Red Robin Gourmet Burgers Inc 2026 Q2 Earnings Call

Good afternoon, everyone, and thank you for your interest in Red Robin. I am pleased to report that our momentum continued in the second quarter, with significant progress across the business as we execute against our priorities under the First Choice plan. We have taken deliberate steps over the past year to strengthen the guest experience, improve hospitality and execution, and invest behind traffic-driving platforms that we believe can increase frequency over time. We are seeing those actions translate into increased guest engagement, elevated satisfaction scores, and improved restaurant-level profitability. We also took major steps this quarter towards strengthening our balance sheet. We announced three refranchising agreements that will collectively generate approximately $96 million in gross proceeds upon closing. Our partners are seasoned multi-concept operators who bring meaningful operating capabilities and resources and who share our hospitality first mindset and core values.

The proceeds received from these transactions, which we expect to receive during the third quarter, will provide us with greater financial flexibility to refinance our existing debt and support our long-term strategic priorities. This represents a step forward for our company, and I appreciate the significant efforts expended by everyone on our team to drive this to a successful outcome. Taken together, the results in the quarter give us greater confidence and reinforces that the First Choice plan is working. We have made substantial and consistent progress across the business over the last year, and the underlying fundamentals continue to move in the right direction. We remain laser-focused on executing against our strategy and positioning the business for sustainable results. Let me now walk through the quarter in more detail and update you on each of our First Choice priorities.

Same-store sales grew 1.3% in the quarter, with traffic effectively flat at down 20 basis points. This traffic result outperformed the industry by 40 basis points as measured by Black Box Intelligence, and for the second quarter in a row, represented our best traffic performance since Q1 of 2023. In addition, we increased our share of visits by 80 basis points in trade areas where competitors are located. Our team has been working toward this inflection point for some time, and it is encouraging to see it build and show up in the results. Value remains a key driver of this traffic performance, and the Big Yummm Burger Deal is delivering as expected. The platform continues to resonate with guests, especially against an economic backdrop where consumers are more discerning about where they spend.

Big Yummm Burger Deal gives guests a clear, accessible entry point while preserving the full Red Robin experience that guests have come to expect. Combined with our targeted First Choice marketing efforts, we are improving both reach and brand awareness, helping us to engage guests more effectively to drive frequency. At the same time, we have remained disciplined on pricing. Our goal is to build traffic and frequency while protecting the value guests associate with Red Robin. Q2 was the fourth consecutive quarter in which our average check increase was below the industry. Turning to profitability, the top-line momentum, combined with disciplined cost management, enabled us to drive four-wall efficiency, including a 20 basis point increase in restaurant-level operating margin to 14.7%. This represented the highest second-quarter margin in four years. Adjusted EBITDA was in line with our high expectations and sets us up well to deliver against full-year financial commitments.

With that as the backdrop, let me walk you through where we stand on each of our First Choice priorities and how we are thinking about our strategic focus for the balance of the year. First, let us start with Hold Serve. Our Hold Serve pillar is about sustaining the operational progress we have made and then building on it. That is exactly what our team continued to do in the second quarter. Our labor efficiency initiatives delivered approximately 50 basis points of year-over-year savings. A key enabler has been the accountability and ownership embedded in our managing partner model, which rewards our partners directly for the improvements they drive in their own restaurants. We are continuing to achieve these efficiencies while still providing high satisfaction scores that remain at the strong levels we have established over the past year. This continues to demonstrate that operational discipline and genuine hospitality reinforce one another.

Our operators keep finding smarter ways to run efficient shifts while providing great hospitality, and that discipline has been showing up quarter after quarter. Moving to our drive traffic pillar, our value and innovation platforms continue to gain traction with guests, and Big Yummm Burger Deal remains central to that story. The platform is mixing at healthy levels and strengthening our relevance with value-seeking guests. We continue to see improving traffic and trials since it launched last year. Importantly, every Big Yummm Burger Deal still includes our signature bottomless sides and beverages, contributing to the compelling value our guests are asking for. Our objective is to generate traffic through attractive platforms rather than depend on broad-based discounting. We continue to use a deliberate barbell approach to the menu, pairing accessible value with more premium and indulgent options so guests can choose Red Robin across different occasions and spending levels.

We believe this approach is building a more sustainable foundation for long-term traffic generation. To that end, we introduced our Towering Double Cheeseburger Sliders LTO during the quarter, giving guests a more indulgent option. We also recently broadened our bone-in chicken wing lineup with new 8, 12, and 16 count options. That expansion was paired with the nationwide launch of Garage Beer, making Red Robin the first national restaurant chain to offer the Kelce brothers-owned brand across its system. Together, we see wings and beer as a natural fit for the social occasions our guests already come to Red Robin for. While it's still early, the reception so far has been encouraging. On the marketing front, our data-driven First Choice strategy continues to see the benefit of a more precise, locally relevant approach to how we reach guests in each trade area.

This has improved the efficiency of our spend and helps build awareness and frequency over time. We expect to keep iterating and building on that discipline as the year progresses. Turning to our find money pillar, I'm pleased to update you on the progress we've made on our balance sheet objectives. As I mentioned at the beginning, since our last call, we've announced three refranchising agreements. Op Burgers with 69 restaurants across 8 states in the Southeast, Mid-Atlantic, and Midwest, Evergreen Dining with 30 restaurants in Washington and Western Idaho, and Kuber Dining with 17 restaurants in Oregon and Washington. Altogether, we expect to receive roughly $96 million in proceeds following the close of these transactions, which we will use to pay down debt and further strengthen our balance sheet.

We're excited about the new franchise partners we've gained through this process, and we're confident they'll be strong stewards of the Red Robin brand in their respective markets. In parallel with the signing of these transactions, we've further advanced our efforts to refinance our existing debt, which comes current later this year. We continue to work with an experienced group of advisors to facilitate this process and have made considerable progress. While I don't have any additional details to provide at this point in time, I can tell you that we see this as an important step in giving the company more financial flexibility over the long term, and we'll keep you updated as the process progresses. Turning to our fixed restaurants pillar, we continue our 2026 light touch refresh program.

The goal is straightforward, improve the guest facing elements that matter most to the dining experience while maintaining a disciplined approach to capital. We recently refreshed 7 restaurants in the St. Louis market. The updated elements modernize the ambiance and aesthetics and are designed to complement the improvements we've made in food, hospitality, and service execution. In addition to our facility refreshes, we're in the middle of rolling out replacement devices for our server handhelds, and we'll shortly introduce an upgraded version of our Ziosk tabletop devices. We believe these investments will improve order accuracy, server efficiency, and overall speed of service, helping us return the gift of time that has historically been an important part of the Red Robin experience. Lastly, I'll address the win together pillar. I continue to be proud of the sense of ownership and pride I'm seeing across our restaurants and our support center.

Our team members are rising to the occasion, putting guests first in everything we do, and actively bringing forward ideas that improve both restaurant operations and the guest experience. We continue to see strong adoption of the enterprise version of ChatGPT that we rolled out last fall across the organization. Adoption has been particularly strong in the field, where our managing partners are putting these tools to work to optimize labor scheduling, manage food costs, and improve how we deliver guest service. We view this as one more tool that can help our operators make faster, better-informed decisions, all of which is showing up in the operational efficiencies behind our results. On the people side, our commitment to building a supportive work environment continues to pay off. Hourly and restaurant management turnover remain at historically low levels, and employee engagement scores are tracking above industry benchmarks.

That stability matters because experienced, engaged team members are better positioned to deliver a consistent guest experience. In addition, greater stability means lower recruitment and training costs, further contributing to our improving restaurant-level operating profits. As we move through 2026, we remain focused on building an environment where great people can grow meaningful careers while helping us strengthen execution and differentiate Red Robin in the marketplace. To the entire Red Robin team, thank you for your continued commitment to our guests and to each other. Your focus, discipline, and guest-first mindset are the foundation of the progress we're making. With that, I'll turn the call over to Mark to review our second quarter financial results.