Do the Right Things

Take a look at some of the new items on Ruby Tuesday’s menu and tell me where the chain went wrong. Isn’t this just what consumers asked for?

By Scott Hume, Editor-in-Chief -- Restaurants & Institutions, 4/1/2008

Unless you are a Wall Street analyst, it’s difficult not to sympathize with Sandy Beall.

The chairman, president and CEO of Maryville, Tenn.-based Ruby Tuesday, Beall has become the poster child for the economic malaise crushing the casual-dining segment. He has declined to minimize how difficult business conditions are and have been for the chain during the past six months, and the Street has repaid his honesty by pummeling Ruby Tuesday’s stock. Shares that traded at about $27 at the beginning of 2007 were down around the $9 level at this writing.

The sad irony is that Ruby Tuesday is suffering despite having done exactly what the marketplace said it should do. The rap on most casual-sector concepts is that they are too much alike, that they haven’t modernized ’70s-era décor packages and that their menus aren’t responding to shifting consumer tastes. Few other chains have worked as earnestly to upgrade their restaurants and their brand personality as has Ruby Tuesday. And what has that gotten Beall? A lot of aging Stones fans’ financial-blog postings using "Goodbye, Ruby Tuesday" as the headline.

There’s no question that the chain’s numbers have been ripe for ridicule. For its fiscal quarter that ended Dec. 4, 2007, Ruby Tuesday reported a 10.8% decrease in same-store sales for company stores and an 8.7% decline at domestic franchised units.

Not great numbers, but not for want of trying to improve the brand and deliver the levels of food and service that consumers consistently have said they want. Last year, Ruby Tuesday invested $4 million in a 6,300-square-foot culinary center where it can develop new dishes and train unit kitchen management. The "Simple, Fresh American Dining" market positioning it adopted couldn’t be more in line with what everyone’s research points to as the culinary experience diners seek. Take a look at the chain’s recent menu additions—Parmesan Caesar Salad, Asian Glazed Ribs, beef or turkey mini burgers, Sirloin & Bistro Chicken (Choice-grade beef and all-natural chicken)—and ask where Ruby Tuesday has gone wrong.

The kitschy, stereotypical "theme restaurant" décor elements are gone from the dining rooms of its 900-plus restaurants, and the chain invested in new glassware and linens and more-contemporary uniforms for dining-room staff. Beall isn’t apologizing, and he isn’t reversing course.

Last month at Bear Stearns’ investment conference, Beall said he "didn’t anticipate how dramatically the conditions would change" when Ruby Tuesday began its rebranding efforts 18 months ago. He hardly can be faulted for failing to predict a decline that so few others saw coming.

What is frightening is that Sandy Beall did see the need to rethink his brand and responded accordingly and that that has not been enough.