Though headwinds remain fierce, Ruth’s Chris Steak House is preparing for a pace of growth it hasn’t experienced in a few years.

The chain is projected to open five restaurants this year, with the first one coming in Aventura, Florida, in March. If Ruth’s Chris accomplishes this goal, it would be the most restaurant openings since 2018, when the chain launched three corporate and five franchise stores.

The brand hopes to reach a pace of five to seven openings each year. Ruth’s Chris hasn’t reached the high end of that range since 2008, when 12 stores opened. The chain has already signed two leases for 2023 and is continuing to fill the pipeline.

Here are gross openings since 2008:

2008

• Company: 5
• Franchise: 7

2009

• Company: 0
• Franchise: 6

2010

• Company: 0
• Franchise: 1

2011

• Company: 0
• Franchise: 2

2012

• Company: 1
• Franchise: 4
• Managed: 1

2013

• Company: 0
• Franchise: 4

2014

• Company: 3
• Franchise: 3

2015

• Company: 2
• Franchise: 3

2016

• Company: 2
• Franchise: 2

2017

• Company: 3
• Franchise: 2
• Managed: 1

2018

• Company: 2
• Franchise: 2
• Managed: 1

2019

• Company: 2
• Franchise: 1

2020

• Company: 0
• Franchise: 0

2021

• Company: 2
• Franchise: 2

Ruth’s Chris finished 2021 with 150 stores, including 74 company-owned units, 72 franchises, and three managed restaurants. Four units opened and three closed during the year. 

“We believe our underlying business remains strong,” CEO Cheryl Henry said during the chain’s Q4 and 2021 earnings call. “And based on our accomplishments in 2021 and thus far in 2022, we’re committed to investing in the long-term growth and health of our business. As we look to the remainder of ’22 and beyond, our strategy is to return to a more consistent cadence of new restaurant development.”

Inflation has impacted new store investment, including increased costs of timber, steel, and labor. In response, Ruth’s Chris is value-engineering restaurants to ensure ROI remains above its 20 percent standard.

Typically, company-owned restaurants range in size from approximately 4,000-13,000 square feet with 180 to 375 seats. In the future, that will downsize to 6,000-10,000 square feet and roughly 230-250 seats.

“I think we have a rigorous process for ensuring that our sites are successful, as we go forward, knowing the pressures that we’re facing,” Henry said. “Very cautious and careful about how we are selecting their sites and understanding their performance. And we’ve seen that in our recent openings in Short Hills [New Jersey] as well as Lake Grove [New York] that they’re as a market outperforming our expectations. So therefore, offsetting some of that additional input cost.”

Henry also anticipates buying out more franchise restaurants.

In 2017, Ruth’s Chris purchased six Hawaii stores from Desert Island Restaurants for roughly $35 million. Two years later, the brand obtained development rights in Philadelphia, Long Island, and parts of New Jersey after buying three franchise restaurants for $18.6 million from long-time operator Marsha Brown. Those stores were located in Philadelphia, King of Prussia, Pennsylvania, and Garden City, New York.

Since that transaction, the steakhouse has opened two company-run locations in the Northeast territory.

“We continuously say we look for the opportunity,” Henry said. “We’re talking to our franchisees as we come out of the pandemic to understand where they are. We’ve done a great deal of work around addressable market and understanding what markets going forward are franchise versus company and if there’s an opportunity in that as we’re talking with them. We’ll take advantage of it, but no specific plan at this point.”

Sales trends are boosting the steakhouse’s confidence. Same-store sales rose 2.8 percent in October and 6 percent in November compared to 2019, but fell 5.3 percent in December as Omicron took hold. Still, the chain finished the quarter with 0.5 percent same-store sales growth. Comps were impacted by approximately 640 basis points due to underperformance of restaurants in Boston, Manhattan, and Hawaii.

For 2021 overall, comps dropped 3.6 percent against 2019.

Comps felt pressure throughout January, but witnessed a strong rebound in February, with same-store sales rising 4.3 percent through the first eight weeks of the first quarter.

Food and beverage costs were 34.1 percent in Q4, or roughly 39 percent higher than 2019. In January, the company saw decreases in beef costs, but CFO Kristy Chipman said it will take a few weeks for that to take shape in the P&L as the chain works through its higher-cost inventory. Cost of goods sold is anticipated to be between 32.5 percent and 33.5 percent in the first quarter.

Staffing costs improved 321 basis points in Q4 compared to 2019, with Ruth’s Chris benefiting from efficiencies in hourly and management labor.

The company is continuing to methodically add back managers into restaurants to support teams and protect the guest experience, Chipman said. Ruth’s Chris expects to have an average of five managers in each store by mid-2022. As those employees come back into the fold, the chain stands by its guidance of 200 basis points of improvement in labor against 2019 levels.

“These are kind of utility managers,” Henry said. “They are great at any position in the restaurant, they can work front of house, back of house, bar area, but really what we expect our managers to do is lead the excellent leaders in the store. And that’s where you’ll see them focused—around the other team members and ensuring we’re delivering the experience we’ve been known for, for almost 57 years now.”

To offset higher costs, the steakhouse carried 6.4 percent pricing into 2022, and will take an incremental 3 percent bump in March.

“Based on our analysis, we believe that price increase will be accepted by our guests as they understand the value they are getting when dining in our restaurants,” Chipman said.

Total revenues for the quarter were $126.7 million compared to $77.4 million in 2020, while company-owned restaurant sales increased to $118.7 million versus $72.2 million in the prior year. Franchise income for Q4 was $5.5 million, up 50.2 percent year-over-year, while operating income was $2.6 million.