Aziz Hashim might have been the shortest-tenured CEO in Ruby Tuesday history.
The company on Tuesday named Ray Blanchette its permanent CEO, hoping that the former Au Bon Pain and Ignite Restaurant Group CEO’s turnaround experience can lift the casual-dining chain back from the depths.
Hashim, whose NRD Capital took ownership of the Maryville, Tenn.-based chain last month and named him interim CEO, called Blanchette a “very opportunistic” hire that led him to replace himself more quickly than he expected.
“The plan was always to find a permanent leader,” Hashim said, adding that Panera Bread’s acquisition of Au Bon Pain was recently completed, making Blanchette available. “It was very opportunistic and I made the decision to forgo the title.”
Blanchette takes on the challenging job of turning around Ruby Tuesday, which operates just less than 600 locations and went private following a steady, 12-year decline. The bar and grill segment in which the company operates is one of the most challenged in the restaurant business, and Ruby Tuesday’s $1.6 million average unit volume, according to Technomic Insight data, is one of the lowest in that sector.
But in an interview at the ICR Conference this week, Blanchette said he is “bullish on the opportunity.”
“There’s still an opportunity to make a difference in bar and grill,” he said.
One of the advantages, he said, is that Ruby Tuesday is a company-owned operation, rather than a franchise, which should make it easier for the company to make changes because it doesn’t have to convince operators to get on board. “Franchising is great, but you lose the ability to maneuver,” he said.
And, indeed, Hashim said the plan, at least for now, is to remain a primarily company-owned operation—at least until the brand has turned around its performance. “I want to be able to look franchisees in the eye and be able to tell them they’re buying something that’s on an upward trend,” said Hashim, himself a former franchisee before he founded the private-equity firm NRD.
Said Blanchette: “We have to turn this business around.”
Blanchette, who had helped turn around Joe’s Crab Shack before taking its owner, Ignite Restaurant Group, public in 2012, said the bar and grill sector has been in a “race to the bottom” in recent years by focusing too much on price.
“I was GM for TGI Fridays in 1992,” he said. “At the time we sold a rack of ribs and fries and slaw for $18.99. That was in 1992. Today that’s what, $13? You think about that.”
He said that bar and grill chains have to focus on the experience inside the restaurants. “We’re selling an experience, not just groceries,” Blanchette said.
One of the challenges in the bar and grill sector is supply. There’s a widely held belief that the sector remains oversupplied for the amount of demand and that chains could be forced to close locations.
Ruby Tuesday has closed hundreds of locations over the years. When asked about the prospect of closing more, Blanchette said it’s too early to tell. But, he said, “All restaurants have to contribute positively to four-wall EBITDA,” or earnings before interest, taxes, depreciation and amortization.
Blanchette said the chain will maintain its Garden Bar, but that won’t be the focus of its turnaround. “It’s difficult to turn a brand around based on lettuce,” he said.
And he noted that new product news, rather than a focus on price to generate traffic, will be vital for Ruby Tuesday’s future. Blanchette said that product news is far more effective than price marketing.
“The strongest advertising is new product news, not price,” he said. “It’s about seeing food you want to shove in your face.”
And while turning around Ruby Tuesday will be a challenge, the company does have some advantages, and a history as a segment leader before the recession hit in 2008.
“It was the front-runner in the category,” Hashim said. “People remember good meals at Ruby Tuesday and good times. It sort of fell into hard times and then there was a decision by management to turn it into a polished casual, and then the recession hit. Talk about awful timing.
“It’s got a cool name. It’s named after a Rolling Stones song. A lot of people are rooting for us.”