At least 150 Ruby Tuesday locations are still closed even as states reopen dining rooms around the country—and many will not reopen.
In an interview with Restaurant Business this week, Aziz Hashim, the founder and managing partner of Ruby Tuesday owner NRD Capital, said the restaurants’ fate rests with how quick dining comes back, as well as the patience of the company’s landlords.
“The final tally as to the permanent number of closures is to be determined for us,” Hashim said. “Some of it depends on how quickly sales come back.”
“It all depends on revenue coming back, and how cooperative landlords are. Revenues and landlords.”
One thing is clear, however: Ruby Tuesday will be a smaller chain than when it started, and the pandemic is hastening a pullback that has been going on for years.
NRD took the casual dining chain private in 2017 in a deal valued at $335 million. The chain had been in a years-long downward spiral, brought on by weakness in the casual dining market and failed efforts to upscale the chain in the past.
The company has continued to close units since the acquisition. “It’s no big secret that the business plan for Ruby Tuesday from the day we bought it was to cull the weaker units,” Hashim said.
A decade ago, Ruby Tuesday operated or franchised 840 locations, according to data from Restaurant Business sister company Technomic. When NRD acquired the chain, it operated 599 restaurants.
Going into 2020, the company operated 470 restaurants, including 19 outside of the U.S.
Today? That number is “between 270 and 300,” according to Hashim. The number of open restaurants remains “fluid,” with a number reopening every day, he said. As such, as many as 180 locations are shuttered, at least temporarily.
Still, the company likely will operate at about a third of where it was just more than a decade ago, and half of where it was just in 2017. Many of the closures hastened by a pandemic that left casual dining restaurants without the dine-in business to which they’ve grown accustomed.
Ruby Tuesday has been undergoing an “orderly process” of culling that herd in the years since NRD bought the chain. As leases expired or it became time to remodel locations, the company would analyze its performance and close the restaurant if it wasn’t profitable.
COVID-19, Hashim said, “has accelerated things forward.”
“What might have taken several more years happened much more quickly,” he said. “We were forced to make decisions overnight.”
“We’re doing maybe five years’ worth of closings in five months,” Hashim added.
The decline of Ruby Tuesday has symbolized the overall decline in casual dining, as more customers shift their business to fast-food and fast-casual restaurants.
“Overbuilding in casual dining has been well reported,” Hashim said. “The notion that all casual-dining companies will be trimming the herd is not a new phenomenon. It took too long to trim some of their fleet.”
Ruby Tuesday was able to recover some sales through its takeout and delivery during the pandemic.
The company has been reopening some locations that were temporarily closed. It expects to reopen more over time, and Hashim noted that “many of those [closed] restaurants have not been stripped of their equipment.”
“In times like this, if you have an extreme decline in sales, you don’t have the luxury of taking a loss month after month after month,” Hashim said.
He said that dine-in sales are picking up as restaurants reopen, though “not as quickly as we would like.” The long-term viability of many restaurants rests not just with their sales but with the willingness of landlords to negotiate lease terms.
Like many restaurants, Ruby Tuesday was able to stop paying rent in April, May and June. Yet, once July rolls around and more restaurants are open, many landlords and other might request all of that back rent.
That could prompt many closure decisions at not just Ruby Tuesday but other restaurants, and particularly casual dining concepts that expect a slower overall recovery. The vendors might demand all the back payments, but the restaurants might not be able to afford it if sales haven’t returned.
“Starting in the third quarter, patience will wear out,” Hashim said. “There’s going to be a blood bath.”
Hashim is not confident in a quick recovery for casual-dining restaurants. “I don’t think it goes back to 100% in the near-term,” he said. “The ability to pay rent at full capacity remains very doubtful.”