Saturday, October 9, 2010

Ruby Tuesday's new seafood concept

As if Ruby Tuesday didn’t have enough choices on its menu of development options, the casual-dining giant is prepping one more type of restaurant it can use to replace weak namesake stores. The company alerted investors earlier this week that it will open a “seafood health concept” later this year.

Management didn’t divulge the name or many particulars about the venture, saying only that it would be one more option for salvaging underperforming Ruby Tuesday sites. Executives lumped it together with the two replacement concepts that were identified earlier, Jim ‘n Nicks and Truffles.

Like those, they explained, the seafood restaurant could replace a played-out Ruby Tuesday at a cost of under $500,000, and generate annual revenues of more than $1 million.

CEO Sandy Beall explained that 23% of a Ruby Tuesday’s guests, or roughly one in four, already order seafood. “It’ll just be a more seafood-oriented Ruby Tuesday, really,” he said during the conference call with analysts. “And it’s very relevant based on what people are eating and their health and so forth.”

The big benefit, he said, would be differentiation from all the other so-called grill-and-bar concepts, like Chili’s, T.G.I. Friday’s and Applebee’s

An analyst voiced his concern that Ruby Tuesday would be entering a sector where even long-established brands are facing considerable challenges. “We can all think of the biggest fish in the sea who is struggling with difficult trends,” said Robert Derrington, the restaurant analyst for Morgan, Keegan. He didn’t name that brand, Red Lobster, by name.

He noted, however, that Ruby Tuesday had experience with seafood restaurants.

Yes, said Beall. The company ran the L&N Seafood Grill chain when both casual-dining brands were part of Morrison, a large contract-feeding company.

Investors also heard the Ruby’s plan to use several young concepts as its expansion vehicles. It recently secured rights to develop units of Lime Fresh Mexican Grill, a fast-casual chain that currently has six stores open.

“As far as the economics go, it's really very, very similar to Chipotle,” said chief marketing officer Mark Young.

Wok Hay, a fast-casual brand that Ruby’s acquired several years ago and subsequently upgraded into a full-service operation, wasn’t mentioned. Ruby had cited it several months ago as a possible replacement concept for tired Ruby Tuesday outlets. It also cited it at that time as a restaurant that could be built on new sites.

Meanwhile, management noted that the first Jim ‘n Nicks is open and generating sales that should top $1.5 million on an annual basis.

They said Ruby’s first Truffles, an upscale casual format, would open next month.