Downtown Restaurants Serving Up Profits

March 30,2010

From the Atlanta Business Chronicle
by Lisa R. Schoolcraft Staff Writer

National restaurant chains like Ruth’s Chris Steak House, Chili’s Grill & Bar and Maggiano’s Little Italy saw sales slip, but profits rise, in 2009. Morton’s The Steakhouse saw both profits and sales decline.

Locally, however, several restaurateurs are seeing better trends.

The four metro Atlanta Ruth’s Chris Steak House restaurants “are having a fabulous year,” said Nancy Oswald, a co-owner of Sizzling Steak Concepts LLC, the franchise owner of the local restaurants and four others.

The Ruth’s Chris at Centennial Olympic Park, out of about 65 franchise Ruth’s Chris restaurants, is No. 1 in sales year-to-date, she said, a spot it has held for several years, except 2009.

Oswald attributes the downtown restaurant’s sales dip last year to the drop in Atlanta convention attendance.

Nationally, Heathrow, Fla.-based Ruth’s Hospitality Group Inc. (Nasdaq: RUTH), parent company of Ruth’s Chris, reported restaurant sales were $330.5 million in fiscal year 2009, down 12.4 percent from $377.4 million in fiscal year 2008, according to filings with the Securities and Exchange Commission.

The company, which has a mix of corporate-owned and franchise restaurants, reported a net profit, however, in 2009 of $2.4 million, compared with a $53.9 million loss the previous year.

Ruth’s Chris drastically cut food and beverage expenses, down 20.8 percent from the previous year, in part because of “favorable beef costs,” the company reported.

Company-owned restaurants generated $4 million in average unit sales in 2009, compared with $4.9 million in 2008, it said.

Locally, revenue at the metro Atlanta Ruth’s Chris restaurants are up 52 percent over last year, Oswald said, who declined to give exact revenue figures. But for the first quarter about to end March 31, the four metro Atlanta stores will exceed $4.5 million in sales, she said.

Oswald said her franchise has bucked the trend in the restaurant industry, opening two Ruth’s Chris locations in 2009, one in Greenville, S.C., in February and another in Kennesaw in October.

The Kennesaw location, in particular, is exceeding expectations, she said.

“We had an aggressive budget and we are exceeding that budget by about 5 percent,” Oswald said.

Steakhouse rival Morton’s Restaurant Group Inc. (NYSE: MRT), which owns Morton’s The Steakhouse, has done less well financially in the past year.

The Chicago-based company, which has 76 corporate-owned restaurants mostly in the United States, reported earlier this month it lost $77.5 million last year, compared with a $61.8 million loss in fiscal 2008.

Revenue declined $48.3 million, or 14.7 percent, to $281.1 million for fiscal 2009 from $329.4 million for fiscal 2008, the company reported.

“There is no question that 2009 presented one of the most challenging economies in our 31-year history,” said, Christopher J. Artinian, Morton’s president and CEO, in a statement.

The weakened economy hurt business travel, conventions and entertaining, he said.

Despite the decreasing revenue seen in the fourth quarter, Morton’s started to see “a modest increase” in revenue in December 2009 and into January and February, Artinian said.

Locally, Morton’s The Steakhouse downtown, which opened in 1985, is seeing the same trend, said Chris Giangrosso, sales and marketing manager. “Our business has picked up incrementally,” he said.