The chain has until December 10 to select a stalking horse bidder.
A federal court approved bidding procedures for Ruby Tuesday’s assets, paving the way for an auction to occur no later than mid-January.
The 48-year-old brand filed for bankruptcy on October 7, and said it planned to shutter 185 company-run stores. The chain has lost nearly 500 locations in the past four years, placing its current systemwide footprint around 250. It entered bankruptcy owing $43 million under its credit facility and roughly $19 million to service providers like third-party vendors and taxing authorities.
Ruby Tuesday has until December 10 to select a stalking horse bidder, which sets the bar for the rest of the bids. According to the guidelines, if the stalking horse bidder doesn’t win the assets, the restaurant may offer a breakup fee of no more than 3 percent of the stalking horse purchase agreement plus reimbursement of out-of-pocket costs, not to exceed $500,000. Any objection to the stalking horse bid must be filed by December 16.
The deadline to submit a qualified bid is January 14. An auction is set to occur no later than January 19.
Whoever acquires the assets will take over a classic dining brand that has struggled for multiple years. Since it was taken private by NRD Partners in 2017, Ruby Tuesday has faced pressures from consumers shifts to quick-service restaurants, declining mall traffic, and the rise of third-party delivery providers. The brand has defaulted multiple times in the past few years despite cutting costs and closing numerous underperforming locations.
Prior to COVID, more than 90 percent of sales were on-premises. In its shift to off-premises, Ruby Tuesday grew delivery sales 450 percent year-over-year and to-go sales by more than 93 percent.
Chains like Ruby Tuesday face a steep climb in the coming winter months, as COVID cases continue to grow and restrictions on indoor dining tighten. That’s coupled with lowering temperatures and increased costs to provide adequate outdoor seating.
“The lack of predictability in the spread of the virus coupled with the necessary responses of governments to try and limit exposure by preventing gatherings has eviscerated the restaurant
industry, whose business model largely depends on providing social environments for people to meet and enjoy dining out,” a court filing said. “… As a result, the COVID-19 pandemic put an unprecedented strain on the financial condition and personnel of the Company.”