Red Robin International, Inc. - a wholly owned subsidiary of
Red Robin Gourmet Burgers Inc.
) - announced the acquisition of four franchised units in Upstate
and Mid-Hudson region of New York.
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Previously owned by Connecticut-based Swan Concepts Inc., the
franchised units are located in Latham, Halfmoon, Fayetteville
and Poughkeepsie. Red Robin Gourmet Burgers currently owns and
operates 12 locations in New York, with another restaurant coming
up in West Babylon, NY.
Post Hurricane Sandy and the economic downturn, Hudson County is
poised for strong economic growth in 2014. Additionally, the
waterfront towns in the Upstate and Mid-Hudson region are popular
tourist attractions. In our view, the acquisition will be a
strategic success, as the profitable location will drive Red
The trend of transitioning to a company-based model is fast
picking up, although most companies still prefer franchisees. A
host of restaurateurs like
Panera Bread Co.
Buffalo Wild Wings Inc.
) have also acquired franchised units in the recent past.
The strong growth witnessed in these franchised units makes them
a lucrative acquisition target. Hence, we view the deal as
strategically positive in an industry that depends largely on
At the end of the last quarter, Red Robin had 495 restaurants. Of
this, 6 were Red Robin's Burger Works restaurants - the company's
smaller prototype restaurant - 134 units were franchised and the
rest were company owned. The company has plans for aggressive
expansion and remains on track to unveil 20 units in 2014, along
with 5 Red Robin's Burger Works.
Red Robin Gourmet Burgers currently carries a Zacks Rank #3
(Hold). A better-ranked stock in the same industry is
The Wendy's Company
), which has a Zacks Rank #1 (Strong Buy).