Outback Franchisee Seeks Bankruptcy Sale of 61 Restaurants

Out West Restaurant Group, an operator of Outback Steakhouse restaurants across the western United States, filed for Chapter 11 bankruptcy protection on November 2. The company has ties to Cerca Trova Restaurant Group, the owner of the 61 restaurants involved in the proposed sale.

Bloomin’ Brands, Outback’s parent company, has agreed to acquire the franchisee’s assets for about $26.3 million, subject to adjustments and the assumption of specified liabilities. Bloomin’ is set to make the initial offer in a court-supervised sale, where other bidders may submit higher offers. A judge must approve the transaction.

Bloomin’ also offered up to $5.5 million in interest-free financing to help fund operations during the bankruptcy, pending court approval. Out West plans to keep the restaurants open during the proceedings. Bloomin’ said the filing would not immediately affect customers, workers or day-to-day operations at the locations.

Cerca Trova attributed its financial strain to lower customer traffic, a slow recovery from the pandemic, higher food prices and unexpected labor costs. Court documents cited beef as its largest expense, with prices rising 15% to 20% in 2022 and roughly 5% annually afterward. The group also took on debt during the pandemic and struggled with the interest as sales recovered.

The company had about $3.6 million in cash when it filed. In the summer, a state judge gave approval to a $1.6 million settlement over wage-and-hour claims, and two additional class actions were filed in the state. The bankruptcy’s effect on settlement payments was unclear. Bloomin’ said the case involved the franchisee and did not affect its corporate operations, financing or liquidity.