Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Guest satisfaction scores have increased to levels not seen since 2016.
- Comparable restaurant revenue exceeded the industry average as measured by Black Box Intelligence.
- Significant improvements in order accuracy, taste of food, and friendliness of staff in the off-premise business.
- The revamped Red Robin Royalty program has seen a 156% increase in sign-ups compared to the same timeframe in 2023.
- Overall guest satisfaction has reached parity with the casual dining industry for the first time in almost nine years.
Negative Points
- Total revenues for the second quarter were only marginally higher than the same period last year ($300.2 million vs. $298.6 million).
- Comparable restaurant revenue decreased by 0.8% when excluding the benefit from the loyalty program.
- Restaurant-level operating profit as a percentage of restaurant revenue decreased by 80 basis points compared to the second quarter of 2023.
- Higher-than-expected inflation in commodities, particularly ground beef, chicken, and produce.
- Labor costs are elevated due to newer leaders and team members building mastery and efficiency in their roles.
Q & A Highlights
Q: Can you break down the components of the EBITDA guidance change?
A: Todd Wilson, CFO: The main factors include a reduction in traffic expectations, higher commodity costs (ground beef, chicken, and produce), and increased labor costs. The traffic reduction accounts for about $15 million of the EBITDA change, while commodities and labor pressures each contribute around $3 million.
Q: How does the traffic reduction impact your financials?
A: Todd Wilson, CFO: The traffic reduction leads to deleveraging of fixed costs, impacting restaurant-level profits. Previously, we expected traffic to be up 1% for the year, but now we anticipate a 4-5% decline.
Q: What is the outlook for G&A expenses in 2025?
A: Todd Wilson, CFO: We initially anticipated $90 million for this year, but due to lower incentive compensation and cost savings, we now expect around $85 million for 2025.
Q: How is the loyalty program performing and what impact do you expect it to have on traffic?
A: G.J. Hart, CEO: The loyalty program is outperforming expectations, with significant increases in new member sign-ups and transactions. We anticipate it will be a major driver of traffic recovery, although exact numbers are not yet available.
Q: Can you explain the rationale behind the recent credit agreement amendment?
A: Todd Wilson, CFO: The amendment increases our compliance leverage ratios and expands the revolver to provide financial flexibility. This proactive step ensures we have room to maneuver and execute our North Star plan despite the challenging consumer environment.
Q: What are the key drivers of improved guest satisfaction?
A: G.J. Hart, CEO: Key drivers include increased manager presence in dining rooms, reduced false waits, improved food quality and timely delivery. These efforts have led to significant gains in guest satisfaction scores.
Q: What are the next opportunities for cost savings and efficiency improvements?
A: Todd Wilson, CFO: We are focusing on refining our actual versus theoretical food cost measurement and consolidating vendors to leverage our scale. Additionally, improving labor efficiency through better training will help drive down costs.
Q: How are you balancing labor investments with financial performance?
A: G.J. Hart, CEO: While we are investing in labor to improve guest experience, we are also focusing on training to enhance efficiency. If the economic environment worsens, we may need to reassess, but current metrics indicate we are on the right path.
Q: How does the 2.2% comp benefit from the loyalty program impact your financials?
A: Todd Wilson, CFO: The benefit is reflected in the restaurant revenue line and flows directly through to profits.
Q: How are you differentiating Red Robin from competitors in the casual dining space?
A: G.J. Hart, CEO: We are focusing on targeted communication through our revamped loyalty program, local store marketing, and efficient use of digital and social media. These efforts aim to highlight our unique value propositions and drive traffic.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
