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Financing

Ruth's Chris sees some relief on beef costs

Earnings Roundup: Chuy's sales hurt by the Texas heat and Fat Brands looks for more acquisition targets.
Ruth's chris beef costs
Ruth's Chris saw beef costs fall 6% last quarter. / Photograph: Shutterstock.

Ruth’s Chris in the second quarter lapped record-high beef prices from a year ago, which resulted in some welcome deflation in the key protein. Its beef costs fell 6% in the period, and the 152-unit steakhouse chain expects its overall food costs to be relatively flat year over year for the second half of 2022.

Ruth’s same-store sales rose 12.6% year-over-year, driven by strong post-omicron demand in April and May. Sales slowed in June, however, up just 1.5% compared to last June.

“While June comps softened compared to the prior 2 months, similar to the overall industry slowdown, we are pleased with the double-digit comp growth,” said CFO Kristy Chipman, according to a transcript on financial services site Sentieo.

Texas temps cool Chuy’s sales

Like Ruth’s, Chuy’s saw sales start to slow in June and into the third quarter. Part of that, executives said, was record heat in May, June and July in Texas, home to about 40 of Chuy’s roughly 100 restaurants.

“We lost $3 million in patio sales this quarter,” said CFO Jon Howie, according to a Sentieo transcript. He noted that patio diners tend to order more alcohol than indoor guests.

Overall, Chuy’s same-store sales rose 1.7% year over year in the period.

On the bottom line, Chuy’s food costs rose 24% in the quarter, while labor costs rose 11%. The Tex-Mex chain said it would raise prices by about 3.5% in the third quarter to help offset the increases. That will bring its total pricing to about 7% for the year.

Fat Brands looks to targeted deals

Fat Brands, the franchise brand collector, has slowed its dealmaking this year after completing nearly $1 billion worth of acquisitions in 2021, including acquisitions of Twin Peaks and Round Table Pizza owner Global Franchise Group. It has announced only one deal this year, for Nestle Toll House Cafe in May.

But it isn’t exactly shying away from acquisitions, either. “Our acquisition strategy is one of the core pillars of Fat Brands, and we will continue to evaluate and capitalize on potential candidates as we see fit,” CEO Andy Wiederhorn said in a statement. 

In particular, the company is looking for brands with a proven, profitable track record with a path to growth. It is not looking for chains that “need significant turnaround efforts and are simply cheap to buy.” 

“We think there are interesting targets available in the market today,” Wiederhorn said.

UPDATE: This story has been updated to correct information on the types of concepts Fat Brands is looking to buy. 

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