The company's five-year plan calls for a slowdown in new restaurant development to focus on growing sales at existing restaurants and acquisitions. For fiscal 2007, the casual restaurant chain anticipates opening 45 to 50 company-owned restaurants, as well as 25 to 30 franchise openings for the year. The company opened 60 new company-owned stores in 2006.
"Our focus continues to be on free cash flow, and an even greater emphasis on cash flow," said Sandy Beall, founder and chief executive officer. "Though we feel we have plenty of long-term restaurant growth, we feel it is most prudent, based on soft consumer demand and potential excess restaurant supply, that we slow new restaurant growth even further over the next several years."
Strategic restaurant closings also are expected for underperforming units, though massive closings will not happen, he added. The company also will expand by acquiring franchisees. That doesn't mean that new unit growth won't pick up eventually, once the company's stated financial goals of 3% to 5% same-restaurant sales growth has been achieved, he added.
The chain also is revamping 30 to 50 existing units this summer to a more upscale ambience. One new restaurant and five remodels have already been completed. If the test remodels are successful, the new look will begin rolling out chainwide in the next fiscal year. The company also plans to increase per-unit sales by upgrading its drink menu, adding more fresh and organic food, and improving customer service.
For the second quarter, Ruby Tuesday reported a total revenue of increase of 14.2% more than the same period last year, driven largely by new restaurant growth, acquisitions and a 1.9% increase in average restaurant volume. Same-restaurant sales for the second quarter decreased 0.2% and increased 4.0% at company-owned and domestic franchise Ruby Tuesday restaurants, respectively. The company reported net income of $16.7 million for the company's second quarter, compared with earnings of $17.4 million for the second quarter of the prior year.
As of Dec. 6, Ruby Tuesday owned and operated 673 namesake restaurants in 43 states, the District of Columbia, Puerto Rico, and 14 foreign countries. Domestic and international franchisees (including Hawaii) operated 200 and 53 restaurants, respectively.
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