Question-and-Answer Session
Operator
(Operator Instructions). We’ll take our first question from Jeffrey Omohundro - Wachovia Securities.
Jeffrey Omohundro - Wachovia Securities
My first question is regards to the menu strategy and your thinking around the initiatives this year to address the traffic issues. In particular, what your thinking is about further efforts in bundled offerings, value initiatives; and does the improvement in food cost give you a little bit more flexibility perhaps to push more aggressively on those efforts.
Michael P. O’Donnell
We started a year ago when we looked at Two for $89 and Summer Celebration, and research that we did said that the customer liked the price certainty, but would prefer more flexibility and as a result wanted an individual pre-fixed opportunity. So, that’s where the Ruth’s Classics came into play. We’ve seen a very high rate of preference for that on us, meaning a P-mix shift, a product mix shift, and feel like that that’s delivering an experience to folks that are predictable and maybe slightly more affordable price range, and as I said earlier that the expectation is that that will give them a greater opportunity to come back more often. In terms of what we’re seeing with food cost, and we remain aggressive as it relates to promoting our $39 and $49 which is a buy-up opportunity for the Classics. So, we’re going to stay on that strategy. We will continue to promote that strategy through the summer, and probably will have that in a variable theme through the fourth quarter although we’re refining where they’re taking place now. The issue of food cost allowing us greater flexibility is one of the reasons we’ve been taking $19.95 steak and fries as an early week promotion, and so I think we are conscious at this point of being able to do some things like that leveraging our food cost; however, recognizing that food cost may not stay there, long term, we’ve to make sure that we don’t have a complete shift in the business. So, I think we’re staying with that theme for the balance of the year.
Jeffrey Omohundro - Wachovia Securities
It seemed like in this period there’s a broadening of the delta between the company’s same-store sales and franchise same-store sales, I wonder if there’s anything behind that and how the health of the franchises would be?
Michael P. O’Donnell
Well, most of the franchises have been around for a substantial amount of time, they’re well capitalized and wonderful people, doing a great job in operating side; I think that we’ve had some geographic challenges, they operate in some smaller markets that may have been impacted by the closing of certain businesses around them or industry around them more than maybe we have; not all of our franchises have participated in the Ruth’s Classic while some of them have. I really would say that their results really reflect more of the markets that they’re in than what’s going on in the business.
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