Outback Has Big Plans for its Small Prototype

The latest design is 16 percent smaller and costs 20 percent less.

April 29, 2022 Ben Coley

Bloomin’ Brands CEO David Deno and his team were disheartened by COVID’s disproportionate impact on the restaurant industry.

But the reality is, as some concepts fell, others rose, and Deno knows his brands fall into the latter.

“We came out in a much stronger place,” the CEO said during the company’s Q1 earnings call. “So our unit growth opportunity now is pretty good. Very good. And if you look at cities where we’re really strong in the South, there’s fill-in opportunities, there’s new unit expansion opportunities.”

Outback’s upcoming growth story will feature a smaller, less expensive prototype that should “enable more meaningful restaurant growth with healthy returns,” said CFO Chris Meyer. The store is 5,000 square feet—a reduction of 16 percent—which was accomplished by redesigning the kitchen and optimizing the dining room without comprising guest experience or the number of tables.

The new asset also includes brighter ambience, a reimagined bar, and a new decor package that contemporizes “the look and feel while also highlighting Outback’s Aussie heritage, Meyer noted. New technology (advanced grills and ovens, kitchen display systems, handheld tablets for servers) will be integrated into the prototype, and space will be set aside for off-premises, which mixed 29 percent at Outback in the first quarter. The new asset costs 20 percent less than a traditionally sized outlet.

A number of casual-dining brands have shifted to smaller footprints because of rising construction costs and growth of off-premises sales.

Peter Ortiz, chief development officer of Perkins Restaurant & Bakery, told FSR last year that the breakfast brand slimmed its prototype to 4,100 square feet and equipped it with pickup lockers and a mobile order window. The executive said, “The day of those 5,000, 6,000, 7,000-square-foot places—that's just a dinosaur.”

In other cases, full-service brands have gone even further by jumping into fast-casual, Outback being one of them with its spinoff, Aussie Grill. The brand has six brick-and-mortar locations in Florida, and works as a virtual kitchen in several Outback stores throughout the U.S. Other chains to jump to fast casual include Buffalo Wild Wings, IHOP, P.F. Chang’s, and Hooters.

Outback ended Q1 with 692 U.S. restaurants (562 company-owned and 130 franchised), and Deno believes there’s room for 75-100 more in the country in key markets like Austin, Miami, and Nashville. The plan is to open six units this year and double that in 2023.

Bloomin’ will leverage learnings from the smaller prototype and apply them across the portfolio, including opportunistically building Carrabba’s (199 stores) and Bonefish Grill (175 stores) in core geographies.

“We were just in Dallas recently, and I think the team was very amazed at how much that city has grown and what the opportunities look like,” Deno says. “Those are the things that we’re looking at as far as our unit expansion opportunity. … We’ve got the asset, we’ve got the team to pick the sites, we’re in metropolitan areas that our growing rapidly and geographies that our growing rapidly, and we’re in a much stronger position competitively versus when the pandemic started. All those things are starting to come together.”

Bloomin' Brands

Nearly 80 percent of Outback's off-premises sales come from digital channels.

Bloomin’s confidence in pent-up customer demand comes from Outback’s successful relocation program. In the past five years, the company relocated roughly 50 restaurants and saw sales lifts of more than 35 percent and AUV of $4.6 million. The brand plans to relocate 100 more in the coming years.

Overall, the company’s same-store sales grew 14 percent in Q1 year-over-year, including a 5.6 percent increase in pricing, a 6.9 percent rise in mix, and a 1.5 percent lift in traffic. The growth in traffic came despite a 300-basis-point impact from Omicron and unfavorable weather. The improvement in mix was fueled by two factors—customers trading up to higher-priced menu items and adding on appetizers and alcohol, and growth of in-restaurant dining, which carries a higher average check.

Q1 off-premises mixed 26 percent, which is flat compared to Q4 and more than double pre-pandemic levels. Third-party delivery accounted for 12 percent, up slightly from 11 percent in the fourth quarter. Nearly 80 percent of off-premises sales in Q1 were digital, driven by a recently implemented online ordering system and mobile app, which has more than 1.8 million downloads.

Here’s how the comps break out by brand:

U.S.

Outback: 9.2 percent
Carrabba’s: 11.5 percent
Bonefish Grill: 21.3 percent
Fleming’s: 45.7 percent

International

Outback: 35.9 percent

With sales increases across the board, Bloomin’ sees growth opportunities beyond just Outback. The 64-unit Fleming’s has room for 15 more locations in core markets California, Texas, and Florida. Recently opened units are earning $6 million in AUV, and the company said the steakhouse’s profit is among the highest in its portfolio. As Bloomin’ approach new stores, it will also look to boost Fleming’s sales by refreshing existing restaurants, such as expanding the bar areas and modernizing the interior.

There’s potential outside the U.S. borders, too, with Outback’s footprint in Brazil. Bloomin’ decided in 2013 to acquire a majority stake in its Brazil operations. From 1997 to 2013, the business grew to 47 stores, and in the eight and a half years since that deal, 76 more have opened.

When Bloomin’ purchased its share, the idea was to reach 100 units in Brazil, Deno said. The company now believes the country is capable of handing 240.

“That has to do with the economics of the business, the growth of the country, the innovations we’re making in how we build the box,” Deno said.

Commodity inflation was up 15 percent in Q1 and labor inflation grew 10 percent. The chain expects both areas to be higher in the first half of 2022 and ease in the latter portion of the year.

Bloomin’ brought in $1.1 billion in revenue in the first quarter, up 15.5 percent year-over-year. The chain expects Q2 revenue to be between $1.1 billion and $1.13 billion.

The company projects 2022 revenue to be between $4.35 billion and $4.4 billion, up from prior guidance of $4.3 billion to $4.35 billion. The shift is a reflection of strong Q1 sales and traffic benefits from additional marketing investments.