Red Robin Franchises: Sales, Costs & Profits (2023)

One of the few restaurant franchise primarily owned by the franchisor (only 20% of the restaurants are franchised), Red Robin franchisees can rely on a strong brand thanks to more than 530 restaurants in the US alone.

Yet, Red Robin isn’t the most affordable franchise if you were to choose a fast food restaurant franchise to invest in. Indeed, you would have to invest $3 million (from investors or a bank).

But what about profits? We found that Red Robin is a profitable franchise with a payback period of 6.2 years on average. Want to know more? Let’s dive in!

Red Robin franchises: key figures

Franchise fee	$35,000
Royalty fee	5.0%
Marketing fee	5.5%
Investment (mid-point)	$2,959,000
Average sales	$3,182,000
Sales to investment ratio	1.1x
Payback period*	6 years
Minimum net worth	$1,750,000
Minimum liquid capital	$750,000

What is Red Robin?

Red Robin is an American chain of casual dining restaurants headquartered in Greenwood Village, Colorado.

It was founded by Gerry Kingen in 1969 in Seattle, Washington, when he bought Sam’s Red Robin and renamed it Red Robin.

Red Robin serves hamburgers, chicken or prime rib sandwiches, macaroni and cheese, milkshakes, signature cocktails, soups, salads, and appetizers like onion rings and quesadillas, as well as veggies or Boca burgers.

Its franchising journey began in 1979 with its first franchise in Yakima, Washington, and today it has more than 546 stores in the US, British Columbia, and Canada.

Red Robin franchises pros and cons

Pros

• Exclusive territory protection: The franchisor grants its franchisees the right to establish their restaurants in an exclusive market area approved by the parent company. It does not authorize any other franchise or operate a competing channel in the protected area as long as the franchisees are compliant with its franchise agreement.
• Investment buyout opportunity: The franchisor offers its franchisees the option for a buyback. In the unlikely event that a franchisee buys the Red Robin franchise and it fails to pick, the franchisor refunds them their development and franchise fees.
• Marketing support: The brand utilizes a superb marketing strategy to enhance improved public relations. It utilizes brand popularity, go-to search terms to improve SEO, social media, email reach, and engagement, and targeted promotional campaigns to publicize the brand’s products and local stores.
• Management training: The brand offers its franchisees extensive management and staff training on how to establish and operate a successful restaurant. It trains them about the products in line with its concept, handling customers, hiring and training staff, and product packaging. In addition, it provides them with new restaurant opening training.
• Franchise support: The brand has experienced top leadership and a professional franchise consultant to provide its franchisees with helpful growth strategies. Franchisees get guidance and expert advice on establishing and running their restaurants successfully.

Cons

• No financing: The brand does not directly or indirectly finance its franchisees for startup costs, equipment, inventory, or trade fixtures. Also, the franchisor does not guarantee its franchisees’ notes, grants, or leases.
• No absentee ownership: The franchise does not present a passive investment opportunity. The franchise owners or their appointed managing directors must be fully active in the decision-making and running of their restaurants.
• Competition: The brand faces a lot of competition from well-known brands in the fast food industry, especially from the giants Burger King, Five Guys, Steak n Shake, and others like Texas Roadhouse, Famous Dave’s or Sonic Drive In to name a few

How much do Red Robin franchises cost?

You would have to invest on average $3,167,500 to open a new Red Robin franchise restaurant.

Note that this is the required investment for a freestanding restaurant. Indeed, there are two kinds of restaurant formats you can choose from:

• Freestanding restaurant: $3,167,500
• Standard size / Mid-size restaurant: $2,750,000

The investment amount is an average; indeed, it varies based on many factors, such as the location of your restaurant, its size, etc.

Here’s the full breakdown of costs per restaurant format:

Red Robin startup costs (Freestanding)

Expense	Amount
Initial franchise fee	$35,000
Building construction cost	$800,000-$1,500,000
Furniture, fixtures and equipment	$700,000-$950,000
Exterior signage	$120,000
Additional Funds 3 Months	$100,000-$200,000
Other	$465,000-$1,510,000
Total	$2,220,000-$4,115,000

Red Robin startup costs (standard/mid-size restaurant)

Expense	Amount
Initial franchise fee	$35,000
Building construction cost	$800,000-$1,500,000
Furniture, fixtures and equipment	$550,000-$950,000
Exterior signage	$40,000
Additional Funds 3 Months	$100,000-$200,000
Other	$340,000-$910,000
Total	$1,865,000-$3,635,000

What’s the turnover of a Red Robin franchise?

On average, a Red Robin franchise makes $3,182,136 in turnover per year.

This is the average sales per restaurant for the 86 of the 89 franchised restaurants as disclosed in the Franchise Disclosure Document.

How profitable is a Red Robin franchise?

Red Robin is a profitable franchise. On average, a Red Robin franchise makes $715,981 in profits per year. This corresponds to a 23% profit margin (adjusted EBITDA margin).

To obtain this number, we used the information available in the Franchise Disclosure Document. Fortunately, Red Robin provides detailed information on the cost structure of its franchise-owned stores.

Profit and loss	Amount	% of sales
Sales	$3,182,136	100%
COGS	($763,713)	24.0%
Labor	($1,050,105)	33.0%
Rent	($318,214)	10.0%
Royalty + marketing fees	($334,124)	10.5%
Adjusted EBITDA	$715,981	~23.0%

Should you invest in a Red Robin franchise?

The payback period, as in the time to recoup your original investment, is 6.2 years on average for Red Robin franchises.

This is a good payback period and therefore a good investment. Indeed, it means you would have to wait 6 years before you can reap the profits of your franchised restaurant. Before that, you would simply repay the investors and creditors (banks).

How does it compare vs. other franchises?