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January 2018. CEO Steve Carley cut bussers across every location, eliminated expeditors, and replaced kitchen managers with generic back-of-house roles. The logic was pure spreadsheet thinking. Labor costs were rising, so remove labor. The savings looked great in quarterly earnings. The second and third order effects were catastrophic.
Tables stopped getting cleared. Wait times ballooned. Walkaways increased 85% year over year. 75% of the dine-in traffic loss came during peak hours, the exact window when the restaurant makes money. Ticket times out of the kitchen jumped a full minute on average. Customers who waited 20 minutes for a table and another 20 for a burger stopped coming back. Red Robins own CEO at the time, Denny Marie Post, admitted the damage was self-inflicted.
And heres the compounding problem. While Red Robin was gutting its own service model, it simultaneously launched a Tavern Double value menu at $6.99 to drive traffic. Orders of the cheap burgers jumped from 9% to 15% of all orders, which cratered the average check. So Red Robin was now serving worse food, slower, in a dirtier restaurant, at a lower price point. That combination is how you enter a death spiral.
Meanwhile, 16% of locations were in malls. Mall traffic was already declining. Those locations saw 5.5% sales drops versus 3% at standalone stores, dragging the whole system down. Management acknowledged the problem quarter after quarter and did nothing about it for years.
Five CEOs in 10 years. Think about that. The one leader who provided stability, Michael Snyder, was with the chain from 1979 to 2005. After that, it was a revolving door. Every new CEO launched a new turnaround plan. Every plan was abandoned by the next CEO. The North Star plan. The First Choice plan. New menu rollouts. Loyalty program reboots. None of it addressed the core issue: theyd trained an entire generation of customers to think of Red Robin as the place where the service is terrible.
The contrast with Chilis makes the failure even clearer. Kevin Hochman took over Chilis in 2022 and did the opposite of what Red Robin did. He simplified the menu, invested in operations, launched a $10.99 3 for Me deal that went viral on TikTok, and let the food speak for itself. Chilis just posted 31% same-store sales growth. Red Robins comparable revenue was down 1.2% for all of 2024.
Both chains were in roughly the same position three years ago. One chain invested in the customer experience. The other spent a decade cutting it. Red Robins $65M market cap and Chilis $3.3B market cap tell you which approach works.
The stock went from $92 to $3.61. Thats what happens when you optimize for the quarterly earnings call instead of the customer walking through the door.
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Triple Net Investor @TripleNetInvest
Red Robin has lost ~90% of its value over the last 5 years
You can now buy the ENTIRE company for just ~$60 million
They used to be one of the most beloved spots for kids, teens, and families...
Where did it go wrong for them and can they turn it around?
https://x.com/aakashgupta/status/2024365923856240790