You Reap What You Sow.
Yeah, I know — that title is a bit trite. But somehow “the chickens have come home to roost” didn’t quite fit for a steakery.
The Lake Mary-based upscale chain has been in the news a lot lately. Today’s financial stories, like this one from Forbes, detail the company’s stock price decline of almost 83% from a year ago. Last week the announcements were about shakeups at the corporate office, as noted in Trading Markets.
A lot of restaurants are in trouble, especially those on the high end. And an end doesn’t get much higher than Ruth’s Chris. But the situation in which Ruth’s Chris finds itself cannot be blamed totally on the economy. Some of the blame has to go to a corporate attitude that put more emphasis on increasing the check total without regard for building a loyal clientele.
This is what I think happened.
It’s my guess that this all started when the company’s stock started trading publicly in 2005. Once it started trading on NASDAQ, Ruth’s Chris was obliged to cater to its stockholders, diners be damned. Increase the profits to increase the value of the stock.
Of course every restaurant wants to increase its profits, whether they’re on the stock exchange or not. It’s the tactics that Ruth’s employed that I have a problem with.
It’s called upselling, and on its face there’s nothing wrong with it, in fact it’s good business sense. An example is when you order a martini and the server suggests a premium gin instead of the house brand. To a martini lover, one made with Bombay Sapphire is better than one made with Gordon’s, and it’s worth the additional charge. Or, when taking the dinner order, the waiter might ask if the diners would like to add a salad or cup of soup. It’s clear that it will cost extra.
But if a server takes the entree order and then asks, “What would you like on your salad?” the upsell goes low. The diner infers that the salad is included.
That’s the sort of upselling I experienced at the Lake Mary Ruth’s Chris. We were a party of six, and shortly after we were seated a young woman came to the table holding two bottles of water. She greeted us and said, “You have your choice of still or sparkling water this evening; I’ll start with the ladies.” I stopped her and asked if tap water wasn’t a third choice. It was. This was followed by the waiter pushing to add appetizers and salads, implying that it would be odd not to accept his recommendations.
After I wrote about that experience, I heard from a woman who had taken her son and three of his friends to Ruth’s to celebrate his 18th birthday. She and her husband sat at a table on the other side of the dining room to give the younger people their privacy but told the server that they would be picking up the tab for the birthday boy and his friends. She couldn’t believe it when she saw the bill.
Her son’s waiter, hearing that it was the kid’s birthday, went heavy on the underhanded upsell. The kicker was when he said, “This is such a special occasion — why don’t you let me bring you a lobster?” He made it sound, the woman told me, as though the lobster would be a gift. (A table of adults might have caught on; it’s even slimier that the server took advantage of his guests’ naivete.) Anyone who has ever ordered a lobster in an upscale steakhouse knows that the cost can hover around the hundred dollar mark and above. The waiter probably made a few extra bucks in a tip that night, the paying couple not knowing the backstory until later, but the restaurant — the company — lost any repeat business from that family.
I suspect a lot of people have left Ruth’s Chris Steak Houses feeling a little poorer, and probably a little sheepish. If you feel you’ve been taken, why would you return for more?
Ruth’s Chris has good food. I’ve never felt the steak was the best in town, but it’s a quality product. And the atmosphere in the restaurants has always been sufficiently upscale to reflect the prices. But along with the food and the ambience, you’ve got to factor in the service. There’s a reason the industry is called hospitality. The businesses that understand that are feeling less of a pinch these days, I suspect. A pinch, yes, just like everyone else, but they have a better chance of surviving. I’m not sure Ruth’s Chris will.
The chain’s founder, Ruth Fertel, was a shrewd businesswoman. She built the restaurant into one of the country’s most successful brands. She also knew how to treat her customers. I never met Fertel, who died in 2002, but I can’t imagine she would approve of how her now publicly-traded company treats its public.