Changes Bloomin'
When Paul Avery opened the nation's seventh Outback Steakhouse in Palm Harbor in 1989, the former Steak & Ale supervisor reveled in the newfound freedom of working for a restaurant that opened only for dinner.
"I don't want to say it was easy, but it was a great lifestyle you could get your arms around," says Avery.
.These days, Avery's lucky to find time for lunch. After Outback co-founders Chris Sullivan and Bob Basham resigned early last year, Avery stepped into a key role on the company's new management team. As chief operating officer -- the No. 2 position behind new CEO Bill Allen -- Avery is confronting the key challenge faced by every mature chain: As expansion possibilities diminish, how do you keep sales growing steadily?
Launched almost two decades ago at the height of the Crocodile Dundee craze, the Aussie-themed eatery made a big splash in middle America. Consumers lined up eagerly for an hour or longer to consume "bloomin' onions" and "shrimp on the barbie." Steadily opening new restaurants, Outback blossomed into a $3.2-billion casual-dining empire with almost 1,300 restaurants spanning 21 countries.
As Outback has saturated existing markets, however, the chain's results have lagged. For the nine months ended Sept. 30, 2005, same-store sales at Outbacks declined by 0.9%, compared with a 3.2% increase for the same nine-month period one year earlier.
Bryan Elliott, a senior restaurant analyst at Raymond James & Associates, says Outback still delivers a "great steak, cold beer and a good bloomin' onion," but "no matter how good your product is, your heavy users or your greatest fans will eventually, no matter how perfect it is, want some variety, and Outback has traditionally not pursued variety in the menu offerings."
Beefing up the brand
Avery and others at Outback acknowledge that their 1980s concept needs invigorating. Even with healthy growth in the company's newer chains, including Fleming's, Roy's, Bonefish Grill, Paul Lee's Chinese Kitchen, Cheeseburger in Paradise, Lee Roy Selmon's and Carrabba's, the flagship Outback still accounts for more than 70% of the company's earnings. "We've got to make sure this brand is relevant for years and years to come, so that is where we spend most of our time," Allen told investors last November.
The company plans to keep opening Outbacks -- as many as 45 worldwide this year -- and is trying to jazz up its menu variety. The chain from now on plans to update at least 10% of its menu annually -- beyond offering different-sized cuts of steak. "Beef is less than half of what we sell," says Avery.
The chain has been testing a new "value menu" in some 250 restaurants experiencing soft sales in the Midwest. It's rolled back the price of bloomin' onions below $6 and has reduced the price of a steak dinner to less than $11 by carving an ounce off its sirloins. The company also is redecorating restaurants, upgrading restrooms and bars, and searching for a new decor.
"The formula early on was to drive an aggressively positive real estate investment deal... then always to try to give more on the plate," Avery explains. Today, with changes in the real estate market and higher beef prices, the attempt is to "drive incremental traffic without raising menu prices at a time when price sensitivity is a concern to the American public." The company also is toying with a prototype that's 1,000 square feet smaller than the typical 6,300-sq.-ft. Outback restaurant. The company hopes the smaller version will allow it to penetrate further into "tertiary" markets.
Meanwhile, the company is pushing growth at its newer chains. Overall, sales at Outback's entire chain of restaurants have increased by 12.8%.
Allen says the rates of return at Carrabba's are "good, getting to a level of excellent." He's also "wildly excited" about Bonefish Grill, a casual seafood restaurant that is the "closest product we've had to date that would mirror the sort of economics we saw in the Outback brand early on." Same-store sales at Bonefish Grills increased 8.9% during the first nine months of 2004 and 3.6% during the same period in 2005.
Company executives also are bullish on Cheeseburger in Paradise, a Jimmy Buffett-inspired restaurant with a tiki-bar motif, and Flemings Prime Steakhouse & Wine Bar, which has 36 locations. This year, the company is launching its ninth concept -- a pricier seafood restaurant in Newport Beach, Calif., called Blue Coral. The company projects that these other brands will account for close to 50% of its annual revenue five years from now.
Some things at Outback -- including the dinner-only hours that attracted Avery -- won't change, he says. The hours are geared toward both the market and the company's workers. Outback's typical customer is a 9-to-5-commuter who lives in the suburbs and stops by Outback for dinner. Also, the evening hours allow the company's employees a better quality of life outside the restaurant. "The business really hinges on our people. We call it, putting our people first," he says.
Outback Steakhouse Inc.ChainRestaurants
(as of Nov. 30)Same-store
sales increase
(9 months ended
Sept. 30)*New
restaurants
planned
in 2006Outback Steakhouse914-0.9%38 to 50Carrabba's Italian Grill1996.4%26 to 28Bonefish Grill873.6%33 to 35Fleming's Prime Steakhouse & Wine Bar3612.2%9 to 10Cheeseburger in Paradise25NA18 to 20Roy's206.1%2Paul Lee's Chinese Kitchen4NA1Lee Roy Selmon's3NA2Source: Outback Steakhouse *Stores opened for 18 months of longer
OUTBACK'S NEW LEADERS
Bill Allen, 46, CEO
Compensation: $750,000 annually, plus incentives and benefits including a one-time signing bonus of $2 million, an undetermined discretionary bonus and 300,000 shares of OSI restricted common stock subject to ongoing employment with Outback.
Background: Allen joined Outback in 1999 as president of Fleming's Prime Steakhouse & Wine Bar, which he co-founded on the West Coast with Paul Fleming in 1998. In 2002, he took over operation of Roy's restaurants. In early 2004, he was named president of West Coast concepts for Outback and helped oversee development of Paul Lee's Chinese Kitchen. He has more than 20 years of experience in the restaurant industry.
Claim to Fame: At age 30, he earned recognition for being the youngest senior vice president in the history of the Marriott Hotel Corp. He won kudos for turning around Marriott's lagging food sales at Los Angeles Airport, where he introduced "branded" concepts like Pizza Hut, Dunkin' Donuts, TCBY and Burger King.
Paul Avery, 46, COO
Compensation: Annual salary of about $600,000 plus other incentives and benefits. If operating goals are met, he's eligible for a company bonus of up to $400,000 per quarter and a year-end bonus of 25% of each quarterly bonus, handsome rewards not typically available to other company executives.
Background: Kicked off his restaurant career at Steak & Ale in 1982. Joined Outback in 1989 as managing partner of an Outback Steakhouse in Palm Harbor. In 1990, named director of operations, became senior vice president of operations in 1993 and moved up to president of the Outback Steakhouse concept in 1997, overseeing 887 restaurants. In 2003, took on the title of corporate president of Outback with added responsibility for three of the company's smaller chains -- Carrabba's Italian Grill, Bonefish Grill and Cheeseburger in Paradise.
Outside the Office: An avid athlete, Avery is hoping to improve his tennis game this year.
Dirk Montgomery, 42, CFO
Compensation: $400,000 annually, plus incentives and benefits including a one-time signing bonus of $300,000, a bonus for 2005 of at least $100,000, annual discretionary bonuses up to 150% of base salary and 100,000 shares of OSI restricted common stock, subject to ongoing employment.
Background: Montgomery is the latest addition to Outback's top team, moving to Tampa from Omaha, Neb., in October to take over the financial reins of the company. He most recently served as retail senior financial officer for ConAgra Foods. Before that, he spent four years as executive vice president and chief financial officer of Express, a division of Limited Brands. He held several senior financial management positions at Sara Lee Corp. between 1991 and 2000 and served in various audit and corporate finance positions at Ernst & Young between 1985 and 1991.
What He Brings to Outback: "He's a great chemistry fit for us," Allen has said. "Having a background in consumer packaging as well as retail, we think that perspective is going to serve our business well."
"I don't want to say it was easy, but it was a great lifestyle you could get your arms around," says Avery.
.These days, Avery's lucky to find time for lunch. After Outback co-founders Chris Sullivan and Bob Basham resigned early last year, Avery stepped into a key role on the company's new management team. As chief operating officer -- the No. 2 position behind new CEO Bill Allen -- Avery is confronting the key challenge faced by every mature chain: As expansion possibilities diminish, how do you keep sales growing steadily?
Launched almost two decades ago at the height of the Crocodile Dundee craze, the Aussie-themed eatery made a big splash in middle America. Consumers lined up eagerly for an hour or longer to consume "bloomin' onions" and "shrimp on the barbie." Steadily opening new restaurants, Outback blossomed into a $3.2-billion casual-dining empire with almost 1,300 restaurants spanning 21 countries.
As Outback has saturated existing markets, however, the chain's results have lagged. For the nine months ended Sept. 30, 2005, same-store sales at Outbacks declined by 0.9%, compared with a 3.2% increase for the same nine-month period one year earlier.
Bryan Elliott, a senior restaurant analyst at Raymond James & Associates, says Outback still delivers a "great steak, cold beer and a good bloomin' onion," but "no matter how good your product is, your heavy users or your greatest fans will eventually, no matter how perfect it is, want some variety, and Outback has traditionally not pursued variety in the menu offerings."
Beefing up the brand
Avery and others at Outback acknowledge that their 1980s concept needs invigorating. Even with healthy growth in the company's newer chains, including Fleming's, Roy's, Bonefish Grill, Paul Lee's Chinese Kitchen, Cheeseburger in Paradise, Lee Roy Selmon's and Carrabba's, the flagship Outback still accounts for more than 70% of the company's earnings. "We've got to make sure this brand is relevant for years and years to come, so that is where we spend most of our time," Allen told investors last November.
The company plans to keep opening Outbacks -- as many as 45 worldwide this year -- and is trying to jazz up its menu variety. The chain from now on plans to update at least 10% of its menu annually -- beyond offering different-sized cuts of steak. "Beef is less than half of what we sell," says Avery.
The chain has been testing a new "value menu" in some 250 restaurants experiencing soft sales in the Midwest. It's rolled back the price of bloomin' onions below $6 and has reduced the price of a steak dinner to less than $11 by carving an ounce off its sirloins. The company also is redecorating restaurants, upgrading restrooms and bars, and searching for a new decor.
"The formula early on was to drive an aggressively positive real estate investment deal... then always to try to give more on the plate," Avery explains. Today, with changes in the real estate market and higher beef prices, the attempt is to "drive incremental traffic without raising menu prices at a time when price sensitivity is a concern to the American public." The company also is toying with a prototype that's 1,000 square feet smaller than the typical 6,300-sq.-ft. Outback restaurant. The company hopes the smaller version will allow it to penetrate further into "tertiary" markets.
Meanwhile, the company is pushing growth at its newer chains. Overall, sales at Outback's entire chain of restaurants have increased by 12.8%.
Allen says the rates of return at Carrabba's are "good, getting to a level of excellent." He's also "wildly excited" about Bonefish Grill, a casual seafood restaurant that is the "closest product we've had to date that would mirror the sort of economics we saw in the Outback brand early on." Same-store sales at Bonefish Grills increased 8.9% during the first nine months of 2004 and 3.6% during the same period in 2005.
Company executives also are bullish on Cheeseburger in Paradise, a Jimmy Buffett-inspired restaurant with a tiki-bar motif, and Flemings Prime Steakhouse & Wine Bar, which has 36 locations. This year, the company is launching its ninth concept -- a pricier seafood restaurant in Newport Beach, Calif., called Blue Coral. The company projects that these other brands will account for close to 50% of its annual revenue five years from now.
Some things at Outback -- including the dinner-only hours that attracted Avery -- won't change, he says. The hours are geared toward both the market and the company's workers. Outback's typical customer is a 9-to-5-commuter who lives in the suburbs and stops by Outback for dinner. Also, the evening hours allow the company's employees a better quality of life outside the restaurant. "The business really hinges on our people. We call it, putting our people first," he says.
Outback Steakhouse Inc.ChainRestaurants
(as of Nov. 30)Same-store
sales increase
(9 months ended
Sept. 30)*New
restaurants
planned
in 2006Outback Steakhouse914-0.9%38 to 50Carrabba's Italian Grill1996.4%26 to 28Bonefish Grill873.6%33 to 35Fleming's Prime Steakhouse & Wine Bar3612.2%9 to 10Cheeseburger in Paradise25NA18 to 20Roy's206.1%2Paul Lee's Chinese Kitchen4NA1Lee Roy Selmon's3NA2Source: Outback Steakhouse *Stores opened for 18 months of longer
OUTBACK'S NEW LEADERS
Bill Allen, 46, CEO
Compensation: $750,000 annually, plus incentives and benefits including a one-time signing bonus of $2 million, an undetermined discretionary bonus and 300,000 shares of OSI restricted common stock subject to ongoing employment with Outback.
Background: Allen joined Outback in 1999 as president of Fleming's Prime Steakhouse & Wine Bar, which he co-founded on the West Coast with Paul Fleming in 1998. In 2002, he took over operation of Roy's restaurants. In early 2004, he was named president of West Coast concepts for Outback and helped oversee development of Paul Lee's Chinese Kitchen. He has more than 20 years of experience in the restaurant industry.
Claim to Fame: At age 30, he earned recognition for being the youngest senior vice president in the history of the Marriott Hotel Corp. He won kudos for turning around Marriott's lagging food sales at Los Angeles Airport, where he introduced "branded" concepts like Pizza Hut, Dunkin' Donuts, TCBY and Burger King.
Paul Avery, 46, COO
Compensation: Annual salary of about $600,000 plus other incentives and benefits. If operating goals are met, he's eligible for a company bonus of up to $400,000 per quarter and a year-end bonus of 25% of each quarterly bonus, handsome rewards not typically available to other company executives.
Background: Kicked off his restaurant career at Steak & Ale in 1982. Joined Outback in 1989 as managing partner of an Outback Steakhouse in Palm Harbor. In 1990, named director of operations, became senior vice president of operations in 1993 and moved up to president of the Outback Steakhouse concept in 1997, overseeing 887 restaurants. In 2003, took on the title of corporate president of Outback with added responsibility for three of the company's smaller chains -- Carrabba's Italian Grill, Bonefish Grill and Cheeseburger in Paradise.
Outside the Office: An avid athlete, Avery is hoping to improve his tennis game this year.
Dirk Montgomery, 42, CFO
Compensation: $400,000 annually, plus incentives and benefits including a one-time signing bonus of $300,000, a bonus for 2005 of at least $100,000, annual discretionary bonuses up to 150% of base salary and 100,000 shares of OSI restricted common stock, subject to ongoing employment.
Background: Montgomery is the latest addition to Outback's top team, moving to Tampa from Omaha, Neb., in October to take over the financial reins of the company. He most recently served as retail senior financial officer for ConAgra Foods. Before that, he spent four years as executive vice president and chief financial officer of Express, a division of Limited Brands. He held several senior financial management positions at Sara Lee Corp. between 1991 and 2000 and served in various audit and corporate finance positions at Ernst & Young between 1985 and 1991.
What He Brings to Outback: "He's a great chemistry fit for us," Allen has said. "Having a background in consumer packaging as well as retail, we think that perspective is going to serve our business well."