A “total return strategy” looks like it paid off for Ruth’s Chris Steak House, which saw a 9.6 percent bump in systemwide restaurant sales during the fourth quarter of 2022 versus 2021.
“We started the year with a goal to deliver on our total return strategy for shareholders, and that began with organic growth, including new restaurants, remodels, and digital technology,” Cheryl Henry, Ruth’s Hospitality Group CEO, told investors on a fourth quarter earnings call. “It also included smartly allocating capital on behalf of our shareholders, and we believe we were able to accomplish both.”
One of the brand’s most exciting accomplishments this year, Henry noted, was the development of a proprietary demand forecasting platform that integrates with Ruth’s labor management system, creating more efficient schedules. The efforts have resulted in a 10 percent improvement in hours per entrée, Henry said.
Notable numbers: Overall, restaurant sales totaled $475.5 million in 2022 versus $402 million in 2021, up 13.8 percent. Restaurant sales at franchisee-owned restaurants also increased last year, up 10.5 percent compared to 2021. Adjusted EBITDA increased 7.2 percent to $83.8 million in 2022, and Ruth’s Chris was able to reduce debt by $40 million and pay $18.3 million in dividend payments.
And though the company (and entire restaurant industry) saw record wage increases, food and beverage costs decreased to 33.3 percent during Q4 for Ruth’s, with total beef costs dropping 4 percent compared to the same period during 2021.
“To give you a sense of the impact of beef prices on our overall financial performance, we estimate that a 10 percent change in beef costs would impact EBITDA by approximately $6 million to $7 million on an annual basis, all else remaining equal,” Kristy Chipman, CFO and COO, told investors.
Demand from “just because” and special occasion guests helped drive the brand’s double-digit top-line growth, according to Henry, as well as successful initiatives on the design front.
Ruth’s Chris relocated and redesigned its restaurant in Winter Park, Florida, with a new bar design and a larger outdoor dining space, which “gives our guests different dining room experience options,” Henry told investors. The restaurant outperformed its former spot by more than 35 percent in November and December combined, noted Henry, and will serve as a prototype for future new restaurants, relocations, and certain remodels. There are upwards of 10 remodels and refreshes planned for 2023.
The brand opened four company-operated restaurants last year, including one location acquired from a franchisee in Long Island, New York, and plans to open five more in 2023. A franchisee is also opening the first Ruth’s Chris Steak House restaurant in Iowa.
As of December 25, Ruth’s Chris had 154 restaurants open, including 77 company-owned and 74 franchisee-owned units, plus three licensed locations. While all company locations are in the U.S., franchisee-owned restaurants include 23 international restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Philippines, Singapore, and Taiwan.
Ruth’s decided not to renew the lease for its Times Square location in Manhattan, New York, which is closing in April after 30 years of business “a shift in the trade area,” or in other words, the too-slow return of office workers to downtown. However, they plan to open at least one new Manhattan location by the end of 2025.
“These plans allow us to relocate and redesign our New York City presence to better serve the market,” Henry told investors.
One of the brand’s other priorities in 2023 is to roll out new hospitality training and standards over the next 12 to 18 months, including a new uniform, table presentation, and smallwares. A refreshed menu and new bar program is also on the to-do list.
“Our success over the past two years is a real testament to the great determination of our team and franchise partners and their ability to adjust quickly to change,” Henry added. “Through their efforts, we’ve achieved record revenues, opened successful new restaurants, invested in new technologies to increase efficiencies, paid down debt, and continued to return cash to shareholders, and we accomplished this through a global pandemic, generationally high inflation, and numerous macro challenges.”