Ruby Tuesday Bets On New Chains To Spark Growth

In a bid to restart its growth, restaurant company Ruby Tuesday (RT) is going off its time-tested menu: Rather than expand its eponymous flagship chain, the company will make forays into Mexican, barbecue, and seafood dining it expects to be more profitable.

Ruby Tuesday, based in Maryville, Tenn., was arguably the hardest, and earliest, hit in a restaurant category—known as casual dining—that bore the brunt of American frugality over the past three years. According to Raymond James estimates, the chain's individual restaurant sales dropped 20 percent from their peak in the second quarter of 2004 to their low in the third quarter of 2009. Its shares plummeted to an all-time low of 91¢ in March 2009 on bankruptcy fears.

"Some people in the investment community thought we wouldn't survive," Samuel "Sandy" Beall, Ruby Tuesday's founder, chairman, president, and chief executive, tells Businessweek.com. "We didn't think that."

Now sales have stabilized and are exceeding industry averages. Shares are up 72 percent so far in 2010, after hitting 12.94 on Oct. 25, their highest level since December 2007. And Beall has an unconventional strategy to expand the company—by actually shrinking the Ruby Tuesday chain and investing in other restaurant concepts.

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