Company will use QR codes so customers can digitally access menu.
Ruth’s Chris Steak House will reopen 12 dining rooms at company-owned locations this Friday as same-store sales plummeted 83.5 percent in April due to the coronavirus pandemic.
This is in addition to the 14 franchised locations that have already reopened dining rooms.
Those company-owned units will reopen across Florida, Tennessee, and Texas. CEO Cheryl Henry said the remainder will come in waves as restrictions are eased in other areas. She estimated that 20 to 30 corporate locations may reopen dining rooms by the end of Q2.
The brand’s largest concentration of restaurants is in California, which has yet to announce official plans to reopen dining rooms. There are also big chunks of locations in Hawaii and the Mid-Atlantic (i.e. New York and New Jersey), which haven’t announced openings either.
To enhance the dine-in experience, menus can be accessed through a QR code on mobile devices. The chain is also selling new side options along with its shareables, and offering opportunities for small private groups to experience menus like the TasteMaker Wine Dinners until the program can be launched systemwide again. Ruth’s will limit the number of employees providing service to each table, as well.
“We have amazing teams in the restaurants that have delivered hospitality for decades. The tenure of the team is amazing,” Henry said during the company’s Q1 earnings call. “And I think this really calls on them to be best at what they do best, and that is really understanding what's making the guests comfortable and enhancing the experience. So there's no question, you're going to have some of those additional sanitations in between table trends, etc. But really where we're calling upon our team is to understand how to make the guest comfortable.”
According to Ruth’s, 56 of its 86 company-owned and managed locations remain open for takeout and delivery. CFO Arnie Haak said the chain has been in constant contact with landlords about abatements and lease modifications, and they expect to reach compromises. However, there is a possibility that up to 10 company-owned stores may close if the brand isn’t able to “recalibrate our operating and occupancy costs.”
Of the 73 franchised stores, 14 have reopened dining rooms, 28 are operating off-premises, and 31 are closed.
At units operating off-premises business, menus have been simplified, third-party delivery networks have been expanded, and online ordering and payment has been launched. Delivery sales went from mixing in the low single-digit range of prior year sales to more than 16 percent of prior year sales in April.
Same-store sales at corporate locations lifted 2.2 percent through February, driven by an increase in average check. However, similar to other full-service chains, Ruth’s was hit hard by the onset of the pandemic. Comps at company-owned stores dropped 50.5 percent in March. Ruth’s corporate stores finished Q1 with a 13.5 percent decrease in comps, including a 14.1 percent slide in traffic and 0.7 percent increase in average check.
Here’s how comps have trended at company-owned stores:
- Q1 2020: -13.5 percent
- Q2 2019: -0.5 percent
- Q1 2019: 1.8 percent
- Q4 2018: -0.1 percent
- Q3 2018: 3.7 percent
- Q2 2018: 1.3 percent
In Q1, average weekly sales were $96,000, down 13.8 percent from $111,400 in 2019. In April, average weekly sales were $19,200. Revenue in Q1 decreased 9.4 percent to $108.5 million.
“From late March, I'd say, through April, the trends have been fairly steady,” said Henry, describing how sales have progressed. “We had a big push around Easter, which is not surprising. A lot of folks spent their holidays and special occasions with us. So that was a good indicator to see that people were still willing to make that investment in those special occasions. … We may start to see some trends back to dining room visitation versus off-premise, but I will also say that I think in certain markets, the off-premise may stay fairly strong for a while.”
To increase financial flexibility, the brand suspended all new restaurant construction and nonessential capital expenditures, which is expected to save $35 million. Although Ruth’s did not provide a specific number, the company said it furloughed a significant amount of employees. Non-furloughed employees, including Henry and other executives, had their salaries reduced. The exception to the pay cut is non-furloughed workers at restaurants, who’ve maintained their full salary. Non-employee board members chose to suspend payment of their compensation.
The weekly cash burn rate is $2.4 million, which includes partial rent payments, reopening costs, and one-time COVID-19 expenses. As of May 4, Ruth’s has $62.5 million in cash on its balance sheet. Ruth’s expects volatility when it comes to the supply chain, but Haak said there hasn’t been a disruption yet and contingencies are in place.