Seeking Alpha

Q2 Restaurant Ratings Round-Up: Red Robin Slides, Buffalo Wild Wings On The Rise

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Includes: BLMN, BOBE, BWLD, CAKE, CBRL, DENN, DFRG, DIN, DRI, EAT, RRGB, RT, RUTH, TXRH
by: Zach Blatt
Zach Blatt
Online retail, restaurants, hotels, eCommerce
Summary

An analysis of over 300,000 restaurant reviews from TripAdvisor provides a sense of how 14 major restaurant tickers have trended in terms of customer experience in Q2-2015.

Red Robin saw a substantial decline in its quarterly average customer rating on both a sequential and YOY basis.

Buffalo Wild Wings' and Chili's fared particularly well in changes in their quarterly average customer rating.

Now that June is over earnings announcements are just around the corner for some of the largest publicly traded restaurant brands. Changes in the value of these stocks will be closely linked to changes and expected changes in volume and perceived customer value. To gather quarterly customer review scores, I ran 19 casual dining restaurant brands representing 16 stock tickers through our RightBid Feedback Collector software on July 1. These brands included both higher end options (Del Frisco's and Ruth's Chris) as well as more lower priced options (Cracker Barrel and Denny's). We ultimately collected 343,708 customer reviews and 32,189 reviews during the second quarter of 2015 all from TripAdvisor.com. A table showing the highlights is shown below:

 

Q2-2015 Ratings

Quarterly Rating Change

YOY Rating Change

Q2-2015 Counts

Quarterly Count Changes

YOY Count Changes

BWLD

3.45

0.13

0.12

1,779

8.54%

64.72%

EAT

3.47

0.07

0.01

2,539

12.59%

47.53%

TXRH

4.19

0.07

0.05

1,500

4.68%

49.55%

DRI

3.88

0.07

-0.02

2,304

9.24%

49.08%

BLMN

3.70

0.06

-0.01

1,208

5.00%

45.31%

CAKE

4.12

0.05

-0.01

2,422

9.84%

48.50%

DIN

3.46

0.04

-0.04

3,333

14.34%

50.19%

RUTH

4.28

0.04

0.02

923

-2.53%

37.35%

RT

3.62

0.03

-0.03

1,502

15.90%

46.11%

ALL

3.71

0.03

0.00

32,189

11.70%

52.76%

DENN

3.45

0.02

0.01

3,260

25.77%

60.99%

BOBE

3.63

-0.01

-0.05

579

33.41%

68.80%

CBRL

3.92

-0.01

0.00

2,689

17.99%

61.70%

DFRG

4.28

-0.03

0.00

440

-14.56%

29.03%

RRGB

3.53

-0.09

-0.13

761

5.40%

49.80%

Findings

As shown above, these tickers vary greatly in terms of average customer ratings and reviewer count growth rates. A couple of trends become clear when observing changes in average customer rating scores between Q2-2015 versus Q1-2015 and the Year Over Year changes between Q2-2015 and Q2-2014. First, Buffalo Wild Wings and Texas Roadhouse have both posted large quarterly and YOY ratings improvements. Investors may want to caution themselves into reading into these patterns as BWLD's Q2 rating of 3.45 is still very low for a popular, fast growing brand. Likewise, the average customer rating for TXRH of 4.19 is the third highest in the sample and is higher than the rating for the Cheesecake Factory. On the other end of the spectrum, Red Robin has shown a decline in its average customer ratings both on a quarterly and YOY basis. Bob Evans is the only other ticker to have both a negative quarterly and YOY change in its average customer rating.

Despite disappointing changes in ratings, BOBE showed the best improvement in the number of customer reviews posted of all of the tickers shown - 33.4% on a quarterly basis and 68.8% YOY. Denny's and Cracker Barrel also have shown strong improvements. (This uptick could be related to more patrons of country style cooking deciding to review on TripAdvisor). On the other end of the spectrum Ruth's Chris and Del Frisco's have seen negative quarterly count changes and the lowest YOY improvements. (This may not be too worrisome for Del Frisco's as several restaurant openings from 2014 probably influenced its numbers).

There is growing evidence that changes in customer ratings can be an important leading indicator of a restaurant's momentum (www.hbs.edu/faculty/Publication%20Files/...). While few brands saw uniform momentum changes both in terms of average review scores and average customer ratings, investors should be extra cautious before investing in Red Robin and can be optimistic that Buffalo Wild Wings is finally finding its stride in terms of winning customer approval.

Methodology Notes

Data was collected on 19 brands: Applebee's, BJ's Restaurants, Bob Evans, Buffalo Wild Wings, Carrabba's, Cheesecake Factory, Chili's, Cracker Barrel, Del Frisco's, Denny's, IHOP, Longhorn Steakhouse, Olive Garden, Outback Steakhouse, Red Robin, Ruby Tuesday, Ruth's Chris, Shake Shack, and Texas Roadhouse. Shake Shack and BJ's Restaurants were removed from the final results because of low review totals. Numbers for DRI, BLMN, and DIN based on combining leading two brands: DRI 64% Olive Garden 36% Longhorn, BLMN 75% Outback 25% Carrabba's, DIN 60% Applebee's 40% IHOP. Reviews for smaller brands were not collected. Some of the more prominent brands that could influence the averages for the tickers included were Grand Lux Café, Bonefish Grill, Yard House, and Sullivan's Steakhouse. Not all tickers (particularly DRI, BOBE, and CBRL) use the standard fiscal quarter calendar and the results described here do not fit squarely into a specific earnings quarter.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.