Outback Steakhouse cut its discounting by more than a fifth in the second quarter, shaving traffic by a percentage point but driving up average checks by about 3.3%, for a same-store sales gain of 1.3%, according to parent company Bloomin’ Brands.
Outback is undertaking two delivery-related initiatives that promise to increase transactions, Bloomin’ revealed.
The steakhouse operation has developed a new interior design that features an “off-premise room” devoted to delivery, takeout and catering orders, in anticipation of “higher expected order volume,” said Bloomin’ CEO Dave Deno. The off-premise area will encompass more floor space than is currently provided for meals consumed outside the chain’s dining rooms. A “soft roll” of the new design will begin this year, with most of the conversions coming in 2020, he added.
Deno also revealed that Bloomin’ has negotiated a tentative deal with a third-party delivery service to complement the self-delivery capabilities of Outback and a sister brand, Carrabba’s Italian Grill. He did not reveal the potential partner’s identity, but said a market test is currently underway.
“This will help expand our reach to customers who are loyal to the third-party delivery companies,” Deno said during Bloomin’s Q2 conference call with financial analysts. “Our market test suggests this will have a significant impact on comp sales over the back half of the year once this contract is completed.”
Delivery currently accounts for about 14% of Outback’s sales and has been growing at a year-over-year rate of 18%, according to Chris Meyer, Bloomin’s CFO. The service is currently offered at 630 units across Outback and Carrabba’s.
Deno said delivery has been profitable for both concepts.
Bloomin’s results for the second quarter show a willingness by the four-concept casual operator to change course and run contrary to the direction of its competitive set.
The 21% decrease in Outback’s discounting comes as many casual chains are trying to provide everyday values with all-you-can-eat or packaged entree bargains. Bloomin’ executives said they deliberately pared back their largest chain’s discounting, knowing the decrease in deal-making would cut into traffic. “We are comfortable with this trade-off, given the quality of traffic that is coming into our restaurants,” said Meyer.
Bloomin’ has also stressed its preference for self-delivery over an alliance with a third party. Executives indicated that its new partnership will be announced shortly.
Its decision to pair up with a service follows an announcement by Chili’s Grill & Bar, a casual-dining leader, that it was reversing its opposition to delivery and teaming up with an outside service, DoorDash.
Two of Bloomin’s other brands did not fare as well during Q2 as Outback did. Same-store sales for Carrabba’s slipped 1.6%, while Bonefish Grill’s comps edged upward by 0.1%.
Domestically, Fleming’s Prime Steakhouse & Wine Bar led the four brands with a comps increase of 1.6%.
Management noted that Outback’s Brazilian operations continue to bounce back, with a same-store sales increase of 3.5%.
Overall, Bloomin’ posted a net income for the quarter of $29 million, an 8.6% rise over the year-ago tally. Revenues totaled $1.02 billion, down less than 1%.
The company ended the quarter with 1,226 U.S. restaurants within its four brands.