March 6, 2007 / 12:26 PM / 12 years ago

Franchising key to Ruth's Chris growth

CHICAGO (Reuters) - Ruth’s Chris Steak House Inc. (RUTH.O) Chief Executive Craig Miller said on Monday he sees franchising as the key to helping the upscale restaurant chain open more than 100 restaurants internationally.

Ruth's Chris Steak House Inc. CEO Craig Miller speaks during the Reuters Food Summit in Chicago March 5, 2007. REUTERS/John Gress (UNITED STATES)

“When you license or franchise, you are not putting your own human capital or financial capital at risk,” Miller said at the Reuters Food Summit in Chicago. “It’s a way of taking advantage of where the window is in the marketplace.”

That window, Miller said, could take Ruth’s Chris steaks to Central America, the Middle East and East Asia in the next few years.

Ruth’s Chris recently signed a five-unit franchise deal with restaurateurs in Costa Rica, Panama and the Dominican Republic, and is in talks to open franchises in the Middle East, China and Japan, he said.

Ruth’s Chris, which abandoned its New Orleans headquarters for Heathrow, Florida, in the wake of the devastation left by Hurricane Katrina, plans to keep its menu — featuring prime U.S. beef — essentially intact overseas, Miller said.

The company’s expansion plans won’t be deterred by risk factors like bird flu and SARS, both of which hampered its Hong Kong and Taiwan locations in recent years, Miller added.

“It was a little bit like the 9/11 incident, this issue parachuting in on you,” Miller said. “All that can have an impact on consumer demand ... I don’t lose a lot of sleep over that because, to be honest with you, there’s not a lot we can do about it.”

In an interview with Reuters Television, Miller said if Congress raises the minimum wage, the company would likely hike its menu prices by 2 to 3.5 percent.

Ruth’s Chris’ menu is also vulnerable to the price of beef and corn, Miller added.

In the past year, food and restaurant companies have grappled with escalating corn prices, which have soared amid rising demand driven primarily by growing production of the corn-based fuel ethanol.

Ruth’s Chris typically uses cattle fattened with corn-rich diets for its high-quality beef.

“Some of the things on the horizon that might impact us — as you mentioned — (are) the price of corn, or price of beef,” Miller said. “Luckily we have hedged in beef this year (at) about 50 percent of our product. We have locked in prices, so that’s going to help us with any short-term swings or volatility in the market.”

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