Red Robin is the latest in a growing number of fast-food eateries planning to shutter underperforming locations following a spate of financial difficulties.
The chain on Wednesday announced it is weighing plans to potentially close 70 locations once their lease expires, as it attempts to turn around its operations. The company has already closed one location in the fourth quarter of fiscal 2024, and recorded a loss of $32.4 million in the quarter in large part from the “review of underperforming restaurants.”
The company plans to sell three properties during the first quarter of fiscal 2025. The sale of those locations is expected to generate $5.8 million, which the company anticipates will be used in part to repay its debt.
While financial results for fiscal 2024 “fell well below” the company’s original expectations, CEO G.J. Hart said the company has made “substantial improvements to the guest experience” to try and drive traffic back to its restaurants.
During its earnings call last week, Hart told analysts that the company saw a 600 basis-point improvement in traffic trends from the first quarter of the year to the fourth.
But “while our improvement has been substantial, we have not yet reached the potential of our iconic brand and expect to drive further traffic improvements in 2025,” he continued.
Red Robin’s story isn’t unique. There has been a growing number of namesake restaurants that have struggled after accumulating too much debt during the pandemic.
The industry expected consumer spending at restaurants to return to pre-pandemic levels once things returned to normal. But the quick-service sector started facing slowing traffic in back-to-back quarters as inflation-wary consumers continued to eat at home more often.
Some companies, like TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill and Red Lobster, have filed for protection in bankruptcy court. However, others, including those that didn’t file for bankruptcy protection, significantly reduced their footprint to position themselves better in the current environment.
Wendy’s, for instance, announced in November that it was shuttering 140 underperforming locations through the end of 2024 as it looks to improve its “restaurant footprint and overall system health.”
Credit: Source link
