Ruth's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.21.14 | About: Ruth's Hospitality (RUTH)

Start Time: 08:07

End Time: 08:45

Ruth's Hospitality Group, Inc. (NASDAQ:RUTH)

Q4 2013 Earnings Conference Call

February 21, 2014 08:00 AM ET

Executives

Michael P. O'Donnell - President and CEO

Arne G. Haak - CFO

Analysts

Nicole Miller Regan - Piper Jaffray

James Fronda - Sidoti & Company

Andrew Barish - Jefferies

Brett Levy - Deutsche Bank

Brian Vaccaro - Raymond James

Operator

Hello. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Ruth's Hospitality Group Incorporated Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today's conference is being recorded.

I’d now like to turn the conference over to Arne Haak, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Arne G. Haak

Thank you, Becky, and good morning everyone. Joining me on the call today is Michael O'Donnell, Chairman and Chief Executive Officer of Ruth's Hospitality Group.

Before I begin, I would like to remind you that part of our discussion today will include forward-looking statements. These statements are not guarantees of our future performance and therefore, undue reliance should not be placed upon them. We’d like to refer you to the Investor Relations section of our website at rhgi.com, as well as the SECs website at sec.gov for copies of today’s earnings press release and our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating and financial results.

Mike will start off the call today. After which, I will provide you with a financial update on our fourth quarter results as well as on our initial outlook on 2014.

I’d like to now turn the call over to Mike.

Michael P. O'Donnell

Thank you, Arne, and thanks to everyone for joining us this morning. From both the sales and profitability standpoint, we’re very pleased with our fourth quarter results, which in turn capped off another strong year for Ruth's Hospitality Group. The strategic initiatives that we’ve implemented over the last few years combined with our ongoing operational focus have contributed significantly to a strong competitive position and continue to drive strength and consistency of our sales and profits.

During 2013 our top line -- our solid top line growth was led by our passion in hospitality and uncompromising service that our team members and franchises provide to our guests day in and day out. Their ongoing dedication led to a 5.3% increase in comparable store sales at Ruth’s Chris Steak House for the year, driven largely by traffic growth as well as positive sales growth at Mitchell’s Fish Market.

While we benefited from a moderation in beef inflation during 2013, we effectively managed our restaurant level expenses and leveraged our infrastructure throughout the year, resulting in an increase in non-GAAP adjusted EPS of over 25%. Given these strong results, we continue to reinvest in our business, strengthen our development pipeline, and further reduce our outstanding debt.

On top of that we were able to return excess capital to our shareholders through the initiation of a $0.04 of quarterly dividend, which we just announced will be increased by 25% to $0.05 in the first quarter. So all in all, we’re very pleased to deliver another year, healthy and consistent results.

Turning to our fourth quarter highlights by brand, comparable sales of Ruth's Chris Steak House company-owned restaurants increased 5.5%. Its worth noting that the increase comes on top of a 5.4% increase last year and since 2010, we’ve seen a three-year comparable cumulative sales increase of approximately 18.5% in the fourth quarter.

Entrees with service proxy for traffic increased by 4.5% during the fourth quarter, while average check increased 1%. Our strategic initiatives continued to focus on driving sales growth largely to traffic and we’re pleased to report our 16th consecutive quarter of traffic growth.

Now a brief comment on sales in Q1 of this year. As you know weather has been a factor during the first quarter. And like most restaurant companies, it had an impact on our business as well. Our first quarter comparable sales has slowed from our recent run rate, we are pleased to let you know that first quarter comparable sales at Ruth’s to early February have remained positive by about 80 basis points.

Our Ruth’s back to the quarter -- our Ruth's Chris franchise-owned domestic comparable restaurant sales increased 0.1% during the fourth quarter. While international comparable franchise-owned restaurant sales increased 0.9%, resulting in a blended increase of 0.3%.

As I noted, we continue to focus on growing sales primarily to traffic across our three core segments, which consist of special occasion guests, corporate businesses and our core regulars. We believe this strategy has contributed significantly towards our broad guest appeal and consistency of our sales growth.

Our Ruth's Chris -- our Ruth's Seasonal Classics are a key component of our menu offerings, particularly to our special occasion guests, who may be looking for value or price certainty. These price fixed selections comprised approximately 22% of preference in the fourth quarter, consistent with recent trends. During the fourth quarter, roughly two-thirds of the customers who selected the Ruth's Seasonal Classics exhibited a preference for the higher-tiered offering.

Our Sizzle Swizzle and Swirl happy hour premium bar menu continues to be an important part of our business. We believe our great guests appreciate the quality and variety of options, as well as the incredible value that the menu offers. We create another opportunity for our guests to enjoy Ruth's Chris Steak House, while not competing with our dining sales.

Private dining at Ruth's Chris Steak House, which we view as a proxy for business demand, grew 3.2% in the fourth quarter. Well this trend is slower than previous quarters in 2013. We believe that it was affected by capacity constraints during the December holiday periods. For the full-year, our private dining sales increased 9%.

From a marketing standpoint, we continue to target our promotions around special events and holidays. During the quarter, we focused on special menu offerings with great appeal for guests. We also launched e-card capabilities, which appeared to resonate well with an increasingly tech-savvy audience. More recently we launched a new wine and cocktail menu and updated our Sizzle Swizzle and Swirl offerings to [Rey] [ph] reviews from our guests.

We were pleased with our fourth quarter television flight and other promotional activity in the quarter to support holidays and celebratory -- and the celebratory season.

With regard to Mitchell's Fish Market, our comparable sales increased 2.6% during the fourth quarter on top of the 3.4% growth in the fourth quarter of last year. Traffic decreased 1.6%, which was offset by a 4.3% increase in average check.

The sales performance in Mitchell's Fish Market was driven by strong Thanksgiving and Christmas holidays and help to drive demand for positive comp sales for the year. A brief comment here on Q1 of this year for MFM on the sales for Mitchell’s Fish Market on sales side, the Midwest region has been among the hardest hit by weather so far this year and as a result Mitchell’s comparable sales have also been more severely affected by January and February’s weather.

To date in the first quarter, our comparable sales are down in the mid to high single-digits. At Mitchell’s we have employed new initiatives around private dining that were well received in the holiday season. We’ve successfully benefit from the best practices at Ruth’s and this area of business will be developed throughout the year, we’re focused on six additional special events in it, along with corporate business events.

Similar to Ruth’s we believe the special event diners come to dinner can bring -- can help raise a profile of Mitchell’s and to engaging educational interactive experiences attract new guests and increase frequency for our regulars. We also moved into retail sales for the first time of our gift cards for Mitchell’s in surrounding markets and look forward to expanding its program in 2014.

Switching to real estate, the efforts we have put in, and strengthening our new unit pipeline continue to produce result. During the fourth quarter our franchisee opened a new Ruth's Chris restaurant in Shanghai, our 16th International franchise restaurant and part of a growing Asian presence of our Ruth's Chris brand. Subsequent to the end of the fourth quarter, we opened a company-owned Ruth's Chris Steak House in Denver during January and this month our franchisee opened a new Ruth's Chris location in Boise, Idaho.

Over the last two years we and our franchise and licensed partners have opened to relocate a 12 new Ruth’s Chris Steak House worldwide. Over this time period our Ruth's Chris Steak House unit count has increased by 50%. And this is becoming an important component of our long-term revenue growth.

We continue to be pleased with the performance of our newer restaurants, which we believe validate our ongoing efforts -- thought to -- thoughtfully accelerate our new restaurant growth.

Looking specifically at 2014, a development schedule is shaping up very nicely, including our new Denver location and we expect to open a total of four company-owned Ruth’s Chris Steak House restaurant this year. Gettysburg, Maryland is currently scheduled for a third quarter opening, while Marina del Rey, California; and Dallas, Texas are scheduled for the fourth quarter.

In addition to the recent opening in Boise, we expect on transact opening in the third quarter and during the fourth quarter. Our franchise pipeline remains solid as we have commitments for 10 future franchise restaurants in the next three years.

We remain active in our development efforts and are continuing to work on additional companies, franchise, restaurants to 2014 and beyond. While we’re encouraged by the recent development activity, our approach to new restaurant development will remain disciplined and prudent with regard to capital deployment. We will continue to provide you updates to you on our newly signed leases and our franchise growth in our future quarterly calls.

I’d now like to turn the call back over to Arne.

Arne G. Haak

Thanks, Mike. For the fourth quarter ended December 29, 2013 we reported net income of $4.2 million or $0.12 per diluted share on a base of 35.9 diluted shares. This compares to net income of $3.7 million or $0.10 per diluted share on a base of 35.3 million dilutive shares in the fourth quarter of 2012.

As a reminder, the fourth quarter of 2012 consisted of 14 weeks compared to 13 weeks in the most recent fourth quarter of 2013. And we estimate that approximately $0.02 of earnings in the prior year can be attributed to the extra week.

Our net income in the fourth quarter of 2013 included a $2.5 million non-cash charge for the impairment of restaurant assets and the $750,000 pre-tax charge related to a fee from early termination of a lease. Additionally, in the fourth quarter, the company changed from the delayed method to the preferable redemption method for recognizing unused gift card breakage revenue. This resulted in a change in accounting estimate affected by a change in accounting principle. The cumulative impact of the change in estimate and the change in principle was recorded in the fourth quarter and resulted in a $2 million non-cash reduction in other operating income.

During last year's fourth quarter, we recognized $683,000 pre-tax gain on the settlement of unclaimed liabilities and a $5 million net charge related to the relocation of the company-owned restaurant, the impairment of assets at two units, and a gain on the disposal of property and equipment.

Excluding these items and income from discontinued operations, our non-GAAP diluted earnings per common share was $0.21 in the fourth quarter of 2013 compared to $0.18 in the prior year fourth quarter. We’ve included a schedule in our press release that reconciles our GAAP diluted earnings per common share to this non-GAAP EPS.

During the fourth quarter of 2013, we generated total revenues of $108.9 million compared to $114.3 million last year. We estimate that last year’s revenues were positively impacted by approximately $9.2 million as a result of the previously mentioned extra week in the quarter.

Average weekly sales for all company-owned Ruth's Chris Steak House restaurants was approximately $106,000 in the fourth quarter, an increase of 4.1% compared to $101.8 thousand in the fourth quarter of last year. Restaurant operating weeks for company-owned Ruth's Chris Steak House restaurants were 819 in the fourth quarter of 2013 compared to 879 last year, which included 60 additional operating weeks largely as a result of last year's 14th week. I'd like to highlight that our average weekly sales calculations in our restaurant operating week, exclude discontinued operations.

At Mitchell's Fish Market, average weekly sales increased 0.8% to $68,000 from $67.4 thousand in the fourth quarter of last year. Restaurant operating weeks at Mitchell's were 247 in the fourth quarter of 2013 compared to 266 last year. Last year's total included 19 additional operating weeks as a result of last year’s 14th week. Franchise income in the fourth quarter increased to $4.2 million from $3.9 million last year due to a combination of improved sales volumes and new franchise unit development.

In terms of our cost structure, food and beverage cost as a percentage of our restaurant sales increased approximately 20 basis points year-over-year in the fourth quarter. During the fourth quarter, our beef costs were up 3.1%. As Mike mentioned earlier, we benefited from an unexpected moderation of beef inflation during 2013 and we expect beef inflation to run up 4% to 8% for the full-year 2014.

Restaurant operating expenses, as a percentage of restaurant sales, were largely flat at 47.8%. Marketing and advertising costs as a percentage of total revenue decreased approximately 50 basis points to 3.7%, largely due to timing differences and planned quarterly spending compared to last year.

Our G&A expenditures increased to $8.6 million from $9.2 million a year-ago, largely due to one less operating week during the quarter. As a percentage of revenues, G&A improved approximately 20 basis points to 7.9%. At the end of the fourth quarter, the Company had $19 million in debt outstanding under its senior credit agreement, down from $37 million at the end of the third quarter of 2013. Overall, we reduced our debt outstanding by $26 million during 2013. Our capital expenditures during the fourth quarter were approximately $4.4 million and we did not repurchase any shares during the fourth quarter.

Also, as Mike noted previously, our Board of Directors recently approved a payment of a quarterly cash dividend to shareholders of $0.05 per share. This dividend will be paid to shareholders on March 27, 2014 to common shareholders of record as of the close of business on March 13, 2014.

Now looking ahead to 2014, we like to provide you with the following guidelines for some of our key cost metrics. Overall we expect our cost of goods sold to be within the range of 31% to 33% of restaurant sales for the year. We expect restaurant operating expenses to range between 49% and 51% of restaurant sales.

Our marketing and advertising spend is projected to be between 3% and 3.2% of total revenue for the year. Our G&A expenses are expected to be between $27.5 million and $28.5 million for the full-year. And we expect our effective tax rate for the full-year to be between 29% and 33%.

Our CapEx spending for 2014 is projected to grow to be between $20 million and $22 million, which is reflective of three additional company-owned restaurant openings in 2014. Finally, we expect our fully diluted shares outstanding to be between 36 million and 37 million shares, which does not assume potential share repurchases in 2014.

And finally, I’d like to make a few comments regarding our first quarter sales expectations and the effect of the change in accounting method for unused gift cards. As Mike noted, like many, we have experienced severe winter weather over a large part of the country and we have shared with you the effect on our first quarter sales to date. In addition, we will also experience an Easter and Lenten shift between the first and second quarter as Easter is three weeks later this year than it was in 2013. We anticipate that this shift will negatively impact first quarter comparable sales by approximately 100 basis points.

At this point in time, we believe that the cumulative effect of the Easter shift, weaker January and February sales due to weather and higher beef prices will result in a year-over-year decline in first quarter earnings. The change in accounting method for unused gift cards will affect our other operating income line in 2014. While we believe that the annual impact on the other operating income is immaterial the seasonality of how we record other operating income will change. Specifically the recognition of other operating income will be smoother in each quarter, which will result in a significant reduction in our 2014 second quarter other operating income when compared to 2013. And we will increase our other operating income in quarters one, three and four.

With that, I'd now like to return the call to Mike.

Michael P. O'Donnell

Thanks, Arne. To reiterate, we remain very excited about the overall health of our business as we begin 2014 and our ability to execute against a well-balanced, shareholder-focused plan anchored by our Ruth's Chris business, while our 2014 initial sales growth is disappointing. We believe that this is a temporary weather-related phenomenon.

We believe that our strong team effort on execution has allowed us to make significant progress over the last few years, leading to a consistent award-winning dining experience that resonates with existing and new customers. We will continue to include high-quality development opportunities for both company and franchise locations in our strategic plans.

Our franchise partners remain the heart and soul of the brand and our mix of company-owned and franchise restaurants is both unique and a distinct competitive advantage as we strategically expand.

Finally, while our first priority will be to evaluate opportunities to grow and reinvest in our business, we’re also focused on making wise, long-term capital decisions that include a mix of dividends, debt reduction and share repurchase. We believe this approach is working and continue -- and can continue as we execute over the coming years.

Becky, I’d now like to open the call -- turn the call over to you to open it for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will take our first question from Nicole Miller with Piper Jaffray.

Nicole Miller Regan - Piper Jaffray

Good morning. Thanks for the update.

Michael P. O'Donnell

Good morning, Nicole.

Nicole Miller Regan - Piper Jaffray

I'm wondering specifically what can or may you do to adjust the capacity issues that you talked about quality for large party’s, especially as you come up on Mother's Day in the spring as an opportunity to again, host large party.

Michael P. O'Donnell

Yes, Nicole, Mother's Day in that season is not as difficult for us. The issue around the holiday season this year as you know it was shortened the time between Thanksgiving and Christmas which created actually less days for people to have private party’s, company celebrations et cetera. So, we shifted as many people as we could to all above open days. We also shifted people in the lunch time opportunities. But as you know -- as we said, we’ve continued to grow that business through the holidays and we did literally run up against, we’d like this date and so it is for other people. So, I really think that that’s a good thing for us. We have also expanded our catering opportunities. So, we continue to look at other outside venues that we can go cater for companies that where we don’t have the capacity. So, I think we’re doing the right things there and I don’t think we’ll see that as a problem at Mother’s Day.

Nicole Miller Regan - Piper Jaffray

Okay, got you. And on the weather impact, can you -- is there any way you can parse so and say that stores that didn’t have as severe weather, are they still outperforming the way you would expect in terms of comp?

Michael P. O'Donnell

Yes, I would. Our two largest markets are Florida and California and those markets continue to perform at the level that is where our run rate has been so, we really do -- this is Sam, we’re going to hear about weather now from everybody, but so I don’t want to (indiscernible) snows but this was, and it gets cold but this (indiscernible) that I know real about has created not only days of snow and weather, but days of negative degree weather and negative temperatures, so this had an impact across there. But where we have had weeks, where we have not had the weather impact and in our California and Florida markets we continue to do well in the neighborhood of where we’ve had our run rates before.

Nicole Miller Regan - Piper Jaffray

And just a quick one for you Arne and I'll hop off. So the company opened -- company owned store development this year, what quarters should we put those in approximately?

Arne G. Haak

Sure. So Denver opened here in the first quarter in (technical difficulty), Gaithersburg, Maryland will be in the third quarter, and right now Marina del Rey and Dallas are fourth quarter openings.

Nicole Miller Regan - Piper Jaffray

Thank you.

Michael P. O'Donnell

Hey, Nicole thanks for being first again.

Nicole Miller Regan - Piper Jaffray

Yes.

Operator

We will go next to James Fronda with Sidoti & Company.

James Fronda - Sidoti & Company

Hi, guys. How are you?

Michael P. O'Donnell

Hi, James.

Arne G. Haak

Good morning, James.

James Fronda - Sidoti & Company

Are there any new initiatives in the pipeline you can talk about other than what you’ve been doing with Seasonal Classics and the Sizzle Swizzle and Swirl?

Michael P. O'Donnell

I mean on a culinary basis and in our wine and liquor basis, we’re very comfortable with what we’ve been doing on National Wine Dinners. We’re very comfortable with what we’ve been doing on Classic Cocktails. We’re very comfortable with what we’ve been doing with Sizzle Swizzle and Swirl although we update all of those things so that they (indiscernible) new ideas. So our Ruth’s Classics continue to resonate, but it also gives us an opportunity to make culinary changes in the sides and the things that we offer there. So, we’re very pleased with the consistency of our execution which I think people really count on. We want to be creative to the extent that we can execute still with a superior level.

James Fronda - Sidoti & Company

Okay. And I guess, could you just go a little more into the e-card capabilities what that entails?

Michael P. O'Donnell

Well, I mean what we’re attempting is, is that we’re doing I mean where they can go on to our websites and buy an e-card, that then transfers to you. You get a print out. You get the opportunity to use that, so that you don’t actually have to go buy the physical piece of paper.

James Fronda - Sidoti & Company

Okay. Now that’s fine. And I guess just in terms of the franchise locations, where are you looking to expand?

Michael P. O'Donnell

Well we have got development opportunities going on around the country and internationally. So the specific locations, Arne you might want to speak to the specific locations that we’re doing in 2014.

Arne G. Haak

Now that the -- in terms of James the franchise we have both domestic and international. I would say the mix is probably more international right now. That’s clearly -- when we grow internationally we wanted that to be at the franchise model. Growing domestically we look at both from a franchise perspective and from a company perspective. So and that’s really kind of a question around the returns and the does the geography make sense for us or does it make more sense for a franchisee.

James Fronda - Sidoti & Company

Okay, all right. Thank you, guys.

Operator

We’ll go next to Andrew Barish with Jefferies.

Andrew Barish - Jefferies

Hi, good morning guys. Can you give us an update on beef contracting and prices continue to remain high I guess, how are you looking at that range given what you contract and what pricing you have for ’14 at this point?

Arne G. Haak

Sure, Andy this is Arne, good morning. Beef is kind of back. We did benefit in the fourth quarter here from our contracts that we have in place from last year. Our beef cost including contracts is up about 3% I think if we hadn’t contracted our cost would have been up in the high single digits in the fourth quarter, because that is the time when it's seasonally strongest, the demand is seasonally strongest. Looking at this year we currently do not have contracts for 2014. Beef prices for prime products have been tracking kind of within our range. They have been kind of low to mid single digits here so far this year. We continue to look for opportunities to put a contract into place. But at the same standpoint we wanted to be at a price that makes sense for us. So last year that opportunity came in the second quarter. We will continue to talk to our suppliers and look for these opportunities but today we haven't found anything yet.

Andrew Barish - Jefferies

And where did the full-year beef inflation windup for ’13?

Arne G. Haak

Up low single digits, it was like a 1% to 2%.

Andrew Barish - Jefferies

Okay. And then just two others, what was the marketing shift in the fourth quarter, how did that play out or how will it play out as we look to 2014?

Arne G. Haak

So it's a good question Andy, but last year we had a fairly dramatic shift around from our normal seasonality of marketing spend which was heavy on Q4 advertising. And we did advertising in 2013 -- television advertising in both the second quarter and the fourth quarter, so we kind of called that out to you. This year there’ll be a little bit of change, we’ll refine that, but there won't be any dramatic changes like we had last year. I mean, I think last year in the second quarter it was like a 100 basis point change between ’12 and ’13. As we stand today and obviously this is a changing backdrop of the economy and what kind of tactics we want to use. We think it will play out fairly close to the trend that we saw in 2013. Nothing dramatic like we saw last year with a 100 basis point move from -- on a quarter basis year-over-year.

Andrew Barish - Jefferies

Got you. And finally, where would you put the potential to look at a franchise acquisition in terms of your uses in your capital allocation thoughts?

Arne G. Haak

Andy we do continue to evaluate that. We did not call it out in this quarter but subsequent to the end of the year we have acquired our franchise location in Austin, Texas, it's one restaurant, so it's not particularly material. But we think it is an opportunity for us and an opportunity for our franchisees. So when they come to the point where if they no longer want to operate their franchise or there’ll come a point in their life, they have someone that they can sell it to. And so we’re very excited about Austin. It’s been extremely well run for a long time and we’re excited to welcome those people into the company as company employees now. So, we have done it. There hasn’t been anything big on this front, but I think as you look at the levers we're working towards all of our levers in terms of adding shareholder value including franchise acquisition.

Michael P. O'Donnell

And Andy in this particular acquisition we do think there’s an opportunity, the potential for an opportunity for a second location which is one of the criteria we had for acquiring a restaurant. So we’re very pleased at having done that. We just had an all franchise meeting here in the last couple of days. I would say that the morale is high, their commitment to the brand is as strong as every and we’re pleased with our long-term franchise relations. And that some of them have actually, have been around so they were awarded their franchises from Ruth. And so without some of those we don’t have succession planning, it will be logical for them to look to us as a possible acquirer.

Andrew Barish - Jefferies

Thanks guys.

Arne G. Haak

All right. Thanks, Andy.

Michael P. O'Donnell

Thanks.

Operator

(Operator Instructions) We will go next to Brett Levy with Deutsche Bank.

Brett Levy - Deutsche Bank

Good morning, gentlemen.

Arne G. Haak

Good morning.

Michael P. O'Donnell

Good morning, Brett.

Brett Levy - Deutsche Bank

Okay. My questions are; first I just wanted a little bit of clarity on why we’re going to see lower G&A in ’14 versus ’13? And then just another one on aside from beef, what else are you seeing in the commodity basket and then after that I'll touch on Mitchell's.

Arne G. Haak

Okay. So first of all, on G&A, if you look at our guidance it was $28.5 million to $29.5 million, it's actually about $500,000 higher than our initial guidance was for 2013 a year ago. So it is moving up in our base plan. The reason we came in higher than our initial guidance is because there’s a fairly significant piece of performance base compensation. So to the extent that the company outperforms its business plan in terms of EBITDA or EPS you can have growth in G&A which is performance based compensation. So, as we stand today we believe that our G&A looked to be between $28 million. It looks to be within that range. If you look at last year, if we started to go higher, if we think we’re trending higher you’ll see us up that guidance but. So the actual initial guidance range is actually $500,000 higher than it was last year. In terms of the commodity basket probably two big things, one is beef just because it's such a big part of the basket, the other part is seafood. In terms of our percentage increase that area is seeing the biggest percentage increase year-over-year. We have worked hard to contract it and contract it in a way that it gives us some certainty but we probably -- when we look at the pressures from beef and the pressures from seafood we think the overall commodity basket is probably up mid single digits.

Brett Levy - Deutsche Bank

Where are you seeing the most pull back?

Arne G. Haak

The most pull back? I think some of the beverage categories are the flattest I mean, so it's not really a pull back it's just kind of flat.

Brett Levy - Deutsche Bank

Okay. Now with respect to Mitchell’s, what do you attribute the, what are we seeing in terms of menu pricing because obviously you said the check was up 4.5 how much of that was price, how much was mix and what do you expect to see over the course of the next year?

Arne G. Haak

So in terms of Mitchell’s there’s a couple of things going on, some of it a little bit more dinner over lunch which is a higher check average. Another, one of the things we’ve done in terms of our limited time offerings we had a very heavy focus on higher priced offerings frequently including lobsters that then they have resonated with the customer. So they come with a higher average check price. So, right now in terms of our menu I think we have less than a 1% price increase year-over-year, the rest of it is really mix between offerings and lunch and dinner.

Brett Levy - Deutsche Bank

And what's your price plan for the Ruth’s chain over the rest of the year?

Arne G. Haak

Right now we have just under 2% in price, there’s a fall off in the third quarter is when the next piece of pricing would fall off and we’ll revisit depending on how the commodity basket goes. For the last three years we’re probably averaging about 1.5% of price.

Brett Levy - Deutsche Bank

Great. Thank you very much.

Operator

At this time we have one question remaining in queue. (Operator Instructions) And we’ll go next to Brian Vaccaro with Raymond James.

Brian Vaccaro - Raymond James

Good morning. On that pricing at Ruth’s Chris, could you remind us what that price factor was in the fourth quarter and also discuss maybe or provide some more color on the -- what appeared to be a slightly negative mix component at Ruth’s Chris and if that’s expected to continue heading into ’14?

Arne G. Haak

First of all I could barely hear the second part of your question Brian, but the first part of the question was what was the price in the fourth quarter and it was right around 2% in the menu for the fourth quarter. Could you repeat the second part of your question about the mix?

Brian Vaccaro - Raymond James

The second part was just around mix and I think it's been running slightly negative the last two quarters and kind of color on that I guess that would easily shift to lower price menu’s the Classics et cetera, but if you expect that to continue going into ’14?

Arne G. Haak

I don’t think we see anything negative happening in terms of our mix. I think we’re very pleased. If I look at just kind of the sales growth and if that’s kind of where the question may be coming and how much of it is coming from check. What was interesting about the fourth quarter was kind of the seasonality of the sales growth. You kind of forget we had all the government shutdown and all that noise back in October. We had very slow sales growth in October. November picked right back up, had a very strong Thanksgiving and December was the strongest quarter -- strongest month in the quarter for us. The only thing that I could possibly think that might affect give the optics externally of a negative mix would be we had very, very strong Thanksgiving and Christmas performance. We have a little bit of a lower price menu offering at Thanksgiving which might play into the overall quarter mix, but we couldn’t be happier with kind of sales performance that our operation teams have been turning in.

Brian Vaccaro - Raymond James

Okay, great. That’s helpful. Thank you.

Michael P. O'Donnell

This is Mike; just that James if you’re still on the line you had asked a very specific question about franchise development for ’14. And I’ll tell you that we got Boise, Idaho it's already opened, we talked about that before. We have got possibilities that we could open in the second quarter in Panama in the fourth quarter Taipei, in the fourth quarter in the Mid East, in the fourth quarter another opportunity in China. We look to be relocating the Sandy Springs restaurant in Atlanta and Indianapolis North for franchisee may possibly will be relocated. Some of these are a little bit of a moving target, some of them could move into ’15. That’s why we really kind of talk about what our commitments are on a longer term basis, but specifically since you asked a question, those are the things that are in the pipeline today, they could slip so.

Operator

That concludes today’s question and answer session. I’ll now turn the call back to Michael O'Donnell for any additional or closing remarks.

Michael P. O'Donnell

Thank you all very much for joining us here early Friday morning. We’re very pleased with the results. We’re very pleased with our team mates in the field, our franchisees. We’re very fortunate to work with such talented people. We thank you for joining us on the call and as always it's a great day to go out eat either steak or fish. Thank you very much.

Operator

That does conclude today's conference. We thank you for your participation.

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