Concerning margins, the steakhouse chain still faces considerable challenges with commodity inflation. Food and beverage costs increased 60 basis points to 30.3 percent compared to the second quarter of 2020. Under that umbrella, total beef costs increased 27 percent compared to 2020 and 34 percent compared to 2019.
“We are keenly aware that the external environment remains uncertain in the short-term and that inflationary pressures are challenging,” Henry said. “We are confident, however, that with the accelerated demand for our legendary experience, the trust our guests have in our brands, and our team's ability to manage the business, we will weather any near-term impacts and remain committed to investing in the long-term future of our business.”
Ruth’s Chris started seeing some deflation in beef prices, but it’s at a much slower recovery rate than the brand originally anticipated, CFO Kristy Chipman said. To address some of these commodities shortcomings, Ruth’s Chris looks at making price adjustments. For this quarter, pricing stood at around 4 percent.
“We weighed several factors, and we're looking at that from pricing, do we think it's permanent or more transitory?” Henry said. “Do we believe that the guest and the consumer is willing to take the pricing on and that we can see that flow through or they start managing their check?”
Usually, Henry said Ruth’s Chris prices remain lower than competitors to provide customers with more value in the menu. But customers are more frequent now, and because of that, Ruth’s Chris has more flexibility with price depending on how consumers behave and how long pent-up demand for celebratory occasions last.
Good things seem to be on the horizon. The brand is only a couple of weeks away from opening all restaurants at 100 percent capacity for reservations. At the end of Q2, 68 of Ruth’s Chris 72 franchise restaurants were open, including 63 restaurants offering full dining service, two restaurants providing outdoor seating only, and three restaurants only offering to-go and delivery service. Additionally, 75 of 76 company-owned or managed restaurants were open with dining service during Q2.
Slowly but surely, Ruth’s Chris is seeing an uptick in bookings even for the fourth quarter holiday season. This type of growth factors into the steakhouse chain’s plans to open seven company stores and three franchise restaurants by the end of 2022. New Jersey, Long Island, and Mount Pleasant are at the top of the list of markets to receive new units. Ruth’s Chris also anticipates the full-scale benefits of its new POS (point of sale) system to ramp up by 2022.
“All in all, we are a stronger and more nimble enterprise with a balance sheet that affords us flexibility as we navigate the ever-changing environment,” Henry said. “I am extremely proud of our team members and franchise partners and their continued efforts to deliver impressive results, while ensuring that the guest experience in our restaurants is reflective of the hospitality and amazing food that Ruth’s Chris Steak House has been known for over 56 years.”
Total revenues narrowly increased from $110.2 million in 2019 to $110.9 million during this year’s quarter. Restaurant sales grew from $27 million in Q2 2020 to $104.2 million this year. Franchise income soared from $1 million last year to $4.5 million in Q2.