Red Robin Could Be The Next McDonald's

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The one great thing about traveling is that you meet people from different countries and all walks of life. I've meet several retirees and the question always comes up, "so what did you do?" On more than one occasion the answer has been McDonald's (NYSE: MCD  ) either as a franchisee or as a shareholder. Some of us wish we could go back in time and buy a McDonald's franchise, or at least put some money into the stock. Unfortunately, we can't do that, but we can look for the restaurant chain that could become the next McDonald's.

A true gourmet burger
While many burger chains may dream of serving up a gourmet burger, Red Robin Gourmet Burgers (NASDAQ: RRGB  ) has made the gourmet burger the cornerstone of its business. For diners and investors, it looks to get even better as the company is set to debut its new 'finest' gourmet burger line. With its new line of burgers, it's a safe bet to say that Red Robin will win Zagat's No. 1 burger in the full service category for the fifth year in a row.

"When the Red, Red Robin (Comes Bob, Bob, Bobbin' Along)"
Red Robin actually gets its name from the popular 1920s song by songwriter Harry M. Woods. Most listeners will remember the song performed by Al Jolson, which hit No. 1 on the Billboard charts. The original Red Robin location was originally called Sam's Tavern. The owner Sam changed the name to Sam's Red Robin because he liked the song so much and was usually singing the tune in his restaurant. Here are a few more reasons why the company is uniquely positioned:

No two meals alike
What I like about Red Robin is that no two meals are the same. Each burger is prepared fresh and the company uses only the finest ingredients. The current menu has more than two dozen different burgers that can be customized to your liking. Examples include A-1 Peppercorn, Royal Red Robin, Chili Chili Cheeseburger, Guacamole Bacon, and Burnin' Love.

Burger line about to get better
On Nov. 12, Red Robin is launching its new line of superior burgers with the new Smoke & Pepper Burger. What's unique about this burger is that it was inspired by Chef Laurent Tourondel, a famous French culinary master. How the dish came about is that the chef entered his burger into the Amstel Light Burger Bash at the 2013 South Beach Wine & Food Festival. It just so happened that Red Robin's Chief Marketing Officer was also a judge in the competition. She liked the burger so much that she decided to put it on Red Robin's menu.

The new Smoke & Pepper Burger looks to be quite the burger. Each flame-grilled Black Angus beef patty is seasoned with alderwood smoked sea salt, followed by extra-sharp cheddar cheese. Then the burger is topped with three strips of black-peppered bacon strips, house-made Smoke & Pepper ketchup, green-leaf lettuce, and pickles. The bun is a fresh ciabatta roll and includes Red Robins' irresistible seasoned steak fries, all for $13.49.

The new line of burgers will all be flame grilled and feature premium produce, cheese, Black Angus beef, and sauces made from scratch in each of Red Robin's restaurants. Buns will also be better than a typical Kaiser roll, like the ciabatta roll for the Smoke & Pepper Burger.

Not done yet
Innovations like this and attention to detail explain why Red Robin is outperforming its competitors. For the third quarter, same-store sales rose 5.7% compared to last year. Customers are loving Red Robin as customer traffic increased 1.1% and guests spent an average of 4.6% more per check than last year. Total sales rose 8.1% compared to last year. Shares of Red Robin have even done better this year, rising 125% this year alone.

How does this compare to McDonald's? In the third quarter, McDonald's same-store sales rose only 0.9%. For October, global same-store sales fared even worse, rising only 0.5%. And McDonald's share price? Up only 12% so far this year.

Still growing
This year Red Robin plans to open 21 new company-owned Red Robin restaurants and one Red Robin Burger Works restaurant. Burger Works is Red Robin's smaller restaurant concept that's all about burgers in a much-smaller location size than a typical Red Robin. I see this concept as having tremendous potential and being able to capitalize on those wishing for the great Red Robin taste, without having to go to a full-service Red Robin location. Two of its Burger Works locations are on college campuses, so that gives you an idea of the market Red Robin is trying to reach.

In terms of franchising, about 135 of its 485 locations are owned by franchisees. While Burger Works is not yet franchised, that could be a real game changer in terms of growth for Red Robin.

Foolish assessment
There's no denying the appeal of burgers to not only consumers, but also investors. Everyone wants to find the next great restaurant concept and everyone is looking for the next McDonald's. While Red Robin has been around for over 40 years, the restaurant continues to innovate and deliver great tasting burgers. If you don't believe me, stop and check out a Red Robin location for yourself. The burgers are great and great tasting burgers usually lead to profits for investors.

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  • Report this Comment On November 16, 2013, at 7:18 PM, prginww wrote:

    Well guess that more will taste food outside the home with extra spending money from lower gas prices and transport costs from farm to the market.

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Related Tickers

9/29/2016 4:00 PM
MCD $114.79 Down -0.39 -0.34%
McDonald's CAPS Rating: ***
RRGB $44.26 Down -0.76 -1.69%
Red Robin Gourmet… CAPS Rating: ****