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Red Robin Gourmet Burgers Inc.

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We note that 2016 was indeed a tough year for Red Robin given the impact of acquiring lower-margin franchise restaurants and higher labor cost that hurt margins. Higher pre-opening and remodeling costs coupled with expenses related to insistent domestic expansion strategies and soft industry trends added to the woes. As a result, shares of the company underperformed the Zacks classified Retail-Restaurants industry in the past year. However, various initiatives undertaken such as efficient menu innovation, focus on increasing speed of service, effective marketing strategy, unit expansion and remodeling programs should aid in turning around its business and gaining investor confidence. It is also set on growing its off-premise, online-ordering business via carry-out, delivery and catering. Still, cost-related issuers, soft consumer spending environment along with company’s limited international presence and domestic contraction raise concerns.

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