The classic chain has seen revenue and unit count decline in recent years.
Ruby Tuesday, a classic casual-dining chain founded 48 years ago, filed for bankruptcy Wednesday and will permanently shut down 185 company-owned restaurants.
That leaves the brand with roughly 250 units worldwide. Ruby Tuesday had 724 units in May 2016.
The restaurant said that prior to the filing, the brand reached an understanding with secured lenders to support restructuring through financing and a plan to move forward.
“The Company ultimately has not been able to overcome the difficulties from the overall decline in the casual dining sector, greatly exacerbated by regulatory responses to contain the COVID-19 pandemic,” the court documents said.
The company owes roughly $43 million under its credit facility and about $19 million to landlords, utilities, employees, taxing authorities, third party vendors, insurance premiums, and other service providers. It also has a Paycheck Protection Program loan worth $10 million.
Ruby Tuesday will use the bankruptcy proceedings to “strengthen its business by reducing liabilities and emerge a stronger organization built for the future.” The chain intends to move through the bankruptcy as “quickly as possible” and plans to keep stores open.
“This announcement does not mean ‘Goodbye, Ruby Tuesday’. Today’s actions will allow us an opportunity to reposition the company for long-term stability as we recover from the unprecedented impact of COVID-19,” said Ruby Tuesday CEO Shawn Lederman in a statement. “Our restructuring demonstrates a commitment to Ruby Tuesday’s future viability as we work to preserve thousands of team member jobs. Our guests can be assured that during the Chapter 11 process, we will continue to deliver welcoming service and provide a safe environment for guests and team members, while serving fresh, signature products that only Ruby Tuesday can offer. With this critical step in our transformation for long-term financial health—this is ‘Hello’, to a stronger Ruby Tuesday.”
Ruby Tuesday's troubles began prior to the COVID pandemic.
The brand was public for 21 years until NRD Partners bought the restaurant in 2017 and took it private. At the time of the merger, Ruby Tuesday had 541 restaurants. Since that acquisition, the brand has struggled despite multiple efforts to address the situation, according to the filing.
The restaurant attributed the decline to a shift in consumer spending to fast-food and fast-casual restaurants, a decrease in mall traffic, and increase in third-party delivery services. This pushed Ruby Tuesday out of compliance with certain financial covenants in 2018 and 2019.
As a result of the challenges, the restaurant closed underperforming locations, sold and leased-backed restaurants, reduced corporate overhead by more than 45 percent, and accelerated its off-premises business. The company also onboarded industry veterans to oversee day-to-day operations and strategic planning.
While the initiatives normalized performance and reduced debt, pressures from the industry continued to increase. The restaurant was once again in default in 2019 and 2020.
The COVID crisis hit Ruby Tuesday particularly hard since more than 90 percent of sales came from in-store dining. The brand was forced to furlough roughly 7,000 employees and reduced its corporate footprint from 421 stores to 236. However, 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.
According to FoodserviceResults, Ruby Tuesday earned $660 million in sales in 2019, a 9 percent drop from 2018.