Red Robin Gourmet Burgers, Inc. Aktie

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Inc. First Quarter 2026 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements among the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and, therefore, are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its first quarter 2026 earnings release on its website at ir.redrobin.com.

On today's call are Dave Pace, President and Chief Executive Officer; Mark Graff, Chief Financial Officer; and Chris Meyer, Interim Chief Financial Officer.

Now I would like to turn the call over to Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. I'm pleased to report that our first quarter results demonstrate continued improvement in the business, highlighted by our strongest traffic performance since the first quarter of 2023, and our highest Q1 restaurant operating profit margin since 2021. These results reinforce that the actions we're taking to strengthen guest engagement are gaining traction. Our Big Yummm value platform continues to resonate with guests with high satisfaction scores, and we're seeing strong results across the system. In addition, our targeted First Choice marketing efforts are improving both reach and brand awareness, helping us to engage guests more effectively to drive frequency.

Importantly, the operational discipline embedded in our First Choice plan is delivering steady improvement across the P&L as well. Our teams remain focused on executing the fundamentals, enhancing the guest experience and positioning the business for sustainable growth.

As it relates to our Q1 performance, same-store sales were down 0.6%, including a 1.0% increase in average check and a 1.6% decrease in traffic. This traffic result improved sequentially from Q4 and continued to narrow the traffic gap to the industry as compared to Black Box Intelligence, reinforcing that our strategies are gaining traction despite a challenging macro environment.

The current economic environment requires that we remain deliberate in highlighting value and discipline in our approach to average check. Q1 was our third consecutive quarter where our check average increases were below the industry. Our prudent approach to menu pricing complemented by the expansion of our Big Yummm platform has positioned us for success and is reflected in our traffic momentum.

Turning to profitability. We're pleased with the continued incremental gains in four-wall efficiency, including a 50 basis points improvement in restaurant-level operating margin to 14.8%. This was our highest first quarter margin in 5 years. Our adjusted EBITDA was in line with our expectations and we remain on track for our full year objectives.

With that, let me update you on our First Choice plan and how we're thinking about our strategic priorities for the remainder of the year. First, let's start with Hold Serve. Our team continues to do a great job sustaining the progress we've made in the past several quarters, and this quarter is no different. During the first quarter, our labor efficiency initiatives drove approximately 130 basis points of year-over-year savings. Our labor percentage of 35.7% was our lowest first quarter labor in 3 years. These improvements reflect the sustained accountability and ownership embedded in our managing partner math.

What's particularly encouraging is that we are achieving these efficiency gains without compromising the guest experience. Our satisfaction scores remain strong, reinforcing that operational excellence and genuine hospitality are not competing priorities, they're complementary.

Moving to our drive traffic pillar. We believe our value and innovation platforms are gaining traction with guests. The expanded Big Yummm platform we launched in late January continues to address the need for value with the new offerings while serving as an incremental traffic driver. All in all, the 6 meal options across our $9.99 to $16.99 price range are strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. In total, our Big Yummm offerings are mixing at over 13%, well within the expectations for this program.

The platform's appeal extends beyond burgers, including our hand-breaded classic chicken sandwiches, Donatos pizza and Whiskey River barbecue chicken wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience.

Overall, the underlying traffic trends in the business are improving, and our momentum is increasingly being driven by compelling platforms rather than relying on traditional discounting. Our deliberate barbell approach with the menu balances compelling value with higher-priced indulgent options to expand guest choice across day parts and occasions. We believe this approach is building a more sustainable foundation for traffic generation.

In addition, we continue to enhance our new product pipeline, which provides additional opportunities to drive frequency. An example of this is our towering sliders that we launched last month, which has generated record-setting menu satisfaction scores and is driving incremental check growth.

On the marketing front, our data-driven First Choice strategy continues to gain traction. Our ability to deliver locally relevant messaging based on competitive dynamics in each trade area has improved both engagement and marketing efficiency. We're seeing the benefits of this more precise, disciplined approach in our traffic performance and expect to build on this momentum as we refine our capabilities throughout the year.

Now let me update you on our third pillar of the First Choice strategy, find money. I'm pleased to report that our momentum on corporate efficiency initiatives continues to deliver meaningful results. As we previously outlined, the G&A reductions we implemented in mid-2025 are providing sustained benefits, and we remain on track to realize the full year step down we anticipated for 2026.

Turning to our balance sheet optimization efforts. Our tactical refranchising initiatives continues to move forward. We're currently in the final stages of discussions with multiple parties, and I'm pleased with both the pace of these conversations and the depth of engagement from prospective franchisees. These are sophisticated operators who recognize the operational progress we've made and see the opportunity that our First Choice strategy creates. The sustained level of interest we're seeing reflects growing confidence in our system improvements and the strength of the Red Robin brand.

I want to emphasize that we remain committed to being disciplined and selective in this process. 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. We plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We look forward to providing further updates on this in the near future.

Turning to our Fix Restaurants pillar. We're continuing our light touch refresh program in 2026. This initiative touches customer-facing elements within our restaurants that can enhance the overall experience and support the quality of our food and service. We expect to have our first markets completed by the end of June. In addition to our facility refreshes, we've begun to roll out replacement devices for our server-handheld technology, and we'll shortly introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for.

Lastly, let me quickly touch on our Win Together pillar. As I reach the 1-year mark as CEO of Red Robin, what stands out most for me is growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives, they're owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. We also recognize that the rate of change continues to accelerate and evolve, and we need to adapt with it. Technology and AI are at the forefront of that discussion, and our team is constantly challenging the status quo to identify ways to enhance our capabilities, reduce friction and differentiate ourselves in the marketplace.

Last fall, we introduced an enterprise version of the ChatGPT AI platform and we're seeing meaningful adoption of the tools across the enterprise, but especially within the field. Our managing partners are actively leveraging these tools to optimize labor scheduling, manage food costs and enhance guest service delivery, all of which are contributing to the operational efficiencies reflected in our results.

On the people front, our focus on creating a supportive work environment continues to pay dividends. Hourly turnover remains at historically low levels and employee engagement scores are tracking positively above industry benchmarks. This stability strengthens our ability to deliver a consistent, high-quality experience our guests expect.

As we progress through 2026, we remain committed to fostering an environment where great people can build meaningful careers while driving the innovation and execution that will differentiate Red Robin in the marketplace. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The operational discipline and guest-first mindset you demonstrate every day are the foundation of our progress, and I'm grateful for your commitment as we execute our First Choice plan.

Before I turn the call over to Mark, I'd like to extend my sincere thanks to Chris Meyer for stepping out of retirement to serve as our Interim CFO. Since December, Chris has provided strong continuity, steady leadership and valuable guidance to our finance team and the entire organization, including me personally. I'd also like to welcome our new CFO, Mark Graff, who just joined us earlier this month. With more than a decade at Bloomin' Brands, he brings deep financial expertise and direct operational leadership to the team. I had the privilege to work with Mark when we were both at Bloomin'. He's been working closely with Chris over the past several weeks as he comes up to speed, and we look forward to his leadership and perspective as we continue to execute on our First Choice plan.

With that, I'll turn the call over to Mark to review our first quarter results.

Thanks, Dave, for the kind words, and good afternoon, everyone. I'd like to start by providing a recap of our financial performance for the fiscal first quarter of 2026. Total revenues in Q1 were $378 million, a decrease of $14 million from 2025. This change in revenue was primarily due to the impact of restaurant closures and a decrease in comp sales. Comp sales, excluding the impact of deferred loyalty revenue were down 60 basis points in Q1. Q1 comp sales included a 1% increase in average check, offset by a 1.6% decline in traffic. The 1% increase in average check consisted of a 3.1% increase in price, offset by a 2.1% decrease in mix and discounts, driven largely by the impact of our Big Yummm value offerings.

As it relates to other aspects of our Q1 financial performance, restaurant-level operating margin was 14.8% and an increase of 50 basis points compared to the first quarter of 2025. The benefits of cost savings and labor efficiencies, check average increase in restaurant closures were offset by inflation and lower traffic.

As it relates to our commodity basket, as of the end of the first quarter, we were approximately 60% locked on our 2026 commodity needs. General and administrative costs were $23 million as compared to $27 million in the first quarter of 2025. The $4 million reduction is primarily due to reduced people costs from our corporate efficiency initiatives and timing of corporate events. Selling expenses were $13 million as compared to $9 million in the first quarter of 2025.

Adjusted EBITDA was $27.3 million in the first quarter of 2026, a decrease of $0.6 million versus the first quarter of 2025. As it relates to our balance sheet and capital structure, we ended the first quarter with $24 million of cash and equivalents, $10 million of restricted cash and $17 million available borrowing capacity under our revolving line of credit.

Turning to our outlook. We are maintaining the full year guidance for 2026. Please note that our outlook does not include any impact from the tactical refranchising initiatives. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. Finally, we expect capital expenditures to be between $25 million and $30 million.

In summary, our first quarter performance marked our continued improvement in our business fundamentals. As we look ahead to the remainder of 2026, we will remain disciplined in executing against the First Choice plan and continue strengthening the operational and financial foundation of the company.

Dave, I'll now turn the call back to you.

Thanks, Mark. We believe our first quarter performance validates the strategic direction we've set with our First Choice plan. Across all 5 pillars of our plan, we're executing with discipline by, one, holding serve on operational efficiencies while maintaining guest satisfaction; two, driving traffic through our expanded Big Yummm value platform and data-driven marketing; three, finding money through our organizational efficiencies and our strategic refranchising initiative that will strengthen our balance sheet; four, fixing our restaurants with targeted refreshes and technology enhancements; and five, winning together by empowering our team members with the tools and culture they need to succeed.

Combined, our strategy has not only improved our underlying traffic momentum and share gains relative to the industry during the first quarter, but also allowed us to better speak to our guests on what matters to them through the continued evolution of our targeted marketing initiatives. We believe we have the right team to make Red Robin a place that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns.

With that, we're happy to take your questions. Operator, please open the lines.

[Operator Instructions] Our first question comes from the line of Alex Slagle with Jefferies.

Congrats, Mark, and -- good to have you back. And Chris, it was certainly great having you back for a while as well. I wanted to just dive more into the acceleration in the same-store sales and traffic trends. And I mean, it seems like the new menu, Big Yummm deals were pretty big and maybe a little bit also from the targeted marketing efforts, but just seems like the trends really accelerated a bit more notably after the storms than I think we would have expected. So if you could kind of dig more into the Big Yumm performance and maybe some of the other metrics like the check performance certainly seemed pretty solid.

Alex, it's Dave. I'll start out and then I'll hand it over to you guys. I think you're right. I mean we did see strength coming into the year. We saw a little bit of dip through the weather that everybody saw in the middle of the quarter and then a nice rebound at the end. Combination of Big Yumm, certainly, the new menu launch that we put out performed as we had hoped or better than we had hoped across a number of different measures. So we felt good about the quarter. And I think you're right. strong start, kind of choppy middle and then strong finish.

So if Mark or Chris, do you want to jump on that?

Yes. The only thing I would add -- this is Chris. I'd say from a marketing perspective, we did increase our spend year-over-year. We feel really good about that targeted marketing approach. We said on the last call, we expect to spend more in marketing dollars much every quarter of this year than we spent a year ago. And I think that we're going to continue on that track certainly in the second quarter.

Okay. And on the cost, the labor efficiency was pretty impressive just given last year. I know there were some acceleration or a benefit that you start to see from the managing partner program and efficiency on that labor line. But I mean, are we starting to level out or like are the turnover levels sort of down and stabilizing? Or do you think there's more room to go on labor?

Yes. First of all, I think hats off to the ops team. They just did a heck of a job kind of tightening their belts, managing this much more effectively than we had in the past. And so they deserve a lot of the credit for this. But we brought it down. We're going to get to a point where there's not the kind of gains that we've been seeing, but we'll continue to kind of work towards that efficiency. We talk about that every day. I think the thing that is our governor right now, Alex, is just making sure the guest satisfaction scores remain, right? As long as we don't think we're impacting the guest we'll keep trying to find ways to be more efficient. But I'd say we're approaching that at least for us right now, optimal level.

Yes. And if you think about how that manifests in the P&L, tactically speaking, we started seeing those benefits in Q2 of last year from a savings perspective. So we are going to start lapping that when we get to Q2 of this year.

Our next question comes from the line of Jeremy Hamblin with Greg Hallum.

Congrats on the results. Just wanted to follow up on the last question in terms of seeing that the cadence kind of exiting the quarter building, have you seen some of that momentum continue here in Q2? And just in terms of check and menu pricing in terms of you're at just over 3% price in Q1, how do you think about price as it plays out through the rest of 2026?

Yes. I mean I think in terms of trends, as we came out of Q1, Q2 is looking a lot right now. But it's early days, yes, at least P5 for us. I think in terms of pricing for the rest of the year.

Yes. I'll let maybe Mark, if you want to talk to that.

We're still in that 3%, 3.5% range. So that's been pretty consistent. We had very little rollover from last year.

Got it. And then in terms of additional menu item initiatives and how you're thinking about menu innovation in combination with some of the marketing efforts, right? So $4 million year-over-year increase in marketing spend in Q1 and clearly in casual dining, capturing attention on social media and digital marketing has been key to driving traffic. I think this is the best quarter on traffic like in 3 years for you guys as well. But you lean in a bit more, do you lean into value a bit more as it's had success and is mixing well. How should we think about the interplay of those 2 things?

Well, I think you just touched on your last word of interplay is exactly what's going to happen is there is going to be an interplay. We're going to try and continue to innovate the consumer is obviously interested in value messaging and value offering across the category these days. But that doesn't mean we're not going to continue to innovate with new products. We put a new menu out in January, which had both value as well as high-end products in the packaging menu. We came out with the slider tower offering, which was another kind of opportunity for us to innovate and introduce new products. And we're continuing to look at, okay, how do we -- what's the next round of the value platform, what does that look like as we go forward.

So all of those things are going, Jeremy. I don't think it's going to be one end or the other. I think we're going to constantly be trying to say, okay, what's the value hook and then what are the other product offerings that we can add to the menu or introduces LPOs.

Understood. Last one for me. Just in terms of the units. Did you have any store closures in Q1? I think you said you were looking at about maybe 20 for the year, but just wanted to understand what you did in Q1? How we should be thinking about the cadence for 2026? And what the expected impact might be on revenues and EBITDA?

Yes, I'll let Mark or Chris talk about impact on revenues and EBITDA, but 6 was the number in Q1, and that will kind of play out relatively equally across quarters for the balance of the year.

In terms of impacting, Chris, do you want to take...

On the sales front, we did have some closures last year. So if you kind of combine that with the expectation of this year, it's close to $40 million from the sales perspective. and it's kind of a mixed bag on the lot side, which it will be pretty neutral from that perspective.

Yes. Jeremy, the other thing, just to clarify, I said that it's going to play out about the same as it did 6 in Q1, but I think your point about [ 2021 ] for the full year is right. It's just going to be spread equally relatively over the next 3 quarters.

[Operator Instructions] Our next question comes from the line of Mark Smith with Lake Street Capital.

I wanted to ask about commodities a little bit. It sounds like -- I think you guys said you've got 60% locked right now through the end of the year. Maybe walk us through opportunities to continue locking stuff and especially as we look at beef, kind of where you're at, what's on contract and when things come up and what maybe we could look for potential inflation this year?

Yes. I mean, from an overall basket perspective, we're still in that kind of 3.5% range. And so beef, a very large piece. We do not lock that piece. So that's really as you think about what's floating that and as you think about dairy as well or kind of 2 of the bigger options that are not. But as you think about chicken and some of those other ones, those are the opportunity areas that we continue to pursue.

Okay. And then similar back to labor efficiencies, and you guys talked about this a little bit, but I'm just curious, any additional thoughts as we think about maybe just the leverage on higher sales that kind of help with some of those efficiencies versus some of the initiatives that you guys in such as using AI on managing labor, the puts and takes within labor that kind of helped you get some of these efficiencies.

Yes. I mean I think it's a combination of things. We've got technology that we introduced with handhelds, which certainly improved the efficiencies at the restaurant level, the AI tools have really -- for those that have adopted it, have really kind of helped just provide China light on the opportunities for those managing partners that are using it. And so we're trying to extend the comfort level with that across the system.

Similarly, at managing inventory food costs and inventory in the restaurants, helping from a planning standpoint that way. We've been really pleased with what we've seen on that. And you kind of keep tightening the labor matrix and targets for the operating team, and they keep hitting it. And so I give them credit for their approach to this thing. But I do want to be conscious of the guest impact. And I don't ever want us to go so far that it negatively impacts the guests. And so we're being pretty careful about how we watch that.

Perfect. The last one for me is really -- I think last quarter, you guys quantified a little bit around Big Yummm mix within dine-in. Are you able to do that? Anything that you can say or quantify around maybe how Big Yummm trended in mix during the quarter?

Yes, I'll just at a headline level or a high level. I'll turn it over to these guys. But we modeled out what we thought Big Yum might do when we put the new menu in place and put it on the menu. And the performance since we've put it on the menu has performed well within our targets for it. And so I know the number, but I'll let Chris or Mark talk about that.

Yes. And we talked about -- so prior to when we put it on the menu with the additional offerings, we talked about that core LTO at $9.99, mixing in the 8% to 9% range. We put it on the menu on the core menu with the 3 price points, the 4 -- the $9.99, the $14.99, the $16.99, we saw that mix jump up. And it's been hovering in that 13% to 14% range pretty much for the duration of the -- since that new menu launched in late January, I wouldn't expect it to move much from here. I think it's going to stay pretty much in this range moving forward, which we're totally fine with -- we feel really good about where it is. It's mixing at the right level. As we introduce new innovation, it's going to create opportunities for us to have barbell price points across the menu. So it's really a perfect strategy for us. We feel really good about how it's playing out.

And we have reached the end of the question-and-answer session. I would like to turn the floor back to Dave Pace for closing remarks.

Yes. Just to wrap it up. Look, thanks for everybody for joining the call. We feel really good about the quarter, and we feel like the First Choice plan is working. We're going to keep on it, and we look forward to talking to you again after Q2. So thanks. We'll talk soon.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Good afternoon, everyone, and welcome to the ACADIA Pharmaceuticals Inc. Red Robin Gourmet Burgers, Inc. Fourth Quarter 2025 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore, are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release.

The company has posted its fourth quarter 2025 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. As we close out 2025, our fourth quarter results reflect the steady momentum we're building as we execute against our First Choice plan. We introduced this plan in the second quarter of 2025 to focus our priorities and outline how we intend to strengthen our competitive position and improve our overall performance.

Today, I'll provide an update on our progress against its key pillars and how we intend to build on that progress in 2026. Before I get into the details, let me begin with some context around our full year and fourth quarter sales performance. For the full year, comp sales were down 0.3%, excluding the impact of deferred loyalty revenue. This included a 3.5% increase in average check, offset by a 3.8% decrease in traffic.

Our traffic improved in the back half of the year as we rolled off 2024 pricing actions and saw traction with our Big Yummm value offering. For the fourth quarter, comp sales were down 3.3%, excluding deferred loyalty revenue. This included a 0.3% increase in average check and a 3.6% decline in traffic. Now like the broader industry, trends softened in October and November relative to where we exited the third quarter.

In addition, we made the intentional decision to shift marketing spend into December to maximize reach during the holiday season. That strategy proved effective. increased support behind our Big Yummm value offering and our holiday promotions drove a notable inflection in December as we outpaced the Black Box Intelligence casual dining index in traffic for the first time since the third quarter of 2024.

Encouragingly, momentum continued into January, where traffic was positive before weather events starting in late January with Winter Storm Fern have made results choppy in subsequent weeks. On profitability, we exceeded our expectations for both restaurant level margin and adjusted EBITDA in the fourth quarter. Full year adjusted EBITDA of $69.7 million represented a 53% growth over 2024, and RLOP margin grew by 190 basis points. Importantly, we achieved this result with only modest pricing in 2025.

For perspective, in the fourth quarter, net pricing contributed just 1.6% to results, underscoring that our performance improvement is increasingly being driven by a stronger consumer proposition and improved operating efficiency. With that context, let me walk through our progress against each pillar of the First Choice plan and our strategic priorities for 2026.

First, let's start with Hold Serve. Our Hold Serve pillar requires that we sustain the progress that we make each quarter and then extend that improvement even further as we move forward. During the fourth quarter, our labor efficiency initiatives contributed approximately 180 basis points to restaurant level margin. These gains were consistent throughout the year and were a primary driver of a 250 basis point reduction in total labor costs for 2025. Importantly, we achieved these efficiencies while maintaining our guest satisfaction scores, demonstrating that productivity and hospitality can coexist.

These improvements also reflect the increased accountability and ownership embedded in our managing partner model, which rewards our partners for improvements that they drive in restaurant-level profitability. This leads me to our next pillar, which is our Drive Traffic initiative. As noted earlier, we saw industry outperformance in December. We believe this improvement is driven by 2 primary factors: one, the power of our Big Yummm burger offer; and two, our improvements in how we market and message to our guests.

First, our $9.99 Big Yummm value offer continues to resonate. Within our dine-in channel, it delivered 10% guest mix in the fourth quarter, strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. Building on this success, we expanded our platform with the January 26 launch of our new menu, integrating additional Big Yummm deals directly into our core offering.

This expanded platform now features 6 meal options across a tiered price range of $9.99 to $16.99, extending beyond burgers into categories such as our hand-breaded classic crispy chicken sandwiches, Donatos Pizza and Whiskey River barbecue wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience.

The new menu also broadens our premium offerings, creating a deliberate barbell approach that balances compelling value with higher-priced indulgent options to expand guest choice across dayparts and occasions. Early results indicate that the menu is performing as expected and that average check has increased and remains healthy as guests engage across the menu.

The second key driver of our fourth quarter traffic improvement was the deployment of incremental investment behind the data-driven First Choice marketing strategy we initially introduced in Q3. This strategy enables us to engage guests more personally and precisely than traditional broad-based campaigns. We've now mapped every restaurant across 6 to 8 competitive categories and clustered locations based on similar trade area dynamics and messaging needs.

This analysis supports more focused and locally relevant messaging, allowing each restaurant to compete more effectively within its specific market. In short, we continue to transition from a broad one-size-fits-all approach to a marketing model that is more precise, more disciplined and more efficient by ensuring that the right message reaches the right guests at the right time, improving the overall return on our marketing spend.

The third pillar of our First Choice strategy is Find Money. As discussed last quarter, our corporate efficiency actions have meaningfully reduced general and administrative expenses, and those savings will continue to benefit us in 2026. For perspective, excluding stock-based comp, we reduced G&A by over $4 million in 2025 and expect to have a similar step down in 2026, driven by the efficiency initiatives implemented in the middle of 2025.

With respect to our work to strengthen our balance sheet and capital structure, we continue to progress on tactical refranchising as a key enabler to this initiative. As previously communicated, we plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We're encouraged by the interest level expressed and the progression of discussions to date. We remain confident that we will achieve our targeted capital structure objectives.

Unrelated to our work to reduce debt, but that is further reflection of franchisee confidence in our system improvements, 3 of our current franchise groups have indicated that they are currently pursuing new unit development opportunities within their territories. With respect to overall refinancing efforts, our improved financial performance has strengthened our liquidity position and along with our progress on refranchising is expected to expand our options to improve our capital structure.

We continue to work with our advisers to advance this process and expect to refinance our debt consistent with our previously outlined objectives. Additionally, as a result of improved business performance and further progress in our refranchising work, we no longer believe that we need to preserve the option to conduct an at-the-market equity offering, and so we have terminated the ATM program announced last November. No shares were issued under that program before it was terminated.

Turning to our Fix Restaurants pillar. In 2025, we completed 20 light-touch refreshes to help our physical environment maintain competitive standards and reflects the quality of our food and service. Our 2026 capital plan allocates additional investment toward restaurant refreshes. We plan to resume refresh activity later in the first quarter, continuing a disciplined light touch approach designed to maximize guest impact.

In addition to our facility refreshes, we begin to roll out replacement devices for our server handheld technology and we'll also introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for.

In the 10 months I've served as CEO, what stands out most for me is the growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives. They are owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. It's also important that we continue to challenge the status quo and identify insights and potential competitive advantages that will enhance our ability to differentiate ourselves in the marketplace.

With that in mind, in the fourth quarter, we launched an enterprise version of the ChatGPT AI platform. Since our launch, we're seeing expanding utilization across the organization with tangible results. We're now in the process of introducing it to our managing partners, along with custom GPT tools and are already seeing adoption and application that assist our managing partners in further optimizing labor costs, COGS and guest service.

The overall impact of our investments in our teams is tangible. Hourly turnover is now at its lowest level since 2017, and engagement scores continue to improve. This translates directly into how we serve our guests and support one another. As we look ahead, we'll remain focused on creating an environment where great people can build meaningful and rewarding long-term careers.

To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The foundation we're building together positions us well to be able to capture the opportunities ahead. With that, I'll turn the call over to Chris to review our fourth quarter results.

Thanks, Dave, and good afternoon, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2025. Total revenues in Q4 were $269 million, a decrease of $16.2 million from 2024. This change in revenue was primarily due to a decrease in comp sales and the impact of restaurant closures.

Comp sales, excluding the impact of deferred loyalty revenue, were down 3.3% in Q4. Including deferred loyalty revenue, comp sales were down 3.1%. This result was in line with the expectations we discussed in our last earnings call. Q4 comp sales included a 0.3% increase in average check, offset by a 3.6% decline in traffic. As it relates to other aspects of our Q4 financial performance, restaurant level operating margin was 11.4%, a decrease of 10 basis points compared to the fourth quarter of 2024.

The benefits of cost savings, restaurant closures and check average increases were offset by inflation and lower traffic. General and administrative costs were $14.9 million as compared to $18.4 million in the fourth quarter of 2024. The reduction is primarily due to reduced people costs from our corporate efficiency initiatives and lower stock-based compensation expense.

Selling expenses were $8.8 million as compared to $5.7 million in the fourth quarter of 2024. Adjusted EBITDA was $11.8 million in the fourth quarter of 2025, a decrease of $2.6 million versus the fourth quarter of 2024. This result was ahead of expectations we discussed on our last earnings call. We finished 2025 with $69.7 million of adjusted EBITDA, which represented 53% growth over 2024.

As it relates to our balance sheet and capital structure, we ended the fourth quarter with $19.9 million of cash and cash equivalents, $9.6 million of restricted cash and $37 million available borrowing capacity under our revolving line of credit. Our strong results in 2025 have improved our liquidity and position us well heading into 2026.

Turning to our outlook. We will now provide the following guidance for 2026. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million.

And finally, we expect capital expenditures to be between $25 million and $30 million. Our financial guidance suggests that we expect to make progress in 2026 across all of our key financial metrics.

In summary, we are pleased with our financial performance in 2025. We have made significant progress towards increasing restaurant level profitability, reducing debt and growing EBITDA. We will remain disciplined in executing against the First Choice plan in 2026 and continue strengthening the operational and financial foundation of the company.

Dave, I will now turn the call back to you.

Thanks, Chris. As we look ahead to 2026, I'm confident that the progress we've made across each pillar of our First Choice plan positions us well for continued performance improvement. Our December results where we outpaced the Black Box casual dining traffic index reinforces that when we execute with precision, combining compelling value, targeted marketing and exceptional hospitality, we can compete effectively.

Our menu enhancements launched in January and give our guests expanded options at both ends of the menu and across dayparts and occasions. And we have a robust new product pipeline that we will introduce throughout the year. Simultaneously, our ability to continually refine and focus our marketing messaging and spend means that we can confidently reach our guests where they are in the most efficient way possible.

Our capital structure initiatives are progressing in line with our plan. We expect the combination of tactical refranchising and refinancing to strengthen our balance sheet and provide the flexibility needed to continue investing in our people, restaurants and technology. Further announcements will be made as we achieve significant milestones on that journey.

While there's much work ahead, our team is focused and committed to building a Red Robin that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns. With that, we're happy to take your questions. So operator, please open the lines.

[Operator Instructions] Our first question is from Todd Brooks with Benchmark StoneX.

Congrats on the inflection of the business in the second half of last year, guys. Two quick questions. One, kind of a block and tackle. But within the 50-basis point to up 150 basis point same-store sales guidance for '26, thoughts on pricing. I think you said you were running about 1.6% price in Q4. What kind of pricing assumption is baked into that guidance for same-store sales?

Yes. Todd, it's Chris. So we took a 3.2% menu price increase when we rolled out our new menu at the end of January. We didn't have a whole lot of carryover from last year. So we're expecting that to carry through for the full year. So the full year pricing impact this year will probably be about 3.2% as well.

Perfect. And then more of a strategic question, but it sounds like the micro-targeted marketing has been a real revelation for you all. Can you -- I know we're a couple of quarters into that, but can you walk us through how far through the process of really implementing that with kind of a full year plan behind it?

And any thoughts -- I know selling expense was up in Q4 versus prior year. But for the full year, there was some efficiency around selling expense. So any color you can give on the selling expense plan needed in '26 to support the micro-targeted marketing efforts?

Yes. Thanks, Todd. It's a pretty holistic shift in the way we're approaching marketing. So not only is it a change in the absolute spend, but it's been a change in the efficiency of it and the allocation of working versus nonworking dollars. So we're able to put a lot more working dollars to work to just that point. I'd say we are probably -- I'm saying 2/3 of the way through the implementation of this.

I mean the stuff that I referenced in the remarks around clustering, identifying competitive groups, understanding trade area dynamics and then allocating messaging priorities to each of those, we've got those in place. We're kind of putting them in action and trying to understand then what's the response.

So as we see these responses, we'll continue to reallocate among those clusters. So if we see something that's not showing the elasticity that we think it should, we'll try it and move it to another cluster. So I'd say we're 2/3 into the implementation, but we still have a little bit to go.

Yes. And the only thing I would add as it relates to 2026 is if we continue to see success that we've seen, we have the agility to deploy more dollars against the full year thought. And I think right now, the expectation is that we will be up in selling expense in 2026 relative to 2025. And I think I can go so far as to say that we would expect to be up in each quarter, particularly given the success that we've seen here late in Q4 and early in Q1.

Our next question is from Jeremy Hamblin with Craig-Hallum.

And I'll add my congratulations on the improved profitability last year. I wanted to start with thinking about the same-store sales guidance for the year. And Q1, by far, your toughest compare for the year. I wanted to get a sense for how you expect things to flow given what you saw in January.

I don't know if in February, you've seen some bounce back post weather, although there's obviously been a couple of storms and impacting a wide swath of the country. But how do you expect kind of that cadence to play out during the year? I mean, are you thinking that Q1 is like a negative comp quarter and then improvement from there?

Yes. I think as we kind of map it out, I'll let Chris talk about this as well. But I think we see it kind of strengthening in the back half of the year more than the front for the points that you raised, given where we're lapping and then the introduction of Big Yummm and how that plays out. But I think your assumption is right, Jeremy.

Yes. And I'll just add a little color as it relates to Q1. We're not going to give a guide, obviously, for Q1, but we do have some perspective. So quarter-to-date comps are down in Q1 about 1%, but it's important to provide context around that because we talk about -- we took very limited pricing in 2025. We did take that 3.2% increase that I mentioned. But that pricing as well as some of the indulgent offerings that we added to the new menu, that we think is going to offset the negative mix associated with taking our Big Yummm burger deal and putting it on our core menu.

So I think if you think about check average, it's probably going to be positive, marginally positive in Q1. In terms of traffic, before Winter Storm Fern hit, traffic was positive in January. And since that winter storm hit traffic trends have been negative, mostly due to weather, right? So we think we'll end up -- the weather impact will cost us maybe 50 basis points as it relates to Q1 in total comp. We lost about 179 operating days quarter-to-date.

We even had some restaurants still closed as of yesterday, so from this most recent storm over the weekend. It's also important as you think about Q1 and the construct of Q1, we had less media weight in February versus what we expect in March or April. So there's a lot going on, but we feel really good about the underlying business and the progress we've made. And so that kind of sets up Q1. And then as you sort of shift towards the back half of the year, that price increase, we start to lap the Big Yummm burger deal in July of this year, and you'll start to see more of that pricing that we took start to flow through.

So PPA is going to be higher in the second half than it was in the first half. And then I think in terms of traffic, just for the reasons I laid out, it's a little bit of the opposite. Traffic will probably be a little higher in Q1 and in Q2. Again, it's a product of lapping the Big Yummm burger deal. We're getting some traffic momentum. But given the media weight and the strong LTO calendar we have in 2026, we feel like it's going to be a better year overall in same-store sales with a stronger second half comp than first half.

Switching gears and looking on the expense side, we know that there's been some pressure from commodity cost, beef pricing, but wanted to get a sense for your expectation on that is basically flat year-over-year in '25 as a whole. But you did note on the November call that there had been a little bit of pressure. So I wanted to get an update on what you're seeing on that end?

Yes. I think, again, look, I think we're going to continue to see beef prices rise. We're factoring that in. We'll see some offsets, obviously, with that. I think Chris can give you more of the specifics as we -- in terms of percentage shift between the 2, but we are expecting those to continue. We'll still see some headwinds on the COGS side.

Yes, I think that's right. We were up roughly 4% in commodities in 2025. We're looking at basically the same number in 2026. Beef inflation is still expected to be high. But the other major categories are going to be kind of plus or minus 1% or 2%. Really beef is the outlier for 2026.

Got it. And then I wanted to ask about your refranchising efforts. It's something where my sense is that there's some engagement there and interest. You'd outlined 25 to 75 units. Any update you might be able to share on progress on that initiative? I noted, obviously, you must feel pretty good about where the balance sheet is. No need to raise capital in the near term. Given that you're going through kind of the debt refinancing process as well, I wanted to see if you could update us on refranchising.

Yes. I mean the truth is, Jeremy, I can't say a whole lot about where we are specifically, but your tone and your assumptions are accurate. We feel better about the overall liquidity of the business. We feel good about the process that we're in. We feel good about the interest that we saw in the franchising exercise, and we feel good about the progression of discussions that we've had. Beyond that, I can't say a whole lot right now, but your kind of underlying tone is accurate.

Great. Last one for me. You made remarkable progress in labor last year. And just to follow up on the other question. In terms of how much more you feel like you can squeeze there, you noted that your satisfaction scores remain strong. Clearly, you're seeing a little bit of a turn here in traffic. Do you look to drive additional labor savings through comp improvement? Or do you feel like there's a little bit more to squeeze out there?

I think it's going to be both. I think we think comp improvement certainly will give us some air cover. But I also think that there is room in the middle of the P&L in the labor spend. And I think our operators feel the same way. I've been extremely pleased with their bullishness on this. This is not just us pushing from the top. They're looking at it saying, yes, we have better tools than we've ever had to be able to understand where our opportunities are.

We have better visibility into who our outliers are and how we have to work with them and coach them and kind of make progress there. And I don't want to underestimate it, and we're just in the very early stages of this, but we've introduced the AI tool and our ops team has grabbed that and run with it and created some custom GPTs that they've introduced at the restaurant level that give us the ability or give our managing partners the ability to understand labor spend on a daily basis, forecasting more effectively and then allocation.

There's been a great adaptation or adoption of that tool at the restaurant level. So we think the combination of all of those things is going to give us room to kind of go even further than we have so far.

Our next question is from Mark Smith with Lake Street Capital.

First, just wanted to ask a little bit about G&A outlook, Dave, you talked about in your commentary. I think that you said kind of similar decline in dollars year-over-year. Correct me if I'm wrong on that. And then maybe walk us through kind of what's driving some savings there?

Yes, I'll start with the numbers, and then I think Dave can add the color. So we finished -- if you exclude stock-based comp, we finished last year G&A at $71 million. I would say in 2026, we're looking at somewhere between $65 million and $67 million range for the year. So that would incorporate the $4 million that Dave talked about, and there's potentially opportunity for a little bit more than that.

Yes. I think just to build on that, we think this is, again, the combination of figuring out efficiencies. We're going to be looking at this every day, every month, every quarter to see how do we build efficiencies into the business further and get smarter about how we operate. So I don't think that's a one-and-done process. That's something that we will continue.

Perfect. And then I just want to ask kind of about the restaurant base. It sounds like some positive movement and thoughts from franchisees around maybe some expansion and opening new restaurants. Curious on the company-operated side, maybe what's built in as far as closures and then any appetite to begin opening some company-operated restaurants?

Yes. Look, I think in terms of the restaurant size, we're still trying to optimize the portfolio. Going back a ways, we found we've made improvements on about 20 restaurants that we had previously identified as potential problems for us or potential closures. We've moved them off the closure list to where we think we can operate them and are hopeful that we can get them back to a performance level that equals the rest of the system.

I think there's still probably -- if you're thinking about it, Mark, I would assume $20 million for this year is the number that we're thinking about. So that's kind of what do we still have that's out there that we need to get to kind of work our way through the system. So we're trying to kind of clean up the portfolio, figure out a way.

The significance of this is if you go back to when this was first brought up, I think we identified $6 million of headwind against the business from these potential closures. That number is now down to about a $1.5 million headwind and shrinking as leases expire and we roll off. So I think we've made huge progress on that and feel good about the state of the portfolio that's moving ahead.

There are no further questions at this time. I'd like to hand the floor back over to Dave Pace for any closing remarks.

Okay. Just quickly, look, thanks. Really appreciate folks for dialing in and hearing our story. We feel good about the progress that we're making, and we look forward to talking to you again in May. So thanks for coming on, and we'll talk to you soon. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, everyone, and welcome to Red Robin Gourmet Burgers, Inc. Third Quarter 2025 Earnings Call. This conference is being recorded.

During management's presentation and to your questions, we will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its third quarter 2025 earnings release on its website at ir.redrobin.com.

Now I'd like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. It was just 4 months ago that we unveiled our "First Choice" plan with a core imperative of establishing Red Robin as the first choice for guests, team members and investors. Today, I'm pleased to report that in the third quarter, we began to see the early fruit from our efforts. During the third quarter, our traffic trends improved sequentially through the quarter, supported by the launch of our Big Yummm promotion and growth in our off-premise business. Equally encouraging are the continued gains in our 4-wall operating efficiency and our team's ability to manage the middle of the P&L, allowing us to beat our expectations for both restaurant level and corporate profitability during the quarter.

Going forward, sustaining and extending this improvement requires continued execution across all aspects of our "First Choice" plan. The momentum we're building reinforces my belief that we're on the right track to deliver on our goal to be the first choice for guests, team members and investors. With that, let me share more detail on our progress and how we're building momentum as we move forward with this "First Choice" Plan.

First, let's start with hold serve. Our operators have continued to raise the bar on performance. During the quarter, our team once again delivered labor results that beat our internal expectations. It's important to point out that we're achieving this efficiency gain while maintaining guest satisfaction scores at the improved level we established last year. This demonstrates that efficiency and hospitality are not mutually exclusive, and our ops team is proving every day that we can deliver both. The numbers also tell the story. The increased efficiency we achieved in the third quarter drove a 90 basis point improvement year-over-year in restaurant level operating profit, almost entirely driven by improvements in labor. These efficiency gains are being accomplished through a healthy blend of process changes, analytics and technology, combined with the entrepreneurial spirit of our operators who are finding the ways to work smarter and more efficiently while refusing to compromise the guest experience.

Our managing partner program also ensures that our partners see the benefits of their efforts in increased compensation as they share in the gains that they are achieving in their restaurants.

As we turn to our drive traffic initiative, I want to reemphasize that we're committed to creating sustainable traffic growth that is rooted in improvements across all of the relevant consumer touch points, including compelling value for the guest, delivering on our commitment of food quality and great taste and a welcoming hospitable and fun environment. As I outlined on our last call, our plan is to build traffic-driving layers, and I'm pleased with our progress.

In addressing these elements of our plan, our first priority was to address our competitive positioning in price point value offers. The Red Robin Big Yummm burger deal that we launched at the beginning of the third quarter has performed above our expectations, resulting in an approximately 250 basis point sequential traffic improvement from the second quarter to the third quarter. More specifically, we entered Q3 with a traffic run rate of approximately down 7%, and we exited the quarter with that run rate at approximately negative 1.4%, a result that we're extremely pleased with. Our Big Yummm deal resonated strongly with our midweek dining occasions, particularly the lunch daypart and delivers on our commitment to provide our guests the gift of time. On average, we're delivering a complete dining experience in under 45 minutes. This promotion delivers exactly what we were looking for, immediate market relevance and trial generation.

To build on this momentum, our team remains hard at work on new menu innovations to accelerate our competitive positioning and price point value offers, and we look forward to sharing updates on our future calls.

That brings us to our second traffic-driving layer. During the third quarter, we launched our data-driven marketing initiative, incorporating microtargeting capabilities that will allow us to engage guests more personally, precisely and efficiently than traditional broad-based messaging. This approach to marketing is intended to more efficiently and effectively reach guests, allowing us to level the playing field against larger, more resourced competitors. These unique and internally developed algorithms help us understand guest decision-making behaviors and as a result, allow us to specifically target messaging and promotion in ways that resonate more directly with each guest.

During our initial rollout of this approach, we saw outsized improvements in traffic and sales for the initial cohort of prioritized restaurants, and we plan to expand our reach to more of our restaurants each period. In addition to the progress we've seen within the 4 walls of the restaurant, we've also seen a dramatic increase in our off-premise business, driven largely through a significantly expanded approach to catering. The off-premise portion of our business represents approximately 25% of sales in the third quarter and delivered traffic growth of 2.9%, a signal that our guests love our food and want to enjoy it in more places than just the dining room. We expect to continue to aggressively grow this segment of our business as we move forward.

Next is our Find Money initiative. I'm pleased to report another quarter where adjusted EBITDA beat our expectations, which continues to reinforce our confidence in the operational improvements we've implemented. In addition, thanks to our corporate efficiency initiatives, we continue to expect between $3 million to $4 million benefit in G&A in 2025 with a $10 million run rate expected to be achieved in 2026. These savings are critical as we balance our investment priorities with delivering profitability.

Regarding our capital structure, we're exploring all elements that I discussed when I introduced our "First Choice" Plan. This includes taking a comprehensive and proactive approach through multiple initiatives to give us optionality as we work to strengthen our balance sheet and position the company for long-term success. We've launched 4 primary tactics to accomplish this. First, as part of this process, we announced today a 6-month extension to the term of our current credit agreement, with the loan now maturing in September of 2027 as compared to March of 2027 previously. This extension provides helpful time to optimize the value of the other efforts.

Second, we've engaged Jefferies to assist us in refinancing our debt to further optimize our capital structure. Jefferies is an industry leader in this space, and we expect to work quickly and effectively with them to deliver a successful outcome on this effort as soon as practicable. Third, today, we announced the establishment of an at-the-market or ATM program, which allows us to sell up to $40 million in equity open market transactions. While we may or may not execute against this option, we put this in place so that we have the option to generate funds if needed and to be in a position to move quickly where we may see compelling opportunities.

Fourth is our refranchising effort. We continue to have great interest and engagement from both existing and potential new franchisees developed through our partnership with Brookwood Associates. We're encouraged by the level of interest in our brand, and we remain committed to a thoughtful process that maximizes value for our shareholders in both the short and long term.

Refranchising is yet another important option to have in our tool belt as we optimize our overall financing structure and work to strengthen our balance sheet. We'll continue to share updates as these projects progress. Supported by the gains we've seen in our operating results through the first 3 quarters of the year, we believe these actions will provide us with the options and flexibility to create the best long-term financing structure for Red Robin while also assisting us with resources to reinvest in the business.

Next, let me provide you with an update to our fixed restaurants efforts. As I mentioned on our last call, we identified the need to invest in critical deferred maintenance to better align our restaurant atmosphere with competitive standards. I'm pleased to report that we successfully completed refreshes in 20 restaurants across 4 markets during the third quarter. As a reminder, these are relatively light touch refreshes from a capital perspective and not full reimaging projects, averaging approximately $40,000 per refresh in the third quarter. We've prioritized these investments by targeting areas that we believe will directly benefit the guest experience. This includes flooring updates, internal finishings, furniture repairs and lighting, coupled with exterior improvements, including signage, paint, lighting and landscaping, all of which will directly benefit guest perceptions and experience. While results are still early, we're already seeing measurable improvements in both sales and traffic performance at these 20 locations.

These results further support our thesis that well-executed improvements that enhance the guests first impression and overall dining atmosphere can deliver measurable results relatively quickly. The success of these actions has helped us fine-tune our investment priorities as we look to expand the number of restaurants that we can touch. Our goal is to offer an environment that matches the quality of food and hospitality that our teams deliver every day, and we'll continue to take a disciplined approach as we expand this initiative further across our system.

Lastly, let me briefly touch on our Win Together plan. As I've continued to travel the country, visiting our restaurants and meeting with restaurant teams, I'm hearing increasingly positive feedback from our team members who see that we're delivering on the promises we made earlier this year. They wanted a value offering, and we delivered the Big Yummm deal. They asked for help addressing long-standing maintenance and repair issues, and we successfully refreshed 20 restaurants during the quarter with more to come. They ask for better technology and tools to execute more efficiently, and we're continuing to roll out additional technology with more planned ahead.

It's encouraging to see that our team is embracing our guest-centric culture. And when combined with the strength of our operating results, we believe it's prudent to modestly raise our CapEx guidance for the year as we further accelerate some of these key initiatives that directly support our team members and their ability to deliver a great guest experience. Encouragingly, we've continued to see our team member turnover rates come down each period to a point where we're now at levels below industry benchmarks. As we look ahead, we believe this collaborative team approach will further strengthen our culture and position us favorably to attract and retain the best talent in the industry. To the almost 20,000 Red Robin team members across the country, I want to extend a heartfelt thank you for your dedication and hard work. I'm proud of what we've accomplished so far and excited about what's still to come.

With that, Todd will now review our third quarter results.

Thank you, Dave, and good afternoon, everyone. In the third quarter, total revenues were $265.1 million versus $274.6 million in the third quarter of fiscal 2024. Comparable restaurant revenue beat our expectations for the quarter and are in line with last week's announcement at a decline of 1.2%. This result includes a 1.7% increase in net menu price, offset by a 3% decline in guest traffic. Guest traffic trends improved sequentially through the quarter and delivered a 250 basis point trend improvement as compared to the second quarter. We attribute this improvement to the success of our Big Yummm Burger deal that launched in July and continued traffic strength in our off-premise business. Restaurant level operating profit as a percentage of restaurant revenue was 9.9%, an increase of 90 basis points compared to the third quarter of 2024. This was driven by the continued success of our operations team, delivering significant gains in labor efficiency.

I would also note, while cost of goods increased due in part to beef inflation that we anticipated, our commitment to deliver value for the guest is also reflected with this increase with the goal that this value ultimately contributes to delivering increasing guest traffic. General and administrative costs were $16.9 million as compared to $20.8 million in the third quarter of 2024. The reduction is primarily due to not holding a partner conference event in 2025 as we did in 2024. In 2024, this cost was mostly offset with vendor contributions credited to other parts of the income statement.

Selling expenses were $6.8 million, an increase as compared to $5.5 million in the third quarter of 2024. The increase is primarily due to additional investment in third-party delivery platforms and other channels. Adjusted EBITDA was $7.6 million in the third quarter of 2025, an increase of $3.4 million versus the third quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains, particularly in labor and the benefit of menu price increases. We ended the third quarter with $21.7 million of cash and cash equivalents, $9.2 million of restricted cash and $29 million of available borrowing capacity under our revolving line of credit.

Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of approximately $1.2 billion is unchanged from our prior guidance. This incorporates expectations that comparable restaurant sales will decline approximately 3% in the fourth quarter, and we will end 2025 with 386 company-owned restaurants in operation. Second, restaurant-level operating profit of at least 12.5% as compared to our prior guidance of 12% to 13%. Third, we now expect adjusted EBITDA of at least $65 million as compared to $60 million to $65 million previously. Finally, we now expect capital expenditures of approximately $33 million as compared to approximately $30 million previously as we continue to execute against the "First Choice" Plan and make investments back into our restaurants and technology.

As added commentary on our guidance, I would note the following points. In recent weeks, we have seen guest traffic trends slow from where we exited the third quarter. We attribute this to intentional timing shifts in our marketing spend and the consumer impact of the government shutdown. While our guidance is grounded in expectation for both traffic and comparable restaurant sales to decline approximately 3% in the fourth quarter, we are optimistic traffic trends will regain traction as our marketing spend levels increase in the remainder of the quarter. On the margin side, we expect cost of goods in the fourth quarter to be similar to the third quarter. For the other operating cost categories, we expect marginal improvement in the fourth quarter as compared to the third as we leverage fixed costs with higher seasonal sales in the fourth quarter. Overall, we are very pleased with our progress, capturing cost efficiencies while delivering a great guest experience. We have made significant gains, increasing restaurant level profitability, reducing debt and growing EBITDA. Initial results from the launch of the Big Yummm are encouraging, and we look forward to the great value at Red Robin delivering growing guest counts.

In closing, I'd like to offer a tremendous thank you to our operators, our restaurant teams and the team at the restaurant support center. This great progress in the business is a result of your hard work, and I'm excited for what's next.

Dave, I will now turn the call back to you.

Thanks, Todd. The progress we've made across all pillars of our "First Choice" Plan gives me confidence that we have the right strategy in place. Our operators are proving every day that efficiency and hospitality can coexist. Our strategic value offering is delivering the expected change in our traffic trends, and we have additional innovations under development for next year. Our data-driven marketing capabilities are being strengthened to position us to compete more effectively, and our restaurant refresh initiatives are being well received by both our team members and our guests. We're not declaring victory, but delivering a sustainable recovery requires a clear strategy, coordinated tactics and engaged team and disciplined execution.

I've seen personally that our Red Robin team members are up to the challenge. Let me close with this. We have more work ahead of us, but we're building momentum with each period and each quarter, positioning us to create a Red Robin that our guests will choose first. Our team members are proud to work for and our shareholders can rely on for predictable and reliable returns.

Before I hand it over to the operator for questions, I want to call out 2 organizational announcements that we made last week. First, I want to recognize the appointment of Jesse Griffith to Chief Operations Officer. As you heard today, our operations team under Jesse's leadership has been a major contributor to the progress we've seen both financially and with our guests. This is a well-deserved move that is reflective of those contributions. I'd also like to acknowledge Todd's plan to move on to another opportunity in our industry. During his time with Red Robin, Todd has been an integral part and member of our executive team and has provided great leadership to the finance team and well beyond. His many contributions were greatly appreciated by all of us, and I want to thank him for all that he did and wish him well in his next role.

With that, we're now happy to take your questions. Operator, please open the lines.

[Operator Instructions]

The first question comes from Jeremy Hamblin from Craig-Hallum.

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?

Yes. Thanks, Jeremy. Two parts. I'll let Todd answer the second part. The first point about mix, the big Yummm deal is mixing at about 8% of our total sales. So we feel pretty good about that. That's kind of where we expected it to come in from a mix standpoint, but it's definitely having the impact that we had hoped it would.

Yes. Jeremy, on the second part of your question, just overall cost of goods, beef is certainly the most inflationary part of our basket right now. We do think the 25% that we saw in Q3, we think that's the right guide for Q4 as well. The team -- we've got different measures that we're putting in place to mitigate that beef inflation. So we think we can hold that 25% through the fourth quarter.

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?

Yes. So let me take that, and I'll let Todd kind of pile on here in a second. In terms of the extension, it was a 50 basis point cost to us to extend for that period of time. So we thought that was reasonable given what we were looking to do and why we wanted to do it.

Regarding the second point about refranchising, I would -- I guess what I'd say to you, Jeremy, is everything is going as we had expected and hoped on refranchising. So the available number of restaurants that there's interest in is in the range that we communicated originally. We have indications of interest, specific proposals put forward that we haven't really negotiated against yet. We're still in the middle of kind of vetting and kind of getting to know who's who. And so it's moving ahead. It's -- as I said in the remarks, it's an option for us. I mean we're going to kind of toggle all of these options to figure out the best combination as we move forward on the refinancing and the whole strengthening of the balance sheet. and refranchising is still one of those options. I'd say we're where we had thought we would be. And -- but nothing firm to announce beyond right now. Todd, do you want to add anything?

No, I think that I'd just reiterate those points. Refranchising an option. It was, I think, a good thing for the business to get the Fortress amendment or the amendment with our lender across the finish line. It gives us the time to really vet through those other options and make sure we maximize value, as Dave said on the call. So a good progress for us.

Great. Congratulations, Todd. Best wishes on your -- the next part of your journey.

Thank you, Jeremy. Really appreciate it.

The next question comes from Todd Brooks from Benchmark Stern.

I'll echo Jeremy's congratulations, Todd. And also, Jesse, I assume you might be in the room, congrats on the promotion to COO, well deserved.

Thanks, Todd.

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?

Yes, we think there is. And we think there are ways to even expand the impact of Big Yummm even further, which we're working on. I think you're right. It wasn't a full quarter. It wasn't day 1. It was probably 3 weeks in. That's probably about right, what you said. So we feel good about it. It came -- it did what we had hoped it would do. It got traffic. It gave people a reason to come in. It got trial again. So from a tactical standpoint, it did what we had hoped to do. Beyond that, I would tell you we're taking a much more strategic look at the entire menu and how we package it together. And so that's some of the pretty substantial work that's going on, which includes Big Yummm and beyond. So I think you'll see more.

I do think there's more there. There was a little wobble coming into the quarter. But for us, and I'm sure you know this, the way the fourth quarter plays out for us, October is the softest month. November picks up a little bit, starts to pick up momentum and then December is when we really make hay. So for us, we've consciously shifted marketing spend from October to the back end. And so a little bit of it was a pullback in marketing spend purposely to backload fish when the fish are or the fish are.

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?

I think we're seeing -- look, it resonates with the guest and it resonates in, as we said, in the kind of early week, midweek and lunch dayparts. The value offering, Todd, is, I think, is a slightly different occasion from the weekend offering in that weekends are date night, and that's when people go out early week lunch, they're kind of looking for a value opportunity to utilize us. So we -- it's part of the thing that we're working on is we think there's opportunity, but there's opportunity in the way we use it and when we use it. I don't think it's going to change. I do think it's going to be every day. I don't see us kind of limiting it back to certain days of the week. But the reality is it does have an impact on some parts of the week more than others.

Great. 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?

Yes. I mean because of the way this is set up, Todd, this is a very -- I've said this, and I've tried to kind of be as clear as I can on this, but it is a hyper micro targeted approach where we get into the individual restaurant and we get into the individual guests, we understand the trade area. We understand the makeup of it. We understand what pulls people in. Is it a value play? Or is it a premium burger play? What is the reason for people making the shift? And we can get that information down to a highly targeted level.

So as we went into the first cohort, as I said, we started with some. We learned as we went into this that, oh, maybe value resonates with this group, but it doesn't resonate with that group. Let's focus on more of a premium burger or maybe a different set of messaging. geez, that seems to resonate more with this group. Let's kind of plus up that messaging in this cohort, plus up the value messaging in another cohort. And so we're kind of generating the knowledge base that we can then cluster and figure out how to deploy messaging and promotions on a highly micro-targeted basis. I mean I'm trying to explain this without kind of showing you, but it's -- that's where we're going with that. So anyway, we started with that. We saw performance, and I'll let Todd kind of pile on top of this above the performance of the rest of the system.

And so as we've gone out, we started with, I think, 50 restaurants. We expanded beyond. We're probably -- we got to 130. We're looking at kind of walking that out further as we get the data. And so we're -- the intention is to expand that across the system. How quickly we get there, we're going as quick as we can.

Todd, I'll just tag on quickly here to expand on the point of the over 100 restaurants that the team has been focused on. Sequentially, there's been a significant improvement in traffic trends in those restaurants to the point that in many weeks, obviously, we're looking daily, weekly, long term. But in many weeks and many periods, we're seeing that those restaurants are delivering positive traffic on a year-over-year basis. And that's ultimately where we want to be. And so now it's just a matter of, hey, we found a playbook that works in those 100 plus, and we'll work to expand that to the other restaurants, obviously.

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?

Yes. Good question. No question, we're seeing it. No question, our ops team is focused on these target restaurants to try and see -- we're not in the business of closing restaurants. We're trying to keep them open and run them and make money, which we've moved a number of them kind of off the watch list back performing where we want them to be. There's still some, as there always is, that aren't quite there yet. We'll give it a shot with them. There's probably going to be a subset of additional closures, but the list is far, far shorter than what we had talked about previously.

The next question comes from Mark Smith from Lake Street Capital.

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.

Mark, Todd here. I'll start. To -- you mentioned, I think others have as well. We were pleased with the mix outcome. Going into the quarter, we thought the impact of the Big Yummm deal may have resulted in more of a mix impact than we saw. Part of that is a credit to our operators. We've given the guests trade-up options. And in many cases, they have taken those, right? So many people are getting the value in the $9.99 deal, but others are trading up to ad toppings, ad beverages, those types of things.

So that helps support the overall check. In terms of other dynamics, one of the areas we always look at add-on type trends in terms of appetizers, desserts, beverages. We've seen those hold steady. And so we think that's a good thing for us in this environment where we see the headlines that maybe consumers are managing their wallets a little bit more. We've seen those areas hold up. So the mix that we saw, we did report, obviously, a little bit of a negative mix. Some of that was the Big Yum. Some of that is a mathematical phenomenon, I'll say, of the growth in our catering business that Dave referenced.

That comes at a lower PPA. And so there's just a natural dilutive effect there as that part of our business grows. But we're seeing stability in appetizers, desserts, beverages with some of the add-ons helping to mitigate the impact of the lower price point on Big Yummm.

Yes, Mark, I would just add, I think I agree with everything Todd said. I think the other thing I would offer is we learned a lot going through this big Yummm deal, and we learned a lot about mix in consumer behaviors. And what resonates on our menu and what we may want to look at further. And so we're doing a lot of menu work right now that I think you'll see in 2026 that is an output of the learnings that we've got through the Big Yummm deal. Big Yummm is a very narrow, very tactical execution. I think the approach that you'll see us evolve to is a much broader, more strategic approach, including the Big Yummm, but beyond that.

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.

Yes, Mark, Todd here. I'll start. I'd frame it this way. When we look at our Q3 spend, we're expecting Q4 to be similar. So we think it is sustainable. It reflects some of the efficiencies that we have put in place and started to capture this year. And so we're certainly pleased with that. But as we look at just Q4 as an example, we expect Q4 to be similar to Q3.

Yes. Look, I think we expect it to hold, Mark. But I think there's -- we're looking at some other opportunities in the future. I mean I'm not worried about it. I don't have anything to signal yet, but I think there are some opportunities that we can not only hold but maybe expand a little further.

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.

Yes, Mark, happy to. So the commentary in the prepared remarks, I talked about both same-store sales and traffic expectation for Q4 down 3%. The traffic, I think, is straightforward. That's frankly, exactly what we ran in Q3 in total at least, and we think is achievable, especially to Dave's point with the backloaded marketing. The sales being equal to traffic is obviously a couple of puts and takes. We do have a little bit of what I'll call gross menu price increase in place, meaning we have some year-over-year benefit from menu price increases. That becomes a lesser level in Q4 than it was in Q3. And so we expect mix will basically negate those menu price changes. So no net check, just the benefit or the impact of traffic flowing through to the comp number, if you follow me through all that.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Mr. Dave Pace for closing remarks. Thank you.

Okay. Just quickly, thanks, everybody, for joining the call. We appreciate it, and we look forward to giving our next update after the fourth quarter. So thanks, everyone. Talk to you soon.

Thank you. Ladies and gentlemen, that does conclude today's conference for today. Thank you very much for joining us. You may now disconnect your lines.

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Inc. Second Quarter 2025 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and, therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its second quarter 2025 earnings release on its website at ir.redrobin.com.

Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. Since stepping in as CEO in early Q2, challenges facing our business have come further into focus. At the core, it's imperative that we returned the business to sustained growth in traffic and same-store sales. As we assess the opportunities, we unveiled our First Choice plan last month. and our team has been busy executing against this bold plan to position Red Robin for long-term success. While our top line performance during the second quarter is not yet reflective of what we believe Red Robin is capable of, we strongly believe the strategy we've put in place will turn the ship around and we're moving quickly to put all aspects of our plan in motion.

Today, I'll walk you through where our focus has been in the first 30 days of the implementation of our First Choice plan, along with addressing some of the highlights from our second quarter. To quickly recap, our First Choice plan consists of the following: first, hold serve, protect and build on the foundations established under the North Star plan; second, drive traffic, creatively engaged with guests and inspire visitation; third, find money, manage profits, expenses and assets to reduce debt and allow for critical reinvestments; fourth, fixed restaurants, invest in the physical estate to improve the overall dining experience; and fifth, win together create a high-performance environment that attracts and retains the best talent in the industry. Through this plan, our goal is threefold: to make Red Robin the first choice for guests searching for a differentiated restaurant experience; team members looking for a great place to work; and investors seeking reliable returns on their investments. With a clear plan in place, we've been hard at work executing the First Choice plan and are seeing positive early results, creating even greater conviction in our long-term plan to capture these opportunities. First, let's talk about hold serve. As we spoke to on our last call, we were very pleased with both level of labor efficiency our operators achieved in the first quarter and how fast they achieved it, given that we expected it to accelerate more gradually through 2025. As we formulated the First Choice plan, we made Hold Serve first pillar in the plan to focus our operators on maintaining this level of execution going forward. The great news is that in Q2, our operators continue to do what they do best, run great restaurants and deliver great food and service. The increased efficiency they achieved in the second quarter drove a 270 basis point improvement year-over-year in restaurant level operating profit margin entirely driven by 300 basis points of labor improvements. At the same time, our operations team has been able to maintain our guest satisfaction scores at or above previous levels. Turning to our drive traffic initiative. As we think about our path back to positive traffic growth, we know that we need to build sustainable traffic so that we are not overly reliant on LPOs or aggressive discounting for long-term success while still being responsive to the marketplace and the need states of our guests. We know that it will not be any single initiative that drives our success. Instead, we're building traffic-driving layers. We believe getting these layers to work in unison will be the key to our success in the long term. The first step in building these layers was to address our weak competitive positioning and price point value offers. As we survey the competitive landscape, it was abundantly clear that price pointed value offerings under $10 are essential to help break through the noise to drive trial and consideration in today's environment. To address this, on July 21, we launched the Red Robin Big Yum Burger deal, which includes a Reds Double Tavern burger, a Bottomless side and a Bottomless beverage starting at $9.99. In addition, the Big Yum! deal has been thoughtfully structured to offer trade-up opportunities like extra burger patties, bacon, avocado or upgraded sides and beverages designed to help mitigate check pressure while still delivering strong value to guests. Now it's still early days, but we're encouraged that the Big Yum! has been successful in improving traffic relative to our Q2 exit rate, which started the third quarter and an approximate 4% decline to date. At the same time, we're capturing significant insights that will feed into the next phase of our marketing approach.

Our second traffic-driving layer will be a state-of-the-art data-driven approach that we expect will begin to roll out late in Q3. As we've mentioned before, this approach incorporates micro targeting capabilities that we expect will allow us to engage guests more personally, precisely and efficiently than traditional broad-based messaging and other performance marketing capabilities. This unique and innovative approach leverages a proprietary mix of tools, analysis and competitive strategy to understand guest decision-making behaviors, enabling us to deliver deeply personalized tactics to place Red Robin as the first choice in our guest consideration set. Effectively competing with larger, more resourced brands in our space will not be successful by just mirroring their strategies. Our approach will leverage these proprietary analytics that will help level the playing field at the restaurant level in a highly efficient manner. While we intend to take a modest step up in our marketing spend in the second half of the year, we're maintaining our adjusted EBITDA guidance of $60 million to $65 million as we balance traffic growth investments with disciplined profitability management. I want to be clear, we don't expect traffic trends to turn overnight. But we're building the foundation for sustainable, profitable growth through this combination of immediate value offerings and long-term analytical capabilities that we expect will position Red Robin to compete more effectively for guest consideration and frequency.

Next, let me update you on our Fine Money initiative. As Todd will speak to in a moment, our operating results in terms of EBITDA generation exceeded our expectations in the first half of the year, giving us incremental capital to address our most pressing challenges. In addition, the corporate efficiency initiatives that we spoke to on our last call have been completed, and we continue to expect to see a $3 million to $4 million benefit in G&A in 2025, with the full $10 million run rate expected to be achieved in 2026. While we're maintaining our current EBITDA guidance for the year, some of the upside from the first half of the year will be invested in key projects that we anticipate will be the drivers of our future top line growth success, including investments in marketing and critical deferred maintenance that I'll discuss in a moment.

Turning to refranchising. Since we launched our outreach efforts with Brookwood Associates last month, we've been pleased with the initial reception and conversations we're having with both existing and potential new franchisees. The level of interest we have seen only underscores my confidence in the relevance of our iconic brand and showcases the expectation that Red Robin will succeed in the long term. This will be a thoughtful and planful process, and we intend to provide further details on our November earnings call as discussions progress.

Next, I want to touch on our fixed restaurants effort. Investments and upgrades we've made over the past 2 years in food and hospitality have elevated the guest experience. The next leg of this journey is to fix our restaurants to better align the atmosphere with modern-day standards and achieve parity or better with the broader casual dining industry. To achieve this, we plan to invest in critical deferred maintenance, including flooring updates, internal finishings, furniture repairs and external improvements like paint, lighting and landscaping that directly impact guest perceptions and their experience. The pathway to address the entire system will take time but we're taking a strategic approach to piloting refreshes across approximately 20 restaurants in 4 markets ahead of our First Choice marketing launch later this year. This will allow us to understand the impact of these packages and fine-tune where to invest additional capital ahead of a more fulsome company-wide rollout. While we're in the very early stages of this initiative, I'm pleased with the image that our refreshed restaurants will present and believe it will set a more inviting foundation to complement our traffic growth objectives and actions.

As I alluded to earlier, we're able to fund and accelerate these initial investments due to the EBITDA upside we saw in the first half of the year. Going forward, we will judiciously meter out further investments as funds become available through the remainder of the year.

Lastly, I want to talk about the Win Together plank of our strategy. As I've visited restaurants over the last 3 months, I heard team members tell me that they knew what we needed to do, but they needed help to do it. They wanted a value offering to be able to compete in the marketplace. They wanted to be able to fix their restaurants to address long-standing maintenance and repair issues, and they wanted technology and tools within the restaurant to help them execute more efficiently to deliver the improved operating performance that they are being asked to deliver. As we drive our guest-centric culture, we looked at each of these problems through the lens of our guest perceptions and we've committed to giving our operators the tools and environment that they need to be successful. During the last 2 quarters, we completed multiple new technology implementations with more to come. By taking this approach and listening closely to the input from our restaurant teams, our operators see that we're in this together, and we're working by their sides to support them and give them the tools that they need to win and deliver the results that we are asking for. With that in mind, I want to extend a heartfelt thank you to the more than 20,000 team members we have across the country. Your dedication to outstanding hospitality every day is what drives our success and will be key to driving our future results. We're very pleased with the profitability performance of the business in the second quarter, and I look forward to winning together as we continue to work to drive the comeback of this iconic brand. In closing, while we're in the early stages of this transformation, we expect the combination of our improved operational efficiency, strategic marketing initiatives, updated physical estate and upcoming refranchising transactions will position us well to deliver on our commitment to make Red Robin the first choice for guests, team members and investors.

With that, Todd will now review our second quarter results.

Thank you, Dave, and good afternoon, everyone. In the second quarter, total revenues were $283.7 million versus $300.2 million in the second quarter of fiscal 2024. Comparable restaurant revenue decreased 3.2%, including a 4.4% increase in net menu price, offset by a 5.5% decline in guest traffic. Guest traffic trends decelerated through the quarter, which we attribute to further increases in competitive promotional activity and our intentionally reduced selling expenses as we developed our new marketing strategy. Restaurant-level operating profit as a percentage of restaurant revenue was 14.5%, an increase of 270 basis points compared to the second quarter of 2024. This was primarily driven by the continued success of our operations team delivering significant gains in labor efficiency.

General and administrative costs were $17.4 million as compared to $16.6 million in the second quarter of 2024.

Selling expenses were $6.4 million, a decrease as compared to $12 million in the second quarter of 2024. As I've mentioned earlier, we intentionally slowed some of our marketing activity during the quarter as we developed our new marketing strategy. While we believe this reduction contributed to our traffic decline as we move through the quarter, it was a necessary transition phase that now positions us to fully fund the First Choice plan through the remainder of the year.

Adjusted EBITDA was $22.4 million in the second quarter of 2025 and an increase of $8.8 million versus the second quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains, particularly in labor, the benefit of menu price increases and reduced selling expenses. We ended the quarter with $24.4 million of cash and cash equivalents, $9.2 million of restricted cash and $37.5 million available borrowing capacity under our revolving line of credit. One of our financial priorities in 2025 is to position the company to refinance the term loan that matures in the first quarter of 2027. Through the first 2 quarters, we repaid approximately $20 million of debt resulting in an outstanding principal balance under the credit agreements at quarter end of $169 million. The debt reduction, coupled with our significant gains in adjusted EBITDA results in a net-debt to adjusted EBITDA ratio of approximately 2x leverage on a trailing 12-month basis. We believe this positions us well as we now begin to engage in substantive refinancing discussions with potential lending partners.

Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of; approximately $1.2 billion as compared to our prior guidance of $1.21 billion to $1.23 billion, this incorporates expectations that comparable restaurant sales will decline 3% to 4% in the remainder of the year, and we will end 2025 and with 386 company-owned restaurants in operation. Second, restaurant level operating profit of 12% to 13%, in line with our prior guidance. Third, adjusted EBITDA of $60 million to $65 million, also in line with our prior guidance. Finally, we now expect capital expenditures on the higher end of our prior guidance of approximately [ $3 million], as we implement the First Choice plan and launch investments to fix restaurants.

As we shared in July, and as Dave alluded to earlier, we expect to use EBITDA over delivery to invest back into our business to drive traffic gains and address deferred maintenance in our restaurants. The strong profitability results from both the first and second quarter support our ability to accelerate our investments under the First Choice plan. The added investments now include our guidance are as follows: First, we launched our Big Yum! promotion on July 21, delivering on our commitment to deliver value for the money to every guest. Initial guest reception has been strong, with approximately 9% of guests choosing the Big Yum! deal. Importantly, we have seen traffic trends improve across the system with the launch of Big Yum! as compared to trends exiting the second quarter. Our guidance incorporates current traffic trends and a negligible change in PPA versus last year as guests capitalize on the great value of this offer. With these baseline guidance assumptions, we expect this to be a near-term investment in the remainder of 2025 that will deliver benefits in traffic, sales and profitability in 2026 and beyond. I would note that any further traction in traffic in 2025 will reduce this near-term investment. Second, to accelerate the traffic curve, we are investing further in our marketing efforts and now expect selling expenses to total approximately $32 million in 2025. We expect this additional investment to support messaging related to Big Yum! and our First Choice marketing initiative later this year. Third, we expect to address deferred maintenance in approximately 20 pilot restaurants ahead of the First Choice marketing launch. This investment is designed to ensure our guests enjoy a great atmosphere that matches the upgrades we made previously to our food and hospitality. This is primarily a capital investment but likely will result in a limited increase to repair and maintenance expenses on the P&L. Fourth, we now expect G&A expense to total approximately $80 million in 2025 and reduced from our prior expectation of approximately $87 million. The $7 million reduction includes approximately $3 million of cost favorability experienced in the first half of the year, and an additional $4 million expected in the second half of 2025. I would note these totals include noncash stock-based compensation expense of approximately $10 million in our original expectation and $8 million in the current outlook.

Finally, we expect much of the G&A favorability in the second half of 2025 and will be absorbed by higher commodity costs, particularly in ground beef and poultry. Overall, we are very pleased with our progress, capturing cost efficiencies while delivering a great guest experience. We have made significant gains increasing restaurant level profitability, reducing debt and growing EBITDA. We are encouraged with the initial launch of Big Yum!, and we look forward to the great value at Red Robin, delivering growing guest counts.

In closing, I'd like to offer a tremendous [indiscernible] and I'm excited for what's next.

Dave, I will now turn the call back to you.

Thank you, Todd. As we look ahead, I want to reiterate our confidence in the path we've charted with the First Choice plan. While we're still in the first inning of this transformation, the progress we've made in just the first 30 days gives me tremendous optimism about what lies ahead. More specifically, our operators have proven their ability to manage the middle of the P&L, which we expect will drive significant leverage when our traffic trends inflect. We are laying down the foundation of our traffic-driving initiatives, from a strategic value offering to a data-driven marketing strategy targeted to deliver sustainable and profitable growth going forward. Our refranchising initiative will provide additional capital to accelerate these investments while strengthening our balance sheet for the long term. And addressing our deferred maintenance will provide a more inviting environment to drive long-term sustainable traffic growth. I want to be clear about our commitment. We'll continue to execute with discipline, investing strategically in high ROI initiatives to drive sustainable traffic growth while maintaining our profitability targets. The turnaround of iconic brands takes time, but with the right strategy, the right team and the right focus on execution, I'm confident we will deliver on our promise to restore Red Robin to its rightful place in the industry. We're now happy to take your questions. So operator, please open up the lines. Thank you.

[Operator Instructions] And the first question comes from Todd Brooks with the Benchmark Company.

Congrats on the strong results in the quarter. .

Thanks, Todd.

Thanks, Todd.

Wanted to explore this kind of journey to labor efficiency that your teams have been delivering against so strongly in the first half year. Where are we in that process, if you're setting kind of an optimal level that they're striving towards and maintaining the customer experience, which you obviously are to date, how much more meat is left on that bone? And as we look to the guidance for full year restaurant level operating margin being maintained at 12% to 13%. Can you decompose how much of that is the incremental value mix expectations with Big Yum!? And how much of that pressure comes from the higher commodity outlook, it sounds like you have for the second half? .

Yes. Thanks, Todd. It's Dave. I'll address the first half, and I'll let Todd talk about the construct of the balance of the year. I think, look, our operators have become much more disciplined in managing through a labor matrix. That involves being confident and more accurate in their forecasting and then scheduling against their forecasting, which they've done effectively. I would tell you that, that number has continued to come down consistently. It hasn't been choppy. It's kind of been steadily, although less accelerated than it was in the early part of the year, in declining. And so I think they're continuing to improve their ability to manage to that matrix. We haven't kind of articulated a specific target that we're trying to get to because we don't want to compromise the guest experience. If we see compromises in the guest experience, then we'll consider backing off a little bit. But Jesse and the team have done a terrific job, and we look for that to continue as long as they can.

Todd, I'll add in. As it relates to Big Yum! and the restaurant level margin guidance being maintained for the year, you heard it in the prepared remarks, both from Dave in terms of reinvesting over delivery as well as in some of my comments. But I'd say at a headline, what's embedded in our guidance for Big Yum! we think it's about a 1% drag on restaurant level profitability in the balance of the year. That's obviously a trade-off that we're making to incent guests to come in and obviously then in turn, come back in future quarters and future years. But in the near term, that near-term investment that I talked about, we think it's about a 1% drag in the balance of the year. Call it roughly half of that is in labor. The other half is spread throughout the P&L, but that's the way we see it developing.

That's great. And just a follow-up on that, Todd, and then I'll hop back in queue. If we think about that drag, what sort of mix does it assume that Big Yum! reaches? And can we just for block and tackling purposes? I know you gave us pieces of it, but kind of disaggregate the price versus mix versus traffic components of Q2 and maybe the second half outlook.

Yes. So -- as far as the first part of your question, so what we see right now is that about 9% of guests are choosing the Big Yum deal, which is from our lens is a great thing. It means people -- they see the promotion, they see the value in it and they're choosing that option. What that translates to is a 2% to 3% drag on PPA. And so that's part of what informed my comments. I think importantly, what I'd point out, Todd, is that 9% mix, that 2% to 3% drag on PPA, and the other component I'd call out as kind of a baseline assumption for our guidance. We said in the prepared remarks that traffic was down 4% so far to start the quarter. we certainly believe there's a path forward there. That's a baseline that we work up from as we get more messaging out on Big Yum! we're certainly optimistic that we can build up from there. but it's really that experience that we've seen through the first, call it, 3 weeks of the Big Yum!, that's really the basis for our guidance. Todd, if there was a second part there, forgive me. Yes, go ahead.

No, no, we can catch it on [ follow-up in orders ].

And your next question comes from Alex Slagle with Jefferies.

Congrats. I just wanted to think about some more actions you have sort of underway to further step up the guest experience, overall satisfaction levels like maybe some of the incremental actions you could take near term to really sort of start moving the needle. I know some of the things like remodels or further down the line, there are some technology improvements you mentioned, but just wanted to get a sense for what you're looking at in the back half to just further really make it a rewarding experience.

Yes. I mean -- Alex, it's Dave. I think the best way I can answer that is it's going to be a holistic approach, which hopefully came through in the messaging is it's a little bit of everything. So we've got to move the ball ahead on the facility. So we're going to be investing in the facilities and you're going to see that at varying levels. We're looking at varying levels across the system. Some need more than others. Some we want to address more than others. We want to kind of see what we can do from a potential standpoint. So we're getting after that. The technology piece, we've just finished a couple of implementations. We've got further implementations coming in terms of progress and decisions we have to make on handhelds and on kind of next-generation table tops and so forth. Those kinds of things are coming down the road. Next traffic-driving initiatives, we're going to put money against that. So it's -- I don't think we can point to any 1 thing, but it's tactics across the board. I don't know whether that helps you answer your question, but...

Yes. No. It's a hard one to answer anyway. On the marketing, I know it's early, just us just getting on board, but just kind of thinking about next steps for the First Choice marketing plan. I know you're gathering some data, getting ready to be able to leverage that. Maybe you could frame up the what the cadence of the incremental spend would look like? Does some of that show up in the 3Q? Or is it really kind of 4Q and into '26?

I'll let Todd answer that one. I think -- go ahead, Todd.

Yes. Alex, I'd point to you here if you think about the first half of the year, which really, as you know, we have that elongated in Q1, right? So we're really 7 periods into a 13-period year. In the first half of the year, we spent almost $16 million in selling expense in the back half of the year, we frankly expect about the same and pretty equally split between Q3 and Q4. The piece that I think is interesting to call out there, though, is I called it out in the prepared remarks, on a year-over-year basis, Q2 was down almost $6 million. And so that's part of what we felt like we saw in the traffic headwind in Q2. When we get to Q3 and Q4, that roughly $8 million of selling spend in each of those quarters is a $2 million to $2.5 million increase year-over-year. So again, we drew, what I hope proves to be a conservative line of traffic embedded in our guidance. but it's the launch of Big Yum!, it's the incremental dollars working for us. It's all of those different pieces that we see as the opportunity to further accelerate the trends that we're seeing in traffic.

Got it. And I think you mentioned the company-owned unit target for ending the year a little bit lower than it was. You find some closures you're bringing forward a little bit?

Yes. I'll talk on the headline, I'll let Todd jump in as well. I mean, look, we've looked at this a couple of ways. First of all, I think from what numbers we've shown in the past, we've been able to -- because of the operating performance, we've been able to remove about 20 restaurants from that list. So we've actually improved performance to the point where even what was originally considered and communicated is a lower number. Beyond that, we've got a watch list of restaurants that we're still working on that we hope we can move even more off of that list, and we're seeing improved performance. We just haven't seen enough yet to kick them off of our focus list. And then there's a number of restaurants that we'll have and will close. Some of them may be a little sooner than otherwise thought because our real estate team has been able to work really effectively with our landlord population to exit some underperforming restaurants sooner at pennies on the dollar for what we would have spent before. So that's why that number has moved around a little bit, but I'll let Todd comment on it, too.

Yes. I'd just reiterate those points, Alex, of you're picking that up right. That number did change. It's exactly to Dave's point because our team did some really good work to find a quicker solution on some of those more challenged restaurants. I'd also reiterate Dave's point, we talked about restaurants that were not profitable in 2024 previously. And we've seen about 20 of those turn profitable on a TTM basis with the results or the strength of the results that we've had in the first part of the year. So it's nice to see that progress across the system. Improve those -- some of those restaurants profitable, we'll resolve some of these restaurants more quickly. And then obviously, we're working with our operators to help give them the tools, as Dave said in the prepared remarks, to drive sales, drive traffic, drive profitability going forward.

And your next question comes from Jeremy Hamblin with Craig-Hallum Capital.

And I'll add my congrats on the impressive operational execution. I wanted to start with a follow-up on the last point and really dig into the franchisee health. I mean what's interesting is your franchisees, they haven't closed any locations. So as you've seen significant improvement in the company-operated portion of the business, are your franchisees also getting commensurate improvement in their restaurant level margins? I mean, first half of the year, your restaurant level margins are up like 300 basis points. Are they getting kind of commensurate profitability? And I think that they operate with better overall restaurant level margins than you do. Is that still true?

Yes. Jeremy, it's Dave. So look, I think you hit it right there at the end. As generally speaking, our franchisees are good operators. We've had -- our franchisee population is so long term in the brand. They've been dialing this in for a long time. And they've generally speaking, been good. And I'll be honest, they've been better operators than we have. I think our team is closing the gap to their performance levels. So I think the short answer is we're getting better. They're still better than us, and we're getting closer.

Got it. And then just to the guidance on same-store sales of down 3% to 4% the remainder of the year. You're lapping tougher compares in Q4 than Q3. Should we be thinking about this as kind of like a minus 3% type comp in Q3 and then a minus 5% in Q4? Or any color you can share on that?

Jeremy, Todd here. Yes, I think directionally, we said the down 3% to 4% because you start to slice the onion a little bit thin at some point there. But I would say, directionally, we're looking at the same thing. And I think based on what we know today, we have Q3 a little bit better in our internal modeling than Q4. But again, I think we're slicing that thin and especially given what we're working towards to drive the change in traffic or to further inflect traffic with Big Yum!, with First Choice with some of this incremental spend, we're certainly optimistic that we can bend that to be different. But at a headline, we're looking at the same thing with the tougher compare in Q4, we think there could be a little bit of shape there. But it's more on the edges than anything pronounced as we think about it.

Got it. And then just you mentioned maybe a little bit of commodity pressure here in the second half. Just -- and you might have quantified that, but you've seen pretty strong results on that. I mean, are we thinking back half of the year cost of sales is more like flattish? Or any more color you might be able to share there, Todd?

Yes. As build on one of the earlier questions, as we think about restaurant level profitability, commodities, we did call out as one of the headwinds that we see. I imagine you and others have seen this through your other research, but ground beef has certainly spiked. We've seen chicken costs, poultry costs increase as well. We think that's a, call it, a $2 million to $3 million headwind in the back half of the year versus what we expected previously. The piece that as we think about restaurant level profitability, though, is, yes, there's a commodity headwind. But there is also a restaurant level profitability, though is, yes, there's a commodity headwind. But there is also a P&L impact that we expect from the value offering of Big Yum!. And so where we've been kind of low 23% on cost of goods, we do see that likely creeping up into the [ 24s ] just based on the value play that we have out there. Now again, obviously, hopefully, we see traffic increase as a result but just as you're thinking about the modeling, that's kind of how we're thinking about the cost side of things.

Great. That's helpful. Last 1 for me. Todd, so you mentioned the the debt, and you guys are doing a great job of reducing that. Wanted to ask a 2-parter on that. First is, do you have a target level that you are striving to get to in terms of absolute kind of net debt levels or total debt levels. And then part 2 is, do you have a time frame when you're looking at getting the refinancing done with that kind of 2027 Q1 maturity?

Yes. Let me take the first part of that, Jeremy. I'll let Todd build on it. I think, look, we've been asked that question. We've asked ourselves that question a lot is what's the right level of debt to get to. And I think this is all, the way I answer it is it all toggles together and it depends a little bit on the refinancing discussions if a potential lender says to us, look, if you can get debt down to x-level I can give you favorable interest terms of this level. However, if your debt is higher at this level, I can only get you interest improvement to this level, so we're going to be factoring all of those things in to say, what's the optimal place to be where we can get -- the reason that we do this is to obviously get our debt level down, but also to improve our financing terms. And we'll look at that with very specificity or great specificity as we kind of figure out what's the optimal level from an interest rate standpoint to reduce our payment schedules. So I think that's -- as we look at the number, I don't have a specific number in mind. It's going to depend on those discussions as well. In terms of timing, I think our objective is to get this to a place where we can do something in Q1 of '26 ideally.

And your next question comes from Mark Smith with Lake Street Capital.

I wanted to go back to the franchisee results. I'm just curious kind of your thoughts around sales levels at your franchise locations. And they're kind of your franchisees buy in into current promotions and some of the changes that you guys are making?

I mean the short answer, Mark, [indiscernible] before Todd get started. The short answer is they bought in, in their participating. So I think that's the best indicator of kind of support for this. I think as with franchisees in any organization, you have varying levels of interest, I want to make sure, obviously, that we don't just trade people down that we're getting the incremental traffic and we're getting the incremental sales on top of that. So they're watching it like we are sensitive to what the performance is. I understand the challenge that we have. I've spoken to all of our franchisees about this and they've said to me, look, we get it. We understand what you're doing. We understand why you're trying to do it. A little concern on trade down, but we're with you. So I mean that's the best way I can answer it.

Okay. And then just looking at pricing, kind of menu price. Can you just remind us kind of when we have some prior years or quarters roll off in price? And then your ability kind of outside of promotions to selectively take price, especially as we look at some commodities that are coming up.

Mark, Todd here. I'll start and then Dave will add in as well. I think just on the pure numbers side, we've commented in the past that we didn't expect to take any further price in 2025, and that remains to be -- remains the case. The pricing that we expect -- now keep in mind, I want to be clear on this. This is pure pricing. I talked about PPA impacts from the Big Yum! deal earlier. But pure price we expect Q3 to be 4.5% to 5% on price. And in Q4, we think that will dip down to 2% to 2.5%. And obviously, that's just based on what we've taken in the past. So we are starting to roll that price off, that will take a further step down as we get into 2026. Again, keep in mind that is just the menu price piece. Again, the trade that we expect from Big Yum! is probably a 2% to 3% drag against that. But that's kind of the pure place of where we are in terms of pricing overall currently.

Yes, let me build on that a little bit. I think Russ and our marketing team are in the early stages of doing the menu optimization study and pricing study, looking at the construct of our menu and looking at what are some of the opportunities we think we have in terms of restructuring the menu to free up either pricing opportunities or better margin performance within individual items. So I think we're looking at all of that as opposed to a [ blunt ] instrument pricing approach, but a much more surgical approach to the menu to figure out how to deliver against guest experiences at the same time increasing margin.

this concludes our question-and-answer session. I would like to turn the conference back over to Dave Pace for any closing remarks. .

Okay. Just really quickly. Thanks, everybody. Appreciate you jumping on. Hopefully, we answered your questions. You got a better picture of where we're heading as a business right now, and we'll update you again in November on our next call. Appreciate it. We'll talk to you then. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, everybody, and welcome to the Red Robin Gourmet Burgers, Inc. Business Update Conference Call. This conference is being recorded.

During management's presentation in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties, including those described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but they are intended to illustrate alternate measures in the company's operating performance that may be useful. Additional information about our non-GAAP financial measures is included in the company's SEC filings.

Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace. Please proceed.

Good morning, everyone. Thank you for your interest in Red Robin. As I approach my 3-month mark as CEO, I'm even more confident in the potential for Red Robin and for our future.

During my first 3 months, it's also become clear that to realize this potential, we must take bold actions across the business to make investments that drive sustainable growth in traffic, profits and cash flow enabled by a strengthened financial position.

Yesterday, we unveiled our First Choice plan to address these opportunities head on. These actions are designed to position Red Robin for long-term success while strengthening our financial foundation. Underpinning all of this is our goal to make Red Robin the First Choice for guests searching for a differentiated restaurant experience, team members looking for a great place to work and investors seeking reliable returns on their investments.

More specifically, the First Choice plan consists of the following: first, hold serve, protect and build on the foundation established under the North Star plan; second, drive traffic, creatively engage with guests and inspire visitation; third, find money, manage expenses and assets to reduce debt and allow for critical investments; fourth, fixed restaurants, invest in the physical state to improve the overall dining experience; and fifth, win together, create a high-performance environment that attracts and retains the best industry talent.

Let's start with holding serve and building on the foundations established under the North Star Plan. As we've spoken to extensively in the past, Red Robin is in a substantially better position now from a food quality and hospitality perspective relative to the start of the North Star plan. When our team members execute the way we know they're capable of, our guests have a great experience at Red Robin.

In fact, in the recent ACSI restaurant and food delivery study, Red Robin saw the largest improvement in customer satisfaction in the entire full service segment. That said, we know that we can still be more consistent across ships, restaurants and regions to deliver a great experience every time.

At the same time, we must maintain the labor efficiencies that we've seen in the first quarter and ensure that we continue to improve overall restaurant profitability. A great dining experience is paramount to a growing restaurant brand and inspires guests to return more frequently, which leads us to our second pillar, drive traffic.

Like many in casual dining and across our industry, Red Robin has experienced traffic declines over the past several years, while at the same time, reducing investments in messaging and promotion. We now need to reverse that approach to increase our creative engagement with guests, and we have a clear path to develop that engagement while generating the resources needed to make it happen.

This starts with delivering value for the money to the guest every time through great food and great service, inclusive of everyday value. To address this opportunity, next Monday, July 21, we're launching our BIG YUMMM deal, which includes a Red's Double Tavern burger, a bottomless side and a beverage for $9.99.

We know we can deliver a great experience to our guests across all areas of our menu. But in order to do so, we must get them through the front door. This new offer will work to drive near-term traffic as we bridge to other marketing efforts we have planned for later this year and beyond.

From a high-level perspective, we need to continually identify and remove barriers to trial and repeat. And our team is hard at work on that as we speak, leveraging increasingly sophisticated data analytics to fully understand our challenge.

Before the end of 2025, we plan to implement a much more targeted marketing plan to meet the most relevant needs and desires of our guests and deliver food, beverages, value and experiences that satisfy those needs and desires in a uniquely Red Robin way.

In order to improve traffic, the objectives are simple and clear. First, inspire more guests to add Red Robin to their consideration when seeking a casual dining experience; and second, to inspire more guests considering a casual dining experience to make Red Robin their first choice.

We're confident that our new analytical and performance marketing capabilities and innovative marketing approach will allow us to punch above our weight. In order to make the critical investments required in our business, it's essential that we strengthen our financial position and free up funds for investment, which leads us to our third pillar that we summarize as find money.

This pillar centers around managing expenses and assets to reduce debt, improve free cash flow and allow for those critical investments back into the business. We'll work to find money through a combination of efforts. First, delivering consistent financial performance. Our operators have increasingly demonstrated their improved ability to effectively manage the business and deliver results at the restaurant level, and we need and expect that to continue.

Second, we plan to reduce expenses across the system. This includes a continuation of our efforts to thoughtfully reduce restaurant-level costs through supply chain efficiency, technology, like our labor scheduling platform to have the right labor at the right time and parity or better changes for the guest. In addition, we recently began implementing a series of corporate cost reductions that we estimate will reduce G&A expenses by approximately $10 million annually at their full run rate.

Third, we're pursuing a tactical refranchising effort for a select number of company-owned restaurants in markets. I want to emphasize that this is a tactical maneuver to generate proceeds that we expect to use to reduce debt, facilitate a refinancing of the debt that remains and to reinvest back into the business.

This is not a fundamental shift in our operating strategy to a more asset-light model. We see opportunity for current franchisees to gain a larger footprint in their Red Robin Holdings, and we partnered with Brookwood Associates to launch a broader marketing effort to bring proven operators into the Red Robin family. When complete, we expect to continue operating with the vast majority of our restaurants as company-owned.

Finally, reducing our overall long-term debt and refinancing it at a more favorable interest rate is a tremendous opportunity to improve free cash flow and create shareholder value. Each element of the strategy has its own timeline as we work them in parallel, and we'll provide updates along the way.

Our success in finding money will enable our fourth pillar, to fix restaurants. As we free up cash through the success of the previous elements of our strategy, we then expect to reinvest in the physical estate to improve the overall dining experience. Our initial efforts are already underway and will address deferred maintenance needs to achieve a competitive standard.

In time, we anticipate this may evolve to a broader renovation effort to further improve the guest-facing surroundings. As part of this process, we also intend to upgrade and invest in new technology to support daily execution, the guest experience and further operating efficiencies.

Our fifth pillar is winning together and is focused on creating a high-performance culture that attracts and retains the best talent in our industry. This pillar starts with a singular focus by the entire organization on continually improving the guest experience through everything we do. We must start with the guest in mind and work back to how we support and deliver a differentiated dining experience.

Further, we'll build on the ownership mindset introduced previously through the managing partner program, where our managing partners share the success of their restaurants. As our operators have embraced the managing partner model, we've already begun to see the benefits through our improved profitability so far this year, while also improving the overall guest experience.

Additionally, we're committed to building and maintaining a performance culture that focuses on achieving results and rewards performance against our goals, not only with our managing partners but throughout the organization. We'll cultivate an environment where our team members can continually grow and develop themselves in order to experience rewarding careers over many years and finally, we'll filter our most difficult decisions through a commitment to always do the right thing, to ensure that our actions find balance among the interests of guests, team members and investors.

These 5 pillars of our First Choice plan will allow us to build upon our strengths and the progress that's been made while addressing our opportunities head on. With a focus that begins with the guest, more engaging messaging, improved cash flow and strategic investments in our restaurants, we're confident in our ability to be the first choice for our guests seeking a differentiated dining experience, for our team members who want a great place to work and for our investors who want to see sustainable growth and value creation.

We look forward to updating you on our progress in the months ahead. And with that, Todd will now take you through a brief update on our expectations for the second quarter and the rest of the year.

Thank you, Dave, and good morning, everyone. For the second quarter, we now expect comparable restaurant sales to decrease approximately 4%, modestly below our previous expectations for a decrease of approximately 3%. As a reminder, these estimates include an approximately 240 basis point headwind resulting from overlapping a benefit in deferred revenue recognized in the second quarter of 2024, related to our loyalty program change that we expect will not recur this year.

While we are not satisfied with our current traffic trends, we are optimistic the strategy laid out today will deliver sustainable traffic growth in time. Despite our current top line trends, we are very pleased with the progress we have made in managing the middle of the P&L and delivering profitability. We now expect our second quarter adjusted EBITDA to exceed our prior expectation of $13 million to $16 million. This represents a continuation of the positive momentum we have seen from our managing partner program and fostering an ownership mentality throughout the organization.

As we look to the remainder of the year, I would call out a few items. First, we do not expect any material impact from refranchising in 2025 as we do not expect the transactions to be completed until early 2026. Second, we do expect to begin capturing the benefit in G&A from the corporate efficiency actions Dave mentioned earlier. Finally, we expect to reinvest the G&A savings and a portion of any EBITDA over delivery in initiatives to drive traffic gains and address deferred maintenance in our restaurants.

Overall, while we acknowledge we have more work ahead, we are confident we have the right strategy and team in place to deliver long-term shareholder value. Our significantly improved financial foundation provides us with the flexibility and resources needed to strategically invest in traffic-driving initiatives and accelerate the execution of our First Choice plan. We are committed to being transparent and accountable for our progress as we move ahead and look forward to providing additional updates in the months ahead.

With that, we are now happy to take your questions. Operator, please open the lines.

[Operator Instructions] Our first question is from Jeremy Hamblin with Craig-Hallum Capital Group.

Congrats on the momentum in profitability. I wanted to start with the Big Yummm deal and the launch for next week, clearly, an aggressive rollout. I wanted to understand what you expect the impact to be on your food costs, what the margin profile might look like? And if you've tested this at all, what type of results you're seeing in terms of driving average check?

Jeremy, Todd here. To start with one of your -- a or piece of your question there, we did test this offer in a handful of markets through 2024 and the start of 2025. So it's an offer that we've tested. We have an expectation based on that. We did see a nice traffic lift in that test. And so obviously, that's what gives us confidence in moving forward here.

In terms of check, I would share, we saw a -- what I would describe as kind of a modest take rate, which I think is a good thing in this case, right, of the folks that found that offer compelling, it appears came in and got it. We didn't see significant trade down to the offer, which financially gives us some confidence as well. So I think it's the combination of -- we saw it move the needle on traffic by a few percentage points, and we didn't see significant degradation in PPA or gross margin per guest.

And so it's all of those factors that let us kind of take the step now. I think it's also an acknowledgment that the competitive environment, this puts us on a competitive playing field from a price point standpoint at least with a lot of the other competitors out there. And so we feel good with our product, our hospitality, as we've talked about, but we felt like price point was one that we could be more competitive with. And so that's what brings us forward.

Yes. Just to top that off, I mean, I agree with the last point that Todd made that we were hearing from our operators and from our guests about price point and the value competitiveness in the marketplace right now. And we felt we had something that we could respond to it with that we felt good about. And so we moved quickly to put it in place.

Great. And then just in terms of coming back to Q2 and providing a little bit of insight here on the upside in profitability despite a little bit of downside on the comp. You mentioned labor. Can you give us a sense, Todd or Dave, on what labor is going to look like here? I mean, are you going to be like sub 37% in Q2? And then just how sustainable is that on a go-forward basis?

So before Todd jumps in, let me just kind of say this is a function of the progress that our operators have made, and we feel really good about it that they have demonstrated their ability to get managed tightly in the middle of the P&L to deliver the results. And it kind of led to the first plank of the strategy of hold serve, which is they've shown us they can do it.

And the point is, look, don't give it up and don't slide backwards. So I'll turn it over to Todd with the specifics. But we feel about -- your point about sustainability is that our operators are managing their forecast, they're managing their labor much more tightly, much more efficiently. And I think with that confidence, we can feel reasonably good about its sustainability.

Yes. And Jeremy, just adding color to kind of our Q2 expectation. I'd call out labor and I'd actually call out cost of goods as well. I would agree with your characterization. As we sit here today, I do think we'll see an improvement in the overall labor percentage from where we were in Q1, which was 37.1%, I believe. And so I would expect a step down there.

Relative to our internal expectations as well, we saw some favorability in some commodities. It wasn't necessarily what the commodities that we typically talk about, egg prices, I'm sure, have been top of mind for many out there. We've seen some favorability in eggs and other areas that have given us some upside on cost of goods as well. And so I think those are the 2 areas that I would call out that are trending better than we expected.

Our next question is from Alex Slagle with Jefferies.

I guess the partner comp program, it does seem like that's really been a nice win so far. And I guess that's part of the labor piece or much of it. I mean, are there tweaks that you want to make to that at this point? Or how you envision that continuing to roll?

Yes. Look, I think the market managing partner program has definitely been a success. We feel good about it. I think as you heard, when it was first put in place, this takes some time to get traction. It takes some time to get the right people in that are subject to that program, and it takes them time to learn their own restaurants in a different way and how to manage it.

So as we've seen them kind of embrace the managing partner philosophy, we laugh a little bit because I say I've got managing partners now pick up the phone and call and say, hey, I got this $500 invoice. Why do I want to pay this? Or why should I pay this, right?

And in the past, those things would just get sent through the system. And now they're looking at it saying, watching every dollar because they know that the performance of the restaurant affects their earnings. And so we feel good about it. And I absolutely agree with you, Alex. I think it is a high -- a large contributor to some of the progress we've seen.

And on the people side, I guess, it probably links a little bit to that, just sort of the next step in raising the bar further for the team member experience and maybe is it some leadership changes, training changes or how you incentivize your team members? Just trying to think through how that evolves as well.

Yes, I think it's all of those things, right? I think in building the culture that you want to see, you've got to have everything reinforcing itself. So you've got to be clear with people what your expectations are. You've got to give them the tools to do their job. You've got to reward performance when they deliver. You've got to compensate them for that. And you've got to make sure you've got the right people in the right seats all the time.

So it's a dynamic organism that you just have to keep adjusting to. But what we're starting with is this point of being a guest-facing culture, right? One of the things under the North Star plan, which I agree with, although I view it as a subtle difference. It's a little bit of a nuance. But under North Star, we talked about creating an ops-focused culture.

I think that's good. I think the reality is we want a guest-focused culture. We want to deliver a great experience for the guests every time and helping the operators -- supporting the operators is the way that many people can do that within the company. But at the end of the day, this is about making sure the guest has a great experience. And so that's the culture that we're going to be creating and then setting up all the reinforcing mechanisms to support that.

Our next question is from Todd Brooks with The Benchmark Company.

Todd, I wanted to lead off. I think if I heard you correctly, the $10 million in G&A savings and the EBITDA upside that is being -- was generated in Q1, and we're seeing it again in Q2. The idea is that this goes into funding the strategies laid out in the First Choice plan.

Where are we funding the balance sheet improvements that you're talking about in kind of part of the find money pillar here? Does that come out of refranchising, so we don't really start to see the balance sheet parts of the plan kick in until fiscal '26? so just kind of walk me through maybe funds generated and when they go against the different initiatives, if we could.

Yes, Todd, this is Dave. I'm going to -- I'll give you a little bit of the headline on this and how we're thinking about it, and I'll let Todd speak to some of the specifics. In terms of the deployment of funds that we create through all the vehicles that I mentioned in the First Choice plan, this is going to be an allocation toggle, if you will, as we move forward.

So we'll see deployment against certain elements of the balance sheet, certain elements of the deferred maintenance that we've got, marketing spend. We'll be kind of putting those in at different points in time. Obviously, some of the big chunks in paying down debt will come through the refranchising efforts. And so we'll see that come probably a little later given our expectations right now.

But I think as we go forward, if we see operating performance or we see other savings or we see things that give us the opportunity to reduce debt, we may do pieces of that along the way. So I don't think it's linear. I think it's going to be fairly fluid. But obviously, the reason that we implement the refranchising tactic is to garner that bigger chunk that we can deploy against the balance sheet. So I'll let Todd talk a little more about that.

Yes. Todd, the only thing I might add in terms of the specific G&A piece and maybe building on all of the parts, but focusing there, in the balance of the year with the actions that we've implemented, we think there's $3 million to $4 million of favorability in G&A relative to our prior expectations. So that's kind of the starting point.

And I think as we thought about it, we felt like the immediate opportunity was in driving top line. And so we think that the Big Yummm as a part of that, getting that message out, getting that offer out was the immediate opportunity.

In time, you saw the progress in Q1 that we did pay down some debt with cash from operations. Obviously, we'll go through the seasonality of the year here. But I think we can continue to make progress there. Obviously, the big unlock though is something like a refranchising that brings in a more substantial amount of money. But as Dave said, it's the toggling that as these different pieces evolve, we'll have to evolve along with it.

Okay. Great. That's really helpful. And then maybe on refranchising approach. And I think you still said vast majority would remain corporate stores. I think you're a little over 80% corporate-owned now. Do you have a sense -- like is there a lower bound for how low you would go in the company franchise mix?

And is there an approach where there are certain regions that you feel like are important to hold as corporate markets or higher volume markets that you would want to hold versus what you're looking to refranchise? Anything strategically that you can give us around the approach for how you're going to tackle refranchising here?

Yes. I mean, look, obviously, we've had a lot of discussion internally about all of those trade-offs. And our objective is to get us to a point where we can significantly pay down debt, reduce the debt level and then refranchise at a lower rate.

Again, I hate to -- I don't want to be dodging of the question, but it's going to be a little bit fluid as well. What do I mean by that? So as we open up and look at potential markets, potential restaurants to sell or refranchise, obviously, the ones that are most profitable, the highest performing ones are going to garner the highest value.

You have to sell fewer of those to secure greater proceeds. If you decide that you want to go down the path of selling your lower-performing restaurants, then you're going to have to sell a lot of them. And we believe that, one, we can fix the business and fix the system and generate performance across the system.

So you don't want to kind of leave money on the table by with restaurants that you believe you can improve the performance of and you don't necessarily want to sell off your highest performance. So I think as we speak with franchisees, as we speak with potential purchasers, it's going to be what are you interested in, what are we interested in, what are we trying to solve for here, which is the proceeds generation.

I think if we're at 80% now, I think it's not unreasonable to think the final range will be somewhere in the 65% to 75%. But that's going to be dependent upon, as you point out, which restaurants they are, what the performance, what's the value of those and what proceeds we can generate.

Okay. Great. And then just a final one. And this gets to -- and I know the plan is in development kind of talking about the marketing plan to support what you're trying to do with First Choice and you hope to have it in place by the end of the year.

But as you're thinking -- I know you're saying we have to kind of punch above our weight to get that message out there from a consideration standpoint. But what type of incremental marketing spend are you starting to frame up in your heads as you think about what the First Choice marketing program needs to be to get you up that consideration scale?

Well, I'll give Todd a chance to answer that one in a second. What I do know is it's going to be a larger amount. And it's that amount of money that we've historically been spending is, I think, is suboptimized for what we need to do and what we can do to break through.

The other thing I'll talk about with the First Choice marketing plan that you'll hear more about it as we get into this later on our next earnings call and beyond is that the First Choice marketing plan, we think is -- and again, you'll hear more about this, is a very innovative, data-centric analytical approach to approaching our guests.

We believe we've uncovered an approach that allows us to be highly laser targeted on the guests to deliver, first of all, understand what goes into their decision tree about choosing where to dine and why to go to Red Robin. And secondly, then what do we need to put in place in front of those guests to inspire traffic.

And as we are able to deploy that we're going to figure out what does that mean, what did they want. We're still -- we're working right now on those data analytics to understand what do they want, what would drive them to come in and then what do we have to do to deliver that.

So all of those things, again, are tied together. And as we get through this data analytics, which is a different algorithm that exists in the marketplace today, we'll understand more about what the cost is to deliver against those expectations. So I will tell you it's a bigger number, but it's -- that's it.

Our next question is from Mark Smith with Lake Street Capital Markets.

I wanted to dig in a little bit on the fixed restaurants part. As we think about this, will this be more of kind of a refresh rather than a reimage program?

Yes. Mark, this will be more of a lighter touch than a full remodel reimaging program. This is not, hey, we've come up with a new design, you're going to see us implementing that design. This is looking at our current fleet and addressing issues that need to be addressed that are customer-facing, that are -- that take away from -- we believe, take away from the dining experience today and that we think we can address.

So I think as we get through this, we've got a big chunk of investments that we have to make in this area. And as we get through this, I think we can then move to a more thoughtful approach to reimaging down the road. But this will be more of a lighter touch update on existing design.

Okay. Second one for me is just as we think big picture here about consumer behavior and your marketing efforts is how you weigh discounting being promotional without kind of training the consumer to just look for big deals in driving their traffic?

Yes. Great question. I mean I think that's the challenge that we all have in this industry these days is that you're trying to provide a value offering to your guests that gets them a reason to come and visit you without kind of diluting the value of your menu. And so you've got to be fairly targeted about what are those things that connect with your consumer and inspire them to come in.

This is not -- what you're seeing with us and with Big Yummm is not an across-the-board, return to heavy discounting. This is a very, very targeted messaging, targeted approach that has been tested that we think can get people into the restaurant. And then we hope that they'll continue to purchase across the menu.

So I think the marketplace has an expectation right now that there are value offerings out there, and we've got to be able to play in that game and do it in a way that doesn't dilute our overall margins. So I think that's what you're going to find us. And I think probably what most of our competitors are doing is trying to find that balance.

With no further questions in the queue, I would like to turn the conference back over to management for closing remarks.

Okay. Thanks, everybody. Look, I appreciate you jumping on the call. As you can hear, we're excited about the First Choice plan. We feel great about the plan. We feel great about our ability to execute it. We feel great about the team that we have out there putting it forward every day. And we'll talk more on our next earnings call, I think which is August 13. And again, thanks for jumping on the call today.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

" Good afternoon, everyone, and welcome to the  Red Robin Gourmet Burgers, Inc. First Quarter 2025 Earnings Call. This conference is being recorded.  During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings.  Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its first quarter 2025 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. Let me begin by sharing how energized I am to be here as the CEO of Red Robin. Although new to the executive team, I've served as Chairman of the Board since 2019 and have been well-versed in our turnaround plan to make this beloved brand relevant again.  Under G.J.'s leadership in its North Star plan, we made critical investments while also taking steps to reduce overall operating costs. The focus on elevating the guest experience while building a winning culture has been integral to establishing a foundation upon which we can grow. I intend to continue to build upon this progress, and I'll walk through my initial priorities and areas of focus later in the call. To that end, I want to personally thank G.J. for all that he's done for Red Robin during his tenure, both as CEO and as a member of the Board. He and I have built a trusted long-standing relationship, and I appreciate his willingness to collaborate during this transitional period to best position the company for its next chapter. With that, G.J. will now provide a brief recap of our progress. Todd will then review our first quarter results before I dive into our initial go-forward thoughts and priorities for Red Robin.

Thank you, Dave, and good afternoon, everyone. I would also like to echo Dave's optimism for the future of Red Robin. I'm very proud of what our team has accomplished over the past 2.5 years. Through their hard work and dedication, we successfully laid the foundation for our comeback journey.  Let me quickly recap some of what we accomplished over the past 2.5 years to put the company in a position to drive long-term shareholder value and enhance Red Robin's competitive positioning. First, we took steps to make Red Robin an operations-focused company through our managing partner program, which incentivizes our restaurant leaders to deliver strong and balanced financial results.  Second, we elevated the guest experience through investments and upgrades in both food and hospitality. From rolling out flat-top grills to deliver a thicker, juicier, and more flavorful burger to upgrading our bar menu and bringing back industry best practice staffing models. We are seeing tangible proof that our guests have begun to recognize and appreciate our efforts.  Third, we optimized guest engagement through our relaunched loyalty program in 2024, allowing our guests to earn a reward much faster and encouraging more frequent visitation to capitalize on their earned rewards. The revamped Red Robin Royalty program has continued to spur membership growth with approximately 15.3 million members at the end of the first quarter.  And lastly, we drove growth in comparable restaurant revenue and unit level profitability in both the fourth quarter of 2024 and the first quarter of 2025. On our last call in February, I shared that in 2025, we expect to become meaningfully more efficient and productive with our labor costs. Todd will expand on this in a moment, but I'm proud of the work the team accomplished to deliver on this goal in the first quarter, and I'm confident it will continue from here.  In the closing, it has truly been a privilege to lead such an iconic brand over the past 2.5 years. With key elements of our plan now in place, and we have delivered strong financial results in the first quarter, we have reached a natural transition point in Red Robin's transformation, and I am confident the company is in great hands with Dave to lead the next phase of this journey. And with that, I'll turn the call over to Todd to walk you through the financial performance.

Thank you, G.J., and good afternoon, everyone. In the first quarter, total revenues were $392.4 million versus $388.5 million in the first quarter of fiscal 2024. The increase is due primarily to a comparable restaurant revenue increase of 3.1%, led by a 6.8% increase in net menu price, outweighing a 3.5% decline in guest traffic.  Restaurant level operating profit as a percentage of restaurant revenue was 14.3%, an increase of 330 basis points compared to the first quarter of 2024. If you recall, one of our focus areas for 2025 is to become meaningfully more efficient with our labor costs. We're pleased with our results in the first quarter as our operators delivered traction faster than we expected. Congratulations to our operations team on this progress, and thank you for all of the hard work that goes into delivering these gains.  General and administrative costs were $27 million as compared to $25.8 million in the first quarter of 2024. Selling expenses were $9.4 million, a decrease as compared to $13.5 million in the first quarter of 2024. The decrease results primarily from a reduction in media in the quarter, overlapping a marketing test last year.  Adjusted EBITDA was $27.9 million in the first quarter of 2025, an increase of $14.5 million versus the first quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains throughout the P&L and particularly in labor and the benefit of menu price increases. We ended the first quarter with $24.2 million of cash and cash equivalents, $9.1 million of restricted cash, and $35 million available borrowing capacity under our revolving line of credit.  As I shared on our last call, one of our financial priorities in 2025 is to position the company to refinance the term loan that matures in the first quarter of 2027. During the first quarter, we used free cash flow we generated, coupled with approximately $5.8 million of gross proceeds from monetizing 3 owned properties to repay approximately $17.8 million of debt. This resulted in an outstanding principal balance under the credit agreement at quarter end of $171.7 million.  Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of between $1.21 billion to $1.23 billion as compared to our prior guidance of $1.225 billion to $1.25 billion. This incorporates expectations that annual comparable restaurant sales will be generally unchanged at approximately 0%, and we will end 2025 with 393 company-owned restaurants in operation; second, restaurant-level operating profit of 12% to 13%, in line with our prior guidance; third, adjusted EBITDA of $60 million to $65 million, also in line with our prior guidance; and finally, capital expenditures of approximately $30 million as compared to $25 million to $30 million previously. While our first quarter results exceeded our expectations, we have pared back our outlook for the remainder of the year due to the broader macro and consumer environment. Our guidance includes an expectation that guest traffic trends from the past few months continue for the remainder of the year. We've also included a cost headwind based on current tariff policies. I would note, we are not planning any menu price increases in the remainder of 2025. We anticipate absorbing the current expected impact of tariffs as we prioritize maintaining value for our guests. The great work of our operators to capture cost savings greater than we initially planned supports this approach. For the second quarter, I'd like to remind everyone that with the launch of our new loyalty program last year, we received a 220 basis point benefit to our reported comparable restaurant sales in the second quarter of 2024 from changes in loyalty revenue. We expect this not to recur in 2025, representing an approximate 240 basis point headwind to our second quarter of 2025 comparable restaurant sales. For modeling purposes, we expect comparable restaurant sales in the second quarter, inclusive of this headwind and with less benefit from menu price increase in the second quarter than the first, will decline approximately 3%. We do not expect royalty revenue will have a meaningful impact on comparable restaurant sales in the third or fourth quarter. Before I turn the call back to Dave, on behalf of over 20,000 Red Robin team members across the country, I would like to extend a very heartfelt thank you to G.J. In senior leadership positions, we are stewards of the business for as long as we have the privilege to lead. I am certain the Red Robin business and our people are better for you having led this company. For me personally, it's been an honor to be your partner. Thank you. Dave, I'll turn the call back to you.

Thanks, Todd. While we're pleased with the headlines of our first quarter financial results, we're far from claiming victory, and there's still more work to be done as we continue the comeback journey of Red Robin. I've spent my initial 4 weeks meeting with the team, speaking with franchisees, visiting our restaurants, and digging into every aspect of our business. I'm confident our team is energized by the changes we've implemented in the last two years, and they look forward to continuing the progress in the next chapter of transformation at Red Robin. Overall, our operational foundation is much stronger, led by the improvements the company has made in food quality and hospitality. Importantly, our overall guest satisfaction scores showcase that our guests are recognizing these improvements. That said, as I've come up to speed over the past month, I still see room for improvement in certain areas of the guest experience, and we'll work to address those quickly. Our opportunity as we move ahead is to maintain the improvements we've made in the guest experience while putting strategies in place to drive sustainable growth in restaurant traffic and corresponding gains in profitability. To that end, I'd like to provide you with my initial high-level priorities for Red Robin in 2025 and beyond. First, it's imperative that we retain and extend the progress that's been made in our operational execution, delivering a high-quality guest experience while also improving our operating efficiency. Second, it's critically important that we return Red Robin to a sustainable traffic growth, and this begins with how we engage with the guest. We must creatively cut through the noise in today's marketplace and be bold when we see opportunities. In the near term, I'm working to ensure that we have the right marketing leader and strategy in place to restore Red Robin as the first choice option for consumers. Recently, Russ Klein has joined our team for a one-year term to help us build our marketing foundation and strategy. Russ brings us a widely recognized track record of success in effectively reconnecting well-known brands with their customer bases, and we're happy to have him. Third, we must work to strengthen our financial position by reducing debt and increasing free cash flow generation. This will allow us greater flexibility to take advantage of the investment opportunities to drive sustainable top-line growth. Fourth, we must reinvest back in our restaurants, so the restaurant facilities and atmosphere match the upgrades we've made to food quality and hospitality. To generate the resources required for these efforts, we have many levers available. I'm encouraged by the team's demonstrated success removing costs throughout the P&L. We continue to see opportunity there, and I'm confident we'll capture additional benefits through their focused actions. In addition, part of my initial onboarding effort has been to work with the team to evaluate even further opportunities. Underlying all of this is an understanding that Red Robin's core equity is providing everyday value and great food in a family-friendly atmosphere. I've shared initial thoughts here, but it's still too early for me to share full details after only 4 weeks of the job. The team and I have already made great progress, and I look forward to sharing additional details in the coming months. I truly believe that at its core, the Red Robin brand is full of opportunity. Through focused efforts on our key priorities, I'm confident that we'll deliver significant value to both our guests and our shareholders. With that, we're now happy to take questions. Operator, please open the lines. Thank you.

Thank you. We will now be conducting a question-and-answer session [Operator Instructions] Our first question comes from the line of Todd Brooks with the Benchmark Company.

G.J., thanks for all you've done for the brand and Dave, glad to get to know you as the baton gets passed for the next leg of the journey here. I just wanted to lead off, and it's a question about the profitability that you guys were able to generate in Q1. I know, Todd, you talked about some anticipated pressure from eating tariffs versus pricing for them on the menu. That's in the 12% to 13% guidance range for restaurant level margin, but obviously, that's a very fluid situation as well. So just wanted to understand the efficiency that you generated in the first quarter, but kind of maintaining that full year guidance in the 12% to 13% range. Is that purely the tariff pressure? Is there something else there as well?

Yes. Todd Wilson here. Good to talk to you. A few things I think I'd call out there. One, we were really encouraged in Q1, and that's part of the way that we beat it. It's frankly, the primary way that we beat our profit expectation in Q1. Our team really got after labor quickly, and we saw a lot of fast progress there, faster than we expected. So that's been really encouraging. I would call out as well, we've watched guest satisfaction scores to make sure we're not giving up anything there, and our overall satisfaction scores continue very strong. So that's very encouraging. Getting to your question, though, as we thought about the balance of the year, traffic you may have seen in the press release, traffic in the first quarter was down 3.5 points. We talked about it last time. The front half of Q1 was stronger. We anticipated that. We saw that kind of normalize in the back half of Q1. And so we've kind of carried forward a down 4% traffic rate through the balance of the year. That's a haircut to what we had in our original expectations. And so that plus the tariffs, which you alluded to. But it's really just, I think, a prudent haircut on the top line that's what's driving us to hold the guidance for the year. The other piece as well is we're still early in the year, right? We've got a long way to go here. It's important to us that when we put out a number, we're confident we're going to deliver it. And so you'll see us be prudent there. But those are really the moving parts of traffic and the tariffs.

Okay. Great. And another one for Todd, if I can. Can you walk through -- you talked about menu price contribution waterfalling as the year goes on. Can you walk through how that proceeds for Q2, Q3 and Q4?

Yes, Todd, we have talked about this before. And as you really kind of look at that progression through the year, we were almost 7 points of contribution in Q1, and we do expect that, that will wind down through the year. As we said on the call, we don't anticipate taking any further pricing action this year. When you look at the quarterly sequencing, I'll talk in terms of just total check growth. When you put price, mix, discounts altogether, we're looking for about 4% check growth in Q2, 4% in Q3. And then as pricing falls off, it will be about 2% in Q4 is our expectation.

Okay. And then one more strategic question, and I'll hop back in queue. If we're getting close to being a year into the changes in the loyalty program. If you guys look at the results so far, it seemed like really kind of encouraging results out of the gate, and we've still seen growth in the program. But have the unlocks around frequency played out the way you expected or either G.J. on the way out or Dave on the way in? How much more opportunity is there to lever Red Robin Royalty more effectively in '25?

Yes. Todd, yes, I would tell you that we are seeing the same kind of increase that we talked about last quarter. And I'll also tell you that some of these numbers, like 22% of our visits are from lapsed users. That's a really good number in terms of our visits overall. And we're holding fairly close to new guests being 20% of our visits. So this program is really working. And I think as we dial this thing up further, there's further opportunity here, but I'll let Dave.

Yes. Let me just piggyback on. I agree with him. I think there's still significant opportunity in the program, the strength of it to grow it and also to how we use it. I think there's an opportunity for us to be smarter about how we implement and use pieces of the program, not that we've been bad at it. I think we're just learning and we're getting better as we go. So I think there's still significant upside there.

Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group.

This is Will on for Jeremy. I guess I wanted to go back to the comp trends. Q1, stronger first half, a little weaker second half. I guess, how should we think about quarter-to-date traffic and check? And then to follow up, I'm just curious on the Hot Honey LTO and how that's kind of stacked up to your guys' expectations in testing.

Will, Todd here. I'll start, and then these guys will add in, I'm sure. As you think about the second quarter, I just kind of talked through the check side to Todd Brooks' question. The traffic side, we really were -- we're thinking about the balance of the year on the traffic side in kind of a down 4% range. And that's consistent with what we saw to end Q1 as well as what we've seen to start the quarter here. So if you think about Q2, you've got that from traffic. Generally, check will offset that. And then I did call out on the prepared remarks, the headwind from lapping some of the credits that we saw last year from the loyalty launch, right? So that's a key call out in Q2. It's more about what happened last year, but you'll see it in our reported Q2 number. So I'd say quarter-to-date trends are very consistent with that, and that's really what we based our guidance on. It just kind of the real fact pattern that we're seeing right now.

I'll jump in, in terms of the Hot Honey promotion, we're very happy with that promotion. It exceeded our expectations and feel great about it.

Yes. I'll just add to that. I think we feel good about the Hot Honey promotion, as G.J. said. That being said, I think we need to figure out ways to bend the curve on traffic. We know that, which is why we're focused on it, why it's one of the priorities that I mentioned in my remarks. So good work on it. But at the end of the day, we've got to bend that curve, and we know that we're focused on how we do that.

Got it. I appreciate the color there. And then as far as closures, so it sounds like you're still expecting 10 to 15 for the year, maybe closer to the higher side of the range. But I guess, how can we think about timing for the balance of the year?

Yes, Will, Todd here again. I think you heard that right. I called out the 393 restaurants in the prepared remarks that we expect to end the year with. That would have us down 14 on the year in total. The way we're thinking about it right now, we do see those relatively evenly spread through the remainder of the year. If we were to see a change there, I think it would certainly be for the better that we're able to accelerate some of these. We've had some good luck in discussions with landlords in a few cases at least that may give us an opportunity to move a little bit quicker there where it makes sense. But at this point, I'd say we think that, that's spread throughout the remainder of the year pretty evenly.

Let me add to Todd's point, separate from this on the 70 restaurant closures. The success that our operations team that we saw in the broad footprint of the business extended to those restaurants. And so we've made significant progress in improving the performance of many of the restaurants on that list. It's too soon to kind of say which ones are on or off, but we're encouraged by the progress that's been made and the improvement in performance of quite a number of restaurants on that list that we've got. So I just want to make sure we point that out.

Our next question comes from the line of Alex Slagle with Jefferies.

I'd like to extend my thanks to G.J. as well and Dave welcome to the call. What do you guys think like high level, we think about the handoff and leadership, kind of leveraging each of your unique skill sets, and we've seen a great foundation put in place over the last couple of years, the North Star plan. And as we transition, Dave, to your leadership, what really changes or anything we should think about from this perspective going forward?

Yes. I'll start off, and I'll let G.J. jump in. We're both smiling because we have a pretty close philosophy on how we think about restaurants. And so this has been a pretty smooth transition all the way around. I want to say again, thanks to G.J. for the collaboration and the work we've done together on this.  I think it's tonality. I think it's focus. G.J. came in and did the right things that this business required when he came in, it needed a reset on labor and operations focus, and he did that. It needed a reset on food and he did that, and it needed a reset on culture and he did that. He put all those things in place that anyone coming in would love to have as a foundation to build on. And I think that's how I look at it.  In terms of my areas of focus, it's the things we talked about. And I don't think they're dramatically different from where G.J. was going, right? We're going to figure out how to bend the curve on traffic. We're going to hold serve on operations. We're going to look to be the first choice for consumers when they want to go out and have a burger.  We're going to give ourselves some financial flexibility on the balance sheet, and then we're going to use some funds to fix the restaurants. I think those are not a lot different than what you would have seen from G.J., and I think we can continue that ball forward and keep moving this business back. But I think those are the important points, and the way we got after them, I think, are the right sequence.

Yes. And I would just say, Alex, that Dave has been Chair. He and I came on this Board the very same day. He's been along this ride in putting this North Star plan and certainly been in dialogue with him every week throughout my tenure here. So as Dave said, I think we're not dramatically changing anything here. There's some additional focuses that he's going to have, but I think it's a great place. And I think this transition is a pretty special one, and it's worked out really, really well.

Great. That's helpful. So what are your operator partners asking for lately? Just sort of what's the next big thing or a big change they'd like to see sort of top of their list?

I'll take a shot at that first since I just finished a tour not long ago. I think it's just continued investment in our facilities, which we continue to work on. And as we generate free cash flow, that's certainly a priority. And the second one is just continued investment in technology. As you know, we've been continually replacing and updating technology, and probably the one thing that they've asked for the most that we need to focus on, which is next on our priority list, which is server handhelds. And that's the one area that I think would be most helpful to them, to our servers as well as to the company in total.

Yes. I would echo that. I also spent some time in restaurants in the first few weeks. Those are some of the things that I heard, operators, they want, give them the tools to be successful. The tools to be successful included the things that they've been given, which are getting the labor and the hospitality right and getting the food right. Giving me the technology that I need to run my restaurants. Giving me a good-looking restaurant that I'm proud to bring people into and figure out how to connect with our consumers with compelling messaging and offers that drive traffic. That's what operators want. They want to be successful. And I think the other thing on that is to build on that is I think the output of the partner program that was put in place is that they'll be rewarded for that. They'll get the benefit of success if we give them the tools to be successful.

Our next question comes from the line of Mark Smith with Lake Street Capital.

First off, any outlook on selling expenses and kind of your expected media spend through the rest of the year?

Mark, Todd here. I'll take that. Yes, I'd say our original guidance for the year was $30 million in selling or included $30 million in selling. And I would tell you that's generally unchanged. With the -- Dave commented on it in his prepared remarks with Russ coming in to lead the team. As we think about the balance of the year, there's a little bit of a breath to take, so to speak, to let him get in, understand the opportunities in our business, and really kind of reassess the marketing plan. But as we've modeled it, we think it's pretty consistent quarter-to-quarter from here. There may be some ebb and flow as kind of naturally happens in that line item. But we see getting to roughly that $30 million on the year pretty consistently through from Q2 through Q4 from here.

Okay. And then can you just remind us just what we have left as far as potential restaurant sales, how many that you guys own out there? And then in that same vein, just kind of your confidence in refinancing that debt and kind of maybe an outlook or timeline around when you think that could happen?

Yes, Mark, we still own 4 properties. And so we monetized a large chunk of that with the sale leasebacks over the last couple of years, and then we called it out. We did sell 3 properties in Q1. So I'd say we're always looking at opportunities there, right? Paying down debt, as Dave alluded to, is one of our key priorities. And so there's still some monetization opportunity there. But I would tell you nothing imminent. If opportunities arise, we'll capitalize them, but I would tell you nothing imminent. In terms of the ability to refinance the loan, quite plainly, I would tell you, I believe that on the back of a really strong quarter like we just printed for Q1, G.J. and I have had varying conversations with lenders over the past several months. And I'm optimistic that as I go revisit those conversations on the heels of these results, we'll see some traction there.  I don't know that I want to put a timeline to the refinance. But at this point, I think I've made it clear in the last couple of quarters. It's certainly top of mind for us and me specifically. And so we'll continue to give updates there. And we'll balance speed with getting the attractive terms that we think are warranted for this business. But I expect we'll be talking about it on each call until we get across the finish line.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Dave Pace, for closing remarks.

Okay, folks. Look, thanks for jumping on the call. We appreciate the opportunity to share our results, and we look forward to talking to you more in the next couple of months. So thank you. We'll talk to you soon.

Thank you. And ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.