Does Red Robin Have the Recipe for Sustainable EBITDA Growth?

Red Robin Gourmet Burgers, Inc. (RRGB) posted a mixed second quarter, but the underlying story is one of improving profitability. Adjusted EBITDA was $22.4 million, up nearly $9 million from the prior year, fueled by strong labor efficiency gains and disciplined cost management. Despite a 5.5% decline in guest traffic and a 3.2% drop in comparable sales, restaurant-level margins expanded 270 basis points to 14.5%, signaling that operational initiatives are delivering results.

The question for investors is whether these improvements can translate into sustainable EBITDA growth. Management believes so, hinging its strategy on the newly launched “First Choice” Plan. The blueprint emphasizes efficiency, traffic-driving initiatives, disciplined capital allocation and restaurant refreshes. Early traction is visible through the Big Yummm value deal, which has boosted traffic trends modestly while keeping price sensitivity in check. A forthcoming data-driven marketing platform is also expected to personalize guest engagement and support long-term traffic stability.

From a balance sheet perspective, Red Robin is reducing leverage, repaying $20 million of debt in the first half of 2025 and bringing net debt to adjusted EBITDA down to roughly 2x. This creates flexibility for refinancing ahead of a 2027 maturity.

Still, risks remain. Competitive discounting, commodity inflation, particularly beef and poultry, and ongoing traffic declines could weigh on near-term performance. Yet, with EBITDA guidance reaffirmed at $60-$65 million for 2025 and reinvestments in brand relevance underway, Red Robin appears to be laying the groundwork for sustained profitability.

Competitors in the Casual Dining Landscape

Red Robin’s pursuit of sustainable EBITDA growth mirrors challenges across the casual dining industry. Brinker International (EAT), parent of Chili’s, has leaned heavily on value promotions to defend traffic while simultaneously tightening cost controls. Like Red Robin, Brinker faces commodity cost pressures, but its larger scale and established loyalty programs provide a cushion for EBITDA stability. Maintaining balance between discounting and margin protection remains critical for both players.

Meanwhile, Bloomin’ Brands (BLMN), operator of Outback Steakhouse, is pursuing efficiency gains and selective unit remodels to drive guest traffic. Similar to Red Robin’s “First Choice” strategy, Bloomin’ has emphasized enhancing the dining experience while leveraging digital marketing to personalize offers. Both companies are also navigating a highly promotional environment, where guest loyalty and pricing power directly impact EBITDA trajectories.

Taken together, Red Robin’s initiatives must prove equally resilient if it hopes to keep pace with competitors’ margin-focused transformations.

RRGB’s Price Performance, Valuation and Estimates

RRGB’s shares have gained 27.5% in the past three months against the industry’s decline of 2.9%.

Price Performance

Despite the recent gain, RRGB is priced at a discount relative to its industry. It has a forward 12-month price-to-sales ratio of 0.1, which is well below the industry average.

P/S (F12M)

The Zacks Consensus Estimate for 2025 and 2026 loss per share has remained stable in the past 30 days.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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