Businesses across California and the rest of the country are under pressure from rising operating costs. Some point to local economic conditions when explaining financial trouble, but entrepreneur Marcus Lemonis says companies still have to make hard choices.
“These are the cards we’re dealt,” Lemonis said Friday. Business owners, he argued, need to respond to those conditions rather than use them as an excuse.
He added that many businesses continue to succeed in California despite its high costs and strict regulations. For the country to prosper, he said, companies need to be well run wherever they operate.
Lemonis was discussing San Diego-based Out West Restaurant Group, an Outback Steakhouse franchisee that filed for Chapter 11 bankruptcy protection. The company cited California’s labor costs and inflation among the main factors behind its financial difficulties.
Out West, also known as Cerca Trova Restaurant Group, is seeking protection from about $449 million in debt. It operates 61 Outback restaurants in California, Arizona, Colorado, Nevada and New Mexico, down from 99 locations in 2018.
In court documents, CEO David Goronkin pointed to declining customer traffic and high operating expenses. California’s minimum wage reached $19.60 an hour in January, while beef prices have risen by as much as 5% a year since 2022, the filing said.
Goronkin said the pressures had accumulated by 2026: customer visits and earnings were falling as food, labor and other costs continued to climb.
Although sit-down restaurants were excluded from California’s 2024 law setting a $20 hourly minimum wage for fast-food workers, full-service restaurants have also faced increased labor costs across the state.
As part of its Chapter 11 restructuring, Out West is asking the court to approve a sale of its assets. Lemonis said businesses facing rising costs may have to raise prices, reduce staffing or close. Decisions made by elected officials, he added, can ultimately affect the people who voted for them.
Bloomin’ Brands, Outback’s parent company, has agreed to buy the 61 remaining restaurants for $26.3 million. It is also offering up to $5.5 million in interest-free financing while the bankruptcy case proceeds.
