New Face, Future for Ruby’s Diner

April 24, 2015

nmxdke-b88381735z.120150416173141000gd396457.10The Irvine chain’s new CEO will condense the chain’s menu and craft new concepts

By Hannah Madans, The Orange County Register
(c)2015 The Orange County Register (Santa Ana, Calif.)

Scott Barnett, the interim chief executive at Ruby’s Diner, has only been on the job for a few weeks, but he’s already tried every item on the chain’s expansive menu.

Barnett replaced the chain’s founder Doug Cavanaugh in March, making him the company’s first new CEO in its 33-year history. Cavanaugh will remain as Ruby’s chairman.

A personal friend of Cavanaugh, Barnett has a long history in restaurants. He’s the former president and CEO of Rusty Pelican, founding president and former CEO of Bubba Gump Shrimp Co., and has served as a consultant for investment banking projects in Hong Kong.

Barnett said his goals include improving Ruby’s by condensing the menu while upholding the restaurant’s standards.

The renewed economy and cheaper gas has been a boon for family restaurants like Ruby’s.

Restaurants like Ruby’s saw 3 percent growth in 2014, a “huge improvement” over sluggish gains in the years immediately after the recession, said Darren Tristano, executive vice president at market research company Technomic.

“The low prices of gas are really starting to help the family-style segment,” he said. “It’s giving more low- to middle-income consumers more money to spend, and as long as gas prices remain low, the restaurant business is going to continue to improve.”

He added that low menu prices are something that helps a restaurant like Ruby’s do well.

“They do have good quality offerings in a theme restaurant, which is something that consumers are looking for, and their price points are relatively good for the California market,” Tristano said.

Meanwhile the fast-casual restaurant sector — an area Barnett sees as having tremendous growth opportunity for Ruby’s — grew 13 percent in 2014.

Barnett spoke to the Register about his experience in the restaurant industry and what he hopes to bring to Ruby’s, a chain named after Cavanaugh’s mother. His answers have been edited for length and clarity.

Q. Why did you want to be involved in the company?

A. The brand is extremely strong. It has great brand equity in the markets in which it operates. Many years ago, I almost went to work with Ruby’s as their vice president of operations. I ended up running Rusty Pelican as CEO instead. Doug (Cavanaugh) is a friend, and he really wanted someone who had a significant amount of experience as a professional manager who could help him transition the company from an entrepreneurial style into a more seasoned manner — and given that we’ve had a long relationship and are friends, it made sense.

Q. You have held many notable jobs in the restaurant industry. What did you learn from each of these positions and what will you bring to Ruby’s?

A. At Bubba Gump Shrimp, I was fortunate to be dealing with a well-known brand with tremendous reach worldwide. The challenge was to deliver on that brand in the manner that people were used to it from the movie. It was all about learning about brands that have a lot of power and seeking ways to deliver on the promise of the brand.

At Rusty Pelican, it was also a well-known brand that had encountered a number of issues. I learned a lot about how to act in a capital restrained environment, team building, starting from the ground up and a company turnaround.

In Hong Kong, I learned from the other side what it was like to be involved in restaurant investments and to help restaurant companies maximize their returns based on our investment criteria.

Q. Did you always know you would end up in the restaurant business?

A. No. I started working in restaurants many years ago, while I was going to school, because I had to pay my own way. I was a cook, a bartender, a busboy, a dishwasher, a valet parking attendant.

When I left college, my intent was to go to grad school but I picked a summer job working in a restaurant and the rest is history. Never went to grad school.

Q. What will you change at Ruby’s?

A. We’re going to dramatically reduce the menu. We are looking at some of the internal operations and the internal policies and procedures and see which work and which can be improved upon. I’m trying to bring some methods I’ve used and learned about in the past that I think can improve upon what’s going on here at Ruby’s.

The menu changes are being tested right now in Yorba Linda and Irvine. The test started March 30, right after I started here. I put that in as quickly as possible because I had identified it as a serious shortcoming at Ruby’s. The results so far have been very positive. If the test proves out in about four more weeks, then we’ll do an implementation within the entire system by the end of May.

Q. What other plans do you have for Ruby’s future?

A. We like the look of the classic ’40s diner that Ruby’s is known for and I think that as we move forward we’re not going to lose the roots on which it was built.

We also want to spruce up the looks of many of the restaurants, both the interior and exterior. But we’re operating in a constrained environment, and we have to be economical and creative in how we do that. I don’t want to change a lot about the ’40s diners look. It’s very iconic, almost timeless. I’m talking about repairs, maintenance, things like that.

Q. What aspects will remain the same?

A. So many restaurants and companies over the years cut corners, take shortcuts and in the end sacrifice the most important part of the experience, which is the food and the service. That is one thing Ruby’s has not done and that is not going to change.

Q. It seems like there are a lot of new people coming to Ruby’s, especially from Yogurtland (Ruby’s vice president of franchise development Larry Sidoti is a former Yogurtland executive). Why is this?

A. The fact that many come from Yogurtland is somewhat random. We at Ruby’s have always made an attempt to hire the very best people. And it just so happens that there were a number of people who were available from Yogurtland.

The best way of recruiting is to find people who are friends or have relationships or have recommendations from good people that already work with us. Birds of a feather tend to flock together. Good people want to work with other good people.

Q. Fast casual option Ruby’s Dinette was recently scrapped. Are there any new Ruby’s concepts underway?

A. We haven’t given up on fast casual. I really think it’s a matter of execution and conceptual positioning. We’re reviewing that. It will almost surely be a growth vehicle for the company going forward.

We are still doing fast casual restaurants in airports around the country and a few other places.

Q. When you venture into fast casual again, will you do it at existing Ruby’s locations or open new ones?

A. We would do it in new locations. When people have a Ruby’s, in their minds, it’s their Ruby’s. Most customers like it as it is. It doesn’t make sense to change their Ruby’s into something else. So you look for an opportunity to create a new Ruby’s in a new environment.

Q. What are some of the biggest challenges in making a restaurant chain successful?

A. The restaurant business isn’t that complicated. It’s really about hot food, service with a smile and pleasant, clean, interesting surroundings. If you deliver on those things on a consistent basis with pricing that makes sense, then you’re going to create an experience for your guest. There are also lot of nuances involving location and making sure you hire the right people.

Q. How have minimum wage increases and healthcare mandates affected the business?

A. Increases in minimum wage and health insurance costs and many other employee-related costs are impacting our industry. They’re impacting the industry at a time when most operators have little to no pricing power and the ability to pass on these costs to the customer.

You have to look for creative ways to minimize the costs without impacting the guest experience. And it gets more challenging every year.

Q. Is there something in particular you want to accomplish as interim CEO?

A. I would love to be able to make a difference in terms of the corporate culture. I would like to be able to influence the growth of the company in what is essentially a very capital-constrained environment. I would love to be able to make the Ruby’s experience a memorable one to the guest and that’s not as easy as it sounds.

Q. What is Cavanaugh’s involvement in the company now?

A. Doug is in many ways an idea guy, a concept guy. And he’s highly focused on the marketing side of the business. He’ll continue to be a major contributor in those areas. I’m going to make very few decisions without sounding them off him beforehand. He is the creator of the concept and the guy who is responsible for the success Ruby’s has had over the years.

Change made atop U.S. unit amid sales slide, hungry rivals

November 29, 2012

Copyright 2012, Chicago Tribune. All Rights Reserved.

McDonald’s Corp. sent a strong signal to Wall Street and the company that a recent slide in U.S. sales isn’t being taken lightly, announcing Thursday that it is replacing the head of its U.S. business with another longtime company veteran who is charged with overseeing a massive remodeling of its restaurants worldwide.

Jan Fields, 57, who has been with the company more than 35 years, will be succeeded by Jeff Stratton, also 57, currently global chief restaurant officer. The change is effective Dec. 1, McDonald’s said.

“This was a business decision,” said McDonald’s spokeswoman Heidi Barker Sa Shekhem. She added that Fields and new CEO Don Thompson had “some long discussions about the state of the business and the decision was made that it was time to make a change in the leadership of the U.S. business.”

Last week, McDonald’s reported that U.S. same-store sales declined 2.2 percent during October because of increasing competition as well as sluggish demand in the U.S. The drop in year-over-year sales was the first in nine years, although sales have been decelerating throughout 2012.

Sa Shekhem emphasized that the decision was not made based on one month of sales, but looking at the total business with an eye on the future.

As McDonald’s has struggled, hamburger competitors such as Wendy’s and Burger King have shown signs of resurgence with the addition of new products. The world’s largest restaurant chain is also seeing competition at breakfast from Starbucks, Dunkin’ Donuts and Subway, with chains like Panera and Chipotle posing threats later in the day.

The same-store sales decline and the departure of Fields are two of the most visible developments since the ascension of Thompson, who took over as CEO in July.

“I’m a little disappointed in this move because it feels a little bit like Wall Street analysts driving this,” said one McDonald’s franchisee who asked not to be named.

While the chain has reported smaller increases and the first sales decrease, the franchisee said, “We came off nine consecutive years, and I’ve experienced it all, and Jan was a big part of that.”

R.J. Hottovy, an analyst with Morningstar, said “it’s tough to read” into the reasons behind Fields’ departure, but the shake-up won’t affect his short-term view.

“I still think the company is going to have a difficult next several months,” he said, adding that “2013 is going to be a better year.” He pointed to expected abatement in food costs and a “stronger pipeline” for new products.

McDonald’s has announced several tests for 2013, including wrap sandwiches, egg whites on breakfast sandwiches and grilled chicken in Happy Meals.

Hottovy added that he also expects sales to increase when the U.S. remodels more of its restaurants, a massive program well under way.

Darren Tristano, executive vice president of Technomic, said the chain has been seeing increased competition and that consumers are still watching small purchases very closely. But for McDonald’s, after nine years of increasing sales, they could be hitting a ceiling, he said.

“At some point you look at $2.5 million (in sales per average U.S. McDonald’s), and they’re doing pretty well,” he said. “Unless you do a double-decker drive-thru and a second kitchen, there’s a level of efficiency they’ve hit that you have to look and say ‘How big can a restaurant get?'”

Despite increased competition, McDonald’s thoroughly dominates the burger market, with a 49.5 percent share of the $65.4 billion segment, as measured by Technomic in 2011. Burger King and Wendy’s had 13.3 percent and 12.8 percent shares, respectively, at the time.

Fields became president of the U.S. business in 2010, succeeding Thompson. She previously was chief operating officer of McDonald’s USA, stepping into that role in 2006. Fields is a 35-year veteran of McDonald’s who began her career with the company behind the restaurant counter.

Her legacy as U.S. president includes a number of health-and-wellness initiatives, including fruit or vegetables in every Happy Meal, pushing to cut sodium levels in the food, and posting calorie counts on menu boards.

As global chief restaurant officer, Stratton has been charged with keeping McDonald’s decade-long, multibillion-dollar global renovation and rebuilding project on track. Restaurants undergoing simultaneous interior and exterior remodels are expected to see a 6 to 7 percent increase in same-store sales upon reopening, no matter where they are located.

Shares in the company closed Thursday at $84.05, down less than 1 percent.

McDonald’s CEO James Skinner retiring

March 23, 2012

The retirement of 41-year veteran James Skinner comes as a surprise to many in the industry. His success at the helm has seen stock prices soar nearly 300 percent over the last eight years as the world’s largest restaurant brand succeeds in growing globally and domestically in a very difficult economic period. He has done a very nice” McJob” and it appears time for McDonald’s to make a “McMove”!

As Skinner steps down on June 30th, he will be succeeded by 22-year veteran Donald Thompson. Thompson will become the first African American in McDonald’s history to lead the chain and should provide strong continuity in the transition. His experience in global strategy and operations will certainly be a strength in supporting McDonald’s continued growth.

With a string of annual growth successes stories, Skinner will leave McDonald’s with the brand at the top of their game. Like many sports champions, it will not only take the talent, but the effective coaching to continue their momentum. Stay Tuned!