After a decade of shrinking unit counts, Outback Steakhouse is charting a return to growth behind a new, scaled-down restaurant design.
The smaller prototype will allow the brand to both enter new markets and fill in existing ones, with the upshot being 3% gross annual unit growth in the near-term, executives said during an earnings call Friday.
The ramp-up could eventually yield as many as 75 to 100 new Outback Steakhouses in the U.S., said Bloomin’ Brands CEO Dave Deno, beginning with six new restaurants this year and up to 23 next year.
The steak chain’s U.S. footprint has declined more than 10% since 2011, from 775 units to 694 last year, according to Technomic. But it has emerged in good shape from the pandemic, which executives credited to a newfound off-premise business as well as better operations and food.
“Even though we were very sad to see what came out in the restaurant industry during COVID, we came out in a much stronger place,” Deno said. “So our unit growth opportunity now is pretty good—very good.”
Bloomin’ has also had success relocating some of its Outbacks, and sees a fertile market for new openings, particularly in Southern states like Florida and Texas.
The new prototype is 16% smaller than a traditional Outback, at about 5,000 square feet, said SVP of Business Development Mark Graff. But an “optimized” dining room layout gives it the same number of tables. It features a brighter ambiance, a redesigned bar and more contemporary decor, Graff said. There’s also dedicated space for to-go orders.
The smaller restaurants cost 20% less to build.
“This, combined with our enhanced profitability, provides attractive new unit-level returns,” Graff said.
Some of the design changes will also apply to remodels of existing Outbacks, Deno added.
The new development strategy underscores Bloomin’s success in recent quarters. All four of its brands posted positive same-store sales for the period ended March 27. Outback was up 9.2% year over year; Carrabba’s Italian Grill, 11.5%; Bonefish Grill, 21.3%; and Fleming’s Prime Steakhouse, 45.7%; for a cumulative increase of 14%.
Some of that boost came from a 5.6% year-over-year price increase. But the company also saw a nearly 7% upshift in menu mix, which it attributed to both a rise in on-premise dining and people ordering more appetizers and alcohol.
The trade-up was a little surprising, said CFO Chris Meyer, given concerns about consumer spending. “It’s just, consumer health appears to be pretty good,” he said.
Bloomin’ also saw a 1.5% increase in traffic to its restaurants despite the impact of the omicron variant during the quarter.
“We’re seeing the benefit of the investments we made in customer service and food over the years,” Deno said. “Customers are noticing that.”
The strong sales helped offset rising costs for food and labor. Commodity inflation for the quarter was up 15% and labor inflation was up 10%, Meyer said. But Bloomin’s operating margins actually increased slightly, to 9.4% from 9.2% a year ago.
The company said it expected inflation to be higher in the first half of 2022 than the second, when it will start lapping elevated costs from a year ago.
“The overall landscape in commodities hasn’t improved much,” Meyer said.
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