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Ruth's Hospitality Group Inc (NASDAQ:RUTH)
Q3 2020 Earnings Call
Oct 30, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's Ruth's Hospitality Group Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]

I would now like to turn the conference over to Mr. Arne Haak, Chief Financial Officer. Please go ahead sir.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Thank you, Melissa and good morning everyone. Joining me today on the call is Cheryl Henry, our President and Chief Executive Officer. Before we begin, I'd 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 would also encourage you to refer to the Investor Relations section of our website at rhgi.com as well as the SEC's 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.

For those of you interested in our 10-Q filing we expect this document to be filed next week. During this call, we will refer to adjusted earnings per share. This non-GAAP measurement was calculated by excluding certainly items. We believe that this measure represents a useful internal measure of performance. You can find a reconciliation of adjusted earnings per share in our press release for today's call.

I would now like to turn the call over to the company's Chief Executive Officer Cheryl Henry.

Cheryl Henry -- President And Chief Executive Officer, Director

Thank you, Arne. Good morning and thank you for joining us for our third quarter 2020 earnings call. We appreciate your time today and hope that everyone is staying safe and healthy. In March of this year, we set the following principles in place to guide us through the challenges of COVID-19: one, further solidify our strong financial position; two, take a strategic long-term approach toward managing and improving our business; and above all three, managing the health and safety of our guests and team members. Today I'm pleased to say, we are successfully executing against all of these principles and I believe they are reflected in our sales and margin performance during the third quarter. Our teams have remained resilient, agile and dedicated to providing the legendary service Ruth's Chris is known for, all while keeping our guests' health and safety paramount. They have operated in a complex, ever-changing environment that requires them to serve our guests in a variety of different modes sometimes changing by the day and they have been very successful.

So while our comparable sales during the third quarter decreased by 37%, it's important to note that the comp base includes over 20 restaurants that were limited to outdoor dining and five restaurants that remained temporarily closed. The more accurate number in our view is a decrease of 21.6%, which reflects restaurants with dining rooms that are open, but in all cases facing capacity restrictions of 50% or more. This improved sales performance when combined with our increased operating efficiencies helped generate positive cash flow for the quarter. I'd now like to share with you some of the reasons behind the strong sales performance that we've seen. First, we benefited from a well-diversified portfolio of restaurants. Nearly 60% of our restaurant portfolio is in suburban or midsized markets and less than 15% of our restaurants are in urban metropolitan areas that are generally seeing softer demand.

The sales performance in the New York area is a great example of the disparities between these market types. During September, sales in our Manhattan restaurant were down 77%, while the sales at our Westchester New York restaurant which is in a hotel were up year-over-year. We have often stated that one of the strengths of the Ruth's Chris model is that it works in a variety of market types and that has proven to be beneficial here in the third quarter. Another strength of the Ruth's Chris model is our broad mix of guest appeal and our ability to evolve our business to changing customer needs. Historically, our sales mix has been distributed relatively equally between special occasion just because and business guests. The COVID pandemic has impacted our private dining demand, but our Ruth's Anywhere Program overcame nearly 90% of that sales decline during the third quarter due to the expanded takeout and delivery initiatives we put in place earlier this year. We are also seeing a rise in demand from our non-business customers. Reservations for celebratory, birthday, anniversary and just because occasions are up double-digit year-over-year, which signals to us that while Americans may not be eating out as frequently when they do eat out, they are choosing high-quality restaurants that they trust like Ruth's Chris.

Our franchise partners are also seeing similar results. Comparable sales for franchise-operated restaurants were down 11.8% in the third quarter after being down 64% in Q2. More impressively comparable sales at our open Asian franchise locations were up 6.6% in the third quarter year-over-year. In addition to the sequential top line improvement, our restaurant operators have risen to the challenge and further improved upon our already strong restaurant operating margin. Arne will share more of the details with you in a few minutes. But at a high level, the 47 restaurants that had open dining rooms during the third quarter on average generated a profit margin of more than 300 basis points higher than last year. These same restaurants also produced over 95% of the restaurant operating profit that they generated in last year's third quarter. While it is uncertain whether this will be applicable on an annual basis due to geographic mix and seasonality of these restaurants, it is worth noting the strong performance by our operators.

I'd now like to spend just a few minutes on our balance sheet. At the end of the third quarter, we had $103.1 million in cash and a net debt of just $32 million, which is down from a net debt position of over $58 million at year-end. In October, we paid down an additional $20 million on our revolving line of credit and secured an extension to our credit facility through February of 2023. With this amendment, our credit facility has now returned to the size it was at the beginning of the year. I am confident that we now have a solid COVID playbook. Sales and profits are moving in the right direction and we are controlling what we can control. Dining room restrictions by state or local governments are not in our control, as you know. But our teams are ready and responsive and will continue to adapt as they deliver great experiences to our guests safely. To that point, the whole Ruth's Chris team, including our franchise partners, have been tireless in their efforts and their dedication to operational excellence and innovation has been outstanding. I am incredibly proud to work alongside each and every one of them during this difficult time.

With that, I would like to turn the call over to Arne to review our third quarter results in more detail.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Thank you, Cheryl. For the third quarter ended September 27, 2020, we reported a net loss of $5.3 million, or $0.15 per diluted share. The net loss in the third quarter of 2020 included $1.2 million in severance payments, $310,000 in losses related to lease modifications, a $3.3 million impairment loss related to inventory and long-lived assets and $217,000 income tax expense related to the impact of discrete income tax items. Excluding these adjustments, our non-GAAP diluted loss per common share was a loss of $0.04. Total revenues for the quarter were $63.4 million, which compares to $103 million in 2019. Company-owned restaurant sales for the third quarter were $58.6 million, which compares to $97.2 million in 2019. The decrease in sales was due to both the local and state in-dining room restrictions as well as restaurant closures which were a result of COVID-19. As Cheryl noted, our comparable restaurant sales improved considerably as the quarter progressed. By month, comparable restaurant sales decreased 43% in July, 38% in August and decreased by 28% in September. Comparable sales thus far in the fourth quarter-to-date have held steady and are down 26%.

Franchise income in the quarter was down 11% year-over-year, reflecting the impact of COVID-19 on our franchisee sales. Domestic franchise comparable sales were down 8.2% year-over-year. Most of this franchise territory is in markets that had fewer dining restrictions during the quarter, or benefited from increased demand due to staycations at nearby beach or mountain attractions. Total international franchise comparable sales were down 28%. Turning to our expenses, food and beverage costs as a percentage of restaurant sales were down 250 basis points year-over-year to 27.1%, which can be attributed to our new more focused menu, as well as beef deflation of 12%. Restaurant operating expenses were down 31.9% largely due to the lower year-over-year sales levels we experienced. As we reopen our dining rooms, we continue to see the results of being sharply focused on regaining our sales leverage. The margins in our restaurants that had open dining rooms in the quarter were up year-over-year, despite the decline in sales. We have seen significant margin improvements in food, in labor and also in our direct operating costs. As we continue to grow our sales, we realize that some of these efficiency gains may slow, but we believe we have identified permanent food and labor efficiencies from these efforts that will be beneficial during a sales recovery. We have also taken a strategic approach to manage our real estate costs.

Our restaurant-level operating margin in the third quarter was down over 400 basis points year-over-year. By far, the biggest margin pressure was due to sales deleveraging of our occupancy expenses. This is why we have been systematically reviewing our real estate portfolio, negotiating revised rent terms and, where necessary, permanently closing a location. In this regard, we permanently closed four company-owned locations during the third quarter. Since the start of the pandemic, we have permanently closed nine locations and there's only one additional location that we are currently evaluating for permanent closure. Many of these restaurants were in locations that were near the end of their lease life or face challenging economics in a post-COVID world, or both. These restaurants had an average age of over 20 years and while profitable, underperformed the system and contributed less than 2% of the company's EBITDA in 2019. Regarding the resumption of new unit development, our new bank amendment now lets us earn growth capex going forward even when our leverage ratio is over 2.5 times. While we are pleased with this feature there's still too much uncertainty in the regulatory environment to say when we would be able to resume real estate growth.

As we look at our restaurant portfolio today, 72 company managed restaurants are open and five restaurants remain temporarily closed. Over 91% of our open restaurants have open dining rooms with capacity restrictions, five restaurants are operating with outdoor dining and one restaurant is operating takeout and delivery only. The operating status of our restaurants remains dynamic and subject to state and local regulatory changes. As we head into our busiest quarter of the year, we recognize that the capacity restrictions may limit our ability to satisfy the seasonal demand, we typically face late in the quarter. Despite these challenges, our operating teams are actively developing plans to maximize our revenue performance during these periods. The income tax rate in the third quarter of 2020 was 19.5% versus 8.5% in 2019. The increase in our tax rate was due to the expectation that the company will have a pre-tax loss in 2020 versus pre-tax income in 2019. As a result, our income tax credits increase our tax rate because they add to the tax benefit. When we have pre-tax income these tax credits will reduce our tax rate. At the end of the third quarter, the company's cash balance was $103.1 million and included approximately $6 million in deferred rent from the second and third quarters. As a reminder, due to the continued uncertainty surrounding the duration of the impact of COVID-19, we're not providing any additional guidance at this time.

Now before we go to Q&A, I'd like to turn the call back to Cheryl for a few summary remarks.

Cheryl Henry -- President And Chief Executive Officer, Director

Thanks, Arne. Just a few quick takeaways. First, we rightsized our real estate portfolio and believe we are now managing a great collection of restaurants given our current circumstances and future opportunities. Second, at the restaurant level, we've made operational changes that have improved margins without sacrificing the Ruth's Chris experience customers have grown to love. As you've heard today, performance is picking up, guest occasions are increasing and we know we can effectively and efficiently operate our restaurant portfolio amid a variety of COVID scenarios.

And third, we further strengthened our balance sheet, which has significant liquidity, yet modest net debt. This will help us as we play defense should cases continue to rise or play offense meaning invest should the cost environment improve in the coming months. All-in-all we have made the right strategic moves for our stakeholders and are cautiously optimistic as we look to navigate the next few quarters. As I said, we are controlling what's controllable in a challenging environment.

And with that we'll open up the line for questions.

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.

Brian Vaccaro -- Raymond James -- Analyst

Thank you. Good morning. My question is just on the monthly sales cadence and I guess in a COVID world it seems to be all about dollars coming in the door rather than year-on-year comp trends at least in my opinion. But I guess, looking at average weekly sales is it right that you exited the period Arne in the low 60s range on the company side? Or perhaps you could even provide monthly AWS through the period. And then could you give us a sense of where AWS has trended here in October? Has it got a little better? Is it similar to September?

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Sure, Brian. Our average weekly sales in September were just north of $77,000 and that's an improvement from we were in the 50s if you remember back in like kind of June-July. So as you think about the cadence, it's been a tremendous trend so far. April when we were takeout and delivery only we were only doing about $20,000. So today in October, we're over $80,000. And it's the seasonality of our business that you're seeing. So I think the good news is -- we're watching this very carefully. The average weekly sales are continuing to grow.

We are continuing to kind of set new highs for individual restaurants and we're watching this particularly as we get toward the end of the quarter because we have some really big numbers we have to compare against. So everything seems to be moving in the right direction. And I think we find it encouraging. So it's been a good trend on average weekly sales.

Cheryl Henry -- President And Chief Executive Officer, Director

Yes. And one note Brian, just as you think about from month-to-month and obviously, there's restaurants coming in and out as jurisdictions change regulations. But the average weekly sales number would include the restaurants that also are just operating in an external dining room standpoint as well. So that's in those numbers.

Brian Vaccaro -- Raymond James -- Analyst

Yes. That makes sense. Sorry, I misquoted the number there. I was looking at the 58.6, but that was sales not average weekly sales. So yes, you're clearly in the 80s in recent weeks. So OK. That's helpful.

And then, I guess, on outdoor dining, could you help frame how many units have expanded outdoor seating perhaps what percent of sales that it contributed? And how do you think that will play out through the winter months? Are there opportunities to maybe add in certain southern states that might offset losing some seats in the northern states?

Cheryl Henry -- President And Chief Executive Officer, Director

Hey, Brian let me say this generally and then I'll give it to Arne. We are fortunate we have a fairly large group in California, Florida and Texas some that stay warmer. Some people that live there probably argue it's not that warm in the winter months. But I think as we look at what is the possibility around 30%, I think of our systems have capabilities through the winter months.

I think obviously the biggest driver for us is when our dining rooms open and when capacity gets up to that at least 50% capacity. So yes, the opportunities are there and I'll give credit to our teams. They have done a fantastic job. I'll tell a quick story in our Woodland Hills location. They had over 100 people on the books, one night and found out that day they needed to close. And instead of closing they went out and got a tent and made this beautiful looking dining room outside and kept all their reservations. So true credit to the team to be able to do that. But again I think the opportunity certainly is when the dining rooms are open. But the teams are prepared in the event that we're not.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Yes Brian, I think Florida could do better this winter. I mean, obviously, it's not real pleasant sitting outside right now. But there are still people that choose to do it. We're just kind of coming into the really nice outdoor dining weather in Florida, so that could help. And California has probably been the most tricky one that kind of pivots back and forth. And every week you have to be kind of prepared to change. I think what has been really impressive is how nimble our operators have been and been able to pivot to Cheryl's point in some cases in a day.

Like OK, we're going to do something different. Carry the tables outside. Someone go get a tent. Let's put down outdoor carpeting. Let's put string lights up. Let's decorate the tables. And you see pictures of like wow that looks really nice and you're sitting in a parking lot behind a mall. So I think, Cheryl's point is dead on. We got a playbook now. We now know like what COVID kind of looks like so far. And we know what to do when this we go in one direction or when we go in another direction and how to manage it and how to manage our cash. And now it's just about OK let's get our businesses to being as strong and as healthy as they can be so we can have a good 2021.

Brian Vaccaro -- Raymond James -- Analyst

Yes. Yes. And sorry if I missed this but the mix of dine-in versus off-premise, you talked about off-premise being an important sort of offset to the lost business customer to an extent. Could you provide some color on what you're seeing in off-premise sales mix versus dine-in?

Cheryl Henry -- President And Chief Executive Officer, Director

Yes. So if you recall Brian, when we were open and it was really to-go only we were running between 20% and 25% of prior year sales. As we open restaurants, we see we're keeping about half of that. So I still think it's a viable option for some people through this. But I'm also seeing I guess on the flip side it's great to see that people trust us and they're willing to come back and have the experience in our restaurants. And I know our teams are thrilled to see them. So it's still certainly something, we stood the program up we have the technology to do it and we are certainly looking to see how we can leverage that especially going into Q4 with the holiday season.

Brian Vaccaro -- Raymond James -- Analyst

Yes. Yes. All right. Well that's great to hear. Congrats on the recovery and I'll pass it along.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

All right. Thank, Brian.

Operator

Thank you. Our next question comes from the line of Andy Barish with Jefferies. Please proceed with your question.

Andy Barish -- Jefferies -- Analyst

Hey, good morning. Just wondering, if you could kind of call out a few of the sort of permanent margin finds that you've located here with the streamlined menu and other procedural changes.

Cheryl Henry -- President And Chief Executive Officer, Director

Yes. Let me start and I'll turn it to Arne for more detail. As we looked at the opportunity especially as the first phase of this went in and we looked at kind of how we're structured in the restaurants, there were some opportunities in really the management of the restaurants as well as some of the hours toward different levels of preps and so forth. And that's where you see the streamlining of the menu. I would say this and I'll let Arnie give some more of the numbers but there is a very delicate balance for us on this. And so as we think about how we're tracking the impact on the guest, whether it's the number of items on the menu or how they feel about the service, we are tracking that on a regular basis, ensuring that we are not impacting this experience overall. And what we've seen we put a few more menu items back on for kind of the input of our guests and we've been able to hold some of those efficiencies we found in labor as well as in some of the remaining streamline menu items.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

So, Andy I think, Cheryl really hit the main themes. I think labor is probably the -- everyone wants to know where is the stickiness. And I think labor is probably the stickiest if you will. The team has gone through and completely looked at the roles of people of how we do back-of-the-house work. There's been changes in the front of the house as well in terms of how we use our management teams. And I think those have the potential to stick.

Now at some point, when sales levels get higher, you're going to need more help back in the kitchen. And you probably won't be able to centralize some of the functions that we've done that maybe don't need to be done today in a restaurant. So I think at some point they'll come back, but that's -- we're going back to a point where our restaurant level margins were healthy. So, I think we're comfortable with that, but we know we have this as a tool to help us manage, as we go through, whatever the length of recovery looks like.

Andy Barish -- Jefferies -- Analyst

Thanks. And then, if you're willing to share, just in terms of the portfolio pruning, kind of on a normalized basis, how would maybe looking at 2019? How would have restaurant level margins benefited, if those stores had been closed?

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Andy, I don't have that number in front of me, to give you an exact but it does also provide -- you're absolutely right. It will provide a tailwind for us, in terms of that they tend to be kind of underperforming. Some of the restaurants had decent sales, but they had just some challenging costs and economics.

And with COVID coming in play, they just -- you couldn't really see a prize on a recovery scenario for years, and years to come. So, that's the color. We can go do that work and perhaps chat about it with you a little bit more, but I don't have the exact number of a tailwind for 2019, if we just took those out.

Andy Barish -- Jefferies -- Analyst

No problem. And then, just finally on, beef costs, just if you have an outlook for 4Q? And then looking back to 3Q of the 250 basis points of cost of goods decline, how much of that do you think was the 12% beef production?

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Sure. So I guess, we'll start off with, the outlook for, the quarter fourth quarter. I think we expect some modest deflation, nowhere near the level of deflation that we saw in the third quarter. So I'd probably say kind of mid-single-digit is probably, if we had to like, hold our finger up in the air and guess on this. The big uncertainty is around retail demand. There's been really strong retail demand for proteins, particularly beef. And that will -- how that plays out in the fourth quarter is the big unknown. As we look at the restaurant level margin, I think you nailed upon one of the things that was really kind of an eye opener.

Our food costs, as a percentage of sales I think, is the lowest I've ever seen it, since I've been here and that's nearly 10 years. And about half of the decline is probably due to beef. So we were down 12%. Last year, I believe in the third quarter we were up 18%, 19%. And it was a record high. So, we're still, kind of if you look at kind of the last five years, we're probably still in the upper half of the bands of where beef is. So we're still relatively elevated point, but we are benefiting from the comp, from last year.

Andy Barish -- Jefferies -- Analyst

Thank you very much.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Melissa?

Operator

Thank you. Our next question comes from the line of James Rutherford with Stephens. Please proceed with your question.

James Rutherford -- Stephens -- Analyst

Hey, guys. Thanks for taking the question. It's actually Sean on for James. Just one quick one, we've been talking a lot about, the heightened independent closure rate, throughout this pandemic. We were wondering what your view is on, how much this might be impacting you in the fine dining segment, where we think perhaps, there could be a higher closure rate just given the difficulty of shifting that occasion to off-premise.

Cheryl Henry -- President And Chief Executive Officer, Director

Thanks, Sean. I'll speak for us. I think Arne, laid it out. We are -- we've done the work around our portfolio based on the, attributes that Arne mentioned. We don't believe, for us, we'll see more closures from here. We'll continue to review it. I think as we all are seeing over the last couple of weeks there's kind of more volatility to come. I think in the space itself, it's early. I think there are a lot of estimates out there. And I'll tell you each week, I read a different number of what's going to happen within the industry. It's unfortunate, that this is taking place. And I think it's early. I think there's more time that's needed here to understand exactly what this landscape looks like in fine dining.

But I can say, on a positive note, when we -- the demand we have seen, when we are allowed to reopen our dining rooms, even with the 50% restriction would tell us there is a -- it's not consumer demand that is kind of limiting that for the industry. It's really what's allowed as we go forward. And so I would say that, yes the consumers are out there. They are looking for that occasion. They want to feel safe. They want to go somewhere they trust. And I think for us, we're in a good spot in the consumer mindset, around the experience they can get.

James Rutherford -- Stephens -- Analyst

Great, awesome. Thank you.

Operator

Thank you....

Cheryl Henry -- President And Chief Executive Officer, Director

Melissa?

Operator

[Operator Instructions] Thank you. Our next question comes from the line of Todd Brooks with CL King & Associates. Please proceed with your question.

Todd Brooks -- CL King & Associates -- Analyst

Hey. Good morning. And thanks for the question. I was wondering if you could just help us understand, how your Q4 typically progresses. And I'm curious, as we get to especially the end of the quarter, how these capacity limits that you're operating under might kick in? And how we need to think about that over a year-over-year basis? And then the typical one-third, one-third, one-third mix, how does that change as we get deeper in the quarter? And just any potential positive offsets from what you're expecting maybe out of the Ruth's Anywhere across the holiday season this year? Thanks.

Cheryl Henry -- President And Chief Executive Officer, Director

Let me take your second question and then I'll toss it to Arne for more of a week-by-week or period-by-period build. I would say you nailed it. Certainly fourth quarter is our highest traditionally private dining focused quarter. We are, obviously, aware of that. I think as we go into the quarter thinking about what the offerings might be. And again it's still -- some of it is out of our control from a standpoint of how much dining room we will have open. But this is where when Arne mentioned the teams are staying agile and have their plans ready to stand up around things like how do we do offsite catering and delivery for folks and larger bundled meals for families that might want to have a dinner for four or a dinner for six if they don't feel comfortable doing that in a restaurant.

So those are all initiatives that are under way. We're putting -- we have a great database of loyal guests over the years. And so we're tapping into that during the holiday season to make sure people understand the different ways they can experience Ruth's Chris. But certainly as you look at where that comp starts to get fairly significant is into the weeks in December.

Arne anything to add there?

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Yeah Todd, just to I guess maybe put a couple of numbers behind it. I know Brian had asked about where we are on average weekly sales. And so if you think about it we've kind of spent the third quarter transitioning from like $60,000 to $80,000. I think as we look at the year-over-year or the trend for year-over-year, our average weekly sales from here on out go anywhere from $100,000 to like the last two weeks of the year you're $150,000 to $200,000 is what you did last year in average weekly sales. So I think that's the big question for us is those really busy weeks and the teams are doing I think a tremendous job. They're being smart about understanding how should I use my private dining room. I may not see a big company holiday party this year, but can I use it for different occasions? Can I use it for a la carte? Can I use it during the day? And they -- I think they have the flexibility to kind of help push back against it.

But it's a pretty big -- when you think about those last -- and I know other people have talked about it too. You look at December there's some really big average weekly sales. And we're anxiously looking every week how are people doing, how are they inching up, who's setting new records for average weekly sales. And we continue to see people doing that, and so I think it's encouraging. But it is sobering when you think about where average weekly sales are and what the comp is for last year.

Cheryl Henry -- President And Chief Executive Officer, Director

And Todd the only other thing I would add is we've seen a willingness from the guests to dine at earlier and later times during the day. And so I think coming into those really significantly weeks that's an opportunity. Arne mentioned dining during the day. So that's something historically we've done on a limited basis, but can be an opportunity for us going into those heavy volume weeks of the past.

Todd Brooks -- CL King & Associates -- Analyst

That's very helpful. And then just my final question, you talked about occasion-based and just because, kind of, tracking up double-digit year-over-year right now as far as occasions. But can you talk about just business demand in general? I think on the last call you talked about at least some inquiries about possible events, but it may have been longer tailed maybe into 2021. But now that where the world sits COVID-wise now can we just talk about the demand from your business customers? Thank you.

Cheryl Henry -- President And Chief Executive Officer, Director

Yeah. I think we kind of sit where we did, which is there's certainly increase. And again this is something that's really regulated to an extent on the local level. And so there's oftentimes we're getting inquiries and the local governments have certain restrictions around party size. And so we are adhering to all of those restrictions for the safety of our guests.

So I'd say the inquiries are there. I would say what's been interesting is seeing a pickup in kind of the social celebration is people looking again to come and celebrate their birthdays and some of it might be just because as we're seeing people looking to get out. But I think the business side and certainly around meetings and so forth has not quite -- we haven't seen a real pickup in that type of business. And again some of it's jurisdictional. So some markets are allowing it and others just -- you can't do a party size over six.

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Todd, I think as I reflect upon this question and your last one too, I think what I would note is it really -- the green shoots of demand if you will reflect the regulatory environment in the markets that they're in. So we're based in Florida, we live in Florida. There's I think a greater acceptance of living publicly in Florida with COVID then there may be for example in the Northeast.

That being said, our approach to safety and I think this is an important one as I reflect upon your question on average weekly sales. In Florida, even though we have the ability to go to 100%, we are still doing social distancing in our restaurants and we are being very thoughtful and thorough in how we think about potentially relaxing this to manage the demand we see. Today as Cheryl said it upfront our first priority is health and safety. This isn't about maximizing a dollar for Q4. It's about keeping our teams safe keeping our customers safe and also balancing that with the need to generate cash flow. So a really good question, thanks.

Operator

Our next question comes from the line of Joshua Long with Piper Sandler. Please proceed with your question.

Joshua Long -- Piper Sandler -- Analyst

Great. Thanks for taking the question. Wanted to see if we might be able to just talk about the learnings of the last couple of quarters, I mean we've pivoted -- or you and your teams have pivoted the business. I wouldn't say air quotes effortlessly right? I'm sure it's been a lot of work behind the scenes. But what have you learned about the brand the consumer that you maybe didn't know beforehand?

And Cheryl I can appreciate that the growth environment is a little bit murky now just in terms of getting some of that stability. But obviously there's a lot of runway in front of the brand. So how are you what have you learned through the pandemic that maybe alters or improves or evolves how Ruth's can grow as a brand going forward? Whether that's more off-premise maybe that's leveraging the digital database just curious as we think out further down or further out in the future.

Cheryl Henry -- President And Chief Executive Officer, Director

That's great. I'll try to -- I think there were three in there. So I'm going to talk to hit them all. First let me say this. I think there were really two big takeaways for me in this and just continuing to see. One is I knew how great our team was. We have a tenured team in the field of leadership. It's truly impressive in the industry. The strength of that, when you are dealing with an ongoing crisis that this has been I don't think can be underestimated. They have -- the way they have stepped up and again pivoted to your point sometimes daily and back and forth and understanding their business and just the tenure and the experience of this team has been outstanding and really the foundation of why we've been as successful as we've been. And that's our ops teams. And the same on our franchise side and I haven't had a real opportunity to talk about what they have done and the agility of the franchisees and the dedication to their brand. And then we see their sales. They are taking advantage of every opportunity while keeping their guests and team members safe. And they're just truly impressive. The second one I would say is you mentioned the strength of this brand.

So I've been here for 13 almost 14 years, but this brand has been around in May for 55 years. And that has become one of the loyalty that guests have to Ruth's Chris the people that have come in and said I've celebrated my birthday here for the last 20 years. I'm not going to stop. I mean it's just a true testament to what has been built over that time. And so, just the loyalty and the dedication of the guest base to the brand has been outstanding. Yes I think that's something we can leverage going forward. I think both understanding what this team is capable of and understanding just how resilient the brand is and how people view it certainly has an opportunity. And you're right it's a little early to be specifically giving numbers around timing and development. But do we think based on what we've learned understanding the strength of the team and the strength of the brand and our guest size that there's an opportunity to grow this brand in the future? Yes I do. And again too early to say exactly how or when or which opportunities specifically, we'll take advantage of. But that opportunity is in front of us.

Joshua Long -- Piper Sandler -- Analyst

Hey thank you.

Operator

Thank you. Ladies and gentlemen that concludes our question-and-answer session. I'll turn the floor back to Ms. Henry for any final comments.

Cheryl Henry -- President And Chief Executive Officer, Director

Thank you all so much for joining us on the call today and we look forward to speaking with you again soon. [Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Arne G. Haak -- Executive Vice President And Chief Financial Officer

Cheryl Henry -- President And Chief Executive Officer, Director

Brian Vaccaro -- Raymond James -- Analyst

Andy Barish -- Jefferies -- Analyst

James Rutherford -- Stephens -- Analyst

Todd Brooks -- CL King & Associates -- Analyst

Joshua Long -- Piper Sandler -- Analyst

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