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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

RED ROBIN GOURMET BURGERS, INC.

(Name of the Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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RED ROBIN GOURMET BURGERS, INC.
6312 South Fiddler's Green Circle, Suite 200N
Greenwood Village, CO 80111
(303) 846-6000



NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 20, 2021



              When:  8:00 a.m. MDT, on Thursday May 20, 2021

              Where:  Red Robin's Yummm U, located at 10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80112 for the following purposes:

              We intend to hold our annual meeting in person again this year. As always, we encourage you to vote your shares prior to the annual meeting.

              Record Date: Stockholders as of March 23, 2021 are entitled to vote

              Annual Report: We filed with the U.S. Securities and Exchange Commission (the "SEC") an annual report on Form 10-K on March 3, 2021 for the fiscal year ended December 27, 2020. A copy of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our stockholders entitled to notice of and to vote at the annual meeting. In addition, you may obtain a copy of the annual report on Form 10-K, without charge, by writing to Red Robin Gourmet Burgers, Inc., Attn: Stockholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111.

              Who Can Attend: All stockholders as of the record date, or their duly appointed proxies, may attend the meeting

              Date of Mailing: This Notice of Annual Meeting of Stockholders and related proxy materials are being distributed or made available to stockholders beginning on or about April 9, 2021

YOUR VOTE IS IMPORTANT

              Whether or not you plan to attend, it is important that your shares be voted at the meeting. Please refer to your proxy card or Notice Regarding the Availability of Proxy Materials for more information


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on how to vote your shares at the meeting and return your voting instructions as promptly as possible. Thank you for your continued support of Red Robin.

    By Order of the Board of Directors,

 

 

GRAPHIC

 

 

Michael L. Kaplan
Secretary

Greenwood Village, Colorado

April 5, 2021

Neither the Securities and Exchange Commission nor any state securities regulatory agency has passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.


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TABLE OF CONTENTS

 
  Page
 
PROXY SUMMARY     1  

PROXY STATEMENT

 

 

10

 
PROPOSAL 1: ELECTION OF DIRECTORS     10  

HOW OUR DIRECTORS ARE SELECTED, QUALIFIED, AND ELECTED

 

 

10

 
Selecting Nominees for Director     11  
Directors and Nominees     11  
Vote Required     15  
Board Recommendation     15  

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

16

 
Governance Principles     16  
Director Compensation     26  

COMPENSATION DISCUSSION AND ANALYSIS

 

 

28

 
Named Executive Officers     28  

EXECUTIVE SUMMARY

 

 

28

 
2020 Company Operational and Performance Highlights     28  
2020 Compensation Actions     30  
2020 Compensation Outcomes     32  

COMPENSATION PHILOSOPHY

 

 

33

 
Compensation Philosophy     33  
Pay Objectives     33  
Pay For Performance Alignment     33  

COMPENSATION DECISION PROCESSES

 

 

33

 
Overview     33  
Compensation Setting     33  
Consideration of Prior Say-On-Pay Votes     34  
Benchmarking     34  
Independent Compensation Consultant     35  
Risk Mitigation     35  

2020 EXECUTIVE COMPENSATION

 

 

37

 
Overview     37  
Key Components of our Executive Compensation Program     38  
Summary of 2020 Compensation Activity     41  

2021 COMPENSATION PROGRAM

 

 

48

 

GOVERNANCE OF EXECUTIVE COMPENSATION

 

 

49

 
COMPENSATION COMMITTEE REPORT     51  
2020 EXECUTIVE COMPENSATION TABLES     52  
EMPLOYMENT AGREEMENTS, SEPARATION ARRANGEMENTS, AND CIC PLAN     59  
CEO PAY RATIO     68  

PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

 

70

 
Vote Required     70  
Board Recommendation     70  

PROPOSAL 3: APPROVAL OF THE AMENDMENT TO THE 2017 PERFORMANCE INCENTIVE PLAN

 

 

71

 
Introduction     71  
Vote Required     78  
Board Recommendation     78  

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  Page
 

PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

79

 
Change in independent Auditor     79  
Evaluation of Auditor     80  
Principal Accountant Fees and Services     80  
Vote Required     81  
Board Recommendation     81  

AUDIT COMMITTEE REPORT

 

 

82

 

VOTING PROCEDURES

 

 

83

 
Voting Information     83  
Votes Required for Each Proposal     84  

DELIVERY OF PROXY MATERIALS

 

 

86

 
"Householding" of Proxy Materials     86  

ADDITIONAL INFORMATION

 

 

86

 
Other Business     86  
Stock Ownership Information     86  
Equity Compensation Plan Information     90  
Proposals for Inclusion in 2022 Proxy Statement     91  
Proposals to be Addressed at 2022 Annual Meeting (But Not Included in Proxy Statement)     91  

APPENDIX A RED ROBIN GOURMET BURGERS, INC. 2017 PERFORMANCE INCENTIVE PLAN

 

 

A-1

 

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PROXY SUMMARY

 
MEETING AGENDA, VOTING MATTERS, AND BOARD VOTING RECOMMENDATIONS
 

 

Proposal
  Board's Voting
Recommendation

  Page Reference
(for more detail)

1   Election of Directors   FOR All nominees   10

2

 

Advisory Vote to Approve Executive Compensation

 

FOR

 

70

3

 

Amendment to the Company's 2017 Performance Incentive Plan, as amended, to increase shares available for issuance

 

FOR

 

71

4

 

Ratification of Independent Auditor

 

FOR

 

79

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ELECTION OF DIRECTORS

              The following provides summary information about each director nominee. Our director nominees possess a range of diverse skills, backgrounds, experience, and viewpoints that we believe are integral to an effective board. Detailed information about each individual's qualifications, experience, skills, and expertise can be found starting on page 10.

Director Nominee
  Age
  Director Since
  Principal Occupation
  Independent
  Committee Assignments

Anthony S. Ackil

  46   2020   Chief Executive Officer of
Streetlight Ventures

 
  AC

Thomas G. Conforti

   
62
 

2019

 

Former Senior Advisor, Executive Vice President and Chief Financial Officer, Wyndham Worldwide

 

 

*FC, AC

Cambria W. Dunaway

 

58

 

2014

 

Chief Marketing Officer, Duolingo

 

 

*NGC, CC

G.J. Hart

   
63
 

2019

 

Chief Executive Officer, Torchy's Tacos

 

 

CC, FC

Kalen F. Holmes

 

54

 

2016

 

Former Executive Vice President (Human Resources), Starbucks

 

 

*CC, NGC

Glenn B. Kaufman

   
53
 

2010

 

Managing Member, D Cubed Group
investment firm

 

 

FC, NGC

Steven K. Lumpkin

 

66

 

2016

 

Consultant, Former Executive Vice President, Chief Financial Officer and director, Applebee's

 

 

*AC, FC

Paul J.B. Murphy III

   
66
 

2019

 

President and Chief Executive Officer, Red Robin

       

David A. Pace

 

62

 

2019

 

Co-Chief Executive Officer, Tastemaker
Acquisition Corporation


 

 

(C), CC

Allison Page

   
36
 

2020

 

Co-Founder and President, SevenRooms

 

 

FC, NGC

Anddria Varnado

 

35

 

2021+

 

GM and Head of the Consumer Business,
Kohler Company


 

 

+

 

AC   Audit Committee   (C)   Denotes Chair of the Board
CC   Compensation Committee   *   Denotes Chair of the Committee
NGC   Nominating and Governance Committee   +   Denotes New Director, Committees TBD
FC   Finance Committee        

DIRECTOR STATISTICS

    91%

Independence

      36%

Gender Diversity

      9%

Racial/Ethnic Diversity

      50%

Board committees
chaired by women

      54.6

years
Average Age

      3.5

years
Average Tenure

   

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BOARD LEADERSHIP SKILLS

Experience / Skills
  David A.
Pace
(Chairman)

  Paul J.B.
Murphy III
(CEO)

  Anthony S.
Ackil

  Thomas G.
Conforti

  Cambria W.
Dunaway

  G. J.
Hart

  Kalen F.
Holmes

  Glenn B.
Kaufman

  Steven K.
Lumpkin

  Allison
Page

  Anddria
Varnado

Public C-Suite Experience       ¨           ¨     ¨   ¨

Restaurant / Hospitality Executive Leadership

 


 


 


 


 

¨

 


 


 


 


 


 

¨

Accounting / Financial Expertise

 


 


 


 


 

¨

 


 

¨

 


 


 


 

¨

Business Transformation

 


 


 

¨

 


 

¨

 


 


 


 

¨

 

¨

 


Technology Strategy

 


 

¨

 


 


 

¨

 


 

¨

 

¨

 


 


 

¨

Marketing / Consumer Insights

 


 


 

¨

 


 


 


 

¨

 


 


 


 


M&A Experience

 


 

¨

 

¨

 


 

¨

 

¨

 


 


 


 


 


Gender / Ethnic Diversity

 

¨

 

¨

 

¨

 

¨

 


 

¨

 


 

¨

 

¨

 


 


Governance

 


 

¨

 

¨

 

¨

 


 

¨

 


 


 

¨

 

¨

 

¨

CORPORATE GOVERNANCE HIGHLIGHTS

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STOCKHOLDER INTERESTS AND RIGHTS

STOCKHOLDER ENGAGEMENT

              We believe that strong corporate governance includes engagement with our stockholders and considering their views. In the last 12 months, we held meetings and discussions with stockholders representing more than 55% of our outstanding shares. We greatly value the feedback received from our stockholders. This engagement provides valuable insight that informs the work of both management and the board.

    RRGB Participants

  Types of Engagement

  Topics Covered

   

Independent Directors,
including Board Chair

Executive Management

     

Stockholders (portfolio managers and corporate governance departments)

Investor conferences

Earnings conference calls

Proxy advisory firms

Prospective stockholders

     

Key value drivers and competitive differentiators

Capital structure and capital allocation priorities

Key strategic initiatives and opportunities

Financial performance and goals

Board composition: qualifications, diversity, skills, and leadership structure

ESG risks and opportunities

Human capital management

Risk management

Executive compensation

COVID-19 response

   

              Engagement with our stockholders informed our actions in the topic areas covered above, particularly our changes to board composition, ESG strategy, human capital management disclosures, and executive compensation during 2020 and early 2021.

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COMPANY HIGHLIGHTS
 

              2020 began as a pivotal year of transformation for the Company and we entered the year with accelerating business momentum. Under a significantly refreshed board and a new CEO, Paul Murphy, the Company was making measurable progress on its turnaround plan. To that end, through the first eight weeks of fiscal 2020, the Company grew comparable restaurant revenue by 3.7%, driven in part by positive Guest count growth. Then, the COVID-19 crisis forced the Company to focus on adjusting to the impact of the pandemic.

              With the onset of the pandemic in early 2020, the Company entered an unprecedented time for our business and industry. The pandemic brought forth complex challenges including severe limitations on dine-in capacity that materially reduced our traffic and sales and challenged our liquidity. In response, we reprioritized or suspended certain aspects of our strategic plan while accelerating others. With the health, safety, and well-being of Red Robin's Team Members, Guests, and communities as our top priority, we successfully shifted restaurants to an off-premise model and took action to preserve liquidity, enhance financial flexibility, and help mitigate the impact of COVID-19 on our business and to set ourselves up for the eventual recovery. Despite the challenges of the pandemic, we were able to significantly improve our operating and financial model. The material improvements we made to our business will enable us to resume our transformation in an even stronger position.

              Through the pandemic, our CEO kept management focused on three priorities: (1) be a brand that survives the pandemic, (2) bring as many Team Members through the pandemic with the Company as possible, and (3) continue to make progress on the transformation strategy to position the Company well to thrive post-pandemic and beyond. These priorities also guided 2020 compensation actions, which included a temporary 20% reduction to executive officer and board member cash compensation and a shift to total shareholder return as the performance metric for our long-term incentive plan.

              Despite the COVID-19 pandemic, we made significant progress on our transformation strategy during 2020 to solidify our financial longevity and develop a more robust business model, including the following accomplishments:

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              Under CEO Paul Murphy's leadership total shareholder return has increased by 15.7%. After growth in the first 8 weeks of 2020 as the Company implemented its turnaround plan, our share price decreased along with our peers during the pandemic. Our share price has shown significant improvement through the end of 2020 and early 2021 as the Company continued its transformation initiatives and positioned itself for strong recovery beyond the pandemic.

GRAPHIC

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SUSTAINABILITY
 

              Red Robin's strategy is closely tied to the communities in which it operates. Our ability to deliver long-term value for all of our stockholders is connected to the strength and long-term sustainability of each state and the overall economy and environment. This is why our board and management team are focused on collaborating with our communities to further a sustainable future.

Corporate Responsibility: Environmental, Social, and Governance (ESG)

              We believe it is imperative that our ESG strategy is part of and aligned with our Company vision and overall strategy. With recent changes to our board and executive leadership teams and learnings from the ongoing pandemic, we are in the process of updating our long range strategic planning, including our ESG strategy. We have been engaging with our stakeholders to discuss the ESG topics most important to them. We are also evaluating meaningful metrics and targets for our ESG priority areas for this year and the future.

              ESG is a board-level priority. The nominating and governance committee and the compensation committee oversee certain ESG related risks, but because ESG spans multiple committees, the full board retains overall ESG oversight responsibility. We believe full board oversight is important to ensure ESG is part of, and aligned with, our overall Company strategy.

              Historically, our ESG practices have been focused on the following areas. See "Corporate Governance and Board Matters" for information related to our governance practices.

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              We highlight our activities in these areas in the "Sustainability" section of our corporate website at www.redrobin.com/pages/company/sustainability. We look forward to providing more information regarding our ESG strategy on our corporate website.

8


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EXECUTIVE COMPENSATION PRACTICES
 

9


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PROXY STATEMENT

              The Board of Directors ("board" or "board of directors") of Red Robin Gourmet Burgers, Inc. ("Red Robin" or the "Company") is providing this proxy statement to stockholders in connection with the solicitation of proxies on its behalf to be voted at the annual meeting of stockholders. The meeting will be held on Thursday, May 20, 2021, beginning at 8:00 a.m. MDT, at Red Robin's Yummm U, located at 10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80112. The proxies may be voted at any time and date to which the annual meeting may be properly adjourned or postponed.


PROPOSAL 1:
ELECTION OF DIRECTORS

HOW OUR DIRECTORS ARE SELECTED, QUALIFIED, AND ELECTED

              Our board of directors is highly engaged and committed to effective governance as reflected in the following actions:

              Currently, 91% of our board is independent. Our board of directors consists of eleven directors, all of whom are independent except our CEO. Following the annual meeting, if all director nominees are elected, all of our directors will be independent, except our CEO. All of our directors are elected on an annual basis for a one-year term. One of our directors, Mr. Kaufman, will transition off the board effective as of December 31, 2021. He will continue on the board until year end in order to provide continuity given significant turnover on the board in the past two years. Following his departure, the board of directors intends to reduce its size to ten directors.

              The directors elected at this annual meeting will serve in office until our 2022 annual meeting of stockholders or until their successors are duly elected and qualified, except for Mr. Kaufman, who will transition off the board effective as of December 31, 2021. Each of our nominees has consented to serve if elected and we expect each of them will be able to serve if elected. If any of our nominees should become unavailable to serve as a director, our board of directors can name a substitute nominee, and the persons named as proxies in the proxy card, or their nominees or substitutes, will vote your shares for such substitute nominee unless an instruction to the contrary is written on your proxy card.

              The board recommends that you vote FOR all of the board's nominees to serve as directors of the Company.

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Selecting Nominees for Director

              Our board has delegated to the nominating and governance committee the responsibility for reviewing and recommending nominees for director. The board determines which candidates to nominate or appoint, as appropriate, after considering the recommendation of the committee.

              In evaluating a director candidate, the nominating and governance committee considers the candidate's independence; character; corporate governance skills and abilities; business experience; industry specific experience; training and education; commitment to performing the duties of a director; and other skills, abilities, or attributes that fill specific needs of the board or its committees. Our board is committed to diversity and the nominating and governance committee considers diversity in business experience, professional expertise, gender, and ethnic background, along with various other factors when evaluating director nominees. The nominating and governance committee will use the same criteria in evaluating candidates suggested by stockholders.

              The nominating and governance committee is authorized under its charter to retain, at our expense, outside search firms and any other professional advisors it deems appropriate to assist in identifying or evaluating potential nominees for director.

Directors and Nominees

              Below, you can find the principal occupation and other information about each of our director nominees standing for election at the annual meeting. Information related to each of our director nominee's key attributes, experience, and skills, as well as their recent public company board service is included with each director's biographical information. Our board is comprised of a highly diverse array of leaders with relevant experience and leadership in each of the key areas of greatest importance to our financial and more general sustainability. These attributes are core to our ability to be nimble and take advantage of opportunities as they arise. In 2021, all eleven of our current directors are standing for re-election. One of our directors, Mr. Glenn B. Kaufman has indicated that he will transition off the board and conclude his service effective December 31, 2021. Following his departure, the board of directors intends to reduce its size to ten directors.

 
    Anthony S. Ackil, 46

Director Since: March 2020

Current Committees:
    Audit

Other Board Service:
B.GOOD (2004-present)
Project Bread (2018-present)
b.good Family Foundation (2014-present)
 

Currently serves as CEO of Streetlight Ventures, a restaurant management platform that supports, manages, acquires, and invests in small to mid-sized restaurant brands, having founded the company in 2019.

From 2004 to 2018, served as CEO of B.GOOD, a healthy fast casual brand that grew to over 80 locations under his leadership.

Earlier in his career, he worked as a consultant for IBM, focusing on internet strategy and corporate structure, and as a consultant at PricewaterhouseCoopers.

Brings to the board of directors more than 15 years of executive experience in the restaurant industry, among other skills and qualifications.

Holds a B.A. in government from Harvard University.

Based on the foregoing, our board of directors has concluded Mr. Ackil should continue as a member of our board.

   
   

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    Thomas G. Conforti, 62

Director Since: August 2019

Current Committees:
    Finance (Chair)
    Audit

Other Board Service:
Vista Life Innovations (2020-present)
American School for the Deaf (2020-present)
 

From 2017 to 2018, served as Senior Advisor to Wyndham Worldwide, where he advised on strategic transactions.

From 2009 to 2017, served as Executive Vice President and Chief Financial Officer for Wyndham Worldwide, during which time the company's TSR significantly outperformed the market and where Mr. Conforti had direct responsibility for finance, technology, real estate, and purchasing functions.

From 2002 to 2008, served as the Chief Financial Officer for IHOP/Dinequity.

Earlier in his career, he held leadership positions at PepsiCo, Inc., KB Home, and The Walt Disney Company, among others.

Currently serves as a Senior Fellow at Harvard's Advanced Leadership Initiative.

Brings to the board of directors more than 30 years of experience in financial, strategic, and operational roles across multiple industries, including restaurant, retail, consumer, and hospitality, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Conforti should continue as a member of our board.

   
   
    Cambria W. Dunaway, 58

Director Since: June 2014

Current Committees:
    Nominating and Governance (Chair)
    Compensation

Other Public Company Board Service:
Planet Fitness Inc. (2017-present)

Other Board Service:
Go Health (2017-present)

Recent Past Public Company Board Service:
Nordstrom FSB (2014-2017)
Marketo (2015-2016)
Brunswick Corporation (2006-2014)
 

Since 2018, has served as Chief Marketing Officer for Duolingo, a language education platform.

Since 2017, has served as a Director of Planet Fitness, during which time the company's TSR has significantly outperformed the market.

Previously was a private consultant supporting organizations with strategic initiatives to accelerate growth and innovation, and coached leaders on how to achieve maximum results, impact, and enjoyment.

From 2010 to 2014, served as the U.S. President and Global Chief Marketing Officer of KidZania, an international location-based entertainment concept focused on children's role-playing activities.

From 2007 to 2010, served as Executive Vice President for Nintendo, with oversight of all sales and marketing activities for the company in the United States, Canada, and Latin America.

From 2003 to 2007, was Chief Marketing Officer for Yahoo!

Previously at Frito-Lay for 13 years in various leadership roles in sales and marketing, including serving as the company's Chief Customer Officer and as Vice President of Kids and Teens Marketing.

Holds a B.S. in business administration from the University of Richmond and an M.B.A. from Harvard Business School.

Brings to the board of directors more than 20 years of experience as a senior marketing and general management executive, launching and growing consumer businesses in entertainment, media, consumer electronics, and packaged goods, including experience in marketing strategy, communications, data analytics, loyalty, digital transformation, and governance including service as the Nominating and Governance Chair at Planet Fitness, Inc., among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Ms. Dunaway should continue as a member of our board.

   
   

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    G.J. Hart, 63

Director Since: August 2019

Current Committees:
    Compensation
    Finance

Other Board Service:
Make A Wish Foundation (2012-present)
Portillo's (2014-present)
James Madison University of Business (2005-Present)
The Hart School (2006-present)

Recent Past Public Company Board Service:
Texas Roadhouse (2004-2011)
 

Since 2018, has served as Chief Executive Officer for Torchy's Tacos, a privately-held fast-casual restaurant concept.

From 2011 to 2018, served as Executive Chairman and Chief Executive Officer of California Pizza Kitchen.

From 2000 to 2011, served as President of Texas Roadhouse Holdings, LLC, and as Chief Executive Officer and member of the board from 2004 to 2011, during which time the company's TSR outperformed the market and the company increased revenues from $63 million to over $1 billion.

Earlier in his career, held leadership positions at TriFoods International, New Zealand Lamb Company, and Shenandoah Valley Poultry, among others.

Brings to the board of directors more than 35 years of experience in the food and beverage industry driving growth and innovation, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Hart should continue as a member of our board.

   
   
    Kalen F. Holmes, 54

Director Since: August 2016

Current Committees:
    Compensation (Chair)
    Nominating and Governance

Other Public Company Board Service:
Zumiez Inc. (2014-present)
1Life Healthcare, Inc. (2017-present)

Other Board Service:
Pacific Northwest Ballet, Advisory Board (2019-present)
 

Since 2017, has served as a Director of 1Life Healthcare, during which time the company has significantly grown its revenues, members, and launched its Initial Public Offering.

From 2009 until retirement in 2013, served as Executive Vice President of Partner Resources (Human Resources) at Starbucks Corporation.

From 2003 to 2009, held a variety of leadership roles with human resources responsibilities for Microsoft Corporation.

Previously held leadership roles in a variety of industries, including high-tech, energy, pharmaceuticals, and global consumer sales.

Holds a B.A. in Psychology from the University of Texas and a M.A. and Ph.D. in Industrial/Organization Psychology from the University of Houston.

Brings to the board of directors more than 20 years of experience as a senior human resources executive, experience with management of executive and compensation programs, and management across multiple industries including retail, technology, and consumer products, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Ms. Holmes should continue as a member of our board.

   
   
    Glenn B. Kaufman, 53

Director Since: August 2010

Current Committees:
    Finance
    Nominating and Governance

Other Board Service:
KEH Holdings, LLC (2012-present)
Trading Company Holdings LLC
(2014-present)
KPS Global LLC (2015-Present)
 

Since 2011, has been a Managing Member of the D Cubed Group, a private-market investment firm. At D Cubed, in addition to leading the firm and its investment committee, chairs the boards of KEH Holdings, Trading Company Holdings, and KPS Global.

From 2009 to 2010, consulted for boards and senior executives of operating businesses and private investment firms.

Previously spent 11 years as a Managing Director at American Securities Capital Partners as a Managing Director; spearheaded the firm's investing in the restaurants, food service and franchising, and healthcare sectors.

Previously served as Chairman or a Director of Potbelly Sandwich Works, El Pollo Loco, Press Ganey Associates, Anthony International, and DRL Holdings (parent of multiple direct-to-consumer brands).

Spent four years as an attorney at Cravath, Swaine & Moore and worked in the small business consulting group of Pricewaterhouse.

Holds a B.S. in Economics from the Wharton School of Business of the University of Pennsylvania and a law degree from Harvard University.

Brings to the board of directors valuable strategic, finance, talent management, marketing, and executive leadership experience, as well as an extensive understanding of restaurant operations, analytical direct/omni-channel marketing, and franchising, among other skills and qualifications.

Has approximately 20 years of experience as an active, engaged, private market investor and extensive restaurant, food service, franchising, healthcare, and retail expertise, as well as legal and business consulting expertise.

Based on the foregoing, our board of directors has concluded Mr. Kaufman should continue as a member of our board.

   
   

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    Steven K. Lumpkin, 66

Director Since: August 2016

Current Committees:
    Audit (Chair)
    Finance

Other Board Service:
Hodgdon Powder Company (2015-present)
Trading Company Holdings, LLC (2015-present)
Fiorella Jack's Stack Restaurant Group (2009-present)

Recent Past Public Company Board Service:
Applebee's International, Inc. (2004-2007)
 

Currently serves as Principal of Rolling Hills Capital Partners, a consulting firm.

From 1995 until retirement in 2007, served in various executive positions at Applebee's International, Inc., including as Chief Financial Officer and Treasurer from 2002 to 2007, during which time the company's TSR outperformed the market, and Director from 2004 to 2007.

Previously served as Executive Vice President and Director at Kimberly Quality Care, Inc.

Holds a B.S. in Accounting from the University of Missouri-Columbia and is a CPA.

Brings to the board of directors more than 30 years of experience in the management consulting, health care, and restaurant industries, among other skills and qualifications.

Has extensive M&A and management experience for franchise operations and an accounting and finance background.

Based on the foregoing, our board of directors has concluded Mr. Lumpkin should continue as a member of our board.

   
   
  Paul J.B. Murphy III, 66

Director Since: October 2019

Recent Past Public Company Board Service:
Noodles & Company (2017-2019)
Del Taco Restaurants, Inc. (2014-2017)
 

Since October 2019, has served as our President, Chief Executive Officer, and Director.

From 2017 to 2019, served as Executive Chairman of Noodles & Company where he was responsible for 459 restaurants across 29 states and led a business turnaround that delivered 4 consecutive quarters of positive comparable restaurant sales growth on revenues of $457 million.

From 2009 to 2017, served as CEO and a member of the board of directors of Del Taco Restaurants, Inc., where he was responsible for 543 company-operated and franchised restaurants with revenues of $470 million and led a successful brand repositioning that resulted in 17 consecutive quarters of company-operated comparable restaurant sales growth and 11 consecutive quarters of system-wide comparable restaurant sales growth.

From 1996 to 2008, held various roles with Einstein Noah Restaurant Group, Inc.; joined as Senior Vice President, Operations and was promoted to Executive Vice President, Operations in 1998, and to Chief Operating Officer in 2002. In 2003, he was appointed President and CEO and a member of the board of directors.

Has significant experience in both operational and executive leadership in the restaurant industry, including leading companies through successful business transformations.

Brings to the board of directors over 20 years of experience in operational and executive leadership in the restaurant industry, including proven business transformation experience, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Murphy should continue as a member of our board.

   
   
  David A. Pace, 62

Director Since: August 2019 (Board Chair since November 2019)

Current Committee:
    Compensation

Other Public Company Board Service:
Tastemaker Acquisition Corporation (2020-present)

Other Board Service:
Dallas Stars Ownership Advisory Board (2017-present)

Recent Past Public Company Board Service:
Jamba Juice (2012-2018)
 

Since October 2020, has served as Co-Chief Executive Officer of Tastemaker Acquisition Corporation, a special purpose acquisition company focusing on the restaurant, hospitality, and related technology and service sectors.

From 2012 to 2018, served as Director of Jamba Juice and as CEO from 2016 to 2018, during which the company delivered 8 consecutive quarters of comparable store sales growth that exceeded the industry benchmark, exited non-core and underperforming business units, and successfully merged with Focus Brands.

From 2014 to 2016, served as President of Carrabba's Italian Grill, and as Executive Vice President and Chief Resource Officer of Bloomin' Brands from 2010 to 2014.

Previously held executive positions with Starbucks Coffee Company, PepsiCo, Inc., and Yum! Brands, Inc.

Brings to the board of directors more than 30 years of leadership and turnaround experience in a range of industries including food and beverage retail, consumer products, entertainment, and ecommerce, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Mr. Pace should continue as a member of our board.

   
   

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    Allison Page, 36

Director Since: February 2020

Current Committee:
    Nominating and Governance
    Finance

Other Board Service:
SevenRooms, Inc. (2011-present)
Pillsbury Institute for Hospitality
Entrepreneurship at Cornell University (2018-present)
 

Co-Founder and President of SevenRooms, a data-driven operations, marketing, and guest engagement platform that empowers hospitality operators to maximize revenue, build brand loyalty, and enable personalized experiences across the guest journey.

Since SevenRooms' founding in 2011, has been responsible for driving product innovation; defining the company's product roadmap, vision, and strategic positioning; growing the company to over 150 employees across 4 global offices; and scaling the platform to over 250 cities worldwide.

From 2009 to 2011, served as an Associate at Hodes Weill & Associates, and was a founding member of the independent real estate and advisory business.

Began career in investment banking at Credit Suisse.

Holds a B.S. in Finance and Real Estate from The Wharton School, University of Pennsylvania.

Brings to the board of directors more than 10 years of leadership experience as an entrepreneur in the hospitality industry and in launching, building, and commercializing high-growth technology platforms at scale across global restaurant, hotel, and entertainment brands, among other skills and qualifications.

Brings extensive knowledge in the areas of technology, guest experience, guest engagement, CRM, marketing, loyalty, data analytics, and consumer trends; was named one of Hospitality Technology's 2019 "Top Women in Restaurant Technology."

Based on the foregoing, our board of directors has concluded Ms. Page should continue as a member of our board.

   
   
  Anddria Varnado, 35

Director Since: March 2021

Committee Service to be determined

Other Public Company Board Service:
Umpqua Holdings Corporation (2018-present)
 

Since December 2020, has served as GM and Head of the Consumer Business at Kohler Company, a global leader in home products, hospitality destinations, and systems where she is responsible for consumer channels and ecommerce sales.

From 2019 to 2020, served as Vice President and Head of Strategy and Business Development at Macy's where she was responsible for the strategic evaluation of the future of the store and consumer.

From 2016 to 2019, served as Vice President and Head of Strategy and Business Development at Williams-Sonoma.

Prior roles include Management Consultant at ZS Associates and leadership roles at New York Life Insurance Company.

Began career as a corporate banking analyst at Citigroup.

Holds a B.A. in Business Administration from Clark Atlanta University and an M.B.A. from Harvard Business School.

Brings to the board of directors deep expertise in the areas of consumer insights and innovation, consumer engagement, and strategic planning and development, among other skills and qualifications.

Based on the foregoing, our board of directors has concluded Ms. Varnado should continue as a member of our board.

   
   

Vote Required

              Proposal No. 1 requires the approval of a majority of the votes cast for each director. Abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the outcome of the vote.

Board Recommendation

              OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE DIRECTOR NOMINEES.

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CORPORATE GOVERNANCE AND BOARD MATTERS

GOVERNANCE PRINCIPLES

              The board of directors has created and oversees corporate governance guidelines which can be viewed on the Corporate Governance section of our website at www.redrobin.com/pages/company/investors.

Executive Development and Management Succession

              Under the Company's corporate governance guidelines, the board maintains a policy and plan for the development and succession of the CEO and senior management that includes:

The nominating and governance committee:

              Mr. Murphy regularly meets with the full board on his performance, and the CEO's annual performance evaluation is conducted under the oversight of the compensation committee. Our CEO conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.

Stockholder Communication with our Board

              The board and management believe the Company's relationships with our stockholders and other stakeholders are an important part of our corporate governance responsibility and recognize the value of continuing communications. In the last 12 months, we held meetings and discussions with stockholders representing more than 55% of our outstanding shares.

              This approach has resulted in our receiving important input and perspectives that have informed our decision making and resulted in action including the addition of new independent directors and enhanced human capital management and ESG disclosures. Throughout the year, we proactively engage with our stockholders directly, through individual meetings, attendance at investor conferences, issuance of press releases, and quarterly conference calls, as well as other stockholder communications. We discuss topics of importance to both our Company and stockholders, including value creation, strategy and

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performance, board refreshment and leadership changes, capital structure and allocation, and governance matters.

              The board values stockholder communication and provides many means for it to occur, including attending the annual meeting, voting, engaging, and writing, by sending a letter to the chair, the board of directors, or a committee addressed to: Board of Directors, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111, or by sending an e-mail to the board's dedicated email address: Board@redrobin.com. Our finance committee and full board is involved in overseeing stockholder engagement.

              With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, director of internal audit, or the compliance officer in the manner provided in the Code of Ethics and the Company's Problem Resolution and Whistleblower Policy and Reporting Procedures. Both the Code of Ethics and the Problem Resolution and Whistleblower Policy and Reporting Procedures may be found on the Corporate Governance section of our website at: www.redrobin.com/pages/company/investors.


Red Robin follows the Investor Stewardship Group's (ISG)
Corporate Governance Framework for U.S. Listed Companies

    ISG Principle       Red Robin Practice    
    Principle 1:
Boards are accountable to stockholders
     

Declassified board structure with all directors standing for election annually

Majority voting in uncontested director elections, plurality voting in contested elections, and directors not receiving majority support must tender their resignation for consideration by the board

   
    Principle 2:
Stockholders should be entitled to voting rights in proportion to their economic interest
     

No dual class structure; each stockholder gets one vote per share

   
    Principle 3:
Boards should be responsive to stockholders and be proactive in order to understand their perspectives
     

Management and board members engaged directly with investors owning more than 55% of shares outstanding in the last 12 months

Engagement topics included value creation, Company strategy and performance, board refreshment and leadership changes, capital structure and allocation, executive compensation, ESG, and governance

   
    Principle 4:
Boards should have a strong, independent leadership structure
     

Strong independent board chair

Board considers appropriateness of its leadership structure at least annually

Strong independent committee chairs

Proxy discloses why board believes current leadership structure is appropriate

   

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    ISG Principle       Red Robin Practice    
    Principle 5:
Boards should adopt structures and practices that enhance their effectiveness
     

Board members have diverse backgrounds, expertise, and skills

Currently, 91% of board members are independent

Robust board annual evaluation process and regular board education instead of arbitrary age or term limits

Active board refreshment plan; six new independent board members through refreshment in 2019-2021

Directors attended over 88% of combined total board and applicable committee meetings in 2020

Limits on outside board service for board members

Independent directors meet regularly in board and committee executive session without members of management present

Annual review of succession plan and talent development plan

Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors

   
    Principle 6:
Boards should develop management incentive structures that are aligned with the long-term strategy of the company
     

Executive compensation program received approximately 96.9% stockholder support in 2020

Compensation committee annually reviews and approves incentive program design, goals, and objectives for alignment with compensation and business strategies

Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives

   

Board Leadership Structure

              The board recognizes one of its key responsibilities is to evaluate and determine the optimal leadership structure to provide independent oversight of management. At this time, we believe it is appropriate for our board to maintain the separation of the roles of board chair and chief executive officer. David Pace currently serves as chair of the board because of his significant leadership experience, especially in the food and beverage retail industry.

              The separation of the roles of board chair and chief executive officer allows our chief executive officer to focus on managing the Company's business and operations, and allows Mr. Pace to focus on board matters, which we believe is especially important in light of the high level of regulation and scrutiny of public company boards. Further, we believe the separation of these roles ensures the independence of the board in its oversight role of evaluating and assessing the chief executive officer and management generally.

Board Role in Risk Oversight

              Our executive officers have the primary responsibility for enterprise risk management within our Company. Our board actively oversees the Company's risk management and regularly engages in discussions of the most significant risks the Company faces and how these risks are being managed.

              The full board receives regular reports on enterprise risk areas from senior officers of the Company, including regarding COVID-19 related risks, human capital management, food safety, and cyber security.

              The board delegates certain risk oversight functions to the audit committee. Under its charter, the audit committee is responsible for oversight of the enterprise risk assessment and management process and ensures the board or a designated committee is monitoring the identification, assessment, and

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mitigation of all significant enterprise risks. Robust discussion of enterprise risk management (ERM) is held at the full board level. The audit committee oversees policies and guidelines that govern the process by which major financial and accounting risk assessment and management may be undertaken by the Company. The audit committee also oversees our corporate compliance programs and the internal audit function.

              In addition, the other board committees receive reports and evaluate risks related to their areas of focus. The finance committee actively oversees the company's risks related to liquidity and access to capital. The nominating and governance committee and the compensation committee oversee certain ESG related risks, but because ESG spans multiple committees, the full board retains overall ESG oversight authority. The committees regularly report to the full board on the assessment and management of risks that fall under their purview.

              The board believes the work undertaken by its committees, the full board, and the senior officers of the Company, enables the board to effectively oversee the Company's risk management.

Selection of Nominees for the Board

              A key role of the board is to ensure that it has the skills, expertise, and attributes needed in light of the Company's strategy, challenges, and opportunities. The board believes that there are skill sets, qualities, and attributes that should be represented on the board as a whole but do not necessarily need to be possessed by each director. The nominating and governance committee thus considers the qualifications and attributes of incumbent directors and director candidates both individually and in the aggregate in light of the current and future needs of the Company. The nominating and governance committee assists the board in identifying and evaluating persons for nomination or renomination for board service or to fill a vacancy on the board. The nominating and governance committee's evaluation process does not vary based on whether a candidate is recommended by a stockholder, a board member, a member of management, or self-nomination. Once a person is identified as a potential director candidate, the committee may review publicly available information to assess whether the candidate should be further considered. If so, a nominating and governance committee member or designated representative for the nominating and governance committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background; his or her specific skills, experience, and qualifications for board service; and any direct or indirect relationships with the Company. In addition, one or more interviews may be conducted with nominating and governance committee and board members and nominating and governance committee members may contact one or more references provided by the candidate or others who would have first-hand knowledge of the candidate's qualifications and attributes.

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              The board considers the recommendations of the nominating and governance committee and then makes the final decision whether to renominate incumbent directors and whether to approve and extend an invitation to a candidate to join the board upon appointment or election, subject to any approvals required by law, rule or regulation.

The Board's Role in Management Succession Planning

              The board, led by its nominating and governance committee, is actively engaged in succession planning and talent development, with a focus on the CEO and senior management of the Company. The board and the nominating and governance committee consider talent development programs and succession candidates through the lens of Company strategy and anticipated future opportunities and challenges. At its meetings throughout the year, the board and nominating and governance committee review progress of talent development and succession programs and discuss internal and external succession candidates, including their capabilities, accomplishments, goals, and development plans. The full board also reviews and discusses talent strategy and evaluations of potential succession candidates. In addition, potential leaders are given exposure to the board, which enables the board to select successors for the senior executive positions when appropriate.

Board Membership and Director Independence

              Our board of directors has determined that each of our directors, except our CEO, Mr. Murphy, qualifies as an independent director under the rules promulgated by the SEC and The Nasdaq Stock Market® ("Nasdaq") listing standards. Therefore, 91% of our current directors are independent. Following the annual meeting, if all directors are elected, all of our continuing directors will be independent, except our CEO. Pursuant to SEC and Nasdaq rules and standards, only independent directors may serve on the board's audit committee, compensation committee, and nominating and governance committee. All members of all board committees are independent in accordance with SEC rules and Nasdaq listing standards. There are no family relationships among any of our executive officers, directors, or nominees for directors.

              Our board is committed to diversity and as such includes directors with gender and ethnic diversity and a diverse set of backgrounds, experience, and skills, including:

 

Executive leadership

Business transformation

Technology strategy

Marketing and consumer insights

Governance

Accounting

 

Talent, human capital, and organizational development

Finance, investor relations, strategic transactions, and M&A

Restaurant executive leadership

Value creation

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Director Attendance

              The board of directors held 14 meetings in 2020, including 1 in-person meeting in early 2020. Our board and committees met more frequently and primarily over video conference during 2020 due to the COVID-19 pandemic. Each of our current directors who served in 2020 attended at least 88% of the aggregate total of meetings of the board of directors and committees during their period of service in 2020. The non-management directors of the Company meet at least quarterly throughout the year and as necessary or appropriate in executive sessions at which members of management are not present.

              The board of directors strongly encourages each of the directors to attend the annual meeting of stockholders. Nine of our ten directors serving at the time attended our 2020 annual meeting. One director was unable to attend due to technical difficulties joining via teleconference.

Committees of the Board

              Our board of directors currently has four standing committees: an audit committee, a compensation committee, a finance committee, and a nominating and governance committee. The board added a finance committee in 2019 to provide guidance on long-range planning, budget and capital allocation, and extraordinary stockholder engagement, among other matters. Each standing committee generally meets at least once each quarter. In addition, other regular and special meetings are scheduled as necessary and appropriate depending on the responsibilities of the particular committee. Each committee regularly meets in executive session without management present. Each board committee operates pursuant to a written charter. The charter for each committee is available on the Corporate Governance section of our website at www.redrobin.com/pages/company/investors. Committee charters are reviewed at least annually by the respective committee to revise and update its duties and responsibilities as necessary.

    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2020

       
    Audit Committee       Committee Members:    
   

Oversees our financial reporting activities, including our annual report and the accounting standards and principles followed

Reviews earnings releases and annual and quarterly reports, including use of any non-GAAP disclosures

Oversees the disclosure process, including understanding and monitoring of the Company's disclosure committee

Selects and retains the independent auditor

Participates in the process to rotate and select the lead audit partner at least every five years

Reviews scope and results of audit to be conducted by the independent auditor

Evaluates performance and monitors independence, commitment to objectivity, and skepticism of selected independent auditor

Approves the budget for fees to be paid to the independent auditor for audit services and non-audit services; evaluates fees for reasonableness and fairness based on benchmarking

Oversees the Company's internal audit function, scope and plan, and the Company's disclosure and internal controls

Oversees the Company's ethical and regulatory compliance

Provides oversight of the Company's enterprise risk management

Regularly meets with independent auditor in executive session

Participates in the evaluation of independent auditor and lead audit partner

      Steven K. Lumpkin GRAPHIC GRAPHIC

Thomas G. Conforti GRAPHIC

Anthony A. Ackil


GRAPHIC Chairperson

GRAPHIC Determined by the board to be an audit committee financial expert as defined under SEC rules

Number of Meetings in 2020:

The audit committee held eight meetings in 2020, all of which were held via videoconference.

   

 

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    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2020

       
    Compensation Committee       Committee Members:    
   

Develops and performs an annual performance evaluation of our CEO

Approves salary, short-term, and long-term incentive compensation programs for the CEO and all executive officers

Reviews and adopts employee benefit plans

Oversees compensation and benefits related ESG areas

Reviews and approves compensation for directors

May engage its own compensation consulting firms or other professional advisors to assist in discharging its responsibilities, as necessary

     

Kalen F. Holmes  GRAPHIC

Cambria W. Dunaway

G.J. Hart

David A. Pace


GRAPHIC Chairperson

Number of Meetings in 2020:

The compensation committee held nine meetings in 2020, all of which were held via videoconference.

   
    Nominating and Governance Committee       Committee Members:    
   

Identifies, evaluates, and recommends to the board of directors, candidates for appointment or election to the board and their independence

Determines whether to recommend to the board to include the nomination of incumbent directors in the proxy statement

Considers candidates to fill any vacancies that may occur

At least once a year, considers whether the number of directors and skill sets is appropriate for the Company's needs and recommends to the board any changes in the composition of the board

Evaluates and recommends to the board committee structure and membership

Develops and oversees the Company's corporate governance policies

Oversees governance related ESG areas

Oversees the Company's litigation and insurance coverage

Oversees the process to assess the performance of the board and its committees

      Cambria W. Dunaway GRAPHIC

Kalen F. Holmes

Glenn B. Kaufman

Allison Page


GRAPHIC Chairperson

Number of Meetings in 2020:

The nominating and governance committee held six meetings in 2020, all of which were held via videoconference.

   

 

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    Name of Committee and Principal Functions

  Current Members and Number of Meetings in 2020

       
    Finance Committee       Committee Members:    
   

Participates in and provides guidance to the board of directors and management on:

o

material acquisitions and dispositions

o

long range planning

o

annual budget

o

capital allocation (including share repurchase programs and 10b5-1 plan)

o

adjustments to capital structure

o

extraordinary stockholder engagement

      Thomas G. Conforti GRAPHIC

G.J. Hart

Glenn B. Kaufman

Steven K. Lumpkin

Allison Page


GRAPHIC Chairperson

Number of Meetings in 2020:

The finance committee held twelve meetings in 2020, all of which were held via videoconference.

   

Board Evaluations

              The board recognizes that a robust and constructive board evaluation process is essential to its effectiveness. As such, the board and each committee conduct annual evaluations to determine whether it and its committees are functioning effectively. As part of the evaluation process, each director also evaluates his or her own performance and periodically completes peer evaluations of the other directors, designed to assess individual director performance. The evaluation process is overseen by the nominating and governance committee, in consultation with the board chair. Outcomes of the evaluation process have been used to inform board succession planning, committee memberships, chair service, and enhancements to board effectiveness.

Review of Evaluation
Process & Assessment Guides
  Assessment Guides &
Evaluation Forms
  One-on-One Discussions   Evaluation Results

 

 

 

 

 

 

 

Nominating and Governance Committee reviews process and assessment guide forms

 

Drive robust discussion and valuable feedback

Focus on efficiency and effectiveness, board and committee composition, quality of board discussions, quality of materials and information provided, and board culture

 

One-on-one discussions between each member of the board and either the nominating and governance committee chair, board chair, or both, regarding evaluation results

 

Final evaluation results discussed with each committee and the full board in executive session

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Indemnification of Directors

              The Company has entered into agreements to indemnify its directors, executive officers, and certain other key employees. Under these agreements, the Company is obligated to indemnify its directors and officers to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys' fees, judgments, fines, and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer. The Company believes these agreements are necessary in attracting and retaining qualified directors and officers.

Limits on Outside Board Service

              As provided in our corporate governance guidelines, without specific approval from our board, no director of the Company may serve on more than four public company boards (including the Company's board) and no member of the audit committee may serve on more than three public company audit committees (including the Company's audit committee). Any audit committee member's service on more than three public company audit committees will be subject to the board's determination that the member is able to effectively serve on the Company's audit committee.

Stockholder Submission of Director Nominees

              A stockholder may submit the name of a director candidate for consideration by the nominating and governance committee by writing to: Nominating and Governance Committee of the Board of Directors, Red Robin Gourmet Burgers, Inc., 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111.

              The stockholder must submit the following information in support of the candidate: (a) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such stockholder's notice by, or on behalf of, such stockholder and such beneficial owner, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Company, the effect or intent of which is to mitigate loss to, manage risk of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Company, and (iv) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees.

Certain Relationships and Related Transactions

              For 2020, we had no material related party transactions which were required to be disclosed in accordance with SEC regulations.

              The board of directors recognizes transactions between the Company and certain related persons present a heightened risk of conflicts of interest. To ensure the Company acts in the best interest of our

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stockholders, the board has delegated the review and approval of related party transactions to the audit committee. Pursuant to our Code of Ethics and the audit committee charter, any related party transaction required to be disclosed in accordance with applicable SEC regulations must be reviewed and approved by the audit committee. In reviewing a proposed transaction, the audit committee must:

              After its review, the audit committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and our stockholders.

Compensation Committee Interlocks and Insider Participation

              During the last completed fiscal year, Cambria W. Dunaway, G.J. Hart, Kalen F. Holmes, and David A. Pace each served as members of the Company's compensation committee for all or a portion of such period. None of the members of the compensation committee is, or at any time has been, an officer or employee of the Company. None of our current executive officers serves as a director of another entity that has an executive officer who serves on our board.

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DIRECTOR COMPENSATION

              The compensation program for our directors is set forth in the table below. The director compensation program is evaluated annually by the compensation committee's independent consultant to assess the program's alignment with the market. As a result of the analysis, the committee chair fee for the nominating and governance committee was updated in the fourth quarter of 2020 to maintain market median levels. In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee temporarily reduced non-employee director cash compensation in order to reduce costs. In March 2020, the Company temporarily reduced the annual cash retainer and committee chair fees by 20%. These fees were not reinstated until Q4 2020. Directors did not receive repayment for the lost wages when payment was restored.

    Annual Retainer     Each non-employee director of the Company receives an annual cash retainer of $70,000, payable in substantially equal quarterly installments. In addition, the chair of the board and each board committee chair receive annual retainers in substantially equal quarterly installments:    

 

 


 


 

        Chair of the board

 

$

85,000

 

 

 

 
              Chair of audit committee   $ 15,000        
              Chair of compensation committee   $ 12,500        
              Chair of nominating and governance committee   $ 10,000 *      
              Chair of finance committee   $ 10,000        

 

 

 

 


 

        *  Chair fee increased from $7,500 to $10,000 beginning in Q4 2020 based on review of market data to align with the market median.

 

 
   
     Equity Awards     Each non-employee director receives an annual grant of restricted stock units with a grant date value of approximately $110,000 and a vesting term of one year or the date of the next annual meeting of stockholders, whichever is earlier. The vesting term is consistent with the Company's declassification of its board of directors with annual elections for one-year terms (until the next annual meeting) in accordance with governance best practices.    

2020 Director Compensation

              The following table sets forth a summary of the compensation earned by our non-employee directors in fiscal 2020.

Name   Fees Earned
or Paid
in Cash
($)(1)
  Stock
Awards
($)(2)
  All Other
Compensation
($)(3)
  Total
($)

Current Directors*

               

Anthony S. Ackil(4)

  67,603   128,332   -   195,935

Thomas G. Conforti

  72,000   109,995   -   181,995

Cambria W. Dunaway

  71,000   109,995   -   180,995

G.J. Hart

  63,000   109,995   -   172,995

Kalen F. Holmes

  74,250   109,995   -   184,245

Glenn B. Kaufman

  63,000   109,995   -   172,995

Steven K. Lumpkin

  76,500   109,995   -   186,495

David A. Pace

  139,500   109,995   -   249,495

Allison Page(5)

  77,192   146,655   -   223,847

Former Directors

 
 
 
 
 

 

 
 

Stuart I. Oran(6)

  8,093   -   -   8,093

*
Table does not include Director Anddria Varnado who was appointed in March 2021 and therefore did not receive any compensation for 2020.

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(1)
As noted above, fees paid to our non-employee directors were temporarily reduced 20% beginning in March 2020 and reinstated beginning in the fourth quarter of 2020. Directors did not receive repayment for the lost wages. Fees paid to our non-employee directors are paid in advance of each quarter. Mr. Ackil and Ms. Page's 2020 fees were pro-rated for partial service in the first quarter of 2020.

(2)
Each director was awarded 7,768 restricted stock units in May 2020. The fair value of such restricted stock units was computed in accordance with the guidance for accounting for stock compensation at $14.16 per share for all directors. All such restricted stock units are subject to vesting in full one year from the date of grant, or the date of the next annual meeting of stockholders, whichever is earlier. The 2020 restricted stock unit award for Mr. Ackil and Ms. Page of 9,063 shares and 10,357 shares, respectively, included an additional pro-rated amount for their partial service prior to May 2020.

(3)
The aggregate amount of all other compensation paid to each director in fiscal year 2020 did not exceed $2,500 per director.

(4)
Mr. Ackil joined the board in March 2020.

(5)
Ms. Page joined the board in February 2020.

(6)
Mr. Oran retired and concluded his board service on May 21, 2020.

              As of the end of the fiscal year 2020, the aggregate number of options and restricted stock units outstanding for each non-employee director is set forth below. Options are considered outstanding until exercised and restricted stock units are considered outstanding until vested and paid.

Director   Options   Restricted
Stock Units

Anthony S. Ackil

  -   9,063

Thomas G. Conforti

  -   7,768

Cambria W. Dunaway

  5,000   7,768

G.J. Hart

  -   7,768

Kalen F. Holmes

  5,000   7,768

Glenn B. Kaufman

  -   7,768

Steven K. Lumpkin

  5,000   7,768

David A. Pace

  -   7,768

Allison Page

  -   10,357

Former Directors

 
 
 
 

Stuart I. Oran

  -   -

Director Stock Ownership Guidelines

              The compensation committee has stock ownership guidelines in place for non-employee directors which require non-employee directors to own Company securities with a cumulative cost basis of at least five times the director's annual retainer. Based on the current annual retainer for non-employee directors, that dollar amount is $350,000. The value of each director's holdings is based on the cumulative cost basis of securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. New non-employee directors have five years from the time the director joins the board to reach the minimum ownership threshold. Non-employee directors may not sell, transfer, or otherwise dispose of common stock that would decrease such director's cumulative cost basis below the ownership guideline amount. All of our directors are currently in compliance or on track to be in compliance with the guidelines at this time. In addition, a majority of directors have not sold any of their awarded shares.

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COMPENSATION DISCUSSION AND ANALYSIS

NAMED EXECUTIVE OFFICERS

              In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation derived from this program by our executive officers, including our "named executive officers." For 2020, our named executive officers were:

              Former officer included as a Named Executive Officer for 2020 as required by SEC rules:


(1)
Mr. Cookson resigned as Senior Vice President and Chief Information Officer of the Company effective as of August 28, 2020.


EXECUTIVE SUMMARY

              Red Robin is committed to building long-term stockholder value. Our executive compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company strategic and financial goals. This executive summary provides an overview of our fiscal 2020 performance, compensation actions, and compensation outcomes based on pay for performance alignment. References to "2020" herein are to the Company's fiscal year ended December 27, 2020.

2020 COMPANY OPERATIONAL AND PERFORMANCE HIGHLIGHTS

              2020 began as a pivotal year of transformation for the Company and we entered the year with accelerating business momentum. Under a significantly refreshed board and a new CEO, Paul Murphy, the Company was making measurable progress on its turnaround plan. To that end, through the first eight weeks of 2020, the Company grew comparable restaurant revenue by 3.7%, driven in part by positive Guest count growth. Then, the COVID-19 crisis forced the Company to adjust and respond to the impact of the pandemic.

              With the onset of the pandemic in early 2020, the Company entered an unprecedented time for our Guests, Team Members, business, and industry. The pandemic brought forth complex challenges including severe limitations on dine-in capacity that materially reduced our traffic and sales and challenged our liquidity. With the health, safety, and well-being of Red Robin's Team Members, Guests, and communities as our top priority, we successfully shifted restaurants to an off-premise only model and took action to preserve liquidity, enhance financial flexibility, and help mitigate the impact of COVID-19 on our business and to set ourselves up for the eventual recovery. Despite the challenges of the pandemic, we were able to significantly improve our operating and financial model. The material improvements we made to our business will enable us to resume our transformation strategy in an even stronger position as we emerge from the pandemic.

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              Through the pandemic, our CEO kept management focused on three priorities: (1) be a brand that survives the pandemic, (2) bring as many Team Members through the pandemic with the Company as possible, and (3) continue to make progress on the transformation strategy to position the Company well to thrive post-pandemic and beyond. These priorities also guided 2020 compensation actions, which included a temporary 20% reduction to executive officer and board member cash compensation and a shift to total shareholder return as the performance metric for our long-term incentive plan.

              Despite the COVID-19 pandemic, we made significant progress on our transformation strategy during 2020 to solidify our financial longevity and develop a more robust business model, including the following accomplishments.

2020 Accomplishments

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2020 COMPENSATION ACTIONS

              Our incentive programs demonstrate our commitment to a pay for performance compensation philosophy. The Company made multiple positive changes to its compensation program beginning in 2020 prior to the pandemic:

              Prior to the pandemic, the compensation committee set 2020 compensation for our named executive officers as follows:

Base Salary

Annual Performance-Based Incentive

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Long-Term Performance-Based Incentive

              The Company's performance and its response to the COVID-19 pandemic impacted 2020 compensation actions. In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee took certain additional actions with respect to the 2020 compensation program in order to meaningfully reduce costs and set performance targets that were most appropriate given the uncertainty and challenges at that time:

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2020 COMPENSATION OUTCOMES

              The Company's challenged 2020 performance impacted our named executive officers' compensation outcomes, consistent with our commitment to a pay for performance compensation philosophy. Based on 2020 performance, the compensation committee:

              See "Compensation Discussion and Analysis—Key Components of our Executive Compensation Program—Incentive-Based Compensation" for further information on the annual corporate incentive and long-term incentive program. See "Compensation Discussion and Analysis—2020 Executive Compensation—2020 Recognition Awards" for further information on the discretionary bonus paid for contributions in 2020.

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COMPENSATION PHILOSOPHY

COMPENSATION PHILOSOPHY

              Our executive compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company strategic and financial goals. It encourages our executive officers to think and act like owners, because they are owners and as such are compensated in significant part based on the performance of the Company.

PAY OBJECTIVES

              Our compensation objectives are designed to link incentives and rewards with current and long-term sustained achievement of these goals:

PAY FOR PERFORMANCE ALIGNMENT

              Our compensation program is designed to pay for performance and is comprised of performance-based short-term and long-term incentive awards. Such compensation varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved or our stock price declines. Performance metrics used for the annual and long-term cash incentive grants are reviewed and approved by the compensation committee. Restricted stock units and stock options vest ratably over multiple years, the value of which is dependent, in whole or in part, on an increase in the Company's stock price.


COMPENSATION DECISION PROCESSES

OVERVIEW

Executive compensation decisions are made by our compensation committee, which is comprised solely of independent directors.

When making compensation decisions, our compensation committee receives input from its independent compensation consultant and recommendations from our CEO for the CEO's direct reports. Our compensation committee reviews benchmarking data of a peer group of restaurant companies as one input into the pay decision process. Other factors that influence pay decisions include, but are not limited to Company performance, individual performance, succession planning, and retention.

COMPENSATION SETTING

              The compensation committee approves target total direct compensation levels for named executive officers by establishing base salaries and setting annual and long-term incentive compensation targets. When appropriate, the committee also approves special awards and relatively modest perquisites. The Company makes pay decisions based on a variety of factors, including:

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CONSIDERATION OF PRIOR SAY-ON-PAY VOTES

              At our 2020 annual meeting of stockholders, 96.9% of votes were cast to approve the advisory "say on pay" vote on the 2019 compensation of our named executive officers. This is the third consecutive year of over 90% support for our "say on pay" proposal, with 90.7% of stockholders voting to approve our "say on pay" proposal in 2019 and 99.3% in 2018.

              We believe the level of support we received from stockholders for the last three years was driven in part by our commitment to a pay for performance philosophy and our linking incentives to current and long-term sustained achievement of Company strategic goals. The compensation committee considered the results of the advisory vote when setting executive compensation for 2020 and will continue to do so in future executive compensation policies and decisions. We regularly engage with our stockholders and this engagement provides valuable insight that informs the work of both management and the board, including in the areas of executive compensation. In the last 12 months, we held meetings and discussions with stockholders representing more than 55% of our outstanding shares. See "Proxy Summary—Stockholder Engagement" for more discussion about our engagement with our stockholders, including Company participants and topics covered.

BENCHMARKING

Restaurant Peer Group

              Restaurant peer group companies were selected and approved by the compensation committee upon the recommendation of management and the committee's independent compensation consultant and are based on their similarity to us with respect to several criteria, including revenue, size, business model, and scope. The peer group used for 2020 compensation benchmarking consists of the 18 restaurant companies identified in the chart below. No changes to the peer group were made in 2020 and therefore the same peer group is being used to set 2021 compensation.

Peer Group    
Biglari Holdings, Inc.   Dine Brands Global, Inc.    
BJ's Restaurants, Inc.   Domino's Pizza, Inc.    
Brinker International, Inc.   Fiesta Restaurant Group, Inc.    
Carrols Restaurant Group, Inc.   Jack in the Box, Inc.    
The Cheesecake Factory, Inc.   Noodles & Company    
Chuy's Holdings, Inc.   Papa John's International, Inc.    
Cracker Barrel Old Country Store, Inc.   Ruth's Hospitality Group, Inc.    
Dave & Buster's Entertainment, Inc.   Texas Roadhouse, Inc.    
Denny's Corporation   The Wendy's Company    

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              2020 Compensation Setting.    The compensation committee uses competitive compensation data from the annual total compensation study of peer and other restaurant companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the compensation committee uses multiple reference points when establishing targeted compensation levels. The committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business unit, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning.

INDEPENDENT COMPENSATION CONSULTANT

              In 2020, Meridian Compensation Partners, LLC ("Meridian") again served as the compensation committee's independent compensation consultant. The independent compensation consultant assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and acts as an advisor to the compensation committee on compensation matters as they arise. The compensation consultant also advises the compensation committee on compensation for the board of directors. The compensation committee evaluated Meridian's independence as its compensation consultant by considering each of the independence factors adopted by Nasdaq and the SEC. Based on such evaluation, the compensation committee believes no conflict of interest exists that would prevent Meridian from independently representing the compensation committee.

RISK MITIGATION

              The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking. The factors considered by the committee include:

              The compensation committee believes it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because:

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              The compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes the risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

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2020 EXECUTIVE COMPENSATION

OVERVIEW

              Our 2020 executive compensation program was comprised of three primary elements: (i) base salaries, (ii) annual performance-based cash incentives, and (iii) long-term incentives that include performance share units (PSUs) based on a three-year performance period, non-qualified stock options, and restricted stock units. We believe the metrics used for both the annual performance-based cash incentive and long-term incentive grants drive stockholder value. The goals for our incentive plans are linked to the Company's financial and strategic business plans.

              By design, "at-risk" pay (incentive pay subject to forfeiture or partial or complete loss of value) comprised 82% of total target compensation for the CEO, Paul Murphy, and 65% of total target compensation for the other named executive officers who were employed at the end of the year as a group. The charts below reflect the portion of our named executive officers' 2020 total target compensation that is considered at-risk (amounts do not reflect the temporary reductions to base salary in 2020).


CEO

GRAPHIC

              Our pay for performance compensation is further demonstrated in actual 2020 CEO compensation:

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Other Named Executive Officers

GRAPHIC

KEY COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

Base Salary

              Base salary provides a minimum level of remuneration to our named executive officers for their efforts. The compensation committee sets base salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually as part of the benchmarking process and adjusts them from time to time to account for relevant factors such as market changes. The compensation committee also considers the CEO's evaluation of each executive's performance and reviews the CEO's salary recommendations for our executives.

Incentive-Based Compensation

              Annual Performance-Based Incentive.    Annual performance-based cash incentives are intended to reward achievement of annual financial performance and strategic goals that drive long-term, sustained creation of stockholder value. Our annual incentive goals are established with reference to the annual portion of our multi-year strategic plan. The annual performance metrics are financial-based measures and strategic goals that the compensation committee believes are aligned with our strategy. The compensation committee continually evaluates the measures against which we gauge our performance and may incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.

              Each of our executives participates in the annual incentive plan under which the compensation committee uses earnings before interest, taxes, depreciation, and amortization, or EBITDA, as the primary metric. EBITDA may be further adjusted under the 2017 Plan to remove the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring, or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if applicable, and is referred to herein as "Adjusted EBITDA."

              The Adjusted EBITDA (70% weight) measure was selected because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors,

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and other matters. In addition, in 2020, the annual performance-based incentive plan included three strategic goals: implementation of our TGX hospitality model (10% weight), rollout of Donatos® pizza to 95 locations (10% weight), and system implementation of the new Digital Guest Journey online ordering platform (10% weight) to incentivize and reward improvements in these strategically important areas.


2020 Annual Performance Based Incentive Plan

GRAPHIC

              The Company grants annual performance-based incentive awards and cash incentive awards, if any, under the 2017 Plan. The compensation committee approves any payouts earned under the annual incentive program following review of actual results at the end of the year. The corresponding dollar payout value varies up or down depending on the actual performance level versus threshold, target, and maximum goals that are set at the beginning of the year. The compensation committee sets the payout ranges each year based on performance expectations and other factors. We believe our performance goals require "stretch" performance and encourage superior performance.

              No payouts are earned if the threshold goals are not achieved. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes of awarding annual incentive compensation.

              Long-Term Performance-Based Incentives.    The compensation committee determines the long-term incentive grants for the executive officers, including the named executive officers, by reviewing peer group market data analysis from its compensation consultant, impact of share usage and affordability, internal equity, and recommendations from the CEO, among other factors. The compensation committee believes the current mix of performance and service-based incentives aligns the interests of executive officers with our stockholders and was appropriate for 2020.

              The 2020 long-term incentive grants for named executive officers consisted of a mix of equity awards in the form of a long-term performance-based incentive component payable in performance stock units (PSUs) (50%), non-qualified stock options (25%), and restricted stock units (25%). These awards are designed to focus management on our strategy of driving consistent, sustainable, achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation is designed to ensure the execution of our evolving strategic plan, consider appropriate risks and returns, and allow for initiatives that span several fiscal years.

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2020 Long-Term Incentive Grants

GRAPHIC

              Beginning in 2017 and continuing through 2019, the long-term performance-based incentive component became payable if annual targets selected by the committee are achieved for that tranche within the three-year performance period. When the performance measure has been met and approved by the compensation committee for a particular tranche during the three-year period of the award, that portion of units is determined but remains subject to a service-vesting requirement until the three-year period has concluded. That determined portion of units is considered "earned," but is not considered vested and will not be delivered until the applicable three-year period has concluded subject to continued employment on such date. The annual metrics are independent of each other. For the third tranche of the 2018 long-term incentive grant and the second tranche of the 2019 grant, the compensation committee selected Adjusted EBITDA. For the second tranche of the 2018 grant and the first tranche of the 2019 grant, the compensation committee selected an earnings metric (Adjusted EBITDA) and a cash return on investment capital metric (CROIC) in the design to achieve a balance between earnings and return on investment and to effectively reward both. For the first tranche of the 2018 long-term incentive grant, the compensation committee selected an earnings metric (Adjusted EBITDA) and an operational metric (Relative Guest Traffic) in the design to achieve a balance between earnings, growth, and driving Guest traffic relative to the restaurant industry (not limited to casual dining) and to effectively reward both. In 2020, the committee returned to setting long term performance goals measured over a multi-year performance period and selected a relative total shareholder return (TSR) metric. Like the goals in our annual performance-based plan, the goals used in our long-term performance-based incentive component are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance.

              The temporary transition to annual goals measured and assessed over a three-year period reflected the challenges of multi-year forecasting in a volatile restaurant operating environment, which continues to be impacted by changes in traditional consumer dining behavior, including a shift from traditional dine-in consumption to increased off-premise dining activity and the use of technology-based food ordering systems. In 2020, the compensation committee returned to setting goals over a multi-year period.

              The 2017 Plan permits the compensation committee to make adjustments, in its discretion, for non-cash, non-recurring, or unusual items. In 2020, all long-term performance-based incentive awards were granted under the 2017 Plan.

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Employee Benefits

              We also provide certain other customary retirement and health and welfare benefits and other ancillary compensation to executives, which are in line with those offered to other groups of our employees, and which comprise a modest portion of our named executive officer compensation.

Modest Perquisites

              We offer a limited number of modest perquisites to our named executive officers, which include a car allowance, phone allowance, and in-restaurant meal discounts. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements on relocation. We review the perquisites we offer to our executives and compare them to those offered by our competitors from time to time.

SUMMARY OF 2020 COMPENSATION ACTIVITY

Base Salary

              Named executive officer salaries for 2020, along with any corresponding increases from their 2019 salaries, are set forth below. The compensation committee considers various factors when setting base salaries including peer compensation practices, market competitiveness, the Company's performance, individual contributions, growth in roles, retention, CEO recommendations for the CEO's direct reports, and other relevant matters. Amounts below are annualized for those that served in role for partial year and do not reflect that base salaries of our named executive officers were temporarily reduced by 20% effective March 30, 2020 through October 5, 2020 in an effort to reduce costs and conserve liquidity during the pandemic. Executive team members did not receive repayment for the lost wages when payment was restored.

Named Executive Officer   2019 Salary   2020 Salary   % Change  

Paul J.B. Murphy III(1)

  $ 900,000   $ 900,000     0 %

Lynn S. Schweinfurth(1)

  $ 450,000   $ 470,000     4.4 %

Jonathan A. Muhtar

  $ 425,000   $ 445,000     4.7 %

Michael L. Kaplan

  $ 400,000   $ 400,000     0 %

Michael Buchmeier

  $ 300,000   $ 300,000     0 %

Former Executive

   
 
   
 
   
 
 

Dean Cookson

  $ 340,000   $ 340,000     0 %

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Incentive-Based Compensation

              2020 Annual Performance-Based Cash Incentives. For the primary component (70% weight) of our 2020 annual performance-based cash incentive program, actual payouts were determined by comparing the Company's fiscal year Adjusted EBITDA to a target level of Adjusted EBITDA for the year established by our compensation committee. Potential payout amounts ranged from 0% to 200% of the executive's target opportunity based on achievement of Adjusted EBITDA ranging from 85% to 115% of the target level of Adjusted EBITDA for the year. The committee believes the 2020 EBITDA goals were rigorous and demonstrated our commitment to a pay for performance philosophy.

 
     Adjusted EBITDA Target and Preliminary Annual Incentive %
 
 
          Proportion of Adjusted EBITDA Target Achieved

  Payout as a
% of Target


 
    Minimum       85%       25%    
 
    Target       100%       100%    
 
    Maximum       ³115%       200%    
 

              The 2020 annual performance-based cash incentive program was also based on three strategic performance targets: implementation of our TGX hospitality model (10% weight), rollout of Donatos® pizza to 95 locations (10% weight), and system implementation of the new Digital Guest Journey online ordering platform (10% weight). Each initiative is measured independently, and the target bonus is earned for each strategic initiative only if the project target is achieved. With a significantly refreshed board, new CEO, and new transformation strategy, the strategic components of the annual performance-based cash incentive were adjusted to align with updated 2020 strategic priorities which were focused on growth and the Guest experience. Significant progress had been made in the areas of off-premise sales and overall guest satisfaction, the strategic goals used in the 2019 annual performance-based cash incentive program, which set us up for significantly increased off-premise business in 2020.

 
     Strategic Target

  Payout Opportunity %

 
    TGX hospitality model rollout       10%    
 
    Donatos® rollout (95 locations)       10%    
 
    Digital Guest Journey implementation       10%    
 

              In 2020, one of the three strategic initiatives was achieved based on the implementation of the TGX hospitality model. The Adjusted EBITDA financial target and two other strategic performance targets were not met and did not result in payout. Based on actual performance during 2020, the total annual

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corporate bonus earned by our NEOs was 10%. Performance goals were set prior to the onset of the COVID-19 pandemic and ongoing incentive programs were not reset during the pandemic.

 

 

2020 Annual Performance-Based Cash Incentive Goal, Achievement, and Payout


 

  

 

Bonus Component—Financial


   


Target
Performance
(dollars in thousands)



   


Actual
Performance
(dollars in thousands)



   

Achievement
Percentage


   



Payout
Achieved
(before
weighting)




    Weighting %

    Actual
Bonus
Percentage
Earned




 
 

 

 

Adjusted EBITDA

    $ 104,000       ($ 33,100 )       0.00 %       0.00 %     70%       0.00%    
     

 

 

Bonus Component—Strategic

                                            Weighting %       Actual Bonus Percentage Earned    
     

 

 

TGX

                                            10%       10.00%    
     

 

 

Donatos Rollout

                                            10%       0.00%    
     

 

 

Digital Guest Journey

                                            10%       0.00%    
     

 

 

Total

                                            100%       10.00%    
 

              Each of our named executive officers has a target annual incentive opportunity expressed as a percentage of the executive's salary and is set based on, among other factors, market and peer comparisons, and internal equity. The target and actual amounts of our annual performance-based cash incentives paid to our named executive officers in March 2021 for 2020 performance are as follows:

Named Executive Officer   2020
Annualized
Salary
  Target
(% of
Actual
Salary)
  $ Amount
at Target
  2020
Actual
Payout
 

P. Murphy III

  $ 900,000     120 % $ 1,080,000   $ 108,000  

L. Schweinfurth

  $ 470,000     75 % $ 352,500   $ 35,250  

J. Muhtar

  $ 445,000     75 % $ 333,750   $ 33,375  

M. Kaplan

  $ 400,000     70 % $ 280,000   $ 28,000  

M. Buchmeier

  $ 300,000     60 % $ 180,000   $ 18,000  

Former Executive(1)

   
 
   
 
   
 
   
 
 

D. Cookson

  $ 340,000     60 % $ 204,000      

(1)
Mr. Cookson was not eligible to receive a payout from the annual performance-based cash incentive program because he was no longer employed at the Company at the end of the performance period.

              2020 Recognition Awards. 2020 began as a pivotal year of transformation for the Company and we entered the year with accelerating business momentum. Under a significantly refreshed board and a new CEO, Paul Murphy, the Company was making measurable progress on its turnaround plan. To that end, through the first eight weeks of 2020, the Company grew comparable restaurant revenue by 3.7%, driven in part by positive Guest count growth. Then, the COVID-19 crisis forced the Company to adjust and respond to the impact of the pandemic.

              With the onset of the pandemic in early 2020, the Company entered an unprecedented time for our Guests, Team Members, business, and industry. The pandemic brought forth complex challenges including severe limitations on dine-in capacity that materially reduced our traffic and sales and challenged our liquidity. With the health, safety, and well-being of Red Robin's Team Members, Guests, and communities as our top priority, we successfully shifted restaurants to an off-premise only model and took

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action to preserve liquidity, enhance financial flexibility, and help mitigate the impact of COVID-19 on our business and to set ourselves up for the eventual recovery. Despite the challenges of the pandemic, we were able to significantly improve our operating and financial model. The material improvements we made to our business will enable us to resume our transformation strategy in an even stronger position as we emerge from the pandemic.

              Through the pandemic, our CEO kept management focused on three priorities: (1) be a brand that survives the pandemic, (2) bring as many Team Members through the pandemic with the Company as possible, and (3) continue to make progress on the transformation strategy to position the Company well to thrive post-pandemic and beyond. These priorities also guided 2020 compensation actions, which included a temporary 20% reduction to executive officer and board member cash compensation and a shift to total shareholder return as the performance metric for our long-term incentive plan.

              Despite the challenges raised during the COVID-19 pandemic, we made significant progress on our transformation strategy during 2020 to solidify our financial longevity and develop a more robust business model. Achievements during 2020 that the compensation committee wished to recognize include:

              Our Team Members, including the named executive officers, received a one-time discretionary cash recognition award in March 2021 for their extraordinary efforts during 2020. This discretionary bonus was a

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one-time award. The award was broad-based, recognizing all bonus eligible Team Members which includes the restaurant management level and above. The compensation committee chose to recognize and reward Team Members through a one-time discretionary award for the resilience, dedication, and leadership of our Team Members during a truly unprecedented and extraordinary year instead of altering ongoing incentive programs or repaying salaries that were reduced by 20% for a portion of the year. The compensation committee determined that the one-time discretionary recognition awards were important and in the best interest of stockholders to reward and retain the Team Members, including our NEOs, who navigated the Company through the COVID-19 pandemic to overcome the initial reduction in dine-in traffic and build sales through off-premise, made progress on our transformation strategy despite such challenges, and set the Company up for success during the dine-in recovery and beyond. This progress is demonstrated when you compare the Company's stock price low of $4.04 during the height of the pandemic and the Company's recent stock price at $37.73 (market close as of March 12, 2021).

              The table below itemizes the one-time discretionary cash bonus awarded to our named executive officers:

 
    Name

 

Discretionary
Bonus


 
    P. Murphy III       $ 162,000    
 
    L. Schweinfurth       $ 52,875    
 
    J. Muhtar       $ 50,063    
 
    M. Kaplan       $ 42,000    
 
    M. Buchmeier       $ 27,000    
 

              In addition to the discretionary bonus provided to Team Members described above, Mr. Buchmeier was awarded an additional one-time $50,000 discretionary bonus to reflect the interim assumption of Chief Operating Officer responsibilities during 2020 in addition to his duties as Chief People Officer for almost the entirety of the year.

              The 10% earned 2020 annual performance-based cash incentive together with the 15% discretionary bonus received by the named executive officers resulted in a total bonus payout for 2020 of approximately 25% of target, as set forth below:

 

 

 

Name


   

Target
Bonus %


   

Target
Bonus $


   

Earned
Bonus


   

Discretionary
Bonus (15%)


   

Additional
Bonus


   

Total
Bonus


 

 

 

P. Murphy III

        120 %     $ 1,080,000       $ 108,000       $ 162,000                 $ 270,000    
 

 

 

L. Schweinfurth

        75 %     $ 352,500       $ 35,250       $ 52,875                 $ 88,125    
 

 

 

J. Muhtar

        75 %     $ 333,750       $ 33,375       $ 50,063                 $ 83,438    
 

 

 

M. Kaplan

        70 %     $ 280,000       $ 28,000       $ 42,000                 $ 70,000    
 

 

 

M. Buchmeier

        60 %     $ 180,000       $ 18,000       $ 27,000       $ 50,000(1)       $ 95,000    
 

(1)
As noted above, Mr. Buchmeier received an additional discretionary bonus of $50,000 for serving as both the interim COO and CPO for almost the entirety of 2020.

              2020 Long-Term Incentive ("LTI") Program.    The 2020 LTI grants made to our named executive officers consisted of 50% payable in performance stock units, 25% payable in restricted stock units, and 25% payable in non-qualified stock options.

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              2020 Long-Term Incentive Grants. In March and April 2020, the Company made the following annual grants to our named executive officers for the 2020-2022 long term incentive program:

Named Executive Officer   Total Long-Term
Incentive
Target Value ($)
  Long-Term
Incentive
PSUs ($)
  Time-Based
Restricted
Stock Units
($)
  Non-Qualified
Stock Options
($)
 

P. Murphy III

    3,000,000     1,500,000     750,000     750,000  

L. Schweinfurth

    611,000     305,500     152,750     152,750  

J. Muhtar

    645,251     322,625     161,313     161,313  

M. Kaplan

    440,000     220,000     110,000     110,000  

M. Buchmeier

    210,000     105,000     52,500     52,500  

Former Executive

   
 
   
 
   
 
   
 
 

D. Cookson

    238,000     119,000     59,500     59,500  

              The amounts listed in the table above represent the target intended value of the grant and amounts may differ from the accounting values provided in the Summary Compensation Table below. The fair value of the restricted stock units and performance stock units is based on the grant date market value of the common shares.

              Long-Term Performance-Based PSUs. For the 2020-2022 long-term incentive grants, 50% was comprised of equity grants in the form of PSUs, as follows:

Named Executive Officer   Long-Term
Incentive PSUs
  Grant Date
Fair Value
($)(1)
 

P. Murphy III

    127,011     1,500,000  

L. Schweinfurth

    25,867     305,489  

J. Muhtar

    27,317     322,614  

M. Kaplan

    18,628     219,997  

M. Buchmeier

    8,890     104,991  

Former Executive

             

D. Cookson(2)

    10,076     118,998  

(1)
Target PSUs are rounded down to the nearest whole share and therefore may differ slightly from the target award value.

(2)
The PSU award for Mr. Cookson was forfeited upon his termination.

              In 2020, the committee returned to setting long term performance goals measured over a multi-year performance period through 2022 and selected a relative total shareholder return (TSR) metric.

              For the 2020 tranche of the 2018-2020 and 2019-2021 ongoing long-term incentive programs, the performance-based incentive metrics for the PSUs was Adjusted EBITDA. No PSUs are earned if threshold performance objectives are not met and up to 200% of the target number of PSUs will be earned if maximum performance objectives are achieved. From 2018 to 2020, the long-term performance-based incentive targets were set annually as a result of the current volatile restaurant operating environment, but no payout can be earned until the end of the three-year performance period. In 2020, the long-term performance-based incentive targets returned to a three-year performance period.

              For purposes of the 2020 tranche of awards under our long-term performance-based incentive, potential payout amounts ranged from 0% to 200% of the executive's target opportunity based on

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achievement of Adjusted EBITDA ranging from 85% to 115% of the target level of Adjusted EBITDA for the year.

 
     2020 Tranche Payout Scale: Adjusted EBITDA & Target and
Preliminary Payout %


 
 
          Target Achieved

  Payout as a
% of Target


 
    Below Minimum       <85%       0%    
 
    Minimum       85%       25%    
 
    Target       100%       100%    
 
    Maximum       ³115%       200%    
 

              Based on actual performance during 2020, the long-term performance-based incentive percentage was below threshold and no amount was earned in respect of the 2020 tranche of outstanding long-term performance-based incentive awards.

 

 

2020 Tranche Long-Term Incentive Performance-based Incentive Goal, Achievement, and Payout


 

  

 

LTI Component


   



Target
Performance
Goal
(in thousands)




    Actual
Performance
(in thousands)



   

Achievement
Percentage


   



Payout
Achieved
(before
weighting)




    Weighting %

   



Actual
Bonus
Percentage
Earned




 
 

 

 

Adjusted EBITDA

    $ 104,000       ($33,100)         0.00 %       0.00 %     100%         0.00 %  
     

 

 

Total

                                          100%         0.00 %  
 

              2018-2020 Long-Term Performance-Based Incentives.    At the end of 2020, the Company completed a three-year performance cycle for the long-term incentive portion of the LTI plan. The performance period covered fiscal years 2018 through 2020, with targets set annually. Based on Adjusted EBITDA and relative guest traffic in 2018, Adjusted EBITDA and CROIC performance in 2019, and Adjusted EBITDA performance in 2020, our named executive officers earned a minimal payout for performance in fiscal year 2018 and 2019 only, as reflected in the table below.

 

 

2018-2020 Cumulative Long-Term Incentive Performance Achievement


 

  

 

Tranche


  Weight

  Metrics/
Weighting


  Award
(% of Target)


 

 

 

Tranche #1 (Fiscal 2018)

    33.33%       Adjusted EBITDA (50%)
Rel. Guest Traffic (50%)
      43.25%    
     

 

 

Tranche #2 (Fiscal 2019)

    33.33%       Adjusted EBITDA (50%)
CROIC (50%)
      13.46%    
     

 

 

Tranche #3 (Fiscal 2020)

    33.33%       Adjusted EBITDA (100%)       0%    
     

 

 

Total

    100.00%               18.90%    
 

              As illustrated in the table above, the compensation committee varied the performance metrics for each year of the 2018-2020 Long-Term Performance-Based Incentives. This decision was made to keep executives focused on key metrics that aligned with the business objectives for that year. Adjusted EBITDA has been a steady and key metric to measure management performance and create stockholder value. The other metrics were identified key initiatives for that particular year. We believe all of the chosen metrics support our management team's alignment with stockholders. Further, we believe the below target payouts demonstrate our commitment to a pay for performance philosophy.

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              Restricted Stock Units and Non-Qualified Stock Options. The restricted stock units and non-qualified stock options granted in 2020 vest ratably over three years on each anniversary date of the grant, which is designed to align incentives with longer-term achievement of objectives. The exercise price of the stock options was set at our closing share price on the date of grant. This means the stock options will have no value unless our share price on the date the option is exercised is greater than the exercise price.

Deductibility of Executive Compensation

              The compensation committee considers the tax impacts of material elements of our executive compensation program. These factors alone do not drive our compensation decisions, but rather they are considered along with other factors such as the cash and non-cash impact of the program, and whether the program is consistent with our compensation objectives.

              Historically, the compensation committee had generally structured our executive compensation in a manner designed to qualify for deductibility under the performance-based compensation exception from the limitation otherwise applicable under Section 162(m) of the Internal Revenue Code. The performance-based compensation exception has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million is generally not deductible.

              Due to ambiguities and uncertainties in the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of potential transition relief under the legislation repealing Section 162(m)'s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact will. Further, while we consider deductibility as one factor in determining executive compensation, in some cases we may decide it is either not possible or desirable to satisfy all of the conditions of Section 162(m) for deductibility and still meet our compensation needs. Accordingly, we may pay compensation that is not deductible under Section 162(m) from time to time.


2021 COMPENSATION PROGRAM

              The Company continually assesses our compensation program to ensure it supports our business strategy and situation. For 2021, the annual incentive plan includes performance targets related to major strategic initiatives in addition to a significant portion based on the Adjusted EBITDA goal. The long-term incentive program mix was adjusted to consist of 50% weighted in PSUs and 50% weighted in RSUs for the named executive officers, which maintains a significant portion of executive compensation based on stockholder return. The 2021 long-term incentive program includes the setting of pre-established performance target goals for a multi-year performance period. The compensation committee selected relative total shareholder return (TSR) as the metric to be measured over the multi-year performance period for PSU awards.

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GOVERNANCE OF EXECUTIVE COMPENSATION

Executive Stock Ownership Guidelines

              Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. The compensation committee believes that executive stock ownership requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to achieve during the term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. The current ownership guidelines require our CEO to own five times base salary, three times base salary for executive vice presidents, and two times base salary for senior vice presidents. Pursuant to the guidelines, the value of the executive's holdings is based on the cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to ach