How Starboard Value plans to fix Bloomin' Brands

The activist investor wants to improve operations at Outback Steakhouse, put the fun back into its marketing and highlight its growing Brazil business.
Outback Steakhouse
Outback has fallen behind its peers in the steakhouse segment. | Photo: Shutterstock

Starboard Value’s plans to turn around Bloomin’ Brands include better operations and more “fun” marketing at the company’s top concept, Outback Steakhouse.

In a presentation posted to its website Wednesday, the activist investor made its case for why Bloomin’, the casual-dining conglomerate that owns Outback, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse, is a potential steal for shareholders if it can improve its performance.

Starboard owns 10% of Bloomin’s shares and believes the company is undervalued relative to its peers. It noted, for instance, that Bloomin’ is trading at a roughly 50% discount to Texas Roadhouse and Darden Restaurants on an enterprise value to EBITDA basis, despite having better free cash flow.

It suggested it would apply the same blueprint at Bloomin’ that it did 10 years ago at Darden, where it replaced the entire board with hand-picked directors and guided the Olive Garden owner onto a path of consistent growth. 

Here are the opportunities Starboard sees at Bloomin’ Brands.

It all starts with Outback

With 689 locations and $2.7 billion in annual sales, Outback Steakhouse is one of the biggest and most recognizable casual-dining brands in the U.S. But, Starboard said, it has lagged other steakhouse chains. Starboard provided a chart showing that Outback’s traffic has been negative since last September, while traffic has increased at Texas Roadhouse and LongHorn Steakhouse.

Starboard blamed the downturn on poor execution at Outback’s restaurants. It said better food and service will be the “key ingredient” for turning things around.

The message was far less detailed than the one Starboard delivered to Darden back in 2014. In a now-legendary 300-slide presentation, the investor offered suggestions as trivial as adding more salt to Olive Garden’s pasta water and limiting the number of breadsticks it gave away.

The investor’s Bloomin’ presentation provided no such minutiae, and it was unclear how exactly Starboard would like to see Outback improve its operations. 

A return to “fun”

Outback’s marketing should be more fun like it used to be, Starboard said, recalling old Outback commercials that featured cowboys, surfers and football. 

The steak chain did recently turn back the clock on its marketing efforts, reviving the “No Rules, Just Right” tagline it has used in the past, most recently in 2013. CEO Dave Deno said the campaign highlights its menu and everyday value, and recent commercials have focused on its food and limited-time offers. It appears Starboard may have other ideas about the chain’s marketing strategy.

Don’t forget Brazil

Starboard is also bullish on Outback’s growing Brazil business, which it called an overlooked gem. The chain has about 150 locations in the country and has become quite popular with Brazilians. Same-store sales for Outback Brazil rose 23% from 2019 to 2022, outperforming Knapp Track casual-dining figures by about 20 points, according to Starboard. That business “warrants a premium, not a discount,” the investor wrote.

Smaller brands show promise

Starboard said Carrabba’s, Bonefish and Fleming’s are attractive growth levers for Bloomin’. The 200-unit Carrabba’s, for instance, is the largest U.S. casual Italian brand not named Olive Garden, and has been a bright spot in Bloomin’s portfolio in recent months. It has consistently outpaced its siblings on same-store sales growth, thanks in part to a growing delivery and catering business. Starboard believes there is white space for it to become “the clear No. 2” in Italian behind Olive Garden.

Starboard also highlighted Bloomin’s growth plans for Fleming’s, which it aims to expand to 100 units from 64, and Outback Brazil, where it wants to open an additional 152 stores for a total of 300. 

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