Red Robin Slows Restaurant Growth

Red Robin, which had more than 360 company-owned and franchised restaurants operating in the US and Canada at the end of the first quarter, opened 18 new locations during the quarter, half of them company-owned and half franchised. For the full year in fiscal 2007, the company plans to open 24 to 27 new company-owned units, while franchisees are expected to open between 15 and 17 new locations.

For the fiscal second quarter of 2007, which is a 12-week quarter compared with the 16 weeks in the first quarter, Red Robin expects to open eight to nine new company-owned restaurants and one or two franchised locations. Four company-owned and one new franchised restaurant have already opened during the second quarter of 2007, with nine company-owned and five franchise restaurants now under construction.

Although it is slowing expansion, the company opened a new building prototype in Georgia in April. Also in April, Red Robin launched a national media campaign to improve brand awareness, saying that the campaign is designed to drive system-wide restaurant sales, particularly where it has not had a long operating history.

Red Robin's net income edged up to $7.5 million, or 44 cents per share, in the first quarter that ended April 22. That compared with $7.4 million and 44 cents per share in the year-ago period. Revenue climbed nearly 25% to $212.3 million from $170.5 million, but same-restaurant sales declined a half-percent on a 3.6%-decrease in guest counts, which offset a 3.1%-gain in the average guest check.

The company's first-quarter financial operations also included commitments from a syndicate of banks led by Wachovia Capital Markets for a new $300-million credit line, which will replace an existing $200-million line. The company plans to employ the credit line, which will provide for more favorable borrowing rates, to repurchase its stock and to finance restaurant construction, in addition to its use for working capital and general corporate requirements.

Red Robin also plans to use the credit line in its previously announced deal to acquire the assets of 17 Red Robin franchised restaurants in California from Top Robin Ventures and Morite of California for approximately $47.5 million. The transaction is expected to close in the second quarter.