Despite a rocky hurricane season inflicting trouble across the Southeast, Ruth’s Chris Steakhouse weathered fairly well during the third quarter.
Across the brand, total restaurant sales increased 17.7 percent or $93.5 million over last year. This big increase is a result of the acquisition of six Ruth’s Chris franchise locations in Hawaii at the beginning of 2018. The company posted revenues of $99.02 million for the quarter, up from the year-ago figure of $85.17 million.
Overall, the company saw a 3.7 percent increase in same-store sales compared to last year. Restaurant traffic increased 1.5 percent and overall check totals lifted 2.1 percent. This lapped the Q3 2017 negative lag of Hurricanes Harvey and Irma, which affected 15 restaurants and 64 total operating days.
Another factor contributing to the positive gains during Q3 was the decrease in food and beverage costs, which declined to 28.3 percent of sales. This was caused by the deflation of beef. Ruth’s Chris chief financial officer, Arne Haak, said there was a 20.5 percent in total beef cost for the brand. As the company moves into the fourth quarter the deflation trend will be slower than Q3, but is expected to continue into the near future
“We're being helped by beef,” Haak said in a conference call. “I think the thing that really was pleasing to me, obviously last year we had a fair amount of margin compression in the third quarter around the hurricane. And the teams really rebounded well and came back. I mean, their plans had them doing it, but to make it happen it happened. And so, our operators have done a really good job of running their restaurants and growing sales.”
Dedication to executing a fine-dining experience for each guest remains top of the priority list for the company.
“During the past six months, I have met with nearly all of our general managers and executive chefs across the country, and will do so again in the next 6 months,” said Cheryl Henry, Ruth’s Chris’ chief executive officer, who transitioned into the role August 10 after 11 years with the brand. “Their success is the absolute foundation of our brand, and everything else is built upon it. The food and presentation have to be perfect every single time. The hospitality and attention to detail are critical, and our people have to be trained, ready, and motivated every night. These principles underlie the foundation of our brand.”
“It's interesting, one of my favorite thing to do is get out and in to the restaurants,” Henry added. “And really the purpose of that is to make sure that the strategy that we have as a company is getting in to the restaurants when it's lived every day by the teams. And I will tell you, I go there think, well, let me inspire people, and I leave inspired. And really, it's inspiring when I leave. And I think it's great to be able to have that one-on-one time with them and ensure that we're aligned from the top of the organization all the way through the folks in the field on what our strategy is.”
Ruth’s Chris’ overall success also comes down to strong relationships with franchise partners, Henry added. Franchisees operate 75 locations and make up about half of the business. Total franchise comparable sales increased 2 percent compared to last year and domestic franchise sales were up 4 percent during the quarter, Haak said.
“October was the strongest month in the quarter last year in terms of year-over-year comparable sales,” he said.
Looking toward the future, the company said it sees growth potential when it comes to franchising. One new restaurant opened in Fort Wayne, Indiana, earlier this year and a second franchise restaurant is set to open in Markham, Ontario, by the end of 2018.
“We have a long history of successful collaboration with our franchise partners, and they are a big part of the success that Ruth's has enjoyed over the years,” Henry said. “This group of franchisees is incredibly excited about the Ruth's Chris Steakhouse brand, and I'm pleased to tell you that we are all well aligned on our vision for the brand's prospects, as well as the path to reach our potential.”
Along with opening new franchise locations, Ruth’s Chris also opened company-owned restaurants in New Jersey and Nevada during the third quarter. Over the next two years, the brand expects to open two more restaurants in Columbus, Ohio and Oklahoma City, while also relocating one of the restaurants in Washington D.C.
The brand is also undergoing a refresh at some locations to make sure the company’s high standards are present across all locations. By the end of 2018, eight locations will be done with remodels, bringing the total number of remodeled restaurants close to 30. Over the next year, seven to nine additional locations will undergo a remodel. Henry said the company is prioritizing larger locations that have the potential to increase capacity when a remodel is complete.
There were 78 company-run restaurants and 75 franchised units open at the end of Q3.