The chain plans approximately 20 company-owned openings and 15 to 20 franchise openings for the year. In addition, it will complete its remodeling program this year. But the company will open none to a maximum of 10 new restaurants in 2009 and beyond, as the company looks to grow through increased sales at existing units. Franchisers will open up to 20 new units.

"Demand and supply have increasing gone out of balance," said Sandy Beall, founder and CEO. "We probably should have pulled back to zero growth sooner."

No restaurant closures are planned beyond typical lease expirations. During the quarter, the company opened five new Ruby Tuesday restaurants and acquired twenty-five restaurants from two Michigan franchisees. No restaurants were closed during the quarter. Domestic and international franchisees opened four new Ruby Tuesday restaurants during the quarter and none were closed.

The potential debt coverage violations are based on the uncertainty of sales, the chain said, emphasizing that it was not in default at this time. It will be working with lenders to modify the covenants. The chain does not have a liquidity issue, Beall said.

Total sales for the quarter were $320.9 million, down 4.7% from the previous year. The company reported a net loss of $10.4 million for the quarter, compared to net income of $16.7 million for the prior year. Same-restaurant sales at company-owned units decreased 10.8%, while same-restaurant sales at domestic franchised units decreased 8.7%.

Ruby Tuesday owns and operates 721 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 169 and 54 restaurants, respectively.