Ruby Tuesday Essay

Should Ruby Tuesday Remain as a Casual-Dining Restaurant?

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Should Ruby Tuesday Remain as a Casual-Dining Restaurant?

Ruby Tuesday has not posted positive revenue growth since 2006. Preliminary outcomes for its fiscal third quarter in February was $225.7 million, which was 17% less than the $271.5 million it reported last year (Munarriz, 2017). Although Ruby Tuesday intends to be acquired, this is considered as a poor strategy that will lead to shareholder loss. The best alternative is to reposition itself as a better-burger restaurant which can increase shareholder value and sales.

PEST and SWOT Analyses

PEST analysis indicates stable political and economic factors, whereas social and technological factors

are less favorable for the casual dining industry. The political atmosphere is business-friendly and stable despite political factions, while economic factors show sluggish growth as the real gross domestic product (GDP) improved at an annual rate of 2.9 percent in the last quarter of 2017 (Bureau of Economic Analysis (BEA), 2018). When it comes to social factors, dining preferences are varied and changing, which could explain the slump in restaurant sales overall (Maze, 2015). The Nation's Restaurant News’ Second 100 report demonstrated that Estimated Sales Per Unit fell by 0.8% (Maze, 2016, 2017a). The decline in casual dining can be explained by evolving consumer preferences as more customers opt for better-burger chains, such as Shake Shack (Maze, 2017b), while others gravitate to independent restaurants, prepared foods, convenience stores, and food trucks (Richter & Street, 2017). Technologies that enhance the ease of online ordering also reduced foot traffic into restaurants as consumers eat at home or the workplace (Maze, 2016, 2017a).
The strengths and weaknesses of Ruby Tuesday suggest that it is not prepared to capture market opportunities and respond to threats. The strengths of Ruby Tuesday are its brand and number of restaurants. Founded in 1972, Ruby Tuesday (2018) is a well-established casual dining brand. Presently, it has more than 500 company-owned and franchised branches. The weaknesses of the company are its declining sales and popularity, as well as the management’s inability to improve its competitiveness after changing its positioning from being upscale to value-driven. The company considers selling itself, which critics say would be similar to being chopped off than re-energized (Munarriz, 2017). The opportunities in the food service industry are in high-growth better-burgers and pizza restaurants, independent dining outlets, take-out/convenient food, and food trucks (Maze, 2016, 2017a; Richter & Street, 2017). The main threats are changing dining preferences that are no longer inclined to casual dining, a low wage growth that affects the demand for casual dining, and technological changes that make it easier to dine anywhere, anytime (Maze, 2016, 2017a; Richter & Street, 2017).
Issue and Problem Statement
The main issue is that Ruby Tuesday fails to turn around its sales performance. The problem statement is: Should Ruby Tuesday remain as a casual-dining restaurant or shift to a more competitive position?
Alternative Strategies
The alternatives are to sell the company, focus on delivery/take-outs, or reposition as a new better-burger brand. If Ruby will be sold, shareholders may be disappointed with the low price and feel that they lost more than they gained (Munarriz, 2017). At the same time, sales would not improve if the stores are all closed and the properties and resources sold as well. The next alternative is focusing on take-outs as restaurants Carrabba's Italian Grill and Outback Steakhouse have done (Maze, 2017a). These restaurants are reporting better sales as they focus on the to-go and delivery strategy (Maze, 2017a). The downsides are that total money spent on take-outs or deliveries remains lower than in-premise dining and the cannibalization of in-store sales (Maze, 2017a). The last alternative is to reposition the brand as a better-burger brand. This means focusing on quick-service meals plus innovations, such as creating food trucks as additional off-premise outlets. The advantages are potential increase in sales and shareholder value as consumers want to try something new and fast to eat, while the disadvantages are the loss of the Ruby Tuesday brand and starting anew as if it is an independent restaurant.
Recommendation
The best alternative should fit the criteria of providing better results to shareholders and increasing quarterly and yearly sales and this can be achieved by repositioning Ruby Tuesday.

Selling out may not benefit shareholders, while focusing on take-out and deliveries would not shake off the "oldness" of Ruby Tuesday's brand. Ruby Tuesday has to start fresh with a new brand and restaurant design that can compete with existing better-burger brands (Richter & Street, 2017). Also, using food trucks can make the business mobile in offering the new brand across the country, thereby serving as a marketing strategy too (Richter & Street, 2017). Food trucks are famous to-go food sources too, especially when placed near schools and workplaces (Richter & Street, 2017). To assess the success of the repositioning, quarterly and annual sales should be closely monitored, as well as customer satisfaction through monthly

surveys.
Conclusion
Ruby Tuesday should not sell itself due to the risk of low purchasing price because of its poor performance; instead, it should reposition itself as a better-burger restaurant with emphasis on quick services and food truck outlets to increase sales and respond to the trend of independent, better-burger dining.

Ruby cannot stay as it is because it has stagnated as a brand. To revive sales, it must become a new company with a new name and positioning that can capture consumers who love to-go food that are delicious, quick to make, and accessible.

References

Bureau of Economic Analysis (BEA). (2018). U.S. Economy at a Glance: Perspective from the BEA Accounts. Retrieved from https://www.bea.gov/newsreleases/glance.htm

Maze, J. (2015). Casual-dining's summer slump: Full-service traffic declined as consumers defected to quick-service competitors. Nation's Restaurant News, 49(13), 104.

_______. (2016). 10 reasons casual dining is still struggling: Competition, economic factors and changing consumer habits lead to weak same-store sales trends. Nation's Restaurant News, 50(8), 42.

_______. (2017a). Casual dining finds a ray of light: Takeout: Chains are making a big push for delivery and to-go orders, but will it be enough? Nation's Restaurant News, 51(8), 14.

_______. (2017b). Casual-dining continues to cede market share: Better-burger chains pick up the slack. Nation's Restaurant News, 51(10), 42.

Munarriz, R. (2017, March 14). Goodbye -- but Not Good Buy -- Ruby Tuesday. Fool.com.

Richter, W., & Street, W. (2017, July 15). Here's why restaurants are in their worst slump since 2009. Business Insider. Retrieved from http://www.businessinsider.com/restaurant-sales-slowdown-reasons-2017-7
Ruby Tuesday. (2018). Our profile. Retrieved from http://www.rubytuesday.com/our-story/profile