Outback Steakhouse is gearing up for a big advertising push heading into 2024. Parent company Bloomin’ Brands is ramping up its marketing efforts to drive guests to the casual-dining chain after consumers largely pulled back on discretionary spending in Q3.
CEO David Deno said the company—which is undergoing a turnaround effort through the pull of activist investor Starboard Value—will use a blend of television and “high-return digital tactics” to highlight Outback’s “No Rules, Just Right” platform, which initially launched in 2013 and was revived this year.
“It’s more than just marketing,” he said in an earnings call earlier this month. “It’s an attitude. It’s how we re-energize our restaurants and bring back the irreverence that Outback is known for.”
The campaign builds on the brand’s equity and heritage with a focus on menu innovation and accessible price points, like the current Steak ‘N Mate LTO, which includes a 6-ounce center-cut sirloin, fried shrimp, and two sides for $16.99.
The higher level of marketing spend is warranted to build traffic amid what Deno called a “softer industry backdrop.” Bloomin’ reported slower traffic and sales coming out of Labor Day. That’s in line with the broader casual-dining segment, which saw a 300-basis-point decline in comparable sales trends from August to September. The slowdown was mostly attributed to seasonality, but Deno said various economic headwinds like student loan repayments and interest rates share some of the blame.
The company’s combined U.S. traffic fell 4.7 percent in Q3. Traffic was down 6.1 percent at Outback, 5.7 percent at Bonefish Grill, 4.4 percent at Fleming’s Prime Steakhouse, and 0.1 percent at Carrabba’s Italian Grill. Combined U.S. comps slid 0.5 percent in the quarter and were down 1.1 percent at Outback, 0.5 percent at Bonefish, and 4.1 percent at Fleming’s. Carrabba’s bucked the trend and delivered a 3 percent same-store sales lift, driven by ongoing strength in takeout, delivery, and catering, which accounted for just over a third of the brand’s total sales.
While traffic started improving in October—and Q4 comps are expected to come in flat or positive 1 percent—the company updated its full-year guidance to reflect shaky consumer confidence in the back half of fiscal 2023. It now expects same-store sales growth between 1.5 and 2 percent, down from its previous guidance of 2 to 4 percent.
“We recognize in the short term that driving traffic growth may be challenged as the consumer is more careful with their discretionary spending,” Deno said.
Despite the topline headwinds, Bloomin’ notched 90 basis points of restaurant-level margin expansion in Q3. Adjusted restaurant-level margin was 14 percent, up from 13.1 percent in the same period a year ago, with pricing and productivity initiatives offsetting a 2 percent increase in commodity inflation and a 4.9 increase in labor inflation.
Pricing peaked around 7.5 percent in the first half of the year and started rolling off in Q3. That led to a sequential decline in average check growth—from 5 percent in Q2 to 4.2 percent in Q3, with around 3 percent expected for Q4.
“We’ve been really careful about our price increases,” Deno said. “If you look at our comp breakdown, we’ve got a 4 percent change in [per-person average]. That’s pretty disciplined versus what’s going on elsewhere in the industry. We’re obviously mindful of where the consumer is, and we believe that going in with a mindset to keep pricing as low as possible is the right place to be.”
While maintaining a value proposition is more important than before, the company isn’t interested in driving traffic mainly through promotions and LTOs, added CFO Chris Meyer. That’s especially true for Outback, which is seeing some competitors lean into discounting to attract guests in a challenging macroeconomic environment.
“I don’t think we believe that deep discounting is where Outback plays in the spectrum of casual dining,” Meyer said. “It doesn’t necessarily lend itself to pursuing a customer cohort that’s heavily motivated by couponing. We’ll use the LTO strategy to keep value front and center. Some windows may be more aggressive than others. But as a general strategy, we’re focused on maximizing the price value equation through exceptional food, service, and ambiance.”
Bloomin’ is relying less on pricing levers and more on operational improvements to offset inflation. To that end, the company recently finished rolling out a new tech and equipment package to all of Outback’s 684 domestic units. Every store is equipped with advanced grills and ovens, kitchen display systems, and handheld tablets for servers.
The restaurants are seeing better ratios of servers to tables thanks to the handheld tablets. Meyer said the front-of-house tech is improving server attentiveness since employees are spending more time on the floor instead of toggling back and forth to enter orders. The kitchen upgrades, meanwhile, are improving order accuracy for customers, with a sharp reduction in recooks driving food waste to “record-low numbers.”
Bloomin’ expects to see around $55 million in productivity benefits in fiscal 2023 on the heels of the new tech and equipment, up from its initial target of $50 million in savings heading into the year.
“A lot of that increase is due to the fact that we’re seeing very strong effectiveness of the technology that we’re putting into the restaurants,” Meyer said.
Looking beyond the immediate financial benefits, he sees the operational improvements elevating the overall customer experience and feeding back into the value and traffic play.
“All of these investments are not just layers to drive productivity,” he said. “They are also layers to drive future guest frequency. It’s not that terribly complicated. When you provide excellent service at a great value to a guest, they want to come back. That’s what this technology really at its core is designed to do.”
On the development front, Bloomin’ is channeling more energy toward building out the Carrabba’s pipeline, which Deno said “earned the right to grow” after landing among the portfolio’s top performers for the past several years.
The company is at the beginning of a multi-year remodeling effort that’s mostly concentrated on Outback. It is on track to reach 100 remodels by the end of the year. The brand’s growth trajectory also is becoming larger thanks to a smaller prototype that’s 16 percent smaller than a traditional store and features a brighter ambiance, reimaged bar, and elevated decor.
Bloomin’s domestic footprint shrank in Q3, with five corporate Outback stores closing and no new stores opening in the quarter. That brought its combined unit count in the U.S. to 1,148, including 684 Outback restaurants, 218 Carrabba’s restaurants, 175 Bonefish restaurants, 64 Fleming’s restaurants, and 7 Aussie Grill restaurants. Six Outback locations opened in Brazil in the quarter, bringing the brand’s total footprint in that country to 190 units.