Good day, everyone, and welcome to the Red Robin fourth quarter 2007 financial results conference call. At this time all participants have been placed on a listen-only mode, and the floor will open for your questions following the presentation. It is now my pleasure to turn the floor over to your host, Ms. Katie Scherping, Chief Financial Officer of Red Robin.

Thanks, Keith. Before I get started I need to remind everyone that part of today’s discussion, particularly, but not limited to, our outlook and development expectations for 2008 will include forward-looking statements. These statements will include but not be limited to references to our earnings guidance, margins, new restaurant openings or NROs, trends, costs and administrative expenses and other expectations. These statements are not guarantees of future performance and therefore investors should not place undue reliance on them. We refer all of you to our 10-K and our 10-Q filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. I also want to inform our listeners that we will make some references to non-GAAP financial measures today during our call. You will find supplemental data in our press release on Schedules 1 and 2 which reconciles our non-GAAP measures to our GAAP results. Now I’d like to turn the call over to Denny Mullen, Chairman and Chief Executive Officer.

Thanks Katie, and thanks for everyone for joining us today. We also have with us Eric Houseman, our President and Chief Operating Officer. Eric will provide an update on the key initiatives that have and will continue to contribute to the business results, and Katie will review in detail our most recent financial results as well as guidance for 2008. But first let’s start with a quick review of the 2007 results. Total revenues increased 23.4% while company-owned comp revenue restaurant sales increased 2.4% on a 52-week comparable basis. As a reminder, our fiscal 2006 year had 53 operating weeks. The total Red Robin system is now in its second year of more than $1 billion in sales. Restaurant level operating profit increased 19.5% to $153 million. GAAP basis diluted earnings per share was $1.82, which is $0.04 above the high end of our full year EPS guidance that we provided on our update last month, related to a decrease in the effective tax rate and compares to $1.75 last year. Katie will talk you through these comparisons year-over-year in a few minutes. In 2007, we also acquired the assets of 16 existing franchised Red Robin restaurants in California as well as 1 location that was under construction at the time, but has since opened, for a total of 17 restaurants. We also assumed management of another franchised restaurant that was part of the California franchised portfolio, and we acquired significant territory in California which we are currently evaluating for additional restaurant development opportunities. And finally in 2007, we opened a total of 40 new Red Robin restaurants, 26 company-owned and 14 franchised locations, and we ended the year with 249 company-owned and 135 franchised locations, a total of 384 Red Robin locations in North America. Looking at our fourth-quarter…

Thanks, Denny. In the fourth quarter of 2007, our comp store sales were up 2.7% on a 12-week comparable basis. This is made up of a 4.2 increase from price and mix, partially offset by a 1.5% decline in guest counts. Though our guest counts declined in the fourth quarter, please keep in mind that, as intended or anticipated, we did not run any media during this period, whereas we did have local advertising running in the fourth quarter of ‘06. For comparison purposes, we posted a 0.2% comp gain in the fourth quarter of 2006, which included a 3.2% increase from price and mix almost entirely offset by a 3% decline in guest counts. You’ll recall that a restaurant enters our comparable base five full quarters after it opens. Our fourth quarter had 192 company-owned comparable restaurants out of the 249 total company-owned restaurants. The 17 acquired franchised restaurants in California are not currently included in the comparable base, but they will be included beginning in the third quarter of 2008. Average weekly sales for this group of restaurants was $64,957 in the fourth quarter of ‘07. Average weekly sales for the comparable base was $62,873 during the fourth quarter, compared to $61,421 last year. Average weekly sales for non-comparable restaurants was $54,022 during the fourth quarter of this year compared to $53,557 last year. Approximately 61% of our operating weeks from the non-comparable restaurants in the fourth quarter of 2007 were from units in new markets compared to 63% in the fourth quarter of 2006. The performance of our non-comparable restaurants average unit volume represented about 85.9% of our average comp store sales volumes in the fourth quarter of 2007. This was slightly lower than the 87.2% in the fourth quarter of 2006. But not unexpected, given the…

Thanks, Eric. First I’ll talk about our results for the fourth quarter 2007, and as Denny mentioned earlier, you may recall that the fourth quarter of 2007 was a 12-week period while the fourth quarter of 2006 was a 13-week period. The impact of the additional weeks on our results contributed about $14.4 million in additional revenue, about $1.9 million in net income, and $0.11 of diluted earnings per share in the fourth quarter of 2006. As I go through our results, the comparisons I will make will be on a fiscal year to fiscal year GAAP basis, and where material, I’ll highlight the additional contribution from the extra week in 2006. We provided Schedule 2 in our earnings press release to help you reconcile our GAAP reported net income and EPS to non-GAAP net income and EPS on a comparable basis. Total revenue in the fourth quarter of 2007, which consists of restaurant sales and franchise royalties, grew 12.3% to $183.8 million from $163.8 million. The 53rd week contributed about $14.4 million to total revenue in the fourth quarter of 2006, so excluding the extra week, our total sales would have increased 23.1% over the fourth quarter of 2006. Restaurant revenues grew 12.5% to $180.4 million from $160.4 million, or 23.6% without the extra week, and consisted of $142 million in sales from our 192 comp restaurants; $13.1 million in sales from the 17 acquired or managed restaurants in California, and $25.3 million in sales from our 41 non-comparable restaurants. Eric already covered comparable sales metrics, so I won’t discuss those specifically, but please note that the 17 acquired California restaurants will not be included in our comp stores sales metrics until the beginning of the third quarter of 2008. As we have done in the past, these restaurants…

Thanks, Katie. To summarize, we are pleased with the financial results for Red Robin during the fourth quarter and full year of 2007. In 2008 we plan to expand our efforts to build our brands, drive increased restaurant sales, and support new restaurant growth in both existing and emerging Red Robin markets. While we grow the top line, we will also continue our efforts to improve operating efficiencies to help offset some of the continued industry cost pressures, as well as continue the discipline of reviewing opportunities to take costs out of our building, all of which we believe will contribute to increased profitability and greater returns to our stockholders. As always, we remain focused on our heritage and passion, which is, of course, our fantastic team members serving the highest quality Gourmet Burgers and a variety of other insanely delicious menu items that have made us the premier destination for America’s families. And as we have said in the past, our success in 2007 would not have been possible without the talent and hard work of every one of our Red Robin team members, and I want to personally say thank you for their efforts. Operator, with that we’d like to open the call for questions.

We’ll go first to Jeff Omohundro - Wachovia.

My question I want to focus on is the advertising spending plan this year, and first if you could just comment a little bit about your thinking around the timing of your spending and how the Presidential election cycle and the Olympic cycle might impact that as we think about it quarterly?

First of all, we increased it to 24 weeks, and want it to pulse on and off through most of the year. We will be off-air during the opening and closing ceremonies of the Olympics, and the election campaign is not on national cable. It’s usually local, and there will be some noise out there for everybody when the campaign is on, but we don’t expect that to be an issue.

And then my other question is also on the advertising front, but in terms of your alternative efforts there, I think you’ve been in the process of finalizing some Internet advertising efforts, for example, just maybe an update on that effort as well?

We did Internet last year, so we’re doing similar programs this year where we will be driving customers to our website to get them to hopefully opt into our eClub, et cetera. We have various syndicated television spots where, like Oprah, et cetera, where people can then go to their website and opt directly or click directly through to our Internet website, and we will have a promotion, if you will, like we did last year, a game promotion on the Internet later this year.

And then lastly, I might have missed it, but did you comment on existing markets versus new markets in terms of your development for 2008? Thanks.

In 2008, Jeff, our operating weeks, will be split fairly evenly between new and existing markets, which is different than the last couple of years where we’ve been heavily weighted in the new markets.

Great. Thank you.

We’ll go next to Destin Tompkins - Morgan Keegan.

I just wanted to ask on the same-store sales guidance of 2% to 3.5%, as we look at the comparisons you’re lapping, they get more difficult through the year. Is it logical to think that the sales trends would be better in the early part of the year?

The sales trends are difficult in Q2 and Q3, because we were heavily on advertising during those periods of time. In Q4, as we’ve stated, we were negative 1.5%, so our guest counts in Q4 are actually going to be easier, we hope, in Q4 of ‘08.

Television matches up in Q2 and Q3 of where we were last year, and will be, not only matches up, but will be heavier. So to the extent we’re comping over Q2, Q3 last year’s improvements, we expect that we’ll be in good shape there.

But given that Q1 is a fairly easy comparison where you weren’t on air, wouldn’t it be logical to expect that we’d see a little bit better trend in Q1 than say later in the year?

Our guidance reflects the easier Q1, obviously.

Okay, and then on the menu pricing, just to clarify, did you roll over a 0.5% in December, and then you, when you put the 0.5% on, won’t that be lapping a 0.9% from last year, so after we get through that going forward, is that about 3.6% you’ll be running until we get to August?

No, we actually rolled off the 0.5% in December, so we’re carrying about 4% into the beginning of this year. We’ll roll off a 0.9% in April as we bring on the 0.5%. And then late August we’ll roll off 2.9%.

So what will you be running from April to August?

About 3.4%.

And then just wanted to ask about the impact of TV as you have experienced being off air in the fourth quarter. When you get ready to roll back on air, or you recently just rolled back on, what has been your experience when you’ve gone off-air and the tailwind that you’ve benefited from and what are your expectations as you go through the year?

We’re frankly not going to get into that, because last year was the first year we went on TV, so we don’t have enough history or background. We’ll talk about how the first quarter is going on TV, in the first quarter.

Okay, great, thank you.

We’ll go next to Nicole Miller - Piper Jaffray.

I missed the beginning of the call. Can you give the stores and the comp base, non-comp and the acquired number of units that match up to the average weekly sales?

The number of comp units is 192; the number of non-comp units is 41; and then we have 17 that are in the 2007 acquired class.

Thank you. Looking at the 0.5% March price increase, do you have an opportunity to be more aggressive throughout the year?

At this point we’re comfortable with that 0.5%, and we’ll evaluate it as we go forward.

Looking back at 2001 and 2003, did you benefit from the last round of tax rebates, and how do you think about the tax rebate benefit, if there is one for later this year?

I think the company benefited to some extent. We’re not going to quantify what it was. Your guess is as good as mine, but we hear statistics that the consumers are going to spend between 40% and 60% probably of that tax rebate. To the extent they spend it and it’s disposable, we certainly think we’ll get our share. We didn’t build that into projections though.

Okay. And then just my final question, can you share advertising feedback, both from franchisees and what you’ve heard from consumers so far?

Feedback in terms of non-quantitative, yes.

Yes.

The feedback has been, likeability has been very strong. We’ve gotten lots of emails, et cetera; we’ve talked to our team members in restaurants to see what guests are saying about the television commercials, and they’ve been quite positive, same with franchise partners.

Thank you.

We’ll go next to Steven Rees - J.P. Morgan.

I wanted to ask about the new unit margin performance. I think in the past you’ve talked about a three-year ramp up process, and with all the NRO initiatives, I wanted to see if you’re seeing any improvement in terms of the new unit margins and how that ramp-up period is progressing?

In the 2007 class, Steven, we did see an improvement. Historically we did say it took us three years to ramp up to that normalized comp-like level. We’re not far enough into it yet to claim exactly what that shrunk to from three years. We’re fairly confident it’s going to be less than three years, though.

Okay, and then in terms of the new unit sales volumes, I think you’ve seen that bounce around between 85% and 91% of system average this year. What are you expecting for 2008, or what are you modeling?

Steven, internally it’s kind of a trend for us; it’s such a dynamic number, and restaurants are coming into that and going out, so it’s really hard to quantify, and then like I mentioned on the call, if you have a quarter that doesn’t have a lot of honeymoon sales, drastically can move that, because the base is so small. So we are looking at these more in terms of, like Katie mentioned, where are they at when they enter the comp base in terms of average unit volume and margin performance.

This year they ran anywhere between 85% and 91%, 92%, depending on whether or not we were on advertising, and as Eric mentioned about the volume of new unit openings in any particular quarter, certainly influences that AUV as the percentage of the comp AUV, so when you model it, you have to model it actually looking at all those variables.

Okay, great, thank you very much.

We’ll go next to Joe Fisher - Bear Stearns.

I was just curious of an update on the commodity side of things. You gave us a lot of detail in the December analyst meeting, but I was trying to piece together what you’re thinking when it all comes together for the year, and also if you’ve done anything on the hamburger side. I think you were paying spot back then.

Joe, good question. I’m glad you asked the question about the hamburger. Let me address that one first. We’ve just recently decided to go ahead and contract that. We have been buying on spot historically. We’ve never contracted before, but given the opportunity and the threats that we see in the near term this year, we decided that now was the time to contract that, so we did. 90% of our food cost is under contract right now, so we have very good visibility to 2008’s costs. Those costs are included in our forecast and in our guidance that we just gave, so we’re very confident that we have some good visibility to those food costs this year.

And with that hamburger, was that contracted up significantly year-over-year? I’m not exactly sure what the market...

It was up about 6% year-over-year on average.

And then just one other question, I was wondering if your development team has seen any change in the real estate landscape when you’re going into, whether it’s new or existing markets, whether it’s cheaper or it’s just easier to obtain certain locations, if you could talk to that?

Our development people are in the room, so we’ll have to say it’s never easy. We’re negotiating harder, we’re demanding more, and we expect that to bear some fruition as we go through the year.

Okay, and then one final one, has there been any noticeable change in mix shift as you’re taking these price increases?

No, not at all.

Okay. Great. Thank you.

And no change in lunch/dinner mix either.

We’ll go next to Conrad Lyon - FTN Midwest.

Nice job lapping that extra week. First question has to do with the acquired units, Wisconsin, thereabout. You talked about it in the last press release closing in the second quarter and being accretive. Does that still hold true?

Yes.

Okay. Can you give us an idea of the condition of these restaurants? Do you think it’s going to require any significant CapEx?

No, not at all. They’re relatively new restaurants, especially the Wisconsin ones.

Okay. And it looks like you got at least on the surface a pretty good deal in terms of price. Does that imply that there’s some margin opportunity there? I’m assuming that perhaps maybe the restaurant-level margins might be a little bit lower than say your average?

In terms of the price, if you will, we believe it’s fair and hopefully the franchise partner believes it’s fair. We always hope and aspire to improve average unit sales and margins, but these are good operators.

Okay. Let me move over to labor. I believe, especially earlier in 2007, I think you added additional labor and perhaps some other costs there to reinforce the message and enhance guest service, especially in newer markets. Do you think that you might see any benefits to labor this year, or might you tail it back a little bit, or will the staffing change this year do you think?

I think early on in the year in 2007, our new unit openings we were experimenting with the right level of staffing, and as we settled into a more consistent methodology of staffing, I think we saw improvements to that later on in the year, and we expect to carry that over into the 2008 openings.

And bottom line, your outlook for labor, do you see it being maybe just flatter to slightly up?

Yes. There’s going to be minimum wage pressure.

Okay.

Before price increases, about 30 basis points of minimum wage pressure.

Okay. Perfect. All right, thank you very much.

We’ll go next to Bryan Elliott - Raymond James.

I may have missed this, but in the prepared remarks, did you reconfirm what you said in December that new units in new markets, the gap between that and new units in old markets had fully closed? Is that still the case?

I would say the gap is narrowing. When we’re off advertising, we notice a bigger delta between new and existing markets. We know that advertising has a very heavy influence in our new markets, so when we’re off advertising, and we were dark all of Q4, we saw a bigger impact of that delta, but we expect to close the gap as we’re on more consistently in 2008 for advertising.

All right. And I believe I also heard you say that some percentage of your ‘08 stores would open with a new prototype, 75%-ish I think it was.

Yes, 75%, that’s right, Bryan.

Just wondered why they all couldn’t benefit?

Because we have many of them that were in process in ‘07 that already have opened the first part of this year.

That were the old prototype that we pushed out.

Once these deals are in process, they take 12 to 18 months, so if they were in process last year, we couldn’t go back and start over again, or it would have cost more than the cost savings.

Okay. Fair enough. Thank you.

We’ll go next to Howard Penney - FBR.

Thanks very much. I have a series of questions, if you don’t mind. The first two, what do you expect the all-in inflation cost of the new units in 2008 to be, and then can you elaborate a little bit more on labor in this quarter and how you were able to manage the labor costs, given the decline in traffic?

Let me address the construction costs. We’re not expecting to see significant increase in construction costs. We think with the reduction in costs that we have taken out of the building that we can control that inflation. It will be minor if any.

Howard, I can answer the labor savings questions. We’ve done a lot of things this year, obviously with the NRO initiatives focused on tools, processes, and different things in our heart-of-the-house as well as front-of-house operation. We have been behind the scenes taking “labor” out of the business model by going to some pre-cut and pre-prepared prep items in the kitchen, so it’s an ongoing focus for us. We have a lot of proprietary tools that we use in-house, and I think the NRO initiative is actually bleeding off and best practices are being developed that are being implemented in our comp restaurants.

That’s helpful, thank you. Big picture advertising question, if you don’t mind. Your decision to go advertise on a national basis is really going to change the complexion of this company in the sense that there is a level of volatility associated with advertising, given that we have seen other companies who do this have relative degrees of success in different promotions, whether they resonate with consumers or not. And then also for 2009 to have an impact over 2008, that 1.5% is going to have to go to 2% or 2.5% or whatever that inflation rate that you’re going to see in order to see the impact. Can you just talk about how you’re going to manage this advertising program and maybe limit some of the volatility, when success, working and not working, and what you see you’re going to have incrementally over the next few years to continue this positive impact?

First of all, that’s a leap on your part not ours that we would naturally increase advertising as a percentage of sales going forward in future years, so to back up, we went into the national campaign to build the brand. So we’re not building it for spikes on promotion. We’re not doing price promotions. We’re not doing specific product promotions. That’s the way we rolled it out last year for the 11 weeks, and that’s the plan that is already in place and bought for this year. That’s the 1.5% level. We have made no decisions about what we will do in ‘09 or beyond. Naturally to the extent that sales increase in ‘08, and naturally by the fact that we have 30 plus restaurants more coming on plus the franchised acquisitions we will have, pot will be a little bit bigger if we say at the 1.5% level, but we’re making no commitment on the promotions. This is a branding campaign that we committed last year and are fully committed to in ‘08.

We’ll go next to Joe Fisher - Bear Stearns.

I was wondering if you can comment on any regional strength or weakness out there?

Joe, we really haven’t seen material weakness in any particular region as we said in the past. If we had, if we do, we will certainly discuss it specifically.

We have no further questions at this time. I would like to turn it back to the speakers for any additional or closing remarks.

We just want to thank everybody for joining us on the call today, and we look forward to talking to you all soon.

Ladies and gentlemen, this concludes today’s conference. You may disconnect at this time.