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Getting Into the Swing of Things at Ruby’s

Getting Into the Swing of Things at Ruby’s

Excellence in Entrepreneurship Awards. Special Report

By JENNIFER BELLANTONIO





All of Doug Cavanaugh’s old high school buddies,except one,laughed when he pitched them his idea of opening a diner in an old bait shop on Balboa Pier.

No one’s laughing now.

It’s been 22 years since Cavanaugh and his buddy Ralph Kosmides scrounged together about $80,000 to renovate and transform the bait shop into a 45-seat 1940s-style diner. The place, named after Cavanaugh’s mom, opened for business on Dec. 10, 1982, with three employees and pulled in about $63 in sales.

Today that’s jukebox change for Ruby Restaurant Group.

Industry sources put the Newport Beach-based chain’s revenue at about $70 million. The company counts 38 restaurants and has plans to open up to 60 new ones in the next five years, including some in Orange County.

Ruby’s California diners are company-owned and make up half of the chain. Franchisees run the outlets in other states, including Nevada, New York and New Jersey.

“We’re really getting ramped up to take flight here,” Cavanaugh said.

His secret: keep it simple and stick to the basics, such as good service, clean restaurants, good food and reasonable prices.

He had success with those practices on Nantucket Island off Cape Cod, where he restored and ran a restaurant and small inn, The Summer House, at the age of 24. Cavanaugh did everything from ordering the food, to prepping the dining room and seating guests.

“It was a tremendous experience for me,” he said. “I had a chance to be immersed in the restaurant business. That’s when I got the bug.”

Two years later, Cavanaugh said, he “sold out.” He returned home to Southern California,Cavanaugh is a graduate of the University of Southern California and Foothill High School in Tustin,and decided to pursue a vision he had before moving east: a diner.

The opportunity presented itself during one of Cavanaugh’s runs on the beach. He spotted the dilapidated bait shop and went home to brainstorm with his dad, Doug Sr., a real estate developer who loved the idea.

Kosmides, now the chief financial officer, also liked it. The two convinced the city of Newport Beach to save the building (it was to be knocked down) and sell it to them. Then, they combed stores in Southern California for 1940s-era antiques and other memorabilia, and eventually designed the Ruby’s concept.

“I chose ’40s over ’50s because I’m a big swing music fan,” he said.

Some of the restaurants, equipped with red vinyl booths, white Formica tables and soda fountains, have themes that were modified to reflect their neighborhoods. Ruby’s AeroDiner in Laguna Beach has small planes that “fly” through the restaurant on a track.

“The fun atmosphere inspires people to come to Ruby’s for the first time, but our high quality food, friendly service and reasonable prices keep them coming back,” Cavanaugh said.

Ruby’s has an edge on larger competitors such as Denny’s because it’s seen as “new and exciting” and plays off “old and nostalgic” feelings, according to Alan Liddle, an editor at trade magazine Nation’s Restaurant News.

“That’s kind of a nice place to be,” he said.

The chain’s positioning becomes key as it spreads into new markets. Last month, the company opened its first restaurant in Maui.



“When you outperform those companies (large diner chains), the word of mouth travels very quickly,” Cavanaugh said. “We’re finding that happening (in Hawaii).”

Cavanaugh has big plans for Ruby’s, but he said he was smart enough to know that “we really didn’t know” how to take the company to the next level without some help.

Consequently, Ruby’s recently added a few restaurant veterans to its management team.

“We’re going through a dramatic systemization of our company. It’s been a phenomenal process,” he said. “I’ve been doing this for 20 years and I’ve never been more excited.”

The chain also plans to enhance its menu (the new one will debut in April) and grow its per store revenue to $3 million from about $2.3 million. Plus, Cavanaugh said, he’s going to take his time picking the right franchise partners.

“We only want to grow as fast as we can maintain our culture,” he said.

Cavanaugh is calculated about his expansion of Ruby’s, which he called a “pure” and “constant” performer. In the past, he said he “got off track” and decided to open a dinner house,Bubbles Balboa,with live entertainment and a full bar. But it flopped.

“We lost well over a million dollars in that venture, which was nearly life threatening for us,” he said.

Cavanaugh said he learned some valuable lessons, which he has applied at Ruby’s.

The shooby-dooby culture there runs deep. Cavanaugh has made Ruby toys and Barbie-shaped Ruby dolls, which resemble photographs of his mom during her high school days in Los Angeles, to hand out to children at Orangewood Children’s Home. He has also sponsored local events and donated 10% of sales at a given restaurant one night to a charitable organization.

And, Cavanaugh continues to feed his passion for swing music.

In fact, when he wed his wife Julie in 1998, the couple took swing dance lessons to add some nostalgic romance to their wedding reception in Emerald Bay, which featured an outdoor tent and big-band orchestra.

So, how does he swing?

“Very poorly,” Cavanaugh said chuckling.

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