Few types of restaurants were walloped as much by the Great Recession as upscale steakhouses. Already too pricey for many leisure diners, concepts like Ruth’s Chris and Morton’s watched their expense-account clientele back off from entertaining as companies slashed T&E budgets. Group and party business, another big part of the sector’s sales mix, similarly dropped like a T-bone slipping off a plate.
By mid-2009, Morton’s was posting a comp sales decline of 26.1%, and Ruth’s painfully notched a 23% fall. At the time, Ruth’s CEO Mike O’Donnell warned investors that a continuation of the trend would cost that chain lost sales of $1 million per store.
That’s why the last few days have been encouraging for restaurateurs trying to gauge where we are in the economic recovery. Ruth’s disclosed this morning that fourth-quarter comps for its namesake brand had risen 9.2%. Earlier in the week, OSI Restaurant Partners, better known as the parent of Outback Steakhouses, disclosed an 18.4% comp rise for its Fleming’s chain.
Granted, chains like those are comparing their recent results to the severely depressed sales levels of a year earlier. But you can’t discount the brands’ efforts to broaden their appeal by adding lower price levels to their menus and using their bars as a less-expensive alternative to their very own dining rooms. Those strategies seem to be working, judging from the comments of the chains’ executives.
O'Donnell, for instance, noted that group business, or what Ruth's calls Private Group Dining, increased 16% during the fourth quarter, the making the holiday season the chain's best since 2007.
Still, the biggest factor, and the one that should hearten any higher-end restaurateur, is the apparent return of expense-account spending and travel. Executives had accurately surmised that the business community couldn’t manacle sales teams to their headquarters desks and still expect revenues to grow.
Any way you slice, the trend is encouraging.