Why Red Robin is struggling today and caught in a downward sales spiral involves a number
of issues.
It's time to investigate what's going on with this burger mainstay and find out what they're
doing to put their beef back on the business track.
Here are some of the real reasons Red Robin is struggling to stay open.
Red Robin had a tough time getting people in the door and into its booths in 2018.
In fact, its dine-in traffic for the year was down 4.2 percent.
Red Robin's CEO and president Denny Marie Post said the decline in dine-in customers
was certainly the biggest issue facing the company, but some locations were feeling that
hurt even more than others.
The dine-in decline was particularly apparent when it came to the company's mall locations,
where sales were down 5.5 percent versus only a 3.6 percent drop in non-mall restaurants.
Post added that those locations accounted for about 16 percent of their base, and that's
a big problem.
Is there a solution?
Post has said:
"We continue to focus on improving the performance of certain challenged mall locations [...]. We've
seen this get worse now three quarters in a row…. [the decline] has us looking with
greater urgency at that element of our portfolio."
No one wants to wait 20 minutes for a table and another 20 minutes for their meal.
Red Robin's wait times have increased and it's driving away the company's potential
dine-in customers and sending them off to find their burger fix elsewhere.
"Hey, get in line.”
“But I don't like waiting in lines."
The company estimates that as much as 75 percent of its drop in dine-in traffic happened during
peak hours, and increasing wait times are very much to blame for that drop.
The time for a customer to get their meal once they've ordered has increased by a minute,
as did the time to be seated.
A mere 60 seconds might not seem like a lot of time, but it adds up and results in a pretty
big increase of customers walking away.
When you're hungry, you don't want to wait.
Post said that year-after-year, those increases pushed Red Robin's walkaway numbers up by
a whopping 85 percent.
It doesn't take a business genius to figure out that when that many people walk in your
doors and then walk right back out, you had better change up the game plan quickly or
your days are numbered.
Adding new tech is one way companies keep up with the times.
But Red Robin's efforts to streamline its business with new technology haven't always
worked out in the restaurant's favor.
Faced with the minimum wage increases that took effect in 18 states in January 2018,
Red Robin opted to offset the rise in labor costs by ditching all of its busboys.
You know -- the people who clean the tables.
The solution was to use a kitchen display technology system dubbed Maestro that reshaped
the server's role.
It was now the server's duty to clean the table, and spoiler alert: things didn't pan
out smoothly.
Initially, industry insiders praised the move, as it would save Red Robin $8 million over
one year's time.
However, it resulted in a slowdown of tables being cleared and a jump in guest complaints.
Red Robin's CEO confessed:
"Unfortunately, we did not execute this well at all.
And it impacted us most during peak periods."
Cutting out a job position and shifting the weight over to servers might have saved the
company money up front, but it only increased the number of people choosing not to dine
in-house.
It was a mistake they couldn't afford to make.
Burgers are big business, and the industry keeps growing to satisfy Americans' burger
cravings.
According to Food Business News, 44 percent of sandwich sales in the United States in
2016 were attributed to burgers.
The burger industry has seen both a rise in chains as well as independent burger joints,
and that means more competition for restaurants like Red Robin.
And unfortunately for them, there's big competition coming from fast food chains offering more
premium burgers.
For example, McDonald's rolled out their "Signature Crafted Recipe burgers" and even Jack in the
Box has launched some delicious-looking new menu offerings.
The beefed up burgers from fast food competitors contributed to Red Robin's stock dropping
20 percent in late 2017.
Whether or not the premium burgers from the fast food competition beat Red Robin in taste
is up for your own taste buds to decide.
However, many of the fancy fast food burgers come in a few bucks cheaper than most of Red
Robin's gourmet burgers, and price is a big deal.
Making an effort to bring in new customers for your restaurant is always a great idea.
Choosing to do so by insulting them is almost always a bad one.
Alas, that's the pitfall Red Robin stumbled into when they decided to go after vegetarians
and let them know about their veggie burger in 2013.
The commercial basically went like this: an actress mentions Red Robin's 24 burger varieties
and had this to say about their veggie burger:
"Red Robin caters to a lot of different tastes.
They even have a Garden Burger just in case your teenage daughter is going through a phase.”
As you can probably guess, vegetarians didn't like having their lifestyle compared to a
teen girl's flavor of the week eating habits, and took to social media to show their disapproval.
Responding to the issue, Red Robin's communications chief, Kevin Caulfield, said that the company
was planning to pull the commercial and it would no longer be on the air.
Red Robin still has a veggie burger on the menu, but they may have lost part of the customer
base they hoped would buy it.
Having strong advertising and a solid marketing tactic is essential for a burger chain that's
looking to compete on a national scale.
Perhaps it was the backlash from the garden burger ad, or maybe it was the two disappointing
sales quarters back-to-back, but whatever the reason, in 2016 Red Robin split with the
ad agency it had been using since 2013 and went looking for a new group that could creatively
spread its burger-and-bottomless-fries gospel.
Red Robin had decided that it wanted its advertising to help them alter their "family-only" image
and bring in the hip adult crowd.
The first step was hiring the KBS agency to figure out what to do with this popular tagline:
"Red Robin — yummm!"
Everyone associates that with Red Robin already, and they've been using it for a long, long
time.
In an attempt to reach a new customer dynamic, it was changed to this:
"Let's burger.
REEEEED ROBIN… yummmm!”
That'll bring in the cool crowd, right?
Next came a campaign that mocked man-buns to promote their bun-less burger because,
hey, hating on man-buns was the cool thing to do in 2017, right?
Considering that Red Robin ended 2017 on a downward slide, the creative relationship
with KBS obviously wasn't all they hoped it would be.
After just a year and a half of working with the agency, Red Robin was back on the market
in search of a new creative ad agency.
Most people know that the average cheeseburger isn't typically classified as health food,
no matter how much we all might hope and wish.
A half pound of red meat, topped with fried onions, cheese, and barbecue sauce with enough
sugar to bring about a cavity just isn't going to win any health awards.
As long as every other competitor is serving up burgers that are on par with being just
as unhealthy as yours, there's probably not much cause to worry about people making a
fuss.
It's when a burger on your menu takes the title of "America's most unhealthy meal" that
there's cause for concern.
Red Robin's Monster meal was a two patty, beefy beast that included bottomless fries
and a milkshake.
That's fine and all, but when you'd have to walk very, very quickly for 12 hours to burn
off the calories, maybe it's time to scale back the "indulgent items" a bit.
Offering a sweet deal that gets customers in the door and buying your product is a great
tactic that's been used for probably just as long as businesses have, well, been in
business.
“Louder, son!"
“BOB BECKER!
OUR PRICES HAVE NEVER BEEN LOWER!”
“That’s it, stop it.
“He…”
“That is totally inappropriate.”
It backfires, however, when the deal you're offering is a little too good, and when not
enough patrons are ordering your other higher priced menu items.
Red Robin's Tavern Double Menu was their solution to bringing customers in who might feel that
hamburger prices were simply spiraling out of control.
In contrast to their higher priced burgers, the Tavern Double Menu aimed to give customers
a cheaper burger at $6.99.
The problem arose when people began opting to order the cheaper burgers more often than
not.
Orders of the Double Tavern burgers jumped from nine percent of orders to 15 percent
and eventually contributed to a drop in the average check price and 2.6 percent decline
in same-store sales.
Juicy burgers with piled on toppings served promptly at a fair price will always be good
for a restaurant's business.
When there's a chance that those burgers come with a side of food poisoning, well, business
seems to dry up worse than a well-done beef patty.
Just ask Jack in the Box about their 1993 E. coli incident that made over 700 people
sick, and killed four, and cost the company millions.
Following the Jack in the Box burger nightmare, Red Robin started asking customers exactly
how they would like their burgers cooked.
In the past, every burger was cooked medium rare, unless the customer specified otherwise.
In 2014, Red Robin was facing down its own health scare when news broke that an employee
in Missouri potentially exposed 5,000 people to Hepatitis A. Red Robin caught a lucky break
that the disease didn't spread to any customers, but the close call still did some damage.
Red Robin ultimately agreed to a settlement of $325,000 with those customers who had to
get shots being paid $10,000 in "special damages."
Red Robin's health scare may not have resulted in any deaths, but hepatitis headlines definitely
aren't the sort of press any restaurant wants associated with its food.
Even when the chain recognized its problems, Red Robin seemed to struggle when it came
to nailing the rebound, and for that very reason Red Robin ended 2018 by halting any
plans to open new restaurants.
Post said that the company's efforts in 2019 would be focused on markets where several
Red Robin restaurants already exist.
That definitely seems like a wise game plan, but the question is, what will that refocused
energy look like?
In August 2018, the company said that they would be putting their hosts through new training
and increasing staff to help with quicker table turnover.
That's addressing a major problem, and while this won't translate to an immediate comeback
for Red Robin, it means they haven't given up hope.
Post said the changes put into effect also included more limited time-only burgers, a
$10 bundle meal that's available only for dine-in customers, and a new takeout initiative.
The burger chain is also attempting to tackle its long wait times by giving its servers
"handheld devices" to relay orders to the kitchen, and also plans to revamp the menu
to cut down on the sales drop from its Tavern burgers.
And there is a little bit of good news on the books for this struggling burger chain.
Red Robin's burger bar catering business has increased from $1 million in 2017 to $11 million
in 2018, so they're definitely going to try and keep that momentum going.
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