Red Robin: Provides Q4-2020 Business Update

Greenwood Village / CO. (rrgb) Red Robin Gourmet Burgers Inc., a full-service restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, provided a business update, including preliminary, unaudited comparable restaurant revenue results for the fourth quarter ended December 27, 2020.

Paul J.B. Murphy III, Red Robin’s President and Chief Executive Officer, said, «During an unprecedented year due to the pandemic, we achieved a great deal, strengthening Red Robin’s operational execution, business model and liquidity. Our accomplishments are now enabling us to focus on creating long-term value for all shareholders as we enter 2021.»

Murphy concluded, «We began the fourth quarter with sequential improvement in comparable restaurant revenue compared to the third quarter, however, momentum stalled due to heightened dine-in and other restrictions in 43 percent of Company-owned restaurants including restaurants in our key states of California, Colorado, Oregon, and Washington. While the near-term is likely to remain volatile because of Covid-19, we are encouraged by recent state re-openings, and we expect indoor dining to be re-opened at 39 restaurants as of January 11th. We firmly believe Red Robin is well-positioned from both a sales and profitability standpoint when conditions normalize.»

Fiscal Year 2020 Accomplishments

Despite the Covid-19 pandemic, we made significant progress on our strategic plan during fiscal year 2020 to solidify our financial longevity and develop a more robust business model. Our accomplishments this past year include the following:

  • Significantly grew off-premise sales, which more than doubled over the prior year;
  • Continued Donatos® roll-out, now in 79 restaurants, a proven growth catalyst driving approximately USD 45 thousand per restaurant in incremental gross margin by the second year;
  • Structurally improved restaurant and enterprise level margin for the long-term compared to 2019;
    • Reduced our menu by over 1/3, improving operational execution and resulting in over USD 2 million in annual savings;
    • Implementing new management labor structure, including approximately USD 14 million in annual savings(1);
    • Optimizing our portfolio by completing lease negotiations for more than 75 percent of Company-owned restaurants resulting in 3 percent to 4 percent in occupancy expense savings over remaining lease terms, as well as permanently closing select restaurants; and
    • Reduced general and administrative expenses by more than 10 percent, or approximately USD 10 million.
  • Reduced costs are expected to result in enterprise margin improvement of over 100 basis points during 2022, as revenues approach pre-pandemic levels, while 2021 is expected to be lower primarily due to sales deleverage related to the pandemic and other inflationary costs;
  • Implemented our Total Guest Experience (TGX) hospitality model, resulting in highest ever Guest Satisfaction Scores; and
  • Increased website traffic by approximately 20 percent, and achieved best ever loyalty email engagement through enhanced segmentation and targeting.

Preliminary Fourth Quarter 2020 Net Comparable Restaurant Revenue Summary Compared to Fourth Quarter 2019

  • Net comparable restaurant revenue decreased 28.9 percent, primarily resulting from our operational shift in response to Covid-19, including limited occupant capacity, operating an off-premise only model at restaurants with closed dining rooms, and closed restaurants;
  • Off-premise sales increased 132 percent and comprised 43.9 percent of total food and beverage sales; and
  • Restaurants with Donatos® outperformed restaurants that do not currently offer Donatos® by over 500 basis points in net comparable restaurant revenue.

(1) Excludes labor savings associated with restaurants closed in 2019 and 2020.

Preliminary net comparable restaurant revenue and average net sales per restaurant for the Company’s 28-day accounting periods through our fourth fiscal quarter ended December 27, 2020 are as follows:

Period ended
Company-owned Restaurants(1) 2020-11-01 2020-11-29 2020-12-27
Net Comparable Restaurant Revenues (15.4)% (28.8)% (39.5)%
Average Net Sales per Restaurant USD 42,509 USD 38,941 USD 35,716
Number of Comparable Company-owned Restaurants 412 412 412

(1) Net sales performance for restaurants re-opened for full fiscal period presented. Restaurant count shown is as of the end of fiscal period presented. Sales performance at restaurants with reopened dining rooms was negatively impacted by rising Covid-19 cases resulting in new restrictions lowering or restricting dining room capacity in our key states of California, Colorado, Oregon, and Washington.

Company-owned Restaurants with Open Indoor Dining Rooms

As of December 27, 2020, the Company operated 246 indoor dining rooms with limited capacity, representing 57 percent of 431 currently open Company-owned restaurants.

Preliminary net comparable restaurant revenue and average net sales per restaurant for the Company’s 28-day accounting periods through our fourth fiscal quarter ended December 27, 2020 are as follows:

Period ended
Company-owned Restaurants with Open Indoor Dining Rooms(2) 2020-11-01 2020-11-29 2020-12-27
Net Comparable Restaurant Revenues (13.7)% (20.7)% (23.3)%
Average Net Sales per Restaurant USD 42,778 USD 39,041 USD 40,578
Number of Comparable Company-owned Restaurants 362 245 236

(2) Net sales performance for restaurants with open indoor dining rooms for the full fiscal period presented. Restaurant count shown is as of the end of the fiscal period presented.

Since the beginning of 2021, indoor dining rooms have been re-opened at 35 restaurants. We expect indoor dining to be re-opened at 4 additional restaurants as of January 11th.

Balance Sheet and Liquidity

As of December 27, 2020, the Company had total debt of USD 170.6 million, of which USD 9.7 million was classified as current. Outstanding borrowings under its credit facility were USD 169.8 million, in addition to amounts issued under letters of credit of USD 8.7 million. Amounts issued under letters of credit reduce the amount available under the credit facility but are not recorded as debt. As of December 27, 2020, the Company had approximately USD 128 million in liquidity, including cash on hand and available borrowing capacity under its credit facility. Due to heightened restrictions and the increase in indoor dining room closures associated with the resurgence of Covid-19, the average cash burn rate for the fourth quarter of 2020 was approximately USD 1.5 million per week.

About Red Robin Gourmet Burgers Inc.

Red Robin Gourmet Burgers Inc. (www.redrobin.com), is a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., and under the trade name, Red Robin Gourmet Burgers and Brews. We believe nothing brings people together like burgers and fun around our table, and no one makes moments of connection over craveable food more memorable than Red Robin. We serve a variety of burgers and mainstream favorites to Guests of all ages in a casual, playful atmosphere. In addition to our many burger offerings, Red Robin serves a wide array of salads, appetizers, entrees, desserts, signature beverages and Donatos® pizza at select locations. It’s now easy to enjoy Red Robin anywhere with online ordering available for to-go, delivery and catering. There are more than 540 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements.