Red Robin (NASDAQ: RRGB) has struggled recently along with the rest of the American restaurant industry.
It’s largely a case of a slightly diminishing customer base having more choices than ever before. That has led to an intense battle for customers that has left even well-liked chains suffering through some difficult quarters.
Red Robin has done better than most: It posted a 4.9% increase in revenues during its third quarter, which it reported on last month, but it did see same-store sales drop by 3.6%. In addition, the chain’s profit margin dropped to 18.6% from 21.6% in the same period a year ago, which caused it to post a $1.6 million loss, down from an $8.3 million profit in 2015.
To help turn those numbers around, Red Robin has a new plan: It’s adding delivery at a number of its locations.
What is Red Robin doing?
The casual family dining chain has partnered with DoorDash to offer delivery from 70 of its restaurants across the country, Nation’s Restaurant News (NRN) reported. This reflects a growing trend of eateries partnering with outside services to make their food available in people’s homes and offices.
“Red Robin wants our guests to enjoy a great meal wherever their busy lives take them, and DoorDash offers a unique opportunity to pair our unmatched quality and taste with speed and convenience of their delivery,” Vice President of Alternative Platforms Jason Rusk told NRN.
Is this a good idea?
Delivering burgers and french fries has long been a challenge, as it’s difficult to package them so fries arrive crispy and toppings show up fresh. Red Robin has been testing ways to do that, according to NRN, but the company declined to share any specifics.
This is an idea that can’t hurt, assuming Red Robin only pays DoorDash when it gets actual orders. There are, of course, some setup costs, and training that will need to be done, but in many markets, consumers already expect their favorite chains to deliver. This deal simply keeps Red Robin on even footing with some of its many rivals.
It’s possible delivery could help nudge up same-store sales, but it’s a very crowded space and it’s hard to see it becoming a major business driver for Red Robin. The company needed to do this, but at best, it will only be a minor success.
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