Outback Steakhouse looks to fix its value perception
Same-store sales declined for the seventh straight quarter. | Photo: Shutterstock
Outback Steakhouse needs to give customers more bang for their buck.
That’s according to Mike Spanos, the new CEO of Outback parent company Bloomin’ Brands. Spanos, the former COO of Delta Air Lines, is spearheading a turnaround effort at Outback. And he is zeroing in on value as a way to fix the brand.
“Outback is an amazing brand, and the steak category is doing well,” Spanos said during an earnings call Wednesday. “However, we are not doing well. The what-you-get-for-what-you-pay relationship is not working.”
The 673-unit steak chain is in the midst of a nearly two-year streak of same-store sales declines. The streak hit seven quarters to begin the year as same-store sales fell 1.3%.
It has lost share to steakhouse competitors such as Texas Roadhouse and LongHorn Steakhouse, which have been two of the best performers in casual dining in recent years. And it has had a particularly hard time attracting customers with household incomes below $100,000. Outback’s leadership thinks value is a big reason for that.
Some of the brand’s value problem has to do with its prices. It has higher prices than competitors, Spanos said. “That is one item area in terms of the value proposition we need to fix strategically,” he said.
Outback has made an initial effort on that front with the return of its Aussie 3-Course meals. The meals offer a choice of soup or salad, an entree and a slice of Cheesecake starting at $14.99.
The offer has been popular, and Outback expects it to drive traffic as it laps some weaker-performing promotions from a year ago. It will become part of the permanent menu in June.
But the chain also believes it needs to do more on value, given the state of consumer spending, and is looking at other potential offers.
“We’re going to have to infuse more value to motivate our guests in this choppy environment,” Spanos said. He noted that that might result in lower check averages and margins in the near-term.
But he also noted that value is not just about price. It’s also about what customers get for that price, including the food and the service.
“Value is a function of price and benefits. And there’s a consistency of execution,” Spanos said. And those elements need some work too.
To that end, the chain is working to simplify its menu so that employees can focus on making fewer items, better. In April, it dropped about 10% of its menu items and has said it could get rid of as much as 20% of the menu.
It’s also looking at its staffing levels and service model and how it defines different employee roles in an effort to improve service. It recently installed Ziosk tabletop payment tablets at all of its locations and is using them to gather customer feedback about what it could be doing better.
That said, Outback is still in the early phases of turnaround planning. It has been testing new initiatives at 14 locations but has yet to share specific details.
“We’re very encouraged by what we’re seeing in the test stores,” Spanos said. “We’re also very much in a learning stage here. So we are moving urgently to learn. But I want to be very deliberate to get it right.”
Bloomin’s non-Outback brands had an uneven quarter. Same-store sales rose at Carrabba’s Italian Grill (1.4%) and Fleming’s Prime Steakhouse (5.1%), but fell at Bonefish Grill (negative 4%). Overall, same-store sales across all of Bloomin’s 1,466 restaurants were negative 0.5% for the quarter.
The Tampa-based company continues to expect same-store sales of negative 2.5% to negative 1.5% for the full year.
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