Red Robin Gourmet Burgers, Inc. Stock

Good afternoon. Welcome to the Red Robin Gourmet Burgers, Inc. Second Quarter 2026 Earnings Call. This conference call is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business, outlook, and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its second quarter 2026 earnings release on its website at ir.redrobin.com.

On today's call are Dave Pace, President and Chief Executive Officer; and Mark Graff, Chief Financial Officer.

Now, I would like to turn the call over to Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. I'm pleased to report that our momentum continued in the second quarter with significant progress across the business as we execute against our priorities under the First Choice plan. We've taken deliberate steps over the past year to strengthen the guest experience, improve hospitality and execution, and invest behind traffic-driving platforms that we believe can increase frequency over time. We're seeing those actions translate into increased guest engagement, elevated satisfaction scores and improved restaurant-level profitability.

We also took major steps this quarter towards strengthening our balance sheet. We announced 3 refranchising agreements that will collectively generate approximately $96 million in gross proceeds upon closing. Our partners are seasoned, multi-concept operators who bring meaningful operating capabilities and resources and who share our hospitality-first mindset and core values. The proceeds received from these transactions, which we expect to receive during the third quarter, will provide us with greater financial flexibility to refinance our existing debt and support our long-term strategic priorities. This represents a step forward for our company, and I appreciate the significant efforts expended by everyone on our team to drive this to a successful outcome.

Taken together, the results in the quarter give us greater confidence and reinforces that the First Choice plan is working. We've made substantial and consistent progress across the business over the last year and the underlying fundamentals continue to move in the right direction. We remain laser focused on executing against our strategy and positioning the business for sustainable results.

Let me now walk through the quarter in more detail and update you on each of our First Choice priorities. Same-store sales grew 1.3% in the quarter with traffic effectively flat at down 20 basis points. This traffic result outperformed the industry by 40 basis points as measured by Black Box and for the second quarter in a row, represented our best traffic performance since Q1 of 2023.

In addition, we increased our share of visits by 80 basis points in trade areas where competitors are located. Our team has been working toward this inflection point for some time and it's encouraging to see it build and show up in the results. Value remains a key driver of this traffic performance, and the Big Yummm offer is delivering as expected. The platform continues to resonate with guests, especially against an economic backdrop where consumers are more discerning about where they spend. Big Yummm gives guests a clear, accessible entry point while preserving the full Red Robin experience that guests have come to expect. Combined with our targeted First Choice marketing efforts, we're improving both reach and brand awareness, helping us to engage guests more effectively to drive frequency.

At the same time, we've remained disciplined on pricing. Our goal is to build traffic and frequency while protecting the value guests associate with Red Robin. Q2 was the fourth consecutive quarter in which our average check increase was below the industry. Turning to profitability, the top-line momentum, combined with disciplined cost management, enabled us to drive four-wall efficiency, including a 20 basis point increase in restaurant-level operating margin to 14.7%. This represented the highest second quarter margin in 4 years. Adjusted EBITDA was in line with our high expectations and sets us up well to deliver against full year financial commitments.

With that as the backdrop, let me walk you through where we stand on each of our First Choice priorities and how we're thinking about our strategic focus for the balance of the year. First, let's start with Hold Serve. Our Hold Serve pillar is about sustaining the operational progress we've made and then building on it. And that's exactly what our team continued to do in the second quarter. Our labor efficiency initiatives delivered approximately 50 basis points of year-over-year savings. A key enabler has been the accountability and ownership embedded in our managing partner model, which rewards our partners directly for the improvements they drive in their own restaurants.

We're continuing to achieve these efficiencies while still providing high satisfaction scores that remain at the strong levels we've established over the past year. This continues to demonstrate that operational discipline and genuine hospitality reinforce one another. Our operators keep finding smarter ways to run efficient shifts while providing great hospitality, and that discipline has been showing up quarter after quarter.

Moving to our Drive Traffic pillar, our value and innovation platforms continue to gain traction with guests, and Big Yummm remains central to that story. The platform is mixing at healthy levels and strengthening our relevance with value-seeking guests. We continue to see improving traffic in trials since it launched last year. Importantly, every Big Yummm meal still includes our signature Bottomless sides and beverages, contributing to the compelling value our guests are asking for. Our objective is to generate traffic through attractive platforms rather than depend on broad-based discounting. We continue to use a deliberate barbell approach to the menu, pairing accessible value with more premium and indulgent options, so guests can choose Red Robin across different occasions and spending levels.

We believe this approach is building a more sustainable foundation for long-term traffic generation. To that end, we introduced our Towering Double Cheeseburger Sliders LTO during the quarter, giving guests a more indulgent option. We also recently broadened our bone-in chicken wing lineup with new 8-, 12- and 16-count options. That expansion was paired with the nationwide launch of Garage Beer, making Red Robin the first national restaurant chain to offer the Kelce brothers-owned brand across its system. Together, we see wings and beer as a natural fit for the social occasions our guests already come to Red Robin for. While it's still early, the reception so far has been encouraging.

On the marketing front, our data-driven First Choice strategy continues to see the benefit of a more precise, locally relevant approach to how we reach guests in each trade area. This has improved the efficiency of our spend and helps build awareness and frequency over time. We expect to keep iterating and building on that discipline as the year progresses.

Turning to our Find Money pillar, I'm pleased to update you on the progress we've made on our balance sheet objectives. As I mentioned at the beginning, since our last call, we've announced 3 refranchising agreements. Op Burgers with 69 restaurants across 8 states in the Southeast, Mid-Atlantic and Midwest, Evergreen Dining with 30 restaurants in Washington and Western Idaho and Kuber Dining with 17 restaurants in Oregon and Washington. Altogether, we expect to receive roughly $96 million in proceeds following the close of these transactions, which we will use to pay down debt and further strengthen our balance sheet. We're excited about the new franchise partners we've gained through this process and we're confident they'll be strong stewards of the Red Robin brand in their respective markets.

In parallel with the signing of these transactions, we've further advanced our efforts to refinance our existing debt, which comes current later this year. We continue to work with an experienced group of advisers to facilitate this process and have made considerable progress. While I don't have any additional details to provide at this point in time, I can tell you that we see this as an important step in giving the company more financial flexibility over the long term and will keep you updated as the process progresses.

Turning to our Fix Restaurants pillar, we continue our 2026 light-touch refresh program. The goal is straightforward. Improve the guest-facing elements that matter most to the dining experience while maintaining a disciplined approach to capital. We recently refreshed 7 restaurants in the St. Louis market. The updated elements modernize the ambiance and aesthetics and are designed to complement the improvements we've made in food, hospitality, and service execution. In addition to our facility refreshes, we're in the middle of rolling out replacement devices for our server handhelds, and we'll shortly introduce an upgraded version of our Ziosk tabletop devices. We believe these investments will improve order accuracy, server efficiency and overall speed of service, helping us return the gift of time that has historically been an important part of the Red Robin experience.

Lastly, I'll address the Win Together pillar. I continue to be proud of the sense of ownership and pride I'm seeing across our restaurants and our support center. Our team members are rising to the occasion, putting guests first in everything we do and actively bringing forward ideas that improve both restaurant operations and the guest experience. We continue to see strong adoption of the enterprise version of ChatGPT that we rolled out last fall across the organization. Adoption has been particularly strong in the field where our managing partners are putting these tools to work to optimize labor scheduling, manage food costs and improve how we deliver guest service. We view this as one more tool that can help our operators make faster, better informed decisions, all of which is showing up in the operational efficiencies behind our results.

On the people side, our commitment to building a supportive work environment continues to pay off. Hourly and restaurant management turnover remain at historically low levels. And employee engagement scores are tracking above industry benchmarks. That stability matters because experienced, engaged team members are better positioned to deliver a consistent guest experience. In addition, greater stability means lower recruitment and training costs, further contributing to our improving restaurant-level operating profits.

As we move through 2026, we remain focused on building an environment where great people can grow meaningful careers while helping us strengthen execution and differentiate Red Robin in the marketplace. To the entire Red Robin team, thank you for your continued commitment to our guests and to each other. Your focus, discipline and guest-first mindset are the foundation of the progress we're making.

With that, I'll turn the call over to Mark to review our second quarter financial results.

Thanks, Dave, and good afternoon, everyone. I'd like to start by providing a recap of our financial performance for the fiscal second quarter of 2026. Total revenues in Q2 were $278 million, a decrease of $6.1 million from the prior year. This change in revenue was primarily due to the impact of restaurant closures offset by an increase in comp sales. Comp sales, excluding the impact of deferred loyalty revenue, were up 1.3% in the quarter. Q2 comp sales included a 1.5% increase in average check offset by flat traffic. This was our best traffic performance since Q1 2023. The 1.5% increase in average check consisted of a 3.3% increase in price offset by a 1.8% decrease in mix and discounts driven largely by the impact of our Big Yummm value offerings. This is consistent with our strategy of maintaining compelling value while pricing prudently.

As it relates to other aspects of our Q2 financial performance, restaurant-level operating margin was 14.7%, an increase of 20 basis points compared to the second quarter of 2025. Benefits from average check, cost savings and labor efficiencies were partially offset by inflation. As it relates to our commodity basket, as of the end of second quarter, we were approximately 60% locked on our 2026 commodity needs. General and administrative costs were $17.6 million as compared to $17.4 million in the prior year quarter. The $0.2 million increase is primarily due to stock-based compensation partially offset by reduced people costs from our corporate efficiency initiatives.

Selling expense was $10.4 million compared to $6.4 million in the second quarter of 2025. The increase reflects our decision to invest behind the Big Yummm value platform and our personalization efforts to improve local market awareness and reach. Adjusted EBITDA was $18.9 million, down $3.5 million versus the second quarter of 2025. This was primarily driven by the $4 million year-over-year increase in marketing spend. We view that spend as an intentional investment behind the traffic-driving initiatives Dave discussed.

As it relates to our balance sheet and capital structure, we ended the second quarter with $23 million of cash and equivalents and $10 million of restricted cash. Total liquidity was $48 million consisting of cash and equivalents plus $25 million of available borrowing capacity under our revolving credit facility.

Turning to our outlook, we are maintaining our 2026 guidance. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. Finally, we expect capital expenditures to be between $25 million and $30 million. Please note that our outlook does not include any impact from the tactical refranchising initiatives Dave discussed earlier.

In summary, our second quarter performance reflects continued improvement in the core operating fundamentals of the business. As we look ahead to the remainder of 2026, our priorities remain disciplined and executing against the First Choice plan, prudent investment behind traffic-driving initiatives and continued progress strengthening the company's financial foundation.

Dave, I'll now turn the call back to you.

Thanks, Mark. Second quarter results reinforce our belief that the First Choice plan is working. It's working because our team is executing on it with focus and discipline. Our labor efficiencies have continued and guest satisfaction has remained strong right alongside them. That combination continues to demonstrate that hospitality and operational discipline reinforce each other rather than compete with each other. Big Yummm keeps performing as designed and we supplemented it this quarter with real menu innovation. Combined with the continued sharpening of our First Choice marketing, we believe we now have multiple layers of comp-driving initiatives rather than relying on a single platform to carry the load. As we look forward, we also feel good about our new product development pipeline and ideas that we have for 2027.

As we referenced, we've made real progress on our balance sheet initiatives with our 3 new refranchising agreements in the process we're engaged in to complete a refinancing and reduce our level of outstanding debt. Our restaurant refresh program and our technology implementations are showing up in the guest experience and our team continues to execute across the system every single day.

Putting it all together, we believe Red Robin has built real momentum. While we still have work ahead of us, we like the direction we're headed, and we believe the plan we have in place will make Red Robin a place that guests choose first, team members are proud to be a part of and shareholders can count on.

With that, we're happy to take your questions. Operator, please open the lines.

[Operator Instructions] Our first question is from Todd Brooks with StoneX.

Congratulations on a really solid quarter. It was great to see. So well done. If I could dig in on a few questions, then I can jump back in queue, but I've got a number of them for you. Mark, can you give us any sense of how same-store sales progressed across the quarter? And I don't know if you want to frame up any qualitative or quantitative commentary about how Q3 has started from a same-store sales standpoint.

Yes, sure. So as we think about the quarter, we continue to see progression specifically on traffic as we got to the quarter where we ended our last period 7 with actually positive traffic in the period. So we felt like that had really good momentum. As a reminder, we were kind of coming up on the expiration of our Big Yummm platform that we launched last year. So we feel like the marketing, the personalization was very much working behind that. So love to see that momentum. As it relates to the quarter, obviously, we're a little gun-shy just given intra-quarter results. But I think it's fair to say at a high level, we like the momentum we're seeing as you see that reflected in the guidance.

Okay, great. And was there any meaningful lift in the business from the World Cup in the quarter?

No, we didn't see much change in the business from the World Cup.

I just want to -- I was just reading the release and I just wanted to see the language. With the upside results in the quarter, the only reason that you're not raising guidance at this point is just the outstanding refranchising transaction, right? It's not commentary about forward outlook for the second half. It's just you're in this weird place waiting for the transaction to close, and that's what's keeping the guidance reaffirmed.

Yes, look, I think it's a little bit of that. We're trying to be cautious about what we put out given where we are. We're close to having all that resolved, and so I'd like to keep the focus on getting that resolved. As Mark said, second half of the year, we start to lap our Big Yummm initiative that we introduced last year in the middle of the year. So I think what we see we feel good about, but we don't want to get over our skis, quite frankly.

Understood. Understood. And I was a little conservative in my modeling on the selling cost side, and it seems like you had good results from the investment in Q2. Is there any thoughts or any way to frame that up for how we should be thinking about selling costs in the second half of the year?

Yes, I mean, look, I think selling costs will be relatively consistent as we think about the second half of the year. But if you -- just for context on this, if you go back, if you recall in Q2 of '25, we were basically without a Chief Marketing Officer for most of that quarter and so we kind of dialed back spend as a result. And that's when Russ came in. And Russ and I actually both came in and we kind of sorted out what do we want to do, where do we want to put our attention and where do we want to put our focus. And while we were doing that, we were kind of putting any of the planned spending on hold just to keep the dry powder for what we wanted to do. So that was a little bit of the overlap there.

Okay, and then a final one for me and I'll jump back in. Obviously, great success, 3 partners, $96 million in gross proceeds once the deals close. Dave, if you think about a digestion period where you and the team are going to have to really focus on those transactions going well and those restaurants transitioning seamlessly to the new partners. Do you think we've created a pause here before we see further refranchising activity where we need to digest? Or what do you think is that? When should we be looking for kind of further activity beyond those first 3 deals?

Yes, look, thanks. I think you nailed it. I mean, our focus is on making sure we do these right. So our teams are engaged right now, both getting to the finish line on closing the transactions and then setting up the transitions with the new partners so that we can kind of have as much of a seamless handoff as we can. What I would tell you is there is a lot of expressed interest from the outside that we've kind of said, look, let's just kind of get through this. Let's make sure we hand these over the right way and then revisit this. So exactly what you said, which is -- I think the pause is to ensure that we execute the right way.

Our next question is from Jeremy Hamblin with Craig-Hallum Capital. Please proceed with your question.

I'll add my congratulations on the results and the positive traffic, the improvement in traffic overall, best in a few years. That's awesome. Just in terms of, I think when you had guided back in May or kind of provided some direction, you expected Q1 to be somewhat close to what you did -- I'm sorry, Q2 to be somewhat close to what you did in Q1. Obviously, you were almost 200 basis points better, and it leads me to believe that you finished the quarter on a strong note. Seems like maybe you even have a little bit more momentum here at the start of Q2. But I just wanted to see if you could provide maybe a little bit more hint at that. And then as we look at comparisons, obviously, tougher comparison in Q3 versus what you had in Q2 before it eases again in Q4. So as you look at what's embedded in your guidance today for the year, should we be assuming that Q4 is going to outperform Q3? Is that what your internal expectations are?

I think that's right on a couple fronts. I think your point about momentum through the quarter is, as Mark said a minute ago, we feel good that we were kind of building momentum as we move through the quarter, which gave us good confidence and particularly in the back half of the quarter. As we get into Q3, yes, the tougher lapses would come into the back half of the year, but I think the expectation is, as you said, Jeremy, we'll be looking for Q4 to be stronger.

Yes. And so, Jeremy, just to dimensionalize, I think we think traffic, right, can keep the momentum be a little bit stronger than it was in the first half. From a pricing perspective, obviously, we're pretty consistent there. That's no change. It really comes to the mix component, and that's really a function of just the Big Yummm in the first half, right, the headwind, and that starts to unwind. And so you get a nice benefit on check in the back half. And so the combination of those pieces see a little bit of same-store momentum in the back half. And we also think we've got some good offers out there on the marketing side with our dinner value bundle.

Yes, to that point, just a quick follow-up on what you expect menu pricing to be in the back half of the year. And then see, you've got like the new Dinner Double Feature. You talked about the Towering Double Cheeseburger LTO as strong. It does seem like menu innovation and LTO innovation has been a net positive, but anything more you can share on that?

Yes, so I'll answer the pricing piece real quick, and I'll turn it to Dave to cover some of the marketing pieces. So we're still on that. We're just above 3%. We're at like 3.2%, 3.3%. That's about where it's been pretty flat all year. So it's been pretty consistent. So I'll turn it to Dave for the marketing.

Yes. On the promotional activity, Jeremy, the Dinner Double Feature idea was to laser target at our dine-in dinner business. The Big Yummm has had a great effect on the business, but it's been skewed toward the lunch business and our lunch business has accelerated pretty aggressively, not as much on the dinner business, although the slope is the same. And I think we think there's an opportunity to further close that traffic gap with a targeted offer at the dinner dining business. And so that's what's behind the Dinner Double Feature idea. But the rest of the work that we've done and we feel good about it. Some things work better than others as we've moved through the year, but we feel like the brand is now able to innovate, introduce ideas that capture the guests' attention. I mean, the slider stuff was really unique. We got a lot of commentary back about that. And we've got other things planned as we exit the year and we head into 2027. So I think we're feeling pretty good about the pipeline that we've got. And I think more specifically about the Dinner Double Feature, it's targeted at a specific part of the business.

Got it. And then just a couple other quick hitters here. Commodity expectation in the back half of the year, particularly, what you might be seeing on beef prices. And then the other one is really post getting these refranchising deals across the finish line, which I think is going to span mostly the month of October. I'm guessing you probably have already met with some bankers about the refinancing. Can you give us a sense for what you think your future interest rates might look like or kind of a range? I think you guys are paying still about mid-teens today, and I would imagine that, that might come down to 7%, 8%, something like that, given where your net debt to EBITDA would be post-refranchising cash flow?

Yes, I mean -- so, Jeremy, I think, again, directionally, you are right where we are. I think we want to get these closed. We are in discussions with the bankers. We're looking at various options. I don't want to get too far ahead of our skis again on interest rate projections, but I think our feeling is that we certainly can do better than where we are right now and we're working toward that as an objective, how much better, we'll see as we work through this. But we still have some wood to chop to get through that. But I think directionally, the tone and the direction you're thinking is where we are. And I'll let Mark talk a little bit about the commodity question -- part of the question.

Yes, on the commodity side, we've been running, call it, almost 5% in the front half. That will be more deflationary in the back half, kind of closer to a blended 3%. The biggest drivers there being beef and poultry kind of coming down over time. Beef's obviously still inflationary but just not as inflationary as it was in the front half.

We have reached the end of the question and answer session. I would like to turn the floor back over to Dave Pace for closing comments.

Yes. Just quickly, thanks everybody for jumping on the call. We appreciate the interest. Hopefully you got a sense of our enthusiasm and our optimism as we move through the year and as we head toward the back half of the year. We feel really good that the First Choice plan is working and we look forward to continuing with that and talking to you again at the end of Q3. So thanks, and that's it for us. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Inc. First Quarter 2026 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements among the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and, therefore, are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its first quarter 2026 earnings release on its website at ir.redrobin.com.

On today's call are Dave Pace, President and Chief Executive Officer; Mark Graff, Chief Financial Officer; and Chris Meyer, Interim Chief Financial Officer.

Now I would like to turn the call over to Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. I'm pleased to report that our first quarter results demonstrate continued improvement in the business, highlighted by our strongest traffic performance since the first quarter of 2023, and our highest Q1 restaurant operating profit margin since 2021. These results reinforce that the actions we're taking to strengthen guest engagement are gaining traction. Our Big Yummm value platform continues to resonate with guests with high satisfaction scores, and we're seeing strong results across the system. In addition, our targeted First Choice marketing efforts are improving both reach and brand awareness, helping us to engage guests more effectively to drive frequency.

Importantly, the operational discipline embedded in our First Choice plan is delivering steady improvement across the P&L as well. Our teams remain focused on executing the fundamentals, enhancing the guest experience and positioning the business for sustainable growth.

As it relates to our Q1 performance, same-store sales were down 0.6%, including a 1.0% increase in average check and a 1.6% decrease in traffic. This traffic result improved sequentially from Q4 and continued to narrow the traffic gap to the industry as compared to Black Box Intelligence, reinforcing that our strategies are gaining traction despite a challenging macro environment.

The current economic environment requires that we remain deliberate in highlighting value and discipline in our approach to average check. Q1 was our third consecutive quarter where our check average increases were below the industry. Our prudent approach to menu pricing complemented by the expansion of our Big Yummm platform has positioned us for success and is reflected in our traffic momentum.

Turning to profitability. We're pleased with the continued incremental gains in four-wall efficiency, including a 50 basis points improvement in restaurant-level operating margin to 14.8%. This was our highest first quarter margin in 5 years. Our adjusted EBITDA was in line with our expectations and we remain on track for our full year objectives.

With that, let me update you on our First Choice plan and how we're thinking about our strategic priorities for the remainder of the year. First, let's start with Hold Serve. Our team continues to do a great job sustaining the progress we've made in the past several quarters, and this quarter is no different. During the first quarter, our labor efficiency initiatives drove approximately 130 basis points of year-over-year savings. Our labor percentage of 35.7% was our lowest first quarter labor in 3 years. These improvements reflect the sustained accountability and ownership embedded in our managing partner math.

What's particularly encouraging is that we are achieving these efficiency gains without compromising the guest experience. Our satisfaction scores remain strong, reinforcing that operational excellence and genuine hospitality are not competing priorities, they're complementary.

Moving to our drive traffic pillar. We believe our value and innovation platforms are gaining traction with guests. The expanded Big Yummm platform we launched in late January continues to address the need for value with the new offerings while serving as an incremental traffic driver. All in all, the 6 meal options across our $9.99 to $16.99 price range are strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. In total, our Big Yummm offerings are mixing at over 13%, well within the expectations for this program.

The platform's appeal extends beyond burgers, including our hand-breaded classic chicken sandwiches, Donatos pizza and Whiskey River barbecue chicken wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience.

Overall, the underlying traffic trends in the business are improving, and our momentum is increasingly being driven by compelling platforms rather than relying on traditional discounting. Our deliberate barbell approach with the menu balances compelling value with higher-priced indulgent options to expand guest choice across day parts and occasions. We believe this approach is building a more sustainable foundation for traffic generation.

In addition, we continue to enhance our new product pipeline, which provides additional opportunities to drive frequency. An example of this is our towering sliders that we launched last month, which has generated record-setting menu satisfaction scores and is driving incremental check growth.

On the marketing front, our data-driven First Choice strategy continues to gain traction. Our ability to deliver locally relevant messaging based on competitive dynamics in each trade area has improved both engagement and marketing efficiency. We're seeing the benefits of this more precise, disciplined approach in our traffic performance and expect to build on this momentum as we refine our capabilities throughout the year.

Now let me update you on our third pillar of the First Choice strategy, find money. I'm pleased to report that our momentum on corporate efficiency initiatives continues to deliver meaningful results. As we previously outlined, the G&A reductions we implemented in mid-2025 are providing sustained benefits, and we remain on track to realize the full year step down we anticipated for 2026.

Turning to our balance sheet optimization efforts. Our tactical refranchising initiatives continues to move forward. We're currently in the final stages of discussions with multiple parties, and I'm pleased with both the pace of these conversations and the depth of engagement from prospective franchisees. These are sophisticated operators who recognize the operational progress we've made and see the opportunity that our First Choice strategy creates. The sustained level of interest we're seeing reflects growing confidence in our system improvements and the strength of the Red Robin brand.

I want to emphasize that we remain committed to being disciplined and selective in this process. Our objective is to partner with franchisees who share our commitment to operational excellence and guest experience while achieving terms that support our balance sheet objectives. We plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We look forward to providing further updates on this in the near future.

Turning to our Fix Restaurants pillar. We're continuing our light touch refresh program in 2026. This initiative touches customer-facing elements within our restaurants that can enhance the overall experience and support the quality of our food and service. We expect to have our first markets completed by the end of June. In addition to our facility refreshes, we've begun to roll out replacement devices for our server-handheld technology, and we'll shortly introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for.

Lastly, let me quickly touch on our Win Together pillar. As I reach the 1-year mark as CEO of Red Robin, what stands out most for me is growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives, they're owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. We also recognize that the rate of change continues to accelerate and evolve, and we need to adapt with it. Technology and AI are at the forefront of that discussion, and our team is constantly challenging the status quo to identify ways to enhance our capabilities, reduce friction and differentiate ourselves in the marketplace.

Last fall, we introduced an enterprise version of the ChatGPT AI platform and we're seeing meaningful adoption of the tools across the enterprise, but especially within the field. Our managing partners are actively leveraging these tools to optimize labor scheduling, manage food costs and enhance guest service delivery, all of which are contributing to the operational efficiencies reflected in our results.

On the people front, our focus on creating a supportive work environment continues to pay dividends. Hourly turnover remains at historically low levels and employee engagement scores are tracking positively above industry benchmarks. This stability strengthens our ability to deliver a consistent, high-quality experience our guests expect.

As we progress through 2026, we remain committed to fostering an environment where great people can build meaningful careers while driving the innovation and execution that will differentiate Red Robin in the marketplace. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The operational discipline and guest-first mindset you demonstrate every day are the foundation of our progress, and I'm grateful for your commitment as we execute our First Choice plan.

Before I turn the call over to Mark, I'd like to extend my sincere thanks to Chris Meyer for stepping out of retirement to serve as our Interim CFO. Since December, Chris has provided strong continuity, steady leadership and valuable guidance to our finance team and the entire organization, including me personally. I'd also like to welcome our new CFO, Mark Graff, who just joined us earlier this month. With more than a decade at Bloomin' Brands, he brings deep financial expertise and direct operational leadership to the team. I had the privilege to work with Mark when we were both at Bloomin'. He's been working closely with Chris over the past several weeks as he comes up to speed, and we look forward to his leadership and perspective as we continue to execute on our First Choice plan.

With that, I'll turn the call over to Mark to review our first quarter results.

Thanks, Dave, for the kind words, and good afternoon, everyone. I'd like to start by providing a recap of our financial performance for the fiscal first quarter of 2026. Total revenues in Q1 were $378 million, a decrease of $14 million from 2025. This change in revenue was primarily due to the impact of restaurant closures and a decrease in comp sales. Comp sales, excluding the impact of deferred loyalty revenue were down 60 basis points in Q1. Q1 comp sales included a 1% increase in average check, offset by a 1.6% decline in traffic. The 1% increase in average check consisted of a 3.1% increase in price, offset by a 2.1% decrease in mix and discounts, driven largely by the impact of our Big Yummm value offerings.

As it relates to other aspects of our Q1 financial performance, restaurant-level operating margin was 14.8% and an increase of 50 basis points compared to the first quarter of 2025. The benefits of cost savings and labor efficiencies, check average increase in restaurant closures were offset by inflation and lower traffic.

As it relates to our commodity basket, as of the end of the first quarter, we were approximately 60% locked on our 2026 commodity needs. General and administrative costs were $23 million as compared to $27 million in the first quarter of 2025. The $4 million reduction is primarily due to reduced people costs from our corporate efficiency initiatives and timing of corporate events. Selling expenses were $13 million as compared to $9 million in the first quarter of 2025.

Adjusted EBITDA was $27.3 million in the first quarter of 2026, a decrease of $0.6 million versus the first quarter of 2025. As it relates to our balance sheet and capital structure, we ended the first quarter with $24 million of cash and equivalents, $10 million of restricted cash and $17 million available borrowing capacity under our revolving line of credit.

Turning to our outlook. We are maintaining the full year guidance for 2026. Please note that our outlook does not include any impact from the tactical refranchising initiatives. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. Finally, we expect capital expenditures to be between $25 million and $30 million.

In summary, our first quarter performance marked our continued improvement in our business fundamentals. As we look ahead to the remainder of 2026, we will remain disciplined in executing against the First Choice plan and continue strengthening the operational and financial foundation of the company.

Dave, I'll now turn the call back to you.

Thanks, Mark. We believe our first quarter performance validates the strategic direction we've set with our First Choice plan. Across all 5 pillars of our plan, we're executing with discipline by, one, holding serve on operational efficiencies while maintaining guest satisfaction; two, driving traffic through our expanded Big Yummm value platform and data-driven marketing; three, finding money through our organizational efficiencies and our strategic refranchising initiative that will strengthen our balance sheet; four, fixing our restaurants with targeted refreshes and technology enhancements; and five, winning together by empowering our team members with the tools and culture they need to succeed.

Combined, our strategy has not only improved our underlying traffic momentum and share gains relative to the industry during the first quarter, but also allowed us to better speak to our guests on what matters to them through the continued evolution of our targeted marketing initiatives. We believe we have the right team to make Red Robin a place that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns.

With that, we're happy to take your questions. Operator, please open the lines.

[Operator Instructions] Our first question comes from the line of Alex Slagle with Jefferies.

Congrats, Mark, and -- good to have you back. And Chris, it was certainly great having you back for a while as well. I wanted to just dive more into the acceleration in the same-store sales and traffic trends. And I mean, it seems like the new menu, Big Yummm deals were pretty big and maybe a little bit also from the targeted marketing efforts, but just seems like the trends really accelerated a bit more notably after the storms than I think we would have expected. So if you could kind of dig more into the Big Yumm performance and maybe some of the other metrics like the check performance certainly seemed pretty solid.

Alex, it's Dave. I'll start out and then I'll hand it over to you guys. I think you're right. I mean we did see strength coming into the year. We saw a little bit of dip through the weather that everybody saw in the middle of the quarter and then a nice rebound at the end. Combination of Big Yumm, certainly, the new menu launch that we put out performed as we had hoped or better than we had hoped across a number of different measures. So we felt good about the quarter. And I think you're right. strong start, kind of choppy middle and then strong finish.

So if Mark or Chris, do you want to jump on that?

Yes. The only thing I would add -- this is Chris. I'd say from a marketing perspective, we did increase our spend year-over-year. We feel really good about that targeted marketing approach. We said on the last call, we expect to spend more in marketing dollars much every quarter of this year than we spent a year ago. And I think that we're going to continue on that track certainly in the second quarter.

Okay. And on the cost, the labor efficiency was pretty impressive just given last year. I know there were some acceleration or a benefit that you start to see from the managing partner program and efficiency on that labor line. But I mean, are we starting to level out or like are the turnover levels sort of down and stabilizing? Or do you think there's more room to go on labor?

Yes. First of all, I think hats off to the ops team. They just did a heck of a job kind of tightening their belts, managing this much more effectively than we had in the past. And so they deserve a lot of the credit for this. But we brought it down. We're going to get to a point where there's not the kind of gains that we've been seeing, but we'll continue to kind of work towards that efficiency. We talk about that every day. I think the thing that is our governor right now, Alex, is just making sure the guest satisfaction scores remain, right? As long as we don't think we're impacting the guest we'll keep trying to find ways to be more efficient. But I'd say we're approaching that at least for us right now, optimal level.

Yes. And if you think about how that manifests in the P&L, tactically speaking, we started seeing those benefits in Q2 of last year from a savings perspective. So we are going to start lapping that when we get to Q2 of this year.

Our next question comes from the line of Jeremy Hamblin with Greg Hallum.

Congrats on the results. Just wanted to follow up on the last question in terms of seeing that the cadence kind of exiting the quarter building, have you seen some of that momentum continue here in Q2? And just in terms of check and menu pricing in terms of you're at just over 3% price in Q1, how do you think about price as it plays out through the rest of 2026?

Yes. I mean I think in terms of trends, as we came out of Q1, Q2 is looking a lot right now. But it's early days, yes, at least P5 for us. I think in terms of pricing for the rest of the year.

Yes. I'll let maybe Mark, if you want to talk to that.

We're still in that 3%, 3.5% range. So that's been pretty consistent. We had very little rollover from last year.

Got it. And then in terms of additional menu item initiatives and how you're thinking about menu innovation in combination with some of the marketing efforts, right? So $4 million year-over-year increase in marketing spend in Q1 and clearly in casual dining, capturing attention on social media and digital marketing has been key to driving traffic. I think this is the best quarter on traffic like in 3 years for you guys as well. But you lean in a bit more, do you lean into value a bit more as it's had success and is mixing well. How should we think about the interplay of those 2 things?

Well, I think you just touched on your last word of interplay is exactly what's going to happen is there is going to be an interplay. We're going to try and continue to innovate the consumer is obviously interested in value messaging and value offering across the category these days. But that doesn't mean we're not going to continue to innovate with new products. We put a new menu out in January, which had both value as well as high-end products in the packaging menu. We came out with the slider tower offering, which was another kind of opportunity for us to innovate and introduce new products. And we're continuing to look at, okay, how do we -- what's the next round of the value platform, what does that look like as we go forward.

So all of those things are going, Jeremy. I don't think it's going to be one end or the other. I think we're going to constantly be trying to say, okay, what's the value hook and then what are the other product offerings that we can add to the menu or introduces LPOs.

Understood. Last one for me. Just in terms of the units. Did you have any store closures in Q1? I think you said you were looking at about maybe 20 for the year, but just wanted to understand what you did in Q1? How we should be thinking about the cadence for 2026? And what the expected impact might be on revenues and EBITDA?

Yes, I'll let Mark or Chris talk about impact on revenues and EBITDA, but 6 was the number in Q1, and that will kind of play out relatively equally across quarters for the balance of the year.

In terms of impacting, Chris, do you want to take...

On the sales front, we did have some closures last year. So if you kind of combine that with the expectation of this year, it's close to $40 million from the sales perspective. and it's kind of a mixed bag on the lot side, which it will be pretty neutral from that perspective.

Yes. Jeremy, the other thing, just to clarify, I said that it's going to play out about the same as it did 6 in Q1, but I think your point about [ 2021 ] for the full year is right. It's just going to be spread equally relatively over the next 3 quarters.

[Operator Instructions] Our next question comes from the line of Mark Smith with Lake Street Capital.

I wanted to ask about commodities a little bit. It sounds like -- I think you guys said you've got 60% locked right now through the end of the year. Maybe walk us through opportunities to continue locking stuff and especially as we look at beef, kind of where you're at, what's on contract and when things come up and what maybe we could look for potential inflation this year?

Yes. I mean, from an overall basket perspective, we're still in that kind of 3.5% range. And so beef, a very large piece. We do not lock that piece. So that's really as you think about what's floating that and as you think about dairy as well or kind of 2 of the bigger options that are not. But as you think about chicken and some of those other ones, those are the opportunity areas that we continue to pursue.

Okay. And then similar back to labor efficiencies, and you guys talked about this a little bit, but I'm just curious, any additional thoughts as we think about maybe just the leverage on higher sales that kind of help with some of those efficiencies versus some of the initiatives that you guys in such as using AI on managing labor, the puts and takes within labor that kind of helped you get some of these efficiencies.

Yes. I mean I think it's a combination of things. We've got technology that we introduced with handhelds, which certainly improved the efficiencies at the restaurant level, the AI tools have really -- for those that have adopted it, have really kind of helped just provide China light on the opportunities for those managing partners that are using it. And so we're trying to extend the comfort level with that across the system.

Similarly, at managing inventory food costs and inventory in the restaurants, helping from a planning standpoint that way. We've been really pleased with what we've seen on that. And you kind of keep tightening the labor matrix and targets for the operating team, and they keep hitting it. And so I give them credit for their approach to this thing. But I do want to be conscious of the guest impact. And I don't ever want us to go so far that it negatively impacts the guests. And so we're being pretty careful about how we watch that.

Perfect. The last one for me is really -- I think last quarter, you guys quantified a little bit around Big Yummm mix within dine-in. Are you able to do that? Anything that you can say or quantify around maybe how Big Yummm trended in mix during the quarter?

Yes, I'll just at a headline level or a high level. I'll turn it over to these guys. But we modeled out what we thought Big Yum might do when we put the new menu in place and put it on the menu. And the performance since we've put it on the menu has performed well within our targets for it. And so I know the number, but I'll let Chris or Mark talk about that.

Yes. And we talked about -- so prior to when we put it on the menu with the additional offerings, we talked about that core LTO at $9.99, mixing in the 8% to 9% range. We put it on the menu on the core menu with the 3 price points, the 4 -- the $9.99, the $14.99, the $16.99, we saw that mix jump up. And it's been hovering in that 13% to 14% range pretty much for the duration of the -- since that new menu launched in late January, I wouldn't expect it to move much from here. I think it's going to stay pretty much in this range moving forward, which we're totally fine with -- we feel really good about where it is. It's mixing at the right level. As we introduce new innovation, it's going to create opportunities for us to have barbell price points across the menu. So it's really a perfect strategy for us. We feel really good about how it's playing out.

And we have reached the end of the question-and-answer session. I would like to turn the floor back to Dave Pace for closing remarks.

Yes. Just to wrap it up. Look, thanks for everybody for joining the call. We feel really good about the quarter, and we feel like the First Choice plan is working. We're going to keep on it, and we look forward to talking to you again after Q2. So thanks. We'll talk soon.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Good afternoon, everyone, and welcome to the ACADIA Pharmaceuticals Inc. Red Robin Gourmet Burgers, Inc. Fourth Quarter 2025 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore, are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release.

The company has posted its fourth quarter 2025 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. As we close out 2025, our fourth quarter results reflect the steady momentum we're building as we execute against our First Choice plan. We introduced this plan in the second quarter of 2025 to focus our priorities and outline how we intend to strengthen our competitive position and improve our overall performance.

Today, I'll provide an update on our progress against its key pillars and how we intend to build on that progress in 2026. Before I get into the details, let me begin with some context around our full year and fourth quarter sales performance. For the full year, comp sales were down 0.3%, excluding the impact of deferred loyalty revenue. This included a 3.5% increase in average check, offset by a 3.8% decrease in traffic.

Our traffic improved in the back half of the year as we rolled off 2024 pricing actions and saw traction with our Big Yummm value offering. For the fourth quarter, comp sales were down 3.3%, excluding deferred loyalty revenue. This included a 0.3% increase in average check and a 3.6% decline in traffic. Now like the broader industry, trends softened in October and November relative to where we exited the third quarter.

In addition, we made the intentional decision to shift marketing spend into December to maximize reach during the holiday season. That strategy proved effective. increased support behind our Big Yummm value offering and our holiday promotions drove a notable inflection in December as we outpaced the Black Box Intelligence casual dining index in traffic for the first time since the third quarter of 2024.

Encouragingly, momentum continued into January, where traffic was positive before weather events starting in late January with Winter Storm Fern have made results choppy in subsequent weeks. On profitability, we exceeded our expectations for both restaurant level margin and adjusted EBITDA in the fourth quarter. Full year adjusted EBITDA of $69.7 million represented a 53% growth over 2024, and RLOP margin grew by 190 basis points. Importantly, we achieved this result with only modest pricing in 2025.

For perspective, in the fourth quarter, net pricing contributed just 1.6% to results, underscoring that our performance improvement is increasingly being driven by a stronger consumer proposition and improved operating efficiency. With that context, let me walk through our progress against each pillar of the First Choice plan and our strategic priorities for 2026.

First, let's start with Hold Serve. Our Hold Serve pillar requires that we sustain the progress that we make each quarter and then extend that improvement even further as we move forward. During the fourth quarter, our labor efficiency initiatives contributed approximately 180 basis points to restaurant level margin. These gains were consistent throughout the year and were a primary driver of a 250 basis point reduction in total labor costs for 2025. Importantly, we achieved these efficiencies while maintaining our guest satisfaction scores, demonstrating that productivity and hospitality can coexist.

These improvements also reflect the increased accountability and ownership embedded in our managing partner model, which rewards our partners for improvements that they drive in restaurant-level profitability. This leads me to our next pillar, which is our Drive Traffic initiative. As noted earlier, we saw industry outperformance in December. We believe this improvement is driven by 2 primary factors: one, the power of our Big Yummm burger offer; and two, our improvements in how we market and message to our guests.

First, our $9.99 Big Yummm value offer continues to resonate. Within our dine-in channel, it delivered 10% guest mix in the fourth quarter, strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. Building on this success, we expanded our platform with the January 26 launch of our new menu, integrating additional Big Yummm deals directly into our core offering.

This expanded platform now features 6 meal options across a tiered price range of $9.99 to $16.99, extending beyond burgers into categories such as our hand-breaded classic crispy chicken sandwiches, Donatos Pizza and Whiskey River barbecue wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience.

The new menu also broadens our premium offerings, creating a deliberate barbell approach that balances compelling value with higher-priced indulgent options to expand guest choice across dayparts and occasions. Early results indicate that the menu is performing as expected and that average check has increased and remains healthy as guests engage across the menu.

The second key driver of our fourth quarter traffic improvement was the deployment of incremental investment behind the data-driven First Choice marketing strategy we initially introduced in Q3. This strategy enables us to engage guests more personally and precisely than traditional broad-based campaigns. We've now mapped every restaurant across 6 to 8 competitive categories and clustered locations based on similar trade area dynamics and messaging needs.

This analysis supports more focused and locally relevant messaging, allowing each restaurant to compete more effectively within its specific market. In short, we continue to transition from a broad one-size-fits-all approach to a marketing model that is more precise, more disciplined and more efficient by ensuring that the right message reaches the right guests at the right time, improving the overall return on our marketing spend.

The third pillar of our First Choice strategy is Find Money. As discussed last quarter, our corporate efficiency actions have meaningfully reduced general and administrative expenses, and those savings will continue to benefit us in 2026. For perspective, excluding stock-based comp, we reduced G&A by over $4 million in 2025 and expect to have a similar step down in 2026, driven by the efficiency initiatives implemented in the middle of 2025.

With respect to our work to strengthen our balance sheet and capital structure, we continue to progress on tactical refranchising as a key enabler to this initiative. As previously communicated, we plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We're encouraged by the interest level expressed and the progression of discussions to date. We remain confident that we will achieve our targeted capital structure objectives.

Unrelated to our work to reduce debt, but that is further reflection of franchisee confidence in our system improvements, 3 of our current franchise groups have indicated that they are currently pursuing new unit development opportunities within their territories. With respect to overall refinancing efforts, our improved financial performance has strengthened our liquidity position and along with our progress on refranchising is expected to expand our options to improve our capital structure.

We continue to work with our advisers to advance this process and expect to refinance our debt consistent with our previously outlined objectives. Additionally, as a result of improved business performance and further progress in our refranchising work, we no longer believe that we need to preserve the option to conduct an at-the-market equity offering, and so we have terminated the ATM program announced last November. No shares were issued under that program before it was terminated.

Turning to our Fix Restaurants pillar. In 2025, we completed 20 light-touch refreshes to help our physical environment maintain competitive standards and reflects the quality of our food and service. Our 2026 capital plan allocates additional investment toward restaurant refreshes. We plan to resume refresh activity later in the first quarter, continuing a disciplined light touch approach designed to maximize guest impact.

In addition to our facility refreshes, we begin to roll out replacement devices for our server handheld technology and we'll also introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for.

In the 10 months I've served as CEO, what stands out most for me is the growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives. They are owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. It's also important that we continue to challenge the status quo and identify insights and potential competitive advantages that will enhance our ability to differentiate ourselves in the marketplace.

With that in mind, in the fourth quarter, we launched an enterprise version of the ChatGPT AI platform. Since our launch, we're seeing expanding utilization across the organization with tangible results. We're now in the process of introducing it to our managing partners, along with custom GPT tools and are already seeing adoption and application that assist our managing partners in further optimizing labor costs, COGS and guest service.

The overall impact of our investments in our teams is tangible. Hourly turnover is now at its lowest level since 2017, and engagement scores continue to improve. This translates directly into how we serve our guests and support one another. As we look ahead, we'll remain focused on creating an environment where great people can build meaningful and rewarding long-term careers.

To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The foundation we're building together positions us well to be able to capture the opportunities ahead. With that, I'll turn the call over to Chris to review our fourth quarter results.

Thanks, Dave, and good afternoon, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2025. Total revenues in Q4 were $269 million, a decrease of $16.2 million from 2024. This change in revenue was primarily due to a decrease in comp sales and the impact of restaurant closures.

Comp sales, excluding the impact of deferred loyalty revenue, were down 3.3% in Q4. Including deferred loyalty revenue, comp sales were down 3.1%. This result was in line with the expectations we discussed in our last earnings call. Q4 comp sales included a 0.3% increase in average check, offset by a 3.6% decline in traffic. As it relates to other aspects of our Q4 financial performance, restaurant level operating margin was 11.4%, a decrease of 10 basis points compared to the fourth quarter of 2024.

The benefits of cost savings, restaurant closures and check average increases were offset by inflation and lower traffic. General and administrative costs were $14.9 million as compared to $18.4 million in the fourth quarter of 2024. The reduction is primarily due to reduced people costs from our corporate efficiency initiatives and lower stock-based compensation expense.

Selling expenses were $8.8 million as compared to $5.7 million in the fourth quarter of 2024. Adjusted EBITDA was $11.8 million in the fourth quarter of 2025, a decrease of $2.6 million versus the fourth quarter of 2024. This result was ahead of expectations we discussed on our last earnings call. We finished 2025 with $69.7 million of adjusted EBITDA, which represented 53% growth over 2024.

As it relates to our balance sheet and capital structure, we ended the fourth quarter with $19.9 million of cash and cash equivalents, $9.6 million of restricted cash and $37 million available borrowing capacity under our revolving line of credit. Our strong results in 2025 have improved our liquidity and position us well heading into 2026.

Turning to our outlook. We will now provide the following guidance for 2026. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million.

And finally, we expect capital expenditures to be between $25 million and $30 million. Our financial guidance suggests that we expect to make progress in 2026 across all of our key financial metrics.

In summary, we are pleased with our financial performance in 2025. We have made significant progress towards increasing restaurant level profitability, reducing debt and growing EBITDA. We will remain disciplined in executing against the First Choice plan in 2026 and continue strengthening the operational and financial foundation of the company.

Dave, I will now turn the call back to you.

Thanks, Chris. As we look ahead to 2026, I'm confident that the progress we've made across each pillar of our First Choice plan positions us well for continued performance improvement. Our December results where we outpaced the Black Box casual dining traffic index reinforces that when we execute with precision, combining compelling value, targeted marketing and exceptional hospitality, we can compete effectively.

Our menu enhancements launched in January and give our guests expanded options at both ends of the menu and across dayparts and occasions. And we have a robust new product pipeline that we will introduce throughout the year. Simultaneously, our ability to continually refine and focus our marketing messaging and spend means that we can confidently reach our guests where they are in the most efficient way possible.

Our capital structure initiatives are progressing in line with our plan. We expect the combination of tactical refranchising and refinancing to strengthen our balance sheet and provide the flexibility needed to continue investing in our people, restaurants and technology. Further announcements will be made as we achieve significant milestones on that journey.

While there's much work ahead, our team is focused and committed to building a Red Robin that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns. With that, we're happy to take your questions. So operator, please open the lines.

[Operator Instructions] Our first question is from Todd Brooks with Benchmark StoneX.

Congrats on the inflection of the business in the second half of last year, guys. Two quick questions. One, kind of a block and tackle. But within the 50-basis point to up 150 basis point same-store sales guidance for '26, thoughts on pricing. I think you said you were running about 1.6% price in Q4. What kind of pricing assumption is baked into that guidance for same-store sales?

Yes. Todd, it's Chris. So we took a 3.2% menu price increase when we rolled out our new menu at the end of January. We didn't have a whole lot of carryover from last year. So we're expecting that to carry through for the full year. So the full year pricing impact this year will probably be about 3.2% as well.

Perfect. And then more of a strategic question, but it sounds like the micro-targeted marketing has been a real revelation for you all. Can you -- I know we're a couple of quarters into that, but can you walk us through how far through the process of really implementing that with kind of a full year plan behind it?

And any thoughts -- I know selling expense was up in Q4 versus prior year. But for the full year, there was some efficiency around selling expense. So any color you can give on the selling expense plan needed in '26 to support the micro-targeted marketing efforts?

Yes. Thanks, Todd. It's a pretty holistic shift in the way we're approaching marketing. So not only is it a change in the absolute spend, but it's been a change in the efficiency of it and the allocation of working versus nonworking dollars. So we're able to put a lot more working dollars to work to just that point. I'd say we are probably -- I'm saying 2/3 of the way through the implementation of this.

I mean the stuff that I referenced in the remarks around clustering, identifying competitive groups, understanding trade area dynamics and then allocating messaging priorities to each of those, we've got those in place. We're kind of putting them in action and trying to understand then what's the response.

So as we see these responses, we'll continue to reallocate among those clusters. So if we see something that's not showing the elasticity that we think it should, we'll try it and move it to another cluster. So I'd say we're 2/3 into the implementation, but we still have a little bit to go.

Yes. And the only thing I would add as it relates to 2026 is if we continue to see success that we've seen, we have the agility to deploy more dollars against the full year thought. And I think right now, the expectation is that we will be up in selling expense in 2026 relative to 2025. And I think I can go so far as to say that we would expect to be up in each quarter, particularly given the success that we've seen here late in Q4 and early in Q1.

Our next question is from Jeremy Hamblin with Craig-Hallum.

And I'll add my congratulations on the improved profitability last year. I wanted to start with thinking about the same-store sales guidance for the year. And Q1, by far, your toughest compare for the year. I wanted to get a sense for how you expect things to flow given what you saw in January.

I don't know if in February, you've seen some bounce back post weather, although there's obviously been a couple of storms and impacting a wide swath of the country. But how do you expect kind of that cadence to play out during the year? I mean, are you thinking that Q1 is like a negative comp quarter and then improvement from there?

Yes. I think as we kind of map it out, I'll let Chris talk about this as well. But I think we see it kind of strengthening in the back half of the year more than the front for the points that you raised, given where we're lapping and then the introduction of Big Yummm and how that plays out. But I think your assumption is right, Jeremy.

Yes. And I'll just add a little color as it relates to Q1. We're not going to give a guide, obviously, for Q1, but we do have some perspective. So quarter-to-date comps are down in Q1 about 1%, but it's important to provide context around that because we talk about -- we took very limited pricing in 2025. We did take that 3.2% increase that I mentioned. But that pricing as well as some of the indulgent offerings that we added to the new menu, that we think is going to offset the negative mix associated with taking our Big Yummm burger deal and putting it on our core menu.

So I think if you think about check average, it's probably going to be positive, marginally positive in Q1. In terms of traffic, before Winter Storm Fern hit, traffic was positive in January. And since that winter storm hit traffic trends have been negative, mostly due to weather, right? So we think we'll end up -- the weather impact will cost us maybe 50 basis points as it relates to Q1 in total comp. We lost about 179 operating days quarter-to-date.

We even had some restaurants still closed as of yesterday, so from this most recent storm over the weekend. It's also important as you think about Q1 and the construct of Q1, we had less media weight in February versus what we expect in March or April. So there's a lot going on, but we feel really good about the underlying business and the progress we've made. And so that kind of sets up Q1. And then as you sort of shift towards the back half of the year, that price increase, we start to lap the Big Yummm burger deal in July of this year, and you'll start to see more of that pricing that we took start to flow through.

So PPA is going to be higher in the second half than it was in the first half. And then I think in terms of traffic, just for the reasons I laid out, it's a little bit of the opposite. Traffic will probably be a little higher in Q1 and in Q2. Again, it's a product of lapping the Big Yummm burger deal. We're getting some traffic momentum. But given the media weight and the strong LTO calendar we have in 2026, we feel like it's going to be a better year overall in same-store sales with a stronger second half comp than first half.

Switching gears and looking on the expense side, we know that there's been some pressure from commodity cost, beef pricing, but wanted to get a sense for your expectation on that is basically flat year-over-year in '25 as a whole. But you did note on the November call that there had been a little bit of pressure. So I wanted to get an update on what you're seeing on that end?

Yes. I think, again, look, I think we're going to continue to see beef prices rise. We're factoring that in. We'll see some offsets, obviously, with that. I think Chris can give you more of the specifics as we -- in terms of percentage shift between the 2, but we are expecting those to continue. We'll still see some headwinds on the COGS side.

Yes, I think that's right. We were up roughly 4% in commodities in 2025. We're looking at basically the same number in 2026. Beef inflation is still expected to be high. But the other major categories are going to be kind of plus or minus 1% or 2%. Really beef is the outlier for 2026.

Got it. And then I wanted to ask about your refranchising efforts. It's something where my sense is that there's some engagement there and interest. You'd outlined 25 to 75 units. Any update you might be able to share on progress on that initiative? I noted, obviously, you must feel pretty good about where the balance sheet is. No need to raise capital in the near term. Given that you're going through kind of the debt refinancing process as well, I wanted to see if you could update us on refranchising.

Yes. I mean the truth is, Jeremy, I can't say a whole lot about where we are specifically, but your tone and your assumptions are accurate. We feel better about the overall liquidity of the business. We feel good about the process that we're in. We feel good about the interest that we saw in the franchising exercise, and we feel good about the progression of discussions that we've had. Beyond that, I can't say a whole lot right now, but your kind of underlying tone is accurate.

Great. Last one for me. You made remarkable progress in labor last year. And just to follow up on the other question. In terms of how much more you feel like you can squeeze there, you noted that your satisfaction scores remain strong. Clearly, you're seeing a little bit of a turn here in traffic. Do you look to drive additional labor savings through comp improvement? Or do you feel like there's a little bit more to squeeze out there?

I think it's going to be both. I think we think comp improvement certainly will give us some air cover. But I also think that there is room in the middle of the P&L in the labor spend. And I think our operators feel the same way. I've been extremely pleased with their bullishness on this. This is not just us pushing from the top. They're looking at it saying, yes, we have better tools than we've ever had to be able to understand where our opportunities are.

We have better visibility into who our outliers are and how we have to work with them and coach them and kind of make progress there. And I don't want to underestimate it, and we're just in the very early stages of this, but we've introduced the AI tool and our ops team has grabbed that and run with it and created some custom GPTs that they've introduced at the restaurant level that give us the ability or give our managing partners the ability to understand labor spend on a daily basis, forecasting more effectively and then allocation.

There's been a great adaptation or adoption of that tool at the restaurant level. So we think the combination of all of those things is going to give us room to kind of go even further than we have so far.

Our next question is from Mark Smith with Lake Street Capital.

First, just wanted to ask a little bit about G&A outlook, Dave, you talked about in your commentary. I think that you said kind of similar decline in dollars year-over-year. Correct me if I'm wrong on that. And then maybe walk us through kind of what's driving some savings there?

Yes, I'll start with the numbers, and then I think Dave can add the color. So we finished -- if you exclude stock-based comp, we finished last year G&A at $71 million. I would say in 2026, we're looking at somewhere between $65 million and $67 million range for the year. So that would incorporate the $4 million that Dave talked about, and there's potentially opportunity for a little bit more than that.

Yes. I think just to build on that, we think this is, again, the combination of figuring out efficiencies. We're going to be looking at this every day, every month, every quarter to see how do we build efficiencies into the business further and get smarter about how we operate. So I don't think that's a one-and-done process. That's something that we will continue.

Perfect. And then I just want to ask kind of about the restaurant base. It sounds like some positive movement and thoughts from franchisees around maybe some expansion and opening new restaurants. Curious on the company-operated side, maybe what's built in as far as closures and then any appetite to begin opening some company-operated restaurants?

Yes. Look, I think in terms of the restaurant size, we're still trying to optimize the portfolio. Going back a ways, we found we've made improvements on about 20 restaurants that we had previously identified as potential problems for us or potential closures. We've moved them off the closure list to where we think we can operate them and are hopeful that we can get them back to a performance level that equals the rest of the system.

I think there's still probably -- if you're thinking about it, Mark, I would assume $20 million for this year is the number that we're thinking about. So that's kind of what do we still have that's out there that we need to get to kind of work our way through the system. So we're trying to kind of clean up the portfolio, figure out a way.

The significance of this is if you go back to when this was first brought up, I think we identified $6 million of headwind against the business from these potential closures. That number is now down to about a $1.5 million headwind and shrinking as leases expire and we roll off. So I think we've made huge progress on that and feel good about the state of the portfolio that's moving ahead.

There are no further questions at this time. I'd like to hand the floor back over to Dave Pace for any closing remarks.

Okay. Just quickly, look, thanks. Really appreciate folks for dialing in and hearing our story. We feel good about the progress that we're making, and we look forward to talking to you again in May. So thanks for coming on, and we'll talk to you soon. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, everyone, and welcome to Red Robin Gourmet Burgers, Inc. Third Quarter 2025 Earnings Call. This conference is being recorded.

During management's presentation and to your questions, we will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its third quarter 2025 earnings release on its website at ir.redrobin.com.

Now I'd like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. It was just 4 months ago that we unveiled our "First Choice" plan with a core imperative of establishing Red Robin as the first choice for guests, team members and investors. Today, I'm pleased to report that in the third quarter, we began to see the early fruit from our efforts. During the third quarter, our traffic trends improved sequentially through the quarter, supported by the launch of our Big Yummm promotion and growth in our off-premise business. Equally encouraging are the continued gains in our 4-wall operating efficiency and our team's ability to manage the middle of the P&L, allowing us to beat our expectations for both restaurant level and corporate profitability during the quarter.

Going forward, sustaining and extending this improvement requires continued execution across all aspects of our "First Choice" plan. The momentum we're building reinforces my belief that we're on the right track to deliver on our goal to be the first choice for guests, team members and investors. With that, let me share more detail on our progress and how we're building momentum as we move forward with this "First Choice" Plan.

First, let's start with hold serve. Our operators have continued to raise the bar on performance. During the quarter, our team once again delivered labor results that beat our internal expectations. It's important to point out that we're achieving this efficiency gain while maintaining guest satisfaction scores at the improved level we established last year. This demonstrates that efficiency and hospitality are not mutually exclusive, and our ops team is proving every day that we can deliver both. The numbers also tell the story. The increased efficiency we achieved in the third quarter drove a 90 basis point improvement year-over-year in restaurant level operating profit, almost entirely driven by improvements in labor. These efficiency gains are being accomplished through a healthy blend of process changes, analytics and technology, combined with the entrepreneurial spirit of our operators who are finding the ways to work smarter and more efficiently while refusing to compromise the guest experience.

Our managing partner program also ensures that our partners see the benefits of their efforts in increased compensation as they share in the gains that they are achieving in their restaurants.

As we turn to our drive traffic initiative, I want to reemphasize that we're committed to creating sustainable traffic growth that is rooted in improvements across all of the relevant consumer touch points, including compelling value for the guest, delivering on our commitment of food quality and great taste and a welcoming hospitable and fun environment. As I outlined on our last call, our plan is to build traffic-driving layers, and I'm pleased with our progress.

In addressing these elements of our plan, our first priority was to address our competitive positioning in price point value offers. The Red Robin Big Yummm burger deal that we launched at the beginning of the third quarter has performed above our expectations, resulting in an approximately 250 basis point sequential traffic improvement from the second quarter to the third quarter. More specifically, we entered Q3 with a traffic run rate of approximately down 7%, and we exited the quarter with that run rate at approximately negative 1.4%, a result that we're extremely pleased with. Our Big Yummm deal resonated strongly with our midweek dining occasions, particularly the lunch daypart and delivers on our commitment to provide our guests the gift of time. On average, we're delivering a complete dining experience in under 45 minutes. This promotion delivers exactly what we were looking for, immediate market relevance and trial generation.

To build on this momentum, our team remains hard at work on new menu innovations to accelerate our competitive positioning and price point value offers, and we look forward to sharing updates on our future calls.

That brings us to our second traffic-driving layer. During the third quarter, we launched our data-driven marketing initiative, incorporating microtargeting capabilities that will allow us to engage guests more personally, precisely and efficiently than traditional broad-based messaging. This approach to marketing is intended to more efficiently and effectively reach guests, allowing us to level the playing field against larger, more resourced competitors. These unique and internally developed algorithms help us understand guest decision-making behaviors and as a result, allow us to specifically target messaging and promotion in ways that resonate more directly with each guest.

During our initial rollout of this approach, we saw outsized improvements in traffic and sales for the initial cohort of prioritized restaurants, and we plan to expand our reach to more of our restaurants each period. In addition to the progress we've seen within the 4 walls of the restaurant, we've also seen a dramatic increase in our off-premise business, driven largely through a significantly expanded approach to catering. The off-premise portion of our business represents approximately 25% of sales in the third quarter and delivered traffic growth of 2.9%, a signal that our guests love our food and want to enjoy it in more places than just the dining room. We expect to continue to aggressively grow this segment of our business as we move forward.

Next is our Find Money initiative. I'm pleased to report another quarter where adjusted EBITDA beat our expectations, which continues to reinforce our confidence in the operational improvements we've implemented. In addition, thanks to our corporate efficiency initiatives, we continue to expect between $3 million to $4 million benefit in G&A in 2025 with a $10 million run rate expected to be achieved in 2026. These savings are critical as we balance our investment priorities with delivering profitability.

Regarding our capital structure, we're exploring all elements that I discussed when I introduced our "First Choice" Plan. This includes taking a comprehensive and proactive approach through multiple initiatives to give us optionality as we work to strengthen our balance sheet and position the company for long-term success. We've launched 4 primary tactics to accomplish this. First, as part of this process, we announced today a 6-month extension to the term of our current credit agreement, with the loan now maturing in September of 2027 as compared to March of 2027 previously. This extension provides helpful time to optimize the value of the other efforts.

Second, we've engaged Jefferies to assist us in refinancing our debt to further optimize our capital structure. Jefferies is an industry leader in this space, and we expect to work quickly and effectively with them to deliver a successful outcome on this effort as soon as practicable. Third, today, we announced the establishment of an at-the-market or ATM program, which allows us to sell up to $40 million in equity open market transactions. While we may or may not execute against this option, we put this in place so that we have the option to generate funds if needed and to be in a position to move quickly where we may see compelling opportunities.

Fourth is our refranchising effort. We continue to have great interest and engagement from both existing and potential new franchisees developed through our partnership with Brookwood Associates. We're encouraged by the level of interest in our brand, and we remain committed to a thoughtful process that maximizes value for our shareholders in both the short and long term.

Refranchising is yet another important option to have in our tool belt as we optimize our overall financing structure and work to strengthen our balance sheet. We'll continue to share updates as these projects progress. Supported by the gains we've seen in our operating results through the first 3 quarters of the year, we believe these actions will provide us with the options and flexibility to create the best long-term financing structure for Red Robin while also assisting us with resources to reinvest in the business.

Next, let me provide you with an update to our fixed restaurants efforts. As I mentioned on our last call, we identified the need to invest in critical deferred maintenance to better align our restaurant atmosphere with competitive standards. I'm pleased to report that we successfully completed refreshes in 20 restaurants across 4 markets during the third quarter. As a reminder, these are relatively light touch refreshes from a capital perspective and not full reimaging projects, averaging approximately $40,000 per refresh in the third quarter. We've prioritized these investments by targeting areas that we believe will directly benefit the guest experience. This includes flooring updates, internal finishings, furniture repairs and lighting, coupled with exterior improvements, including signage, paint, lighting and landscaping, all of which will directly benefit guest perceptions and experience. While results are still early, we're already seeing measurable improvements in both sales and traffic performance at these 20 locations.

These results further support our thesis that well-executed improvements that enhance the guests first impression and overall dining atmosphere can deliver measurable results relatively quickly. The success of these actions has helped us fine-tune our investment priorities as we look to expand the number of restaurants that we can touch. Our goal is to offer an environment that matches the quality of food and hospitality that our teams deliver every day, and we'll continue to take a disciplined approach as we expand this initiative further across our system.

Lastly, let me briefly touch on our Win Together plan. As I've continued to travel the country, visiting our restaurants and meeting with restaurant teams, I'm hearing increasingly positive feedback from our team members who see that we're delivering on the promises we made earlier this year. They wanted a value offering, and we delivered the Big Yummm deal. They asked for help addressing long-standing maintenance and repair issues, and we successfully refreshed 20 restaurants during the quarter with more to come. They ask for better technology and tools to execute more efficiently, and we're continuing to roll out additional technology with more planned ahead.

It's encouraging to see that our team is embracing our guest-centric culture. And when combined with the strength of our operating results, we believe it's prudent to modestly raise our CapEx guidance for the year as we further accelerate some of these key initiatives that directly support our team members and their ability to deliver a great guest experience. Encouragingly, we've continued to see our team member turnover rates come down each period to a point where we're now at levels below industry benchmarks. As we look ahead, we believe this collaborative team approach will further strengthen our culture and position us favorably to attract and retain the best talent in the industry. To the almost 20,000 Red Robin team members across the country, I want to extend a heartfelt thank you for your dedication and hard work. I'm proud of what we've accomplished so far and excited about what's still to come.

With that, Todd will now review our third quarter results.

Thank you, Dave, and good afternoon, everyone. In the third quarter, total revenues were $265.1 million versus $274.6 million in the third quarter of fiscal 2024. Comparable restaurant revenue beat our expectations for the quarter and are in line with last week's announcement at a decline of 1.2%. This result includes a 1.7% increase in net menu price, offset by a 3% decline in guest traffic. Guest traffic trends improved sequentially through the quarter and delivered a 250 basis point trend improvement as compared to the second quarter. We attribute this improvement to the success of our Big Yummm Burger deal that launched in July and continued traffic strength in our off-premise business. Restaurant level operating profit as a percentage of restaurant revenue was 9.9%, an increase of 90 basis points compared to the third quarter of 2024. This was driven by the continued success of our operations team, delivering significant gains in labor efficiency.

I would also note, while cost of goods increased due in part to beef inflation that we anticipated, our commitment to deliver value for the guest is also reflected with this increase with the goal that this value ultimately contributes to delivering increasing guest traffic. General and administrative costs were $16.9 million as compared to $20.8 million in the third quarter of 2024. The reduction is primarily due to not holding a partner conference event in 2025 as we did in 2024. In 2024, this cost was mostly offset with vendor contributions credited to other parts of the income statement.

Selling expenses were $6.8 million, an increase as compared to $5.5 million in the third quarter of 2024. The increase is primarily due to additional investment in third-party delivery platforms and other channels. Adjusted EBITDA was $7.6 million in the third quarter of 2025, an increase of $3.4 million versus the third quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains, particularly in labor and the benefit of menu price increases. We ended the third quarter with $21.7 million of cash and cash equivalents, $9.2 million of restricted cash and $29 million of available borrowing capacity under our revolving line of credit.

Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of approximately $1.2 billion is unchanged from our prior guidance. This incorporates expectations that comparable restaurant sales will decline approximately 3% in the fourth quarter, and we will end 2025 with 386 company-owned restaurants in operation. Second, restaurant-level operating profit of at least 12.5% as compared to our prior guidance of 12% to 13%. Third, we now expect adjusted EBITDA of at least $65 million as compared to $60 million to $65 million previously. Finally, we now expect capital expenditures of approximately $33 million as compared to approximately $30 million previously as we continue to execute against the "First Choice" Plan and make investments back into our restaurants and technology.

As added commentary on our guidance, I would note the following points. In recent weeks, we have seen guest traffic trends slow from where we exited the third quarter. We attribute this to intentional timing shifts in our marketing spend and the consumer impact of the government shutdown. While our guidance is grounded in expectation for both traffic and comparable restaurant sales to decline approximately 3% in the fourth quarter, we are optimistic traffic trends will regain traction as our marketing spend levels increase in the remainder of the quarter. On the margin side, we expect cost of goods in the fourth quarter to be similar to the third quarter. For the other operating cost categories, we expect marginal improvement in the fourth quarter as compared to the third as we leverage fixed costs with higher seasonal sales in the fourth quarter. Overall, we are very pleased with our progress, capturing cost efficiencies while delivering a great guest experience. We have made significant gains, increasing restaurant level profitability, reducing debt and growing EBITDA. Initial results from the launch of the Big Yummm are encouraging, and we look forward to the great value at Red Robin delivering growing guest counts.

In closing, I'd like to offer a tremendous thank you to our operators, our restaurant teams and the team at the restaurant support center. This great progress in the business is a result of your hard work, and I'm excited for what's next.

Dave, I will now turn the call back to you.

Thanks, Todd. The progress we've made across all pillars of our "First Choice" Plan gives me confidence that we have the right strategy in place. Our operators are proving every day that efficiency and hospitality can coexist. Our strategic value offering is delivering the expected change in our traffic trends, and we have additional innovations under development for next year. Our data-driven marketing capabilities are being strengthened to position us to compete more effectively, and our restaurant refresh initiatives are being well received by both our team members and our guests. We're not declaring victory, but delivering a sustainable recovery requires a clear strategy, coordinated tactics and engaged team and disciplined execution.

I've seen personally that our Red Robin team members are up to the challenge. Let me close with this. We have more work ahead of us, but we're building momentum with each period and each quarter, positioning us to create a Red Robin that our guests will choose first. Our team members are proud to work for and our shareholders can rely on for predictable and reliable returns.

Before I hand it over to the operator for questions, I want to call out 2 organizational announcements that we made last week. First, I want to recognize the appointment of Jesse Griffith to Chief Operations Officer. As you heard today, our operations team under Jesse's leadership has been a major contributor to the progress we've seen both financially and with our guests. This is a well-deserved move that is reflective of those contributions. I'd also like to acknowledge Todd's plan to move on to another opportunity in our industry. During his time with Red Robin, Todd has been an integral part and member of our executive team and has provided great leadership to the finance team and well beyond. His many contributions were greatly appreciated by all of us, and I want to thank him for all that he did and wish him well in his next role.

With that, we're now happy to take your questions. Operator, please open the lines.

[Operator Instructions]

The first question comes from Jeremy Hamblin from Craig-Hallum.

Congrats on the strong results. I wanted to start with just some of the commentary around the Big Yummm initiative and where it's mixing. Just to get a sense for where that's mixing as a portion of sales. And then as you talked about a little bit of an uptick here in food and beverage costs to get a sense if you expect that to kind of stabilize in this current range or given a little bit of pressure on beef prices as well, we should be expecting that to click up a little bit here going forward?

Yes. Thanks, Jeremy. Two parts. I'll let Todd answer the second part. The first point about mix, the big Yummm deal is mixing at about 8% of our total sales. So we feel pretty good about that. That's kind of where we expected it to come in from a mix standpoint, but it's definitely having the impact that we had hoped it would.

Yes. Jeremy, on the second part of your question, just overall cost of goods, beef is certainly the most inflationary part of our basket right now. We do think the 25% that we saw in Q3, we think that's the right guide for Q4 as well. The team -- we've got different measures that we're putting in place to mitigate that beef inflation. So we think we can hold that 25% through the fourth quarter.

Great. And then just switching gears a bit here. I wanted to understand the cost of getting the amendment to your current debt agreement, getting that extension to September 2027. What was the financial cost of that getting the extra 6 months?

And then secondly, related to the refranchising efforts to get a sense for how that initiative is progressing and what valuations are looking like if you have maybe a better sense, I think you called out initially 25 to 75 potential locations. If you have winnowed that down a bit more or what other color you might be able to share with us?

Yes. So let me take that, and I'll let Todd kind of pile on here in a second. In terms of the extension, it was a 50 basis point cost to us to extend for that period of time. So we thought that was reasonable given what we were looking to do and why we wanted to do it.

Regarding the second point about refranchising, I would -- I guess what I'd say to you, Jeremy, is everything is going as we had expected and hoped on refranchising. So the available number of restaurants that there's interest in is in the range that we communicated originally. We have indications of interest, specific proposals put forward that we haven't really negotiated against yet. We're still in the middle of kind of vetting and kind of getting to know who's who. And so it's moving ahead. It's -- as I said in the remarks, it's an option for us. I mean we're going to kind of toggle all of these options to figure out the best combination as we move forward on the refinancing and the whole strengthening of the balance sheet. and refranchising is still one of those options. I'd say we're where we had thought we would be. And -- but nothing firm to announce beyond right now. Todd, do you want to add anything?

No, I think that I'd just reiterate those points. Refranchising an option. It was, I think, a good thing for the business to get the Fortress amendment or the amendment with our lender across the finish line. It gives us the time to really vet through those other options and make sure we maximize value, as Dave said on the call. So a good progress for us.

Great. Congratulations, Todd. Best wishes on your -- the next part of your journey.

Thank you, Jeremy. Really appreciate it.

The next question comes from Todd Brooks from Benchmark Stern.

I'll echo Jeremy's congratulations, Todd. And also, Jesse, I assume you might be in the room, congrats on the promotion to COO, well deserved.

Thanks, Todd.

I wanted to lead off and kind of take -- thanks for dimensionalizing kind of that entry and exit traffic run rate for the business.

Dave, I think Big Yummm was launched third week of July, so not even a full quarter's worth of impact. And I know you had spoken about working against things like upsell and kind of coaching up the front-of-house teams, how to sell the product. And the mix looked pretty benign and only down 10 basis points. So I guess kind of coming out of Q3, and I know you talked about a wiggle down here to start the quarter, but unlocking the big Yummm and the traffic benefit from it, my sense is, is there still some fruit in front of us to drive further improvement from it?

Yes, we think there is. And we think there are ways to even expand the impact of Big Yummm even further, which we're working on. I think you're right. It wasn't a full quarter. It wasn't day 1. It was probably 3 weeks in. That's probably about right, what you said. So we feel good about it. It came -- it did what we had hoped it would do. It got traffic. It gave people a reason to come in. It got trial again. So from a tactical standpoint, it did what we had hoped to do. Beyond that, I would tell you we're taking a much more strategic look at the entire menu and how we package it together. And so that's some of the pretty substantial work that's going on, which includes Big Yummm and beyond. So I think you'll see more.

I do think there's more there. There was a little wobble coming into the quarter. But for us, and I'm sure you know this, the way the fourth quarter plays out for us, October is the softest month. November picks up a little bit, starts to pick up momentum and then December is when we really make hay. So for us, we've consciously shifted marketing spend from October to the back end. And so a little bit of it was a pullback in marketing spend purposely to backload fish when the fish are or the fish are.

Great. And just one follow-up there. What do you feel or what are you hearing from customers about the importance of having an everyday value platform now instead of having a be appointment dining? How important has that been and what you're hearing and feedback?

I think we're seeing -- look, it resonates with the guest and it resonates in, as we said, in the kind of early week, midweek and lunch dayparts. The value offering, Todd, is, I think, is a slightly different occasion from the weekend offering in that weekends are date night, and that's when people go out early week lunch, they're kind of looking for a value opportunity to utilize us. So we -- it's part of the thing that we're working on is we think there's opportunity, but there's opportunity in the way we use it and when we use it. I don't think it's going to change. I do think it's going to be every day. I don't see us kind of limiting it back to certain days of the week. But the reality is it does have an impact on some parts of the week more than others.

Great. Dave, you also mentioned the data-driven marketing efforts and the fact that you had kind of a cohort of stores that maybe are a little bit more challenged where you saw really outsized improvement, I think, was your actual words from these efforts. Can you talk about any way to dimensionalize the traffic improvement from the effort? And then you talked about a path to expand this further. Can you maybe walk us through what that looks like going into '26?

Yes. I mean because of the way this is set up, Todd, this is a very -- I've said this, and I've tried to kind of be as clear as I can on this, but it is a hyper micro targeted approach where we get into the individual restaurant and we get into the individual guests, we understand the trade area. We understand the makeup of it. We understand what pulls people in. Is it a value play? Or is it a premium burger play? What is the reason for people making the shift? And we can get that information down to a highly targeted level.

So as we went into the first cohort, as I said, we started with some. We learned as we went into this that, oh, maybe value resonates with this group, but it doesn't resonate with that group. Let's focus on more of a premium burger or maybe a different set of messaging. geez, that seems to resonate more with this group. Let's kind of plus up that messaging in this cohort, plus up the value messaging in another cohort. And so we're kind of generating the knowledge base that we can then cluster and figure out how to deploy messaging and promotions on a highly micro-targeted basis. I mean I'm trying to explain this without kind of showing you, but it's -- that's where we're going with that. So anyway, we started with that. We saw performance, and I'll let Todd kind of pile on top of this above the performance of the rest of the system.

And so as we've gone out, we started with, I think, 50 restaurants. We expanded beyond. We're probably -- we got to 130. We're looking at kind of walking that out further as we get the data. And so we're -- the intention is to expand that across the system. How quickly we get there, we're going as quick as we can.

Todd, I'll just tag on quickly here to expand on the point of the over 100 restaurants that the team has been focused on. Sequentially, there's been a significant improvement in traffic trends in those restaurants to the point that in many weeks, obviously, we're looking daily, weekly, long term. But in many weeks and many periods, we're seeing that those restaurants are delivering positive traffic on a year-over-year basis. And that's ultimately where we want to be. And so now it's just a matter of, hey, we found a playbook that works in those 100 plus, and we'll work to expand that to the other restaurants, obviously.

Okay. Great. And I'll wrap it up into one final question. If you take the traffic driving benefit of the Big Yummm and you take the early success with the data-driven marketing, Dave, as you're thinking out to '26, I think year-to-date, there's maybe been 17 restaurant closures. Thoughts on stability of the base and maybe improving kind of that bottom decile or bottom quartile of stores with the early success that you're seeing from these 2 initiatives?

Yes. Good question. No question, we're seeing it. No question, our ops team is focused on these target restaurants to try and see -- we're not in the business of closing restaurants. We're trying to keep them open and run them and make money, which we've moved a number of them kind of off the watch list back performing where we want them to be. There's still some, as there always is, that aren't quite there yet. We'll give it a shot with them. There's probably going to be a subset of additional closures, but the list is far, far shorter than what we had talked about previously.

The next question comes from Mark Smith from Lake Street Capital.

I just want to dig in a little bit more on menu mix and kind of check dynamics and consumer behavior. Big seem to mix well. But can you talk about kind of other parts of the menu, beverages, desserts, people sharing meals. Curious to hear what you're seeing in consumer behavior kind of during the quarter and even post quarter.

Mark, Todd here. I'll start. To -- you mentioned, I think others have as well. We were pleased with the mix outcome. Going into the quarter, we thought the impact of the Big Yummm deal may have resulted in more of a mix impact than we saw. Part of that is a credit to our operators. We've given the guests trade-up options. And in many cases, they have taken those, right? So many people are getting the value in the $9.99 deal, but others are trading up to ad toppings, ad beverages, those types of things.

So that helps support the overall check. In terms of other dynamics, one of the areas we always look at add-on type trends in terms of appetizers, desserts, beverages. We've seen those hold steady. And so we think that's a good thing for us in this environment where we see the headlines that maybe consumers are managing their wallets a little bit more. We've seen those areas hold up. So the mix that we saw, we did report, obviously, a little bit of a negative mix. Some of that was the Big Yum. Some of that is a mathematical phenomenon, I'll say, of the growth in our catering business that Dave referenced.

That comes at a lower PPA. And so there's just a natural dilutive effect there as that part of our business grows. But we're seeing stability in appetizers, desserts, beverages with some of the add-ons helping to mitigate the impact of the lower price point on Big Yummm.

Yes, Mark, I would just add, I think I agree with everything Todd said. I think the other thing I would offer is we learned a lot going through this big Yummm deal, and we learned a lot about mix in consumer behaviors. And what resonates on our menu and what we may want to look at further. And so we're doing a lot of menu work right now that I think you'll see in 2026 that is an output of the learnings that we've got through the Big Yummm deal. Big Yummm is a very narrow, very tactical execution. I think the approach that you'll see us evolve to is a much broader, more strategic approach, including the Big Yummm, but beyond that.

Okay. Then I also wanted to ask about G&A. I know you didn't have this partners conference, but it looks really pretty good. I'm curious just how sustainable G&A is at these levels? Is it further cuts or maybe some ramp back up with more investments.

Yes, Mark, Todd here. I'll start. I'd frame it this way. When we look at our Q3 spend, we're expecting Q4 to be similar. So we think it is sustainable. It reflects some of the efficiencies that we have put in place and started to capture this year. And so we're certainly pleased with that. But as we look at just Q4 as an example, we expect Q4 to be similar to Q3.

Yes. Look, I think we expect it to hold, Mark. But I think there's -- we're looking at some other opportunities in the future. I mean I'm not worried about it. I don't have anything to signal yet, but I think there are some opportunities that we can not only hold but maybe expand a little further.

Excellent. And last one for me, Todd, I apologize, but I missed some of your comp guidance here for Q4. If you can walk through that and kind of the thought process behind where you're at for kind of comp expectation.

Yes, Mark, happy to. So the commentary in the prepared remarks, I talked about both same-store sales and traffic expectation for Q4 down 3%. The traffic, I think, is straightforward. That's frankly, exactly what we ran in Q3 in total at least, and we think is achievable, especially to Dave's point with the backloaded marketing. The sales being equal to traffic is obviously a couple of puts and takes. We do have a little bit of what I'll call gross menu price increase in place, meaning we have some year-over-year benefit from menu price increases. That becomes a lesser level in Q4 than it was in Q3. And so we expect mix will basically negate those menu price changes. So no net check, just the benefit or the impact of traffic flowing through to the comp number, if you follow me through all that.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Mr. Dave Pace for closing remarks. Thank you.

Okay. Just quickly, thanks, everybody, for joining the call. We appreciate it, and we look forward to giving our next update after the fourth quarter. So thanks, everyone. Talk to you soon.

Thank you. Ladies and gentlemen, that does conclude today's conference for today. Thank you very much for joining us. You may now disconnect your lines.