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RT – One Day Until The Live Demolition

Ruby Tuesday is literally blowing up one of its locations on Tuesday, August 5 at 3 p.m. ET “to bid a final farewell to the past with one elegant, understated gesture: Demolishing the last old Ruby Tuesday,” as the company states on its website. The company has launched a massive reimage program, remodeling 650 restaurants in the last 12 months, as of 4Q08. So when it says the “last old Ruby Tuesday,” it is referring to a location that has not yet been upgraded.
  • This live demolition, in of itself, is funny. It is made even more ridiculous when you consider that the reimages have not yet proven successful as the restaurant upgrades represent a change in strategy with RT attempting to enter the more upscale restaurant market. These restaurant reimages have alienated a big portion of RT’s prior customer base. Management stated on its last conference call, “we probably hurt ourselves by taking the eye off the ball when we remodeled approximately 650 company-owned restaurants in less than 12 months, as well as by losing some of our guests, we believe lower end guests who maybe felt less comfortable in our reimaged restaurants.” The company is making a big deal about saying goodbye to the “old Ruby Tuesday,” but it is also saying goodbye to a lot of its former loyal customers.
  • Make sure to watch it live at RubyTuesday.com!

EAT – 4Q Less Than Toxic

As I have said before, the company’s improved capital allocation decisions should generate more favorable returns going forward as should its move to a higher franchise ownership mix (expected to reach 35% franchise ownership by the end of 2008). Additionally, Brinker’s recent restructuring of its restaurant support center in 3Q08, which represented a 10% reduction of costs, should give the company some leverage on the G&A line.
  • 3 recent data points to think about:
  • Our proprietary grass roots survey gives us confidence that the favorable trends at Chili’s from last quarter have continued. Chili’s same-store sales were up 1.6% in 3Q08 after being down 2.4% in 2Q and negative for all of fiscal 2007. These improved trends seem to reflect management’s sentiment from its 3Q earnings call in April when they said, “so the short-term trend appears positive and we’re off to a good start and expect the stimulus checks to help in May and June. In addition it appears California and Florida are doing better. With still negative performance both those markets appear to have bottomed down in December and have shown improvement each month since.”
  • NPD data points to an uptick in traffic trends within the bar and grill segment in the March-May 2008 timeframe. According to NPD, casual dining posted a 1% increase in traffic with the bar and grill category posting the largest incremental year-over-year traffic gains, up 4%. The casual dining “varied menu” lost traffic, which suggested a trade off to bar and grill.
  • Bennigan’s recent filing for Chapter 7 bankruptcy protection and the subsequent restaurant closures should benefit Chili’s as Bennigan’s was a direct competitor within the bar and grill segment. Additionally, Chili’s more penetrated U.S. states overlapped with those of Bennigan’s so the closures should also help Chili’s from a capacity standpoint (please refer to my Bankruptcy Cycle Continues – July 30 posting for more details).
EAT Same-Store Sales

Father Knows Best

I find it both amusing and telling to see the timeline below of the 3 years leading up to the demise of Boscov’s – which filed Chapter 11 today. The punchline is that the founders of the business saw this coming. They cashed out in early ’06 – the same time private equity money was free, and the writing was on the wall for the apparel retail business heading into ’07 and beyond. Boscov’s is not alone in founders cashing out at the top. Goody’s, Chick’s Sporting Goods (before sale to Dick’s), as well as others. Whenever a founding family looks to sell 100 years of blood sweat and tears. Run. Fast.

Thanks to First Rain for directing me to several articles on the topic.

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