Asset Recognition

Red Robin has relatively low cash ratio. With a five year average of .13, this figure reveals Red Robin has cash and cash equivalents equal to 13% of its current liabilities. This low figure raises concerns, with low liquidity Red Robin could encounter issues in meeting short term debts. Even more so, if Red Robin were to face an unexpected financial dilemma, their low cash ratio illustrates the company's neglect to its available cash to cover short term issues. Regarding the company's current ratio, Red Robin has a five year average current ratio of .51. This low value suggests the company could have a hard time achieving short term obligations with the current assets. As compared to the peer group, Red Robin lags in both current and cash ratio, which raises concerns regarding the company's liquidity.

Red Robin's days sales outstanding has remained consistent over the past five years with an average 6.57 days. Red Robin outperforms JACK, and DIN in this metric, while lagging CHUY who reported 2.51 days in 2022. Red Robin has maintained a strong 6.5 days to collect payment across the past five years which reflects the company's ability to collect payment from customers typically within a week. Nonetheless, if Red Robin were to have a lower days sales outstanding value, the company's current ratio would also see an increase.

Red Robin's inventory method of choice over the past five years has been First In First Out (FIFO). CHUY and JACK also use FIFO, and DIN did not have their inventory method listed on their balance sheet. The reason that RRGB, CHUY, and JACK all use FIFO is because for obvious reasons, that being their inventory is predominantly food and beverage, with the exception of other items like takeout boxes, utensils, etc. Given that the majority of inventory within this subindustry is food, and companies in the restaurant industry are expected to provide consumers with a level of quality and freshness. Even more so, they are required to serve customers with food that adheres to food safety regulations, meaning food that has not exceeded its shelf life. Furthermore, FIFO gives insight into how the cost of goods sold influences the company's bottom line. Red Robin and other restaurants need to have the exact cost of each ingredient that makes up a menu item to determine the profitability of each menu item. Red Robin's inventory turnover in days has been a five year average of 9.5, which is much higher than it's competitors. This value can be explained through the company's failure to produce significant gross profit over the last five years, combined with relatively low inventory.

Red Robin has a five year average days payable outstanding of nearly 12 days and has remained consistent in this metric. This value means that on average, it takes Red Robin 12 days to pay off its suppliers and vendors upon receiving a good or service. Compared to its competitors, JACK reported 23 days in its most recent statement, CHUY 9 days, and DIN 36. Furthermore, there does not seem to be a linear trend between Red Robin and its peer group in meeting obligations with vendors. 

Red Robin has had a largely inconsistent cash collection cycle (CCC) over the past five years, with an average of 4.23, a peak of 8.60 in 2020, and a low of 1.78 in 2022. As compared to its peers, DIN has a very long CCC, JACK has a similar CCC history compared to RRGB, and CHUY has maintained efficient working capital management with a negative CCC over the past five years. Overall, Red Robin has a good cash collection cycle is ahead of competition.

On average, across the past five years, 79.8% of Red Robins total assets are fixed assets. The company leases the real estate for the majority of company-owned restaurants under operating leases. Red Robin also owns the real estate for 36 company-owned restaurants. Regarding PPE turnover, Red Robin has a five year average PPE turnover of 1.62, 1.78 in 2022. Compared to its competitors, Red Robin has a strong PPE value, JACK .97 (2022), CHUY 1.27 (2022), and DIN 2.09 (2022). Overall, Red Robin uses their assets in an efficient manner, with every $1 of PPE investment, $1.62 in revenue is created. The ability for the company to own the real estate for various locations is an undoubted advantage as well.