As Bloomin’ Brands approached what it believed would be the second-most inflationary year in its history, it started looking for ways to save money.
It did not have to turn over very many couch cushions to find it. In fact, two projects that were already underway at its Outback Steakhouse brand—handheld ordering tablets for servers and new grills and ovens—are expected to make restaurants more productive. That, plus costs wrung out of the supply chain, will contribute about $25 million to an overall $50 million in savings for the Tampa-based company this year.
Executives believe those efficiencies should make 2023 a year of margin growth for the parent of Outback, Carrabba's and other brands, even in the face of commodity and labor inflation in the mid-single digits.
“At the restaurant level, I feel pretty good about keeping my restaurant margin flat to slightly positive versus last year,” said CFO Chris Meyer in an earnings call Thursday, according to a transcript from financial services site Sentieo.
Bloomin’s restaurant-level operating margin for the quarter ended Dec. 25 was 16.3%, 0.2 points lower than a year ago. Operating income margin was 7.7%—a 0.2-point improvement and 0.3 points off its long-term goal of 8%.
Handheld tablets that allow servers to enter orders tableside are in all of Outback’s 692 U.S. restaurants and are already making an impact. Advanced ovens and grills will be fully installed by the third quarter. Meyer said these upgrades will lower Outback’s labor costs and cost of sales.
And while those savings are much-needed, executives seemed just as excited about the technology’s impact on the top line.
“I just want to underscore once again that we’ll go long-term with greater service levels and more accurate cooking that especially the grills provide,” CEO Dave Deno told analysts. “We expect to build sales and traffic in our restaurants at Outback.”
Traffic in particular could make or break Bloomin’ margin goals for the year. Traffic at Outback was down about 9% year over year in the fourth quarter, even though the brand was lapping the effects of the Omicron variant of COVID-19 a year ago. Same-store sales rose just 1% in the quarter thanks to pricing of about 10%.
Executives said traffic was “soft” in November and was hurt in December by winter storm Elliott, but that it has accelerated this year.
“And the traffic increases are beyond just lapping a softer last year because of Omicron and the weather,” Deno noted. Bloomin' is forecasting a same-store sales increase of 3% to 5% for the current period.
And it has plans to build on that momentum. It’s dusting off an old Outback marketing campaign—“No Rules, Just Right”—to promote everyday value, new food items and what Deno described as a “re-energized” attitude in restaurants. It will not include discounts, he said.
At other brands, Bloomin’ is introducing new “sales layers,” such as a Social Hour menu at Fleming’s Prime Steakhouse featuring beverages and appetizers from 4-6 p.m. Meanwhile, Bonefish Grill has brought back its brunch offering with an improved menu.
It’s also remodeling 100 restaurants this year, part of a multiyear effort intended to “keep our assets looking at their best,” Deno said.
Despite pulling hard on those traffic levers, Bloomin’ is factoring negative traffic into its outlook for the year, citing macroeconomic uncertainties. It expects same-store sales growth of 2% to 4% in 2023 and an average check increase of 5%.
“Now if that negative traffic doesn't manifest, and we've talked about how we've started the year, I could have a better margin outcome this year compared to where we were last year,” Meyer said. “It's all going to come down to traffic, right?”
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