From humble beginnings in 1972 in Knoxville, TN, Ruby Tuesday has grown into one of the premier casual dining chains not just in the United States, but around the world. Currently operating over 500 locations with over 32,000 employees, we can see how far this restaurant has come. In 2017, the chain went private after being acquired by NRD Capital Management, based out of Atlanta, GA.
Net Lease Overview
In the growing sector of casual dining, Ruby Tuesday continues to be a major influence in the crowded field. Known throughout the sector as being able to produce quality food and service for mid-range prices, Ruby Tuesday has cemented itself as one of the larger chain restaurants. Signing long term leases on space under a NNN structure provides good value for the property owner as the tenant is responsible for all operating costs. this allows the landlord to collect consistent income for an extended time. Usually, the lease will also incorporate rental escalations to help offset inflation throughout the term.
Ruby Tuesday follows a basic restaurant layout, allowing different tenants to take over the space and move in to a second generation space with minimal effort. With the casual dining sector continuing to grow, having that flexibility allows the landlord to maximize the building’s value. Leases usually incorporate extra options, allowing Ruby Tuesday to extend their term. Primarily located in high visibility locations with ease of access, Ruby Tuesday locations themselves provide value for the property owner.
Currently operating as a private company under the umbrella of NRD Capital Management, we can see the success this chain has had since they started operating in 1972. Today there are currently more than 500 restaurants in operation world wide with plans to continue growing. Based off the values Ruby Tuesday follows, serving food that is unwaveringly fresh while providing gracious and quality hospitality, they should continue to be a model chain. To this point Ruby Tuesday markets the family friendly essence of their restaurants, while maintaining a fresher take on food compared to other chain restaurants.
Compared to direct competitors in the sector we can see that the cap rates for Ruby Tuesday fall in between Chili’s and Applebee’s. They are also the only comps to not have a lower cap rate for 10+ years, as this is a result of the majority of sales having more than 10 years remaining.
Compared to the sector overall, we can see that cap rates for all sales and sales with 10+ years remaining are higher than the sector overall. Compared to casual dining competitors, Ruby Tuesday trades at a discount compared to the sector average.