The letter of intent also provides for up to an additional $3million purchase price earn-out to be paid in 2008 upon theacquired restaurants achieving certain 2007 sales targets.The 17restaurants generated $56.3 million in revenue in 2006.

The territory covered by the exclusive franchise rights of thesellers includes the area of Los Angeles County north of Interstate10, the California counties of San Luis Obispo, Santa Barbara,Ventura, Fresno, Kings, Tulare and Kern, as well as a portion ofRiverside County. Red Robin, which expects the acquisition to closein the second quarter of 2007, subject to customary closingconditions, anticipates funding the purchase through borrowingsunder its line of credit.

The Red Robin franchisees who are selling the restaurants haveoperated them for about 20 years and have expanded steadily duringthat time, according to comments in a conference call this morningin which Red Robin officials discussed the acquisition.DennisMullen, chairman and chief executive officer of Red Robin, saidthat the two were among the first franchisees in California andthat while he could not be sure of their reasons for selling, thefranchisee founders were advancing in age and that was likely afactor in their decision to sell.