Ruby Tuesday Inc. must increase television advertising to drive consumers into the company’s upgraded restaurants and reverse sagging same-store sales, executives said during a conference call with analysts.
The Maryville, Tenn.-based operator and franchisor of casual-dining restaurants released results for its fiscal 2012 second quarter, reporting a net loss of $2 million, or 3 cents per share, compared with net income of $4.6 million a year earlier.
Ruby Tuesday said same-store sales at company-operated restaurants declined 4.2 percent for the quarter, compared with a 4.2-percent increase in fiscal 2011’s second quarter.
That marked the third consecutive period of comparable sales erosion despite chain efforts to upgrade its menu, service and ambience above those of its peers in the competitive grill-and-bar segment.
“We continue to focus on taking costs out of our business — and we do an excellent job in this area — so we can invest in television and pay for a salad bar,” Ruby Tuesday chief executive Samuel E. “Sandy” Beall said.
“We need to drive awareness and trial to help close the gap between brand [perception and] actual experience in our test markets.”
Importance of trial
Driving such trial is critical in light of the positive results from recent product, marketing and service-enhancement tests and ongoing initiatives, Beall said.
“People who come in like Ruby Tuesday. People who haven’t come in, think of us as the old Ruby Tuesday [and] we’ve got to change that,” Beall said.
Earlier, Beall had said consumers were responding favorably to the chain’s test at 220 restaurants of complimentary add-on visits to the Fresh Endless Garden Bar and fresh-baked garlic cheese biscuits with the purchase of entrees starting at $8.99, among other initiatives.
Ruby Tuesday already is seeing improvements in guest experience scores from a test of a service upgrade begun late in the second quarter at 10 percent of the company’s 742 company restaurants, Kimberly Grant, executive vice president, said. The program, which will be rolled out systemwide in the third quarter, features such touches as upgraded uniforms and the grating of cheese on pasta and shaking of martinis at the table.
“We believe this new service initiative will further improve our record high internal and external guest satisfaction scores,” Grant said.
A variety of television advertising strategies were tested recently in 11 markets, Ruby Tuesday officials said, and in three of those markets sales grew by high single-digit percentage amounts.
“We plan on increasing our TV [advertising] locations from approximately 20 percent today to 50 percent of the system in the fourth quarter, so we’re excited about that,” Beall said, adding that the company believes the advertising tactics used in the three highest performing test markets can be successfully replicated elsewhere.
Beall suggested that the recent positive results from TV ad tests may be a matter of timing and the fact that there is now as much as a 20 percentage point difference between the brand perception scores of people who have tried the improved operation and others who have not.
Explaining why current TV ads touting developments at Ruby Tuesday may be spurring more trial and sales, he said the perceptions of lapsed users or people who have never dined at the chain “are so much different, and they haven't changed those perceptions because we haven't [until recently] told them anything new about the brand.”