A number of Outback Steakhouse locations closed their doors last month in the lead-up to a bankruptcy petition by one of the casual dining chain’s largest franchisees, court documents reveal. The store closures span four states. Here’s what to know.
What’s happened?Cerca Trova Restaurant Group Holdings, which operates as Out West Restaurant Group, one of Outback Steakhouse’s largest franchisees, sought Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware on Monday.
The San Diego-based company, which currently employs around 3,669 workers, operates 61 Outback Steakhouse restaurants across Arizona, California, Colorado, Nevada, and New Mexico.
Outback Steakhouse, the dining chain known for its Australian theme, had more than 660 U.S. restaurants as of the end of last year, according to parent company Bloomin’ Brands.
Why did Cerca Trova file for bankruptcy?Court records show the franchisee filed for bankruptcy to sell the majority of its assets.
However, that same day, Cerca Trova filed a motion to reject the leases on 10 restaurant locations that it had closed between October 11 and October 25.
According to court documents, the shuttered restaurants operated at a loss or at margins insufficient to cover their occupancy costs. These locations aren’t part of the proposed sale.
Which Outback Steakhouse locations recently closed?The following Outback Steakhouse locations closed in October.
Arizona
California
Colorado
Nevada
The franchisee had previously closed three underperforming locations earlier this year, court documents show.
Growing financial pressure since 2018In court documents, the company noted that it has faced growing financial challenges since 2018 due to declining traffic and rising labor costs.
In 2020, during the COVID-19 pandemic, its revenue dropped around 35%. Cerca Trova has pursued a sale four times since 2018.
The company cited declining traffic and earnings—along with rising labor, food, and production costs—as the drivers of the mounting financial pressures that led to its recent bankruptcy filing.
On November 1, Bloomin’ Brands entered into a purchase agreement to acquire all of Cerca Trova’s assets for $26.3 million, subject to competing higher offers. The majority of Outback Steakhouse locations are already company-owned.
Fast Company reached out to Bloomin’ Brands to ask whether it plans to reopen any of the recently closed locations. We’ll update the story if we receive a reply.