Red Robin Gourmet Burgers Reports Earnings for the Fiscal Second Quarter 2009

Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a casual dining restaurant chain focused on serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the twelve and twenty-eight weeks ended July 12, 2009.

Financial and Operational Highlights

Highlights for the 12 weeks ended July 12, 2009, compared to the 12 weeks ended July 13, 2008, are as follows:

• Total revenues decreased 2.6% to $201.1 million.

• Restaurant revenue decreased 2.4% to $198.0 million.

• Company-owned comparable restaurant sales decreased 11.5%.

• Restaurant-level operating profit decreased 6.0% to $35.6 million.

• GAAP diluted earnings per share were $0.41 vs. $0.49 in the same period a year ago, which included a $0.03 charge for reacquired franchise costs and related acquisition integration expenses in the fiscal second quarter of 2008.

• A total of seven new Red Robin(R) restaurants, six company-owned restaurants and one franchised location, were opened during the second quarter 2009.

As of the end of the fiscal second quarter of 2009, there were 304 company-owned and 131 franchised Red Robin(R) restaurants.

'Red Robin's financial performance during the second quarter reflected the continued weak macroeconomic climate that is impacting the casual dining industry as a whole, combined with the lapping of our successful brand-building national advertising last year,' said Dennis B. Mullen, Red Robin Gourmet Burgers, Inc., chairman and chief executive officer. 'We are encouraged by our Team Members' abilities to streamline operations and manage controllable costs, while delivering a consistently great dining experience, in addition to their focus on targeted traffic-driving and retention initiatives to improve our top line. For the balance of the year, we will concentrate on making further progress on improving productivity and executing on our targeted marketing strategies.'

Fiscal Second Quarter 2009 Results

Comparable restaurant sales decreased 11.5% for company-owned restaurants in the fiscal second quarter of 2009 compared to the fiscal second quarter of 2008, driven by a 12.2% decline in guest counts, which was partially offset by a 0.7% increase in the average guest check. Average weekly comparable sales from the 245 company-owned comparable restaurants were $56,335 in the fiscal second quarter of 2009, compared to $64,842 for the 207 company-owned comparable restaurants in the fiscal second quarter of 2008. Average weekly sales for the 44 non-comparable company-owned restaurants were $56,053 in the fiscal second quarter of 2009, compared to $56,233 for the 43 non-comparable restaurants in the fiscal second quarter a year ago. For all company-owned restaurants, average weekly sales were $55,973 from 3,619 operating weeks in the fiscal second quarter of 2009 compared to $63,013 from 3,281 operating weeks, in the fiscal second quarter of 2008.

Early in the second quarter of 2008, the Company acquired 15 existing Red Robin franchised restaurants from three franchisees (the '2008 Acquired Restaurants'). Average weekly sales for these 15 restaurants were $49,842 in the fiscal second quarter of 2009 and $54,905 in the fiscal second quarter of 2008. These 15 locations will be included in the company-owned comparable restaurant base in the fiscal third quarter of 2009.

Total Company revenues, which include company-owned restaurant sales and franchise royalties and fees, decreased 2.6% to $201.1 million in the fiscal second quarter of 2009, versus $206.4 million last year. Franchise royalties and fees decreased 10.4% to $3.1 million in the fiscal second quarter of 2009 compared to $3.4 million in the same period a year ago. Franchise royalties and fees in the fiscal second quarter of 2008 included $276,000 of royalties attributed to the 2008 Acquired Restaurants.

For the fiscal second quarter of 2009, the Company's U.S. franchise restaurant sales of $69.2 million were lower compared to $74.9 million in the prior year period, primarily as a result of franchise restaurants acquired by the company early in the fiscal second quarter of 2008. Comparable sales in the fiscal second quarter of 2009 for franchise restaurants in the U.S. decreased 10.3% and for franchise restaurants in Canada decreased 1.6% from the fiscal second quarter of 2008. Average weekly comparable sales for the U.S. franchised restaurants were $51,970 from the 100 comparable restaurants in the fiscal second quarter of 2009, compared to $58,353 for the 87 comparable restaurants in the fiscal second quarter of 2008. Average weekly sales in the fiscal second quarter of 2009 for the Company's 18 comparable franchise restaurants in Canada were C$52,977 versus C$53,829 in the same period last year. Canadian results are in Canadian dollars.

Restaurant-level operating profit margins at company-owned restaurants were 18.0% in the fiscal second quarter of 2009 compared to 18.6% in the fiscal second quarter of 2008. Fiscal second quarter 2009 restaurant-level operating profit margins were negatively impacted by an approximately 0.5% increase in food and beverage costs, a 0.2% increase in labor costs, along with a 0.8% increase in occupancy costs, partially offset by 0.9% lower operating costs, largely driven by lower year-over-year contributions to the Company's national advertising fund, which were 0.25% of restaurant revenue in the fiscal second quarter of 2009 versus 1.5% of restaurant revenue last year.

The Company's restaurant-level operating profit metric does not represent income from operations or net income calculated in accordance with generally accepted accounting principles ("GAAP"). Schedule I of this earnings release reconciles restaurant-level operating profit to income from operations and net income for all periods presented.

General and administrative expense was $15.1 million in the fiscal second quarter of 2009 and $14.5 million in the fiscal second quarter of 2008, which were 7.5% and 7.0% of total revenue, respectively. Reacquired franchise and other acquisition costs in the fiscal second quarter last year represented one-time pre-tax charges of $0.5 million.

Interest expense was $1.6 million in the fiscal second quarter of 2009, compared to $1.8 million in the fiscal second quarter of 2008.

In the fiscal second quarter of 2009, the Company realized a reduction in the effective tax rate to 23.2% compared to 27.8% for the fiscal second quarter of 2008.

Net income for the fiscal second quarter of 2009 was $6.4 million, or $0.41 per diluted share, as compared to net income of $7.9 million, or $0.49 per diluted share, in the fiscal second quarter of 2008. Net income for the fiscal second quarter of 2008 included a $0.03 per diluted share charge for reacquired franchise costs and acquisition-related integration expenses.

Schedule II of this earnings release reconciles the impact on the net income and diluted earnings per share as reported on a GAAP basis in the fiscal second quarter of 2009 and 2008 to adjusted amounts excluding certain acquisition costs.

Outlook

The Company expects to open two new company-owned restaurants in the fiscal fourth quarter of 2009. Both of these restaurants currently are under construction. A new franchised restaurant that opened early in the fiscal third quarter of 2009 is expected to be the last new franchised opening of the fiscal year. For the full 52-week period, the Company expects to open a total of 15 new company-owned restaurants, while franchisees have opened a total of four new restaurants.

The Company continues to expect that guest counts will remain negative in fiscal year 2009. In addition to the general macroeconomic pressures, the extent of the traffic declines may also be influenced by prior-year marketing activities, which create more difficult comparisons during certain periods. The Company also expects certain costs, such as minimum wage increases and select commodity cost increases, to continue to put pressure on restaurant-level profitability. Based on these factors, the Company anticipates that without any menu price increases, restaurant-level operating margins could decline by 50 to 80 basis points during fiscal year 2009, even after considering the benefit from reduced national advertising contributions and other cost reduction activities. For every 10 basis point change in restaurant level operating profit during fiscal year 2009, diluted earnings per share are estimated to be impacted by approximately $0.04.

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