Red Robin

Red Robin Analysis Project

Corporate Finance

MBA 630-03

Spring 2009

Sumner Douglas

Greg Jaboin

Justin Romph

Jared Spackman

John Uriarte

Company Introduction

From small town roots in Seattle, Red Robin’s classic American story of humble origins to national success started with a single restaurant in 1969. Finding success as a purveyor of gourmet burgers near the University of Washington, the single restaurant quickly grew to include a number of outlets. Not content on running a small town burger chain the original owner expanded the business even more rapidly by franchising the concept. In particular one franchisee stood out among the list of assignees. Mike Snyder a young entrepreneur purchased the rights to open a store in his home town of Yakima. Snyder was a savvy businessman who ran his franchised stores well. By 1985 Red Robin International was a relative success running seven company owned stores and overseeing 15 franchises with Snyder's units the showpieces of the 16 year old company. Having decided to move on from the organization, the original owner sold his stake in Red Robin International to a Japanese conglomerate, Skylark Co. Ltd. The powerful company expanded rapidly and quickly lost sight of the original concept in a storm of culture shock. The company stores floundered returning profits 25% lower than Mike Snyder's franchise units. Realizing they needed a new direction if the company was to survive, Skylark named Mike Snyder the president of Red Robin International. Under Mike's direction, the chain quickly turned around jumping from an average profit margin of 13% to a lofty 19% margin. Mike was careful to manage costs and improve efficiency and implemented a bonus system for company employees. Mike quickly moved up the ranks to the Chairman's office.

In 2000, the company completed a recapitalization and absorbed Mike Snyder's franchise giving him a significant stake in the new organization. At the same...