Ruby Tuesday Inc.’s (RT) plan to operate other brands, including a competitor to Chipotle Mexican Grill Inc. (CMG) in the rapidly growing fast-casual space, comes as the restaurant company faces waning growth for its namesake brand as well higher costs mainly due to changes to the healthcare law.
Ruby Tuesday’s founder and Chief Executive Samuel “Sandy” Beall said in an interview Thursday that the prospect of higher labor costs was “definitely a factor” in the company’s recent licensing agreement to open and operate up to 200 Lime Fresh Mexican Grill locations over the next decade.
Lime Fresh, currently with seven locations in Florida, operates fast-casual restaurants, a format similar to Chipotle and Panera Bread Co. (PNRA) that offers meals at higher prices than fast food chains but without some of the costs, like table service, of a full-service restaurants.
“It’s a little simpler of an operation when it comes to healthcare — Obamacare — which could be devastating for the industry,” Beall said of Lime Fresh. Each Lime Fresh location may have about 20 full-time employees, compared with 60 to 70 at a typical Ruby Tuesday restaurant.