An iconic, 50-year old, American dining brand - Ruby Tuesday - filed for bankruptcy in October. The company has 185 locations in the U.S. and 300 globally. The filing was due to a drop in revenue from operations due to the coronavirus leading to a drop in foot traffic.
With the bankruptcy filing, Rub Tuesday will reduce its debt. It will continue operations but look to shutter some locations and cut expenses. CEO Shawn Lederman in a statement said, "Today's actions will allow us an opportunity to reposition the company for long-term stability as we recover from the unprecedented impact of Covid-19."
Challenging Conditions for Restaurant Industry
Even before the coronavirus, many restaurants were struggling. There are many similarities to the challenges faced by physical retail stores. Consumers were electing for takeout rather than dine-in. Fast-casual dining was taking a greater share of dining dollars.
Some consumers were opting for healthier items which meant that many restaurants serving typical food like Applebees or TGI Fridays were also struggling. Some consumers were opting for the more specialized fare. For example, they'd rather get a burger at Five Guys than Ruby Tuesdays as they may have previously.
Of course, the coronavirus took a tough situation and made it worse. For a restaurant like Ruby Tuesday, foot traffic is their lifeblood. Unlike other restaurants, they were unable to make up for the lost business through increased deliveries or takeout.
This had led to bankruptcies among local restaurants and national chains like Sizzler, California Pizza Kitchen, and Vapiano.
Restaurant Stock Performance
In retail, the coronavirus has crushed many stores but a select few have been able to improve their conditions. Companies like Walmart (NYSE: WMT), Target (NYSE: TGT), or Bed Bath & Beyond (NYSE: BBBY) have successfully grown their online sales during the pandemic.
In the same way, some restaurants like Domino's Pizza (NYSE: DPZ) or Chipotle Mexican Grill (NYSE: CMG) have also managed to maintain growth and positive momentum during the pandemic.
Another similarity between both industries is that the total aggregate amount of retail spending and spending on eating out continues to trend higher on a longer-term basis. Yet, it's still one of the most competitive industries due to new entrants in the market and constant, changing consumer tastes.
A longer-term threat to many restaurants is the emergence of "ghost kitchens". These are basically small locations that only offer delivery and pickup. They are savvy at marketing and using online sales to grow. Often, the same "ghost kitchen" can appear like it has multiple locations online.