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Red Robin to Expand in Texas Despite Soft Industry Backdrop

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A challenging industry backdrop has been hampering the performance of most restaurant chains and Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is no exception.

In fact, as the operating environment remains increasingly challenging, the decline in sales volume has begun to impact the returns on the company’s new restaurant openings. Also, management noted that 2016 class of new restaurant openings generated below-expectation revenues, limiting overall revenue growth for the company.

Nevertheless, at the last quarterly conference call, the company stated that the recent performance has been encouraging as the locations opened in 2017 have seen better revenue trends, more in line with past standards.

Consequently, though Red Robin has slowed down on its unit growth plan for 2017 and 2018, it has not completely refrained from it.

Recently, the completely announced its plan to open a new Red Robin Gourmet Burgers and Brew restaurant at Cedar Park, TX, on Sep 18.

Apart from the signature items like Royal Red Robin Burger, Bottomless Steak Fries, Smoke & Pepper Burger, and Red's Tavern Double the menu will also feature Freckled Lemonade. Additionally, the restaurant will serve Black & Bleu burger, The Marco Pollo, the Southern Charm Burger along with a variety of salads, entrees, soups and wraps.

Currently, there are more than 550 Red Robin restaurants across the United States and Canada.

Yet, the company loses out in terms of international presence. While several other restaurant chains including Yum! Brands, Inc. (YUM - Free Report) , McDonald’s Corporation (MCD - Free Report) and Domino’s Pizza, Inc. (DPZ - Free Report) have opened their outlets in the emerging markets, Red Robin seems to be weak on this front.

Nevertheless, shares of the company have gained 16.5% in a year, outperforming its industry’s growth of 7%.

This performance can be attributed to rising investor confidence as the company undertakes various initiatives to improve sales and regain market share as the year progresses. To this end, Red Robin’s efforts to reinvigorate the brands through menu innovation, operational improvement, and remodeling programs are impressive.

Further, Red Robin plans to grow its off-premise, online-ordering business via carry-out, delivery and catering, thus moving smartly on new revenue streams.

In fact, the company expects off-premise orders to become growth engine in the second half of the year as it begins to actively promote the new offerings, reach more guests often, thus driving improved profitability.

Currently, Red Robin carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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