Outback Franchisee Files Chapter 11 With $449 Million in Debt

Out West Restaurant Group, a San Diego franchisee that runs 61 Outback Steakhouse restaurants, has filed for Chapter 11 bankruptcy protection with $449 million in debt, Fox Business reported. Bloomin’ Brands, the Florida company that owns the Outback chain, has agreed to buy the 61 locations for $26.3 million.

The deal would put the restaurants under the parent company, provided the bankruptcy court allows the sale. Out West has asked the court for permission to sell its assets as part of the case.

Who Out West is and where it operates

The company’s legal name is Cerca Trova Restaurant Group. Its restaurants are in California, Arizona, Colorado, Nevada and New Mexico. At its largest, in 2018, it managed 99 restaurants, so the chain has shrunk to 61 since then.

Chapter 11 lets a business keep operating while it reorganizes its debts or sells assets under a judge’s supervision. In this case the plan described in the filing is a sale to Bloomin’ Brands.

What the franchisee blamed

In court documents, CEO David Goronkin pointed to fewer customers and high operating costs. He wrote that “by 2026, the pressures on the business had converged,” with guest traffic and earnings falling while spending on food, labor and other production costs kept climbing.

The filing named California labor costs and inflation as the main reasons for the company’s trouble. California’s minimum wage reached $19.60 an hour in January. The filing also said beef prices have risen by as much as 5% a year since 2022.

Sit-down chains such as Outback were exempt from the $20-an-hour minimum wage California set for fast-food workers in a 2024 law. Full-service restaurants across the state have still faced higher labor costs, according to Fox Business.

How Bloomin’ Brands is involved

Besides the $26.3 million purchase agreement, Bloomin’ Brands is providing up to $5.5 million in debtor-in-possession financing, and it charges no interest on that money. Debtor-in-possession financing is a loan made to a company during bankruptcy so it can keep paying bills, such as payroll and suppliers, while the case moves forward.

The purchase price of $26.3 million compares with the $449 million in debt Out West is seeking relief from. How the sale money would be divided among creditors was not disclosed.

What it means for diners, workers and creditors

For customers, the restaurants are still operating, and the planned buyer is the company behind the Outback brand. The reports did not say whether any of the 61 locations would close or how many people Out West employs.

The filing also drew comment on television. Entrepreneur Marcus Lemonis, a Fox Business contributor, said on “Fox & Friends” that business owners facing high costs have to make hard choices, such as raising prices, cutting staff or closing. “A lot of businesses want to make excuses now,” he said, adding that many companies keep doing well in California despite its costs and rules.

What to watch next

The bankruptcy court has to approve Out West’s request to sell its assets and the financing from Bloomin’ Brands. Other bidders, the terms of the sale and a closing date had not been disclosed.

Source: Fox Business