Outback Steakhouse suddenly closes 21 locations in major restructuring.

Outback Steakhouse Closes 21 Locations Amid Cost-Cutting Strategy

In October, Outback Steakhouse suddenly shut down 21 restaurants in the U.S. This move is part of a broader cost-cutting initiative from its parent company, Bloomin’ Brands.

According to a recent earnings report, the Tampa-based chain, known for its quirky Australian themes, is starting what they call a “comprehensive turnaround strategy.” This plan includes the closure of 22 more Outback locations over the next four years as their leases come to an end.

This year hasn’t been kind to Bloomin’ Brands, with their stock plummeting by over 40%. Investors are worried about shrinking profit margins and stagnant customer traffic across their various restaurant brands.

The company, which also operates Carrabba’s Italian Grill and Bonefish Grill, indicated that these closures stem from an underperforming segment and shifts in consumer spending patterns. They’ve cited growing competition from value-oriented restaurants like Texas Roadhouse, Longhorn Steakhouse, Chili’s, and Applebee’s.

Furthermore, Bloomin’ Brands announced a $33 million impairment charge related to the closures. They anticipate an additional $5 million to $7 million in severance and closure expenses for the fourth quarter.

Currently, Outback has around 670 restaurants operating in the U.S., a reduction of about 10% from a decade ago, when the count was around 750.

To manage cash flow better, the company decided to suspend shareholder dividends. They’re reallocating funds for debt repayments and reopening stores. Additionally, there’s a three-year, $75 million plan aimed at enhancing menu quality and customer service.

CEO Mike Spanos mentioned on the earnings call that Outback possesses significant brand equity. He believes they have a strong opportunity to turn brand recognition into actual visits to restaurants.

Spanos pointed out that part of their strategy involves trimming the company’s footprint while also improving service quality. In a bid to enhance customer satisfaction, they’ll reduce the number of tables each server manages from six to four, as reported by a magazine.

Bloomin’ Brands plans to renovate all remaining Outback restaurants by the end of 2028, with updates including a brighter design, a smaller kitchen, and a larger pickup area for takeout orders.

Despite the challenges with stock performance, Outback’s most recent quarter showed a slight improvement, with same-store sales rising by 0.4%, marking the first positive growth in two years. In contrast, their competitors continue to thrive, with Texas Roadhouse and Darden’s Longhorn Steakhouse reporting increases of 5.8% and 5.5%, respectively.

Analysts indicate that Outback’s key challenge lies in convincing customers that dining there is worth it, especially when competitors focus heavily on volume and promotional offers.

This latest plan for a turnaround is part of a trend where major restaurant chains face job cuts as they try to adapt to shifting spending habits in a post-pandemic world. Bloomin’ Brands previously closed 41 restaurants in its portfolio earlier in the year, primarily due to high rents and labor costs.