Bloomin’ Brands moved to buy 61 Outback Steakhouse restaurants for $26.3 million as Out West Restaurant Group and Cerca Trova Restaurant Group filed for Chapter 11 bankruptcy on Monday. The Outback Steakhouse location closures list now sits inside a Bankruptcy Court process that could shift control of a major part of the chain’s U.S. franchise system.
61 restaurants are included in the stalking horse agreement, along with substantially all of Out West’s other assets. Bloomin’ Brands also agreed to provide up to $5.5 million in debtor-in-possession financing, a structure that can keep a distressed operator funded while the sale process runs through the Bankruptcy Court.
Bloomin’ Brands and 115 franchises
115 franchised restaurants and 544 company-owned units appear in Bloomin’s most recent 10-Q, which puts the proposed purchase in sharp focus. If the deal closes, Bloomin’ Brands could take control of an outright majority of Outback Steakhouse’s U.S. franchised locations, a meaningful shift for a system that has depended on franchise operators in the U.S.
The company said it is working closely with Out West, its lenders, and other stakeholders throughout the Bankruptcy Court-supervised process as it focuses on maintaining stability in Out West’s restaurant operations, supporting Team Members and continuing to serve guests.
Southwest locations and California
Arizona, Nevada, New Mexico and Colorado were listed in Cerca Trova’s Chapter 11 filing, while Out West’s filing also listed significant creditors in California. The franchisee’s operations are concentrated in the Southwest, so the proposed sale reaches far beyond a single corporate transaction and into the day-to-day footprint of the brand in that region.
Direct operational control is the complication inside the deal. Bloomin’ Brands said buying Out West’s restaurants gives it direct operational insight, allows it to invest in the units through its development initiatives, and to mitigate disruption to guests and employees, even as the filing shows financial distress at its largest U.S. franchisee.
Outback Steakhouse had already closed a number of underperforming locations last year ahead of a multi-stage turnaround plan, then invested significantly in steak quality and ended a streak of same-store sales declines. Which specific restaurants are included in the 61-location purchase and closure list is the question that now matters most to the affected Southwest markets and the workers tied to those units.
