Red Robin Plans Restaurant Growth

The 2008 openings will include 30 to 33 new company-owned restaurants, plus 11 to 13 new franchised restaurants. Red Robin has been testing a new lower-cost prototype design, and it says that approximately 75% of all company-owned locations that it opens next year will feature the new lower-cost design. Red Robin has already opened 36 restaurants this year, 23 of them corporate and 13 franchised, and it expects to hit its goal by opening three company-owned and three franchised units in the fourth quarter.

The company opened seven of its new restaurants in the third quarter, five of them company-owned and two of them franchised, to end the quarter with 246 company-owned and 134 franchised Red Robin locations. The company also acquired the assets of one of the remaining two existing franchised restaurants in California from Top Robin Ventures and acquired a new restaurant that had been under construction at the time of the original acquisition closing.

While a number of retailers and restaurants have been reporting flat or slightly lower financial results in recent months because of changing economic conditions, Red Robin's comparable restaurant sales and traffic trends both reached their highest levels in more than 18 months in the third quarter. Dennis B. Mullen, chairman and chief executive officer of the chain, commented in the conference call: "We believe this is impressive, considering the current state of the casual dining industry."

Comparable restaurant sales increased 4.8% for company-owned restaurants in the quarter, compared to the fiscal third quarter of 2006. Mullen said the drivers of the comps were a 3.7% increase in the average guest check as well as a 1.1% increase in guest counts. He also said that the chain's initial national television and internet media campaign raised awareness for the brand and driving restaurant sales across the entire system, particularly in locations where the company does not have a long operating history.

For the quarter, the company took in revenue of $188.7 million in a 27% increase over last year's third-quarter revenue. It earned 49 cents a share on net income of $8.2 million, compared with net income of $6 million in the third quarter last year. This year's net included a charge of a penny a share after tax related to the cost of reacquiring a franchised location in California and seven cents per diluted share in stock compensation expenses. This year's per-share figure represented an increase from last year's 36 cents in the third quarter, which also included one-time charges that cut into earnings last year.