of maybe an outlook or timeline around when do you think that could happen.
Mark: Yes, Mark.
Todd Wilson: Yeah, Mark, we still own four properties. And so, you know, we, we monetized a large chunk of that with the sale lease backs over the last couple years. And then we we called it out, we did sell three properties in Q1. So, you know, I'd say we're always looking at opportunities there, right, you know, paying down debt, as Dave alluded to, is one of our key priorities. And so there's still some monetization opportunity there. But I would tell you nothing imminent, if opportunities arise, we'll capitalize them. But I would tell you nothing imminent.
Mark: We still own four properties and so we monetize the large chunk of that with the sale leasebacks over the last couple of years and then we called it out we did sell three properties in Q1, so yes.
Mark: We're always looking at opportunities there paying down debt.
Speaker Change: Dave alluded to was one of our key priorities and so theres still some monetization opportunity there, but I would tell you nothing eminent if opportunities arise, we'll capitalize on them, but I would tell you nothing eminent.
Todd Wilson: You know, in terms of the ability to refinance the loan, you know, quite plainly, I would tell you, I believe that on the on the back of a really strong quarter, like we just printed for Q1, you know, GJ and I've had had varying conversations with lenders over the past several months. And I'm optimistic that as I go revisit those conversations on the heels of these results, we'll see some traction there. I don't know that I want to put a timeline to the refinance. But at this point, you know, I think I've made it clear in the last couple quarters, it's certainly top of mind for us and me specifically.
Mark: In terms of the ability to refinance the loan quite plainly I would tell you I believe that on the back of a really strong quarter like we just printed for Q1.
Speaker Change: G J, an iPad had various conversations with lenders over the past several months.
Speaker Change: And I'm optimistic that as I go we'll revisit those conversations on the heels of these results we will see some traction there I don't know that I want to put a timeline to the refinance.
Speaker Change: But at this point I think I made it clear in the last couple of quarters, It's certainly top of mind for us and <unk>, specifically and so we'll continue to get updates there.
Mark Smith: And so we'll continue to give updates there and we'll balance speed with, you know, getting the attractive terms that we think are warranted for this business. But I expect we'll be talking about it on each call until we get across the finish line. Perfect. Thank you. Thanks.
Speaker Change: We'll balance speed with.
Speaker Change: Getting the attractive terms that we think are warranted for this business, but I expect we'll be talking about it on each call until we get across the finish line.
Speaker Change: Perfect. Thank you.
Mark: Thank you thanks Mark.
Mark: Thank you.
Operator: Thank you, and we have reached the end of the question and answer session.
Speaker Change: And we have reached the end of the question and answer session I would like to turn the floor back over to CEO, Dave pace for closing remarks.
Dave Fahey: I would like to turn the floor back over to CEO Dave Pace for a closing remark. Okay, folks, look, thanks for jumping on the call. We appreciate the opportunity to share our results and we look forward to talking to you more in the next couple months. So thank you. We'll talk to you soon. Thank you.
Speaker Change: Okay folks look thanks for jumping on the call. We appreciate the opportunity to share our results and we look forward to talking to you more in the next couple of months. So thank you and we'll talk to you soon.
Speaker Change: Thank you and ladies and gentlemen. This does concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Operator: And ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.
Speaker Change: Okay.
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