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What changed in RED ROBIN GOURMET BURGERS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RED ROBIN GOURMET BURGERS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+285 added−303 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in RED ROBIN GOURMET BURGERS INC's 2023 10-K

285 paragraphs added · 303 removed · 220 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+19 added−18 removed35 unchanged
Biggest changeWith the transition to a new leadership team in 2022, we have deprioritized new restaurant growth as we focus on other business initiatives and uses of capital. In 2022, we resumed our restaurant refresh and remodel program to keep our restaurants relevant and well-maintained. We continue to believe this type of investment presents an opportunity to provide compelling investment returns.
Biggest changeBeginning in 2022, we resumed our restaurant refresh and remodel program to keep our restaurants relevant and well-maintained. We continue to believe this type of investment presents an opportunity to provide compelling investment returns. We are conducting a thorough review and evaluation of all completed refreshes and remodels to gather learnings and measure consumer response.
We plan to offer the use of this survey tool multiple times during the year to gain feedback when key events occur, so we can quickly respond to suggestions and concerns when they arise. We believe that such a tool will not only assist us with workforce retention, but also enhance labor productivity over time.
We also plan to offer the use of this survey tool multiple times during the year to gain feedback when key events occur, so we can quickly respond to suggestions and concerns when they arise. We believe that such a tool will not only assist us with workforce retention, but also enhance labor productivity over time.
Restaurant Management From 2020 through 2022, our typical restaurant management team consisted of a General Manager, an assistant General Manager, one to two associate managers, and additional shift supervisors depending on restaurant sales volumes. We believe it is critical to operate our restaurants with a full complement of experienced, professional, and salaried restaurant management.
Restaurant Management From 2020 through 2022, our typical restaurant management team consisted of a General Manager, an assistant General Manager, one to two associate managers, and additional shift supervisors depending on restaurant sales volumes. We believe it is critical to operate our restaurants with a full complement of experienced and professional restaurant management.
We are also subject to federal regulation and state laws that regulate the offer and sale of franchises and substantive aspects of the franchisor-franchisee relationship. Various federal and state labor laws govern our relationship with our Team Members and can significantly impact our operating costs.
We are subject to federal regulation and state laws that regulate the offer and sale of franchises and substantive aspects of the franchisor-franchisee relationship. Various federal and state labor laws govern our relationship with our Team Members and can significantly impact our operating costs.
Red Robin not only meets the requirements but also maintains a higher-level designation as a Merchant and Service Provider. These PCI compliance standards, set by a consortium of the major credit card companies, require annual assessment to ensure certain levels of system security and procedures are in place to protect our Guests' credit card and other personal information.
Red Robin not only meets the requirements but also maintains a higher-level designation as a Merchant. These PCI compliance standards, set by a consortium of the major credit card companies, require annual assessment to ensure certain levels of system security and procedures are in place to protect our Guests' credit card and other personal information.
In order to provide the freshest ingredients and products and to maximize operating efficiencies between purchase and usage, each restaurant's management team determines the restaurant's daily usage requirements for food ingredients, products, and supplies, and accordingly, orders from approved suppliers, and distributors. The restaurant management team inspects deliveries to ensure that the products received meet our safety and quality specifications.
In order to provide fresh ingredients and products and to maximize operating efficiencies between purchase and usage, each restaurant's management team determines the restaurant's daily usage requirements for food ingredients, products, and supplies, and accordingly, orders from approved suppliers, and distributors. The restaurant management team inspects deliveries to ensure that the products received meet our safety and quality specifications.
We also use technology to interact with our Guests via our digital platforms, including our website, mobile Apps, loyalty platform, online ordering site, table top kiosks, Server handhelds, and Guest feedback systems, which provide actionable insights on the overall Guest experience. We utilize centralized financial, accounting, and human resource management systems to support our Restaurant Support Center and Company-owned restaurants.
We also use technology to interact with our Guests via our digital platforms, including our website, mobile Apps, loyalty platform, online ordering site, tabletop kiosks, Server handhelds, and Guest feedback systems, which provide actionable insights on the overall Guest experience. We utilize centralized financial, accounting, and human resource management systems to support our Restaurant Support Center and Company-owned restaurants.
Wilson joined Red Robin as Chief Financial Officer in November 2022. Mr. Wilson most recently served as Chief Financial Officer at Hopdoddy Burger Bar and Hibar Hospitality from 2018 until 2022. Prior to that, he was Vice President of Finance for Jamba Juice from 2016 until 2018. From 2011 to 2016, Mr.
Wilson joined Red Robin as Chief Financial Officer in November 2022. Mr. Wilson previously served as Chief Financial Officer at Hopdoddy Burger Bar and Hibar Hospitality from 2018 until 2022. Prior to that, he was Vice President of Finance for Jamba Juice from 2016 until 2018. From 2011 to 2016, Mr.
We specialize in customizing our menu items to meet our Guests' dietary needs and preferences and have received recognition from experts in the allergen community. In addition to burgers, which accounted for 61% of food sales in 2022, Red Robin serves an array of other mainstream favorites that appeal to our Guests.
We specialize in customizing our menu items to meet our Guests' dietary needs and preferences and have received recognition from experts in the allergen community. In addition to burgers, which accounted for 56% of food sales in 2023, Red Robin serves an array of other mainstream favorites that appeal to our Guests.
We refer to our fiscal years as 2022, 2021, and 2020 throughout this Annual Report on Form 10-K.
We refer to our fiscal years as 2023, 2022, and 2021 throughout this Annual Report on Form 10-K.
Our fiscal years, fiscal year end dates, and the number of weeks in each period are summarized in the table below: Fiscal Year Year End Date Number of Weeks in Fiscal Year Current and Prior Fiscal Years: 2022 December 25, 2022 52 2021 December 26, 2021 52 2020 December 27, 2020 52 Upcoming Fiscal Years: 2023 December 31, 2023 53 2024 December 29, 2024 52 Business Strategy The Company recently released its North Star five-point plan designed to enhance the Company's competitive positioning.
Our fiscal years, fiscal year end dates, and the number of weeks in each period are summarized in the table below: Fiscal Year Year End Date Number of Weeks in Fiscal Year Current and Prior Fiscal Years: 2023 December 31, 2023 53 2022 December 25, 2022 52 2021 December 26, 2021 52 Upcoming Fiscal Years: 2024 December 29, 2024 52 2025 December 28, 2025 52 Business Strategy In January of 2023, the Company released its North Star five-point plan designed to enhance the Company's competitive positioning.
Forward-looking statements may relate to, among other things: (i) our business objectives and strategic plans, including projected or anticipated growth, including in Guest traffic and revenue, planned improvements in operational efficiencies, gross margins, and expense management and enhancements to our restaurant environments and Guest engagement, including the anticipated impacts of innovations, improvements and enhanced marketing support for certain aspects of our business; (ii) our expectations about pricing strategy and average check size; (iii) our expectations of the competitiveness of the labor market and our ability to hire, train, and retain Team Members, including the success of our Managing Partner and Market Partner program and Team Member engagement efforts; (iv) anticipated capital investments and the results of such investments including in our restaurant refresh and remodel program and our digital ecosystem, information technology systems, our restaurant development program, and the anticipated related benefits; (v) our expectations about restaurant operating costs, including commodity and food prices and labor and energy costs; (vi) anticipated legislation and other regulation of our business; (vii) anticipated continued investments in our partnership with Donatos®; (viii) our expectations about anticipated uses of, and risks associated with future cash flows, liquidity, future capital expenditures and other capital deployment opportunities, and taxes; (ix) our expectations regarding competition; and (x) our expectations regarding demand and business recovery, consumer preferences, and consumer discretionary spending; (xi) our expectations regarding the implementation and anticipated benefits of our ESG, diversity, equity and inclusion and other initiatives; (xii) our ability to successfully implement our food safety programs, (xii) our ability to successfully implement our health and safety initiatives; (xiii) anticipated impacts of COVID-19; (xiv) the seasonality of our business; (xv) our ability to successfully implement, and our expectations regarding, our North Star five-point plan to enhance the Company’s competitive positioning; (xvi) our expectations and other statements regarding interest rates, commodity prices and other factors; (xvii) the expected impacts of government regulations on our operations and financial condition, and changes in such regulation; (xviii) the implementation of our restaurant management transition program, including anticipated benefits to our Guest traffic, community focus and results of operations; and (xviv) the other risks discussed under Risk Factors below.
Forward-looking statements may relate to, among other things: (i) our business objectives and strategic plans, including projected or anticipated growth, including in Guest traffic and revenue, growth strategies, planned improvements in operational efficiencies, gross margins, and 8 Table of Contents expense management and enhancements to our restaurant environments and Guest engagement, including the anticipated impacts of innovations, improvements, marketing and branding strategies, and changes to our loyalty program; (ii) our expectations about pricing strategy and average check size; (iii) our expectations of the competitiveness of the labor market and our ability to hire, train, and retain Team Members, as well as the success of our Managing Partner and Market Partner compensation program; (iv) anticipated capital investments and the results of such investments including in our restaurant refresh and remodel program and our digital ecosystem, information technology systems, our restaurant development program, and the anticipated related benefits; (v) our expectations about restaurant operating costs, including commodity and food prices and labor and energy costs; (vi) anticipated legislation and other regulation of our business; (vii) anticipated continued investments in our partnership with Donatos®; (viii) our expectations about anticipated uses of, and risks associated with future cash flows, liquidity, future capital expenditures and other capital deployment opportunities, and taxes; (ix) our expectations regarding competition; and (x) our expectations regarding demand, consumer preferences, and consumer discretionary spending; (xi) our expectations regarding the implementation and anticipated benefits of our ESG, diversity, equity and inclusion and other initiatives; (xii) our ability to successfully implement our food safety programs, (xii) our ability to successfully implement our health and safety initiatives; (xiii) the seasonality of our business; (xiv) our ability to successfully implement, and our expectations regarding, our North Star five-point plan to enhance the Company’s competitive positioning; (xv) our expectations and other statements regarding interest rates, commodity prices and other factors; (xvi) the expected impacts of government regulations on our operations and financial condition, and changes in such regulation; (xvii) the implementation of our restaurant management transition program, including anticipated benefits to our sales, Team Member performance and engagement, Guest traffic, community focus and results of operations; and (xiii) the other risks discussed under Risk Factors below.
Our franchisees are independent organizations to whom we provide certain support. See "Restaurant Franchise and Licensing Arrangements" for additional information about our franchise program. As of December 25, 2022, there were Red Robin restaurants in 38 states and one Canadian province. The Company operates its business as one operating and one reportable segment.
Our franchisees are independent organizations to whom we provide certain support. See "Restaurant Franchise and Licensing Arrangements" for additional information about our franchise program. As of December 31, 2023, there were Red Robin restaurants in 39 states and one Canadian province. The Company operates its business as one operating and one reportable segment.
Available Information We maintain a link to investor relations information on our website, ir.redrobin.com , where we make available, free of charge, our Securities and Exchange Commission ("SEC") filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We make available through this investor relations website, free of charge, our Securities and Exchange Commission ("SEC") filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
In support of this approach the compensation plan for field restaurant leaders will change significantly. A larger portion of the total compensation package for Managing Partners will be in the form of a monthly bonus linked to restaurant-level operating profit.
In support of this approach, beginning in 2024, the compensation plan for field restaurant leaders will change significantly. A larger portion of the total compensation package for Managing Partners will be in 3 Table of Contents the form of a monthly bonus linked to restaurant-level operating profit.
This Council meets with our Executive Team and Board of Directors on a periodic basis to provide recommendations and updates on our progress against our evolving DE&I objectives.
The DE&I Steering Council meets with the DE&I Committee, our Executive Team, and Board of Directors on a periodic basis to provide recommendations and updates on our progress against our evolving DE&I objectives.
Wilson served as Division CFO and Vice President of Finance at Bloomin’ Brands. 6 Table of Contents Sarah Mussetter. Ms. Mussetter joined the Company as Chief Legal Officer and Secretary in December 2022. She previously held the roles of Associate General Counsel and Vice President, Deputy General Counsel for the Company from 2011 to 2021.
Wilson served as Division CFO and Vice President of Finance at Bloomin’ Brands. Sarah Mussetter. Ms. Mussetter joined Red Robin as Chief Legal Officer and Secretary in December 2022. She previously held the roles of Associate General Counsel and Vice President, Deputy General Counsel for the Company from 2011 to 2021. Prior to joining the Company Ms.
Our restaurants are subject to various licensing requirements and other regulations by state, and local health, safety, fire, and other authorities, including licensing requirements, regulations for the sale of alcoholic beverages and food, and public health related indoor capacity restrictions. To date, we have been able to obtain and maintain all necessary licenses, permits, and approvals.
Our restaurants are subject to various licensing requirements and other regulations by state, and local health, safety, fire, and other authorities, including licensing requirements, regulations for the sale of alcoholic beverages and food, and public health related indoor capacity restrictions. We obtain and maintain necessary licenses, permits, and approvals to run our business.
We also compete with many other restaurant and retail establishments for Team Members. Seasonality Our business is subject to seasonal fluctuations. Sales in most of our restaurants are typically higher during the summer months and winter holiday season due to factors including our retail-oriented locations and family appeal.
We also compete with many other restaurant and retail establishments for Team Members. 7 Table of Contents Seasonality Our business is subject to seasonal fluctuations. Sales in most of our restaurants were historically higher during the spring and summer months and winter holiday season due to factors including our retail-oriented locations and family appeal.
Of our total cost of goods in 2022, ground beef represented approximately 15%, poultry represented approximately 12%, and potatoes represented 4 Table of Contents approximately 11%. We monitor the market for the primary commodities we purchase and extend contract positions when applicable in order to minimize the impact of fluctuations in price and availability.
Of our total cost of goods in 2023, ground beef represented approximately 14%, potatoes represented approximately 12%, and poultry represented approximately 11%. We monitor the market for the primary commodities we purchase and extend contract positions when applicable in order to minimize the impact of fluctuations in price and availability.
Additionally, we engage an independent auditing company to perform unannounced comprehensive food safety and sanitation assessments at least three times a year in all Company-owned and franchised restaurants. If an assessment identifies any gaps, a documented plan is required for any deficiency noted. This same follow-up requirement is in place for government regulatory inspections.
Additionally, we engage an independent auditing company to perform unannounced comprehensive food safety and sanitation assessments at least three times a year in all Company-owned and franchised restaurants. If an assessment identifies any gaps, a documented plan is required for any deficiency noted.
Unless otherwise provided in this Annual Report on Form 10-K, references to "Red Robin," "we," "us," "our", or the "Company" refer to Red Robin Gourmet Burgers, Inc. and our consolidated subsidiaries. As of the end of our fiscal year on December 25, 2022, there were 511 Red Robin restaurants, of which 414 were Company-owned and 97 were operated by franchisees.
Unless otherwise provided in this Annual Report on Form 10-K, references to "Red Robin," "we," "us," "our", or the "Company" refer to Red Robin Gourmet Burgers, Inc. and our consolidated subsidiaries. As of the end of our fiscal year on December 31, 2023, there were 506 Red Robin restaurants, of which 415 were Company-owned and 91 were operated by franchisees.
Beginning in 2023, we anticipate changing the typical restaurant management team to consist of a Managing Partner, an assistant General Manager, a kitchen manager, and associate managers or shift supervisors as appropriate dependent primarily on restaurant Sales volume. We expect this transition in restaurant management will occur in phases.
Beginning in 2023, we changed the typical restaurant management team to consist of a Managing Partner, an assistant General Manager, a kitchen manager, and service managers, associate managers, or shift supervisors, as appropriate, dependent primarily on restaurant Sales volume. This transition in restaurant management is occurring in phases.
Our compensation and performance evaluation systems are designed to compensate our Team Members fairly for their level of experience, team effort, and overall contribution to our business. We leverage our rewards to motivate our Team Members to do what is necessary in our mission to deliver a best-in-class Guest experience.
Compensation and performance evaluations are designed to compensate our Team Members fairly for their level of experience and overall contribution to our business. We leverage our rewards to motivate our Team Members to do what is necessary in our mission to deliver a best-in-class Guest experience. For our operations leaders we implemented a performance-based compensation program.
We welcome open, candid feedback to ensure Team Members feel heard and engaged and to better support the values important to each of our Team Members. We accomplish this through a variety of programs and forums, including town halls, virtual open forums, and one-on-one coaching, wellness and engagement meetings, and Team Member Voice surveys.
We welcome open, candid feedback to promote Team Members feeling heard and engaged and to better support the values important to each of our Team Members. We accomplish this through a variety of programs and forums, including Team Member engagement surveys, virtual open forums, one-on-one coaching, wellness and engagement meetings, Town Hall meetings, leadership conferences, and exit interviews.
We offer a selection of buns, including gluten free, sesame, brioche, and lettuce wraps, with a variety of toppings, including house-made sauces, crispy onion straws, sautéed mushrooms, several cheese choices, and a fried egg. All of our burgers are served with our all-you-can-eat Bottomless Steak Fries® or Guests may choose from other side options.
We offer a selection of buns, including gluten free, sesame, brioche, and lettuce wraps, with a variety of toppings, including house-made sauces, crispy onion straws, sautéed mushrooms, several cheese choices, and a fried egg. All of our burgers are served with a choice from eight all-you-can-eat bottomless sides from steak fries, to broccoli, to garlic fries.
As a result, our quarterly operating results may fluctuate significantly as a result of seasonality. Accordingly, results for any one quarter or year are not necessarily indicative of results to be expected for any other quarter or for any year, and comparable restaurant sales for any particular future period may vary.
As a result, our quarterly operating results may fluctuate significantly as a result of seasonality, and seasonality of sales may shift over time. Accordingly, results for any one quarter or year are not necessarily indicative of results to be expected for any other quarter or for any year.
During the COVID-19 pandemic, we took additional measures to protect our Team Members and Guests from infectious disease as well as comply with state and local protocols designed to maintain a healthy work environment. Diversity, Equity, and Inclusion ("DE&I") At Red Robin, our Guests and Team Members reflect the communities we serve and can always come as they are.
Since the COVID-19 pandemic, we have taken additional measures to protect our Team Members and Guests from infectious disease as well as comply with state and local protocols designed to maintain a healthy work environment. Diversity, Equity, and Inclusion ("DE&I") At Red Robin, we value everyone for who they are.
In 2022, we published our first sustainability report, which is available on our website at ir.redrobin.com. The contents of the sustainability report and our website are not incorporated by reference into this Form 10-K.
In 2023, we published our second sustainability report and Sustainability Accounting Standards Board (the "SASB") Restaurant Industry disclosures, which is available on our website at ir.redrobin.com. The contents of the sustainability report, our SASB Restaurant Industry disclosures and our website are not incorporated by reference into this Form 10-K.
We are also subject to certain guidelines under the Americans with Disabilities Act of 1990 7 Table of Contents and various state codes and regulations, which require restaurants and our brand to provide full and equal access to persons with physical disabilities.
The development and construction of new restaurants is also subject to compliance with applicable zoning, land use, and environmental regulations. We are also subject to certain guidelines under the Americans with Disabilities Act of 1990 and various state codes and regulations, which require restaurants and our brand to provide full and equal access to persons with physical disabilities.
Prior to joining the Company Ms. Mussetter worked for the law firm of Holme Roberts & Owen LLP (now Bryan Cave Leighton Paisner LLP). Most recently, Ms. Mussetter was SVP Deputy General Counsel for Skillsoft Corp., a learning application and technology company based in Denver, from September 2021 to December 2022. Wayne Davis. Mr.
Mussetter worked for the law firm of Holme Roberts & Owen LLP (now Bryan Cave Leighton Paisner LLP). Most recently, Ms. Mussetter was SVP Deputy General Counsel for Skillsoft Corp., a learning application and technology company, from September 2021 to December 2022. Jyoti Lynch. Ms. Lynch joined Red Robin as Chief Technology Officer in June 2023.
In 2022, we had an average check per Guest of $15.99. Average Guest check increased 10.5% compared to 2021. We believe our price-to-value relationship, featuring our innovative array of quality burgers, served with bottomless fries, differentiates us from our casual dining competitors and allows us to appeal to a broad base of middle income, multi-generational consumers.
In 2023, we had an average check per Guest of $17.08. Average check per Guest increased 6.8% compared to 2022. We believe our price-to-value relationship, featuring our innovative array of quality burgers, "instaworthy" beverages, and over 30 bottomless items, differentiates us from our casual dining competitors and allows us to appeal to a broad base of middle income, multi-generational consumers.
As part of our human capital management strategy, we focus on the following areas: Our Team Members As of December 25, 2022, we had 24,335 Team Members consisting of 23,908 Team Members at Company-owned restaurants and 427 Restaurant Support Center and field-based Team Members.
As part of our human capital management strategy, we focus on the following areas: Our Team Members As of December 31, 2023, we had 22,516 Team Members, consisting of 22,149 Team Members at Company-owned restaurants and 367 Restaurant Support Center and field-based Team Members.
These technologies are integrated with our point-of-sale system to provide daily, weekly, and period-to-date reporting that is important for our Operators to run an efficient and high-performing restaurant.
These technologies include (but are not limited to) labor management systems, sales and forecasting tools, inventory management, and operational execution technologies. These technologies are integrated with our point-of-sale system to provide daily, weekly, and period-to-date reporting that is important for our Operators to run an efficient and high-performing restaurant.
In addition, we compete to attract Guests for off-premises dining occasions, including online ordering, delivery, to-go, and catering. The number, size, and strength of competitors vary by region, concept, market, and even restaurant. We compete on the basis of taste, quality, price of food and related Guest value, Guest service, ambiance, location, and overall dining experience.
The number, size, and strength of competitors vary by region, concept, market, and even restaurant. We compete on the basis of taste, quality, price of food and related Guest value, Guest service, ambiance, location, and overall dining experience.
These laws govern minimum wage requirements, overtime pay, tip credits, paid leave, meal and rest breaks, unemployment tax rates, health care and other benefits, workers' compensation rates, citizenship or residency requirements, child labor regulations, and discriminatory conduct.
These laws govern minimum wage requirements, overtime pay, tip credits, paid leave, meal and rest breaks, unemployment tax rates, health care and other benefits, workers' compensation rates, citizenship or residency requirements, child labor regulations, and discriminatory conduct. Available Information We use our investor relations website, ir.redrobin.com, as a channel of distribution of Company information.
Digital enhancements and loyalty improvements continue to be an iterative effort and we expect to continue to implement ongoing enhancements that benefit our Guests and Team Members. In 2023 and 2024, we expect to begin infrastructure modernization efforts to improve performance and stability of current and future technology solutions.
In 2024, we continue to make iterative enhancements to the digital and loyalty experience that benefit our Guests and Team Members. Beginning in 2024, we expect to begin implementing infrastructure modernization efforts to improve 5 Table of Contents performance and stability of current and future technology solutions.
To maximize our purchasing efficiencies and obtain the best possible prices for our high-quality ingredients, products, and supplies, our centralized purchasing team negotiates supply agreements that may include fixed price contracts that can vary in term or formula-based pricing agreements that can fluctuate on changes in raw material commodity pricing.
This same follow-up requirement is in place for government regulatory inspections. 4 Table of Contents To enhance our purchasing efficiencies and obtain competitive prices for our high-quality ingredients, products, and supplies, our centralized purchasing team negotiates supply agreements that may include fixed price contracts that can vary in term or formula-based pricing agreements that can fluctuate on changes in raw material commodity pricing.
We also offer burgers made with other proteins including chicken breasts (grilled or fried), turkey patties, as well as a proprietary vegetarian patty and the Impossible™ plant-based burger patty.
Our menu features our signature product, a line of Gourmet Burgers with layers of fresh ingredients and premium quality, fresh ground beef. We also offer burgers made with other proteins including chicken breasts (grilled or fried), turkey patties, as well as a proprietary vegetarian patty and the Impossible™ plant-based burger patty.
We are conducting a thorough review and evaluation of all completed refreshes and remodels to gather learnings and measure consumer response. When complete, we expect this evaluation will inform our go forward design criteria, investment level, and pace of refreshes and remodels. In 2020, we announced our partnership with Donatos®, a high-quality pizza brand "nested" inside of Red Robin restaurants.
When complete, we expect this evaluation will inform our go forward design criteria, investment level, and pace of refreshes and remodels. In 2020, we announced our partnership with Donatos ® , a high-quality pizza brand "nested" inside of Red Robin restaurants. Through this partnership, our restaurants prepare and serve Donatos ® branded pizzas to our dine-in and off-premises Guests.
We qualify and require outside third party certification audits on an annual basis for all of our food and beverage suppliers, as well as growers. Their certifications must comply with the Global Food Safety Initiative, if applicable. Our restaurant leaders must pass and maintain an accredited manager-level food safety and sanitation certification.
We qualify and require outside third party certification audits on an annual basis for all of our food and beverage suppliers (excluding alcoholic beverages, which are not held to the same auditing standards), as well as growers. Their certifications must comply with the Global Food Safety Initiative, if applicable.
Strict food safety protocols, including safe cooking temperature requirements, food handling procedures, cooling procedures, and frequent temperature and quality checks, ensure the safety and quality of the food we serve in our restaurants.
Our restaurant leaders must pass and maintain an accredited manager-level food safety and sanitation certification. We maintain strict food safety protocols, including safe cooking temperature requirements, food handling procedures, cooling procedures, and frequent temperature and quality checks, for the safety and quality of the food we serve in our restaurants.
This transition marks a major change in our operational approach for the future. Expectations for local restaurant leadership will be to “own” all aspects of the profit and loss of the restaurant. Decision making on a number of P&L related activities will now be driven by local leadership with the support of multi-unit field operations leaders when appropriate.
This transition marks a major change in our operational approach with expectations for local restaurant leadership to behave as if they are the “owner” of the restaurant. Decision making on a number of activities is now being driven by local leadership with the support of multi-unit field operations leaders when appropriate.
Restaurant Concept With our menu of Gourmet Burgers and American favorites, attractive atmosphere, and playful environment that connects friends and family, our brand not only carries great memories for our most loyal Guests but also appeals to a broad demographic. Our Guests seek connection with friends and family across a diverse and multi-generational demographic.
Restaurant Concept With our menu of Gourmet Burgers and American favorites, creative beverage menu, over 30 bottomless items, energetic atmosphere, and playful environment that connects families of all kinds, our brand not only carries great memories for our most loyal Guests but also appeals to a broad demographic.
Competition The restaurant industry is highly competitive, and our Guests may choose to purchase food at supermarkets or other food retailers. Although, for some occasions, we compete against other segments of the restaurant industry, including quick-service and fast-casual restaurants, our primary competition is with other sit-down, casual dining restaurants within the full service dining segment.
Although, for some occasions, we compete against other segments of the restaurant industry, including quick-service and fast-casual restaurants, our primary competition is with other sit-down, casual dining restaurants within the full-service dining segment. In addition, we compete to attract Guests for off-premises dining occasions, including online ordering, delivery, to-go, and catering.
We believe our trademarks, service marks, and other intellectual property rights have significant value and are important to our brand building efforts and the marketing of our restaurant concept.
We believe our trademarks, service marks, and other intellectual property rights have significant value and are important to our brand building efforts and the marketing of our restaurant concept. Government Regulation We are subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content, and menu labeling.
In 2022, we established a 10-member Diversity, Equity, and Inclusion Council to develop a long-term strategy and plan for our Company. This group meets on a monthly basis to assess opportunities for the Company to improve its efforts to create a best-in-class work environment that thrives on inclusion and diversity of thought.
In 2023, we established a DE&I Steering Council made up of senior leaders of the organization to establish an overarching long-term strategy and plan for our Company. The DE&I Committee meets routinely to assess opportunities for the Company to improve its efforts to create a best-in-class work environment that thrives on inclusion and diversity of thought.
We also engage security assessors and consultants to review and advise us on our other data security practices with respect to protection of other sensitive personal information that we obtain from Guests and Team Members. Marketing and Advertising We build brand equity and awareness through a marketing mix inclusive of paid, owned and earned media.
We engage external security assessors and consultants to review and advise us on our other data security practices with respect to protection of other sensitive personal information that we obtain from Guests and Team Members. Marketing and Advertising Our marketing strategy has been designed to foster awareness, elevate brand equity, encourage consideration, and ultimately drive traffic and sales.
Health and Safety We operate with the health, safety, and well-being of Red Robin's Team Members, Guests, and communities in mind, as well as federal, state and local regulatory requirements.
We also believe this program rewards our Partners for making the right day-to-day decisions to satisfy our Guests and meet our financial objectives. Health and Safety We operate with the health, safety, and well-being of Red Robin's Team Members, Guests, and communities in mind, as well as federal, state and local regulatory requirements.
We accept electronic payment cards from our Guests for payment in our restaurants. We also receive and maintain certain personal information about our Guests and Team Members.
In 2024, we also expect to launch a new loyalty program, transitioning to a points-based system to reward our most loyal guests. We accept electronic payment cards from our Guests for payment in our restaurants. We also receive and maintain certain personal information about our Guests and Team Members.
We are also subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content, and menu labeling. Our collection or use of personal information about Guests or our Team Members is regulated at the federal and state levels, including the California Consumer Privacy Act.
Our collection or use of personal information about Guests or our Team Members is regulated at the federal and state levels, including the California Consumer Privacy Act.
We champion a culture of inclusion, diversity of thought, perspective and experience, all vital ingredients of a winning recipe. We have a successful Women's Excellence program, a Company-wide resource group to support and inspire Team Members through development, networking, leadership, and other resources while fueling a culture of opportunity and diversity.
We have a successful Women's Excellence program, a Company-wide resource group to support and inspire Team Members through development, networking, leadership, and other resources while fueling a culture of opportunity and diversity. In 2022, we established a Diversity, Equity, and Inclusion Committee to develop a mission and vision for DE&I from a Team Member’s point of view.
Leaders who are effective 3 Table of Contents at driving higher levels of monthly operating profit will receive higher monetary rewards. This model also supports our intent to improve our level of community focus within the local regions we serve.
Leaders who are effective at driving higher levels of performance will receive higher monetary rewards over time. This model also supports our intent to improve our level of community focus within the local regions we serve. Managing Partners will have the flexibility and resources to drive localized activities aimed at nurturing relationships within their community to drive Guest traffic.
As of December 25, 2022, approximately 49% of our estimated annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through the end of 2023. Restaurant Development, Remodels, and Donatos® In 2020, Red Robin reestablished a new restaurant development program as part of its long-term growth strategy.
As of December 31, 2023, approximately 50% of our estimated annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through the end of 2024.
Human Capital Management We strive to ensure our people, who we refer to as Team Members, live out and benefit from our core values: Integrity, Fun, Unbridled Hospitality, and High Performance. We believe that when we live out these values, we win together! Winning together is our core objective.
Our sustainability efforts continue to evolve, and we intend to continue to adapt our sustainability approach to integrate with our North Star strategic priorities. Human Capital Management We strive to ensure our people, who we refer to as Team Members, live out and benefit from our core values: Integrity, Fun, Unbridled Hospitality, and High Performance.
However, certain commodities, primarily cheese, bacon and ground beef, have historically been subject to market price fluctuations. During the COVID-19 pandemic, we experienced distribution disruptions, commodity cost inflation, and certain food and supply shortages.
During the COVID-19 pandemic, we experienced distribution disruptions, commodity cost inflation, and certain food and supply shortages.
We nurture this culture by ensuring that our people are front and center, that they have a clear understanding of what is expected, and that people love working for our brand. We strive to provide our people with a great place to work, opportunities for growth, and competitive compensation for their contributions.
We believe that when we live out these values, we win together! Winning together is our core objective. We nurture this culture by ensuring that our people are front and center, that they have a clear understanding of what is expected, and that people love working for our brand.
Our values empower and motivate our Team Members and create a Company culture that we collectively take pride in every day. We also provide 2 Table of Contents our Team Members the opportunity to grow and develop, promote health and safety, and value inclusion, diversity, and engagement.
We also provide our Team Members the opportunity to grow and develop, promote health and safety, and value inclusion, diversity, and engagement.
ESG: Ongoing Commitment to Sustainability Red Robin is a company that cares; we strive to make the world a better place for our Team Members, our community, and our planet.
ESG: Ongoing Commitment to Sustainability Red Robin is a company that cares; we strive to impact Guests, Team Members, communities, and our planet for the better. We continued our sustainability journey by completing a materiality assessment, designed to help us identify and understand the ESG topics that matter most to our stakeholders.
The management team of each restaurant is responsible for the day-to-day operation of that restaurant, including hiring, training, and coaching of Team Members, as well as operating results. Our typical restaurant employs approximately 57 Team Members, most of whom work part-time on an hourly basis.
Our expectation is this approach will help to drive both top and bottom-line results and engagement. The management team of each restaurant is responsible for the day-to-day operation of that restaurant, including hiring, training, and coaching of Team Members, as well as operating results.
Our two largest franchisees own 41 restaurants located in Eastern and Central Pennsylvania, Michigan and Ohio. Franchise Compliance Assurance We actively work with and monitor our franchisees' performance to help them develop and operate their restaurants in compliance with Red Robin's standards, systems, and procedures.
Franchise Compliance Assurance We actively work with and monitor our franchisees' performance to help them develop and operate their restaurants in compliance with Red Robin's standards, systems, and procedures. During the restaurant development phase, we review the franchisee's site selection and provide the franchisee with our prototype building plans.
During the restaurant development phase, we review the franchisee's site selection and provide the franchisee with our prototype building plans. We provide trainers to assist the franchisee in opening the restaurant for business. We advise the franchisee on all menu items, management training, and equipment and food purchases.
We provide trainers to assist the franchisee in opening the restaurant for business. We advise the franchisee on all menu items, management training, and equipment and food purchases. We also exchange best operating practices with our franchisees as we strive to improve our operating systems while attaining a high level of franchisee participation.
We also exchange best operating practices with our franchisees as we strive to improve our operating systems while attaining a high level of franchisee participation. Information Systems and Digital Technology We rely on information systems and digital technology in all aspects of our operations, striving to create seamless Guest experiences and enable Operations to deliver on our Brand commitments.
Information Systems and Digital Technology We rely on information systems and digital technology in all aspects of our operations, striving to create seamless Guest experiences and enable Operations to deliver on our Brand commitments. In our restaurants, these technologies are designed to facilitate operational efficiency and support the Guest experience.
In late 2022, we partnered with an outside vendor to launch a new Team Member engagement survey across our enterprise. Launch is set for mid-2023. We plan to use this information to gather insights from our Team Member population and identify opportunities to better meet their needs.
In 2022, we partnered with an outside vendor and launched a new Team Member engagement survey to all field Team Members in 2023. We have utilized this information to gather insights from our Team Member population and have created action plans from this data to continue to enhance our workplace.
Under our new 2023 plan we expect each Partner will earn a base salary plus a performance bonus, which represents a percentage of each of their respective restaurant’s operating profit.
Our individual restaurant managers and multi-restaurant operators are now referred to as "Managing Partners" and "Market Partners," respectively. Under the new compensation plan for these field Team Members, they will earn a base salary plus a performance bonus, which represents a percentage of each of their respective restaurant’s operating profit.
Through this partnership, our restaurants prepare and serve Donatos® branded pizzas to our dine-in and off-premises Guests. Pursuant to a licensing arrangement, we pay royalties on sales of Donatos® pizza products to Donatos®. As of December 25, 2022, we have introduced Donatos® pizzas to 245 restaurants.
Pursuant to a licensing arrangement, we pay royalties on sales of Donatos ® pizza products to Donatos ® . As of December 31, 2023, we have introduced Donatos ® pizzas to 273 restaurants. We plan to continue implementation of Donatos ® and anticipate eventually operating Donatos ® in substantially all Red Robin restaurants.
Executive Officers The following table sets forth information about our current executive officers: Name Age Position G. J. Hart 65 President, Chief Executive Officer, and Member of the Board of Directors Todd Wilson 45 Chief Financial Officer Sarah Mussetter 44 Chief Legal Officer and Secretary Wayne Davis 60 Chief People Officer G.J. Hart. Mr.
Hart 66 President, Chief Executive Officer, and Member of the Board of Directors Todd Wilson 46 Chief Financial Officer Sarah Mussetter 45 Chief Legal Officer and Secretary Jyoti Lynch 52 Chief Technology Officer Meghan Spuler 43 Chief People Officer Kevin Mayer 54 Chief Marketing Officer G.J. Hart. Mr.
Davis joined Red Robin as Chief People Officer in November 2021. Prior to joining the Company he served as Senior Vice President of Human Resources at Comcast/NBC Universal from June 2009 to January 2021, and Vice President of Human Resources at YRC Worldwide from June 2005 to June 2009.
Spuler joined Red Robin as Chief People Officer in December 2023. Prior to joining the Company, she held the roles of Chief People Officer of Eckerd Connects from 2021 to 2023. From 2016 to 2021, Ms. Spuler served as Director of Human Resources, Senior Director of Human Resources, and Vice President of Human Resources for Bloomin' Brands. Kevin Mayer. Mr.
We expect to change our legacy program because we believe that providing each Partner with a significant stake in our business will attract and retain the best talent in the industry. We also believe that this program rewards our Partners for making the right day-to-day decisions to satisfy our Guests and meet our financial objectives.
We changed our legacy program because we believe providing each Partner with a direct and uncapped financial incentive will attract and retain the best talent in the industry and incentivizes each Partner to take action to drive growth in the restaurant or market they manage.
Removed
We pride ourselves on our Gourmet Burgers and other mainstream favorites served in a casual, playful atmosphere. Our menu features our signature product, a line of Gourmet Burgers made from premium quality, fresh ground beef. To complement our best-selling Gourmet Burgers, we offer an everyday-value line of Red's Tavern Double® burgers, and Red Robin's Finest line made with premium toppings.
Added
Our Guests enjoy the playful spirit of our experience and the comfort they feel with friends and family across a diverse and multi-generational demographic. We pride ourselves on our Gourmet Burgers and other mainstream favorites served in a casual, playful atmosphere.
Removed
We are beginning to undertake a more formal and robust sustainability journey with meaningful goals and a commitment to align with the industry and are informed by experts including the Sustainability Accounting Standards Board (the "SASB"). We will continue to adapt our sustainability approach integrated with our North Star strategic priorities.
Added
We strive to provide our people with a great place to work, opportunities for growth, and competitive compensation for their contributions. Our values empower 2 Table of Contents and motivate our Team Members and create a Company culture that we collectively take pride in every day.
Removed
We focus on General Manager tenure in restaurants and its positive link to Guest traffic, overall Guest satisfaction, and Team Member turnover trends. Our General Manager turnover during 2022 was 20.9%, and 72.0% of General Managers have been managing their current restaurant for a year or more. None of our Team Members are covered by a collective bargaining agreement.
Added
We are committed to combining the key ingredients of diverse identities, perspectives, and experiences to create our own special seasoning of Unbridled Hospitality. By respecting and supporting our Team Members, our Guests, and our Communities, we all win together.
Removed
For our field operations leaders we anticipate implementing a new performance-based manager compensation program. Our individual restaurant managers and multi-restaurant operators, are now referred to as "Managing Partners" and "Market Partners," respectively.
Added
Our typical restaurant employs 40 to 70 Team Members, most of whom work part-time on an hourly basis.
Removed
Managing Partners will have the flexibility and resources to drive localized activities aimed at nurturing relationships within the community to drive Guest traffic. It is our expectation that this approach will help to drive both top and bottom-line results.
Added
Restaurant Development, Remodels, and Donatos ® With the transition to a new leadership team and focus on the North Star plan in 2022 and 2023, we deprioritized new restaurant growth in the short-term as we focus on other business initiatives and uses of capital.
Removed
We plan to continue implementation of Donatos® to additional restaurants in 2023 and anticipate eventually operating Donatos® in substantially all Red Robin restaurants. We invested $6.1 million and $17.1 million in the Donatos® expansion in fiscal 2022 and 2021, respectively.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include but are not limited to: extended periods of inclement weather which may affect Guest visits as well as limit the availability and cost of key commodities such as beef, poultry, potatoes, and other items that are important ingredients in our products; material disruptions in our supply chain; changes in borrowings and interest rates; changes to accounting methods or principles; impairment of long-lived assets, including goodwill, and losses on restaurant closures; and costs from natural disasters and repairs to damaged or lost property.
Biggest changeThese events may also impact the cost and availability of key commodities such as beef, poultry, potatoes, and other important ingredients in our products; cause material disruptions in our supply chain; impact borrowings and interest rates; cause damage to or closure of restaurants, or result in lost opportunities for our restaurants. Moreover, our business fluctuates seasonally.
Our restaurants compete on the basis of a varied menu and feature burgers, salads, soups, appetizers, other entrees, desserts, and our signature alcoholic and non-alcoholic beverages, and we are in the process of rolling out Donatos® pizza to our restaurants. Our continued success depends, in part, upon the continued popularity of these foods and this style of dining.
Our restaurants compete on the basis of a varied menu and feature burgers, salads, soups, appetizers, other entrees, desserts, and our signature alcoholic and non-alcoholic beverages, and we are in the process of rolling out Donatos® pizza to our restaurants. Our success depends, in part, upon the continued popularity of these foods and this style of dining.
For example, although we require all of our Team Members to provide us with the government-specified documentation evidencing their employment eligibility, some of our Team Members, without our knowledge, may not meet federal citizenship or residency requirements, which could lead to a disruption in our work force.
For example, although we require all Team Members to provide us with the government-specified documentation evidencing their employment eligibility, some Team Members, without our knowledge, may not meet federal citizenship or residency requirements, which could lead to a disruption in our work force.
The global and domestic economic environment may negatively affect frequency of Guest visits and average ticket spend at our restaurants, which would negatively affect our revenues and our results of operations. The global and domestic economic environment affects the restaurant industry and may negatively affect us directly and indirectly through our customers, distributors, and suppliers.
The global and domestic economic and geopolitical environment may negatively affect frequency of Guest visits and average ticket spend at our restaurants, which would negatively affect our revenues and our results of operations. The global and domestic economic and geopolitical environment affects the restaurant industry and may negatively affect us directly and indirectly through our customers, distributors, and suppliers.
We are subject to laws relating to information security, privacy, cashless payments, consumer credit, and fraud. Additionally, an increasing number of government and industry groups have established laws and standards for the protection of personal and health information.
We are subject to laws and regulations relating to information security, privacy, cashless payments, consumer credit, and fraud. Additionally, an increasing number of government and industry groups have established laws and standards for the protection of personal and health information.
This reliance has grown since the onset of the COVID-19 pandemic as we have had to rely to a greater extent on systems such as online ordering, contactless payments, online reservations, systems supporting a remote workforce.
This reliance has grown since the onset of the COVID-19 pandemic as we have had to rely to a greater extent on systems such as online ordering, contactless payments, online reservations, and systems supporting a remote workforce.
We may be subject to a variety of evolving threats, including but not limited to social engineering, such as phishing, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, supply-chain attacks, software bugs, server malfunctions and large-scale, complex automated attacks that can evade detection for long periods of time.
We continue to be subject to a variety of evolving threats, including but not limited to social engineering, such as phishing, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, supply-chain attacks, software bugs, server malfunctions and large-scale, complex automated attacks that can evade detection for long periods of time.
Our image and reputation and the image and reputation of other franchisees may suffer materially, and system-wide sales could significantly decline if our franchisees do not operate restaurants according to our standards. 18 Table of Contents We are subject to federal and state laws that regulate the offer and sale of franchises and aspects of the licensor-licensee relationship.
Our image and reputation and the image and reputation of 17 Table of Contents other franchisees may suffer materially, and system-wide sales could significantly decline if our franchisees do not operate restaurants according to our standards. We are subject to federal and state laws that regulate the offer and sale of franchises and aspects of the licensor-licensee relationship.
Many of our competitors are expanding their use of social media and new social media platforms are rapidly being developed, potentially making more traditional social media platforms obsolete and making it challenging for us to differentiate our social media messaging. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal.
Many of our competitors are expanding their use of social media and new social media platforms are rapidly being developed, potentially making more traditional social media platforms obsolete and making it challenging for us to differentiate our social media messaging. As a result, we need to continuously innovate and develop our social media strategies to maintain broad appeal.
As part of our marketing efforts, we rely on an omni-channel creative strategy including increased social and digital engagement platforms, including Facebook®, Instagram®, and Twitter® to attract and retain Guests. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal.
As part of our marketing efforts, we rely on an omni-channel creative strategy including increased social and digital engagement platforms, including Facebook®, Instagram®, and Twitter® to attract and retain Guests. As a result, we need to continuously innovate and develop our social media strategies to maintain broad appeal.
The market price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes in financial estimates by research analysts with respect to us or others in the restaurant industry, announcements of significant transactions (including mergers or acquisitions, divestitures, joint ventures or other strategic initiatives) by us or others in the restaurant industry, and the COVID-19 pandemic.
The market price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes in financial estimates by research analysts with respect to us or others in the restaurant industry, and announcements of significant transactions (including mergers or acquisitions, divestitures, joint ventures or other strategic initiatives) by us or others in the restaurant industry.
If our franchisees fail to maintain the appropriate level of PCI compliance or they experience a security breach, it could negatively impact their business operations, and we could face a loss of or reduction in royalties or other payments they are required to remit to us and it could adversely affect our reputation and Guest confidence.
If our franchisees fail to maintain the appropriate level 11 Table of Contents of PCI compliance or they experience a security breach, it could negatively impact their business operations, and we could face a loss of or reduction in royalties or other payments they are required to remit to us and it could adversely affect our reputation and Guest confidence.
The insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack. We also use information technology systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements.
The insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack. 12 Table of Contents We also use information technology systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements.
Key members of our senior executive management team are central to our success and difficult to replace. We may be unable to retain them or attract other highly qualified senior executives, particularly if we do not offer competitive employment terms.
Key members of our senior executive management team are central to our success and difficult to replace. We may be unable to retain them or attract other highly qualified senior executives, particularly if we do not offer 16 Table of Contents competitive employment terms.
As a result, if we do not appropriately manage our social media strategies, our marketing efforts in this area may not be successful and any failure (or perceived failure) to effectively respond to negative or potentially damaging social media chatter, 14 Table of Contents whether accurate or not, could damage our reputation, negatively impacting our restaurant sales and financial performance.
As a result, if we do not appropriately manage our social media strategies, our marketing efforts in this area may not be successful and any failure (or perceived failure) to effectively respond to negative or potentially damaging social media chatter, whether accurate or not, could damage our reputation, negatively impacting our restaurant sales and financial performance.
Shifts in consumer preferences away from this cuisine or dining style could have a material adverse effect on our future profitability. In addition, competitors' use of significant advertising and food discounting could influence our Guests' dining choices.
Shifts in consumer preferences away from this cuisine or dining style could have a material adverse effect on our future profitability. In addition, competitors' use of significant advertising and food 13 Table of Contents discounting could influence our Guests' dining choices.
Our trademarks could be infringed in ways that leave us without redress, such as by imitation or by filings by others in jurisdictions where we are not currently 20 Table of Contents registered. In addition, we rely on trade secrets and proprietary know-how in operating our restaurants, and we employ various methods to protect these trade secrets and proprietary know-how.
Our trademarks could be infringed in ways that leave us without redress, such as by imitation or by filings by others in jurisdictions where we are not currently registered. In addition, we rely on trade secrets and proprietary know-how in operating our restaurants, and we employ various methods to protect these trade secrets and proprietary know-how.
In addition, we rely on our Team Members to accurately disclose the full amount of tips received, and we based our FICA tax reporting on the amounts provided to us by such tipped Team Members. Inaccurate Team Member FICA tax reporting could subject us to monetary liabilities.
In addition, we rely on our Team Members to accurately disclose the full amount of tips received, and we base our FICA tax reporting on the amounts provided to us by such tipped Team Members. Inaccurate FICA tax reporting could subject us to monetary liabilities.
Moreover, our business fluctuates seasonally. Prior to the onset of the COVID-19 pandemic, sales in most of our restaurants have been higher during the summer months and winter holiday season. As a result, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly as a result of seasonality and the factors discussed above.
Prior to the onset of the COVID-19 pandemic, sales in most of our restaurants have been higher during the summer months and winter holiday season. As a result, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly as a result of seasonality and the factors discussed above.
As a result of our geographic concentration, negative publicity regarding any of our restaurants in the Western United States, as well as regional differences in the legal, regulatory, and litigation environment, could have a 17 Table of Contents material adverse effect on our business and operations, as could other regional occurrences such as local strikes, energy shortages, or increases in energy prices, droughts, earthquakes, fires, or other natural disasters.
As a result of our geographic concentration, negative publicity regarding any of our restaurants in the Western United States, as well as regional differences in the legal, regulatory, and litigation environment, could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes, regional cost-of-living increases, energy shortages, or increases in energy prices, droughts, earthquakes, fires, or other natural disasters.
Delays or failures in opening new restaurants, or the inability to profitably operate them once opened, could materially and adversely affect our planned growth. 16 Table of Contents The success of our expansion strategy and the success of new restaurants depends upon numerous factors, many of which are beyond our control, including the following: • changes to or volatility in the macroeconomic environment nationally and regionally, which could affect restaurant-level performance and influence our decisions on the rate of expansion, timing, and the number of restaurants to be opened; • competition in our markets and general economic conditions that may affect consumer spending or choice; • our ability to locate, hire, train, and retain qualified operating Team Members to staff our new restaurants, especially our Managing Partners and Market Partners; • identification of and ability to secure an adequate supply of available and suitable restaurant sites; • timely adherence to development schedules; • cost and availability of capital to fund restaurant expansion and operation; • negotiation of favorable lease and construction terms; • the availability and cost of construction materials and labor; • our ability to manage construction and development costs of new restaurants; • unforeseen environmental problems with new locations; • securing required governmental approvals and permits, including liquor licenses, in a timely manner or at all; • our ability to attract and retain Guests; • weather, natural disasters, and other calamities; and • our ability to operate at acceptable profit margins.
The success of our expansion strategy and the success of new restaurants depends upon numerous factors, many of which are beyond our control, including the following: • changes to or volatility in the macroeconomic environment nationally and regionally, which could affect restaurant-level performance and influence our decisions on the rate of expansion, timing, and the number of restaurants to be opened; • competition in our markets and general economic conditions that may affect consumer spending or choice; • our ability to locate, hire, train, and retain qualified operating Team Members to staff our new restaurants, especially our Managing Partners and Market Partners; • identification of and ability to secure an adequate supply of available and suitable restaurant sites; • timely adherence to development schedules; • cost and availability of capital to fund restaurant expansion and operation; • negotiation of favorable lease and construction terms; 15 Table of Contents • the availability and cost of construction materials and labor; • our ability to manage construction and development costs of new restaurants; • unforeseen environmental problems with new locations; • securing required governmental approvals and permits, including liquor licenses, in a timely manner or at all; • our ability to attract and retain Guests; • weather, natural disasters, and other calamities; and • our ability to operate at acceptable profit margins.
We have registered or filed applications for trademarks for these names and logos, among others, with the United States Patent and Trademark Office and in Canada and we have applied to register various trademarks in certain other international jurisdictions.
We have registered or filed applications 19 Table of Contents for trademarks for these names and logos, among others, with the United States Patent and Trademark Office and in Canada and we have applied to register various trademarks in certain other international jurisdictions.
As of the end of 2022, approximately 49% of our estimated 2023 annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through 2023.
As of the end of 2023, approximately 50% of our estimated 2024 annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through 2024.
If we have experienced, or in the future experience, a security breach, we could become subject to claims, lawsuits, or other proceedings for purportedly fraudulent transactions arising out of the theft of credit or debit card information, compromised security and information systems, failure of our employees to comply with applicable laws, the unauthorized acquisition or use of such information by third parties, or other similar claims.
We have in the past been subject, and we could in the future become subject, to claims, lawsuits, or other proceedings for purportedly fraudulent transactions arising out of the theft of credit or debit card information, compromised security and information systems, failure of our employees to comply with applicable laws, the unauthorized acquisition or use of such information by third parties, or other similar claims.
For example, California enacted legislation that increased its minimum wage through a series of annual rate increases, from $10.50 an hour in January 2017 to $15 an hour in January 2022, and some California localities currently mandate wages higher than $15 an hour.
For example, California enacted legislation that increased its minimum wage through a series of annual rate increases, from $10.50 an hour in January 2017 to $16 an hour in January 2024, and some California localities currently mandate wages higher than the state minimum.
Our business is subject to various federal, state, and local government laws and regulations, including, among others, those relating to our employees, public health and safety, food safety, alcoholic beverage control, public accommodations, financial and disclosure reporting and controls, and consumer health regulations, including those pertaining to nutritional content and menu labeling such as the Affordable Care Act, which requires restaurant companies such as ours to disclose calorie information on their menus.
Our business is subject to various federal, state, and local government laws and regulations, including, among others, those relating to our employees, public health and safety, food safety, alcoholic beverage control, public accommodations, data privacy and security, securities regulation, and consumer health regulations, including those pertaining to nutritional content and menu labeling such as the Affordable Care Act, which requires restaurant companies such as ours to disclose calorie information on their menus.
Changes to our operations structure and compensation, service model, Guest experience and cooking platform, supply chain and vendors, and Guest engagement may not achieve the business growth and results we expect, which may negatively affect Guest satisfaction, Guest traffic, sales, or profits.
Changes to our operations structure and compensation, service model, Guest experience and cooking platform, supply chain and vendors, marketing and branding strategies, loyalty program, technology, and Guest engagement may not achieve the business growth and results we expect, which may negatively affect Guest satisfaction, Guest traffic, sales, profits, or liquidity.
Various factors beyond our control, including adverse weather conditions, governmental regulation and monetary policy, potential imposition of tariffs on imports from other countries, product availability, recalls of food products, and seasonality, as well as the effects of the current macroeconomic environment on our suppliers, may affect our commodity costs or cause a disruption in our supply chain.
Various factors beyond our control, including adverse weather conditions, governmental regulation and monetary policy, trade barriers and import tariffs, product availability, recalls of food products, and seasonality, as well as the effects of the current macroeconomic environment on our suppliers, may affect our commodity costs or cause a disruption in our supply chain.
As of December 25, 2022, a total of 166 or 40% of our 414 Company-owned restaurants, representing 49% of restaurant revenues, were located in the Western United States (i.e., Arizona, California, Colorado, Nevada, Oregon, Idaho, New Mexico, Utah, and Washington state).
As of December 31, 2023, a total of 167 or 40% of our 415 Company-owned restaurants, representing 49% of restaurant revenues, were located in the Western United States (i.e., Arizona, California, Colorado, Nevada, Oregon, Idaho, New Mexico, Utah, and Washington state).
Increasing competition in the market for Team Members may increase our labor costs, including by requiring us to take additional measures to ensure that our compensation and benefits for Team Members remain competitive within the restaurant industry and with other industries that compete with us for workers, which could materially increase our expenses.
Increasing competition in the market for Team Members may increase our labor costs, including by requiring us to take additional measures to ensure that our compensation and benefits for Team Members remain competitive within the restaurant industry and with other industries that compete with us for workers, which could materially increase our expenses, or take measures to limit the impact of staffing shortages on the Guest experience.
We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases, and risks related to renewal. As of December 25, 2022, 378 of our 414 Company-owned restaurants are located on leased premises.
We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases, and risks related to renewal. As of December 31, 2023, 398 of our 415 Company-owned restaurants are located on leased premises.
If we are unable to attract and retain qualified people, especially in our restaurants at the Managing Partner level and regionally at the Market Partner level, our restaurants could be short staffed, we may be forced to incur overtime expenses, hourly Team Member turnover could increase, and our ability to operate our restaurants and roll out new service model and technology solutions effectively could be limited, and the Guest experience could be negatively affected, leading to a decline in traffic and sales.
If we are unable to attract and retain qualified people, our restaurants could be short staffed, we may be forced to incur overtime expenses, hourly Team Member turnover could increase, and our ability to operate our restaurants and roll out new service model and technology solutions effectively could be limited, and the Guest experience could be negatively affected, leading to a decline in traffic and sales, which could materially adversely affect our financial performance.
Moreover, such volatility has in the past and may in the future attract the interest of activist stockholders. Responding to activist stockholders can be costly and time-consuming, and the perceived uncertainties as to our future direction resulting from responding to activist strategies could itself then further affect the market price and volatility of our common stock.
Responding to activist stockholders and securities litigation can be costly and time-consuming, and the perceived uncertainties as to our future direction resulting from responding to activist strategies could itself then further affect the market price and volatility of our common stock.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. In the past, we have experienced the negative impacts of a breach of a service providers' network.
Failure to obtain and maintain adequate directors' and officers' insurance could materially adversely affect our ability to attract and retain qualified officers and directors. 21 Table of Contents Risks Related to Owning Our Stock The market price of our common stock is subject to volatility, which has and may continue to attract the interest of activist stockholders.
Failure to obtain and maintain adequate directors' and officers' insurance could materially adversely affect our ability to attract and retain qualified officers and directors. 20 Table of Contents Risks Related to Owning Our Stock The market price of our common stock is subject to volatility, which has and may continue to attract the interest of activist stockholders or subject us to securities litigation, which could cause us to incur significant expenses, hinder execution of our strategy and impact our stock price.
The inability to complete stock repurchases under a repurchase program may negatively impact investor perception of us and may therefore affect the market price and volatility of our stock. ITEM 1B. Unresolved Staff Comments None.
Continuing share repurchases, or alternatively limiting or halting share repurchases under our share repurchase program may negatively impact investor perception of us and may therefore affect the market price and volatility of our stock. ITEM 1B. Unresolved Staff Comments None.
Our distributors and suppliers also may be affected by higher minimum wage or health care costs, which could result in higher costs for goods and services supplied to us. A shortage in the labor pool or other general inflationary pressures or changes could also increase our labor costs.
Our distributors and suppliers also may be affected by higher minimum wage or health care costs, which could result in higher costs for goods and services supplied to us.
Our ability to repurchase stock will depend on our ability to generate sufficient cash flows from operations, as supplemented by proceeds from the exercise of employee stock options and our capacity to borrow funds, which may be subject to economic, financial, competitive, and other factors that are beyond our control.
Our ability to repurchase stock will depend on our ability to generate sufficient cash flows from operations, as supplemented our capacity to borrow funds, which may be subject to economic, financial, competitive and other factors that are beyond our control. Further, our Credit Agreement limits our ability to repurchase shares to certain conditions set forth by the lenders.
While we have introduced an alternative to third party delivery by offering an online Company platform to collect orders and outsource the "last mile" of delivery, we may not be able to convert Guests to our platform and that model remains subject to some of the same risks. 15 Table of Contents Our operations are susceptible to the changes in cost and availability of commodities which could negatively affect our operating results.
While we have introduced an alternative to third party delivery by offering an online Company platform to collect orders and outsource the "last mile" of delivery, we may not be able to convert Guests to our platform and that model remains subject to some of the same risks.
Accordingly, they may be better equipped than us to increase marketing or to take other measures to maintain their competitive position, including the use of significant discount offers to attract Guests. We also compete with other restaurants and retail establishments for prime real estate locations.
Accordingly, they may be better equipped than us to increase marketing or to take other measures to maintain their competitive position, including the use of significant discount offers to attract Guests.
Third parties may have the technology or know-how to breach the security of this customer information, and our security measures and those of our technology vendors may not effectively prohibit others from obtaining improper access to this information. A number of restaurant operators and retailers have experienced security breaches in which credit and debit card information may have been stolen.
Third parties may have the technology or know-how to breach the security of this customer information, and our security measures and those of our technology vendors may not effectively prohibit others from obtaining improper access to this information.
In addition, desirable locations for the relocation of existing restaurants may not be available at an acceptable cost, due in part to the inability to easily terminate a long-term lease. In the last several years, off-premises sales, specifically delivery, have increased due to consumer demand for convenience.
In addition, we compete with other restaurants and retail establishments for prime real estate locations. Desirable locations for the relocation of existing restaurants may not be available at an acceptable cost, due in part to the inability to easily terminate a long-term lease. During the COVID-19 pandemic, off-premises sales, specifically delivery, increased due to consumer demand for convenience.
While we try to offset labor cost increases through price increases, more efficient purchasing practices, productivity improvements, greater economies of scale and by offering a variety of health plans to our Team Members, there can be no assurance that these efforts will be successful.
A shortage in the labor pool or other general inflationary pressures or changes could also increase our labor costs. 18 Table of Contents While we try to offset labor cost increases through price increases, more efficient purchasing practices, productivity improvements, changing staffing models, greater economies of scale and by offering a variety of health plans to our Team Members, there can be no assurance that these efforts will be successful.
In addition, the Biden administration and members of Congress have called for an increase in the federal minimum wage from $7.25 an hour to $15 an hour. We anticipate additional legislation increasing minimum wage standards will be enacted in future periods and in other jurisdictions, including a potential increase or elimination of the tip credit wage.
In addition, the Biden administration and members of Congress have called for an increase in the federal minimum wage and tip credit wage (or eliminate the tip credit altogether) and more mandated benefits. We anticipate additional legislation increasing minimum wages and mandated benefits will be enacted in future periods and in other jurisdictions.
In the past, many of our eligible Team Members chose not to participate in our Company-sponsored health care plans for various reasons, but we expect to continue to see increased costs due to the impact of changes in the health care laws, including as a result of any repeal, replacement or other significant modifications of The Patient Protection and Affordable Care Act of 2010 (the "Affordable Care Act").
In the past, many of our eligible Team Members chose not to participate in our Company-sponsored health care plans for various reasons, but we expect to continue to see increased costs due to the impact of changes in the health care laws.
During fiscal 2022, the price of our common stock fluctuated between $5.70 and $18.42 per share.
During fiscal 2023, the price of our common stock fluctuated between $5.39 and $15.63 per share.
We have in the past and may in the future engage in sale-lease back transactions, which have and may in the future increase the number of our leased properties. Payments under our operating leases account for a significant portion of our operating expenses. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases.
Payments under our operating leases account for a significant portion of our operating expenses. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases.
The expansion of our restaurant base depends in large part on our ability and the ability of our franchisees to timely and efficiently open new restaurants and to operate these restaurants on a profitable basis.
The expansion of our restaurant base depends in large part on our ability and the ability of our franchisees to timely and efficiently open new restaurants and to operate these restaurants on a profitable basis. Delays or failures in opening new restaurants, or the inability to profitably operate them once opened, could materially and adversely affect our planned growth.
Our ability to fund our operating plans and to implement our capital deployment strategies depends on sufficient cash flow from operations or other financing, including using funding under our revolving Credit Facility and from potential sale-leaseback transactions.
Decreased cash flow from operations, or an inability to access credit or successfully execute our potential sale-leaseback transactions could negatively affect our business initiatives or may result in our inability to execute our revenue, expense, and capital deployment strategies. 10 Table of Contents Our ability to fund our operating plans and to implement our capital deployment strategies depends on sufficient cash flow from operations or other financing, including using funding under our revolving Credit Facility and from potential sale-leaseback transactions.
Although the majority of our commodities are sourced domestically, changes in trade policy and tariffs could negatively impact our commodity costs. We may be unable to obtain favorable contract terms with suppliers or adjust our purchasing practices and menu prices to respond to changing food costs, and a failure to do so could negatively affect our operating results.
We may be unable to obtain 14 Table of Contents favorable contract terms with suppliers or adjust our purchasing practices and menu prices to respond to changing food costs, and a failure to do so could negatively affect our operating results. We may experience interruptions in the delivery of food and other products from third parties.
These third party delivery companies require us to pay them a commission, which lowers our profit margin on those sales. Any bad press, whether true or not, regarding third party delivery companies or their business model may negatively impact our sales.
Any bad press, whether true or not, regarding third party delivery companies or their business model may negatively impact our sales.
We may experience interruptions in the delivery of food and other products from third parties. Our restaurants depend on frequent deliveries of fresh produce, food, beverage, and other products.
Our restaurants depend on frequent deliveries of fresh produce, food, beverage, and other products.
From time to time, we make capital expenditures for, and commit management resources towards, efforts aimed at improving our competitiveness and our ability to attract and retain qualified management and operating Team Members, such as our recently announced restaurant management transition program.
From time to time, we make capital expenditures for, and commit management resources towards, efforts aimed at improving our competitiveness and our ability to attract and retain qualified management and operating Team Members, such as our recently launched Market Partner and Managing Partner compensation programs designed to reward these Team Members based on the profits of the restaurants they oversee.
While our share repurchase program is currently suspended, when resumed, any repurchase by us of our shares of common stock will further reduce cash available for operations and future growth, as well as debt repayment.
The amount, timing, and execution of repurchases under this repurchase program may fluctuate, and any repurchases by us of our shares of common stock may further reduce cash available for operations and future growth, as well as debt repayment.
We maintain a separate insurance policy covering cyber security risks and such insurance coverage may, subject to policy terms and conditions, cover certain aspects of cyber risks, but is subject to a retention amount and may not be applicable to a particular incident or otherwise may be insufficient to cover all our losses beyond any retention. 12 Table of Contents Further, in light of recent court rulings and amendments to policy forms, there is uncertainty as to whether traditional commercial general liability policies will be construed to cover the expenses related to a cyber-attack and breaches if credit and debit card information is stolen.
We maintain a separate insurance policy covering cyber security risks and such insurance coverage may, subject to policy terms and conditions, cover certain aspects of cyber risks, but is subject to a retention amount and may not be applicable to a particular incident or otherwise may be insufficient to cover all our losses beyond any retention.
We may not be successful in implementing these initiatives, and they may not lead to the benefits or results that we anticipate.
Additionally, we have made and may continue making changes to our service model, including adding back bussers and providing servers with fewer tables. We may not be successful in implementing these initiatives, and they may not lead to the benefits or results that we anticipate.
Risks Related to Our Business Our business strategy may not be successful or achieve the desired results, which may have an adverse impact on our business and financial results. Our "North Star" business strategy developed under new leadership is designed to drive long-term shareholder value and enhance Red Robin's competitive positioning.
Risks Related to Our Business Our business strategy may not be successful or achieve the desired results, which may have an adverse impact on our business and financial results. The Company is currently undergoing a significant transformation. In 2023, we launched our "North Star" business strategy.
Our profitability depends in part on our ability to anticipate and react to changes in commodity costs.
Our operations are susceptible to the changes in cost and availability of commodities which could negatively affect our operating results. Our profitability depends in part on our ability to anticipate and react to changes in commodity costs.
Our capital deployment strategies include but are not limited to paying down debt, maintaining existing restaurants and infrastructure, and executing on our long-term transformation strategy. If we experience decreased cash flow from operations, our ability to fund our operations and planned initiatives, and to take advantage of growth opportunities, may be delayed or negatively affected.
If we experience decreased cash flow from operations, or an inability to access new capital on acceptable terms with acceptable interest rates if needed, our ability to fund our operations and planned initiatives, and to take advantage of growth opportunities, may be delayed or negatively affected.
Off-premises sales could also cannibalize dine-in sales, or our systems and procedures may not be sufficient to handle off-premises sales, which may require additional investments in technology or people. Additionally, a large percentage of delivery from our restaurants is through third party delivery companies.
While we plan to continue to invest in the growth of our off-premises sales, there can be no guarantee we will maintain or increase such sales. Off-premises sales could also cannibalize dine-in sales, or our systems and procedures may not be sufficient to handle off-premises sales, which may require additional investments in technology or people.
Our marketing and branding strategies to attract, engage, and retain our Guests may not be successful, which could negatively affect our business. We continue to evolve our marketing and branding strategies in order to appeal to customers and compete effectively to attract, engage, and retain customers.
Our marketing and branding strategies to attract, engage, and retain our Guests, including anticipated changes to our loyalty program, may not be successful, which could negatively affect our business. While we persistently refine our communication strategies to effectively target and compete for the right customers, it's essential to acknowledge potential challenges that may arise.
New laws requiring additional nutritional information to be disclosed on our menus, changes in nutritional guidelines issued by the federal government agencies, issuance of similar guidelines or statistical information by other federal, state or local municipalities, or academic studies, among other things, may affect consumer choice and cause consumers to significantly alter their dining choices in ways that adversely affect our sales and profitability.
The food service industry as a whole rests on consumer preferences and demographic trends at the local, regional, and national levels. New information or changes in dietary, nutritional or health guidelines, among other things, may affect consumer choice and cause consumers to significantly alter their dining choices in ways that adversely affect our sales and profitability.
Although we employ security technologies and practices and have taken other steps to try to prevent a breach, we may nevertheless not have the resources or technical sophistication to prevent rapidly evolving types of cyber-attacks.
Although we employ security technologies and practices and have taken other steps to try to prevent a cybersecurity incident, we have in the past and could be impacted by a cyber-attack, due to the rapidly increasing number of cybersecurity threats.
Our strategy focuses on transforming to an operations focused restaurant company, elevating the Guest experience, removing costs and complexity, optimizing Guest engagement, and driving growth in comparable restaurant revenue and unit level profitability, and delivering financial commitments. These strategies and related initiatives, including changes to our restaurant management structures, may not result in sustained higher sales.
Developed under new leadership, this five-point plan is designed to drive long-term shareholder value and enhance Red Robin's competitive positioning. The North Star five-point plan focuses on transforming to an operations focused restaurant company, elevating the Guest experience, removing costs and complexity, optimizing Guest engagement, and driving growth in comparable restaurant revenue and unit level profitability, and delivering financial commitments.
Our revenues and operating results may fluctuate significantly due to various risks and unexpected circumstances, including increases in costs, seasonality, weather, and other factors outside our control. We are subject to a number of significant risks that might cause our actual quarterly and annual results to fluctuate significantly or be negatively affected.
We are subject to a number of significant risks that might cause our actual quarterly and annual results to fluctuate significantly or be negatively affected. Adverse weather conditions, natural disasters, climate change, or catastrophic events, such as terrorist acts, can adversely impact restaurant sales.
If we are unable to anticipate and offset increased labor costs, our financial performance could be materially adversely affected. Decreased cash flow from operations, or an inability to access credit or successfully execute our potential sale-leaseback transactions could negatively affect our business initiatives or may result in our inability to execute our revenue, expense, and capital deployment strategies.
If we are unable to anticipate and offset increased labor costs, our financial performance could be materially adversely affected.
Moreover, many of our competitors have larger marketing resources and more extensive national marketing strategies and media usage and we may not be able to successfully compete against those established programs.
Furthermore, the competitive landscape presents a challenge, as some competitors boast larger marketing resources and more extensive national strategies, potentially limiting our ability to successfully compete against these well-established programs.
Removed
The COVID-19 pandemic disrupted and may further disrupt our business, which has and could further materially adversely affect our operations, business, and financial results. Any future epidemic, disease outbreak, or public health emergency may result in similar adverse effects . The COVID-19 pandemic has had a material adverse effect on our business.
Added
These strategies and related initiatives, including changes to our restaurant management structures, may not result in increased traffic and sustained higher sales, which are important to achieving our strategic objectives.
Removed
The COVID-19 pandemic has impacted and may continue to negatively impact our ability to operate our restaurants, sales and traffic at our restaurants, restaurant staffing, availability of supplies, and commodity costs.
Added
The Company is working to complete a third sale-leaseback transaction and if completed, anticipated proceeds will be used to repay debt. Our capital deployment strategies include but are not limited to paying down debt, maintaining and improving existing restaurants and infrastructure, and executing on our long-term transformation strategy.
Removed
The extent to which the COVID-19 pandemic and other epidemics, disease outbreaks, or public health emergencies will impact our business, liquidity, financial condition, and results of operations depends on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the public health emergency; the negative impact on the economy; the short and longer-term impacts on the demand for restaurant services and levels of consumer confidence; our ability to successfully navigate the impacts; government action, including restrictions on restaurant operations; and increased unemployment and reductions in consumer discretionary spending.
Added
If we are unable to comply with the financial and other covenants in our Credit Facility, our financial condition could be negatively affected. Our Credit Facility contains financial and other restricted covenants, including among others, a Total Net Leverage ratio covenant.
Removed
Even if a virus or other disease does not spread significantly, the perceived risk of infection or health risk may damage our reputation and adversely affect our business, liquidity, financial condition, and results of operations.
Added
A breach of these covenants could result in default, and if such default is not cured or waived, our lenders could accelerate our debt and declare it immediately due and payable. If this occurs, we may not be able to repay or borrow sufficient funds to refinance the debt.
Removed
We cannot guarantee that changes to our operational policies and training will be effective to keep our Team Members and Guests safe from COVID-19 or future public health emergency.
Added
Even if financing is available, it may not be on acceptable terms. A default under our Credit Facility could cause a material adverse effect on our financial condition, including our liquidity and cash flows.
Removed
Any publicity relating to health concerns or the perceived or specific outbreaks of COVID-19 or other public health emergency attributed to one or more of our restaurants, or restaurants generally, could result in a significant decrease in Guest traffic in all of our restaurants and could have a material adverse effect 10 Table of Contents on our results of operations.
Added
Further, in light of recent court rulings and amendments to policy forms, there is uncertainty as to whether traditional commercial general liability policies will be construed to cover the expenses related to a cyber-attack and breaches if credit and debit card information is stolen.
Removed
Changes resulting from the COVID-19 pandemic or future public health emergencies and any additional changes may materially adversely affect our business, liquidity, financial condition, and results of operations, particularly if these changes are in place for a prolonged amount of time.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCertain lease agreements also require the Company to pay maintenance, insurance, and property tax costs. We own real estate for 36 Company-owned restaurants located in Arizona (4); Arkansas (1); California (1); Colorado (4); Florida (1); Georgia (1); Illinois (1); Indiana (1); Maryland (1); Missouri (1); North Carolina (3); Ohio (4); Pennsylvania (3); Texas (5); Virginia (4); and Washington (1).
Biggest changeCertain lease agreements also require the Company to pay maintenance, insurance, and property tax costs. We own real estate for 17 Company-owned restaurants located in Arizona (2); California (1); Colorado (4); Florida (1); North Carolina (2); Ohio (1); Pennsylvania (1); Texas (2); Virginia (2); and Washington (1). Our Restaurant Support Center and test kitchen is located in Englewood, Colorado.
For on-site critical, Company leadership, and those who desire to work in a shared location, we have optimized our office footprint at this location to meet the needs of that population. We occupy this facility under a lease that expires May 31, 2025.
For on-site critical, Company leadership, and those who desire to work in a shared location, we have optimized our office footprint at this location to meet the needs of that population. We occupy this facility under a lease 22 Table of Contents that expires May 31, 2025.
In addition, we occupy the first floor and sublease to a third party the second and third floors of a facility in Greenwood Village, Colorado under a lease that expires on May 31, 2025. Our existing prototype for new Red Robin restaurants is approximately 5,100 square feet with a capacity of approximately 200 seats.
In addition, we occupy approximately 900 square feet and sublease to third parties the first, second, and third floors of a facility in Greenwood Village, Colorado under a lease that expires on May 31, 2025. Our existing prototype for new Red Robin restaurants is approximately 5,100 square feet with a capacity of approximately 200 seats.
We develop restaurants under ground leases on which we build our own restaurants in addition to converting existing buildings on standalone, in-line, end cap, and mall locations. As of December 25, 2022, our restaurant locations comprised approximately 2.7 million square feet. 22 Table of Contents
We develop restaurants under ground leases on which we build our own restaurants in addition to converting existing buildings on standalone, in-line, end cap, and mall locations. As of December 31, 2023, our restaurant locations comprised approximately 2.6 million square feet.
Our Restaurant Support Center and test kitchen is located in Englewood, Colorado. As a result of the COVID-19 pandemic, we implemented a dispersed workforce policy that permits many of our Restaurant Support Center Team Members to continue working remotely and we expect that to continue on a go-forward basis.
We have a dispersed workforce policy that permits many of our Restaurant Support Center Team Members to continue working remotely and we expect that to continue on a go-forward basis.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings For information regarding contingencies related to litigation, please see Note 12. Commitments and Contingencies included within Item 8. Financial Statements and Supplementary Data of Part II of this Annual Report on Form 10-K for the period ended December 25, 2022, the contents of which are incorporated herein by reference. ITEM 4.
Biggest changeITEM 3. Legal Proceedings For information regarding contingencies related to litigation, please see Note 12. Commitments and Contingencies included within Item 8. Financial Statements and Supplementary Data of Part II of this Annual Report on Form 10-K for the period ended December 31, 2023, the contents of which are incorporated herein by reference. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur ability to repurchase shares is limited to certain conditions set forth by our lenders in the Credit Facility.
Biggest changeNo share repurchases were made by the Company during fourth quarter 2023 and approximately $58.4 million remained available for future purchases as of December 31, 2023. Our ability to repurchase shares is limited to certain conditions set forth by our lenders in the Credit Facility.
Performance Graph The following graph compares the yearly percentage in cumulative total stockholders' return on Common Stock of the Company since the end of its fiscal year 2017, with the cumulative total return over the same period for (i) The Russell 3000 Index, and (ii) the S&P 600 Restaurants.
Performance Graph The following graph compares the yearly percentage in cumulative total stockholders' return on Common Stock of the Company since the end of its fiscal year 2018, with the cumulative total return over the same period for (i) The Russell 3000 Index, and (ii) the S&P 600 Restaurants.
Dividends We did not declare or pay any cash dividends on our common stock during 2022, 2021 or 2020. We currently anticipate we will retain any future cash flow to service debt, maintain existing restaurants and infrastructure, and execute on our long-term business strategy.
Dividends We did not declare or pay any cash dividends on our common stock during 2023, 2022 or 2021. We currently anticipate we will retain future cash flow to service debt, maintain existing restaurants and infrastructure, and execute on our long-term business strategy.
(2) The S&P 600 Restaurants includes companies such as Bloomin' Brands Inc., Brinker International, Inc., Chuy's Holdings Inc., Dine Brands Global, Inc., Fiesta Restaurant Group, Inc., and The Cheesecake Factory Incorporated. ITEM 6. Reserved 25 Table of Contents
(2) The S&P 600 Restaurants includes companies such as Bloomin' Brands Inc., Brinker International, Inc., Chuy's Holdings Inc., Dine Brands Global, Inc., Fiesta Restaurant Group, Inc., and The Cheesecake Factory Incorporated. ITEM 6. Reserved
Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 31, 2017, the last trading day in the Company's 2017 fiscal year, in the Company's Common Stock and in each of the indices.
Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 28, 2018, the last trading day in the Company's 2018 fiscal year, in the Company's Common Stock and in each of the indices.
ITEM 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on The Nasdaq Global Select Market under the symbol RRGB. As of February 24, 2023, there were 89 registered owners of our common stock.
ITEM 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on The Nasdaq Global Select Market under the symbol RRGB. As of February 26, 2024, there were 84 registered owners of our common stock.
This performance graph shall not be deemed to be "soliciting material" or to be "filed" under either the Securities Act or the Exchange Act. 24 Table of Contents COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1) Among Red Robin Gourmet Burgers, Inc., The Russell 3000 Index and S&P 600 Restaurants Index Fiscal Years Ended December 31, 2017 December 30, 2018 December 29, 2019 December 27, 2020 December 26, 2021 December 25, 2022 Red Robin Gourmet Burgers, Inc.
This performance graph shall not be deemed to be "soliciting material" or to be "filed" under either the Securities Act or the Exchange Act. 24 Table of Contents COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1) Fiscal Years Ended December 30, 2018 December 29, 2019 December 27, 2020 December 26, 2021 December 25, 2022 December 31, 2023 Red Robin Gourmet Burgers, Inc.
Issuer Purchases of Equity Securities During the fiscal year ended December 25, 2022, the Company did not have any sales of securities in transactions that were not registered under the Securities Act that have not been reported in a Current Report on Form 8-K. No share repurchases were made by the Company during 2022.
Issuer Purchases of Equity Securities During the fiscal year ended December 31, 2023, the Company did not have any sales of securities in transactions that were not registered under the Securities Act that have not been reported in a Current Report on Form 8-K.
(RRGB) $ 100.00 $ 47.33 $ 54.97 $ 35.61 $ 30.40 $ 9.88 The Russell 3000 Index 100.00 112.59 149.16 178.27 224.41 182.64 S&P 600 Restaurants (2) $ 100.00 $ 115.04 $ 129.10 $ 167.49 $ 162.41 $ 125.88 ——————————————————— (1) Represents performance of $100 invested on December 31, 2017 in stock or index, including reinvestment of dividends based on fiscal year ends for purposes of comparability.
(RRGB) $ 100.00 $ 116.13 $ 75.22 $ 64.22 $ 21.33 $ 46.67 The Russell 3000 Index 100.00 132.48 158.33 199.31 162.32 204.32 S&P 600 Restaurants (2) $ 100.00 $ 112.21 $ 145.58 $ 141.17 $ 112.11 $ 132.82 ——————————————————— (1) Represents performance of $100 invested on December 28, 2018 in stock or index, including reinvestment of dividends based on fiscal year ends for purposes of comparability.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRestaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below: Fifty-two weeks ended 2022 compared to 2021 (Dollars in millions) December 25, 2022 December 26, 2021 Increase/(Decrease) Restaurant revenue $ 1,230.3 $ 1,137.7 8.1 % Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) Cost of sales 24.9 % 22.9 % 200 Labor 35.8 36.0 (20) Other operating 18.3 18.3 — Occupancy 8.0 8.5 (50) Total 87.0 % 85.7 % 130 The following table summarizes Net loss, loss per diluted share, and adjusted loss per diluted share (a non-GAAP 27 Table of Contents measure) for the fifty-two weeks ended December 25, 2022 and December 26, 2021: Fifty-two Weeks Ended (Dollars and shares in thousands, except per share amounts) December 25, 2022 December 26, 2021 Net loss as reported $ (77,800) $ (50,002) Loss per share - diluted: Net loss as reported $ (4.91) $ (3.19) Change in estimate, gift card breakage (0.33) — Write-off of unamortized debt issuance costs 0.11 — Other charges, net: Asset impairment 2.43 0.45 Gain on sale of restaurant property (0.58) — Severance and executive transition, net of $(3,299) and $0 in stock-based compensation 0.14 — Other financing costs 0.09 — Restaurant closure costs, net 0.05 0.40 Closed corporate office costs, net of sublease income 0.03 — COVID-19 related charges 0.03 0.08 Litigation contingencies 0.26 0.08 Board and stockholder matter costs — 0.01 Income tax effect (0.58) (0.26) Adjusted loss per share - diluted $ (3.26) $ (2.43) Weighted average shares outstanding Basic 15,840 15,660 Diluted 15,840 15,660 We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.
Biggest changeFifty-Three Weeks Ended Fifty-Two Weeks Ended 2023 compared to 2022 (Dollars in millions) December 31, 2023 December 25, 2022 Increase/(Decrease) Restaurant revenue $ 1,274.3 $ 1,230.2 3.6 % Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) Cost of sales 24.2 % 24.9 % (70) Labor 37.2 35.8 140 Other operating 17.7 18.3 (60) Occupancy 8.1 8.0 10 Total Restaurant Operating Costs 87.2 % 87.0 % 20 Restaurant Level Operating Profit 12.9 % 13.0 % (10) Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues. 27 Table of Contents The following table summarizes net loss and loss per diluted share, and adjusted loss per diluted share for the fifty-three weeks ended December 31, 2023 and fifty-two weeks ended December 25, 2022: Fifty-Three Weeks Ended Fifty-Two Weeks Ended (Dollars and shares in thousands, except per share amounts) December 31, 2023 December 25, 2022 Net loss as reported $ (21,228) $ (78,883) Loss per share - diluted: Net loss as reported $ (1.34) $ (4.98) Gift card breakage (1) 0.03 (0.33) Write-off of unamortized debt issuance costs (2) — 0.11 Other charges (gains), net: Asset impairment 0.58 2.43 Gain on sale of restaurant property, net of expenses (1.87) (0.58) Severance and executive transition, net of $128 and $(3,299) in stock-based compensation 0.22 0.14 Other financing costs (3) — 0.09 Restaurant closure costs, net 0.19 0.05 Closed corporate office costs, net of sublease income 0.03 0.03 Litigation contingencies 0.58 0.26 Asset disposal and other 0.11 0.03 Income tax effect 0.04 (0.58) Adjusted loss per share - diluted $ (1.44) $ (3.32) Weighted average shares outstanding Basic 15,835 15,840 Diluted (4) 15,835 15,840 (1) During 2022, the Company re-evaluated the estimated redemption pattern related to gift cards.
We have identified the following as the Company's most critical accounting policies and estimates, which are most important to the portrayal of the Company's financial condition and results and require management's most subjective and complex judgment.
We have identified the following as the Company's most critical accounting estimates, which are most important to the portrayal of the Company's financial condition and results and require management's most subjective and complex judgment.
The amount of the impairment loss is measured as the amount by which the carrying value exceeds the fair value of the asset, which is determined using discounted cash flows. 38 Table of Contents Judgments made by management related to our ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as changes in economic conditions, changes in operating performance, and the ongoing maintenance and improvements of the assets.
The amount of the impairment loss is measured as the amount by which the carrying value exceeds the fair value of the asset, which is determined using discounted cash flows. 39 Table of Contents Judgments made by management related to our ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as changes in economic conditions, changes in operating performance, and the ongoing maintenance and improvements of the assets.
Components of this category include marketing and advertising costs, our Restaurant Support Center, regional, and franchise support salaries and benefits; travel; professional and consulting fees; corporate information systems; legal expenses; office rent; training; and board of directors expenses.
Components of this category include marketing and advertising costs, our Restaurant Support Center, regional, and franchise support salaries and benefits; travel; professional and consulting fees; corporate information systems; legal expenses; office rent; training; and Board of Directors' expenses.
For further information on Other charges line items, refer to Note 4. Other Charges (Gains), net, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Interest Expense and Interest Income Interest expense in 2022 and 2021 was $20.6 million and $14.2 million, respectively.
For further information on Other charges (gains) line items, refer to Note 4. Other Charges (Gains), net, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Interest Expense and Interest Income Interest expense in 2023 and 2022 was $26.6 million and $20.6 million, respectively.
GAAP as a measure of performance. 29 Table of Contents Restaurant Data The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated: Fifty-two Weeks Ended December 25, 2022 December 26, 2021 Company-owned: Beginning of period 430 443 Opened during the period — 1 Closed during the period (16) (14) End of period 414 430 Franchised: Beginning of period 101 103 Opened during the period 1 — Closed during the period (5) (2) End of period 97 101 Total number of restaurants 511 531 30 Table of Contents The following table presents total Company-owned and franchised restaurants by state or province as of December 25, 2022: Company-Owned Restaurants Franchised Restaurants State: Arkansas 2 1 Alaska 3 Alabama 4 Arizona 17 1 California 57 Colorado 22 Connecticut 3 Delaware 5 Florida 18 Georgia 6 Iowa 5 Idaho 8 Illinois 20 Indiana 11 Kansas 5 Kentucky 4 Louisiana 1 Massachusetts 3 2 Maryland 12 Maine 2 Michigan 19 Minnesota 4 Missouri 8 3 Montana 1 North Carolina 17 Nebraska 4 New Hampshire 3 New Jersey 11 1 New Mexico 3 Nevada 6 New York 14 Ohio 17 2 Oklahoma 5 Oregon 15 5 Pennsylvania 11 20 Rhode Island 1 South Carolina 4 South Dakota 1 Tennessee 9 Texas 20 9 Utah 1 5 Virginia 20 Washington 37 Wisconsin 11 Province: British Columbia 12 Total 414 97 31 Table of Contents Results of Operations Operating results for each fiscal period presented below are expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.
Restaurant Data The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated: 30 Table of Contents Fifty-Three Weeks Ended Fifty-Two Weeks Ended December 31, 2023 December 25, 2022 Company-owned: Beginning of period 414 430 Opened during the period 1 — Acquired from franchisees 5 — Closed during the period (5) (16) End of period 415 414 Franchised: Beginning of period 97 101 Opened during the period — 1 Sold to Company during the period (5) — Closed during the period (1) (5) End of period 91 97 Total number of restaurants 506 511 31 Table of Contents The following table presents total Company-owned and franchised restaurants by state or province as of December 31, 2023: Company-Owned Restaurants Franchised Restaurants State: Arkansas 2 1 Alaska 3 Alabama 4 Arizona 18 1 California 57 Colorado 22 Connecticut 3 Delaware 5 Florida 17 Georgia 6 Iowa 5 Idaho 8 Illinois 20 Indiana 11 Kansas 5 Kentucky 4 Louisiana 1 Massachusetts 5 Maryland 11 Maine 2 Michigan 19 Minnesota 4 Missouri 8 3 Montana 1 North Carolina 17 Nebraska 4 New Hampshire 3 New Jersey 11 1 New Mexico 3 Nevada 6 New York 14 Ohio 16 2 Oklahoma 5 Oregon 15 5 Pennsylvania 11 20 Rhode Island 1 South Carolina 4 South Dakota 1 Tennessee 9 Texas 18 9 Utah 1 5 Virginia 20 Washington 37 Wisconsin 11 Province: British Columbia 11 Total 415 91 32 Table of Contents Results of Operations Operating results for each fiscal period presented below are expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.
Recently Issued Accounting Standards See Note 2. Recent Accounting Pronouncements, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for our discussion of recently issued accounting standards. 39 Table of Contents
Recent Accounting Pronouncements, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for our discussion of recently issued accounting standards. 40 Table of Contents
(2) Finance lease obligations include interest of $2.3 million. (3) Operating lease obligations exclude variable lease costs, such as sales based contingent rent, and include interest of $176.5 million. (4) Purchase obligations includes the Company's share of expected system-wide fixed price commitments for food, beverage, and restaurant supply items.
(2) Finance lease obligations include interest of $2.1 million. (3) Operating lease obligations exclude variable lease costs, such as sales based contingent rent, and include interest of $192.6 million. (4) Purchase obligations primarily include the Company's share of expected system-wide fixed price commitments for food, beverage, and restaurant supply items.
Pre-opening Costs (In thousands, except percentages) 2022 2021 Percent Change Pre-opening costs $ 568 $ 1,410 (59.7) % As a percent of total revenues — % 0.1 % (0.1) % Pre-opening costs, which are expensed as incurred, comprise the costs related to preparing restaurants to introduce Donatos® and other initiatives, as well as direct costs, including labor, occupancy, training, and marketing, incurred related to opening new restaurants and hiring the initial work force.
Pre-opening Costs (In thousands, except percentages) 2023 2022 Percent Change Pre-opening costs $ 587 $ 568 3.3 % As a percent of total revenues — % — % — % Pre-opening costs, which are expensed as incurred, comprise the costs related to preparing restaurants to introduce Donatos ® and other initiatives, as well as direct costs, including labor, occupancy, training, and marketing, incurred related to opening new restaurants and hiring the initial work force.
The Company also had 97 franchised restaurants in 16 states and one Canadian province as of December 25, 2022. The Company operates its business as one operating and one reportable segment. Our primary source of revenue is from the sale of food and beverages at Company-owned restaurants. We also earn revenue from royalties and fees from franchised restaurants.
The Company also had 91 franchised restaurants in 14 states and one Canadian province as of December 31, 2023. The Company operates its business as one operating and one reportable segment. Our primary source of revenue is from the sale of food and beverages at Company-owned restaurants. We also earn revenue from royalties and fees from franchised restaurants.
Overview Description of Business Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our" or the "Company"), primarily operates, franchises, and develops casual dining restaurants with 511 locations in North America. As of December 25, 2022, the Company operated 414 Company-owned restaurants located in 38 states.
Overview Description of Business Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our" or the "Company"), primarily operates, franchises, and develops casual dining restaurants with 506 locations in North America. As of December 31, 2023, the Company operated 415 Company-owned restaurants located in 39 states.
Depreciation and Amortization (In thousands, except percentages) 2022 2021 Percent Change Depreciation and amortization $ 76,245 $ 83,438 (8.6) % As a percent of total revenues 6.0 % 7.2 % (1.2) % Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of reacquired franchise rights, leasehold interests, and certain liquor licenses.
Depreciation and Amortization (In thousands, except percentages) 2023 2022 Percent Change Depreciation and amortization $ 66,190 $ 76,245 (13.2) % As a percent of total revenues 5.1 % 6.0 % (0.9) % Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of reacquired franchise rights, leasehold interests, and certain liquor licenses.
Other revenue primarily comprises gift card breakage, which represents the value associated with the portion of gift cards sold that are unlikely to be redeemed, licensing income, and recycling income. During 2022 and 2021, we recognized $14.8 million and $5.4 million of gift card breakage. Refer to Note 1.
Other revenue primarily comprises gift card breakage, which represents the value associated with the portion of gift cards sold that are unlikely to be redeemed, licensing income, and recycling income. During 2023 and 2022, we recognized $9.9 million and $13.8 million of gift card breakage.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements. The Company's fiscal year ends on the last Sunday of each calendar year.
Occupancy (In thousands, except percentages) 2022 2021 Percent Change Occupancy $ 98,868 $ 96,484 2.5 % As a percent of restaurant revenue 8.0 % 8.5 % (0.5) % Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs.
Occupancy (In thousands, except percentages) 2023 2022 Percent Change Occupancy $ 102,761 $ 98,868 3.9 % As a percent of restaurant revenue 8.1 % 8.0 % 0.1 % Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs.
We base our estimates and judgments on historical experiences and various other factors we believe to be appropriate under the circumstances. Actual results may differ from these estimates, including our estimates of future restaurant-level cash flows, which are subject to the current economic environment, and we might obtain different results if we use different assumptions or conditions.
Actual results may differ from these estimates, including our estimates of future restaurant-level cash flows, which are subject to the current economic environment, and we might obtain different results if we use different assumptions or conditions.
We believe the non-GAAP measure of adjusted EBITDA gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.
We believe these non-GAAP measures give the reader additional insight into the ongoing operational results of the Company, and are intended to supplement the presentation of the Company's financial results in accordance with GAAP.
Cost of sales as a percentage of restaurant revenue increased 200 basis points in 2022 as compared to 2021.
Cost of sales as a percentage of restaurant revenue decreased 70 basis points in 2023 as compared to 2022.
Cash Flows The table below summarizes our cash flows from operating, investing, and financing activities for each fiscal year presented (in thousands): Year Ended 2022 2021 Net cash provided by operating activities $ 35,532 $ 47,292 Net cash used in investing activities (29,568) (42,241) Net cash provided by financing activities 29,533 1,563 Effect of exchange rate changes on cash (41) 20 Net change in cash and cash equivalents, and restricted cash $ 35,456 $ 6,634 Operating Cash Flows Net cash flows provided by operating activities decreased $11.8 million to $35.5 million in 2022 as compared to 2021.
Cash Flows The table below summarizes our cash flows from operating, investing, and financing activities for each fiscal year presented (in thousands): Year Ended 2023 2022 Net cash provided by (used in) operating activities $ (1,157) $ 35,532 Net cash provided by (used in) investing activities 8,226 (29,568) Net cash provided by (used in) financing activities (33,712) 29,533 Effect of exchange rate changes on cash 2 (41) Net change in cash and cash equivalents, and restricted cash $ (26,641) $ 35,456 Operating Cash Flows Net cash flows provided by operating activities decreased $36.7 million to $1.2 million in 2023 as compared to 2022.
Critical Accounting Policies and Estimates Critical accounting policies and estimates are those we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters.
Critical Accounting Estimates Critical accounting estimates are those we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors we believe to be appropriate under the circumstances.
The $6.5 million increase was primarily due to the increase in average total debt and higher interest rates. Our weighted average interest rate in 2022 and 2021 was 9.1% and 7.1%.
The $5.9 million increase was due to higher weighted average interest rates. Our weighted average interest rate in 2023 and 2022 was 12.7% and 9.1%, respectively. Average outstanding debt in 2023 and 2022 was $205.6 million and $200.8 million, respectively.
Other Operating (In thousands, except percentages) 2022 2021 Percent Change Other operating $ 224,704 $ 207,829 8.1 % As a percent of restaurant revenue 18.3 % 18.3 % — % Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, third party delivery fees, and other miscellaneous costs.
Other Operating (In thousands, except percentages) 2023 2022 Percent Change Other operating $ 224,999 $ 224,704 0.1 % As a percent of restaurant revenue 17.7 % 18.3 % (0.6) % Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs.
Selling, General, and Administrative expenses (In thousands, except percentages) 2022 2021 Percent Change Selling, general, and administrative expenses $ 136,612 $ 122,743 11.3 % As a percent of total revenues 10.8 % 10.6 % 0.2 % Selling, general, and administrative costs include all corporate and administrative functions.
Selling, General, and Administrative expenses (In thousands, except percentages) 2023 2022 Percent Change Selling, general, and administrative expenses $ 124,130 $ 136,612 (9.1) % As a percent of total revenues 9.5 % 10.8 % (1.3) % Selling, general, and administrative costs include all corporate and administrative functions.
Cost of Sales (In thousands, except percentages) 2022 2021 Percent Change Cost of sales $ 306,509 $ 260,896 17.5 % As a percent of restaurant revenue 24.9 % 22.9 % 2 % Cost of sales, which comprises food and beverage costs, is variable and generally fluctuates with commodity costs and sales channel mix and volume.
Cost of Sales (In thousands, except percentages) 2023 2022 Percent Change Cost of sales $ 308,962 $ 306,509 0.8 % As a percent of restaurant revenue 24.2 % 24.9 % (0.7) % Cost of sales, which comprises food and beverage costs, is variable and generally fluctuates with sales volume.
Other Charges (Gains), net (In thousands, except percentages) 2022 2021 Percent Change Asset impairment $ 38,534 $ 7,052 * Gain on sale of restaurant property (9,204) — * Severance and executive transition, net of $(3,299) and $0 in stock-based compensation 2,280 — * Other financing costs 1,462 — * Restaurant closure costs, net 828 6,276 (86.8) % Closed corporate office costs, net of sublease income 475 — * COVID-19 related charges 438 1,288 (66.0) % Litigation contingencies 4,148 1,330 * Board and stockholder matter costs — 128 (100.0) % Other charges (gains), net $ 38,961 $ 16,074 * Percentage increases and decreases over 100 percent were not considered meaningful.
Other Charges (Gains), net (In thousands, except percentages) 2023 2022 Percent Change Asset impairment $ 9,130 $ 38,534 (76.3) % Gain on sale of restaurant property, net of expenses (29,543) (9,204) * Severance and executive transition, net of $128 and $3,299 in stock-based compensation 3,419 2,280 50.0 % Other financing costs — 1,462 (100.0) % Restaurant closure costs, net 3,062 828 * Closed corporate office costs, net of sublease income 416 475 (12.4) % Litigation contingencies 9,140 4,148 * Asset disposal and other 1,713 438 * Other charges (gains), net $ (2,663) $ 38,961 * Percentage increases and decreases over 100 percent were not considered meaningful.
Year Ended 2022 2021 Revenues: Restaurant revenue 97.2 % 97.9 % Franchise revenue 1.5 1.5 Other revenue 1.3 0.6 Total revenues 100.0 % 100.0 % Costs and expenses: Restaurant operating costs (1) (exclusive of depreciation and amortization shown separately below): Cost of sales 24.9 % 22.9 % Labor 35.8 36.0 Other operating 18.3 18.3 Occupancy 8.0 8.5 Total restaurant operating costs 87.0 85.7 Depreciation and amortization 6.0 7.2 Selling, general and administrative expenses 10.8 10.6 Pre-opening and acquisition costs — 0.1 Other charges 3.1 1.4 Loss from operations (4.5) % (3.2) % Other expense (income): Interest expense 1.6 % 1.2 % Interest (income) and other, net — (0.1) Total other expenses 1.6 1.2 Loss before income taxes (6.1) (4.3) Income tax benefit 0.1 — Net loss (6.1) % (4.3) % ——————————————————— (1) Expressed as a percentage of restaurant revenue 32 Table of Contents Revenues Year Ended (Revenues in thousands) 2022 2021 Percent Change Restaurant revenue $ 1,230,318 $ 1,137,733 8.1 % Franchise revenue 19,306 17,236 12.0 % Other revenue 16,993 7,109 139.0 % Total revenues $ 1,266,617 $ 1,162,078 9.0 % Average weekly net sales per Company-owned restaurants $ 55,852 $ 51,116 Total operating weeks 22,028 22,258 (1.0) % Net sales per square foot (excludes closed restaurants) $ 468 $ 425 10.1 % Restaurant revenue, which comprises primarily food and beverage sales, increased $92.6 million in 2022, or 8.1%, as compared to 2021.
Year Ended December 31, 2023 December 25, 2022 Revenues: Restaurant revenue 97.8 % 97.2 % Franchise revenue 1.2 1.5 Other revenue 1.0 1.3 Total revenues 100.0 % 100.0 % Costs and expenses: Restaurant operating costs (1) (excluding depreciation and amortization shown separately below): Cost of sales 24.2 % 24.9 % Labor 37.2 35.8 Other operating 17.7 18.3 Occupancy 8.1 8.0 Total restaurant operating costs 87.2 87.0 Depreciation and amortization 5.1 6.0 Selling, general, and administrative expenses 9.5 10.8 Pre-opening costs — — Other charges (gains), net (0.2) 3.1 Income (loss) from operations 0.3 % (4.5) % Other expense (income): Interest expense 2.0 % 1.6 % Interest (income) and other, net (0.1) — Total other expenses, net 2.0 1.6 Loss before income taxes (1.6) (6.2) Income tax expense (benefit) 0.0 0.1 Net loss (1.6) % (6.2) % (1) Expressed as a percentage of restaurant revenue. 33 Table of Contents Revenues Year Ended (Revenues in thousands) 2023 2022 Percent Change Restaurant revenue $ 1,274,294 $ 1,230,189 3.6 % Franchise revenue 15,867 19,306 (17.8) % Other revenue 12,885 16,039 (19.7) % Total revenues $ 1,303,046 $ 1,265,534 3.0 % Average weekly net sales volumes in Company-owned restaurants $ 59,454 $ 55,852 6.4 % Total operating weeks 21,643 22,028 (1.7) % Restaurant revenue, which comprises primarily food and beverage sales, increased $44.1 million in 2023, or 3.6%, as compared to 2022.
The impact during the fifty-two weeks ended December 25, 2022 comprises $5.9 million included in Franchise royalties, fees, and other revenue partially offset by $0.6 million in gift card commission costs included in Selling, general and administrative expenses on the Consolidated Statements of Operations.
The impact of this change in estimate comprised $5.9 million included in Other revenue, partially offset by $0.6 million in gift card commission costs included in Selling, general, and administrative expenses on the Consolidated Statements of Operations.
We expect cash flows from operations and available borrowing capacity under the Credit Facility will be sufficient to meet debt service, capital expenditures, and working capital requirements for at least the next twelve months.
We expect cash flows from operations and available borrowing capacity under the Credit Facility will be sufficient to meet debt service, capital expenditures, and working capital requirements for at least the next twelve months. The Company is working to complete a third sale-leaseback transaction related to its owned properties and if completed, anticipates proceeds will be used to repay debt.
Selling, general, and administrative expense increased $13.9 million, or 11.3% in 2022 as compared to 2021. 34 Table of Contents General and administrative expenses increased $9.5 million or 12.6% in 2022 as compared to 2021.
Selling, general, and administrative expense decreased $12.5 million, or 9.1% in 2023 as compared to 2022. 35 Table of Contents General and administrative expenses increased $4.4 million or 5.2% in 2023 as compared to 2022.
The increase was primarily driven by approximately 15.3% commodity basket inflation, partially offset by menu price increases. 33 Table of Contents Labor (In thousands, except percentages) 2022 2021 Percent Change Labor $ 440,564 $ 409,901 7.5 % As a percent of restaurant revenue 35.8 % 36.0 % (0.2) % Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits.
The decrease was primarily driven by menu price increases and implementation of various cost savings initiatives, partially offset by commodity inflation and investments to enhance food quality. 34 Table of Contents Labor (In thousands, except percentages) 2023 2022 Percent Change Labor $ 473,538 $ 440,564 7.5 % As a percent of restaurant revenue 37.2 % 35.8 % 1.4 % Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits.
These amounts are estimates based on anticipated inventory needed for the Company's restaurants, and could vary due to the timing of volumes. 37 Table of Contents (5) Other non-current liabilities primarily represent the employee deferred compensation plan liability. Refer to Note 15.
The timing of amounts presented is estimated based on anticipated inventory needed for the Company’s restaurants and could vary due to changes in anticipated traffic counts, consumer preferences, or other factors. 38 Table of Contents (5) Other non-current liabilities primarily represent the employee deferred compensation plan liability.
The following table lists the components of our capital expenditures for each fiscal year presented (in thousands): Year Ended 2022 2021 Restaurant improvement capital and other $ 15,882 $ 12,798 Investment in technology, infrastructure, and other 12,303 10,812 Donatos® expansion 6,054 17,113 New restaurants and restaurant refreshes 3,920 1,538 Total capital expenditures $ 38,159 $ 42,261 Expenditures for Donatos® expansion include expenditures for kitchen equipment, other equipment and other capital costs associated with adding Donatos® to our restaurants, Restaurant improvement capital and other consists of capital equipment for our restaurants, Investment in technology, infrastructure and other consists of capital costs related to restaurant technology assets, capital overhead, and other items.
The following table lists the components of our capital expenditures for each fiscal year presented (in thousands): Year Ended 2023 2022 Restaurant improvement capital and other $ 22,160 $ 15,882 Investment in technology, infrastructure, and other 16,778 12,303 Donatos ® expansion 8,620 6,054 New restaurants and restaurant refreshes 1,882 3,920 Total capital expenditures $ 49,440 $ 38,159 Restaurant improvement capital and other consists of capital equipment for our restaurants.
Adjusted loss per share should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S. GAAP as a measure of performance.
Other companies may define these non-GAAP measures differently, and as a result may not be directly comparable to those of other companies. Adjusted loss per share-diluted and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S.
Income Taxes Income tax provision was $0.7 million in 2022, compared to an income tax benefit of $0.2 million in 2021. Our effective tax rate was a 1.0% provision in 2022 and a 0.3% benefit in 2021.
Income Taxes Income tax provision was $0.3 million in 2023, compared to an income tax provision of $0.7 million in 2022.
Accordingly, as of December 25, 2022, we had $68.4 million of availability under the current share repurchase program. Effective March 14, 2020, the Company suspended its share repurchase program to provide additional liquidity during the COVID-19 pandemic. The new Credit Agreement limits our ability to repurchase shares to certain conditions set forth by our lenders in the new Credit Facility.
Accordingly, as of December 31, 2023, we had $58.4 million of availability under the current share repurchase program. Our Credit Agreement limits our ability to repurchase shares to certain conditions set forth by the lenders in the Credit Facility.
From the date of the current program approval through December 25, 2022, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million. There were no share repurchases in 2022 and 2021.
From the date of the current program approval through December 31, 2023, we have repurchased a total of 1,088,588 shares at an average price of $15.18 per share for an aggregate amount of $16.5 million. The Company completed $10.0 million of share repurchases in 2023 and no share repurchases during 2022.
The amounts issued under letters of credit reduce the amount available under the Credit Facility but are not recorded as debt. We are subject to a number of customary covenants under our Credit Facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments, as well as a Total Net Leverage ratio covenant.
Borrowings included within the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Covenants We are subject to a number of customary covenants under our Credit Facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments, as well as a Total Net Leverage ratio covenant.
Employee Benefit Programs, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Financial Condition and Future Liquidity We require capital principally to maintain, improve, and refurbish existing restaurants; build new restaurants; support infrastructure needs; fund operational changes; and for general operating purposes.
Financial Condition and Future Liquidity We require capital principally to maintain, improve, and refurbish existing restaurants; build new restaurants; support infrastructure needs; fund operational changes; and for general operating purposes.
The increase in average Guest check resulted from a 6.4% increase in pricing and a 3.8% increase in menu mix, and was partially offset by a 0.1% decrease from higher discounts. The increase in menu mix was primarily driven by our limited time menu offerings and higher dine-in sales volumes.
The comparable restaurant revenue increase was driven by a 6.8% increase in average Guest check with a 5.2% decrease in Guest count. The increase in average Guest check resulted from a 7.5% increase in menu pricing and 0.9% decrease in discounts, partially offset by a 1.6% decrease in menu mix.
If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value. We determine fair value based on quoted prices in the active market for the license in the same or similar jurisdictions, representing a level 1 fair value measurement.
We determine fair value based on quoted prices in the active market for the license in the same or similar jurisdictions, representing a level 1 fair value measurement. Recently Issued Accounting Standards See Note 2.
Our pre-opening costs fluctuate from period to period, depending upon, but not limited to, the number of restaurant openings, the size of the restaurants being opened, and the location of the restaurants. Pre-opening costs for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opening in subsequent quarters.
Pre-opening costs for any period will typically include expenses associated with restaurants opened during the period as well as expenses related to restaurants opening in subsequent periods.
As of December 25, 2022, the Company had outstanding borrowings under the Credit Facility of $205.7 million net of $8.3 million of unamortized deferred financing charges and discounts, of which $3.4 million was classified as current, in addition to amounts issued under letters of credit of $9.1 million.
As of December 31, 2023, the Company had outstanding borrowings under the Credit Facility of $182.6 million net of $6.5 million of unamortized deferred financing charges and discounts, none of which was classified as current.
Dine-in sales comprised 71.3% of total food and beverage sales in 2022, as compared to 65.5% in 2021. Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period.
Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period. Comparable restaurant revenues include those restaurants that are in the comparable base based on operating five full fiscal quarters as of the end of each period presented.
Labor as a percentage of restaurant revenue decreased 20 basis points in 2022 as compared to 2021. The decrease was primarily driven by sales leverage, and lower management incentive compensation costs, partially offset by wage rate inflation in 2022.
Labor as a percentage of restaurant revenue increased 140 basis points in 2023 as compared to 2022. The increase was primarily driven by investments in hourly labor, management labor, and related payroll taxes. Additionally, incentive compensation expense increased due to increased achievement of incentive targets, partially offset by lower group insurance expense.
The following table summarizes Net Loss (a GAAP measure), and EBITDA and Adjusted EBITDA (non-GAAP measures) for the fifty-two weeks ended December 25, 2022 and December 26, 2021: 28 Table of Contents Fifty-Two Weeks Ended December 25, 2022 December 26, 2021 Net loss as reported $ (77,800) $ (50,002) Interest expense, net 19,882 14,168 Income tax provision (benefit) 747 (152) Depreciation and amortization 76,245 83,438 EBITDA 19,074 47,452 Change in accounting estimate, gift card breakage (1) (5,246) — Other charges, net: Asset impairment 38,534 7,052 Gain on sale of restaurant property (9,204) — Severance and executive transition 2,280 — Other financing costs (2) 1,462 — COVID-19 related costs 438 1,288 Restaurant closure costs 828 6,276 Closed corporate office costs, net of sublease income 475 — Litigation contingencies 4,148 1,330 Board and stockholder matter costs — 128 Adjusted EBITDA $ 52,789 $ 63,526 (1) Change in estimate, gift card gift card breakage revenue, net of commission relates to the Company's re-evaluation of its estimated redemption pattern.
(4) The impact of dilutive shares is excluded due to the reported net loss for all periods presented. 28 Table of Contents The following table summarizes net loss, and EBITDA and adjusted EBITDA for the fifty-three weeks ended December 31, 2023 and fifty-two weeks ended December 25, 2022: Fifty-Three Weeks Ended Fifty-Two Weeks Ended December 31, 2023 December 25, 2022 Net loss as reported $ (21,228) $ (78,883) Interest expense, net 25,796 19,882 Income tax provision (benefit) 310 747 Depreciation and amortization 66,190 76,245 EBITDA 71,068 17,991 Gift card breakage (1) 480 (5,246) Other charges, net: Asset impairment 9,130 38,534 Gain on sale of restaurant property (29,543) (9,204) Severance and executive transition 3,419 2,280 Other financing costs (2) — 1,462 Restaurant closure costs 3,062 828 Closed corporate office costs, net of sublease income 416 475 Litigation contingencies 9,140 4,148 Asset disposal and other 1,713 438 Adjusted EBITDA $ 68,885 $ 51,706 (1) During 2022, the Company re-evaluated the estimated redemption pattern related to gift cards.
The Company is using available cash flow from operations to maintain existing restaurants and infrastructure, and execute on its long-term strategic initiatives. As of December 25, 2022, the Company had approximately $58.8 million in liquidity, including cash and cash equivalents and available borrowing capacity under its Credit Facility.
As of December 31, 2023, the Company had approximately $48.6 million in liquidity, including cash and cash equivalents and $25.0 million available borrowing capacity under its Credit Facility.
Financial and Operational Highlights 26 Table of Contents The following summarizes the financial and operational highlights during the fifty-two weeks ended December 25, 2022: Restaurant revenue, compared to the same period in the prior year, is presented in the table below: (millions) Restaurant revenue for the fifty-two weeks ended December 26, 2021 $ 1,137.7 Increase in comparable (1) restaurant revenue 100.6 Decrease in non-comparable restaurant revenue (8.0) Total increase 92.6 Restaurant revenue for the fifty-two weeks ended December 25, 2022 $ 1,230.3 (1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the end of the period presented.
Key Performance Indicators and Non-GAAP Financial Measures Restaurant revenue, compared to the same period in the prior year, is presented in the table below: (millions) Restaurant revenue for the fifty-two weeks ended December 25, 2022 $ 1,230.2 Increase in restaurant revenue from the fifty-third week 24.5 Increase in comparable (1) restaurant revenue 18.8 Increase in non-comparable restaurant revenue 0.7 Total increase 44.1 Restaurant revenue for the fifty-three weeks ended December 31, 2023 $ 1,274.3 (1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the 52 weeks ending December 24, 2023. 26 Table of Contents Restaurant revenue and operating costs, and restaurant level operating profit for the period are detailed in the table below: Fifty-Three Weeks Ended Fifty-Two Weeks Ended 2023 compared to 2022 (Dollars in millions) December 31, 2023 December 25, 2022 Increase/(Decrease) Restaurant revenue $ 1,274.3 $ 1,230.2 3.6 % Restaurant operating costs: Cost of sales 309.0 306.5 0.8 % Labor 473.5 440.6 7.5 % Other operating 225.0 224.7 0.1 % Occupancy 102.8 98.9 3.9 % Total Restaurant Operating Costs $ 1,110.3 $ 1,070.6 12.4 % Restaurant Level Operating Profit (1) $ 164.0 $ 159.5 2.8 % (1) Restaurant Level Operating Profit is a non-GAAP measure.
In 2022, depreciation and amortization expense as a percentage of revenue decreased 120 basis points as compared to 2021. The decreases are primarily due to net closed Company-owned restaurants, and sales leverage.
In 2023, depreciation and amortization expense as a percentage of revenue decreased 90 basis points as compared to 2022. The decrease is primarily due to asset impairments and disposals reducing the depreciable asset base.
Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality.
Closed Company-owned restaurants were not included in the comparable base for the fiscal years ended December 31, 2023 and December 25, 2022. Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new restaurants during the period.
(2) Other financing costs includes legal and other charges related to the refinancing of our Credit Facility in the first quarter of fiscal year 2022.
(2) During 2022, the Company completed the refinancing of our Credit Facility and reported a non-cash charge associated with the write-off of unamortized debt issuance costs related to the remaining unamortized debt issuance costs. (3) Other financing costs includes legal and other charges related to the refinancing of our Credit Facility in 2022.
Franchise revenue increased $2.1 million, or 12.0%, in 2022 compared to 2021 primarily due to increased comparable franchise sales. The dollar amount of both royalty income and advertising fund contributions increased as each is calculated primarily as a fixed percentage of franchise sales.
Franchise revenue primarily includes royalty income and advertising fund contributions. Franchise revenue decreased $3.4 million, or 17.8%, in 2023 compared to 2022. Franchise revenue declined primarily due to a reduction in the percentage of sales each franchisee is required to contribute to support selling activities.
The increase is primarily due to $30.6 million in net borrowings in 2022 compared to a net borrowings of $3.7 million in 2021 as a result of the Company's refinancing of debt on March 4, 2022 and $3.9 million in initial deposit proceeds received related to the sale of a restaurant property in the second quarter of 2022, partially offset by an increase in cash used for debt issuance costs. 36 Table of Contents Credit Facility On March 4, 2022, the Company replaced its prior amended and restated Credit Agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement"), which provides for a new Senior Secured Term Loan and Revolving Credit Facility (the “Credit Facility”).
In 2023, the use of cash resulted primarily from the Company’s repayment of outstanding debt with proceeds from the sale-leaseback transaction, $10.0 million of share repurchases, and standard principal payments due under the terms of the Company’s Credit Agreement. 37 Table of Contents Credit Facility On March 4, 2022, the Company replaced its prior amended and restated Credit Agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement"), which provides for a new Senior Secured Term Loan and Revolving Credit Facility (the “Credit Facility”).
Interest income and other decreased by $0.7 million to $0.0 million in 2022 from $0.7 million in 2021 due to interest income, primarily related to an income tax refund, that was offset by investment losses, related to a deferred compensation plan for which assets are held in a rabbi trust, in 2022 compared to investment gains related to the deferred compensation plan in 2021.
Interest income and other increased by $1.1 million in 2023 due to investment changes related to a deferred compensation plan for which assets are held in a rabbi trust, along with higher interest income on bank account balances in the 53-week period.
The Company's fiscal year ends on the last Sunday of each calendar year. Most of our fiscal years have 52 weeks; however, we experience a 53rd week once every five to six years. Both 2022 and 2021 refer to 52 week fiscal years. Fiscal Year 2022 Accomplishments Fiscal 2022 was a year of progress and transition for our business.
Most of our fiscal years have 52 weeks; however, we experience a 53rd week once every five to six years. Our discussion for fiscal year 2023, which ended on December 31, 2023, refers to a 53-week period with the fifty-third week occurring in the fourth quarter.
Investing Cash Flows Net cash flows used in investing activities decreased $12.7 million to $29.6 million in 2022 as compared to 2021. The decrease is primarily due to proceeds from the sale of a restaurant property and decreased spending on the Donatos® expansion, partially offset by increased spending on restaurant improvements, and investments in technology and other projects.
Investing Cash Flows Net cash flows provided by investing activities increased $37.8 million to $8.2 million in 2023 as compared to 2022. The increase in cash flows provided by investing activities is primarily due to proceeds from sale-leaseback transactions and a sale of real estate, partially offset by increased capital expenditures and the acquisition of five franchised restaurants.
During 2020, the Company impaired information technology assets totaling $5.2 million due to the COVID-19 pandemic redirecting our implementation of certain digital platforms in order to accelerate our speed to market. Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value.
Debt Outstanding Total debt outstanding increased $37.9 million to $214.9 million at December 25, 2022, from $177.0 million at December 26, 2021, primarily driven by net proceeds from the execution of the Credit Facility during the fifty-two weeks ended December 25, 2022.
As of December 31, 2023, we were in compliance with all debt covenants. Debt Outstanding Total debt outstanding decreased $25.7 million to $189.1 million at December 31, 2023, from $214.9 million at December 25, 2022, primarily driven by payments of long-term debt using proceeds from the sale-leaseback transactions during the fifty-three weeks ended December 31, 2023.
Contractual Obligations The following table summarizes the amounts of payments due under specified contractual obligations as of December 25, 2022 (in thousands): Payments Due by Period Total 2023 2024 - 2025 2026 - 2027 Thereafter Long-term debt obligations (1) $ 299,097 $ 24,608 $ 45,869 $ 228,442 $ 178 Finance lease obligations (2) 12,325 1,483 2,889 2,710 5,243 Operating lease obligations (3) 617,001 77,380 148,694 126,478 264,449 Purchase obligations (4) 149,203 52,499 35,887 38,815 22,002 Other non-current liabilities (5) 4,435 1,013 398 100 2,924 Total contractual obligations $ 1,082,061 $ 156,983 $ 233,737 $ 396,545 $ 294,796 ——————————————————— (1) Long-term debt obligations primarily represent minimum required principal payments under our existing Credit Agreement as of December 25, 2022, including estimated interest of $84.2 million based on a 9.81% average borrowing interest rate.
Contractual Obligations The following table summarizes the amounts of payments due under specified contractual obligations as of December 31, 2023 (in thousands): Payments Due by Period Total 2024 2025 - 2026 2027 - 2028 Thereafter Long-term debt obligations (1) $ 278,312 $ 22,292 $ 44,585 $ 211,435 $ — Finance lease obligations (2) 10,784 1,386 2,815 2,451 4,132 Operating lease obligations (3) 619,896 82,310 153,136 126,940 257,510 Purchase obligations (4) 230,683 61,464 95,328 49,813 24,078 Other non-current liabilities (5) 1,903 360 142 74 1,327 Total contractual obligations $ 1,141,578 $ 167,812 $ 296,006 $ 390,713 $ 287,047 ——————————————————— (1) Long-term debt obligations primarily represent minimum required principal payments under our existing Credit Agreement as of December 31, 2023, including estimated interest of $89.2 million based on a 11.62% average borrowing interest rate.
We define EBITDA as net loss before interest expense, income taxes, and depreciation and amortization. Other companies may define EBITDA and adjusted EBITDA differently, and as a result our measure of EBITDA and adjusted EBITDA may not be directly comparable to those of other companies.
We define EBITDA as net loss before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA and Adjusted loss per share-diluted are supplemental measures of our performance that are not required by or presented in accordance with GAAP.
During 2022, the Company determined long-lived assets at 46 locations were impaired as a result of our cash flow analysis, and recognized non-cash impairment charges of $38.0 million. During 2021, we impaired ten Company-owned restaurants as a result of our cash flow analysis resulting in non-cash impairment charges of $6.4 million.
During 2022, the Company recognized non-cash impairment charges of $38.5 million, primarily related to impairments of long-lived assets at 46 underperforming locations and quota state liquor licenses at six locations.
Adjusted loss per diluted share excludes the effects of asset impairment; gain on sale of restaurant property; severance and executive transition costs; other financing costs; restaurant closure costs; closed corporate office costs, net of sublease income; COVID-19 related costs; litigation contingencies; board and stockholder matters costs; goodwill impairment; change in estimate - gift card breakage; write-off of unamortized debt issuance costs, and related income tax effects.
Adjusted EBITDA and adjusted loss per share-diluted exclude the impact of non-operating or nonrecurring items including changes in estimate, asset impairments, litigation contingencies, gains (losses) on debt extinguishment, restaurant and office closure costs, gains on sale leaseback transactions, severance and executive transition costs and other non-recurring, non-cash or discrete items; net of income tax impacts.
The increase in tax expense for th e year ended December 25, 2022, is primarily due to the 2022 impact of state taxes including minimum state income taxes and state franchise taxes as well as an adjustment to federal taxes . 35 Table of Contents Liquidity and Capital Resources Cash and cash equivalents, and restricted cash increased $35.4 million to $48.8 million at December 25, 2022, from $22.8 million at the beginning of the fiscal year.
Our effective tax rate was a 1.5% provision in 2023 and a 1.0% provision in 2022, reflecting minimum state income taxes and state franchise taxes despite a pretax net loss position. 36 Table of Contents Liquidity and Capital Resources Cash and cash equivalents, and restricted cash decreased $26.6 million to $31.6 million at December 31, 2023, from $58.2 million at the beginning of the fiscal year.
In 2022, occupancy costs as a percentage of restaurant revenue decreased 50 basis points as compared to 2021 primarily driven by sales leverage and the impact of permanently closed restaurants and lease amendments, partially offset by higher general liability costs.
Other operating costs as a percentage of restaurant revenue decreased 60 basis points compared to the same period in 2022. The decrease was primarily driven by reduced third party commission expenses associated with lower off-premises mix and lower commission rates, and reduced restaurant supply costs primarily due to various cost saving initiatives, partially offset by higher repairs and maintenance costs.
The change in net cash provided by operating activities is primarily attributable to repayment of CARES Act deferred payroll tax of $8.8 million; $5.6 million higher interest payments due to the increased average total debt and higher interest rates; and decreased cash from earnings after non-cash items, as presented in the Consolidated Statements of Cash Flows, partially offset by changes in working capital, including the tax refunds received in 2022.
The change in net cash provided by operating activities is primarily attributable to the timing of payroll as a result of the 53rd week discussed above, the receipt of an income tax refund of $14.6 million in 2022, and severance payments and higher interest payments in 2023.
Removed
All comparisons under this heading between 2022 and 2021 refer to the fifty-two weeks ended December 25, 2022 and December 26, 2021, unless otherwise indicated.
Added
Our discussion for fiscal years 2022 and 2021, which ended December 25, 2022 and December 26, 2021, refers to a 52-week period in each year. The following discussion comparing our results in 2023 and 2022 refers to the fifty-three weeks ended and fifty-two weeks ended, December 31, 2023 and December 25, 2022, respectively.
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The COVID-19 pandemic continued to impact us particularly in the first half of fiscal 2022 directly through government mandated restrictions, and indirectly through supply chain disruptions and labor shortages. We and the broader United States economy experienced inflation levels not seen in decades.
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For a discussion comparing our results from 2022 to 2021, 25 Table of Contents refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 25, 2022, filed with the SEC on February 28, 2023.
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Despite these headwinds, our accomplishments in 2022 include the following: • Revenue increased by approximately $104.5 million, from approximately $1.2 billion in fiscal 2021, to approximately $1.3 billion in fiscal 2022. • Achieved a comparable restaurant revenue increase of 9.2%.
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Highlights for Fiscal 2023 Compared to Fiscal 2022 • Total revenues are $1.3 billion, an increase of $37.5 million. ◦ Comparable restaurant revenue (1) increased 1.6%. ◦ Comparable restaurant dine-in sales (2) increased 6.9%. ◦ The fifty-third week in 2023 contributed $24.5 million or 1.9% in restaurant revenue. • Net loss is $21.2 million, a decrease of $57.7 million from a net loss of $78.9 million during 2022. • Adjusted EBITDA (3) is $68.9 million, a $17.2 million increase. • Completed two Sale-Leaseback transactions, generating net proceeds of $58.8 million and a gain, net of expenses of $29.4 million. • Repaid $24.9 million of debt and repurchased $10.0 million of stock.
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Comparable restaurant revenue has increased for eight (8) consecutive quarters. • Comparable restaurant revenue and comparable restaurant traffic exceeded the industry average as measured by the Black Box Casual Dining index. • Continued investments in sales building and infrastructure initiatives: ◦ Installed Donatos® in 52 Company-owned restaurants, bringing the total number of restaurants with Donatos® to 245 as of December 25, 2022.
Added
(1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the 52 weeks ending December 24, 2023. The comparable restaurant base includes 406 restaurants out of the total 415 Company-owned restaurants. (2) Comparable restaurant dine-in sales are calculated based on the Company’s point-of-sale sales data, which does not include adjustments for loyalty breakage.
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Comparable restaurant revenue growth in fiscal 2022 compared to fiscal 2021 at restaurants with Donatos® outperformed restaurants without Donatos ® by 470 basis points. ◦ Invested in Guest facing facility upgrades and renovations in more than 200 restaurants. ◦ Upgraded infrastructure technology in restaurant and support center locations. • Facilitated a successful transition to a new Chief Executive Officer and other executive leadership positions.
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(3) See below for a reconciliation of adjusted EBITDA, a non-GAAP measure, to Net loss.
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Inflationary Cost and COVID-19 Impact The COVID-19 pandemic and the related aftermath continues to create unprecedented challenges for our industry including changing consumer behavior, labor and supply chain challenges, and wide spread inflationary costs. Cost of sales as a percentage of sales increased 200 basis points in 2022 compared to 2021, driven primarily by commodity cost inflation.
Added
See below for a reconciliation of Restaurant Level Operating Profit to Income from Operations and Income from Operations as a percentage of total revenues.
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Our ability to attract and retain Team Members became more challenging in the competitive job market in 2022. At the start of fiscal 2022, staffing was our number one priority. We made significant progress in improving the staffing levels in our restaurants throughout the year.
Added
The impact of this change in estimate comprised $5.9 million included in Other revenue, partially offset by $0.6 million in gift card commission costs included in Selling, general, and administrative expenses on the Consolidated Statements of Operations. (2) Other financing costs includes legal and other charges related to the refinancing of our Credit Facility in 2022.
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The challenges in hiring and retention and global supply chain disruptions also affected many of our vendor partners, resulting in intermittent product and distribution shortages. We remain focused on proactively addressing these industry challenges, while delivering a great Guest experience and continuing to prioritize the satisfaction and retention of our Team Members.
Added
GAAP as a measure of performance. 29 Table of Contents The following table summarizes Income from Operations, and Restaurant Level Operating Profit for the fifty-three weeks ended December 31, 2023 and fifty-two weeks ended December 25, 2022: Fifty-Three Weeks Ended Fifty-Two Weeks Ended December 31, 2023 December 25, 2022 Income (loss) from operations $ 4,542 0.3% $ (57,497) (4.5)% Less: Franchise royalties, fees and other revenue 28,752 2.2% 35,345 2.8% Add: Other charges (gains), net (2,663) (0.2) 38,961 3.1 Pre-opening costs 587 — 568 — Selling 34,770 2.7 51,700 4.1 General and administrative expenses 89,360 6.9 84,912 6.7 Depreciation and amortization 66,190 5.1 76,245 6.0 Restaurant level operating profit $ 164,034 $ 159,544 Income (loss) from operations as a percentage of total revenues 0.3% (4.5)% Restaurant level operating profit margin (as a percentage of restaurant revenue) 12.9% 13.0% The Company believes restaurant level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant level operating efficiency and performance.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMany of the commodities purchased by us are subject to volatility due to market supply and demand factors outside of our control, including the price of other commodities, weather, seasonality, production, trade policy, and other factors. During the COVID-19 pandemic, we experienced distribution disruptions, commodity cost inflation, and certain food and supply shortages.
Biggest changeCommodity Price Risks We purchase food, supplies and other commodities for use in our operations based on prices established with our suppliers. Many of the commodities purchased by us are subject to volatility due to market supply and demand factors outside of our control, including the price of other commodities, weather, seasonality, production, trade policy, and other factors.
A 1.0% change in the effective interest rate applied to these loans would have resulted in pre-tax interest expense fluctuation of $2.1 million on an annualized basis.
A 1.0% change in the effective interest rate applied to these loans would have resulted in pre-tax interest expense fluctuation of $1.9 million on an annualized basis.
The base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5% per annum, or (c) one-month term SOFR plus 1.0% per annum. As of December 25, 2022, we had $214.0 million of borrowings subject to variable interest rates.
The base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5% per annum, or (c) one-month term SOFR plus 1.0% per annum. As of December 31, 2023, we had $189.1 million of borrowings subject to variable interest rates.
A 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $3.1 million on an annualized basis. Many of the food products we purchase are affected by changes in weather, production, availability, seasonality, and other factors outside our control.
A 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $3.1 million on an annualized basis. 41 Table of Contents
As of December 25, 2022, approximately 49% of our estimated annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through the end of 2023. These contracts may exclude related expenses such as fuel surcharges and other fees.
To manage this risk in part, we enter into fixed-price purchase commitments for certain commodities. As of December 31, 2023, approximately 50% of our estimated annual food and beverage purchases were covered by fixed price contracts, most of which are scheduled to expire at various times through the end of 2027.
Removed
Commodity Price Risks The Company's restaurant menus are highly dependent upon a few select commodities, including ground beef, poultry, potatoes, and restaurant supplies. We purchase food, supplies and other commodities for use in our operations based on prices established with our suppliers.
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To manage this risk in part, we enter into fixed-price purchase commitments for certain commodities; however, it may not be possible for us to enter into fixed-price purchase commitments for certain commodities, or we may choose not to enter into fixed-price contracts for certain commodities.
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In an effort to mitigate some of this risk, we have entered into fixed price agreements on some of our food and beverage products, including certain proteins, produce, and cooking oil.
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In addition, we believe that almost all of our food and supplies are available from several sources, which helps to reduce or mitigate these risks. 40 Table of Contents

Other RRGB 10-K year-over-year comparisons