Goodbye 95 Ruby Tuesdays

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Softness in the casual dining sector, is forcing the closure of more restaurants. Ruby Tuesday Inc., which late last week reported a nearly 6% decline in revenue for its fourth quarter, announced it will be closing 95 underperforming restaurants by next month.

The popular Knoxville, Tenn., based restaurant chain operates 724 Ruby Tuesday restaurants system-wide, of which 646 were corporate-owned. During previous quarter Ruby Tuesday closed seven restaurants and opened just two.

Ruby Tuesday, chairman and CEO JJ Buettgen, said, “Our fourth quarter was impacted by softness in the casual dining industry and increased promotional activity by our peers. Given that we expect the macro environment to remain challenging for some time, we are taking the necessary steps to change the trajectory of our business.”

“The decision to close restaurants is a difficult but necessary step as we take aggressive actions to strengthen our organization,” Buettgen said. “Performance at each of these locations, despite the loyalty of valued guests and the efforts of our dedicated employees, was not meeting expectations.”

Ruby Tuesday’s news follows last week’s announcement from owners of Logan’s Roadhouse Inc., a Nashville-based casual dining chain with 234 restaurants, that it filed for Chapter 11 bankruptcy reorganization and was closing 21 of its restaurants.

A few things are driving the slowdown in casual dining sales, Buettgen of Ruby Tuesday cited general concerns about the state of election outcomes; the trend of towards eating more at home; and a real step up in terms of promotional activity by its competitors.

“It’s been competitive for quite some time, but I would say in the last couple of quarters what you see is within casual dining more companies using a broader range vehicle. So people whether its traditional couponing, online efforts, there’s just a lot of brands competing with aggressive offers, at pretty much every place you can reach the consumer,” he said.

Ruby Tuesday recently completed a comprehensive review of its corporate-owned restaurant portfolio and determined that it was in the company’s best interest to close underperforming restaurants. The as of yet unidentified locations will cease operations by September 2016.

Mike Ellis, chief development officer for Ruby Tuesday, said the real estate review included looking at the financial performance of each restaurant in the portfolio; evaluating the market wide unit count and specific restaurant placement; examining the demographic makeup surrounding each restaurant; assessing traffic patterns to determine the site visibility and accessibility from surrounding roads, proximity of competitors and nearby traffic generators; and finally considering the lease or ownership structure in place at the location.

“What was clear from this comprehensive review was that underperforming locations shared similar attributes such as high market concentration, challenged trade areas, or unfavorable population demographics,” Ellis said. “All of these factors contributed to low restaurant-level sales and profitability.”

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