Ruby’s Diner chief Doug Cavanaugh’s ingredients for success
The gig: As founder and chief executive of Ruby Restaurant Group, Doug Cavanaugh oversees a chain of 37 Ruby’s Diner restaurants in six states, including eateries at five airports. His first Ruby’s Diner, which opened in 1982, was a renovated bait shop on Balboa Pier in Newport Beach that had been slated for demolition. The Irvine company celebrated its 30-year anniversary in December.
Hometown boy: Cavanaugh, 56, was born and raised in Los Angeles, where he lived until he was 12, before moving to Tustin, where his mother still lives in his childhood home. He has fond memories of Los Angeles. He often biked past the oil fields near Baldwin Hills and watched cars race at the Ascot Park speedway in Gardena. “I grew up in L.A. in the golden age,” he says. “When the streetlights came on, it was time to come home.”
The summer they moved to Orange County, Cavanaugh’s family stayed in a motel near Disneyland while their house was being built. Cavanaugh spent nearly every day at Disneyland that summer, and says the theme park’s rigorous attention to detail and focus on providing a unique experience left an impression. “I got my MBA in Disney at the age of 12,” he jokes. “I’ve really tried to bring those principles to Ruby’s.”
An enterprising tradition: What he didn’t glean from “The happiest place on Earth,” Cavanaugh says he learned from his father, who ran a real estate and construction business. “My dad was a classic entrepreneur, a hardworking guy,” he says. Cavanaugh would drive with his father to construction sites or sit beside him at meetings. His first job, at the age of 8, was sterilizing copper pipes for the construction crews, for which he was paid 50 cents an hour, as he remembers it. “And I was happy to get it.”
In high school, he formed a business of his own, scrubbing down boats with a school buddy at Newport Harbor — though, he admits, it was really to meet girls. When he graduated with a marketing degree from USC in 1979, Cavanaugh was looking for his next big venture.
The real estate pages: It came to him on Mother’s Day of 1980, as he and some of his friends were flipping through The Times as they sat in a hot tub. There in the real estate pages was an advertisement for nine acres of oceanfront property on Nantucket Island, complete with cottages, a restaurant and a pool. They flew out east to investigate, and within months Cavanaugh had opened his first restaurant, the Summer House, with his partners. “It was really intoxicating because it clicked very quickly,” Cavanaugh says.
He received a crash course in the restaurant business from a partner, his ex-girlfriend’s mother. He developed recipes, culled ingredients and tended bar. Soon, patrons were flying private jets in from New York City just for dinner. “It was instant gratification.... You knew exactly how well you did that day,” says Cavanaugh, and he instantly fell in love with the restaurant business.
But the West Coast, his family and a certain dilapidated bait shop at the end of a pier were beckoning.
A jog that changed it all: He saw the building one day jogging on the beach near the Balboa Pier. It stood abandoned with a huge redwood tub in the center that once held bait. “It was in terrible shape; it was about ready to fall down,” Cavanaugh says.
The bait shop was constructed in 1940 in the “streamline modern” style, something Cavanaugh says screamed “diner.” When he approached the city originally, officials dismissed him as young and inexperienced. In 1982, he sold his stake in the Nantucket restaurant and returned. “I didn’t make a dime. But I got my education,” Cavanaugh says. “I now viewed myself as this worldly restaurateur of 26.”
Cavanaugh and his new partner, junior high buddy Ralph Kosmides, pleaded with the city to let them restore the building, which leaders had planned to tear down. This time, the city relented. Cavanaugh and Kosmides embarked on a “stick-by-stick” restoration of the place, doing much of the work themselves. They pored over literature about ‘40s diners and scoured antique shops for vintage Coca-Cola signs, cigarette machines and red vinyl booths until the 45-seat diner was just right. Customers often mistakenly think the restaurant has been around since the 1940s.
The namesake: Cavanaugh planned to name the diner after his mother, but first he had to ask her permission. “It was what good sons do,” Cavanaugh says. But Ruby, who’d always thought her name was too old-fashioned, said no. “I ignored her and did it anyway,” says Cavanaugh, and on opening day that December, he walked his mother down the long pier and unveiled the glowing sign. “There she saw her name in neon,” he says. Ruby playfully swatted his arm.
“She’s just the perfect mascot because she represents that era very well,” Cavanaugh says of his mother, who grew up in Missouri and moved to Los Angeles as a teenager in the 1940s. Her likeness, adapted from a photo of her as a cheerleader at L.A.’s Fremont High School, adorns every menu. Today, Cavanaugh says, his mother, now 90, enjoys being a celebrity. Young patrons often ask for her autograph when she dines at her namesake restaurant.
‘Ruby magic’: On opening day, the restaurant pulled in a grand total of $65. By the second year, revenue topped $1 million, and Cavanaugh began focusing on expanding to other pier-front locations. By 1990, the company’s seven locations brought in a reported $8 million and employed 650 workers in the busy season. The chain, which began franchising in 1989, grew rapidly, adding 27 restaurants in the 1990s.
Throughout, Cavanaugh says, the restaurants have focused on maintaining quality and adapting to changing tastes. The waitresses still wear red candy-striped dresses and the clam chowder is made with real cream, but the menu also boasts chicken tacos and healthful options. The chain recruits and trains staff centrally and extols the values of “Ruby magic,” and periodically inspects locations for quality and service standards. During a recent visit to the original Balboa Pier location, Cavanaugh noticed a handwritten “Take Out” sign in the to-go window. Employees were instructed to take it down so that a properly printed sign could be hung.
What’s next: Ruby’s Diner has managed to weather the recession despite “flat” sales, a fact that Cavanaugh says amazes him. Cavanaugh credits the chain’s ability to capture customers who are wary of the expense of sit-down dining but want a step up from fast food. But Cavanaugh sees “fast-casual” as the next wave of growth for the restaurant chain, as the company explores adding locations in smaller footprints like food courts and airports, which Cavanaugh considers “brand builders.”
Cavanaugh says his business has always had “fits and starts” — the Seal Beach location closed Jan. 7 over a lease dispute after 25 years on the pier. But as the company enters its 31st year, Cavanaugh says he’s ready. “I’m always looking for the next restaurant, always trying to find the next opportunity.”
