Incorporated: 1972
NAIC: 722110 Full-Service Restaurants; 533110 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works)
Ruby Tuesday, Inc. is a leading company in the bar-and-grill category of the U.S. casual dining restaurant industry. From its original location in Knoxville, Tennessee, the Ruby Tuesday chain has grown to more than 700 units in about 40 states primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest. Nearly 500 of the outlets are company owned with the remainder being franchised. Entrees, ranging in price from $6.49 to $16.99, include ribs, chicken, steak, seafood, pasta, burgers, and sandwiches, and the menu also features soups, a salad bar, and desserts. The restaurants also offer food for carry-out via the company's "curb-side to-go" initiative. Ruby Tuesday's relatively small but expanding international operations include about three dozen franchised restaurants in about a dozen countries. Ruby Tuesday was founded in 1972 with the opening of the Knoxville outlet, enjoyed ten years of expansion as an independent company, then spent 14 years as part of Morrison Inc. (later known as Morrison Restaurants Inc.) from 1982 to 1996, and finally became independent again in 1996 when Morrison split up into three separate publicly traded companies, one of which was Ruby Tuesday, Inc.
That original Knoxville location had its beginnings in a Hollywood-like deathbed scene. In 1972 Samuel E. (Sandy) Beall was a 22-year-old University of Tennessee, Knoxville, student majoring in finance, who on the side helped William Kholmia manage a group of Pizza Hut restaurants. Kholmia suffered a massive heart attack that year. On his deathbed, Kholmia, wanting his protegé to be his own boss, offered Beall $10,000 to open a restaurant.
Beall accepted the offer, and together with four of his college buddies scraped together another $10,000 to open the first Ruby Tuesday, which was located near the university campus in Knoxville. Beall named the restaurant after the then ubiquitous Rolling Stones' song "Ruby Tuesday," which he kept hearing on the jukebox. The restaurant itself, which was a converted old house, featured barn wood walls, fake Tiffany lamps over the tables, and a $1.45 hamburger served on an English muffin. Beall also secured the first liquor-by-drink license in Knoxville, which enhanced the restaurant's popularity with students. Ruby Tuesday's subsequent success made Beall too busy for school, so he dropped out to devote himself full-time to his venture.
Over the next several years, Ruby Tuesday grew slowly, adding a new outlet about every nine months. As the chain expanded, the rustic decor and inexpensive fare proved popular with not only college students but also young couples. By 1982, ten years after its founding, Ruby Tuesday was a 15 restaurant chain. Nearly all the restaurants were located in regional shopping malls. Beall had also begun to develop a second concept called L&N Seafood Grill.
As Ruby Tuesday's rate of growth began to increase in the early 1980s, Beall realized he needed more capital to expand the flagship chain and develop other concepts. He considered taking the company public, entering the franchising game, or selling the company. It was the last option that he eventually took, following a real estate agent/acquaintance's suggestion that Morrison Inc. might be a likely buyer.
Morrison was a cafeteria and contract foodservice chain founded in 1920 and headquartered in Mobile, Alabama. An ill-conceived diversification in the 1960s into motels, china and small wares, insurance, and other disparate areas led to confusion and reduced profit margins by the late 1970s. Morrison's fortunes were turned around following the appointment of Ernest Eugene Bishop as CEO in 1980. Bishop quickly divested the company of all its non-restaurant and food-service businesses, and then, in April 1982, enhanced Morrison's restaurant sector by buying Ruby Tuesday for $15 million in cash and stock. At the time, Ruby Tuesday revenue averaged about $1 million a year per restaurant.
Bishop left Beall in control of the day-to-day operations of Ruby Tuesday, making Beall president of the newly created Specialty Restaurant Division of Morrison. Beall soon opened the first L&N Seafood Grill, located in Knoxville, then developed the Silver Spoon Cafe concept, a New York City delicatessen-style restaurant. The first Silver Spoon opened in 1984, also in Knoxville.
By 1985 it was clear that the sale of Ruby Tuesday to Morrison had indeed enabled the restaurant chain to markedly increase its growth rate. At fiscal year-end 1985, there were 35 Ruby Tuesdays in business, more than double the number at the time of the sale, along with seven L&N restaurants. The Specialty Restaurant Division as a whole brought in $70 million in revenue, 11 percent of Morrison's total. More importantly, the Ruby Tuesday restaurants were improving Morrison's overall profitability since the Specialty Restaurant Division's $7.5 million in profits represented 18 percent of the parent company's total.
The increasing importance of the specialty restaurants to Morrison's future was quite evident when Bishop decided in 1985 that Beall should be his successor. That year Bishop made Beall executive vice-president of Morrison's specialty restaurants and cafeteria operations. Since before Ruby Tuesday was sold to Morrison, Beall lived in the resort town of Hilton Head, South Carolina, and commuted to Knoxville, where Ruby Tuesday was still based. In 1986 Bishop asked Beall to relocate to Mobile to become president and COO of Morrison, and Beall agreed, proving his dedication and his desire to succeed Bishop by leaving his beloved Hilton Head.
Meanwhile, the specialty restaurants continued to grow at a rapid pace in the late 1980s, nearing the 200-unit mark, with more than 125 Ruby Tuesdays among them. All of this growth was achieved through company-owned units, keeping Morrison in total control of operations, control that would have been impossible if the company had decided to franchise. As Morrison's cafeteria operations suffered from a general category-wide decline, the specialty restaurants became even more important, accounting for half of Morrison's profits by the end of the decade.
In the early 1990s, in order to provide more growth opportunities and to guard against the fluctuations of the retail market, the Ruby Tuesday chain was shifted from an emphasis on shopping mall locations to a longer-term 50-50 mix of mall and freestanding locations. In conjunction with this shift came Ruby Tuesday's inclusion in so-called restaurant parks, clusters of dinner houses that share some development and ongoing operational costs and that provide customers a range of restaurant choices in a small area--even the easy ability to switch their restaurant choice if the wait at one restaurant is too long. One of the first restaurant parks featuring a Ruby Tuesday was located in the Denver suburb of Englewood--with the other dinner houses being Chevys, Grisanti's, and Stanford's.
In 1992 Morrison restructured itself, emphasizing restaurants over cafeterias by changing its name to Morrison Restaurants Inc. The dinner house restaurants--Ruby Tuesday, L&N, and Silver Spoon--were positioned within Morrison Restaurants as the Casual Dining Group, later known as the Ruby Tuesday Group. The year 1992 also saw Beall become CEO of Morrison, and Morrison posted its first $1 billion revenue year.
In the early 1990s, Beall was beginning to become disenchanted with the L&N Seafood concept. Ruby Tuesday's success was largely attributed to its per-person check average of $8.75, and Beall was finding it nearly impossible to get L&N's average even under $10. At the same time, the Silver Spoon concept was not overly successful either, and was considered too similar to Ruby Tuesday itself. Meanwhile, Beall was strongly interested in entering the burgeoning Italian restaurant sector, and signed a letter of intent late in 1992 to acquire Uno Restaurants Corporation and its chain of 110 Italian restaurants. Early the following year, however, Uno pulled out of the deal after a disagreement over the purchase price.
Left without this prize acquisition, Beall decided it was time to abandon Silver Spoon and create a new casual Italian restaurant, to be called Mozzarella's Cafe. In 1993 Silver Spoon units began to be converted to Mozzarella's, which featured a variety of pasta dishes and pizzas, as well as fresh seafood, steak, and grilled chicken selections. The check average--$9.50--was higher than Ruby Tuesday's, but still under the $10 mark. The under $10 category was where Beall wished to position all of the Ruby Tuesday Group concepts.
Beall continued to revamp the Ruby Tuesday Group later in 1993 and in the following two years. The group entered into a joint venture in mid-1993 with the Dallas-based 12-unit Tia's Tex-Mex, founded by Larry Lavine (founder of the highly successful Chili's chain), who needed financing to fund further expansion. As part of the joint venture agreement, the Ruby Tuesday Group was given a five-year option to acquire Tia's, which it did in January 1995 for $9 million in common stock. Tia's restaurants were conceived to be "reminiscent of a grand old Mexican restaurant," featured display kitchens and outdoor patios, and offered various Tex-Mex dishes with a $9 check average.
The year 1993 also saw the debut of Sweetpea's, a Southern-style dinner house, in suburban Atlanta. Featuring such home-style and comfort-type meals as country-fried steak and chicken pot pie and a check average in the $7 range, Sweetpea's was positioned to compete with such stalwarts as Cracker Barrel and Shoney's. In 1994, having already grown to four units, the Sweetpea's name was changed to Snapp's because the Ruby Tuesday Group could not secure legal rights to the name and because the Dallas-based Black-eyed Pea (another Southern-style restaurant) raised objections to the name, fearing customer confusion.
In mid-1994, the Ruby Tuesday Group announced that it would phase out the L&N Seafood Grill concept, given that L&N could not conform to the Ruby Tuesday under $10 check average. Most of the L&Ns were subsequently converted to either Ruby Tuesdays or Mozzarella's Cafes, although several were simply closed. Approximately $20 million was set aside to implement the phaseout.
In May 1995 Ruby Tuesday entered into a license agreement with Jardine Pacific to develop Ruby Tuesday restaurants in the Asia-Pacific region. The first Ruby Tuesday located outside the United States opened in Hong Kong in July 1995, with additional units planned for mainland China, Singapore, Malaysia, and Australia.
Ruby Tuesday came full circle in 1996 when Morrison was split into three separate public companies: Ruby Tuesday, Inc., the former Ruby Tuesday Group; Morrison Fresh Cooking Inc., comprised of Morrison's cafeterias and quick-service restaurants; and Morrison Health Care Inc., the healthcare foodservice business of Morrison. Of the spinoffs, Beall said, "Now that our businesses have matured, we no longer need a layer of administrative management between these self-supporting independent operations and the shareholders." Legally, Ruby Tuesday, Inc. was the successor company to Morrison Restaurants Inc.; Beall retained his position as president and CEO of Ruby Tuesday, which remained based in Mobile.
Ruby Tuesday's first year of its second period as an independent company was a rough one. Although revenues increased 20.3 percent to $620.1 million in fiscal 1996, the company posted a net loss of $2.9 million due in part to increased competition in its restaurant sector and in part to $25.9 million in asset impairment and restructuring charges that were posted during the third quarter. The firm bounced back the next year, however, reporting profits of $25 million on sales of $655.4 million. During 1997 the company established an international division to facilitate overseas growth, and it also began franchising. In terms of the latter, the strategy taken was to keep operating company-owned restaurants in core geographic areas while selling off or otherwise establishing units in noncore regions. For example, during the fiscal year ending in June 1998, 48 restaurants in Arizona, Colorado, Florida, and a few other markets were sold to franchisees. At the same time, Ruby Tuesday was opening about 40 new restaurants a year.
In the summer of 1998 the company returned to its roots, moving its corporate headquarters to Maryville, Tennessee, about 15 miles south of Knoxville. The new corporate campus also included an onsite training facility. Revenue growth slowed in the final years of the decade because of the continuing sale of units to franchisees, but profits kept growing. For fiscal year 1999, revenues grew just 1.5 percent, reaching $722.3 million, but profits jumped 25.6 percent, to $36.5 million. That year the poorly performing Mozzarella's Cafe units were converted into a concept called American Cafe. Among the overseas markets being targeted for growth at this time were Chile, Honduras, Iceland, India, and Kuwait. Back home, the number of franchised Ruby Tuesdays neared the 100 mark.
Ruby Tuesday began the 21st century with a retrenchment. In April 2000 the company announced plans to sell off the Tia's Tex-Mex (26-unit) and American Cafe (42-unit) chains in order to focus full attention on the flagship operation. In November 2000 Ruby Tuesday completed the sale of the restaurants to Specialty Restaurant Group, LLC in a management-led buyout valued at about $59 million. In anticipation of the sale, the company took a $10.1 million charge, cutting into profits for the fiscal year ending in June 2000. Whereas profits grew only slightly, revenue increased 10 percent, reaching $797.5 million, despite the sale of another 42 Ruby Tuesday restaurants to franchisees.
The early 2000s saw Americans increasingly seeking takeout food higher in quality than typical fast-food fare. A few casual dining chains, including Outback Steakhouse, Inc., pioneered in curbside pickup programs through which a customer could call in an order and then drive to the restaurant and park in one of several designated spaces. These spaces were monitored by restaurant staff, usually via video camera, who would then run the order out to the car. Ruby Tuesday joined this successful trend by launching what was eventually called "curb-side to-go" at selected locations in 2001. After finding that takeout revenues had doubled at these units, the company began expanding the program. By late 2003 all the chain's non-mall locations were offering curb-side to-go.
Although Ruby Tuesday saw some softening of sales, particularly at its mall locations, in the immediate aftermath of September 11, 2001, when consumers pulled back on their spending, the overall trend was positive. The company continued to open 45 to 50 company-owned units per year in the eastern United States, while opening about two dozen franchise units each year west of the Mississippi. By early 2004 there were at least 700 Ruby Tuesdays across the country, more than 200 of which were franchise outlets. For the fiscal year ending in May 2004, the company's revenues surpassed the $1 billion mark for the first time. Profits were a record $110 million.
At this time, Ruby Tuesday was in the midst of launching several initiatives aimed at nutrition- and diet-conscious Americans. In late 2003 its restaurants began frying foods in canola oil, which is free of the trans fats that had been linked to heart disease. At the same time, a new menu was introduced featuring several low-carb items aimed at dieters watching their intake of carbohydrates. Then in April 2004, in an unprecedented move, the restaurants began using menus that included nutritional information for every item, listing calories, total fat, net carbs, and fiber. The company backtracked just four months later, however, and removed the listings from the menus, citing the prohibitive cost of printing new menus every time there were changes. Anytime a menu item was altered in any way, such as a portion size change or the amount of a particular ingredient, a menu reprint was necessitated. As a replacement, Ruby Tuesday began printing the data on separate tabletop cards, the updating of which was expected to be quicker and less costly.
The timing of these initiatives was perhaps unfortunate. Simultaneously, Ruby Tuesday also cut its portion sizes on a number of its dishes, which alienated many customers, and it also began a marketing transition from a coupon-based campaign to the chain's first television advertising effort. The elimination of the coupons and the negative customer response to the portion cuts were factors in a 5 percent decline in sales during the second half of the 2004 calendar year. With a consumer backlash against leaner menus apparently building, Ruby Tuesday early in 2005 at least partially reversed course and rolled out heavier fare, including thick-cut onion rings and half-pound burgers. The menu nevertheless still offered more than 30 low-carb, low-fat, and low-calorie choices, and Ruby Tuesday remained the only U.S. casual dining chain with a salad bar. Chairman and CEO Beall was hoping that aggressive television advertising could turn the tide and make this downturn short-lived.
Principal Competitors
Darden Restaurants, Inc.; Brinker International, Inc.; Applebee's International, Inc.; Carlson Restaurants Worldwide, Inc.; Outback Steakhouse, Inc.
Further Reading
Bernstein, Charles, "Beall Puts the 'More' in Morrison: Samuel E. 'Sandy' Beall III Is Determined to Make Morrison Inc. a Casual-Restaurant Chain Empire Every Bit As Strong As Brinker and General Mills Restaurants," Restaurants and Institutions, July 1, 1994, pp. 20-22, 26, 30, 34.
------, "Morrison: Hello, Ruby Tuesday," Restaurants and Institutions, August 26, 1992, pp. 27-28.
Carlino, Bill, "Forging a New Identity," Nation's Restaurant News, March 28, 1994, p. 66.
------, "Morrison Splits into Three Companies," Nation's Restaurant News, October 9, 1995, p. 1.
------, "Ruby Tuesday Tunes Trio, Adds Sweetpea's to Stable," Nation's Restaurant News, May 24, 1993, p. 5.
Geisel, Amy, "There's No Place Like Home: Ruby's Back to Its Roots," Knoxville (Tenn.) News-Sentinel, May 17, 1998, p. D1.
Gordon, Mitchell, "Morrison's Moves: Cafeteria Operator Profiting from Full-Serve Eateries," Barron's, September 30, 1985, pp. 50-51.
Gray, Steven, "Dishing Out the Truth: Ruby Tuesday Yanks Listings of Calories, Fat on Its Menus," Wall Street Journal, August 31, 2004, p. B1.
Greenwald, Judy, "Profitable Recipe: Morrison Finds Few Things Beat the Cafeteria Trade," Barron's, September 13, 1982, pp. 52-53.
Hayes, Jack, "Drive-by Dining: Ruby Tuesday Steers Toward Curbside Takeout," Nation's Restaurant News, November 26, 2001, pp. 4, 61.
Kadlec, Daniel, "Chain Reaction," Time, June 7, 2004, pp. 99-100.
King, Paul, "Divided They Fall: Former Morrison Cos. Face Drop in Profits," Nation's Restaurant News, May 6, 1996, p. 11.
LaVecchia, Gina, "Ruby Tuesday Still Rocks," Restaurant Hospitality, May 2002, pp. 53-54, 56, 58.
Palmeri, Christopher, "Hello, Ruby Tuesday," Forbes, December 20, 1993, p. 194.
Peters, James, "Ruby Tuesday Deploys Sales, Service Initiatives," Nation's Restaurant News, October 21, 2002, pp. 4, 11-12.
------, "Ruby Tuesday Rolls Out Changes to Drive Sales," Nation's Restaurant News, July 21, 2003, pp. 4, 11, 95.
Walkup, Carolyn, "Ruby Tuesday Accounts for Content, Serves Up Nutritional Info on Menus," Nation's Restaurant News, March 22, 2004, p. 1.
Waters, C. Dickinson, "Ruby Tuesday to Divest Sister Chains in Favor of Core Product," Nation's Restaurant News, April 24, 2000, pp. 1, 138.
Yeldell, Cynthia, "Ruby Tuesday to Start Advertising," Knoxville (Tenn.) News-Sentinel, July 16, 2004, p. C1.
— David E. Salamie
