Red Robin Refinances Debt with $115 Million Facility, Announces Resignations of Two Board Members
Key Facts
Red Robin announced on October 27 that James Pappas and Chris Martin had resigned from its board of directors, effective October 23, weeks after the company completed the refinancing of its credit facility. The moves come amid a transformation that included selling company-owned restaurants and shifting to a franchise model. The company said the strategic objectives of the investment that accompanied the two directors’ appointments to the board had been largely achieved. Following the resignations, the board has 6 members, 5 of them independent. Pappas, managing partner at JCP Investment Management, and Martin, managing director at Jumana Capital, joined the board in December 2024.
The refinancing closed on October 2 and was announced by the company on October 5, ahead of the two directors’ resignations, which were announced on October 27. The new $115 million facility comprises a $90 million term loan and a $25 million revolving credit line. It matures on October 2, 2031, 5 years after it was signed. The company can increase its size by up to an additional $20 million, subject to lender participation. Its terms set an interest margin of 275 to 350 basis points over SOFR, depending on the leverage ratio; the initial rate was 325 basis points over SOFR, with no SOFR floor.
The company said proceeds from the facility will repay outstanding borrowings under the previous agreement and related fees and expenses, and will also support working capital and general needs, including capital expenditures and permitted acquisitions. JPMorgan Chase Bank led the transaction as administrative agent and collateral agent. Along with U.S. Bank, it served as lead arranger and joint bookrunner, while Texas Capital Bank acted as documentation agent. The new financing replaces a previous credit agreement. The company had reported that outstanding borrowings under that agreement totaled $167.2 million as of July 12, while reported liquidity was about $47.8 million, including cash and available borrowing capacity.
The refinancing followed a refranchising program that Red Robin said, together with operational improvements, helped it secure lower-cost bank financing. The two departing directors said that “operational improvements and the refranchising program resulted in lower-cost bank refinancing,” allowing management to focus on growing the business rather than managing leverage. Since December 2024, the company has refreshed its menu, strengthened its leadership team and worked to improve restaurant margins under its First Choice plan. On September 1, it announced that it had completed most of the closings for 3 refranchising transactions, which included the sale of 108 company-owned restaurants for gross proceeds of about $89.4 million. The company had said the plan included selling more than 100 restaurants it owned and operated.
Results for the second quarter of fiscal 2026 showed improvement in some restaurant metrics despite a decline in total revenue. Revenue was $277.6 million in the 12 weeks ended July 12, compared with $283.7 million in the corresponding period of 2025. By contrast, comparable restaurant revenue rose 1.3%, with guest traffic down 0.2% and average check up 1.5%. The company said guest traffic results were its best since the first quarter of 2023. Restaurant operating margin was 14.7%, up 20 basis points year over year and the highest second-quarter margin since 2022; the company attributed the improvement mainly to a higher average check and efficiency initiatives that offset the impact of inflation.
In an update on its refranchising plan, the company expected to close the sale of 8 additional restaurants under the Op Burgers agreement by the end of fiscal 2026, for about $6.6 million. It said this would bring expected total gross proceeds to about $96 million from the sale of 116 restaurants. Red Robin maintained its fiscal 2026 guidance, projecting comparable restaurant revenue growth of 0.5% to 1.5%, restaurant operating profit of about 13.0% and adjusted EBITDA of $70 million to $73 million. It also forecast capital expenditures of $25 million to $30 million. The company said the guidance did not account for the impact of announced refranchising transactions because the timing of their completion was uncertain.
Red Robin shares closed at $8.19 on October 27, compared with $8.20 in the previous session. The stock had closed at $8.69 on October 21 and $8.71 on October 22, before ending the October 23 session at $8.15. The two directors’ resignations were announced after the October 27 session closed, so that day’s share price does not reflect a reaction to the announcement. These closing prices place the stock’s moves in the sessions before the announcement in a clear timeline, without attributing price changes to the news. The additional restaurant sale is expected to close by the end of fiscal 2026, according to the company’s forecast.