Red Robin Gourmet Burgers(RRGB -2.60%) reported fiscal second quarter 2025 results on Aug. 13, 2025, with GAAP revenues of $283.7 million, a comparable restaurant revenue decline of 3.2%, and a 270 basis point year-over-year improvement in restaurant-level operating profit margin, led by labor efficiencies. Management reaffirmed full-year adjusted EBITDA (non-GAAP) guidance of $60 million to $65 million, launched the new value-oriented Big Yum burger promotion, and accelerated efficiency and capital plans under the new First Choice turnaround strategy.

Labor efficiencies boost Red Robin margins

Restaurant-level operating margin reached 14.5%, a 270 basis point year-over-year increase, fully attributable to 300 basis points of labor cost reduction. Guest satisfaction scores remained stable or improved, despite tighter labor controls.

"The increased efficiency they achieved in the second quarter drove a 270 basis point improvement year over year, 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."
-- Dave Pace, President & Chief Executive Officer

Sustaining labor productivity gains without negative impact on the guest experience signals both management discipline and operational leverage in turnaround efforts, positioning the company to better absorb future cost inflation or incremental marketing spend.

Big Yum promotion lifts guest traffic

The third quarter of fiscal 2025 began with guest traffic down approximately 4%, but the July 21, 2025, launch of the Big Yum $9.99 burger value deal quickly captured a strong 9% share of guest orders and improved traffic relative to the fiscal second quarter exit rate. Big Yum is structured with optional paid trade-ups to limit per-person average (PPA) dilution and is expected to create a 2% to 3% PPA drag in the near term for the third quarter of fiscal 2025, while building visit frequency.

"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 at an approximate 4% decline to date."
-- Dave Pace, President & Chief Executive Officer

Ramping up traffic through innovation in value and tiered upselling mitigates risk against heavy discounting and provides a foundation for sustainable, profitable growth in an increasingly competitive landscape.

Red Robin accelerates remodels and refranchising

Management will invest capital upside from first-half EBITDA outperformance into pilot remodels at approximately 20 restaurants before company-wide deployment, targeting both deferred asset maintenance and guest experience upgrades. Refranchising discussions launched in July have generated robust interest, which management expects to boost balance sheet flexibility and fund incremental store investments.

"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 four 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."
-- Dave Pace, President & Chief Executive Officer

Redirecting near-term profitability gains into targeted capital expenditures, while advancing refranchising to unlock external funding, indicates a disciplined approach to strategic reinvestment that addresses both asset base risk and future sales opportunity.

Looking ahead

For fiscal 2025 (period ending Dec. 28, 2025), management guides total revenue (GAAP) to $1.2 billion, down from $1.21 billion to $1.23 billion previously, comparable restaurant sales to decline 3% to 4% for the remainder of the year, and adjusted EBITDA of $60 million to $65 million (non-GAAP), with 386 company-owned restaurants open at year-end. Capital expenditure will approach $30 million due to acceleration of First Choice plan investments, with fiscal third and fourth quarter selling expenses each increasing by $2 million to $2.5 million year-over-year to support traffic-driving initiatives. No specific new long-term EBITDA or traffic growth targets were announced, but refranchising updates are promised on the November call.