Strategic Analysis

Red Robin Gourmet Burgers Inc. operates casual dining restaurants in North America. The company specializes in providing customers with their signature high-quality burgers and bottomless steak fries. Each location is inviting to guests of all ages. In Red Robins most recent 10-K, they detail their North Star five-point plan to improve its competitiveness within the industry. The five points include transform to an operations focused restaurant company, elevate the guest experience, remove costs and complexity, optimize guest engagement, drive growth in comparable restaurant revenue & unit level profitability, and deliver financial commitments. Their vision statement is defined as "The Red Robin vision is to be the most loved restaurant brand in the communities we serve." Ultimately, Red Robin's mission is to, "serve our guests awesome American food and bottomless fun." With this mission in mind, the company's vision is to, "be the most loved restaurant brand in the communities we serve." Red Robin achieves these ideologies through an extensive menu that offers customers to customize their food options, while also providing their signature gourmet burgers that keeps customers coming back for more. In conclusion, Red Robin's strategy centers around operational excellence, guest satisfaction, cost efficiency, and community engagement. By executing its North Star plan and staying true to its mission and vision, Red Robin aims to solidify its position as a beloved restaurant brand, offering both delicious food and a memorable dining experience. Ongoing efforts to optimize operations and engage with guests indicate a commitment to growth and profitability in the competitive restaurant industry. 

Operating within a very competitive industry such as the restaurant space is extremely difficult. Fortunately, Red Robin describes their competitive advantage as, "We believe our Guest demographics, strong brand recognition, Gourmet Burger concept, family friendly atmosphere, attractive price-value relationship, and the quality of our food and service enable us to differentiate ourselves from our casual dining competitors." With a strong family-oriented environment focus in each Red Robin location, their ability to connect and resonate with North American families has allowed their brand to grow in the hearts of customers. 

In particular, Red Robin differentiates themselves from other sit down restaurant chains through their gourmet burgers. Red Robin's menu allows for customers to customize their burgers and personalize their meals all aimed at enhancing the customer experience. Burgers accounted for 61% of the company's total food sales in 2022. However, not all customers favor meat products, especially in today's society with many consumers favoring alternative proteins such as vegetarian pattys, and plants-based burger pattys. The culmination of these alternatives along with gluten free buns and lettuce wraps aim at meeting all customers dietary needs. As a result of Red Robin's extensive menu items and alternative menu items, they have been recognized as a leader within dietary needs and preferences in the industry from experts within the allergen community.

STRENGTHS

Community Engagement: 

Red Robin does a very good job of interacting within the communities they operate. From food donations, hosting charitable events, and loyalty reward programs for customers all contribute to fostering relationships across communities

Brand:

Since the company first started operations in 1969, they have been able to promote and cultivate their identity around gourmet burgers. Consumers instantly corelate Red Robin with their signature burger options, and the company slogan, "Red Robin, Yum!"

Extensive Menu:

Offering a diverse menu that caters to every dietary need is a strength of Red Robin's operations. By immersing themselves as a family-oriented sit-down restaurant, they have available food options for all family members, regardless of dietary restrictions. Vegetarian, vegan, and gluten-free options on their menu allow for consumers across all backgrounds to enjoy a positive dining experience.

WEAKNESSES 

Revenue Segments: 

97% of Red Robin's total revenue comes from restaurant sales. If a COVID-19 pandemic were to occur again and restaurants were to be shut down, the company would suffer greatly, There's an impending need for the company to diversify it's revenue segments.

Global Presence:

Red Robin has 511 restaurants across 38 states, and one Canadian province. Not diversifying across the globe is preventing the company from acquiring a new customer base.

OPPORTUNITIES

Promoting Alternative Food Options:

Red Robin's ability to incorporate alternative food options in relation to beef burgers is an untapped business segment for the company. With many consumers shifting to vegan and vegetarian diets, Red Robin has the infrastructure and resources in place to serve this particular community. Further marketing this component of their menu to reach more consumers and families could be highly beneficial.

Online Ordering & Takeout Options:  

As a result of the pandemic, Red Robin was forced to adapt and incorporate alternative forms of distributing their products. Further developing these services to reach a broader customer base through apps like Doordash, UberEats, and other platforms.

Partnerships & Endorsements:  

Partnering with supermarkets and wholesalers to distribute their products into grocery stores. Also teaming up with celebrities or athletes to further promote their products and brand.

THREATS

Competitive Industry:

Operating within the restaurant subindustry is a very cruel and difficult space to operate in. Depending on economic conditions, consumers might steer away from disposing income on eating out. Furthermore, the availability of alternatives is a constant battle within this industry.

Health:

There has been a societal shift away from traditional American eating habits. More individuals are switching to healthy dietary options, and while Red Robin has integrated these options, it is not the primary focus of their menu.

Red Robin has made positive strides over the past year to improve their Truevalue ESG Rank.  A year ago, Red Robin was considered to be an industry laggard regarding ESG, however they have been able to pivot themselves out of the laggard category, into the industry average.  Red Robin has made notable progress across the categories of environmental, social, and governance. Beginning with governance, the total management team consists of seven males, and three females, two of which were hired in 2022. Additionally, the total board is an almost even split, consisting of five males and four females.

In terms of social responsibility, Red Robin made positive strides in 2022 to help better relationships with customers, employees, and the communities they operate in. This is reflected through the company's changes within labor practices, employee relations, and community engagement. The company set a goal of empowering their team members within their roles, and carried out this goal through team member surveys to install a means for employees to share their opinions, perspectives, and ideas on a consistent basis to senior leaders of the company. Furthermore, the company implemented new incentive plans for both corporate and field operations, in accordance to key performance metrics, with the intention of further developing these programs in the future. Community engagement has also improved through loyalty reward programs for consistent customers. Even more so, Red Robin is active within the communities they operate through food donations, team member volunteering, and hosting fundraisers in their facilities. In total, Red Robin donated over 2,294 pounds of food to local food banks in 2022.

Lastly, regarding environmental responsibility, Red Robin has made improvements regarding their overall waste. They have been able to reduce single-use plastics, while continuously researching sustainable alternatives. One initiative the company has implemented is their 100% recycling of fryer oil across their locations, removing fryer oil from the waste stream, and making it available as an alternative source of fuel. Red Robin has reduced their overall food waste through a partnership of a waste hauling company, Elytus, diverting waste from landfills. Lastly, Red Robin has placed a large emphasis on promoting sustainable packaging in their operations. In 2022, they sought to divert from plastic use, transitioning 20% of single-use plastics, and researching alternative options for the other 80%. Currently, 98% of Red Robin's packaging used for off-premise is recyclable, reusable, or compostable.

In sum, Red Robin is considered to be average in regards to their ESG rating within the restaurant industry. As compared to their peer group, Red Robin outperforms about half of their competitors within ESG, as a result of their continuous improvement to various environmental, social, and governance initiatives. Inherently, the company's improvement of their ESG rating over the past year is an undeniably positive trend for the company, and provides investors with a bullish outlook for the company's commitment to sustainable practices in the future.

Consumers are much more cognitive when it comes to supporting corporations in modern society. In other words, individuals will endorse businesses and corporations that are committed towards sustainable practices. Restaurants that produce high amounts of food waste, high water usage, large energy consumption, and other discouraging sustainable practices will not prevail in this industry moving forward. Additionally, consumers are prioritizing high quality ingredients, more often locally-sourced ingredients. Consumers are willing to pay a premium when it comes to understanding where their food comes from, with a larger emphasis on supporting restaurants that communicate the transparency of the origins of their food. Even more so, there is a heightened responsibility for restaurants to support their local communities, as reflected through sustaining relationships with local suppliers and vendors. Lastly, the COVID-19 pandemic induced a new wave of online ordering and takeout practices. Restaurants not being able to operate during the COVID-19 shutdown were forced to innovate. This innovation resulted in consumers becoming accustomed to the ease of online ordering and satisfaction of not having to leave their home or workplace to receive their food. Restaurants that are able to optimize their online ordering and takeout techniques will dominate the restaurant industry moving forward. To conclude, the restaurant industry experienced a sharp shift in consumer demands and expectations as a result of the COVID-19 pandemic as reflected through online ordering and takeout methods. Beyond the pandemic, the direction of the restaurant industry is trending towards adhering to the demands of modern consumers. These demands are heavily influenced by transparency, sustainability, eco-friendly practices, and locally sourced ingredients. In the future, restaurants that take these consumer preferences into account will lead the industry moving forward.