Ruby Tuesday Inc (RT) announced recently that it is expanding in Hawaii through franchised restaurants. Franchisee RT Hawaii Restaurants Inc. is planning to open three new restaurants in Hawaii, within the next three years with the first one expected to open in June 2011. The possible locations remain undisclosed. 

Ted Davenport and Rick Nakashima, the two principal investors in the company, who will also invest in this venture, currently own and operate 4 Ruby Tuesday restaurants in Honolulu, Mililani and Kaneohe and with the opening of three additional restaurants in Hawaii, the total number of their owned restaurants will increase to 7. 

We believe expansion of Ruby Tuesday in Hawaii through a franchisee model reduces its capital requirements.  Additionally, free cash flow will continue to grow, leaving room to reinvest in increasing brand recognition and enhancing shareholders’ return. Moreover, Hawaii is the only U.S. state made up entirely of islands, thus its attractive location will drive traffic.
The company recently announced its fourth quarter 2010 adjusted earnings per share of 33 cents, which surpassed the Zacks Consensus Estimate of 28 cents and soared 18% year over year. During the quarter, same-restaurant sales for company-owned restaurants inched up 0.3% from the prior year quarter, but dropped 0.5% for domestic franchised restaurants. 
Ruby Tuesday expects same 2011 store sales for company-owned restaurants in a range of flat to positive 2% and earnings estimate is expected to be in a range of 76 cents to 86 cents per share.
In fiscal 2011, the company plans to open 8 to 13 franchised restaurants, out of which 10 will be international. However, it plans to open only one to two company-owned restaurants in 2011.
Ruby Tuesday currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Ruby Tuesday’s primary competitors in casual dining restaurant market include Buffalo Wild WingsInc. (BWLD) and Biglari Holdings Inc (BH). For both the stocks, we have a Zacks Rank of #1 (short-term Strong Buy recommendation). Buffalo Wild Wings also announced recently that it is planning to expand in Canada in the next 5 years.

Based in Maryville, Tennessee, Ruby Tuesday has company-owned and franchised restaurants in 46 states, the District of Columbia, Guam, and 14 foreign countries. The company is led by its founder Sandy Beall.
 

 
BIGLARI HOLDING (BH): Free Stock Analysis Report
 
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
 
RUBY TUESDAY (RT): Free Stock Analysis Report
 
Zacks Investment Research