Welcome to Chopping It Up. I'm your host, Mike Hallen, the senior restaurant and food service analyst at Bloomberg Intelligence. Today we're joined by G. J. Hart, President and CEO of Red Robin Gourmet Bergers. Thanks for doing this, Thanks Mike.
Good to be with you.
Yeah, our audience can't see us, but it's good to see you. Let's let's just jump right in here. Man, what attracted you to the Red Robin job.
Well, let's let's go back in time a little bit when when we were building and growing Texas Roadhouse, Red Robin was in it's really in its prime time and was really one of the premier casual dining restaurant brands, and we learned a lot in terms of what they were doing and doing it well. And the biggest thing is just how the differentiated space about kids, family, great food, great hospitality, reasonable price, and so following them, I've always
had an affection form. They were phenomenal around being parts of communities, giving back to communities, all things that we were doing at Texas Roadhouse, and so roll forward over the years, I was asked if I would be interested in going on the board of Red Robin at the time, and that was in twenty nineteen and right before COVID, and I was like, you know, if I could make some difference because they were, you know, hit upon some challenging times and I thought, well, shoot, I'd like to
do that. And so going on the board first. And then when the board approached me about the opportunity to take over. You know, I had been retired for about six months at the time, nine total, and I was like, I was ready. I was too young to not work and sitting boards is great and I love it, but
it's not the same as operating a business. And so a lot of things lined up really, really well, and so I jumped in because I just felt like I could add some value here and really take this brand back and make it come back to its roots and make it relevant for today. So it's been an exciting run. I'm having a heck of a lot of fun.
All right, good stuff. I saw some news out this week. Our friend Nicole Miller Reagan was placed on the board, which is great. Nicole's awesome. What about the senior management team? Are they in place or do you still have roles to fill there?
Yeah, So we've done We've put together a phenomenal team. I'm really proud of the group that we've put together. And the one position that we have left, we've got an interim who was my former chief people officer Texas Roadhouse who retired and he came back as interim, and we're on the final stages of that search. We've actually got an offer out and there'll be an acceptance I'm pretty sure for the Chief People Office role and then
we'll be totally complete. But the team is definitely ready, willing and enable, and we're high functioning and I believe that we're going to get some high performance out of them.
Okay, good stuff. So just for the audience that may not be familiar, what's the store count now Red Robin and where is it strong geographically?
Yeah, so the store count today is a total count of five hundred and ten restaurants. Our strongest markets are up really on the West coast. Red Robin was originally founded up in Washington State, so we've got a big pros big presence up in Washington, Oregon, California, Nevada, and of course you know on the East coast as well. We're probably a little bit lesser density in the Midwest. We've got a good presence in the Southwest, but clearly the West Coast is the predominant portion of Red robin.
Oh okay, So being on the West Coast, do you think you're going to see any impact from the for the fast food wage increases that we're we're seeing in California? I know there have been some people talking about how, you know, they expect maybe full service chains to have to pay a little bit more in the kitchen. Is this something that that you've discussed with the team.
Yeah, we're we're paying attention to it. Clearly, there'll be some compression and there'll be some expectations. You know, generally speaking, if you think about our team members on the West Coast, particularly in places that there's no tip credit, they're they're well above that now in terms of total compensation. But at the end of the day, as you know, there's an expectation and as those positions in fast food go up, that they're going to need to go up as well.
So you know, we're going to watch it real closely and see kind of what's what what's the right course of action. It's not just about just taking price because you know, as you know, the consumers ever more sensitive today to price, So we'll we'll watch it and we'll see.
Okay, so who is the the Red Robin customer.
Well, it's interesting our our our guest base is pretty wide and demographics pretty wide, so you get, you know, a varied income. It tends to skew a little bit more female generally, which is not surprising candidly although it being Burgers being premiere, but we do skew that way. And and it's a pretty wide spectrum from everything from your from your hard working sort of you know, Middle America high income folks to two people that are that
are at the high income levels. So that's the benefit that we do have because we're so family and kid centric that it allows people to come in and as they are and feel comfortable in the Red Robin no matter what walk of life that you're in.
Yeah, my son, when he was younger, you always loved the place. And I am a huge fan of the onion rings too. So uh so I was answering too. Yeah, all right, cool, why don't we talk a little bit about the guest experience improvements? You know, all good turnarounds start with better food and better service. Right, so if you could talk a little bit about the improvements that the team's made there.
So we put together a plan that I really developed with all the different stakeholders, different folks around the company, just to realign ourselves on what our north star would be and what's that overall mission vision and brand promise and over our core values. And we came up with this north Star plan and the first part of that plan was was around people and culture and you have
to start there. And what had happened with Red Robin over the years, and I've talked about this a lot, is there were some decisions made for whatever reason that clearly were not good for the overall guests, nor was it good for the team ember things like getting rid of bussers back in twenty eighteen and started to do away with the expo the need for a senior person in the expo window, or not having a true management complement, more generalists and not have kitchen managers or service managers,
and then really challenged by COVID and staffing challenges in some of the decisions made made it verally challenging for the company, and so we really started to look back at the basics around that first started with management compliment, put back our certified training, restaurants started to go back to kitchen managers. We've put over two hundred and fifty kitchen managers in place in addition to what we already had.
And when I say already had, some of the restaurants did not follow suit with some of the sort of changes that came down from the corporation. So we started there, and then we started really building up our staff. And one of the things that had happened in the hospitality model was it was more of a team approach, and
in and of itself, that's fine. So you had server assistants and so servers were having many more cables and if a server assistant or you had a staffing problem, which as you know, coming through COVID was close, but then even coming back was challenging. Now all of a sudden, a server can't possibly service our guests when they have
ten tables and so without the proper services. So we've gone more to a traditional model, less tables for servers, added back busters, added back to the expos stations with management. So we started there and that was first and foremost, and then we started working on the food as the
second piece of it. And on the food front, we changed the cooking process for gourmet burgers because I asked the question, if our brand promise is about the best gourmet burgers, are we convinced we could do that with the what we're doing today And the answer is no. And so we started looking back and Jeff Brian, our chef, and I started working on what makes the most sense, and we changed the whole system to flat top cooking.
So we got rid of the nico the belt driven ovens that gives us not only a better burger, it's bigger, it's juicier, all those kind of things. It actually helped efficiency as well as it us more optionality for menu development down the road, which is a big part of our plan in the North Star plant anyway. So I'm pleased to say that in that whole process, the hospitality piece has come through. Been in the system the longest, so we've seen our overall net sentiment for service has
gone up twenty eight percent. So if you serve all the social data points, I mean, twenty eight percent increase over this period of time is really I think terrific. The food is coming now. We did the change mid year for the flat tops, but we actually in the fall. We just just recently launched our full menu with where we've touched eighty five percent of the menu and we've upgraded ingredients. So we've done things like improve our bund
we've improved our mayonnaise. We've improved our going from a regular tomato to a vying ripened tomato. We've improved our bacon, we've improved all of our sauces, so we've touched almost
every part of it. And that was launched just a few weeks ago and that's doing really really well, and we're super excited about people really seeing the difference in our burgers and seeing the difference in our optionality on the menu because we've added clentres, meaning we've added Whiskey River barbecue ribs, we've had a tsunami shrimp, we've added a non fried appetizers with the shrimp, and then we've added Brussels sprouts and some additions like that that help
us to really have more optionality, less veto vote for the guests, and so those are the type of things that we're doing. We've still got a long way to go. But first, the first hospitality service and people. Now it's going into food and we're working. We're pretty excited about what we're doing for twenty twenty four.
Good stuff. And you revamped the market partner program. Can you speak to that, sure?
Well, the company was had typical general managers that had a base salary and a bonus opportunity, and bonuses were changed each year based on the prior and I'm not a big fan of that because a lot of times you tend to leave out the guest experience right at the end of the day, growing guest traffic and sales as a result of people doing the right thing, and if you take care of the people, they take care
of your guests. And so you know, going to a managing partner compensation program where they really get paid each month based on their success of their restaurant, to me makes sense. It gets that sense of ownership, that pride factor. They become very much involved in every aspect of their business and they become business people, not just great restaurant operators. And so we launched it for our multi unit midyear this year and it's going extremely well. And we started
there so that we can learn and adjust. When you have a big restaurant count like we do having done this before. It takes a while and it's difficult to implement a system like this in a big, big number of restaurants. So we started there great learning and our plan is through and we will be rolling out the managing Partner program right after the first of the year.
And we're excited about it because, you know, we think it's really going to move the brand forward with that sense of ownership and pride.
Yeah, very cool. And you mentioned that customer experience is included in there, so you know a lot of these programs people are comped out based on sales, so it sounds like you have some customer service scores involved in the compensation structure.
No, it'll be solely around guest traffic, sales, and profitability. However, you can't drive sales or profitability or traffic without really having a great guest experience. So the idea is you share all these operators, share best practices from it, what's working, what's not, and they tend to be competitive with each
other in terms of things like guest satisfaction scores. But all of it flows back that it's about being running a business, and you know, Mike if you're running your own business, if you take care of your people, they're going to take care of your business. So that's that's the idea here.
Yeah, for sure, you know, customer service scores and speed of service and all that stuff is so closely linked to traffic obviously, totally, totally, all very cool. And so you're also going to implement the single unit operator program. Is that going to be similar to what you implemented at Texas Roadhouse and Torches?
It will be similar. All the dynamics are different for each brand, but yes, it would very much be similar to that.
Okay, great, And you're making some changes to the loyalty program. A lot of people in the restaurant industry are making some changes right now, So can you speak to that a little bit?
Sure, Well, we do have a big, big loyalty base. It's they're about thirteen and a half million members, and.
Yeah, that's strong for them.
It is strong, and we're still gaining. The loyalty platform has historically in my pay and being focused on maybe not the right thing to me. Loyalties about rewarding your most loyal guests for frequency and for being loyal to the brand versus trying to acquire new and then give them ongoing discounts and ongoing promotional activities. So we're going to flip that and really start to reward our most
loyal guests. And we're going to go to a point based system versus what we have today where you've got to get nine, you get to ten free. So the points where it's more in real time and we think makes more sense for our guests going down. And we'll get that launched and sort of the first half of next year, and we're super excited about it. What we've learned is the company was really messaging mostly discount promotionals
to the loyalty base. And what we want to do is start just having a dialogue and start to individualize that communication that we can do with our guest base. That'll tap longer term into how we can communicate on an individual basis. So we're super excited. It is a big asset of the company. We think it's we can lever it the right way, tell our story more successfully that way, and I'm really liking the path that we're on. Great.
So you know, on your earnings call, you mentioned that you saw a shift and that from September to October and results had improved despite student loan repayments resuming, And we kind of saw the same thing industry wide. You may have your improvement may have been larger than the industry, but we did see some improvement in October industry wide that we we thought was a little bit surprising. What do you you know, what are you seeing as there?
You know, and what did you think was the main reason for that improvement in October?
Yeah, So in our case, we're making a lot of changes we just talked about, from management, hospitality to food. We're doing so much that we think that we're going to see and are seeing effects of that as a result of our change. The current bigger picture or macro environment, it's hard to say and ascertain exactly, you know, how much is coming from where given all the change that we've got, But nevertheless, we'll take it right and so so feeling good about that. And Mike, you may have read,
you know, we had negative comp for the quarter. We signaled that it was within expectations because again we were making some decisions to get ourselves out of virtual brands, because to focus on the brand long term. The Red Robin brand we think that's the right decision. Well, that's
you know, that definitely comes at at a price. We have gone away from all this deep discounting in every channel to be and focused on brand development long term in providing our guests and experience they can count on day in, day out, and that comes with the price. So we had all those things on top of, you know, within all this noise. So there's just a lot in terms of us analyzing, you know, just the macro environment
in and of itself. What I would say to you though, is, you know, I've been pretty pretty surprised how resilient the overall consumer has been and continues to be, because you know, if you really look at some of these economic trends, you know, we feel certain things and things are not necessarily perfect, but generally speaking, people have more money and more disposable money to spend. So I've been pretty surprised
at how resilient they've been. So hopefully that continues and and and then as we make our changes, we'll benefit and really be able to grow our business.
Yeah, and it looked like investors were happy with with the earnings report even though you know, same sort of sales. One thing went down, So it seems like they're they're bullish on you know, these changes that you're making and the direction that Red Robin is moving in. Back in August, last time I saw you at the prosper conference, you know, you know, we were chatting it up and I was telling you how I was surprised how find dining results had been so poor this year. That was probably the
biggest surprise I've had, you know, throughout the industry. Is there anything that's surprising you about the US consumer outside of it being resilient, you know, and whatever else you had already spoken about.
Now, you know America, American consumers like to spend right, So at the end of the day, I don't know that I'm surprised, I say it. You know, I'm a little bit surprised, as I just pointed out, But at the end of the day, that's good news. So yeah, you know, if there was an overriding concern, I think it's really centered around more of the geopolitical situation and just you know, how does that because it definitely affects people at home, and I think that that that worries
me a bit. There's obviously nothing I can do about it, but it is something that h that that they do think about. But at the end of the day, now there's no no huge surprises of the then how resilient they are?
Okay, good stuff and uh you like another one of your h casual dining competitors made the move to cut back on discounting, and I think that's important. I don't think you want to train your customers to only come to your restaurant when you're offering some sort of a discount.
So can you talk about how that's gone and how it's going, and you know how this maybe uh you know might impact your your decision to about how you're going to deploy marketing spend and if you're going to increase it or to decrease it over the next year.
Well, let me let me unpack that a little bit. And in terms of how it's going, it's going fine. I think to the to build a brand successfully over time, you need to provide guests uh uh, the ability to know exactly what they're going to get when they're that every time they come in they're going to get that same type of experience. And sure there's times you want to promote certain things, but not just to come in
as a result of some discount. So it's going fine. Guys, we just talked about you know, we felt it in terms of sales and traffic a little bit, but we're going to roll over that. And last year the company was really throwing a lot at all the different channels and really discounting significantly. So as we roll over that, we'll get through that. And I do believe with the
changes that we're making, people are experience. We're seeing it and the feedback that we're seeing as I just mentioned some of the consumer sentiment data, some of the overall experience data that we're getting is showing that they see that. So I think all in all, we're feeling really good about the progression that we're making and the progress that we've seen so fully intent and we're optimistic about the future here in terms of marketing spend, let me just
do with that. One of the things I want to just say about marketing spend is we're really unpacking and really taking a look at how do we how do we use our dollars to be more effective than maybe what we've been in the past, being very laser focused, being more community oriented, really targeting as We just talked about loyalty and using those platforms to make our dollars work that much harder for us, and we think we can do that. So at the end of the day,
will we need to spend a little bit more. We've talked about that, We've been asked quite a bit of that. We're going to make the right decision because we need to bust through to get people to understand it. There's a new day here at Red Robin and this comeback is real. We're bringing it relevant to today and just come give us a shot. So we're kind of figuring out exactly how best to do that, and then from there,
what's the level of investment. It's not going to be significantly different than what we've done this year, but you know, this year we've we've cut back the marketing spend to focus on operations. Get that right. First, you've invested a tremendous amount back into the business and we've talked about that on our last earnings call. How many millions of dollars we've invested back into the company with all the food investments, in the labor investments and all those things.
So more to come on that, but at the end of the day, we think marketing dollars, we can spend a lot more effectively.
Okay, great, Now, are you you shifting your mix of traditional versus digital ad spending in the next year or two?
Yeah, you know, clearly, you know the whole we're going to have less traditional and more digital. You know, I think that's the way of the way it is today. Long term, it's how do we communicate and understand enough about each individual guest to be able to communicate them on a one on one level. We're not there yet, but we think longer term we can get there with some of those changes, and that's when they real magic
can happen. Is Hey, Mike, you came in, you know, last week and you got X, Y and Z. Would you know, would you like to try the same thing or would you like to try something new? And you know, those kinds of relations and hips will be important and through the total guest experience, people want to know, want to feel special, and we need to be able to do that in a fun environment where they can come as they are, and that's what we're going to do.
Okay, great. Also, uh, you know, you got you have a lot of a lot of moving pieces. Man, you have an ambitious plan. It's it's great because it's all stuff that makes a lot of sense and seems to be gaining some uh, gaining some steam. But can you talk about the renovation plans a little bit? I mean, what what what percentage of the stores do you expect to touch and how long do you expect it to take?
Yeah, the when when you talk renovation, why don't we just say this coming out of COVID as many restaurant companies struggle to keep up with just general maintenance.
And oh yeah, R and M is up for all my companies, this yere.
And and so to be candid, we're actually, I won't say they're all renovations, but we're spending the bulk of our capital dollars going back to get our restaurants where we need them to be just day to day operationally and looking right. And so we're spending tremendous, tremendous amounts of dollars. Having said that, we also know, as we've got an aging an aging fleet, we need to think
about what does that remodel look like. And we've announced that we were going to do a few restaurants in a couple of markets to see kind of what level of investment we need to make and what kind of returns that we can get a good return. So we haven't. We're actually doing the plans now. We will actually do some of the work for those renovations in the first part of next year and then we'll monitor those aside from there. But again, there's so many uses of our capital.
We're trying to be really effective here, and so the remodel program in the way you're thinking about it will take numerous years for us to do as we earn more. It's like I tell people, this is we need to earn our way, and that's what we're doing and reinvesting that capital to make sure that we're not just doing it and just food quality. We're also making sure the facilities are right and giving our team members the assets and something that they can work with.
Yeah, you're doing it the right way, because you know, if you spend a lot of money on ads and renovating your stores before you get the operations nailed and the food improved, what's the point, right, So yeah, that makes a whole lot of sense. Do you do your stores employee server handhelds and are there any other tech enhancements that that you're interested in implementing.
So again, it's sort of back to basics here, and we do use handhelds, but to be to be candid, we're upgrading all of our restaurants. Will have done here very shortly where we'd have Wi Fi in every restaurant and so metch of the handhelds that we currently are using our radio frequency and kind of the old way. And we are working now to plan to uh to
have handhelds with with Wi Fi and the restaurants. And we're currently taking our infrastructure and updating all of it so that we can be so in this century, if you will. And so I tell people, first things first, and that's what we're doing. First. Are there plenty of bells and whistles we can do down the road to achieve some of the things I've talked about that individual relationship with guests. We are, but we've got to do
this first. First things first, and so this infrastructure is really important and the handhelds will be a big part of that.
Okay, cool, And what about the sale, lease back traction transactions? Excuse me, still not recovered from Las Vegas and R FDC. So if you could give us an update on the on the cell least back and what do you plan on doing with the cash.
Sure, So, we've completed two tranches of it's nineteen restaurants at this point. We've got one more trench that we're looking to do and with the two we've actually invested it back into business. We've paid down some debt, we talked about that at our earnings release as well, and
we bought back a little bit of stock. So so our plan with if we get the third trunch completed, which we're currently working on, then that would go to reduce debt and at the end of the day, we're using it to strengthen our balance sheet.
All right, great, where does where does the leverage ratio stand?
Well, what we we hope to do, you know, sort of getting down to a leverage less than two to one. So we think we'll have that completed by the end of this year.
Okay, great, And I heard Red Robin was on the tonight show and something you mentioned something about a burger teeny What can you talk a little bit about that.
Yeah, so we were working with a celebrity bartender group that was that's a reality star that wanted it that came to us and our PR team have been working hard and came with this idea doing a burgertini, martine and burgertini and basically taking burger juice and a bunch
of ingredients and making a martini and and UH. Anyway, so then there's this this this UH program called Chainfest, which is a Michelin star chef out in California in LA that really likes chains and then takes and really romanticizes eight brands items to something that he thinks was cool. And they're doing these big events coming up I think in early December, and we're one of the restaurant companies.
And and last night on the on the Late night show, they had had a mission star chef on there and a couple of the items and most of it was around Red Robin and and our burgers and UH and the burgertini. It was a lot of fun. It was it was a good piece, you know. And look, at the end of the day, we're anywhere where we can start to tell people there's a new day here at
Red Robin. We're trying to do and these are just fun little events that if we have people talking about us, they're gonna hopefully give us a shot.
Yeah, it's cool, and I feel like Red Robin has some of that like experimental, like innovative type stuff in its DNA.
Right.
I remember the uh, you know, the first time I ever saw like beer floats, you know, with Sam Adams beer and a milkshake was at Red Robin. Right.
Yeah, so we're known for those those first of all in beverage innovation for sure, and we've got a great team working on things now. You know, we need to come back and one of the things we're trying to use his own shakes again to your point, come up with some cool creative shakes. We're the non alcoholic beverage we continue to lead away and freckled lemonade is still you know, our most popular drink and and so yeah, we're known for that. And the same thing with burger,
you know, gourmet burger innovation. And so you're going to see some really cool things coming. We have a Lava Burger coming, which is going to be a really cool kind of experience at the table. And yeah, that's the beauty and that's the history of this fifty four year old brand, iconic brand that it's been known for that and we want to bring those fun elements back to this brand. We brought our mascot back, Red, as you know.
I have to tell you, Mike that we had our town hall where after our earnings, we get our whole teams together, and we had Red there and we had a we do a lot with Make a Wish Foundation and the family. The fifteen year old son was the wish recipient, but they had his brother was a young little kid and stall Red and we had a couple hundred people in this room and I watched this little kid just walk all the way to follow Red and then just literally put his hands up in the air
for Red to pick him up. And it was just priceless, you know. And that's kind of what you want.
Yeah, that is cool. Yeah, and you know it makes your job a little more fun. It sounds like can I could tell the passion you have in your voice and you talk about the brand. That's great, man. So uh yeah, it's on my list. Man. This weekend, me and Jake are gonna make it over to the Seacaucus. Red Robin. I'm looking forward to it. So thanks again
for doing this. Where can the rest of the members of the audience find their nearest restaurant, and uh, you know where can they find Red Robin on social media?
Well, any of the social media redrobin dot com, and they can find us and there'll be a restaurant near them for sure.
All Right, thanks man, This is it's a great story and I'm looking looking forward to continuing to follow it. And you know, I wish your success, all right, my friend. Thanks all right, and thanks to the audience for tuning in. If you liked the episode, please share with your friends and colleagues.