Red Robin Gourmet Expands Domestically - Analyst Blog

Red Robin Gourmet Burgers Inc. RRGB is set to unveil two new restaurants in Washington and Florida in a bid to expand in the lucrative domestic market. The twin openings, one at Tacoma Area, WA and another in Fort Lauderdale Area, FL are scheduled for Apr 14, 2014.

Also, on the occasion of the opening of these two restaurants, the company has decided to donate the revenues earned from selling its signature Freckled Lemonade during the first week (Apr 14-Apr 20) to a non-profit entity named Alex's Lemonade Stand Foundation.

Like other outlets, these units will also offer signature food items like Royal Red Robin Burger and Bottomless Steak Fries, which will continue to contribute to the company's sales. Moreover, these outlets will also offer popular beverages.

Red Robin has outlined a set of initiatives including menu innovation, an effective marketing strategy, unit expansion and remodeling programs to reinvigorate its brands. Menu innovation is an effective tool to survive in the highly competitive fast casual dining industry. In our view, Red Robin's seasonal menu innovation will increase traffic in the upcoming months.

Additionally, Red Robin's operational strategies such as expansion into high-growth markets are positives. Also, the company's smaller prototype restaurant concept — Red Robin's Burger Work — is also expected to drive profitability.

Moreover, Red Robin's unit expansion remains unruffled amid an uncertain economy. With the resurgence of consumer confidence, management has accelerated its unit openings and plans to open 20 Red Robin units in 2014. However, we remain concerned about the incremental labor costs and commodity inflation. Macroeconomic uncertainty also remains a headwind.

Red Robin Gourmet presently has a Zacks Rank #3 (Hold). Some better ranked stocks worth considering in the restaurant industry include Ignite Restaurant Group, Inc. IRG, The Wendy's Company WEN, Burger King Worldwide, Inc. BKW. While Ignite Restaurant and The Wendy's sport a Zacks Rank #1 (Strong Buy), Burger King Worldwide holds a Zacks Rank #2 (Buy).