This article is part of our Rising Star Portfolios series.

Yes, Red Robin Gourmet Burgers (Nasdaq: RRGB) beat earnings expectations. Yes, shares bounced as high as 15% today on the news. And yes, that made me money in the positions I own in my Rising Star portfolio and my personal holdings. So why am I grouchy about the results?

For the quarter, revenue rose 5.4%, to $189.3 million, while earnings climbed more than 37%, to $2.2 million. But for the year, earnings fell a substantial 59%, despite higher sales.

For the quarter, same-store sales increased a modest 0.8%, thanks to a 1.1% traffic bump. Traffic is one of the key metrics that I need to see improve in Red Robin's turnaround, as I mentioned earlier this week. The company is attempting to improve repeat customers with Red Royalty, a loyalty program that offers guests free food and drink -- and gets the company more customer information to help it better target its promotions. Currently, the system's capturing one out of every three guest checks.

Like peers McDonald's (NYSE: MCD) and Wendy's/Arby's (NYSE: WEN), inflation in beef, cheese, and other food prices is giving Red Robin indigestion. But the company plans a 1.5% price increase in April – its first in three years -- to help mitigate those riding costs.

I'm more intrigued by the company's increasing focus on selling alcoholic drinks. A decade ago, the company derived about 11% of its mix from alcohol. Today, that's just 6%. BJ's Restaurants (Nasdaq: BJRI) hits 20%, the best in its class, according to Red Robin CEO Stephen Carley. Each 1% increase in alcohol sales mix leads to an additional $6 million in profit, according to Carley. Alcohol is also a key driver for the consistently profitable Buffalo Wild Wings (Nasdaq: BWLD), and I like Red Robin's move to reclaim the space.

The company's also concentrating on cutting costs. In January, Red Robin handed pink slips to about 17% of its workforce, leading to roughly $3 million in annual savings. But the company expects that the near-term savings could be eaten up by legal and corporate governance advisors. More significantly, the company aims to cut $16 million to $18 million in restaurant-level costs over the next 12-24 months. Carley provided several examples that yielded several million in savings, but when pressed by an analyst on the conference call, he was unable or unwilling to divulge other specific cost-cuts. That gives me pause, as does the company's unwillingness to provide any guidance for 2011.

The company plans capex at $39 million to $41 million this year, and will open 10 company-owned locations in 2011. Each restaurant costs about $1.8 million to open, which adds up to a planned $18 million in new stores for 2011. I'm less than thrilled with the company's continued expansion, as long as same-store sales remain so iffy. And the company plans five more locations for 2012. I'd rather that Red Robin focus on generating free cash flow, especially since the company is trying to renegotiate its credit agreement in the next few months.

On the positive side, the company stated that it would buy as much as $25 million in shares over the next six months, following the advice of activist investors. That would amount to about 7% of shares outstanding. More of this would be nice.

Foolish bottom line
With an industry veteran at the helm, I'm hopeful about Red Robin's turnaround, especially its increased focus on marketing and operational cuts. But I'd prefer a more rigorous focus on capital investment. Still, with activist investors hanging around, I'm expecting some big things, given the low expectations built into this stock.

Buffalo Wild Wings is a Motley Fool Hidden Gems selection. Motley Fool Options has recommended writing a covered strangle on Red Robin. The Fool owns shares of Red Robin. Try any of our Foolish newsletter services free for 30 days.

Jim Royal, Ph.D., owns shares in Red Robin and McDonald's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.