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Ruth Built the Steakhouse. Katrina Intervened.
November 9, 2005
NEW YORK TIMES
09-09-2005
By ERIC DASH
ORLANDO, Fla., Sept. 8 It was the steakhouse that Ruth built, a New Orleans institution that sizzled over the last four decades not just as a tourist favorite but also as a popular hangout for the city's power brokers.
But last Wednesday, not long after the levees burst in New Orleans, the top executives of Ruth's Chris Steakhouse gathered here in the lobby of the downtown Orlando Embassy Suites for an hour-long, soul-searching meeting.
As the executives debated whether to operate out of temporary quarters in another city while keeping their headquarters just outside New Orleans or to relocate permanently elsewhere, they decided that there were simply too many unknowns about the future of the city where their nationwide chain of 88 restaurants got its start.
How long would the airport remain closed to commercial traffic? How soon would their office building and the surrounding area be accessible? Where would the 58 people in its headquarters live?
Given all that, not to mention the cost and disruption of uprooting employees and their families twice, the group unanimously agreed the right decision was to move its headquarters while they began the long process of restoring their two New Orleans restaurants and a third that was destroyed in Biloxi.
"It was probably one of the toughest decisions that I ever had to make: to tell my people that we are not going back," said Craig S. Miller, the chief executive of Ruth's Chris.
Many other businesses in New Orleans, particularly those with public shareholders, face a similar quandary. And as others struggle to get back on their feet, the quick, practical decision by Ruth's Chris may foreshadow a painful exodus of a number of other companies from the city and surrounding region.
Ruth's Chris executives say they are not abandoning their company's heritage, only their headquarters in the New Orleans suburb of Metairie.
After all, it was during an earlier hurricane that the steakhouse first endeared itself to residents of the Crescent City. Just three months after Ruth Fertel, its founder, mortgaged her house for an $18,000 loan to buy the Chris Steak House in 1965, Hurricane Betsy stormed through the Gulf Coast and cut off electricity in New Orleans. Not wanting to spoil thousands of pounds of beef, she cooked steaks over a gas stove while her brother served them to victims and relief workers who flocked to her restaurant. Later, those same people came back as customers.
But that storm did not overwhelm New Orleans the way Katrina did.
Nor did it pose the same challenge to Ruth's Chris, now a newly public company with a responsibility to shareholders it has never before known. Indeed, only last month Ruth's Chris was celebrating its initial public offering as the largest restaurant chain to do so since Domino's Pizza started trading in 2004.
The Friday before Hurricane Katrina struck, Ruth's Chris was riding high. Its executives held a pre-opening party at the new restaurant planned for the Hard Rock Hotel and Casino in Biloxi, a party attended by the mayor and local VIP's. But by Tuesday, the building was decimated.
The company's stock price was pounded as well. After climbing just shy of $21 a share in the days before the storm hit, it dropped to $18.37 yesterday.
Ruth's Chris executives say they do not have good damage estimates because they have been unable to visit any of the restaurant sites.
Shortly after the party in Biloxi ended, the forecasts of the storm's target narrowed. When conditions worsened on Sunday, Mr. Miller and Geoffrey Stiles, the chief operating officer, flew with their spouses to Orlando, where each also owns a home. As Katrina slammed into the coast early Monday morning, the two men began calling each other hourly with updates and emergency plans, switching between cable channels to monitor conditions back home as best they could.
"We started really taking a serious look at a game plan," Mr. Miller said. "How do we start and get this company up and running in basically a week? That's about all we had."
By Tuesday, the two men had set up a makeshift communications center in Mr. Miller's condominium and contacted their senior management team, asking them to come to Orlando to take on specific tasks. One started the insurance claim another set up a live-operator employee hotline.
With temporary office space secured in Orlando, the company hired brokers to scout for a more permanent home in six major cities: Atlanta; Baton Rouge, La.; Dallas; Houston; Orlando; and Tampa, Fla. By Thursday, only Dallas and Orlando remained as contenders. After negotiating tax incentives from economic development officials in Seminole County in Florida, and seeking approval from the company's board, they had the keys to a fully furnished 21,000-square-foot corporate office and training center by late Friday afternoon. This week, they were putting up Post-it notes with manager's names on the doors.
The company also quickly established procedures for manually writing paychecks so their employees could immediately obtain cash. They decided that any of the 400 or so Ruth's Chris employees who worked in the Gulf Coast region could go to any of their steakhouses elsewhere to pick up their paycheck and get job, provided they were prepared to relocate.
Franchise owners were updated on the company's situation, but most had already chipped in.
On Friday last week, the executives learned that the company's first quarterly report would be delayed. The downtown New Orleans office of its auditor, KPMG, was severely damaged and working copies of some financial documents were under water. Over the weekend, the executive team chartered planes for a trip to recover important data from the corporate offices in Metairie; they also retrieved three pictures of Ruth Fertel.
This week, much of the attention has been focused on addressing employee needs. Of the 400 employees forced to relocate by the hurricane, about 75 percent have contacted the company. A planning meeting here on Wednesday dealt with an array of subjects, from determining where and when to buy ads on Gulf Coast radio stations encouraging employees to call in. The company plans to establish a formal job bank by Friday to identify all potential positions available for employees forced to move.
"Quite honestly, I don't want to wait more than a day," Mr. Stiles said. "Let's not let process get in the way of progress."
While all senior executives have already agreed to relocate, so far only about 60 percent of the corporate staff have said they will move.
But the bigger question facing the company is whether leaving New Orleans at its time of greatest need something outsiders say that Ruth Fertel, who died in 2002, would have never done will come back to haunt Ruth's Chris, particularly when its new headquarters is in Orlando, known for its suburban sprawl and dozens of bland food outlets. "When they give you a start, you kind of owe it to the city," said Brad Brennan, a member of the family that owns Brennan's Restaurant and Commander's Palace, a small New Orleans-based company with restaurants in Las Vegas and Houston, too. Mr. Brennan vows to return as soon as he can. "Payback is staying your ground," he said, "and employing the people that want to remain there and want to be employed."
Mr. Miller vigorously defends the company's decision. And he argues that with half of his employees in the area without homes and current prospects for good-paying jobs in New Orleans dim, the best thing Ruth's Chris can do is provide steady paycheck in other locations for its employees thrown out of work.
"If I had the choice and it was at all feasible to operate in New Orleans, why would I move?" Mr. Miller asked rhetorically. "If Ruth had been running a public restaurant company, she would have done exactly what we did."