Can Ruth's Chris Steak House Age With Grace?

Dinner at Ruth's Chris Steak House is a big deal, featuring thick steaks and fine wine in a luxurious setting.

But tough times and shifting consumer habits have the Lake Mary-based chain thinking a little smaller these days.

As its parent company, Ruth's Hospitality Group, struggles with plunging sales and heavy debt, it's offering less-expensive food and may build scaled-back restaurants once the company can begin growing again.

Even so, company leaders know that they can't lose too much of the elegance that has made Ruth's one of fine dining's most recognizable names.

Chief Executive Officer Michael O'Donnell talked about that delicate balancing act in an earnings conference call with analysts July31. It had been a rough quarter: Revenues fell 17.9percent to $88.4million, and profit dropped 15.6percent to $2.3million, compared with a year ago.

"We're not only trying to continue to maintain viability with our core group of people that want to come for the full experience and want to come and celebrate their great anniversary, but we also need to find ways ... that you can come and have a dining experience at Ruth's Chris that maybe is not quite as complicated and not quite as expensive," he said.

Deals keep dropping Ruth's already has tried prix fixe menus, which have become common offerings at many types of restaurants during the recession. Once considered occasional deals, they now stay on menus for months at a time.

Ruth's started with a two-for-$89 summer deal in 2008, and in February responded to consumer demand for something even less expensive. The $39.95 "Ruth's Classics" three-course meal now accounts for "a sizable portion" of sales, said O'Donnell, whose company has 130 Ruth's locations around the world.

Ruth's also has been testing a $19.95 steak-and-fries promotion in three locations. And it has been experimenting with a bistro menu, which includes burgers and sushi.

Bar menus started becoming common a few years ago, but the recession has strengthened their popularity, said Darren Tristano, executive vice president of Chicago-based food-industry research and consulting firm Technomic.

"They're a great appeal to those that want to come in for a light meal and a decent meal and not have to break the bank," he said.

In general, fine-dining restaurants should look at offering "a slightly scaled-down version" of their offerings, said Linda Lipsky, a Pennsylvania-based restaurant consultant. Diners "don't care as much about taking something home for the next day, and they sure as heck don't want to leave it on the plate," she said.

At Ruth's, all the deals have cut into the bottom line, with the average guest check down 6.5 percent to $70 per person. The average volume per restaurant has shrunk � from $5.6 million in its established restaurants in 2007 to $5 million last year.

More paring in future? With each restaurant generating less money, the company has to think about cutting costs, including how it builds new restaurants.

In the future, "when we start thinking about returns, the question � and we're evaluating that now � is what does the prototype look like in the future? It may be a little smaller," said Bob Vincent, the company's executive vice president and chief financial officer, in the July earnings call. "Maybe the tonality of it might be a little different, and I think the cost of it, the investment probably is going to be a little different." Ruth's would not provide details, nor would company officials agree to an interview. But they did acknowledge during the conference call that they might learn some lessons from Mitchell's Fish Market, a less-expensive chain Ruth's acquired last year.

"There's some discussion about the formality of fine dining, and is it too formal," O'Donnell said. "Mitchell's, which we would say is really in the polished-casual space, is not as formal. Maybe in some cases it has a little more energy than we typically have." While same-restaurant sales at Ruth's plunged 23 percent in the quarter that ended June 28, sales at Mitchell's 19 restaurants fell slightly less than 10 percent.

Restaurant experts say consumers will always want a fancy restaurant to celebrate special occasions or impress business clients. But some predict that people will visit less often, and younger consumers have different expectations.

Today's diners "want something more casual," Tristano said. "They don't want to feel uncomfortable in a restaurant." And changing an upscale brand to appeal to those customers won't be easy, he said.

"You have a brand that has a perception of being very upscale and where my father goes to eat," he said. "We always tell our clients you have to find a way to appeal to multiple generational groups without alienating them.

"You're not going to start playing Led Zeppelin music in a Ruth's Chris. The swing generation that's still there is going to say, 'I'm out of here.'"

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