Ruby Tuesday Files for Bankruptcy

Ruby Tuesday announced Wednesday it has filed for Chapter 11 bankruptcy, according to a press release. The restaurant previously came to an agreement with its secured lenders to support its restructuring through financing, and the company plans to reduce liabilities "and emerge a stronger organization built for the future." Liabilities are between $100 million and $500 million, according to the chain's Delaware bankruptcy filing.

Casual dining concepts without a heavy off-premise presence in particular have experienced significant challenges since the onset of the novel coronavirus. The company joins a growing cohort of casual chains that have declared bankruptcy during the pandemic, including Sizzler, California Pizza Kitchen and Chuck E. Cheese parent CEC Entertainment. 

"This announcement does not mean 'Goodbye, Ruby Tuesday'. 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," Shawn Lederman, Ruby Tuesday's CEO, said in the press release. "Our restructuring demonstrates a commitment to Ruby Tuesday's future viability as we work to preserve thousands of team member jobs."

This bankruptcy follows a tumultuous few months for the struggling restaurant chain. This summer, Ruby Tuesday reportedly stopped paying pensions for more than 100 employees without informing them before declaring insolvency in September. The chain has also reportedly closed locations this year without alerting impacted employees, which suggests a level of chaos behind the scenes that could be difficult to recover from. As of August, the company shuttered 150 restaurants, despite receiving a Payment Protection Program loan.

Like many casual-dining chains, Ruby Tuesday was struggling even before the COVID-19 pandemic. The chain has closed approximately 200 restaurants in the past couple of years, with only roughly 300 global locations remaining, according to CNN. This could be due in part to a lackluster brand favorability among diners — according to an American Customer Satisfaction Index Restaurant Report 2019-2020 released in June, the chain was among the lowest-scoring casual restaurants. This may reflect a more general disinterest in Ruby Tuesday's style of casual dining, an issue that wouldn't be helped by financial restructuring.

To generate consumer interest and boster its brand image, Ruby Tuesday has rolled out several initiatives during the coronavirus crisis, allowing diners to donate meals to Ruby Tuesday employees in need and selling items from its pantry to consumers. The company also partnered with Nathan’s Famous in July to sell hot dogs out of its kitchens for delivery only to try and boost revenue. 

While many franchisors have rolled out similar initiatives to off-set the economic devastation caused by COVID-19, it appears that casual-dining brands like Ruby Tuesday have a lot more work to do if they hope to recover.