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Executives

Steve Rockwell - Vice President, Finance

Samuel E. Beall - Chairman of the Board, President, Chief Executive Officer

Marguerite N. Duffy - Chief Financial Officer, Senior Vice President

Mark Young - Senior Vice President, Marketing

Kimberly M. Grant - Executive Vice President

Analysts

Jeffrey Omohundro - Wells Fargo

Keith Siegner - Credit Suisse

Thomas Forte - Telsey Advisory Group

Joseph Buckley - Banc of America Merrill Lynch

Brad Ludington - Keybanc Capital Markets

Ruby Tuesday, Inc. (RT) F3Q10 Earnings Call April 7, 2010 5:00 PM ET

Operator

Welcome to the Ruby Tuesday Incorporated third quarter earnings call. (Operator Instructions) It is now my pleasure to introduce your host, Steve Rockwell, VP of Finance for Ruby Tuesday. Thank you. You may begin.

Steve Rockwell

Thank you and thanks to all of you for joining us this evening. With me today are Sandy Beall, Ruby Tuesday Chairman and CEO; Margie Duffy, Chief Financial Officer; Mark Young, our Senior Vice President and Chief Marketing Officer and Kimberly Grant, our Executive Vice President.

I would like to remind you that there are likely to be forward-looking statements in our comments and I refer you to the note regarding forward-looking information in our press release and the most recently filed Form 10-Q. We plan to release fourth quarter fiscal year 2010 earnings in late July, a couple of weeks later than normal because of a change in the date of our board meeting.

Our third quarter earnings were released today after the market closed. A copy of our press release can be found on our Investor Relations section of our website at rubytuesday.com and is also available on Business Wire, First Call and other wire services.

Our format today includes a review of our third quarter results, an update of our fiscal 2010 outlook and a review of our plans and strategies. At the conclusion of our prepared remarks, we will open up the lines for questions.

I will now turn the call over to Sandy.

Samuel Beall

First of all I want to thank all of you all for listening in this afternoon. We are very excited about the momentum in our business. Our third quarter was our best sales quarter in the last three years even with the paralyzing winter storms in many of the markets in each month of the quarter and despite lapping the start of our improving trends in last year’s third quarter which was approximately 4 points better than last year’s second quarter. So overall we feel it was a great sales quarter.

We believe the consistent focus over the last several years on our brand strategies of greatness, hospitality, uncompromising freshness and quality, a fresh new look and compelling value is the foundation of this improvement. We are successfully getting people in to see the new Ruby Tuesday and they are coming back. We have also made some good progress on our key objectives for this year as a result of the cost savings we implemented last year; closing underperforming restaurants and stopping the decline in same store sales.

Our key objective as we began the fiscal year were and continue to be to increase same restaurant sales and traffic, to maximize cash flow and reduce our debt and to further strengthen our brand for high quality casual dining food and service and by providing our guests with compelling value. We made great headway in all of these areas.

Our driving focus is to increase same restaurant sales and traffic. Same restaurant sales were down 0.7% in the quarter and we estimate that the bad weather reduced sales by 1.5-2 percentage points. Same restaurant sales were slightly positive in January and February even with the weather impact which was significant in February.

These results compare to a 1.7 decline in the second quarter and a 3.1 decline in the first quarter. We introduced our mid-year menu update in November. We added a great deal of variety with a continued focus on quality, value and differentiation, all aligned with our high quality casual dining positioning. Our guests are responding well to this new menu. Our price increase was approximately 1-2% and our change in preference helped by our new menu design was 0.5 to about 1%.

One of our long-term objectives is to increase our average check to $12.50 to $14.50 and we are now making progress towards that. We took steps forward on achieving this goal in the quarter as the new menu and our promotional strategy resulted in a higher average check, as we mentioned offset by some decline in traffic. Our marketing strategy gives us much better control over our sales destiny. We better know what levers to pull to get the results we want. By effectively managing our promotions we achieved good sales and strong profits. We traded some traffic for check in the quarter to the benefit of profitability. We think this is a very good balance.

Our trends are good and our sales and traffic outperformed Knapp Track, the industry benchmark, both on a one-year and two-year basis. The improvement in our sales and balance sheet and our continued strong operations have allowed us to begin to develop longer term strategies to improve our return on assets and create additional shareholder value.

Now I will turn the call over to Margie to discuss our financial performance and update our guidance for the year.

Marguerite Duffy

Thank you Sandy. Good evening everyone. We were pleased with our third quarter results. Our ability to increase check helped restaurant operating margins and cash flows contributing to our debt pay down. I will review the quarter and update our guidance for the remainder of fiscal 2010.

We reported fiscal third quarter fully diluted earnings per share of $0.28 versus $0.09 last year. Last year’s earnings per share including closure and impairment charges primarily lease reserves at $0.17 related to the restructuring of our property portfolio announced in the second quarter of fiscal 2009. Closure and impairment charges were $0.02 per share this year.

Total revenue increased 3.2% during the quarter primarily reflecting the 0.7% decline in same restaurant sales and a decrease of 12 company owned restaurants from the same quarter of the prior year. We didn’t open any company operated restaurants in the third quarter and we closed 11. Franchise revenue declined 33% primarily reflecting the [bringing] of temporarily reduced or deferred royalties for some franchisees and a decline in same restaurant sales of 5.3% for domestic franchise restaurants in the third quarter.

The franchisees did not participate in some of our incentive programs in the quarter, contributing to their underperformance versus our company operated restaurants. The restaurant level operating margin was 19.5% for the quarter compared with 18.8% a year earlier. Food costs were flat at 28.5%. In general we continue to experience favorable commodity costs which allowed us to invest in higher quality menu offerings.

Labor cost as a percent of sales declined to 32.7% from 33% as the benefits from cost savings initiatives, a new labor scheduling process and last year’s store closing outweighed higher payroll taxes this year. On restaurant operating costs, other restaurant operating costs were down 20 basis points. Lower utilities and rent were partially offset by increased repair and maintenance in part reflecting upgrades to our television and satellite service package and increased snow removal and other costs.

Depreciation was down 50 basis points as a percent of sales primarily because of savings from our restaurants closings in the third quarter of last year and assets becoming fully depreciated from the prior year. SG&A expenses rose 70 basis points as a percent of revenue. The increase was largely the result of higher bonus accruals and lower franchise support service fee income. The equity and earnings of our franchise partners swung to a profit from a loss principally due to lower fees to certain partners, higher same restaurant sales for some of the larger 50% owned partnerships and lower advertising charges compared to the prior year.

Interest expense in the quarter declined to $3.6 million from $7.8 million reflecting both a decline in our average debt balances and the lower interest rate on our bank debt because of the low level of LIBOR and a lower spread to LIBOR. Closure and impairment expenses were down substantially primarily because of lease reserve charges last year that were related to our store closing program and lower impairment. Our tax rate was 20.1% compared with 5.3% last year reflecting the higher level of pre-tax income.

In turning to the balance sheet our book debt including current maturities was $322 million, down approximately $43 million in the quarter. Year-to-date we have paid down $171 million of debt. A year ago our book debt was $525 million and we have paid off a little more than $200 million in the last 12 months. At the end of the quarter our book debt to total capital was 38%. Our book debt to EBITDA was 2.2 and our total funded debt to EBITDAR, the ratio pertinent to our loan covenants, was 2.85. We clearly have made a lot of progress in reducing debt and strengthening our balance sheet.

Our guidance is as follows: We do not expect to open any new Ruby Tuesday company operated restaurants and anticipate closing one in the fourth quarter. Our franchisees expect to open between 1-4 restaurants in the quarter up to two of which are international. For the full year we will not open any new company operated restaurants and will close 14. Franchisees are anticipated to open 5-8 including 3-5 international. We estimate same restaurant sales for company operated restaurants will be down 1-2% for the year. Through the first three quarters of the year same restaurant sales for company operated restaurants were down 1.9%.

Our fourth quarter comparison represents the most difficult of the year when we were down 3.2% a 360 basis point improvement over the rate of decline in the third quarter of last year. We expect the restaurant operating margin for the year will be down 25-50 basis points primarily reflecting the impact of our compelling value strategy on food costs. Depreciation and amortization is projected to be $63-65 million. SG&A is targeted to be down 10-12% year-over-year. We will have an increase in marketing expenses in the fourth quarter from last year’s very low levels primarily related to higher spending on newspaper and internet advertising.

Bonus expense is also expected to be higher for the fourth quarter and full-year. Interest expense is expected to be in the $16-17 million range. The tax rate is projected to be 20-22%. Diluted earnings per share in fiscal 2010 are estimated to be in a range of $0.60 to $0.65, above our earlier guidance of $0.50 to $0.60.

Capital expenditures are estimated to be $18-20 million and we estimate we will pay down $20-25 million of additional debt this year bringing the total debt pay down for the fiscal year to $190-195 million. On April 1 we accessed our revolver to pay our Series 8 private placement notes totaling $70 million with an interest rate of 6.44%. Our liquidity remains very strong and we have excess capacity on our revolver of approximately $175 million after this draw down.

We have made tremendous progress in the last year and a half to improve our operating results and strengthen our balance sheet. As a result we have considerably more financial and operating flexibility than at any time over the last couple of years.

Now I am happy to turn the call over to Mark to go over some of our sales building programs.

Mark Young

Thank you Margie. Our marketing strategy for the last five quarters has focused on print promotions, digital media and local marketing programs to get guests in to see the fresh new Ruby Tuesday. This emphasis has enabled us to be more targeted and responsive to the needs of specific markets and restaurants than we could be using television.

Most importantly, our strategy has been more effective as the results demonstrate. We are very careful to position our promotions in a way that supports our high quality casual dining position. We did some consumer research to be sure that positioning was getting through to our guests and by a factor of nearly 2 to 1 consumers cited the food over the promotion when viewing one of our advertisements.

Our continued top line momentum in the third quarter as we lap the start of our improving trends last year was largely the result of the successful implementation of several of the programs we discussed on our last call. For example, the menu we introduced late in the second quarter has been well received by our guests and has contributed to a higher check with minimal price increases. This was achieved through the placement of items on the menu, an expanded appetizer line, a separate quesadilla section and some great new dinner entrees including a variety of lobster combinations.

We also introduced several new entrees on the brunch menu including steak and Eggs, Cranapple Crepes and a couple of new omelets. We are pleased with the way brunch is continuing to gain momentum and the positive impact it has had on the perception of the Ruby Tuesday brand.

One of our strategies is to build our liquor sales in the dining room and our food sales in the bar. Towards this objective we introduced our $5 all day, every day premium cocktail program. With the goal of trading some diners to a cocktail from a nonalcoholic drink. In the bar we started to offer our Give Me a Mini program. After 9 p.m. anyone ordering a $3 beverage receives a free mini and has the option of purchasing additional mini’s for $2.

In the fourth quarter we will continue to offer incentives to promote trial and frequency while still driving the compelling value. In addition we will be offering or testing programs that are designed to build frequency. For example, last week we rolled out to most restaurants a new, all-day Tuesday program with steak and lobster for $13.99. This features our sirloin steak and our lobster tails at a great price. In tests we were able to drive sales and traffic through the week.

We are also offering a weekend special for two with our Dinner for Tue promotion. This promotion allows a couple to enjoy a shared appetizer, two dinner entrees and a desert for $19.99 per person. This is an extension of the successful Valentine’s Day promotion that drove traffic and value perception. We have other ideas we will be testing to improve the overall value perception including offering craveable hot breads. We also will be offering several new menu items and enhancements to our garden bar as our biggest point of differentiation and a number one loyalty builder.

We will continue to evolve the menu to support our high quality casual dining position, increase guest frequency over time, broaden our appeal and provide our guests with compelling value. We are focused on creating more variety, craveability and constantly improving our existing menu items. As we discussed before our long-term goal is to increase our average check to the $12.50 to $14.50 range from approximately $12 where it is currently at. We made progress towards this objective in the third quarter and our marketing program will continue to manage the balance between sales, check, traffic and profitability.

Now Kimberly will give you a little more information on the sales, team and guest satisfaction.

Kimberly Grant

Thank you Mark. Our mission statement is to consistently deliver a memorable, high quality casual dining experience with compelling value. Everything we are doing right now from our marketing and menu, as Mark discussed, to our operational strategies is focused on strengthening our brand by increasing trial, increasing frequency, increasing average check and most important continuing to improve the guest experience every day.

During the quarter we continued to experience very high levels of guest satisfaction with our top two box scores for our four key attributes which are overall experience, value, intent to revisit and intent to recommend all well over 91%. Our top box scores continued to increase and more than 2/3 of our guests or just about 70% rate their overall experience a 5 on a 1 to 5 scale.

These scores represent the experiences of just about 120,000 guests each quarter and we have been tracking these scores for nearly three years now. Although we are very happy with the improvement in our top box scores, we know as a brand we must constantly look for ways to create more promoters of our brand and to do this we have to deliver a more consistent guest experience.

In our pursuit of operational excellence we have implemented a new management structure in about 70% of our restaurants. Traditionally each of our restaurants has a managing partner or a general manager and two assistant managers. In this new management structure, assistant managers are now designated as guest service specialists or culinary specialists depending upon their individual passions and skill sets. During the month of February each of these specialists received hands on training in the field and we will be conducting follow-up continuing education both in the field and in our Center for Leadership Excellence in Tennessee later this summer.

It is important to note that there is no additional cost for this program since it is simple a reallocation of our resources and we expect to have 100% of our restaurants including our franchise systems on this program by the end of the first quarter. Our goal is to consistently execute at a high quality, casual dining level and we believe this initiative should further improve the food and service experience at Ruby Tuesday.

As a brand we are also focused on continuing to improve our guest beverage experience by leveraging our award winning beverage program which features our one of a kind $5 premium cocktails as well as our extensive craft beer and wine offerings, our happy hour and late night food programs and our newly installed, high definition flat screen televisions.

In March all of our passionate bartenders throughout the country received a second round of field training in support of our goal to increase total bar sales including food and we are already experiencing some great progress towards this objective. We have also started to begin to track guest satisfaction in the bar. While there are fewer respondents of course and we don’t have any historical data to compare it to, the initial satisfaction levels are a little higher than our overall level in the dining room which is very encouraging.

Our key measures have remained solid as well. We expect to finish this year with management turnover just a little over 20% and our hourly turnover well under 100%. We are very proud of these numbers and the stability in our management teams as these are very low levels for our industry and they are in line with our objectives for the year.

With all of that said we are very encouraged by the continued momentum in our sales performance, our key measures and our operational performance. However, we remain very focused on our ultimate goal which is consistently to drive same restaurant sales.

I will turn this back over to Sandy.

Samuel Beall

To wrap it up before we start taking questions, it has been a very difficult two years for us. We have fought hard. We have worked hard. We have worked smart to get the results we are getting now. That is from the benefit of all of our strategies and the new Ruby Tuesday position. Our sales as you have seen have been on solid and improving trends for the last 15 months. We have been performing better than that even as we overlapped our improving performance on a 1-year and a 2-year.

Our same store sales were slightly positive in January and February is the most impressive one I think. We are very proud of this. We have also reduced costs significantly and are controlling costs well. We found a good balance of sales, traffic and profit. We are paying down a ton of debt, as Margie said, $43 million last quarter which is a record for us and $200 million for the year.

We have very, very low CapEx needs for now and for the foreseeable future which leaves us in the fortunate position of significant annual excess cash flow. Our focus is to keep doing what we are doing, strengthen the business every quarter and to keep creating and rebuilding shareholder value. With that we will open it up for questions.

Question and Answer Session

Operator

(Operator Instructions) The first question comes from the line of Jeffrey Omohundro - Wells Fargo.

Jeffrey Omohundro - Wells Fargo

You have made significant progress reducing debt. Can you update us on your targets around debt to capital? As you approach these targets particularly moving into the new fiscal year how you are thinking about reinvesting in the business versus returning cash to shareholders?

Samuel Beall

That is a tough one to answer right now. I think I would say we have just gotten off the defensive in the last quarter or two. We are now on the offensive. I think if we had to guess on a permanent level of capital for us or debt would probably be in the $150 million range is where we feel comfortable. Basically being one year’s cash flow. Our first objective would be to invest in the business although we don’t have any great demands right now.

I think having excess capital probably won’t really happen based on having $150 million. We will be in the situation in 12 months give or take and we would address that closer to that period of time.

Jeffrey Omohundro - Wells Fargo

I have been very interested around your efforts on the bar program and I really appreciate Kimberly’s comments on that. I am wondering if you could expand a little bit on what is really driving the higher guest satisfaction in the bar? Is it the focus on freshness there? Is it perhaps relative to what your competitors are doing? Maybe a little more comment on that and also margin performance there particularly what we are seeing on the cost side and beverage and alcohol.

Kimberly Grant

First of all on the scores of guest satisfaction it is actually the first quarter that we have ever started tracking these scores. We had about approximately 20,000 people fill out surveys related to the bar. So this is really setting the benchmark for our brand on the experience in the bar area with regard to the food and beverage they consume.

We are encouraged the scores are a little bit higher than the dining room. I believe they should be higher than the dining room because the guests in the bar area have a very tentative bartender and we don’t have a lot of bar sales to speak of at 10%. So we like the scores and we are going to keep pushing to get them higher.

Samuel Beall

I think what is helping is the team has really positioned us as a premium bar program. We are not doing two for one. We are not just trying to sell alcohol. As Mark or Kimberly said it is about food. So we have premium drinks at a very fair price, $5 for premium. We have great food products in the bar. We are actually rolling out with the new menu that is actually differentiated products from the dining room. It is about entertainment also with the flat screens and sports programs and March Madness contests and so forth. I think the bar is indicative of what we are doing for the entire box.

That is as full of innovation, innovation, innovation that is aggressively going after sales everywhere we can within those four walls and I think we are seeing the benefits of that. Our brunch is adding sales for the week. Our bar has added sales for the week. Our Tuesday Lobster night we feel decent about that and we have more coming on after that. It is innovation and being aggressive about attacking sales.

Operator

The next question comes from the line of Keith Siegner - Credit Suisse.

Keith Siegner - Credit Suisse

I have a question on the margin guidance. It still includes an expectation as you went through for a decline full-year versus full-year. I guess given the strength in the quarter and given some of the closures of the lower margin units and considering that margins have trended from down 70 in 1Q to up 70 in 3Q the guidance kind of implies that we need to see something kind of below 18.4 for 4Q. It just seems surprising to me we need to go from up 70 to down 50 or more for third quarter to fourth quarter, can you help me understand? Is it new initiatives that are going to drive the cost of sales higher? I am surprised at the guidance and if you could help me understand a little better that would be great.

Marguerite Duffy

It is initiatives whether it is lobster night that has some variance on food costs or whether it is our initiatives in staffing during those peak sales periods, putting additional labor in on Saturday night with our peak sales, we are investing in those types of strategies and incentives and that is going to bear some on that margin.

Samuel Beall

We hope it is better than that but when you are doing some of these tests you want to make sure you have it covered and you want to make sure you do it right. We think we are making enough money to be able to do that instead of just going for pure profit. So we continue to invest in the business.

Keith Siegner - Credit Suisse

The adding of labor for example on Saturday nights is that going to increase in the fourth quarter or is that already in place in the third quarter?

Marguerite Duffy

That will increase in the fourth quarter versus what we might spend in third.

Keith Siegner - Credit Suisse

On franchisee margins, how have the franchisee economics trended? Is it similar to company? I guess have they been as successful as the company at controlling costs?

Samuel Beall

I don’t think they are as successful as the company. I think originally when we did the partner program they probably operated better restaurants than us and they operate fine restaurants but I think the company has really excelled in every aspect of running restaurants and on cost. We run better costs than they do.

Keith Siegner - Credit Suisse

My last question which kind of stems from that, thinking about royalty abatement or deferrals and things like that what is the metric that will get those programs to start to decline? Is it the franchisee? Is it comps? Is it profits?

Samuel Beall

Just pure sales.

Keith Siegner - Credit Suisse

Just pure sales?

Samuel Beall

Pure sales.

Operator

The next question comes from the line of Thomas Forte - Telsey Advisory Group.

Thomas Forte - Telsey Advisory Group

I wanted to know looking ahead what are your thoughts on future company owned unit growth or purchasing some of the restaurants from your franchise operators?

Samuel Beall

Well, as far as new company restaurant growth that is way, way down the list of priorities. I think we said 3-5 years before we start growing. We will be growing even smaller prototypes so we may test 1-2 of them. Really no meaningful company owned restaurant growth in the next several years. As far as purchasing franchise partners, where they make sense we think that is good. By them for six times EBITDA or less we think that can work. You will see some of that as we have in the last couple of years. I think we have averaged probably a couple a year. You could continue to see that.

Thomas Forte - Telsey Advisory Group

You talked about the variance in performance from the company owned stores and franchise stores. Does that suggest that there is a need for TV advertising to help the sales of the franchise operators?

Samuel Beall

I think what it suggests is a need for if anything this year we will probably invest more in over-managing them to be more like company restaurants because we think there is an opportunity to 100% follow our programs and adopt everything we are doing because we are getting superior performance. That is our commitment for this next year.

Also we have being honest with you on new programs we generally have them lag 6-12 months until we really get the results. We have so many exciting programs we are really wrapping it up where we have early adoption of the programs instead of waiting out 6 months because the impact has been so good on sales.

Operator

The next question comes from the line of Joseph Buckley - Banc of America Merrill Lynch.

Joseph Buckley - Banc of America Merrill Lynch

Could you talk about the actual food cost experience year-over-year and maybe sequentially? What kind of inflation or deflation I am assuming are you seeing in your food cost basket?

Marguerite Duffy

We have had the good fortune of it being relatively flat on the food cost basket. Our investments have been for instance and a little lobster product to it is the only place we have really seen it.

Samuel Beall

We are not really having any decreases and looking out for the next 12 months we see relatively flat also. It could be up a few cents a pound but that is about it. It is a pretty benign market.

Joseph Buckley - Banc of America Merrill Lynch

The check in traffic this quarter I don’t know if it is the first time in three quarters or four quarters your traffic is down again and check was up. Could you quantify both? Kind of the magnitude of the two and tell me how you think about it. Given you have been very traffic focused to this point.

Samuel Beall

We are still very traffic focused. We are just trying to have a balance and it was a much tougher quarter with weather also. I think that had some impact on it. Keep in mind we still beat Knapp Track and I think we are still probably the best performers out there. So I think that gave you price and preference information. So we would have been off if you multiply that out a couple of points, 2-3 points I guess.

Mark Young

If you add the price preference that adds up to somewhere in the 2-3% range which would be a good proxy for check.

Samuel Beall

On a 2-year basis we continue to improve by about 3 points over the previous quarter which is most important to us and I think in the fourth quarter we will improve further too. So we are very happy with those trends we have. We are very, very happy with the balance of what we are spending to drive traffic and how much we are making. So we have top line. I feel good considering the environment and the competition on the traffic amount and we feel outstanding about bottom line. So we think it is a good balance.

Joseph Buckley - Banc of America Merrill Lynch

A question on the new management structure. The focus of the assistants on being culinary or guest service. What is the goal of that? What do you think the impact…what is the quality and impact on guest experience?

Kimberly Grant

That targeted impact is to specifically improve the quality of our food and the quality of our service in the dining room. The culinary managers focus 100% of their time only in the kitchen, only on inspecting and ensuring food of uncompromising freshness and quality. Their schedules are matched up to the exact peak shifts we experience and we are already seeing our food quality improve as a result.

On the service side, the guest service managers spend 100% of their time only in the dining room. They don’t have to worry about the kitchen. They don’t have to check in trucks. They don’t have to do any of the distractions that take them away from taking care of our guests. So they spend 100% of their time what we call large and in charge, in the dining room looking to fulfill any guest need and supporting the service team. So we have selected individuals by their personal passion. It wasn’t a matter of just divvying everyone up. In some restaurants we don’t have a culinary manager today because there wasn’t one person or candidate available that has a passion yet. We believe by the end of the first quarter we will be there.

Samuel Beall

What we are doing is we have taken the way we were in the restaurants, gotten as much quality as we could out of it and now we are moving up to say the way Capital Grille would run their restaurants where they have a culinary manager, a chef in the back of the house and the dining room manager really focuses only on the quality of service, the training and the hiring and being on that floor in the front of the house. Then you have a general manager who is the only generalist now. So you have two specialists, 100% committed accountable to certain areas and that will allow us to ramp up, move and improve the quality of our food and service another 25-50% we think over the next three years.

Kimberly Grant

The other thing that the new structure allows is to have two managers in the building during guest operating hours for most of our shifts. In the past we have usually only had one manager in the building. So it is extra coverage, extra supervision and it is going to result in better execution.

Joseph Buckley - Banc of America Merrill Lynch

Can you get to the two managers in the building versus one with no incremental cost?

Samuel Beall

Yes because you are working more and you have more [bids] on your schedule and you have overlapping in the peak times.

Kimberly Grant

We also use hourly team members to fulfill the nonessential closing and opening hours when guests aren’t in the building. So you are focusing your management when guests are in the building.

Operator

The next question comes from the line of Brad Ludington - Keybanc Capital Markets.

Brad Ludington - Keybanc Capital Markets

I wanted to ask I guess Margie first on the increased marketing dollars in the fourth quarter is that going to be split between the OpEx line or G&A or pretty much all in one of those areas?

Marguerite Duffy

All of the MD&A line.

Brad Ludington - Keybanc Capital Markets

You talked about a goal of increasing frequency and trial and other aspects. Do you have any measures? Is frequency up or is this, the improvement in same store sales and traffic based on just people coming back and trying the brand again?

Samuel Beall

We think our core traffic is moving about 3%. I don’t know the frequency number but I think frequency has to be up some and we know we are creating trial but I don’t know the exact number. Our average, in 90 days we averaged 2.9 visits from those who come in.

I appreciate you all taking time today to get an update on Ruby Tuesday. If you have any questions give Stephen a call. Thank you very much.

Operator

This concludes today’s teleconference. You may disconnect your lines. Thank you for your participation.

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Source: Ruby Tuesday, Inc. F3Q10 (Qtr End 02/28/10) Earnings Call Transcript
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