No. Outback Steakhouse itself is not bankrupt. Out West Restaurant Group, one of the chain’s largest franchisees, filed for Chapter 11 bankruptcy protection Monday, Nov. 2, in federal bankruptcy court in Delaware. The San Diego company, legally named Cerca Trova Restaurant Group Holdings, runs 61 Outback locations in California, Arizona, Colorado, Nevada and New Mexico. It says all of them will stay open while the case moves forward.
Outback’s parent company, Bloomin’ Brands, has agreed to buy most of the franchisee’s restaurant assets for about $26.3 million. It will also lend up to $5.5 million at no interest to keep the restaurants running. Both deals need court approval. Bloomin’ will serve as the stalking horse bidder, which means its offer sets the floor that any rival buyer must beat.
Why did the Outback franchisee file for bankruptcy?
The company pointed to high food and labor costs and fewer diners walking through the door. Most of its restaurants are in California, and it said the state’s minimum wage laws made labor especially expensive. It also said it has been struggling since the COVID-19 pandemic.
The trouble started earlier than that. According to bankruptcy documents, Out West borrowed to expand in the mid to late 2010s and began having financial problems in 2018. Bloomberg reported that the operator ran 99 Outback restaurants at its 2018 peak.
Which Outback Steakhouse locations closed?
Before filing, the franchisee closed 10 restaurants between Oct. 11 and Oct. 25 and asked the court to let it reject their leases. Court documents say those locations lost money or did not earn enough to cover rent and other occupancy costs. They are not part of the proposed sale. One of the closed restaurants was on Virginia Street in Reno, and the franchisee had already closed three underperforming locations earlier this year.
What happens to the Outback workers?
The franchisee employs about 3,669 people. Bloomin’ Brands said the filing will have no immediate impact on customers, restaurant employees or daily operations…