Red Robin Q3 2025: Contradictions Emerge on Big Yummm Impact, Labor Efficiency, and Traffic Trends

Date of Call: November 10, 2025

Financials Results

• Revenue: $265.1M, versus $274.6M in Q3 FY2024 (down ~3.5% YOY)
• Operating Margin: Restaurant-level operating profit 9.9% of restaurant revenue, up 90 bps YOY

Guidance:

• Total revenue for 2025 expected to be approximately $1.2B (unchanged)
• Q4 comparable restaurant sales and traffic expected to decline ~3%
• Expect to end 2025 with 386 company-owned restaurants
• Restaurant-level operating profit target at least 12.5% (raised from prior 12–13%)
• Adjusted EBITDA expected at least $65M (raised from prior $60–65M)
• Capital expenditures expected ~ $33M (up from ~$30M)
• Expect Q4 cost of goods similar to Q3; beef inflation ~25% expected to hold into Q4
• G&A expected to be similar to Q3; pursuing debt refinancing, ATM up to $40M and refranchising as balance-sheet options

Business Commentary:

• Traffic Improvement and Value Offering:
• Red Robin's traffic trends improved sequentially through Q3, with an approximately 250 basis point sequential traffic improvement from Q2 to Q3.
• The introduction of the Red Robin Big Yummm burger deal contributed significantly to this improvement, resulting in a traffic run rate reduction from down 7% at the start of Q3 to negative 1.4% by the end of the quarter.

• The value offering resonated with guests, particularly during midweek dining occasions and lunch dayparts, driving a quicker dining experience.

• Operational Efficiency and Labor Costs:

• Red Robin achieved a 90 basis point improvement in restaurant level operating profit year-over-year in Q3, largely driven by improvements in labor efficiency.
• The company's operating team successfully managed labor results, meeting internal expectations despite maintaining guest satisfaction scores at improved levels.

• The efficiency gains were realized through a blend of process changes, analytics, technology, and the entrepreneurial spirit of operators.

• Rebranding and Marketing Strategies:

• Red Robin's data-driven marketing initiative showed outsized improvements in traffic and sales, with positive year-over-year traffic in many periods for the initial cohort of prioritized restaurants.
• The use of microtargeting capabilities allowed for more precise and efficient guest engagement, outperforming traditional broad-based messaging.

• The success of these marketing efforts is part of Red Robin's strategy to compete more effectively with larger, more resourced competitors.

• Financial Stability and Cost Management:

• Red Robin ended Q3 with adjusted EBITDA of $7.6 million, an increase of $3.4 million versus the same quarter in 2024.
• The increase in adjusted EBITDA and improved general and administrative costs were due to cost efficiency gains, particularly in labor and menu price increases.
• The company's ability to manage costs and optimize its capital structure through initiatives like debt refinancing and potential refranchising efforts is crucial for long-term financial stability.

Sentiment Analysis:

Overall Tone: Positive

• Management said they 'began to see the early fruit' of the First Choice plan: traffic improved sequentially, Big Yummm drove ~250 bps sequential traffic improvement, restaurant-level operating profit rose 90 bps YOY to 9.9%, adjusted EBITDA beat expectations and was raised to at least $65M, and they exited Q3 with run rate traffic near -1.4% (improved from -7%).

Q&A:

• Question from Jeremy Hamblin (Craig-Hallum Capital Group LLC, Research Division): Congrats on the strong results. I wanted to start with just some of the commentary around the Big Yummm initiative and where it's mixing. Just to get a sense for where that's mixing as a portion of sales. And then as you talked about a little bit of an uptick here in food and beverage costs to get a sense if you expect that to kind of stabilize in this current range or given a little bit of pressure on beef prices as well, we should be expecting that to click up a little bit here going forward?
  Response: Big Yummm is mixing at ~8% of total sales; beef is the primary inflationary pressure and management expects a ~25% food-cost level in Q3 to hold through Q4 with mitigation measures in place.

• Question from Jeremy Hamblin (Craig-Hallum Capital Group LLC, Research Division): Great. And then just switching gears a bit here. I wanted to understand the cost of getting the amendment to your current debt agreement, getting that extension to September 2027. What was the financial cost of that getting the extra 6 months? And then secondly, related to the refranchising efforts to get a sense for how that initiative is progressing and what valuations are looking like if you have maybe a better sense, I think you called out initially 25 to 75 potential locations. If you have winnowed that down a bit more or what other color you might be able to share with us?
  Response: The credit-extension cost was ~50 basis points; refranchising is progressing as expected with interest and proposals in the previously communicated range but no finalized deals yet.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): I wanted to lead off and kind of take -- thanks for dimensionalizing kind of that entry and exit traffic run rate for the business. Dave, I think Big Yummm was launched third week of July, so not even a full quarter's worth of impact. And I know you had spoken about working against things like upsell and kind of coaching up the front-of-house teams, how to sell the product. And the mix looked pretty benign and only down 10 basis points. So I guess kind of coming out of Q3, and I know you talked about a wiggle down here to start the quarter, but unlocking the big Yummm and the traffic benefit from it, my sense is is there still some fruit in front of us to drive further improvement from it?
  Response: Yes — management believes there is additional upside from Big Yummm (initial quarter only ~3 weeks of impact) and from broader menu and execution changes as the program scales.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Great. And just one follow-up there. What do you feel or what are you hearing from customers about the importance of having an everyday value platform now instead of having a be appointment dining? How important has that been and what you're hearing and feedback?
  Response: The everyday value offering resonates with guests—especially midweek and lunch—complements rather than replaces weekend occasions, and will be used daily with varying impact by daypart.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Dave, you also mentioned the data-driven marketing efforts and the fact that you had kind of a cohort of stores that maybe are a little bit more challenged where you saw really outsized improvement, I think, was your actual words from these efforts. Can you talk about any way to dimensionalize the traffic improvement from the effort? And then you talked about a path to expand this further. Can you maybe walk us through what that looks like going into '26?
  Response: Microtargeted marketing produced outsized traffic gains in the initial cohort; rollout expanded from ~50 to ~130 restaurants, with many of those now showing sequential and sometimes positive YOY traffic—plan is to scale the playbook across the system.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Okay. Great. And I'll wrap it up into one final question. If you take the traffic driving benefit of the Big Yummm and you take the early success with the data-driven marketing, Dave, as you're thinking out to '26, I think year-to-date, there's maybe been 17 restaurant closures. Thoughts on stability of the base and maybe improving kind of that bottom decile or bottom quartile of stores with the early success that you're seeing from these 2 initiatives?
  Response: Operations have moved many underperforming restaurants off the watch list; while a subset may still close, the anticipated number of additional closures is far smaller than previously projected.

• Question from Mark Smith (Lake Street Capital Markets, LLC, Research Division): I just want to dig in a little bit more on menu mix and kind of check dynamics and consumer behavior. Big seem to mix well. But can you talk about kind of other parts of the menu, beverages, desserts, people sharing meals. Curious to hear what you're seeing in consumer behavior kind of during the quarter and even post quarter.
  Response: Mix was largely benign—guests often trade up with add-ons (toppings, beverages) so appetizers/desserts/beverages held steady; catering growth is dilutive to check and partially explains negative mix.

• Question from Mark Smith (Lake Street Capital Markets, LLC, Research Division): Okay. Then I also wanted to ask about G&A. I know you didn't have this partners conference, but it looks really pretty good. I'm curious just how sustainable G&A is at these levels? Is it further cuts or maybe some ramp back up with more investments.
  Response: G&A is expected to be similar in Q4 to Q3 and reflects captured efficiencies; management views this level as sustainable for now while evaluating future opportunities.

• Question from Mark Smith (Lake Street Capital Markets, LLC, Research Division): Excellent. And last one for me, Todd, I apologize, but I missed some of your comp guidance here for Q4. If you can walk through that and kind of the thought process behind where you're at for kind of comp expectation.
  Response: Q4 comps are expected to be down ~3% driven primarily by traffic; menu price benefits are smaller in Q4 and mix effects largely offset pricing, so sales decline tracks traffic decline.

Contradiction Point 1

Impact of Big Yummm on Profitability

It involves differing expectations regarding the impact of the Big Yummm initiative on profitability, which can affect investor assessments of the company's financial performance.

How is the Big Yummm initiative affecting sales mix, and will food and beverage costs change? - Jeremy Hamblin(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: Big Yummm is expected to be a 1% drag on restaurant level profitability in Q3 and Q4, with half in labor and half across the P&L. - Todd Wilson(CFO)

What is the current status of labor efficiency initiatives? And can you break down the contribution from the Big Yummm offer versus higher commodity outlook to full-year restaurant operating margin guidance? - Todd Morrison Brooks(The Benchmark Company, LLC)

2025Q2: The Big Yummm is expected to be a 1% drag on restaurant level profitability in Q3 and Q4, with half in labor and half across the P&L. - Todd Wilson(CFO)

Contradiction Point 2

Data-Driven Marketing Impact

It involves differing assessments of the impact of data-driven marketing on sales performance, which can influence strategic decision-making and investor expectations.

What is the outlook for store base stability and improvement in the bottom 10% with recent initiatives? - Todd Brooks(The Benchmark Company, LLC, Research Division)

2025Q3: We expect fewer closures than previously anticipated. - David Pace(CEO)

How is the labor efficiency initiative progressing? How much of the full-year restaurant operating margin guidance is attributed to the Big Yummm offer versus higher commodity prices? - Todd Morrison Brooks(The Benchmark Company, LLC)

2025Q2: We now expect fewer closures than previously anticipated. - David A. Pace(CEO)

Contradiction Point 3

Labor Efficiency Improvements

It involves differing perspectives on the progress and impact of labor efficiency initiatives, which are crucial for operational and financial performance.

What was the cost of the debt agreement extension, and how is the refranchising initiative progressing? - Jeremy Hamblin(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: Labor efficiency has improved consistently, driven by disciplined execution and better forecasting. - David Pace(CEO)

What is the current status of labor efficiency improvements, and can you break down the contribution of the Big Yummm offer vs higher commodity outlook to the full-year restaurant operating margin guidance? - Todd Morrison Brooks(The Benchmark Company, LLC)

2025Q2: Labor efficiency has improved consistently, driven by disciplined execution and better forecasting. - David A. Pace(CEO)

Contradiction Point 4

Big Yummm Impact on Traffic

It reflects differing expectations on the impact of a key marketing initiative (Big Yummm) on traffic trends, potentially influencing strategic planning and investor expectations.

Can you explain how the Big Yummm initiative affects sales mix and if there will be changes in food and beverage costs? - Jeremy Hamblin(Craig-Hallum Capital Group)

2025Q3: The Big Yummm deal is mixing at about 8% of our total sales, which aligns with our expectations and has positively impacted traffic trends. - David Pace(CEO)

How does Q1 efficiency support the 12-13% full-year guidance range for restaurant-level margin? - Todd Brooks(The Benchmark Company)

2025Q1: There may be some temporary softness in traffic as we transition to this offer. - Todd Wilson(CFO)

Contradiction Point 5

Traffic Trends and Expectations

It involves differing expectations regarding traffic trends throughout the year, which are critical for forecasting sales and operational planning.

Given the traffic dip at the start of the quarter, is there still room for further improvement from the Big Yummm initiative? - Todd Brooks(The Benchmark Company)

2025Q3: We're clearly focused on enhancing our traffic trends and volumes. - David Pace(CEO)

Can you explain first-quarter efficiency and how it supports the 12-13% full-year restaurant margin guidance? - Todd Brooks(The Benchmark Company)

2025Q1: We expect traffic to remain soft for the balance of the year. - Todd Wilson(CFO)