Dive Brief:
- Red Robin sold 30 company-owned units to Evergreen Dining, a multi-unit restaurant operator, for $23.5 million in cash, according to a Thursday press release.
- The restaurants are located in Washington and Western Idaho and will continue to operate under the Red Robin brand. The transaction is expected to close during the second half of the year.
- Red Robin plans to use proceeds from the sale to pay down outstanding debt and support its First Choice Plan, which includes efforts to find money both by refranchising stores and reducing expenses and debt to the point where the chan can refinance its obligations.
Dive Insight:
Last year, CEO and President David Pace said the chain could end up being 65% to 75% company owned, meaning it could sell off up to 15% of its store system.
More deals could be in the works, as the chain was in final discussions with multiple parties as of mid-May, CEO and President David Pace said during an earnings call. These operators understood the operational progress Red Robin made and how First Choice is creating opportunities, he added.
“The sustained level of interest we're seeing reflects growing confidence in our system’s improvements and the strength of the Red Robin brand,” he said.
Evergreen Dining operates over 100 restaurants across different brands and has been in the restaurant business for 30 years, according to the press release. Red Robin said the company has the organizational depth to run these restaurants, given its experience with restaurant accounting, human resources, IT, marketing, payroll, purchasing and real estate services.
“I want to emphasize that we remain committed to being disciplined and selective in this process,” Pace said. “Our objective is to partner with franchisees who share our commitment to operational excellence and guest experience while achieving terms that support our balance sheet objectives.”
Last year, the chain analyzed 70 stores for closure, but made enough improvements at 20 units that they were removed from the closure list during the fourth quarter. The chain only closed six units during the first quarter, per its earnings call. As of the end of the quarter, the chain had 469 units, compared to 491 a year ago, according to a 10-Q filing with the U.S. Securities and Exchange Commission.
The First Choice Plan also focuses on improving operational efficiencies, boosting traffic, improving the restaurants’ appearances and creating a better environment for employees to boost recruitment and retention.
During the first quarter, Red Robin posted a decline in comparable restaurant revenue of 0.6%, according to an earnings release. Its traffic losses moderated, however, to negative 1.6% compared to the year ago quarter of negative 3.5%.
