Good morning, ladies and gentlemen, and welcome to the Red Robin Gourmet Burgers Second Quarter 2012 Conference Call. [Operator Instructions] As a reminder, part of today's discussion will include forward-looking statements within the meaning of federal security laws. These statements are commonly identified by words such as continue, plan, expect, will and other terms with similar meaning. These statements will include but not be limited to statements that reflect the company’s current expectations with respect to the financial condition of the company, results of operations, plans, objectives, future performance and business, including the company’s traffic and revenue-driving initiatives, intentions, with respect to expense management, and plans for deployment of capital and other expectations discussed during the course of this call. Although the company believes the assumptions upon which preliminary or initial results, financial information and forward-looking statements are based are reasonable as of today’s date, these forward-looking statements are not guarantees of future performance, and therefore, investors should not place undue reliance on them. Also these statements are based on facts known and expected as of the date of this conference call, and the company undertakes no obligation to update these statements to reflect events or circumstances that might arise after this call. Participants on the call today should refer to the company’s Form 10-K and other filings with the SEC for a more detailed discussion of the risks, uncertainties and other factors that could impact the company’s future operating results and financial condition. The company has posted its fiscal second quarter 2012 press release and supplemental financial information related to the quarter’s results on its website, www.redrobin.com in the investor section.. I will now turn the call over to Mr. Steve Carley, Chief Executive Officer of Red Robin.

Thanks, Dana, and thanks, everyone, for joining us on our call today. Joining me are Eric Houseman, our President and Chief Operating Officer; Denny Post, our Chief Marketing Officer; and Stuart Brown, our Chief Financial Officer. After Stuart and I deliver our prepared remarks, Eric and Denny will be available for Q&A at the end of the call. Let’s start with a few financial headlines. As we shared in our earnings release, as you can see on Slide 3 of the supplemental information, our fiscal second quarter highlights include our total revenues increasing to $223.7 million or 3.7% over the second quarter last year, as our company-owned comparable net restaurant sales increased 0.8%, driven by a 0.9% increase in guest traffic. Our restaurant-level operating profit margin increased to 21.1% from 20.8%, driven by sales leverage and lower other operating cost. This was partially offset by increases in food cost and occupancy expenses. And our restaurant-level operating profit was $46.4 million or 5.2% higher than a year ago. Earnings per diluted share growth of 8.3% to $0.52, compared to adjusted earnings per diluted share of $0.48 a year ago. During the second quarter we were encouraged by the significant sequential improvement in guest count from a decrease of 3.6% in Q1 to an increase of 0.9% in Q2. Slides 4 and 5 include key areas of focus during the second quarter. One of these was our launch of Red's Tavern Double and our Tavern Styles. This is just one example of how we’re driving cravability, reinforcing our burger authority with our guest, and laying the foundation for everyday value. And I’ll remind everybody this everyday value issue is our number one barrier to trial and to increasing frequently of Red Robin. The Tavern Double is a tasty fired-grill classic 1/3 pound beef burger, at a $6.99 every day value price point. And that includes Bottomless Fries. But it's more than that. It’s also a great platform to deliver unique flavor combinations in our burgers, in a way that only Red Robin can do. Our introductory Tavern Styles included the southwest-inspired Cantina Jack, the bacon lovers Pig-Out, and the blue cheese and buffalo sauced Buzzalo, all of which were hits with our guest. We continue to bring news to this platform with the Fiery Ghost, featuring the ghost pepper and the Cry Baby with both spicy sautéed and fried onions in late June. We can clearly gauge presence in these styles by tracking their sales mix individually. This was the single-most successful introduction in recent Red Robin history. At over 2x the peak mix of our recent champ, the Oktoberfest Burger, and it sustained a double-digit mix for the entire second quarter. And in June, we addressed the number one guest request by adding a bigger Tavern Style, with our new Red Big Tavern Burger. In summary, we’ve now introduced everyday value at Red Robin at a powerful price point that is driving trial, and is anticipated to build frequency over time. And it’s designed from a cost of good prospective to drive profits too. Our quarter-on-quarter restaurant-level operating profit is evidence of this very positive impact. Through the collaboration of our culinary and ops teams, we already have in the pipeline new Tavern Double Styles that we believe our guest will love. So there’s much more to come with this platform as it continues to drive cravability, cement Red Robin's reputation as the burger authority, and provide value day in and day out. We’ll continue to use a media strategy similar to what we’ve done in the past, to drive news and guest interest. But with everyday value represented by the Tavern Double, we’ll focus our media to drive awareness of everyday value, and then share news about our really great gourmet burger seasonal offerings at full retail price. Moving on to another initiative, which is taking back the bar. This continues to outpace prior years' performance in both the alcohol and non-alcohol categories, with our alcoholic beverage mix increasing to 7.2% in the second quarter, up from 6.4% a year ago. Our beverage PPA event days like our Cinco de Mayo program, and stronger merchandizing of happy hour during off-peak periods, are helping us increase awareness of our adult beverage offerings and increasing alcohol beverage sales as a percentage of total sales, while beginning to address a great adult experience in the bar. During last quarter's call, we talked about the addition of our master mixologist, Donna Ruch, to our culinary team. Since then, Donna has been fully engaged, looking not only at new beverage innovation and ways to make our signature beverages more appealing to guests, but also exploring creative presentation of our beverages, experimenting with glassware packages and even testing new bar equipment. All of this not only helps us drive beverage sales in our total system in the short term, but it also supports our longer-term strategy, to reclaim our heritage as a great place for adults, as well as families. Regarding efforts to dramatically enhance the guest experience at Red Robin, which we’re putting under the title of brand transformation. After a thoughtful exploration and testing, we’ve locked down design concepts to create a fresh and more relevant restaurant environment for all of our guests. These include exciting plating and presentation changes and enhanced service. We expect to implement the first wave of transformation in about 2 dozen of our existing restaurants by the end of the year. And any future refinements to our brand transformation plan will be based on a thorough financial return analysis and comprehensive guest feedback. So this, as they say, is truly a marathon and not a sprint. Stuart will provide a little more detail on planned expenditures for the brand transformation initiative. Let’s move on to Red Royalty. Remember our goal for this best-in-class loyalty program is not only to increase the frequency of guest visits through Red Royalty membership, but to drive repeat visits that are profitable. So about a year after our system rolled out the program, we did a complete review of how it’s working. We analyzed the reward structure and examined what we’re learning about guest behavior to determine if the program is delivering the expected outcomes. Based on the internal visits we’re seeing from our highest-frequency guests, and the impact on our profitability, we continue to optimize the program with refinements that will expand membership in Red Royalty and further increase profitability, including the use of expanded surprise and delight programs such as day part-specific offers and the rollout of our Red Royalty mobile app this fall. Let me touch quickly on social media. During Q2 we increased our Facebook followers by over 140% over last year, and we recently surpassed the 0.5 million follower mark. With this growing presence in social media it’s becoming easier for our guest to find us and learn about what’s going on at Red Robin. There was a lot of great conversation on Facebook around our Tavern Double and Styles, especially the Fiery Ghost and Cry Baby. And our ability to have an ongoing dialog with our guest is why we’ll continue to leverage social media strategically as part of our overall marketing mix. Regarding new unit growth, we opened a Red Robin Burger Works in downtown Denver during the second quarter. And we have 9 NROs planned for the back half of the year. Of those 9, so far in the third quarter, we’ve opened 2 full-sized Red Robin restaurants in Pembroke Pines, Florida and Riverside, California and a new Red Robin Burgers Works in Boulder, Colorado, which is our fourth Burger Works location. So we expect to have 10 new full-sized units and 4 additional Burger Works added to our restaurant base in 2012, plus the franchise restaurant that we recently acquired in Clifton, New Jersey. As you saw in our press release, we did close one restaurant in Del Mar, California in Q2, due to the lease expiration. Also 2 franchise restaurants in Texas temporarily closed during the second quarter as another franchisee takes over. Both of these Texas restaurants are expected to reopen this month. And in Canada, one franchise restaurant closed in early Q2 due to a lease termination, and another closed for remodeling, and reopened early in Q3. Now I wanted to share an update on our Burger Works strategy. While we’re still testing this new Red Robin service model, we are very, very pleased with the early results, and we are capturing the learnings from a diversity of locations that we’ve opened to date: an outdoor lifestyle center, in the heart of a college campus, and in the downtown urban setting. We’ve also successfully applied to Burger Works the same the NRO discipline that we used to get our full-size units off to a strong start, and normalized as quickly as possible. As a reflection of our confidence in the potential for Burger Works, we recently hired an experienced and seasoned restaurant industry leader to serve as the Vice President of Operations for Burger Works. Rob Geresi joined us after a successful career in restaurant operations at Sonic. Rob has extensive experience in QSR, in addition to have founded a start-up restaurant chain, York Bagel and Deli, which he built from the ground up to more than 60 locations. We believe Rob has the depth and diversity of experience to help us refine and expand Burger Works, and we’re very excited to have Rob on the team. Now before I turn the call over to Stuart, I’d like to make clear that we’re thoughtfully assessing the impact that healthcare reform will have on costs, benefit programs and operating policies at Red Robin. Currently at Red Robin, just over 40% of our eligible team members participate in our healthcare plans to-date, and we offer a richer array of benefits than the minimum required by the new legislation. While the rules are still being written, what this eventually cost and who ultimately pays will vary given many assumptions. Key variables include how many additional team members would participate in the plan, changes in benefit levels, as well as changes to the part time/full time team member mix, and of course turnover numbers. We intend to provide additional information in the future, but our preliminary estimates show this to be equivalent to an incremental 1% to 2% sales tax beginning in 2014, and assuming Red Robin made no changes to its current plan design or labor practices. We’ll be trying to work collaboratively with our peers in the restaurant industry on a comprehensive approach to addressing the cost challenges affecting all of us. But given the recent Supreme Court ruling, we want to be as forthright as we can in addressing this very timely issue. Now here’s Stuart to give you more perspective on our operating results and our outlook for the balance of the year.

Thank you, Steve, and I appreciate everyone taking time to join us on the call this morning. As Steve touched on and is outlined in our press release, we performed very well this quarter in a number of fronts, including trends in guest counts, expansion of our operating margins and growth in EBITDA. For the second quarter, our total revenues increase 3.7% due primarily to a 3% increase in operating weeks and a 0.8% increase in comparable restaurant sales. Net income was $7.7 million or $0.52 per diluted share, which represents a 8.3% increase over last year's adjusted earnings. Year-to-date adjusted earnings per shares increased 16% to $1.23 per share. Looking at the top line, as you can see on Slide 7 of our supplemental reporting information, comparable restaurant sales growth of 0.8% resulted from a 0.9% increase in guest counts and a slight decrease in average check. The April menu introduced our everyday value Red's Tavern Double, which achieved great acceptance as Steve discussed, leading to higher guest counts and profitability. However, average check decreased with the loss of some appetizer sales, mainly offset by higher beverage instances. While the new culinary team we announced last quarter -- with the new culinary team we announced last quarter, we are in the process of revamping our appetizer offerings, which will come in several steps over the coming year. As shown on Slide 8, our restaurant margins were 21.1% in the second quarter, or 30 basis points higher than the year ago. The 20-basis-point increases in both cost of sales and occupancy costs were more than offset by lower expenses in a number of areas, including transaction fees and utilities, as well as the leverage of higher sales on labor. Our cost reduction program is truly ingrained, and this quarter we began implementing several new initiatives, including reusable kid’s cups, as well as switching an equipment vendor from fixed fee to a timely materials contract, which together will save in excess of $500,000 annually. Below restaurant-level operating profit, Selling, General and Administrative costs were in line with expectations, and $1 million higher than last year, due to costs related to our new IT systems, and increased amortization of equity-based compensation, partly offset by lower severance cost which we incurred last year. The implementation of our new financial and supply chain IT systems, which we have talked about on previous calls, has been delayed following quality assurance testing. We are now planning for implementation of our financial systems in the fourth quarter, along with piloting of our supply chain system, but as early adopter of the program, we are prepared for additional delays until testing is satisfied. Our EBITDA continued to grow strongly versus a year ago, increasing $2.3 million or 10% -- over 10% to $24 million in the fourth quarter. Year-to-date, our EBITDA was $56.4 million, an increase of 12.7% compared to 2011. We invested $17.4 million during the quarter, including approximately $6 million in new restaurants, $4 million for maintenance capital, $3.2 million for the restaurant we acquired in Clifton, New Jersey and $4 million in our IT systems and corporate overhead. Our capital structure remains in good shape with $29.9 million of cash on hand and $135 million of debt. During the quarter we used excess cash to repurchase 255,000 shares for $7.7 million. As of the end of the second quarter, $40 million remained under the board authorization for share repurchases this year. Looking ahead, our guidance for the rest of the year has been revised to reflect the slowing consumer demand which we have heard about from our peers and industry research. As you see in our press release and on Slide 13 of our supplemental information, we now expect comparable restaurant sales growth for the year to be near 0.5%. While we had comparable sales growth of 0.8% in the first half of the year, casual dining traffic nationally was negative in June and July according to Black Box. On top of that, remember that traffic is reduced during the Olympics, particularly at dinner. During the last summer games, Red Robin sales were 3% to 5% below trend. So with limited to no national growth, and a decrease for the 3 weeks of the Olympics, one would expect negative same-store sales growth in the third quarter versus last year. We have, of course, though undertaken promotional initiatives to blunt the impact of the slowing demand generally, and of the Olympics specifically, but our competitors are surely taking action as well. Marketing steps during the remainder of the year include continuing to emphasize our successful Tavern Double with our unique styles, offering premium seasonal items, using targeted promotions to our Red Royalty members and other actions. So while we expect comparable restaurant sales growth to be negative in the third quarter, it should turn positive again in the fourth quarter, with continued success of our everyday value platform supported by the October menu, which includes exciting and popular seasonal items, additional drinks and beverages and a modest price increase. We will open 9 additional restaurants in the second half of 2012, resulting in an increase in operating mix of almost 4%, excluding the impact of the extra operating week we have this fiscal year. Further, as Steve covered, we will test several different levels of remodels across over 20 restaurants in 5 markets. Investments in the remodels are expected to be $5 million to $6 million, plus we’ll be spending another $3 million to upgrade audio visual packages in an additional 100 restaurants. There will be some accelerated appreciation and costs related to this part of brand transformation, which we will detail on our next call. Despite the slowing consumer demand, we have raised our targets for restaurant-level operating margins to increase about 50 basis points from the 19.8% achieved in 2011. And this is 30 basis points better than our original guidance. As a result of favorable cost of sales and operating expenses more than offsetting the leverage lost from the lower-than-expected sales. Guidance for Selling, General and Administrative cost is being raised to range from $108 million to $109 million, or about $1 million higher than our original guidance, due to the expensing of more of our investments in our IT system and brand transformation initiatives. We’ve received a number of concessions from our IT vendors that offset a majority of the impact of the system implementation delays, but a higher portion of the projected cost will be expensed. Of the remaining $50 million or so of expense this year in G&A, the third quarter is expected to be about $1 million higher than the fourth quarter. Depreciation and amortization expense has been trending lower in recent quarters, due to 5- and 7-year assets becoming fully depreciated, but it will begin to tick up in Q3 and Q4 related to our brand transformation initiative. Before turning the call back over to Steve, I want to remind you that while we are taking steps to assure short-term performance to the brand, the entire team is working very diligently in putting the pieces in place to insure an even stronger future. We spent the better part of last week together with our leadership -- senior leadership team and our board, working through our strategic objectives, including strengthening our value proposition for guests, differentiating ourselves further from mainstream casual and fast casual competitors and accelerating our organic growth. With that, I’ll hand the call back over to Steve for some final comments before taking your questions. Thank you.

Thanks, Stuart. Before we close, I wanted to take a moment to acknowledge the outpouring of support the Red Robin family received after the recent theatre shootings in Aurora, Colorado. As you probably know, many team members in the Red Robin family were affected by this tragedy. But I’m very proud to say that Red Robin team members, guests, suppliers and others from across the country pulled together to help our people with emotional, spiritual and financial support in their time of need. And we wanted to thank everybody for their thoughts and generosity. So to recap our Q2 call this morning, in addition to the year-over-year growth in our bottom line results, we were encouraged by the significant improvement in our guest counts from the late first quarter level. The guest response to our new menu and the introduction of Tavern Double Burger platform has given us solid momentum as we head into the back half of the year. We’ve said during recent conversations with our shareholders that if 2011 was the year to harvest some low-hanging fruit, then 2012 is the foundational year for Red Robin. And we believe our business is already getting stronger and our financial performance is improving. Again, this is a marathon and not a sprint, so we remain focused on our long-term growth and prosperity. As always, I appreciate all the support and hard work of the many Red Robin team members who take care of our guests every day, and contribute to our continued success. With that operator, we’d be happy to take questions.

[Operator instructions] We’ll go first to Joe Buckley, with Bank of American/Merrill Lynch.

A couple of questions. Just trying to put some of the guidance in perspective. The SG&A coming a little bit higher, do you have a sense yet how that’s going to play out next year? Will the IT-related expense to continue through 2013?

Joe, this is Stuart. Yes, I mean, I think year-over-year should be coming down as we get our financial and supply chain systems rolled out to the restaurants. Again, it’s going to depend upon the exact timing of that. Assuming we get the financials in the fourth quarter and can get the supply chain piloted, you'll continue to see some implementation cost in the first half, and then it'll really start to trend down strongly in the second half. The next key piece of our store supply chain system that we have in the pipeline is labor management, which will drive some real results. But that’s -- some of the drop-off you’ll see from the supply chain system will be offset higher costs in labor management rollout.

Okay. And then just on sales. The third quarter caution, I guess I’m a little bit surprised, the 3% to 5% number I guess related back to the 2004 summer Olympics experience, is that correct?

That’s correct, and so I’m not trying to signal that, that’s exactly what’s going to happen this time, so that was 2008 when the economy was already pretty weak. But sequentially, you got to remember opening and closing nights of the ceremonies, I mean, everybody’s sitting at home watching TV. So you’re losing about 10% of sales, that -- during those nights. And you’ve got 3 weekends. So I think in the -- I know Black Box actually put a piece where their July numbers, that they’re expecting pretty meaningful slowdown for casual dining across. So again, we’ve got some marketing steps to offset some of that, but nationally, it's sort of what we should walking in.

Okay. And are your thoughts more Olympic-focused as opposed to, we’ve heard lots of companies talking about slowing sales. I mean you’re a few weeks into your quarter, including a little bit of Olympics experience under your belt, I guess. So is it more Olympics focused or…

I’d say Olympic – again, you’ve got 12 weeks. So if you get 3 weeks that are down because of your Olympic, that’s the biggest thing that’s weighting it down. There’s definitely -- I mean, most of our peers have all reported, there’s definitely some national slowing. I mean, when we put our original plan together, we built that on sort of the GDP growth of 2.5%. Well, that GDP growth is going to be 20% below that, right? It’s going to be under 2% probably for the year. And so there’s definitely some national slowing, but the biggest impact in Q3 is the Olympics. And that's what also gives us confidence more in the trend versus Q4.

Okay. And then just one more, just on food costs, a bunch of noise out there. What are you experiencing currently, is 2012 coming in maybe a little better than you thought? And any preliminary thoughts on 2013?

Yes, I mean it is coming in better than we thought, even ground beef is coming a little bit better, which is really the result of the drought, and farmers sending more cattle to slaughter. So you’re getting sort of an unnatural supply that's coming onto the market, which is going to hurt us next year. So we’re watching the markets for next year and trying to understand how strong is the reaction to what’s going on today. So ground beef has been higher. And what you’ve -- you’ve seen beef actually coming down a little bit over the summer. Chicken, we’re contracted really through the rest of the year. We’re slightly higher on chicken than we were last year. You’ll see with the grain prices, you’ll see chicken prices go up, but our initial expectations are for last years, that’s not going to be a meaningful increase. And fries, they’ll go up. But that also seems like that’s going to be a fairly moderate increase. So those are our biggest items. It’s too soon to tell right now on what our beef prices are going to come out. So we’ll talk about that more on the next call.

We’ll go next to Jeff Omohundro, with Davenport & Company.

Just a question on average to maintain this traffic momentum. It was mentioned earlier about media to drive awareness of your everyday value. I’m just wondering with the crowding out effect that we would expect this fall from the Olympics, from the elections, maybe you can address media plans, LTOs and communications of how you’ll communicate the value.

Jeff, this is Denny, great question. We have an advantage in the fact that we’re a national cable buyer. Where you're going to see a lot of crowding out is going to be at the local level, primarily, and then of course the risk that people may just kind of turn away from viewing. But we have scheduled the same amount of media this fall, and very much lined up with last year, which was of course our successful Oktoberfest promotion. We got off to a great start in Q2 with the Tavern Double, we still have a lot of opportunity to drive awareness around that everyday value proposition. And also to continue to layer in the premium seasonal burgers that we've talked about. So I feel like the media that we’ve got set is going to do a great job of driving in the folks, and continuing to drive trial and awareness of Tavern Double. And then beyond that, we’ll be using our social media, I think continually more and more effectively, which is a great tool for us. And then you couple that with our Red Royalty program membership, and we continue to find that our ability to speak directly to them in a relationship messaging way, not just a deal way, is making a real difference underneath some of these promotions. So I’m pretty confident we’ve got a good mix.

And on the seasonal premium end, will the pricing be somewhat similar year-over-year?

We’re going to actually have an opportunity on our premium and to take full margin this year. The nice thing about the Tavern Double is it’s been engineered at everyday value at $6.99 to be more penny profitable than a discounted LTO in the way we’ve been to market before. So from that standpoint, I think we have a lot of opportunity in profitability, as well as trade outs to the seasonal offering. So without giving away exact details, hopefully you can read through all that.

We’ll go next to Jeff Farmer with Wells Fargo.

You did touch on this, but how did traffic play out through the quarter? Was it much stronger when you were on air with the Tavern Double, or did it pretty much hold up even when you went dark?

No, I think the – just going back and looking at our numbers and trying to compare those also to Black Box in terms of how we did versus the market. I mean clearly, as Steve talked about the Tavern Double really had a strong impact in terms of driving guests into our restaurants. And that was the whole point of the media plan, everything else is to create awareness of this value. We talk about $6.99, I want to add in, with the Styles, which is mixing really well, you’re at $7.99, so for $1 more, you get this great flavor profile. And now we’ve rolled out the Tavern, the big Tavern which is even a full price point as well. So the total mix of these things is mixing in at higher than the $6.99 that you may think. So the -- but from a traffic perspective, I mean we clearly took a lot of share early in the quarter when we were rolling this out. And we’ve continued to, although the media certainly helped.

And then as related to day parts, you had sort of mentioned last quarter that you were seeing a lot of pressure at the lunch day part. So in terms of that traffic improving, was it fairly evenly distributed across lunch and dinner, or more heavily weighted toward lunch?

Well, I will say that we have more to give at lunch than most people, because we’ve always had a more balanced business than most of our -- the mainstream casual competitors in any case. So they’ve been very aggressive about lunch deals. But we have seen increase in dinner day part as well as some at lunch associated with Tavern. And if you go back to the fundamental work that we did to get after this kind of menu engineering, it was clear that affordability and food prices are an issue across day parts. So for us, this is not just a lunch play by any means, it is one that we believe will drive traffic across the day.

Jeff, just to correct one thing. While we’ve had some moderate decrease in the lunch mix, it’s not been substantial.

No, we’re not.

Okay. And then obviously it’s very clear, obviously Tavern Double is moving the needle for you. You’ve been able to sort of build off that platform a little bit. But, what’s next. I assume you’re not just going to hang your hat on Tavern Double and continue to sort of use that as a primary platform. What other type of things can you pursue? I mean, even getting outside of hamburgers? Is there anything you can…

Well, we’re continuing - as Stuart mentioned, we’re doing a great deal of work around PPA builders, particularly appetizers, beverage, all the things that round out a meal. What goes with a burger. We’ve got great news in shakes. If you haven’t tried our Salted Caramel Shake, I highly recommend it. And we launched that at the same time as Tavern Double, it saw some terrific take there. Again, one of the things that we found time and again with our Red Royalty guest is, when they come in, they don’t necessarily come in to spend less money, they come in to get more for their dollar. So we see them add on, trade up, and we want to give them more and more reasons to do that. And then desserts will follow. We have a lot of opportunities built out around our core menu items. We also have a pipeline of specialty burgers and a tremendous pipeline of Tavern Styles, which as Stuart mentioned, builds -- only builds margin further on each one of those Tavern Double sold.

Okay, and then final question. You said -- you’ve answered this question a couple times in the past, but if you were to achieve cost savings above and beyond that $16 million to $18 million you’ve already pointed out. You’ve been saying that again, you’d be investing that back into the business. But given sort of the top-line trends you’re seeing from an industry perspective, are you any more likely to let some of that flow to the bottom line, given the environment?

This is Stuart, Jeff. No. Again, we want to keep improving the -- for our guest, is it worth the value that I pay? We want to continue to differentiate ourselves from our peer group, and really stand out on that. So as much as we can reinvest back, and we’ve talked about brand transformation in terms of the environment, product, plating, presentation, that is the right long-term investment to be making.

We’ll go next to David Dorfman, with Morgan Stanley.

I wanted to follow-up on your comment that sort of when you’re original plan was to sort of made in your mind, you sort of had a 2.5% GDP or sort of a stronger macro than what ultimately we are experiencing. And just how that has sort of changed either your piece of roll out or even your strategy altogether. And specifically, if you can just comment on the timing of sort of the various pieces of the menu rollout and the brand transformation, and especially on what enhanced service includes as well?

This is Stuart. Yes, I view those as sort of 2 different things. One of them, when you’re looking at the -- what’s going on with the guest this week, which I think everybody wants to talk about. There’s a number of sort of short-term things we can do. The huge advantage we have there is Red Royalty, right? We’ve got over 1.7 million, 1.8 million registered users of that, so we’ve got an audience between that and Facebook that we can really talk to the raving Red Robin fans. So we can do some short-term tactics that is a little bit stealth. You don’t have to offer it to everybody, so you can really manage your margin and really drive impact that way. Long term, in terms of how we’re investing in the business, menu changes. As we touched on, the brand transformation is physical as well as menu. We talked about it at our investor day we had earlier in the year. And so we’re in the process of thoughtfully testing a number of those initiatives. We will be testing a number of those this fall, reading the results through the winter and early spring. And so we will continue to evolve the menu, continuing to make impacts. I would say the one on this fall will be more minor, with anticipation of more major menu changes, in terms of the enhancement that Denny talked about in terms of burgers, appetizers, desserts in the spring. And then we’ll get the results also from the reads from the almost 2 dozen restaurants that we’re testing brand transformation on, and can roll that out in the back half.

Jump in one thing on that. David, I heard you kind of ask about brand transformation. Let me also just reinforce, we are testing a ton of things this fall. So we’re trying to be very informed about how we move forward, and we’re going to have some considerable options for next year. You asked specifically about brand transformation and what we meant, kind of by the service standards. Again, one of the goals of brand transformation is to make Red Robin a great place for adults, as we traditionally were, as well as families. That requires kind of a different sense of how do we zone the restaurant, how do we talk to our guest. And the staffing approach there. So we’re really looking at all of that. We have a cross-functional team now led by a dedicated VP over brand transformation. And we are taking on all the challenges in working with our ops partners. It’s not just about redesigning the box that we’re in, it’s about all the elements. And I think we’re being very thoughtful about that, and have some good opportunities.

And just on the sort of macro question as well. I think, sort of the last time we saw the big dip, parties with children was one of the categories of diners that was hit hardest, and that sort of affected Red Robin disproportionately. Is that something you’re seeing the beginning of again, or is there a way to sort of judge how your guests are bringing children or not?

I think – I was going to say, I think that continues to be a challenge, that when you look at the uncertainty and the consumer uncertainty out there, it certainly disproportionately affects middle income families, and that’s where we do a lot of our business. So we’re also looking at how do we reinvest in our approach to families and children, and not just chase the adult crowd, because we want to keep a nice balance in our business and we believe we can do that.

One thing, just you’re looking at the second quarter. I mean, the ratio of kids meals that we have in our menu is down a little bit, very slightly year-over-year. However, more than anecdotally, the data's showing is actually some of that is teens who before would be looking at the kids menus are actually trading up to the Tavern Double.

Next is Will Slabaugh with Stephens.

Wanted to follow up on the menu in general, and kind of where you feel you are in that evolution. You've talked about how successful the Tavern Double was on the bottom end. I know you talked in the past about eventually getting something else on the higher end. So I guess 2 questions here, where you feel like you are sort of percentage-wise on the evolution of where you think that menu can go. And then secondly, as far as you want to talk about when we should expect to see things maybe on the higher end of the menu.

I’ll take that one. I would say, so we've talked about a barbell menu approach. You asked for a percentage, we’re 40% of the way there, if at all. Lots of opportunity that remains. And part of the testing and development that we’re doing is how do we address the higher end of the barbell as well. We’re just not ready to speak specifically about that yet. One of the things we want to be obviously thoughtful about along with the others. But I feel really great about the start that we’ve gotten with Tavern Double. I think it’s actually given us some -- a little bit of pricing power to kind of stretch out the middle of the menu too, in terms of our specialty burgers. And we’re looking at that in terms of new presentation and some other things that will help us start to really range out all of our burger offerings. We’re also actively looking to improve some of our entrée offerings. And of course, as I said before, round out things like appetizers and desserts. So long way to go on this, but got a great team in place, a lot of tests starting, and very confident that we’re going to have a lot of pipeline activity in the menu format to support that.

Good to hear it. And then on the big positive swing to traffic this quarter from last quarter, wondering how much that new more nimble way of approaching marketing that you talked about last quarter affected that, or if at all. And if you could speak to that a little more. Or was it more just the everyday value of the Tavern Double, kind of with a kick from alcohol sales, et cetera.

Yes.

Yes. Things are starting to work better, we’re getting smarter, and yes. It was -- a lot of it was Tavern Double. We have a lot of interest in coming back to Red Robin with the right proposition.

Lastly from me, pricing. I know that rolled off, and wondering, you mentioned you'd be taking some additional pricing in October with the new menu rolling out. But looking at corn up, et cetera, wondering if you had any sort of range of what that might look like, what you’re most comfortable with. I know you’ve had roughly 2% rolling on the menu in the past.

Yes, just -- Will, this is Stuart. It’s going to be modest. And again, it’s -- we would have liked to not have taken any. We’re looking at the same things you are in terms of the impact of the drought, and what it’s going to commodities next year, as well as minimum wage increases. And just trying to get a little bit ahead of that. We’re still finalizing numbers, but it’s not going to be a major price increase, it'll be modest.

And we'll take our next question from Steve Anderson with Miller Tabak.

Just can you give an exact number on your mix in terms of the Tavern Double and where mix has been on some of your previous LTOs?

Well, as I said in prepared remarks, the -- we’re not going to give a specific mix, we think that that’s proprietary for us. But we can tell you that of our most successful promotions in the past upon introduction at its peak, the Tavern Doubles were more than 2x the product mix of anything we’ve done in the past. And even more importantly, they still sustained at a double-digit level of price mix for the entire second quarter. So we’re very encouraged and very pleased.

On top of that the take on the Styles is higher than we had anticipated from our concept research, which is why we remain so certain about doing that. But things like this summer where we were able to market without television, Fiery Ghost and Cry Baby, and get some considerable attention in the worlds of public relations, where we haven’t traditionally done well on social media. Again, Red Robin historically had a great attitude. It had a swagger, it had indie cred, if you will. And we think we can bring some of that back, and we’re certainly doing that with the Tavern Double and the Styles.

We’ll go next to Conrad Lyon with B. Riley & Company.

Steve, I think you sort of, kind of alluded to this with your last comment there, but really it’s just kind of repeat visitation. Do you have a handle on that and how that’s trending with your LTO?

Conrad, one of the things that I want to reinforce is that our average user comes to Red Robin about once every 3 months. So when we talk about a marathon and talk about continuing to tell the same story, talk about having to continue to talk about everyday value, that’s one of the reasons. And so as opposed to a quick pop that’s going to fade, we think this is going to be a nice initial pop and a really nice slow continued build, as people continue to discover that we’re not taking that price point away, that it's there every day, and that they can get it anytime they want. So this is going to take some continued communication with our guests, and it’s going to take some time for even our existing user base to wander in and discover it. But we’re really excited about its initial traction.

And Conrad, you just referred to, just to get you, it is everyday value.

Yes, I realized that after I said that.

Just I want to do that because yes, unlike -- we’re not trying to play the limited time deal game. We’re really starting to engineer the menu for maximum reach. We see very strong repeat intent on these products.

Yes. Okay, well that leads into this one. I know you touched upon the commodity outlook, and it’s hard to gauge what that’s going to be. But let me ask about just levers you might pull to overcome any commodity inflation. I mean obviously there’s pricing and you’re pretty clear about that. But might you play with more LTOs or alter the SKUs on the menu?

Conrad, this is Stuart, I mean we’re not looking too much at that actually. I mean, it is a -- we’re looking at -- if we look into different hedging strategies out there for a couple of different of our commodity items, particularly at fuel. I know a few of our peers out there doing that. We have not played a lot in that, but given where oil is and things like that, there may be some opportunities for us to lock in there. But again, these are things that we are working with our suppliers, potatoes, obviously is a big piece, about 10% of our purchases. We finalizing negotiations on that now for basically next year. So we’re doing the things that we think we can be doing. Could we be more aggressive? Yes, I think where you’d be more aggressive, the premium you’d be paying to lock in price today, in some cases may not be worth it. It’s like a steep inverted yield curve, and if you go out too far, try to get too aggressive, you’re going to end up paying more than you should long term.

Got you. Okay. Final question, this is kind of a macro thing, and maybe direct it toward Steve. But just the competitive environment, you’ve been pretty straight about your thoughts on that. How do you feel you’re stacking up against both QSR, fast casual, do you think you’re maintaining your share, taking share, losing share?

Conrad, we did the math on Tavern Doubles, so at $6.99 with Bottomless Fries, you add a Coke and a 15% tip, and you’re at $10.98. If you happen to wander into Five Guys, get their burger, their fries and their Coke, you’re into about $10.97. So we’re feeling very good about having a terrific fire grilled unique product, that gives our guests everyday value, is a powerful tool to protect our share from fast casual, and that’s really what we’re focused at, and we think we’re getting really close.

Okay, so it sounds like your maintaining share.

We did a good job in Q2.

And we’ll go next to Nicole Miller with Piper Jaffray.

A couple quick ones on the Tavern Double, I was wondering if that and maybe perhaps in conjunction with the Royalty program. Can you tell yet if you’re driving the frequency of guests or if you’re getting a new guest in the restaurant?

It’s really too early to tell from that standpoint. I would tell you that my gut says, and we have tracking in place to start to learn this, that this definitely drove trial of guests who had not -- who were positive to Red Robin, but just simply had not been in, in a while. So I think it is probably affecting more of our lapsed user and appealing to a different user than our most loyal guest, who is represented in Red Royalty.

Okay. And also, the pipeline, with the focus on value, how -- I’m just wondering what is the length of the pipeline? So in terms of the products you want to promote and then the marketing to back it up, is it 9 months, 12 months, 18 months, where do you stand today?

Well, I would say certainly the focus on value in terms of Tavern Double Styles, they almost write themselves, they’re quite easy to do. In fact, I followed Stuart's contest with a $1,000 challenge to our team members, we’ll be announcing the award this week for the very unique burger built with all existing ingredients. So again, a great way for us to do some things. But so from a pipeline standpoint, I’d say we’re well out into next year in terms of the development and testing that we’ve got going on across the menu, not just in the value area, Nicole, but across the menu. Because we continue to want to balance the value traffic driving potential with our specialty burgers and where we’ve traditionally done so well in that $10 range. So continue -- you’ll continue to see items in both sides.

Nicole, this is Steve. To give Denny some cred, when she came, we were about 12 weeks out on our new product pipeline, and now we are 12 months plus out, not only on Tavern Double and Styles, but across the entire menu.

And we’ll take our next question from Chris O’Cull with KeyBanc. Christopher O'Cull: I had a follow-up question, Stuart, regarding the pricing. What pricing did you average during the second quarter, and what will you be rolling off on the back half of this year?

So we’ll be -- so last October in the October menu, we had about a 0.9% price increase and probably about 0.7% or so flowed through from that. So that’s what you’ll be really cycling over versus last year. Christopher O'Cull: And I missed it, what was the second quarter pricing?

Prices for last year and the April menu we had taken about 1.2% -- we had about 1.2% price increase. Christopher O'Cull: Okay, so the average …

After flow through.

That rolled off.

Yes, so that rolled off in April. Christopher O'Cull: Okay, so the average increase in the second quarter was?

About 1%. Christopher O'Cull: About 1%, great. And then I had another question regarding your comparable sales guidance for the fourth quarter. I think you suggested that it should turn positive in the fourth, or that’s the implied guidance. What gives you confidence that, that’s going to occur given the comparisons are harder and sales seem to be slowing?

Some of it is some of the items we’ve got stacked up for the promotional activity. Again, if you look at the success that we had with the Tavern Double and the initial media, the media that we’ll have on -- the next round of media, will be rolling out the last 2 weeks of Q3 and the first 2 weeks of Q4, which is the same cycle that we had last year. We think that will continue to resonate. And again, I would say absent the Olympics, we would be flat to positive, probably in Q3. So and in Q4 then you've got a little bit of modest -- you’ve got a little bit of the price increase as well so. Christopher O'Cull: And is there a gift -- should the gift card program help in the fourth quarter at all, you think?

It will to some degree. Again, the major -- the last sort of major piece of the rollout that we had to expand our gift card program, happened last year, it was sort of late in the year last year, for the holiday season. So that was the sort of the other major sort of third-party distributor. So year-over-year you may get some growth, but it won’t be huge.

[Operator Instructions] We’ll go next to Peter Saleh, with Telsey Advisory Group.

I just wanted to ask about the alcohol mix. Seems like it was up nicely from last year, but it looks like it's pretty flat to the first quarter. So just wondering, the new menu that’s going to be rolling out in October, is that going to feature more alcohol? Is that what you guys are hinting at in terms of the push in October, given that more of the appetizers and the -- that the main entrées won’t start until sometime next year?

We’re doing a number of things, Peter, this is Denny, from incentives and also getting much more active about promoting alcohol, alcoholic beverages as an alternative and as a complement to our burger. So you’ll actually see a kind of a fun piece of news that'll be coming with our fall promotion that puts us squarely in the -- certainly in the beer business, which there’s a lot of opportunity to sell a beer with a burger. So it is certainly the focus of the organization to continue to drive this over fall. And again, without giving away too much, we have a number of tests that I think will help us create organic growth, as well as pipeline that will help us drive more and more conversation about Red Robin as a place to enjoy an adult beverage along with your burger. So we’re definitely working on it.

And remember, Peter, as -- we’re going to be rolling out dramatically enhanced audio visual packages to over 100 restaurants this year alone. As the first of a wave of dramatic improvements in both the dining room, particularly the bar, to make it a much more welcoming, warm and interesting place for adults to gather. So that’s also -- changing that environment is also going to help.

Great. And then on the commodity side, I know you had mentioned you’re seeing ground beef prices coming down a little bit from the early slaughter, how long do you expect that to last? And granted, it may be short lived, but are there opportunities to lock in a little more today for next year?

Peter, this is Stuart. No, I mean it’s probably not going to be really long-lived. But no, because we buy all fresh, we buy it on the spot market, and so there’s not an opportunity for us to lock in. There are some people out there obviously who freeze it, stick it in their freezer for a long time, we don’t do that.

And with no further questions in the queue, I’d like to turn the call back to Mr. Carley for any additional or closing remarks.

We appreciate everybody’s interest. Thank you so much. And with that, we’ll wrap the call up.

Again, that does conclude today’s presentation. We thank you for your participation.