<PAGE>

                                                                    Exhibit 10.2

                          RED ROBIN INTERNATIONAL, INC.

                             1996 STOCK OPTION PLAN

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
1.  THE PLAN ..............................................................   1
1.1 Purpose ...............................................................   1
1.2 Administration ........................................................   1
1.3 Participation .........................................................   2
1.4 Shares Subject to the Plan ............................................   2
1.5 Grant of Options ......................................................   2
1.6 Exercise of Options ...................................................   2
1.7 Payment Forms .........................................................   2
1.8 Cashless Exercises ....................................................   3

2.  OPTIONS. ..............................................................   3
2.1 Grants ................................................................   3
2.2 Option Price ..........................................................   3
2.3 Option Period .........................................................   3
2.4 Exercise of Options ...................................................   3
2.5 Limitations on Grant of ISOs ..........................................   4

3.  OTHER PROVISIONS ......................................................   4
3.1 Rights of Eligible Persons, Participants and Beneficiaries ............   4
3.2 Adjustments Upon Changes in Capitalization; Acceleration;
    Possible Early Termination of Options .................................   5
3.3 Termination of Employment .............................................   6
3.4 Government Regulations ................................................   7
3.5 Tax Withholding .......................................................   7
3.6 Amendment, Termination and Suspension .................................   8
3.7 Effective Date of the Plan ............................................   9
3.8 Term of the Plan ......................................................   9
3.9 Governing Law .........................................................   9

4.  NON-EMPLOYEE DIRECTOR OPTIONS .........................................   9
4.1 Participation .........................................................   9
4.2 Option Grants .........................................................   9
4.3 Option Price ..........................................................  10
4.4 Option Period .........................................................  10
4.5 Exercise of Options ...................................................  10
4.6 Termination of Directorship ...........................................  11
4.7 Acceleration; Possible Early Termination of Options ...................  11
4.8 Adjustments ...........................................................  11

5.  DEFINITIONS ...........................................................  11
5.1 Definitions ...........................................................  11
</TABLE>

                                       i

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                          RED ROBIN INTERNATIONAL, INC.
                             1996 STOCK OPTION PLAN

1.   THE PLAN.

     1.1  Purpose.
          -------

          The purpose of this 1996 Stock Option Plan (the "Plan") is to promote
the success of the Company by providing equity incentives to attract, motivate
and retain key personnel. Capitalized terms are defined in Article 5.

     1.2  Administration.
          --------------

          1.2.1     Committee. This Plan shall be administered by the Committee,
                    ---------
acting by a majority vote. The Committee may delegate administrative functions
to third parties, including employees of the Company. All actions of the
Committee are subject to this Plan.

          1.2.2     Powers of Committee. The Committee has authority to (a)
                    -------------------
construe and interpret this Plan and any related agreements, (b) further define
the terms used in this Plan, (c) prescribe, amend and rescind rules and
regulations relating to the administration of this Plan, (d) establish and
modify the terms of Option Agreements and Exercise Agreements including, but not
limited to, restrictions on transfer and repurchase rights, (e) determine the
effect, if any, on a Participant's rights from leaves of absence and (f) make
all other determinations necessary or advisable for the administration of this
Plan. The determination of the Committee on any of the foregoing matters shall
be conclusive.

          1.2.3     Binding Determinations. Any action taken by, or inaction of,
                    ----------------------
the Company, the Board or the Committee relating to this Plan is within the
absolute discretion of that group or entity. No member of the Board or
Committee, or officer or employee of the Company or any Subsidiary, will be
liable for any such action or inaction. In determining whether to take any
action permitted under the Plan, the Company, the Board or the Committee may
rely upon the advice of counsel and accountants of the Company, and such
determination shall be conclusive.

          1.2.4     Committee Membership. Subject to the requirements of the
                    --------------------
definition of Committee contained in Article 5, the Board may, at any time (a)
change the number of members of the Committee, (b) remove from membership on the
Committee all or any of its members, and (c) fill any vacancy existing on the
Committee, whether caused by removal, resignation or otherwise.

                                       1

<PAGE>

     1.3  Participation.
          -------------

          Options may be granted only to Eligible Persons. An Eligible Person
who has been granted an Option may, if otherwise eligible, be granted additional
Options.


     1.4  Shares Subject to the Plan.
          --------------------------

          1.4.1     Number of Shares. The aggregate number of Shares that may be
                    ----------------
issued pursuant to all Options, including ISOs, may not exceed 950,000, subject
to adjustment under Section 3.2. Shares may be issued for any lawful
consideration.

          1.4.2     Calculation of Available Shares and Replenishment. If any
                    -------------------------------------------------
Option lapses or terminates without having been exercised in full, the
unpurchased or unvested Shares will again be available for purposes of this
Plan. The foregoing sentence does not apply to Shares withheld under Section
3.5.

     1.5  Grant of Options.
          ----------------

          The Committee will determine the Eligible Persons to whom Options will
be granted pursuant to Article 2, the terms and conditions of Options (which
need not be identical) and the number of Shares subject to each Option. In
addition, Non-Employee Directors may be granted NQSOs pursuant to Article 4.
Each Option will be evidenced by an Option Agreement approved by the Committee.
The grant of an Option is made on the Options Date.

     1.6  Exercise of Options.
          -------------------

          An exercisable Option will be deemed to be exercised when the
Secretary of the Company receives an executed Exercise Agreement from the
Participant, together with payment of any required Purchase Price in accordance
with Section 1.7, 1.8 or 4.3, as applicable. Options are exercisable only for
whole shares. Fractional shares will be disregarded for all purposes under this
Plan.

     1.7  Payment Forms.
          -------------

          The Purchase Price of each Option must be paid in full at the time of
each purchase in one or a combination of the following methods, to the extent
authorized by the Committee or set forth in the Option Agreement: (a) cash or
cashier's check payable to the Company, (b) if the Committee approves, a Note,
or (c) if the Committee approves, by Shares already owned by the Participant.
Any Shares delivered that were initially acquired upon exercise of an Option
must have been owned by the Participant at least six months as of the

                                       2

<PAGE>

date of delivery. Shares used to satisfy the Purchase Price will be valued at
their Fair Market Value on the exercise date.

     1.8  Cashless Exercises.
          ------------------

          Option Agreements may also provide that the Option may be exercised
and payment can be made by delivering a properly executed exercise notice to the
Company, together with irrevocable instructions to a bank or broker to promptly
deliver to the Company the amount of sale proceeds necessary to pay the Purchase
Price and, unless otherwise provided by the Committee, any applicable tax
withholding under Section 3.5. The date of exercise will be deemed to be the
date the Company receives the proceeds.

2.   OPTIONS.

     2.1  Grants.
          ------

          Options may be granted to any Eligible Person. Each Option must be
designated by the Committee as either an NQSO or an ISO, and such intent will be
indicated in the Option Agreement. ISOs may be granted only to Eligible Persons
who are employed by the Company or a corporation that is a "parent" or
"subsidiary" corporation within the meaning of Sections 424(e) and 424(f) of the
Code, respectively.

     2.2  Option Price.
          ------------

          The Purchase Price per Share covered by each Option will be determined
by the Committee. In the case of ISOs the Purchase Price per Share must be at
least 100% (110% in the case of persons described in Section 2.5.2) of the Fair
Market Value of the Shares on the Option Date.

     2.3  Option Period.
          -------------

          Each Option will expire on a date determined by the Committee, but not
later than 10 years after the Option Date, and will be subject to earlier
termination as set forth in this Plan or the Option Agreement.

     2.4  Exercise of Options.
          -------------------

          An Option may become exercisable in whole or in part, on the date or
dates specified in the Option Agreement and thereafter will remain exercisable
until the earlier of the expiration or termination of the Option, or as
otherwise set forth in this Plan. At least 100 Shares must be purchased at one
time unless the number purchased is the total number at the time available for
purchase under the Option.

<PAGE>

     2.5  Limitations on Grant of ISOs.
          ----------------------------

          2.5.1     $100,000 Limit. If the aggregate Fair Market Value of Shares
                    --------------
with respect to which ISOs first become exercisable by a Participant in any
calendar year exceeds $100,000, taking into account Shares subject to all ISOs
granted by the Company which are held by the Participant, the excess will be
treated as NQSOs. To determine whether the $100,000 limit is exceeded, the Fair
Market Value of Shares subject to Options shall be determined as of the Option
Dates of the Options. In reducing the number of Options treated as ISOs to meet
the $100,000 limit, the most recently granted Options will be reduced first. If
a reduction of simultaneously granted Options is necessary to meet the $100,000
limit, the Company may designate which Shares are to be treated as Shares
acquired pursuant to an ISO.

          2.5.2     Limitation on Purchase Price and Term. No ISO may be granted
                    -------------------------------------
to any person who, on the Option Date, owns (or who is deemed to own under
Section 424(d) of the Code) outstanding Shares possessing more than 10% of the
total combined voting power of all classes of stock of the Company, unless the
Purchase Price of such Option is at least 110% of the Fair Market Value of the
Shares subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the Option Date of the Option.

3.   OTHER PROVISIONS.

     3.1  Rights of Eligible Persons, Participants and Beneficiaries.
          ----------------------------------------------------------

          3.1.1     No Binding Commitment. Status as an Eligible Person is not a
                    ---------------------
commitment that any Option will be made to any Eligible Person.

          3.1.2     No Employment Contract. Nothing contained in this Plan
                    ----------------------
(or any document related hereto) shall confer upon any Eligible Person or
Participant any right to continue in the service or employ of the Company or
constitute any contract or agreement of service or employment, or interfere in
any way with the right of the Company to reduce such person's compensation or
other benefits or to terminate the services or employment of such person, with
or without cause. Nothing contained in this Plan (or any related document) shall
affect any other contractual right of any Eligible Person or Participant.

          3.1.3     Limitations on Transferability. Shares issuable pursuant
                    ------------------------------
to an Option will be issued only to the Participant or, if the Participant dies,
to the Participant's Beneficiary. Other than by will or the laws of descent and

                                       4

<PAGE>

distribution or other exception to transfer restrictions authorized by the
Committee, no benefit under, or interest in, this Plan or in any Option shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action shall be void. No
such benefit or interest shall be, in any manner, liable for, or subject to,
debts, contracts, liabilities, engagements or torts of any Eligible Person,
Participant or Beneficiary. The Committee shall disregard any attempted
transfer, assignment or other alienation prohibited by the preceding sentence or
other applicable law and shall pay or deliver such cash or Shares in accordance
with this Plan.

          3.1.4     No Trust or Fund. No Participant, Beneficiary or other
                    ----------------
person shall have any right, title or interest in any fund or in any specific
asset (including Shares) of the Company by reason of any Option. Neither the
provisions of this Plan (or of any documents related hereto), nor the creation
or adoption of this Plan, nor any action taken pursuant to this Plan, shall
create a trust of any kind or a fiduciary relationship between the Company and
any Participant, Beneficiary or other person.

     3.2  Adjustments Upon Changes in Capitalization; Acceleration; Possible
          ------------------------------------------------------------------
          Early Termination of Options.
          ----------------------------

          3.2.1     Adjustments. If the outstanding Shares are changed into or
                    -----------
exchanged for cash or a different number or kind of shares or securities of the
Company or of another issuer, or if additional Shares or new or different
securities are distributed with respect to the outstanding Shares, through a
reorganization or merger to which the Company is a party, or through a
combination, consolidation, recapitalization, reclassification, stock split,
stock dividend, reverse stock split, stock consolidation or other capital change
or adjustment, an appropriate adjustment will be made in the number and kind of
Shares or other consideration that is subject to or may be delivered under this
Plan and pursuant to outstanding Options.

          3.2.2     Acceleration. Upon the occurrence of an Event, each Option
                    ------------
shall become immediately exercisable. The Committee may accord any Participant a
right to refuse any acceleration, whether pursuant to the Option Agreement or
otherwise.

          3.2.3     Possible Early Termination of Options. If any Option has
                    -------------------------------------
been fully accelerated pursuant to Section 3.2.2 but is not exercised prior to
(a) a dissolution of the Company, or (b) a reorganization event described in
Section 3.2.1 that the Company does not survive, or (c) the

                                       5

<PAGE>

consummation of reorganization event described in Section 3.2.1 that results in
an Event approved by the Board, and no provision has been made for the survival,
substitution, exchange or other settlement of such Option, such Option shall
thereupon terminate.

         3.3  Termination of Employment.
              -------------------------

              3.3.1      Options.
                         -------

                    (a)  Any Option, to the extent not exercised, will terminate
         and become null and void upon a termination of employment or service of
         the Participant, except as set forth in this Section or otherwise
         expressly provided in the Option Agreement. All Options shall be
         subject to earlier termination under Section 2.3, and any and all
         rights under an Option, to the extent not previously exercised, will
         expire immediately upon a termination of employment or service of the
         Participant for Cause. The Committee will be the sole judge of Cause.

                    (b)  Unless otherwise expressly provided in the Option
         Agreement, a Participant will have the following time periods to
         exercise Options to the extent they were exercisable on the date of the
         Participant's termination of employment or service:

                         (i)    If the Participant's employment or service
              terminates for any reason other than Cause, the Participant will
              have 90 days after the date of termination of employment or
              service to exercise any Option to the extent that it was
              exercisable as of such date;

                         (ii)   If the Participant's employment or service
              terminates for Cause, the Option shall lapse immediately upon the
              Participant's termination of employment or service;


                         (iii)  If the Participant's employment or service by
              the Company terminates by reason of Total Disability, or if the
              Participant suffers a Total Disability within 90 days of a
              termination of employment or service described in Section
              6.3.1(b)(i), the Participant or the Participant's Personal
              Representative, as the case may be, will have six months after the
              date of Total Disability (or, if earlier, termination of
              employment or service), to exercise any Option to the extent that
              it was exercisable as of such date;

                                       6

<PAGE>

                             (iv) If the Participant dies while employed
                  or engaged by the Company, or within 90 days after a
                  termination of employment or service under Section 6.3.1(b)(i)
                  or 6.3.1(b)(iii) above, the Participant's Beneficiary may
                  exercise, at any time within six months after the date of the
                  Participant's death (or, if earlier, termination of employment
                  or service) any Option to the extent that was exercisable as
                  of such date.

                  3.3.2   Adjustments to Exercisable Portion. Notwithstanding
                          ----------------------------------
the foregoing, if a Participant's employment or services with the Company
terminates for any reason other than for Cause, the Committee may increase the
portion of a Participant's Option exercisable to the Participant, or
Participant's Beneficiary or Personal Representative, as the case may be, upon
such terms as the Committee determines.

                  3.3.3   Effect of Cessation of Subsidiary Status. If an entity
                          ----------------------------------------
ceases to be a Subsidiary, such action will be deemed for purposes of this Plan
to be a termination of services or employment of each Eligible Person of that
entity who does not continue as an Eligible Person of the Company or another
Subsidiary.

             3.4  Government Regulations.
                  ----------------------

                  This Plan, the granting of Options, the issuance or transfer
of Shares, and the payment of money, pursuant thereto are subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any regulatory or governmental agency (including, but not limited to, "no
action" positions of the Commission) that may, in the judgment of the Committee,
be necessary or advisable. Without limiting the generality of the foregoing, no
Options may be granted, no Shares will be issued, and no cash payments may be
made by the Company, pursuant to any such Option, unless and until, in each such
case, all legal requirements applicable to the issuance or payment have been
complied with. In connection with any stock issuance or transfer, the person
acquiring the Shares must, if requested, give assurances satisfactory to the
Committee in respect of such matters as the Committee deems desirable to assure
compliance with all applicable legal requirements. A Participant will not be
entitled to the privilege of stock ownership as to any Shares not actually
issued to such Participant.

             3.5  Tax Withholding.
                  ---------------

                  3.5.1   Withholding Obligation. Upon any exercise, vesting, or
                          ----------------------
payment of any Option or, if required under the Code, upon the disposition by a
Participant or other person of Shares acquired pursuant to the exercise of an
ISO

                                       7

<PAGE>

prior to satisfaction of the holding period requirements of Section 422 of the
Code, the Company has the right at its option to require payment by cashier's
check payable to the Company of, or to deduct from amounts payable in cash, the
amount of any taxes that the Company may be required to withhold with respect to
such transactions. If a tax is required to be withheld in connection with the
issuance or transfer of Shares, the Participant may elect, with Committee
approval, to have the Company reduce the number of such Shares issued or
transferred by the number of Shares (valued at Fair Market Value) necessary to
accomplish such withholding.

              3.5.2    Tax Withholding Loans. The Committee may permit a loan
                       ---------------------
from the Company to a Participant in the amount of any taxes that the Company
may be required to withhold, for a term, at a rate of interest and pursuant to
such other terms established by the Committee.

         3.6  Amendment, Termination and Suspension.
              -------------------------------------

              3.6.1    Amendment, Termination and Suspension. The Board may, at
                       -------------------------------------
any time, terminate or, from time to time, amend, modify or suspend this Plan or
any part hereof. In addition, the Committee may, from time to time, amend or
modify any provision of this Plan and, with the consent of the Participant, make
such modifications of the terms of such Participant's Option as it deems
advisable. The Committee, with the consent of the Participant, also may amend
the terms of any Option to provide that the Purchase Price of the Shares
remaining subject to the original Option be reestablished at a price not less
than 100% of the Fair Market Value of the Shares on the effective date of the
amendment. No modification of any other term of any Option that is amended in
accordance with the foregoing shall be required, although the Committee may make
such further modifications of any such Option as are not inconsistent with this
Plan. No Options may be granted during any suspension of this Plan or after its
termination.

              3.6.2    Stockholder Approval. If an amendment would materially
                       --------------------
(a) increase the benefits accruing to Participants, (b) increase the aggregate
number of Shares that may be issued or (c) modify the requirements of
eligibility for participation in this Plan, the amendment shall be approved by
the Board and, to the extent then required by applicable law, by the
stockholders of the Company.

              3.6.3    Effect on Outstanding Options. Options issued before the
                       -----------------------------
effective date of any amendment, suspension or termination of this Plan will not
without specific action of the Board or the Committee and the consent of the
Participant, in any way modify, amend, alter or impair any rights or obligations
under any such Option.

                                       8

<PAGE>

     3.7  Effective Date of the Plan.
          --------------------------

          This Plan will be effective upon its approval by the Board, subject to
approval by the stockholders of the Company within twelve months from the date
of such Board approval.

     3.8  Term of the Plan.
          ----------------

          Unless previously terminated by the Board, this Plan will terminate at
the close of business on September 9, 2006, and no Options will be granted under
it thereafter.

     3.9  Governing Law.
          -------------

          This Plan and all documents related hereto shall be governed
by, and construed in accordance with, the laws of the state of incorporation of
the Company. If any provision is held by a court of competent jurisdiction to be
invalid and unenforceable, the remaining provisions of this Plan will continue
to be fully effective. It is the intent of the Company that this Plan and
Options satisfy and be interpreted in a manner that satisfies the applicable
requirements of Section 1361, et. seq., of the Code and regulations promulgated
thereunder at any time that the Company has elected to be taxed as an
S-Corporation thereunder. If any provision of this Plan or of any Option
Agreement would otherwise frustrate or conflict with the intent expressed above,
that provision to the extent possible shall be interpreted and deemed amended to
avoid such conflict.

4.   NON-EMPLOYEE DIRECTOR OPTIONS.

     4.1  Participation.
          -------------

          Options under this Article 4 shall be granted only to members of the
Board who are not officers or employees of the Company ("Non-Employee
Directors") and may be granted in addition to any other NQSOs granted to a
Non-Employee Director pursuant to Article 2 of this Plan. In addition, Options
under this Article 4 shall be evidenced by Option Agreements substantially in
the Form of Exhibit A hereto.

     4.2  Option Grants.
          -------------

          After approval of this Plan by the stockholders of the Company, if any
person who is not then an officer or employee of the Company shall become a
director of the Company for the first time, there shall be granted automatically
(without any action by the Board or the Committee) an NQSO (the grant date of
which shall be the date such person takes office) to such person to purchase
5,000 shares of Common Stock. On each anniversary of the date on which a Non-

                                       9

<PAGE>

Employee Director receives (or, as described in the next sentence, is deemed to
have received) his first NQSO pursuant to this Section 4.2, he shall have
granted to him automatically (without any action by the Board or the Committee)
an NQSO to purchase 1,000 shares of Common Stock provided he is still a
Non-Employee Director on such date. For purposes of the preceding sentence, each
person who was a Non-Employee Director immediately prior to the Annual
Stockholders Meeting occurring during 1996 and who remains in office following
such meeting, shall be deemed to have received his first NQSO under this Section
as of the same date such person was treated as receiving his first NQSO under
paragraph 3(c)(2) of the Company's 1990 Incentive Stock Option and Nonqualified
Stock Option Plan. Non-Employee Directors who have been granted an NQSO under
this Section 4.2 shall be referred to herein as "Non-Employee Director
Participants".

         4.3   Option Price.
               ------------

               The Purchase Price per share of the Common Stock covered by each
NQSO granted pursuant to Section 4.2 shall be 100 percent of the Fair Market
Value of the Common Stock on the date of such grant (the "Grant Date"). The
Purchase Price of any shares purchased shall be paid in full at the time of each
purchase in cash or by check or in shares of Common Stock valued at their Fair
Market Value on the business day next preceding the date of exercise of the
NQSO, or partly in such shares and partly in cash.

         4.4   Option Period.
               -------------

               Each NQSO granted under this Article 4 and all rights or
obligations thereunder shall expire on the tenth anniversary of the Grant Date
and shall be subject to earlier termination as provided below. A Non-Employee
Director Participant shall exercise an NQSO granted under this Article 4 by
delivering to the Secretary of the Company a written notice stating the number
of Shares to be purchased pursuant to the Option and accompanied by (i) delivery
of an executed Exercise Agreement and (ii) payment made in accordance with and
in a form permitted by Section 4.3 for the full Purchase Price of the Shares to
be purchased.

         4.5   Exercise of Options.
               -------------------

               Except as otherwise provided in Section 4.6 and 4.7, each Option
granted under Section 4.2 shall become exercisable at the rate of 20% per annum
commencing on the first anniversary of the Grant Date and each of the next four
anniversaries thereof.

                                       10

<PAGE>

     4.6  Termination of Directorship.
          ---------------------------

          If a Non-Employee Director Participant's services as a member
of the Board terminate by reason of death or Total Disability, an NQSO granted
pursuant to Section 4.2 hereof held by such Non-Employee Director Participant
shall immediately become and shall remain exercisable for one year after the
date of such termination or until the expiration of the stated term of such
NQSO, whichever occurs first. If a Non-Employee Director Participant's services
as a member of the Board terminate for any other reason, any portion of an NQSO
granted pursuant to Section 4.2 held by such Non-Employee Director Participant
which is not then exercisable shall terminate and any portion of such Option
which is then exercisable may be exercised for three months after the date of
such termination or the balance of such NQSOs term, whichever period is shorter.

     4.7  Acceleration; Possible Early Termination of Options.
          ---------------------------------------------------

          Each Option granted pursuant to this Article 4 shall be subject to
acceleration upon the occurrence of certain events as provided in Section 3.2.2
of this Plan. To the extent that any Option granted under this Article 4 is not
exercised prior to (i) a dissolution of the Company or (ii) a merger or other
corporate event that the Company does not survive, and no provision is made for
the assumption, conversion, substitution or exchange of the Option, the Option
shall terminate upon the occurrence of such event.

     4.8  Adjustments.
          -----------

          The specific numbers of shares stated in the foregoing
provisions of Section 4.2 and the consideration payable for such shares shall be
subject to adjustment in certain events as provided in Section 3.2.1 of this
Plan.

5.   DEFINITIONS.

     5.1  Definitions.
          -----------

          "Beneficiary" means the person(s) or trust(s) entitled by will or the
           -----------
laws of descent and distribution to receive the benefits specified under this
Plan if a Participant dies. If the Company is an S-Corporation, the
Participant's Beneficiary must be a person eligible to be an S-Corporation
stockholder pursuant to Section 1361 of the Code.

          "Board" means the Board of Directors of the Company.
           -----

                                       11

<PAGE>

          "Cause" means that the Committee, acting in good faith, determines
           -----
that the Participant has: (a) committed a material breach of the Participant's
duties and responsibilities (other than as a result of incapacity due to a Total
Disability); or (b) been convicted of a felony, or entered a plea of guilty or
nolo contendere with respect to such a crime; or (c) violated any fiduciary duty
or duty of loyalty owed to the Company; or (d) been generally incompetent or
grossly negligent in the discharge of the Participant's duties and
responsibilities; or (e) engaged or is engaging in immoderate use of alcoholic
beverages or narcotics or other substance abuse; or (f) violated any of the
Company's established employment policies in effect from time to time.

          "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
to time.

          "Commission" means the Securities and Exchange Commission.
           ----------

          "Committee" means the Compensation Committee appointed by the Board
           ---------
and consisting of two or more Board members or such greater number as may be
required under applicable law. In the absence of such appointment, the Board
shall be the Committee.

          "Common Stock" means the Common Stock of the Company.
           ------------

          "Company" means Red Robin International, Inc., a Nevada corporation,
           -------
and its successors, and, where the context so warrants, its Subsidiaries.

          "Eligible Person" means (a) an officer or key employee of the Company,
           ---------------
(b) a member of the Board of Directors of the Company, (c) an independent
contractor who performs services as an advisor or consultant for the Company.
Service as an Eligible Person shall be considered employment for all purposes of
the Plan; provided, however, that only individuals who satisfy clause (a) of
this definition may be granted ISOs under the Plan.

                  "Event" means approval by the stockholders of the Company of
                   -----
any of the following:

                       (a)  The dissolution or liquidation of the Company;

                       (b)  An agreement to merge or consolidate, or otherwise
     reorganize, with or into one or more entities other than Subsidiaries, as a
     result of which less than 50% of the outstanding voting securities of the
     surviving

                                       12

<PAGE>

     or resulting entity are, or are to be, owned by former stockholders of the
     Company;

               (c)  The sale of substantially all of the Company's business
     assets to a person or entity that is not a Subsidiary; or

               (d)  A person or entity that is not a stockholder of the Company
     on the date this Plan is adopted by the Board acquires directly or
     indirectly 50% or more of the Company's outstanding voting securities.

          "Exercise Agreement" means a written agreement, approved by the
           ------------------
Committee, setting forth the terms for exercise of an Option.

          "Fair Market Value" on any date shall mean:
           -----------------

               (a)  if the Shares are publicly traded: (i) if the Shares are
     listed or admitted to trade on a national securities exchange, the closing
     price of the Shares on the Composite Tape, as published in the Western
     Edition of The Wall Street Journal, of the principal national securities
     exchange on which the Shares are so listed or admitted to trade, on such
     date, or, if there is no trading of the Shares on such date, then the
     closing price of the Shares as quoted on such Composite Tape on the next
     preceding date on which there was trading in such Shares; (ii) if the
     Shares are not listed or admitted to trade on a national securities
     exchange, the last price for the Shares on such date, as furnished by the
     National Association of Securities Dealers, Inc. ("NASD") through the
     NASDAQ National Market Reporting System or a similar organization if the
     NASD is no longer reporting such information; (iii) if the Shares are not
     listed or admitted to trade on a national securities exchange and are not
     reported on the National Market Reporting System, the mean between the bid
     and asked price for the Shares on such date, as furnished by the NASD or a
     similar organization; or

               (b)  if the Shares are not publicly traded or the NASD or a
                                      ---
     similar organization does not furnish the mean between the bid and asked
     prices for the Shares on such date, the fair market value of a Share as
     determined by the Committee in good faith. Any determination as to fair
     market value made pursuant to this Plan shall be determined without regard
     to any restriction other than a restriction which, by its terms, will never
     lapse, and shall be conclusive and binding on all persons.

                                       13

<PAGE>

          "ISO" means an option designated as an incentive stock option within
           ---
the meaning of Section 422 of the Code, the award of which contains such
provisions as are necessary to comply with that Section.

          "NQSO" means an option designated as or deemed by Section 2.5
           ----
to be a nonqualified stock option.

          "Note" means a promissory note approved by the Committee evidencing a
           ----
loan from the Company to the Eligible Person of an amount equal to the Purchase
Price of an Option. Any Note shall be subject to the following terms:

               (a)  The principal of the note shall not exceed the amount
     required to be paid to the Company upon the exercise or receipt of such
     Option, and the note shall be delivered directly to the Company in
     consideration of such exercise or receipt.

               (b)  The term of the Note, including extensions, shall not exceed
     ten (10) years.

               (c)  The Note shall provide for full recourse to the Participant.

               (d)  The Note shall bear interest at a rate determined by the
    Committee, but not less than the interest rate necessary to avoid the
    imputation of interest under the Code.

               (e)  The unpaid principal balance of the Note shall become due
    and payable on the tenth day after the termination of employment or service
    of a Participant.

               (f)  If required by the Committee or by applicable law, the Note
    shall be secured by a pledge of any Shares financed thereby (and other
    collateral if required by the Committee).

               (g)  The terms shall conform with applicable rules and
    regulations of the Federal Reserve Board as then in effect.

          "Option" means an option to purchase Shares under this Plan. An Option
           ------
shall be designated by the Committee as an NQSO or an ISO.

          "Option Agreement" means a written agreement, approved by the
           ----------------
Committee, setting forth the terms of an Option. Option Agreements for ISOs
shall include any terms and conditions required for "incentive stock options"
under Section 422 of the Code.

                                       14

<PAGE>

          "Option Date" means the date upon which the Committee took the action
           -----------
granting an Option or such later date set by the Committee.

          "Participant" means an Eligible Person who has been granted an Award.
           -----------

          "Personal Representative" means the person or persons who, upon the
           -----------------------
Total Disability or incompetence of a Participant, has lawfully acquired on
behalf of the Participant the power to exercise the rights and receive the
benefits specified in this Plan. If the Company is an S Corporation, the
Participant's Personal Representative must be a person eligible to be an S
Corporation stockholder pursuant to Section 1361 of the Code.

          "Purchase Price" means the exercise price, if any, payable by the
           --------------
Participant to the Company upon exercise of an Option in accordance with the
applicable Option Agreement and Exercise Agreement; provided, however, that such
exercise price shall not be less than the minimum lawful consideration required
under applicable state law.

          "Shares" means shares of the Company's Common Stock.
           ------

          "Subsidiary" means any corporation or other entity a majority or more
           ----------
of the outstanding voting stock or voting power of which is beneficially owned
directly or indirectly by the Company.

          "Total Disability" means a "permanent and total disability" within the
           ----------------
meaning of Section 22(e)(3) of the Code and, with respect to NQSOs, such other
disabilities, infirmities, afflictions, or conditions as the Committee may
include.

                                       15