Special Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements, which represent our expectations or beliefs concerning future events, including one or more of the following: future financial performance and restaurant growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, availability of debt financing on terms attractive to the Company, payment of dividends, stock repurchases, and restaurant and franchise acquisitions and re-franchises. We caution the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause our actual results to differ materially from those included in the forward-looking statements, including, without limitation, the following:

• changes in promotional, couponing and advertising strategies;

• guests' acceptance of changes in menu items;

• changes in our guests' disposable income;

• consumer spending trends and habits;

• mall-traffic trends;

• increased competition in the restaurant market;

• weather conditions in the regions in which Company-owned and franchised restaurants are operated;

• guests' acceptance of our development prototypes and remodeled restaurants;

• laws and regulations affecting labor and employee benefit costs, including further potential increases in state and federally mandated minimum wages;

• costs and availability of food and beverage inventory;

• our ability to attract qualified managers, franchisees and team members;

• changes in the availability and cost of capital;

• impact of adoption of new accounting standards;

• impact of food-borne illnesses resulting from an outbreak at either Ruby Tuesday or other restaurant concepts;

• effects of actual or threatened future terrorist attacks in the United States;

• significant fluctuations in energy prices; and

• general economic conditions.

General:

Ruby Tuesday, Inc., including its wholly-owned subsidiaries ("RTI", the "Company," "we" and/or "our"), owns and operates Ruby Tuesdayฎ casual dining restaurants and two Wok Hay restaurants. Wok Hay is an Asian concept located in Knoxville, Tennessee. We also franchise the Ruby Tuesday concept in selected domestic and international markets. As of December 2, 2008 we owned and operated 713, and franchised

Overview and Strategies

Casual dining, the segment of the industry in which we operate, is intensely competitive with respect to prices, services, convenience, locations, and the types and quality of food. We compete with other food service operations, including locally-owned restaurants, and other national and regional restaurant chains that offer the same or similar types of services and products as we do. Three years ago, our analysis of the Bar and Grill sector of Casual Dining indicated that many of the concepts, including Ruby Tuesday, were not clearly differentiated and as the sector matures this lack of differentiation will make it increasingly difficult to attract new guests to all but the largest companies. Consequently, in response to this analysis, we developed "brand strategies" focusing on Uncompromising Freshness and Quality (high-quality menu items), Gracious Hospitality (guest service), and 5-Star Facilities (the look and atmosphere of our restaurants). Later we added Compelling Value to our strategic focus in response to the difficult operating and consumer environment.

Our first priority was to improve our food with an emphasis on Uncompromising Freshness and Quality. Our Gracious Hospitality initiative comprised upgrading our team selection, image, and performance standards. In fiscal 2008, we completed the reimaging of our Company-owned restaurants, creating a fresh, new, updated look for our restaurants and accomplishing our objective of having 5-Star Facilities. Completion of the reimaging program resulted in the strategic repositioning of our brand and put us in position to deliver on our mission of delivering a memorable, high-quality casual dining experience with Compelling Value.

While we were in the process of implementing our brand strategies, consumer spending came under pressure for a variety of reasons, and the casual dining segment of the restaurant industry has experienced a difficult operating environment. These factors have contributed to declines in same-restaurant sales and our not meeting our targeted financial results for the last two years, even though our measures of guest satisfaction have shown increases.

Our same-restaurant sales for Company-owned restaurants declined 10.8% and our diluted loss per share declined to $(0.73) in the second quarter of fiscal 2009. Included in the diluted loss per share were charges arising from restaurant closures and impairments and the write-off of our goodwill. Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we discuss our fiscal 2009 second quarter and year-to-date financial results in detail as well as provide insight for the same periods of the prior fiscal year. We remind you, that, in order to best obtain an understanding of our financial performance during the last three fiscal years, this MD&A section should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes.

We remain committed to increasing shareholder value and have set the following financial goals for the remainder of fiscal 2009 and beyond:

• Get more from our existing restaurants. Our principal focus is to grow same-restaurant sales (same-restaurants are defined as those that have been open at least 18 months) and average annual sales per restaurant, with long-term targets of 2-3% annual growth and $2.4 million, respectively. Our average annual sales per restaurant for Company-owned restaurants was $1.8 million for the rolling twelve-month period ended December 2, 2008. Our first priority is to stabilize same-restaurant sales and arrest the current decline. To achieve this, we will continue to focus on our core brand strategies that appear to be successful in improving customer satisfaction. We will continue to increase consumer awareness about the new Ruby Tuesday brand through a combination of media advertising and local marketing initiatives. Now that each element of the brand complements the others, we believe we are in a position to more effectively communicate our changes to our guests. If our execution of our brand strategies leads to success in maintaining our current customers and the advertising and marketing initiatives draw in new customers, we believe we can grow same-restaurant sales and average annual restaurant volumes.

• Lower our costs. We constantly strive to reduce our cost of doing business at both the corporate and restaurant levels without having a negative impact on quality or our guests' experience. Consistent with this objective, we implemented in the second quarter of fiscal 2009 programs

which we hope will save us $40.0 to $45.0 million of costs annually, including the elimination of losses at restaurants we are closing.

• Generate free cash flow and improve our balance sheet. Because of our leverage, we are highly focused on maximizing our cash flow. If we are successful in stabilizing same-restaurant sales and maintaining or lowering our costs, we should generate substantial cash flow. Furthermore, our capital requirements are relatively modest as we anticipate only adding approximately four restaurants this year, and our maintenance capital spending needs are low because we have remodeled virtually all the Company-owned restaurants within the last year. We define "free cash flow" to be the net amount remaining when purchases of property and equipment are subtracted from net cash provided by operating activities. We anticipate total capital spending in fiscal 2009 to be approximately $19.0 million to $21.0 million, down from $116.9 million in fiscal 2008. We also estimate we will generate $68.0 million to $78.0 million of free cash flow in fiscal 2009, of which $23.6 million was generated in the first two quarters. A substantial portion of our fiscal 2009 free cash flow, including all of the free cash flow generated year-to-date, will be dedicated to the reduction of debt. Similarly, free cash flow generated in the next few years following fiscal 2009 will also be used to reduce debt. Our objective is to reduce debt as quickly as possible to the point where the payment of dividends and share repurchases will no longer be restricted by our loan agreements. We are also evaluating other ways we could reduce bank debt and strengthen our balance sheet.

Results of Operations:

The following is an overview of our results of operations for the 13- and 26-week periods ended December 2, 2008:

Net loss increased to $37.4 million for the 13 weeks ended December 2, 2008 compared to $10.4 million for the same quarter of the previous year. Included in the most recent period's loss are pre-tax charges totaling $56.2 million related to restaurant closures and impairments and the write-off of our goodwill as discussed in more detail below and in Note K to the Condensed Consolidated Financial Statements. Diluted loss per share for the fiscal quarter ended December 2, 2008 increased to $0.73 compared to $0.20 for the corresponding period of the prior year as a result of an increase in net loss as discussed below.

During the 13 weeks ended December 2, 2008:

? One Company-owned Ruby Tuesday restaurant was opened;

? Three Company-owned Ruby Tuesday restaurants were closed;

? Four franchise restaurants were opened and three were closed;

? One Wok Hay was opened;

? Same-restaurant sales at Company-owned restaurants decreased 10.8%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants decreased 6.2%;

? We formulated a plan to restructure our property portfolio, which included the planned closing of approximately 40 restaurants in the third quarter of fiscal 2009 and an additional 30 restaurants over the next several years, and wrote-down properties held for sale to facilitate their disposal, resulting in impairment charges of $34.6 million, dead site write-offs totaling $2.0 million, and $0.6 million of closed restaurant lease reserves and other adjustments; and

? We wrote-off our goodwill of $19.0 million as a result of the overall poor economic conditions, declines in fair value, same-restaurant sales trends at Company-owned restaurants, and weak industry conditions.

Net loss was $37.1 million for the 26 weeks ended December 2, 2008 compared to net income of $0.7 million for the same period of the previous year. Included in the most recent period's loss are pretax

During the 26 weeks ended December 2, 2008:

? Three Company-owned Ruby Tuesday restaurants were opened;

? Eleven Company-owned Ruby Tuesday restaurants were closed;

? Eight franchise restaurants were opened and five were closed;

? One Wok Hay was opened;

? Same-restaurant sales at Company-owned restaurants decreased 10.8%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants decreased 7.1%;

? We formulated a plan to restructure our property portfolio, which included the planned closing of approximately 40 restaurants in the third quarter of fiscal 2009 and an additional 30 restaurants over the next several years, and wrote-down properties held for sale to facilitate their disposal, resulting in year-to-date impairment charges of $36.2 million, dead site write-offs totaling $2.1 million, and $0.9 million of closed restaurant lease reserves and other adjustments; and

? We wrote-off our goodwill of $19.0 million as a result of the overall poor economic conditions, declines in fair value, same-restaurant sales trends at Company-owned restaurants, and weak industry conditions.

The following table sets forth selected restaurant operating data as a percentage of total revenue, except where otherwise noted, for the periods indicated. All information is derived from our Condensed Consolidated Financial Statements included in this Form 10-Q.

                                    Thirteen weeks ended             Twenty-six weeks ended
                                December 2,      December 4,      December 2,     December 4,
                                   2008             2007              2008            2007
Revenue:
Restaurant sales and operating    99 .3%           98 .9%            99 .2%           98 .9%
revenue
Franchise revenue                  0 .7             1 .1              0 .8             1 .1
Total revenue                    100 .0           100 .0            100 .0           100 .0
Operating costs and expenses:
Cost of merchandise (1)           27 .4            28 .0             27 .3            27 .5
Payroll and related costs (1)     36 .6            34 .5             35 .3            33 .2
Other restaurant operating        22 .5            21 .5             21 .9            20 .3
costs (1)
Depreciation and amortization      6 .7             7 .9              6 .5             7 .4
(1)
Selling, general and               8 .6            10 .2              8 .3             9 .4
administrative, net
Closures and impairments          12 .8             0 .5              6 .4             0 .4
Goodwill impairment                6 .5                               3 .1
Equity in losses of
unconsolidated franchises          0 .2             0 .5              0 .0             0 .4
Interest expense, net              3 .4             2 .6              3 .2             2 .3
(Loss)/income before income      (24 .1)           (4 .7)           (11 .3)            0 .1
taxes
(Benefit) for income taxes       (11 .2)           (1 .5)            (5 .2)            0 .0
Net (loss)/income                (12 .9)%          (3 .2)%           (6 .1)%           0 .1%

(1) As a percentage of restaurant sales and operating revenue.

The following table shows year-to-date Company-owned and franchised Ruby Tuesday concept restaurant openings and closings, and total Ruby Tuesday concept restaurants as of the end of fiscal 2009's and 2008's second quarter.

--------------------------------------------------------------------------------
                            Thirteen weeks ended       Twenty-six weeks ended
                           December      December      December      December
                           2, 2008       4, 2007       2, 2008       4, 2007
Company-owned:
Beginning number          715           691           721           680
Opened                    1             5             3             9
Acquired from franchisees -             25            -             36
Closed                    (3)           -             (11)          (4)
Ending number             713           721           713           721

Franchise:
Beginning number          226           244           224           253
Opened                    4             4             8             7
Sold to RTI               -             (25)          -             (36)
Closed                    (3)           -             (5)           (1)
Ending number             227           223           227           223

The following table shows year-to-date Company-owned Wok Hay concept restaurant openings as of the end of fiscal 2009's and 2008's second quarter.

                           Thirteen weeks ended       Twenty-six weeks ended
                          December      December      December      December
                          2, 2008       4, 2007       2, 2008       4, 2007
Company-owned:
Beginning number         1             1             1             -
Opened                   1             -             1             -
Acquired                 -             -             -             1
Ending number            2             1             2             1

We estimate that one additional Company-owned Ruby Tuesday restaurant will be opened during the remainder of fiscal 2009.

We expect our domestic and international franchisees to open approximately 12 to 15 additional Ruby Tuesday restaurants during the remainder of fiscal 2009.

Revenue

RTI's restaurant sales and operating revenue for the 13 weeks ended December 2, 2008 decreased 9.4% to $287.7 million compared to the same period of the prior year. This decrease primarily resulted from a 10.8% decrease in same-restaurant sales, lower overall average restaurant volumes, and a net decrease of eight restaurants from the same quarter of the prior year. The decrease in same-restaurant sales is partially attributable to reductions in customer counts, due to a challenging economic environment and various consumer pressures, at a time concurrent with our move toward the higher end of casual dining. We also believe that other factors contributing to the decline include the loss of some of our customers who do not feel as comfortable in our re-imaged restaurants, the impact of heavy price-focused advertising by some of our traditional competitors, and leveling of sales growth in the casual dining segment of the restaurant industry resulting from the growth of supply outpacing that of demand.

Franchise revenue for the 13 weeks ended December 2, 2008 decreased 41.0% to $2.1 million compared to the same period of the prior year. Franchise revenue is predominately comprised of domestic and international royalties, which totaled $1.9 million and $3.1 million for the 13-week periods ended December 2, 2008 and December 4, 2007, respectively. This decrease is due to a decline in royalties from domestic franchisees as a result of temporarily reduced royalty rates for certain franchisees, a decrease in same-restaurant sales for domestic franchise Ruby Tuesday restaurants of 6.2% in the second fiscal quarter of fiscal 2008, and the acquisitions of franchisees in the prior year.

For the 26 weeks ended December 2, 2008, sales at Company-owned restaurants decreased 7.8% to $608.9 million compared to the same period of the prior year. This decrease primarily resulted from a 10.8% decrease in same-restaurant sales for the 26-week period ended December 2, 2008 coupled with a net decrease of eight restaurants.

Under our accounting policy, we do not recognize franchise fee revenue for any franchise partnership with negative cash flows at times when the negative cash flows are deemed to be anything other than temporary and the franchise has either borrowed directly from us or through a facility for which we provide a guarantee. Accordingly, we have deferred recognition of a portion of franchise revenue from certain franchise partnerships. Unearned income for franchise fees was $1.5 million and $3.4 million as of December 2, 2008 and June 3, 2008, respectively, which are included in other deferred liabilities and/or accrued liabilities - rent and other in the Condensed Consolidated Balance Sheets. The reduction in unearned income is primarily attributable to fee rebates given to certain franchise partnerships during the first two quarters of fiscal 2009. These franchise fee rebates were recognized by the franchise partnerships as income. For 50%-owned franchise partnerships, these rebates created income of $1.0 million which is included in Equity in losses of unconsolidated franchises in the Condensed Consolidated Statement of Operations for the 26 weeks ended December 2, 2008, as discussed below.

Pre-tax (Loss)/Income

Pre-tax loss increased to $69.9 million for the 13 weeks ended December 2, 2008, over the corresponding period of the prior year. For the 26-week period ended December 2, 2008, pre-tax loss was $69.5 million compared to pre-tax income of $0.7 million for the same period of the prior year. The increase in pre-tax loss for both the 13- and 26-week periods is primarily due to a decrease of 10.8% in same-restaurant sales at Company-owned restaurants, closures and impairment expenses of $37.2 million and $39.2 million for the 13- and 26-week periods ended December 2, 2008, respectively, goodwill impairment of $19.0 million, combined with increases, as a percentage of restaurant sales and operating revenue or total revenue, as appropriate, of payroll and related costs, other restaurant operating costs, and interest expense, net. These higher costs were offset by lower, as a percentage of restaurant sales and operating revenue or total revenue, as appropriate, cost of merchandise, depreciation, and selling, general and administrative expenses, net.

In the paragraphs which follow, we discuss in more detail the components of the increase in pre-tax loss for the 13- and 26-week periods ended December 2, 2008, as compared to the comparable period in the prior year.

Cost of Merchandise

Cost of merchandise decreased 11.4% to $78.8 million for the 13 weeks ended December 2, 2008, over the corresponding period of the prior year. As a percentage of restaurant sales and operating revenue, cost of merchandise decreased from 28.0% to 27.4% for the 13 weeks ended December 2, 2008.

For the 26-week period ended December 2, 2008, cost of merchandise decreased 8.4% to $166.5 million over the corresponding period of the prior year. As a percentage of restaurant sales and operating revenue, cost of merchandise decreased from 27.5% to 27.3% for the 26 weeks ended December 2, 2008.

The decrease for both the 13- and 26-week periods as a percentage of restaurant sales and operating revenue is primarily due to several promotions offered in the prior year such as a free garden bar with the purchase of certain entrees and lunch fresh combinations along with direct mail and freestanding insert coupons. These value offerings had the impact in the prior year of reducing average food check which increased the related food cost as a percentage of restaurants sales and operating revenue.

Payroll and related costs decreased 3.9% to $105.2 million for the 13 weeks ended December 2, 2008, as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, payroll and related costs increased from 34.5% to 36.6%.

For the 26-week period ended December 2, 2008, payroll and related costs decreased 2.0% to $215.0 million, as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, payroll and related costs increased from 33.2% to 35.3%.

The increase as a percentage of restaurant sales and operating revenue for both the 13- and 26-week periods is primarily due to higher management labor due to a loss of leveraging with lower sales volumes, an increase in health insurance costs based on unfavorable claims experience, higher hourly labor relating to the rollout of the quality service specialist program during the second quarter of the prior year, and minimum wage increases in several states since the first quarter of the prior year.

Other Restaurant Operating Costs

Other restaurant operating costs decreased 4.9% to $64.8 million for the 13-week period ended December 2, 2008, as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, these costs increased from 21.5% to 22.5%.

For the 26-week period ended December 2, 2008, other restaurant operating costs decreased 0.7% to $133.3 million as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, these costs increased from 20.3% to 21.9%.

The increase as a percentage of restaurant sales and operating revenue for both the 13- and 26-week periods is primarily due to higher utility costs, primarily electricity, higher rent expense due to a loss of leveraging from lower sales volumes, and higher bad debt expense. These increases were partially offset by decreases, as a percentage of restaurant sales and operating revenue, in repairs and maintenance costs as a result of lower building repairs due to the recent completion of a re-imaging of our restaurants, lower equipment repair and maintenance contract costs, and lower supplies due to glassware and tablecloth upgrades in the prior year.

Depreciation and Amortization

Depreciation and amortization expense decreased 23.1% to $19.3 million for the 13-week period ended December 2, 2008, as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, this expense decreased from 7.9% to 6.7%.

For the 26-week period ended December 2, 2008, depreciation and amortization expense decreased 19.0% to $39.5 million as compared to the corresponding period in the prior year. As a percentage of restaurant sales and operating revenue, this expense decreased from 7.4% to 6.5%.

The decrease for both the 13- and 26-week periods as a percentage of restaurant sales and operating revenue is primarily due to accelerated depreciation in the prior year ($4.7 million and $8.7 million, respectively) for restaurants reimaged as part of our re-imaging initiative.

Selling, General and Administrative Expenses, Net

Selling, general and administrative expenses, net of support service fee income totaling $1.5 million, decreased 24.2% to $24.8 million for the 13-week period ended December 2, 2008, as compared to the corresponding period in the prior year. As a percentage of total operating revenue, these expenses decreased from 10.2% to 8.6%.

Selling, general and administrative expenses, net of support service fee income totaling $3.3 million, decreased 18.3% to $51.1 million for the 26-week period ended December 2, 2008 as compared to the

The decrease for both the 13- and 26-week periods is primarily due to a reduction in advertising as a result of utilizing a direct mail program in the prior year in conjunction with the completion of reimaged restaurants compared to a reduced direct mail program only in the second quarter of fiscal 2009, . . .