I f and when gourmet hamburger chain Red Robin International decides to turn itself into a publicly-held company, few Wall Street investors will be able to resist the lure of its compelling investment story.
How come? Part of the reason involves this company’s risen-from-the-dead corporate history. Red Robin limped along under foreign ownership for much of its 32-year existence, but this 171-unit casual dining chain has gone on a long winning streak since president and c.e.o. Mike Snyder took over in 1996. No matter which financial metric you use as a measure since then—same-store sales, EBITDA and all the rest—they’ve all been going straight up since Snyder, the original and largest Red Robin franchise holder, started calling the shots at corporate.
But the juicier part of the investment story involves Red Robin’s future. It’s No. 45 on RH’s list of top growth chains already, and this company has only begun to scratch the surface of its true potential.
Not that it’s a small company today. Red Robin is on track to ring up $450 million in sales this year, Snyder says. But this chain does roughly 80 percent of this business west of its Denver headquarters, most of it in California and Washington state. Although it has made inroads in a handful of cities in the much more populous Eastern and Southeastern regions of the U.S., most of this vast territory is still relatively untouched. If Snyder and Co. can duplicate their success in the Western states as they roll out more units east of the Rockies, Red Robin seemingly can’t miss becoming a casual dining monster.
"We could become a billion-dollar brand," says Neil Culbertson, the company’s v.p. of marketing.
They’ve certainly got a formula in place that could take them to that level, if not much higher. The Red Robin dining experience weaves together a gourmet-burgers-and-spirits menu, a vibrant atmosphere and affordable pricing to produce a veto-proof option that any modern family can love. Unit decor and atmosphere are cool enough for kids, yet not so edgy that their parents can’t relate. A steady stream of new items ensures that Red Robin stays plugged in to most food and flavor trends, yet the menu remains totally accessible for all ages. And the bar features an ever-changing lineup of cocktails and zippy non-alcoholic drinks that help make even non-indulging patrons feel like they’re spending a night on the town.
"Our philosophy is to take great care of families while not forgetting the adults," says Snyder.
Boy, do they ever.
Red Robin’s target customer is someone who is looking for a more sophisticated dining experience than the QSR segment provides, yet one whose service speed and check price doesn’t stray too far from QSR parameters. It’s a group which includes just about every family that has kids.
"Our demographics are distinctive for a reason," says Culbertson. "Fifty-nine percent of our guests are female, which puts us at the top of any major concept. That’s because a big focus at Red Robin is to make our restaurant the kind of place where women feel comfortable bringing their friends and families."
The idea at Red Robin is that while mom is relaxing with a glass of wine and dad’s sipping on a microbrew or cocktail and sneaking peaks at some ESPN action on one of the handful of TVs, there’s still plenty going on with the restaurant’s decor and energy level to keep the kids—who constitute 20 percent of Red Robin’s clientele—entertained. Then everybody dives into the food, which manages to be both interesting and straightforward, and comes out quickly.
The bottom line: Everyone gets the experience they