Welcome to the Red Robin Gourmet Burgers, Inc. first quarter 2008 financial results conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Katie Scherping, Chief Financial Officer of Red Robin.

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 the remainder of 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 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 one, which reconciles our non-GAAP measures to our GAAP results. Now I would like to turn the call over to Denny Mullen, Chairman and Chief Executive Officer.

We also have Eric Houseman, our President and Chief Operating Officer with us. Eric will provide an update on key initiatives that we have underway to continue driving our growth and Katie will review in detail our most recent financial statements, as well as 2008 guidance update, but first let’s start off with a quick review of our first quarter 2008 results. Total revenues increased 20.4% while company owned comparable restaurants sales increased 3.9%, compared to the first quarter 2007. It is worth noting that similar to what others in the industry have been reporting recently beginning in the quarter we have now experienced an appreciable drag on total company performance from our 56 restaurants in California, Arizona and Nevada. Our restaurants in these markets now appear to be disproportionately impacted by current economic challenges. In a few minutes we will share some additional detail on the magnitude of the impact these restaurants had on our company results. Restaurant level operating profit increased 14.9% to $47.9 million. Katie will walk you through the various components of the margin and more detailed expectations of our operating cost in a few minutes, but I wanted to mention that we saw a decline of a 100 basis points year-over-year in our restaurant margins primarily due to food and beverage cost increases and our additional advertising contribution costs, which were somewhat offset by improved labor cost over the last year. While we were once surprised by the margin decline in the first quarter as we had modeled it into our forecast, we did see continuing margin stress which is causing us to take pricing action as we enter the second half of the year. Diluted earnings per share was $0.43 compared to $0.44 per diluted share a year ago inline with our internal financial…

In the first quarter of 2008 our comp store sales were up 3.9%, which was made up of a 4.3% increase from pricing mix offset a bit from a 0.4% decline in guest counts. For comparison purposes, our comp store sales were down 0.5% in the first quarter of last year, including a 3.1% increase in pricing mix which was more than offset by a 3.6% decline in guest counts. Keep in mind that last year we launched our first National Media Campaign in mid April, so the campaign did not have an impact on the first quarter of 2007. This year, however, we began national advertising in early February, giving us several more weeks on air in the first quarter this year, which we believe helped drive those improved results. As Denny mentioned in the first quarter, we began seeing an appreciable drag on total company performance from our restaurants in California, Arizona and Nevada. Markets that for us seem to be experiencing greater impact from the nation wide economic challenges compared to our restaurants in other markets. If we exclude the performance of those 56 restaurants in these three markets, our comparable restaurant sales would have been up 6.2% or more than 230 basis point increase from the 3.9% comp store sales that we reported and our guest counts would have been roughly up 1.7%. We don’t expect a quick economic turn around in these markets and considering that California, Arizona and Nevada represent about 28% of the total company owned comparable restaurants and more than 30% of the company’s 2007 comp restaurant revenues, we believe that we will continue to see these markets negatively impact our results throughout the rest of this year. You will recall that our restaurant enters on a comparable base, five full quarters…

Now, let’s talk about the results for the first quarter of 2008, which was a 16-week period ending April 20, 2008. By the way, if you haven’t already seen our news release on this quarters results. You can find it on our website at redrobin.com in the Investor Relations section. Total revenues for the first quarter of 2008, which consist of restaurant sales and franchise royalties, grew 20.4% to $255.6 million from $212.3 million last year. Restaurant sales were 21.2% to $250.9 million from $207.1 million and consisted of $201.6 million in sales from our 200-comp restaurant; $16.5 million from the 17 acquired or managed franchise restaurants in California and $32.8 million in sales from our 42 non-comp restaurants. Since, we have already covered comparable restaurant sales metrics, I won’t discuss those specifically, but pleased note as Eric mentioned, the California franchised restaurants acquired in mid 2007 and the 15 franchised restaurants acquired in our second quarter of 2008 will not be included in our comp store sales metrics until later periods. Franchise royalties and fees decreased 11.2% in the first quarter to $4.6 million and excluded the royalty contributions from the 17 acquired or managed California restaurants, from which we recognized $588,000 in royalty revenue in the first quarter of last year. In 2007, we received $315,000 in fees from nine franchised restaurant openings in the first quarter versus fees of $35,000 from one franchised restaurant that opened in the first quarter this year. The 94-comp restaurants in the US franchised system reported a 4% increase in same store sales, while the 18-comp restaurants in the Canadian franchised system reported a 6.7% increase in same store sales for the first quarter. Our restaurant-level operating profit margin was 19.1%, which compared to the 20.1% reported last year. The margin decline…

As I said at the opening the first quarter was challenging for the casual dining industry and for Red Robin, but our great, talented and unbridled team member stay focused on what really matters: living our cornerstones, building our brand and delivering an unbeatable guest experience with our fantastic gourmet burgers. Looking ahead and in anticipation of further intense commodity and other cost pressures we will continue to work on managing our costs while also focusing on efforts to increase guest traffic particularly in parts of the country where economic conditions are especially difficult. Without a doubt, it’s going to be an interesting year, but we believe an exciting one too. We have a great brand and great team members to help us to face these challenges and take advantage of the opportunities to grow our business. Thank you and we would like to open this for your questions at this time.

(Operator Instructions) We will go first to Matt DiFrisco with Oppenheimer.

Hi, my question is with respect to the commodity costs; first also just a bookkeeping. Can you give us what your average check is currently and then my question is more in the relation to the commodity costs you talked about as well as the Prime Rib Dip Sandwich how that effected your cost of goods sold, can you break up that 100 basis points or you said 95 basis points in the release drop off year-over-year in relative food costs? Thanks.

Let me just start with the footprint in average tax was $11.40 in the quarter Matt.

About the same as it was in the Q4.

Right, okay and then can you give us the breakdown of the 100 basis points on the relative food costs. How much of it makes effects for us, how much of it was commodity pressure that you didn’t factor in, because I was under the impression you had 90% of your cost locked in and at the 3% plus price would have mitigated the large portion of this.

Well, in the first quarter we did expect 100 basis points of a good portion of that 100 basis point of pressure and 95 basis points on a year-over-year basis and that didn’t surprise us. We did have a little bit of pressure from the Prime Rib and so that was maybe 10 basis points; pretty small on a year-over-year basis. So, that’s kind of that breaks down. It’s the go forward that caused us to look at an opportunity to take prices we get to mid-year.

So the price increase though for the remainder of the year is incremental correct from your prior guidance?

Yes, that’s correct.

I would guess you have a pretty strong internal assumption on the comp there being upwards of where we just registered probably pretty close to 6% comp, I would think in that quarter?

Our comp guidance is 2.5% to 4% for the full year.

With anomalies to be higher in one of those quarters, I would presume when you take that larger increase and have the three from last year as well?

That’s right. We will come in with the 2.7% price in late June and then in August, we will roll off this 3% that we are carrying right now.

We will move on to Steven Rees from JP Morgan.

Just on the non-comp average weekly sale, I think it continued trend at about 14% to 15% discount despite a pretty good same store sales environment and some increased advertising. I mean can you just comment on the new sales volumes, if they are meeting your projections and how these units are progressing once they open and maybe some color on how the units are doing this year that you built them with the new prototype versus some of the ones you did last year and its also a California, Nevada loss I guess issue?

Well Steven, I think there are about four questions in there just try to roll back. One, yes the inner roads that are opening in first quarter, they are meeting our sales assumption. One of the things that we are seeing is a slightly less honey moon opening but we are going into majority of our new markets in the first quarter where we don’t have any as many strong seasoned restaurants in the first quarter, so there is a little sales likeness, however what we are seeing with the new restaurants, kind of our initiatives is that we are maintaining and retaining more of those honey moon sales and normalizing a heck of a lot quicker, so we are very happy with the performance in Q1 of the inner rows.

And on a like basis, our comp averaging volume went up from 53,000 a year ago to 64,005 this year, so as your comp drives up the non-comparable probably either stays the same or start dropping back a little bit. So we are pretty happy with our performance in the year on the non-comparable. It’s about roughly 85.5% which is where we were in the fourth quarter last year.

Okay and then just on the development and some of those more challenged markets, what percentage are you developing going forward in the California, Nevada and Las Vegas?

It’s not till later in the year that we have got some California and Nevada restaurants coming in. We still got about 50:50 split in the number of units we are opening, operating lease are a little more weighted towards new markets in the first part of the year because we have got a little more new markets opening in the first part of the year and it looks like our we have got a couple of California in Q3 and then the other ones are Washington, Colorado, Illinois I think we've got quite a few existing.

None, in Nevada.

Next we will go to John Glass from Morgan Stanley.

First just I guess in your guidance, you raised your guidance. You met your first quarter internal expectations, so is it correct to assume that your incremental revenues from the new stores or what's driving or the incremental accretion from the acquisition is what's driving the upside to the estimates and that the price increase were off set in the even margin degradation that you experienced. I mean were you initially expecting 100 basis points of restaurant level margin erosion this year?

Yes, we were.

In your view is that the price increase takes care of all of the fruit cost inflation or what are you baking into that in terms of these?

Yes and as well as de-leveraged from the degradation in California, Arizona and Nevada; that’s new compared to when we did our original projection. So, that the second quarter forward is really take care -- the price increase is going to be taken care of our go forward cost trends.

And how much pricing in June will you have with the 2.7% added in?

We are carrying about 33 into the quarter and then we will add the 27 late June and then we will roll off 3 in August, about mid August.

Okay and when you think about the next two quarters in terms of advertising or more from a rating standpoint, that maybe spending standpoint, are the overlaps roughly equal versus last year or are you still spending a little bit more in terms of impressions or how you measure it in the second quarter and third quarter versus last year?

[Inaudible] entire in both quarters Q3 is a little more heavily weighted even in the third quarter last year.

Is there anyway to quantify, how much more advertising you are going to be doing in the second and third quarter than last year?

As far as TRP’s in-depth level of detail, we don’t discuss that level of detail John.

I think Eric you alluded to it, but you talked about being pleased with new store productivity; are you also pleased with the new store margins, are they following the increase in volumes that you are seeing, when you are seeing improvement in labor are you talking mostly at the new stores or could you drill down on that please?

Yes, John we are very pleased initially. Now obviously one quarter into this year, but we are very pleased with what we are seeing at the margin line specifically labor, but a lot of different cost categories.

And a year ago if you remember we were just starting some of these NRO initiatives, John and we did talk about higher post opening labor cost a year ago when we implemented these initiative and those post opening costs have come down as well as some of these institutionalized initiatives that Eric was speaking about.

In your comp guidance, are you assuming that traffic is positive this year or does it remain kind of were it is?

While our full year guidance of 2.5% to 45 lies about 4% price, so you can do the math on what we assume with GAAP to negative 1.5% to zero assumption for the full year.

[[Bill Livingston]] from KeyBanc Capital Markets, that’s our next question. [Bill Livingston]: Thank you. I have just a couple of questions related to the interest rate swap and was there any sort of charge in the income statement related to that?

No, we just took the benefit of the lower interest rate, but only for a small period of time in the quarter; it’s only a few weeks. [Bill Livingston]: But there wasn’t a fee that you had to pay to the banks for locking in interest, okay.

No [Bill Livingston]: And then, the 3.7% interest rate for the year is kind of an effective balance interest rate versus -- you have the 1.8 for the $120 million, correct?

There is -- the interest rate itself that we lodge in is 2.7925 and then we pay a LIBOR plus of 87.5 basis points, so effectively about 3, 7 all in.

On that trench.

On a $120 million trench. [Bill Livingston]: Okay and then on your openings, the 30 to 32 openings company for the year, does that include the Eau Claire opening.

Yes.

And we will go to our next question from Jeff Omohundro with Wachovia Securities.

I guess first maybe you could talk a little bit about the check composition. With the favorable mix and I think you said above expectations on the Prime Rib Dip Sandwich, given the price point of that products I mean we are surprised to here that check was flat sequentially from Q4. Maybe you can share what else is going on the track?

Well the menu wasn’t rolled out until late in the quarter.

Yes, the menu Jeff didn’t roll out March 21, so it was very late in the quarter. Only three weeks of impact for both mix as well as price and we are seeing a slight straight down in our beverage category specifically alcoholic.

So, would you expect to see check to pick-up just relative to that in the Q2 ex-prices.

Yes we do.

And speaking of the pricing given the macro environment, given the challenges in California, Nevada, Arizona, I am just curious about your confidence in price value to drive such a significant incremental or price increase. Did you give any thought to maybe some regionalization of it giving the source in those markets perhaps not such a significant price increase?

Yes Jeff, our menus are regionally. We actually have five menu tiers across the country. So, California is not even one of the highest menu tiers even though it is one of the highest places to do business. We didn’t take the price likely; we looked some external research as well as compared food pricing away from home, at home, in the CPI and all of our major indexes and felt that we were below the CPI in all of the markets that we are currently operating in, so we felt confidence that we did have some room for price.

Yes and then my last question is on the operational initiatives that you are pursuing your improved controllable labor, could elaborate a little bit on that? Thanks.

Well, a lot of it revolves around our proprietary labor software that we referred to as new stars and really looking at initiatives both a, how to manage the shoulders as well as taking some costs out of the individual, out of the house productivity in terms of prep items, the reduction of skews and different prep items, bringing in products that may be pre-portioned or pre-cut to save the timing in the back of the house.

We will go next to Analyst for Nicole Miller Regan with Piper Jaffray.

Hi, first quarter I may have for you guys is about the rebate checks, about 25% of that have been mailed out, have you guys seen any impact yet on those or do you expect to see anything?

Rob that would be in our second quarter and I’m not going to comment into our quarter, but our full-year guidance takes into accounts what we feel our guest experience is going to be and if that happened to be an improvement over that grade, but I don’t think we have materially included anything there.

Okay and then you have -- talked about the commodity side a little bit and I believe you said something -- increase in freight costs, so you are going see that for the remainder of the year. Did you mentioned that the cost of goods sold would actually be unfavorable and if so what did you give out, bps amount or not?

We have talked about a lot of margin pressure on a year-over-year basis. There’s still going to be about 100 basis points even after the price increase.

100 basis point of pressure on costs of goods sold?

On our losses generally that includes our 50 basis points higher at nationally advertising cost year-over-year basis.

Okay great and then finally can you just give us a little bit of color surrounding the recent press release about the borrowing compensation that you put out lastly?

We put that out specifically because one of three proxy solicitation groups or proxy advisors; one, all aboard is favorable in terms of all motions. One voted recommended a withhold from Pattye Moore which we think is wrong, because Pattye Moore had consulting fees before she became a director of Red Robin. So this rating group said she would be a affiliated which frankly I think is ridiculous because she qualifies as an independent director according to NASDAQ and the SEC and Pattye is a highly experienced director and has substantial restaurant experience and is a great integrated consultant to us and now a great director. So, we took exception to that as you might have gathered. The other aspect was amended performance incentive plan -- basically it came down to -- our goal is to attract and motivate and retain, rewards select team members. Last year this same group approved our plan. The issue was one of burn rates and the issue there is that they -- with options that are forfeited or canceled, they are not counted into additions to the plan and in the restaurant business as you all know there is a good deal of turnover and we believe those set of options and the cancellations, forfeitures should be returned to the plan; therefore -- then the last point, is that this group is flawed in our opinion. Comparative group or they used such as hotels and slot machine companies for instance as opposed to peer group restaurants which our board compensation committee and their independent consultant used. So that’s basics of it and we’ve been talking to institution holders to just explain our position.

On the development side can you give us any detail on kind of the breakdown over the next couple of quarters of what you expect fairly even across the board or are we going have a heavier in the third or fourth quarter?

I think we said earlier on in the year we usually open the majority of our restaurants in the first, second and third quarter. Fourth quarter, we would like to have our team members at home during the holidays. So we tend to open just about all our restaurants before Thanksgiving holiday comes down.

The 13 opened and 13 under construction, they all open pretty quickly and it doesn’t leave much less.

We’ll go to Destin Tompkins of Morgan Keegan.

Hi, Katie my first question on the 100 basis points of restaurant level pressure for the full year, if you could just kind to help break that down a little bit I guess logic would say with the additional menu pricing that should help offset some of the cost of sales pressure in the operating expense line that was I guess effected by the a little bit higher rate of advertising in Q1 should lessen a little bit as we go through the year, so what would be driving that 100 basis points for the full-year?

Well keep in mind our other operating cost includes that 50 basis points of incremental spend for advertising year-over-year. So, that’s 50 basis points, the other 50 basis points is both coming from cost pressure in food primarily and then the offset is going to be some of the labor savings that we are expecting to continue onto seeing in the year.

The 50 basis points Destin it goes throughout the whole year, just to be clear on national marketing front.

Q1 wasn’t at basically 80 basis points on a kind of weighted average basis.

Right and that’s because we didn’t start the contributions till March of ’07, so you have more impact in the Q1 on a year-over-year basis.

No, it seems like it’s going to be less in term to the un-favorability as we go through the year from Q1 and we’ve also got that the menu price increase. I think you said you expected labor to be favorable for the full-year, so I was just trying to figure out. It sounds like it’s a combination of cost of sales and operating expense pressure maybe a little bit of occupancy as well from the…

The new restaurants.

From the new restaurants that the leasing, building and land owned, is that correct?

Yes.

Okay and then one other question I had and maybe this is best for Eric or Denny. While your competition is focused on value based promotions in this environment where the consumers are under considerable pressure, would you consider potentially layering some of your TV advertising with a value based promotion or maybe something in store that was a little bit just strengthened your value proposition a little bit on the menu?

Not at this time, we are looking at other local store marketing in some of the more stressed areas, but no discounting.

The -- in recent quarters, it hasn’t seem like you have seen the drop off from some of those regionally week markets California, Arizona and Nevada. What -- any insight on why you think there was a little bit of lag in your experience with the sales fall off in those markets?

We certainly have been asked that many times in the previous quarters, when others have reported issues in there. A couple of things; when we were new on TV, last year going into this year, so I happen to believe that probably held market share or tripped market share for a while, but this economy has gotten tougher and tougher in the -- in those three markets particularly, as is well publicized and we didn’t see it as we were going into the fourth quarter and there was no change, frankly in California to speak of and that all came around in the first quarter.

That appears that’s all the questions we have for today.

Well, thank you all for joining us today. We look forward to the opportunity to talk to you all soon. We will be out on the roads in a couple of weeks. Thank you very much. Bye.