Ruth's Chris Mission Possible: to Know the Guests
For Ruth's Hospitality Group, investing in its brand’s technology platforms and digital future remains a top priority.
Earlier this year, Ruth's Hospitality Group “reiterated the commitment we made in 2019 to invest strategically in our technology platforms and digital future,” said Cheryl Henry, President and CEO, during Q2 earnings call with analysts.
The focus for these investments are to reduce the friction in the experience for both guests and team members, to enhance hospitality to drive frequency and to increase productivity and efficiency to optimize margin.
Ruth’s “made meaningful progress during the quarter, beginning with the implementation of foundational technologies, including new POS and labor management systems,” Henry said.
[According to HT's 2021 POS Software Trends report, 65% of restaurants plan to add new functionality/modules to their current POS software this year.]
Henry disclosed the brand’s top action items: to reduce debt, to open 7 new units through 2022, and last but not least, to “continue that investment in data and digital transformation because the future of Ruth's Chris will be driven by better understanding our guests and the use of technology to improve their brand experience,” Henry explained.
Dine-In on the Rebound
For Ruth's Hospitality Group, known for its Ruth’s Chris steakhouse banner, “the pace of recovery began to accelerate during the second quarter and we witnessed our guests enthusiastically coming back to dine-in our restaurants,” said Henry.
“The pace of recovery began to accelerate during the second quarter and we witnessed our guests enthusiastically coming back to dine-in our restaurants.
Highlights from the Q2 earnings report
- During Q2, 75 of 76 company-owned or managed Ruth’s Chris Steak House restaurants were open with dine-in service.
- As of the end of Q2, 68 of the company’s 72 franchisee-owned restaurants were open, including 63 restaurants offering dine-in service, two restaurants offering outdoor seating only and three restaurants offering to-go and delivery service only.
- Q2 restaurant sales were $104.2 million compared to $27.0 million in Q2 '20.
The Return of Dine-In
In Q2, the brand saw guests return to dine-in. It’s a trend that has been playing out coast to coast; according to this study: 55% of consumers are ready to return to dine-in.
“We saw traffic being negative versus 2019 in April and May, and June was the first positive traffic that we've seen. Albeit it was low single-digit positive traffic in June. And then as we entered into July, we continued to see checks flow through along with slightly higher traffic increases,” said CFO Kristy Chipman during the call with analysts
And when they dine-in, guests are ordering and eating more – adding apps and salads, larger entrees and desserts, Chipman explained.
“There's this pent-up celebratory occasion that people feel like this has been something they've missing. They've known Ruth's. It hasn't necessarily been in their lives during pandemic. So when they're coming in, they're making that decision to truly celebrate and build check,” Henry added.
Texas and Florida markets continued to be highlights, with comp sales of 46% and 24%, respectively, while Boston, Hawaii and Manhattan have been slower to recover towards 2019 levels. “With New York Theater District expected to open in September and international tourism slowly returning to Hawaii, we are seeing positive signs of sales recovery in these areas,” said Henry.
Consumers and restaurants alike are dealing with inflation when buying products. For Ruth’s, the overall basket inflation in Q2 was in the 15-16% range, said Chipman. Ruth’s is starting to see some deflation on some items. “We lag that a little bit,” she said. “So as prices come down, it takes us 2 to 4 weeks before we start to see that in our overall basket” and she expects pricing volatility to continue in the coming months.
Marketing with Gift Cards
Ruth’s touched on one of its marketing initiatives. To reach to new and existing customers, Ruth’s is among the brands that sells gift cards at discount retailers such as Costco. For example, a $100 gift card may sell for $79.
A Deal to Wine About
Ruth’s is among the brands that have embraced off-premises dining. The brand has seen the most increase in first-time users in its Ruth's Anywhere program, the brand’s streamlined off-prem menu for delivery and takeout, said Henry. It is attracting younger, Millennial consumers. As part of Ruth’s Anywhere, customers can add a bottle of wine to most take-out orders for half-off the listed price.
“…We started to see a younger, more affluent guests, trying Ruth's for the first time through our takeout and delivery program,” said Henry. The brand is also using “data and digital initiatives and the investment we're making to ensure that as we are able to understand who those guests are that we are ensuring we're building a relationship with them, staying in touch with them.
“… Our ultimate goal is to take that first-time guest and that one experience and translate it to a lifetime of usage. So that's really the foundation … knowing our guest … to drive frequency.”
Off-Premise Retention
Now that most all locations were open in Q2 for dine-in, the off-premise revenue mix is expected to level off between 5% and 7% over time, Henry explained.
“I do think there's some stickiness and we've built a new channel for our brand. We want to be there for people when they feel like that's the best approach for the experience they can have on a given night. Our work pre-COVID told us that, that is an additional visit,” said Henry. “We've definitely been able to enhance through COVID, the platform where people can order and can pick up at Ruth's. And so, we're happy to be there and meet the guests where they need us.”