Red Robin kicks off a fresh chapter with a $9.99 value offering
Red Robin Gourmet Burgers has announced a new strategic plan, called "First Choice," aimed at driving long-term shareholder value. The plan builds upon the foundational North Star plan, with added initiatives focused on financial restructuring, marketing, technology investments, and cost management.
The First Choice plan, which was unveiled recently, includes five pillars: Hold Serve, Drive Traffic, Find Money, Fix Restaurants, and Win Together by creating a high-performance culture.
Hold Serve and Improve Operational Efficiencies
The Hold Serve pillar aims to maintain and improve operational efficiencies, building on the progress made under the North Star plan. This includes continued focus on cost efficiencies and operational improvements.
Drive Traffic and Inspire Visitation
The Drive Traffic pillar focuses on engaging guests and inspiring visitation. This includes a bigger investment in marketing to break through with customers. Red Robin is launching a new $9.99 combo meal called Big Yummm to attract more customers.
Find Money and Strengthen the Balance Sheet
The Find Money pillar focuses on managing expenses and assets to reduce debt and enable investments. This includes the company's plans to sell some corporate-owned restaurants to franchisees, aiming to operate between 65% to 75% of its locations. The proceeds from refranchising will be used to pay down Red Robin's debt, which currently totals over $686 million.
Fix Restaurants and Improve Dining Experience
The Fix Restaurants pillar focuses on investing in facilities to improve the dining experience. This includes a broader reimaging program planned for the future.
Win Together and Create a High-Performance Culture
The Win Together pillar focuses on creating a high-performance culture. This includes efforts to reduce costs and pay down debt, such as saving money through operational efficiency, streamlining the supply chain, using technology, and cutting corporate-level costs by $10 million annually.
Accelerating Growth and Improved Financial Health
Compared to the North Star plan, which began in early 2023 and recently saw improvements—such as a 3.1% increase in same-store sales in Q1 2025 and doubling of adjusted EBITDA—the First Choice plan aims to accelerate sustainable guest count growth, increase profitability, and generate free cash flow by adding focus on financial restructuring, debt reduction via refranchising, and targeted marketing efforts.
Red Robin forecasts a slight decline in Q2 2025 same-store sales (-4%) but expects adjusted EBITDA to exceed prior guidance, reflecting continued operational gains despite sales fluctuations. CEO Dave Pace emphasizes that First Choice is designed to make Red Robin the preferred choice for guests, team members, and investors by preserving North Star gains but driving further growth and improved financial health.
The managing partner program, introduced as part of the North Star plan, is credited for the recent financial improvement as it ties managers' earnings to their restaurants' profits. The company has also seen improvement on the bottom line, with Q1 EBITDA increasing by 108% to $27.9 million and Q2 EBITDA exceeding the projected range.
While North Star achieved positive momentum through operational improvements and cost efficiencies, First Choice takes a more comprehensive approach addressing marketing, balance sheet strength, technology investments, and everyday guest value.
Former CEO G.J. Hart stepped down in April, with David Pace taking over. Under Pace's leadership, Red Robin is looking to save money through operational efficiency, streamlining the supply chain, using technology, and cutting corporate-level costs by $10 million annually. The company has resisted discounting under its previous plan but has eased up recently due to inflation-weary diners seeking more value.
The new plan has already shown positive results in select markets where Red Robin has been testing Big Yummm, a new offering that includes the Red's Double Tavern Burger, bottomless fries, and a drink. The company saw a few percentage point increase in traffic without a significant impact on margins.
In summary, First Choice builds on the foundational North Star plan with added initiatives focused on refranchising to reduce debt, targeted marketing to drive traffic, investments in restaurants and technology, and cost management to strengthen the balance sheet and improve long-term profitability and cash flow generation.
- Red Robin's new strategy, First Choice, inclines towards refranchising some corporate-owned restaurants to affiliates, a move aimed at finding money and strengthening the balance sheet, considering the company's existing debt of over $686 million.
- The technological aspect of the First Choice plan is manifested in the company's agenda to cut corporate-level costs by $10 million annually through operational efficiency, supply chain streamlining, and technology utilization, as part of their drive for cost management and improved financial health.
