What is it about the restaurant industry that keeps pulling people back into the fray? In recent weeks we’ve had three more examples of grizzled vets who’ve made enough money to fund a life of leisure. But instead of spending their remaining days on a racetrack or golf course, they’re looking for a new restaurant concept to hatch or grow.
Consider, for instance, Brad Blum’s newfound interest in Cosi, the upscale sandwich concept. Blum rose to prominence as the cappo of Olive Garden, which was wheezing a bit when he took it over. He righted it and then moved on to Burger King, where a sale of the company did him no good. Most recently, he headed Romano’s Macaroni Grill, seemingly a natural fit after his stewardship of Olive Garden.
Last week Blum alerted the SEC that he’d amassed a 6.75% stake in Cosi. “As of Sept. 6, 2011, Blum Growth LLC is now an active investor,” Blum said through his investment concern.
The filing notes that Blum wants a say on the composition and top management of Cosi (its former CEO, Jim Hyatt, just resigned). I’m going to go out on a limb here and predict that Blum wants a role in each governing body.
But he’s not the only vet who’s reactivated himself for a new restaurant challenge. Craig Nickoloff sold the high-volume Claim Jumper casual chain to the private equity company Leonard Green & Partners in 2005 for a reported $200 million. The amount seemed fitting for a concept that took the California gold rush as its theme.
Just to add a little icing to the case: Claim Jumper filed for bankruptcy a year ago.
Nickoloff could be kicking back with the wife he met while she was covering him and Claim Jumper for Nation’s Restaurant News, a distinction that made her a legend among those of us who write about the business (I’ve finally relinquished my dreams of a Rachel Rae Romeo, primarily because my current wife insisted.)
Instead, Nickoloff has teamed up with acclaimed West Coast chef Michael Cimarusti (of Providence restaurant) to buy Silver Spoon, described by Eater Los Angeles as “West Hollywood’s ancient coffee shop.” The pair hasn’t revealed its intentions for the space, but official filings say the location will do business as Connie and Ted’s.
Watchers are wondering if the venture might also involve Nickoloff’s son, Nick, who owns and operates three namesake restaurants.
Meanwhile, Ohio’s Cameron Mitchell is putting the finishing touches on his eighth Ocean Prime upscale “supper club,” in the Buckhead area of Atlanta. Two more branches are under development, according to Mitchell’s Columbus-based company.
The chain building comes just four years after Mitchell sold an earlier seafood chain, 19-unit Mitchell’s Fish Market, to Ruth’s Chris as part of a $94-million deal (two steakhouses were also part of the purchase).
To call Mitchell irrepressible is an understatement. I met him when he was sleeping on the floor of a co-worker’s hotel room so he could afford to attend an industry event. He was determined to open a restaurant concept of his own and wanted to learn everything he could.
Seems that desire has only grown stronger.
Showing posts with label Ruth's Chris. Show all posts
Showing posts with label Ruth's Chris. Show all posts
Monday, September 19, 2011
Wednesday, August 3, 2011
Ruth's O'Donnell: Making a plan work
This is the second installment of a three-part celebration of the industry's top turnaround stars. You can read the first installment, on Cheryl Bachelder, here.
The turnaround at Ruth’s Chris didn’t start out with a bang. It was more of the resounding-thud variety.
Like a lot of high-ticket concepts, the expense-account chain was kneecapped by the Great Recession. In February 2009, comps fell 23%. And that was after it’d rolled out a cut-rate deal to pull customers back. For a mere $39.99 per head, guests were treated to a three-course meal that included shrimp or a six-ounce fillet.
By Ruth’s-ian standards, it was a Dollar Menu. But the headwinds were too strong. Trade-offs to the discount lowered Ruth’s check average without drawing an offset in traffic. In short, it looked as if the concept was just discounting to customers it would’ve drawn anyways.
At the rate of decline, said CEO Mike O’Donnell, units would each lose $1 million in annual sales.
The next tactic didn’t work so well, either, or at least not at first. The chain put the spotlight on the flattop-grilled steaks and other entrees that had long been its signatures. They were grouped together into a special Classics menu. Customers would recognize the items, but not the prices, since they were lowered to a traffic-stimulating level.
Then came one of those smack-your-forehead moments. To hold down costs, Ruth’s simultaneously cut its advertising. So it had a deal, but no way of telling patrons about it. Guests were already in the unit when they learned of the special promotional session.
It didn’t look good for Ruth Fertel’s brainchild. But O’Donnell proved why he’s one of the toughest execs the industry has ever seen. His lengthy resume included stints during some of the roughest times at Champps, Sbarro and Ground Round. He’s also been fire-hardened by working at such operations as Outback and T.G.I. Friday’s. This is no crème puff.
He stuck with the Classics deal. Today, it accounts for about 30% of Ruth’s sales, which are on the rise. Traffic was up 3.3% in the second quarter, with a 2.4% rise in the average check, yielding an average sales increase per store of 5.8%.
Meanwhile, O’Donnell diversified the chain’s prices. A bistro menu put more affordable choices in front of customers, who could now return even if the company wasn’t picking up the tab.
He also pushed for group business, which had fallen like a stone. The installation of a satellite communication system provided an extra reason for businesses to hold their meetings at a Ruth’s, with banquet service included. In the second quarter, group sales were running 16% above the tally of a year earlier.
Now O’Donnell is trying to work the same program with Ruth’s secondary concept, the Mitchell’s dinnerhouse chain. The home office is diversifying the menu. While the Ruth’s brand is testing TV advertising, the smaller Mitchell’s operation is experimenting with radio.
Still, O’Donnell isn’t crowing about his company’s recent achievements. During a conference call with financial analysts, he was asked where the turnaround stands.
“Our everyday user continues to show improvement. Our business-to-business experience shows improvement,” he said. “So we think that as long as the economy continues or the higher end of the economy continues to do reasonably well, we will continue to track in that regard.”
I wouldn't bet against him.
The turnaround at Ruth’s Chris didn’t start out with a bang. It was more of the resounding-thud variety.
Like a lot of high-ticket concepts, the expense-account chain was kneecapped by the Great Recession. In February 2009, comps fell 23%. And that was after it’d rolled out a cut-rate deal to pull customers back. For a mere $39.99 per head, guests were treated to a three-course meal that included shrimp or a six-ounce fillet.
By Ruth’s-ian standards, it was a Dollar Menu. But the headwinds were too strong. Trade-offs to the discount lowered Ruth’s check average without drawing an offset in traffic. In short, it looked as if the concept was just discounting to customers it would’ve drawn anyways.
At the rate of decline, said CEO Mike O’Donnell, units would each lose $1 million in annual sales.
The next tactic didn’t work so well, either, or at least not at first. The chain put the spotlight on the flattop-grilled steaks and other entrees that had long been its signatures. They were grouped together into a special Classics menu. Customers would recognize the items, but not the prices, since they were lowered to a traffic-stimulating level.
Then came one of those smack-your-forehead moments. To hold down costs, Ruth’s simultaneously cut its advertising. So it had a deal, but no way of telling patrons about it. Guests were already in the unit when they learned of the special promotional session.
It didn’t look good for Ruth Fertel’s brainchild. But O’Donnell proved why he’s one of the toughest execs the industry has ever seen. His lengthy resume included stints during some of the roughest times at Champps, Sbarro and Ground Round. He’s also been fire-hardened by working at such operations as Outback and T.G.I. Friday’s. This is no crème puff.
He stuck with the Classics deal. Today, it accounts for about 30% of Ruth’s sales, which are on the rise. Traffic was up 3.3% in the second quarter, with a 2.4% rise in the average check, yielding an average sales increase per store of 5.8%.
Meanwhile, O’Donnell diversified the chain’s prices. A bistro menu put more affordable choices in front of customers, who could now return even if the company wasn’t picking up the tab.
He also pushed for group business, which had fallen like a stone. The installation of a satellite communication system provided an extra reason for businesses to hold their meetings at a Ruth’s, with banquet service included. In the second quarter, group sales were running 16% above the tally of a year earlier.
Now O’Donnell is trying to work the same program with Ruth’s secondary concept, the Mitchell’s dinnerhouse chain. The home office is diversifying the menu. While the Ruth’s brand is testing TV advertising, the smaller Mitchell’s operation is experimenting with radio.
Still, O’Donnell isn’t crowing about his company’s recent achievements. During a conference call with financial analysts, he was asked where the turnaround stands.
“Our everyday user continues to show improvement. Our business-to-business experience shows improvement,” he said. “So we think that as long as the economy continues or the higher end of the economy continues to do reasonably well, we will continue to track in that regard.”
I wouldn't bet against him.
Friday, February 18, 2011
Sizzle's coming back to steakhouses
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.
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.
Saturday, October 31, 2009
Ugh I
Ruth’s Chris ran a promotion through the summer called Ruth’s Classics, built on several of the steakhouse chain’s most familiar specialties. The signatures were offered in specially priced meals that were intended to turn the heads of bargain hunters, but the chain decided to cut costs by holding back on advertising for the deals. “By and large the promotion was not seen as new to our customers,” acknowledged CEO Mike O’Donnell. All they saw were staples of the menu grouped together.
To make matters worse, O’Donnell added, competitors stepped up their promotions during the same timeframe, dealing Ruth’s “a slight setback” in market share.
During a conference call with investors, officials of the chain disclosed that six units are testing a Bistro menu consisting of items priced from $9 to $19. The limited menu is being offered in the test stores’ bars.
To make matters worse, O’Donnell added, competitors stepped up their promotions during the same timeframe, dealing Ruth’s “a slight setback” in market share.
During a conference call with investors, officials of the chain disclosed that six units are testing a Bistro menu consisting of items priced from $9 to $19. The limited menu is being offered in the test stores’ bars.
Wednesday, August 5, 2009
Don't bogart that financial statement
This week's earnings reports are giving the restaurant industry a new riff for its all-night blues jam. And, man, it's a killer. If the business could find enough green shoots, its best shot at solace might be to smoke 'em.
Consider, for instance, the meltdown at the high end of the casual market. The comp sales figure provide the slide work on this one: Morton's, down 26.1%; Ruth's Chris, down 23%; McCormick & Schmick's, down 17.3%; Benihana, down 13.1%. Keep in mind that several of those big-ticket players have already armed themselves with steep discounts relative to their usual prices. There's just not enough expense-account and top-ticket tourism business to avert a sales plummet. Ruth's Chris, for instance, said a continuation of its comps trend would cost each store about $1 million a year in sales.
But that's casual dining, and the top drawer at that. Surely it's a different story for fast-food.
Sure enough, comps ebbed only a little more than a percentage point for company-run Jack in the Box restaurants, and the damage wasn't much worse for the burger concept's little sister of a brand, Qdoba.
But in analyzing the factors for the benefit of investors, Jack in the Box CEO Linda Lang acknowledged that breakfast, one of the areas of growth for the whole sector, had been weak.
"We also saw some fall-off in sales [of] side items, carbonated beverages, and shakes," added Lang. Throw coffee in there, and you have the key profit drivers of fast-food.
Jack's solution: Discount deeper. The chain recently added a head-turner called the Big Deal, a cheeseburger, taco, fries and a drink, for $2.99. And, says Lang, "We currently have additional value-priced product or promotions in test elsewhere in our system." She described them as "margin neutral or margin friendly," without revealing specifics.
BurgerBusiness, Scott Hume's site devoted to all things burgers, noted in a recent posting that $2.99 is the new $5, the rockbottom threshold where everyone wanted to be earlier this year. As he pointed out, White Castle and Sonic are already offering meals at that price level.
Even Hardee's, a proponent of heft, is dabbling with bargain-priced snacks, vis-a-vis its new biscuit holes.
Product giveaways have become a routine way for chains to flycast for more customers. But if an everyday meal costs a mere $2.99, will that hook stay as irresistible? Or might "cheap" become irreversibly associated in the public's mind with "quick-service"?
I don't know, but I bet we're going to find out.
Consider, for instance, the meltdown at the high end of the casual market. The comp sales figure provide the slide work on this one: Morton's, down 26.1%; Ruth's Chris, down 23%; McCormick & Schmick's, down 17.3%; Benihana, down 13.1%. Keep in mind that several of those big-ticket players have already armed themselves with steep discounts relative to their usual prices. There's just not enough expense-account and top-ticket tourism business to avert a sales plummet. Ruth's Chris, for instance, said a continuation of its comps trend would cost each store about $1 million a year in sales.
But that's casual dining, and the top drawer at that. Surely it's a different story for fast-food.
Sure enough, comps ebbed only a little more than a percentage point for company-run Jack in the Box restaurants, and the damage wasn't much worse for the burger concept's little sister of a brand, Qdoba.
But in analyzing the factors for the benefit of investors, Jack in the Box CEO Linda Lang acknowledged that breakfast, one of the areas of growth for the whole sector, had been weak.
"We also saw some fall-off in sales [of] side items, carbonated beverages, and shakes," added Lang. Throw coffee in there, and you have the key profit drivers of fast-food.
Jack's solution: Discount deeper. The chain recently added a head-turner called the Big Deal, a cheeseburger, taco, fries and a drink, for $2.99. And, says Lang, "We currently have additional value-priced product or promotions in test elsewhere in our system." She described them as "margin neutral or margin friendly," without revealing specifics.
BurgerBusiness, Scott Hume's site devoted to all things burgers, noted in a recent posting that $2.99 is the new $5, the rockbottom threshold where everyone wanted to be earlier this year. As he pointed out, White Castle and Sonic are already offering meals at that price level.
Even Hardee's, a proponent of heft, is dabbling with bargain-priced snacks, vis-a-vis its new biscuit holes.
Product giveaways have become a routine way for chains to flycast for more customers. But if an everyday meal costs a mere $2.99, will that hook stay as irresistible? Or might "cheap" become irreversibly associated in the public's mind with "quick-service"?
I don't know, but I bet we're going to find out.
Friday, July 31, 2009
Discounting at the sterling level
How do you tactfully offer a bargain when your customers view you as a Mercedes-class experience? That’s the quandary facing Ruth’s Chris Steak House, a longtime favorite of the expense-account crowd.
The chain tried a bundled-meal deal—the equivalent of a Dollar Menu to the Gold Card set—in February. Patrons could have shrimp, a six-ounce filet or several other upscale entrees, packaged with a side and a dessert, for a mere $39.95. By the standards of that segment, this was dangerously close to a tie-in with a blockbuster summer movie.
The nod to value played well with Ruth’s clientele. “It has been well received by our guests and is representing a sizable portion of our sales mix,” CEO Mike O’Donnell told analysts during a conference call today.
Indeed, he seemed to suggest, the promo might’ve been too well received. The chain’s typical guest check fell 6.5%, to $70. Ruth’s was getting less per guest, which would’ve been fine if more guests were drawn by the head-turner.
But comp sales fell by more than 23%. The numbers indicate that traffic was down as well as the average check.
So what’s a high-end chain to do?
The chain is currently testing a bistro menu in the lounges of six restaurants. A second possibility, a $19.95 steak-and-fries platter, is being tested during the normally slow beginning of the week at three locations.
But the chain’s not abandoning its prix-fixe deal, at least not this summer. Apparently the company feels it was enough of a brake on the traffic decline to keep it in place. O’Donnell cited expectations that the value offer might catch on and hit an “inflection point,” where it becomes a boon to traffic, even though the average tab might slip by a few more dollars. And as he noted in response to a question on that point, patrons can “buy up” to a $49.95 version.
I guess it’s like trading up to a large drink.
The chain tried a bundled-meal deal—the equivalent of a Dollar Menu to the Gold Card set—in February. Patrons could have shrimp, a six-ounce filet or several other upscale entrees, packaged with a side and a dessert, for a mere $39.95. By the standards of that segment, this was dangerously close to a tie-in with a blockbuster summer movie.
The nod to value played well with Ruth’s clientele. “It has been well received by our guests and is representing a sizable portion of our sales mix,” CEO Mike O’Donnell told analysts during a conference call today.
Indeed, he seemed to suggest, the promo might’ve been too well received. The chain’s typical guest check fell 6.5%, to $70. Ruth’s was getting less per guest, which would’ve been fine if more guests were drawn by the head-turner.
But comp sales fell by more than 23%. The numbers indicate that traffic was down as well as the average check.
So what’s a high-end chain to do?
The chain is currently testing a bistro menu in the lounges of six restaurants. A second possibility, a $19.95 steak-and-fries platter, is being tested during the normally slow beginning of the week at three locations.
But the chain’s not abandoning its prix-fixe deal, at least not this summer. Apparently the company feels it was enough of a brake on the traffic decline to keep it in place. O’Donnell cited expectations that the value offer might catch on and hit an “inflection point,” where it becomes a boon to traffic, even though the average tab might slip by a few more dollars. And as he noted in response to a question on that point, patrons can “buy up” to a $49.95 version.
I guess it’s like trading up to a large drink.
Monday, January 12, 2009
No mas! No mas!
The business week is barely underway, but it's already shaping up to be a stinker. The early bad news includes the bombshell that Landry's is backing out of a long-awaited buyout by founder and CEO Tilman Fertitta because the backers don't want details of the financing arrangement revealed to shareholders, as the SEC is demanding. Then there's Ruth's Chris' disclosure that fourth-quarter same-store sales dropped 18.5%. And, just to put that last smiley face on the morning's restaurant headlines, there's a full-fledged food-safety crisis involving peanut butter sold by one supplier to foodservice operators in at least 42 states.
The Landry's situation is by the far the real startler. The deal has had more ups and downs than a roller coaster at one of the company's amusement complexes. Now, with the going-private process in the home stretch, the buyout is called off, for reasons that are murky at best.
As an announcement cryptically recounts, the SEC ordered that the terms between buyer, seller and the deal's financial backers be released to shareholders. Landry's said it informed the agency that the agreements prohibit the disclosure of that proprietary information. The SEC responded in essence with, "Too bad. Tell your shareholders all the specifics."
If Landry's decided to comply with the SEC's directive, the funding might've been pulled in retribution. But, even worse for the company, the lenders could back out of a stipulation that they refinance $400 million in notes. Landry's would lose its suitor and a chance to lighten a crippling debt burden. The most responsible choice, the company argued in a press release, was to terminate the buyout. That way it wouldn't have to issue a proxy to shareholders. The disclosures demanded by the SEC would not have be made, the financiers would be appeased, and the refinancing could continue.
The big mystery, of course, is what the lenders--several Jefferies & Co. and Wells Fargo affiliates--did not want revealed. Barring a new John Grisham novel, we may never find out.
Perhaps Fertitta should shift his attention to buying out Ruth's Chris instead.
The Landry's situation is by the far the real startler. The deal has had more ups and downs than a roller coaster at one of the company's amusement complexes. Now, with the going-private process in the home stretch, the buyout is called off, for reasons that are murky at best.
As an announcement cryptically recounts, the SEC ordered that the terms between buyer, seller and the deal's financial backers be released to shareholders. Landry's said it informed the agency that the agreements prohibit the disclosure of that proprietary information. The SEC responded in essence with, "Too bad. Tell your shareholders all the specifics."
If Landry's decided to comply with the SEC's directive, the funding might've been pulled in retribution. But, even worse for the company, the lenders could back out of a stipulation that they refinance $400 million in notes. Landry's would lose its suitor and a chance to lighten a crippling debt burden. The most responsible choice, the company argued in a press release, was to terminate the buyout. That way it wouldn't have to issue a proxy to shareholders. The disclosures demanded by the SEC would not have be made, the financiers would be appeased, and the refinancing could continue.
The big mystery, of course, is what the lenders--several Jefferies & Co. and Wells Fargo affiliates--did not want revealed. Barring a new John Grisham novel, we may never find out.
Perhaps Fertitta should shift his attention to buying out Ruth's Chris instead.
Subscribe to:
Posts (Atom)
Posts
