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By | November 2012
Page 1 of 9
Internet Mini Case #9
Outback Steakhouse, Inc.
Maryanne M. Rouse

With 1,185 restaurants in 50 states and 21 foreign countries in 2004, Outback Steakhouse, Inc. (OSI), was one of the largest casual dining restaurant companies in the world. Founded in 1988 with a single restaurant in Tampa, Florida, OSI now comprised eight unique themed concepts: Outback Steakhouse (884 company-owned, franchised, and development joint venture units), Carrabba’s Italian Grill (171), Bonefish Grill (66), Fleming’s Prime Steakhouse and Wine Bar (31), Roy’s (18), Lee Roy Selmon’s (2), Cheeseburger in Paradise (11), and Paul Lee’s Chinese Kitchen (2).

At the end of January 2005, 1,120 of the existing restaurants were company owned. The balance was more joint ventures—the preferred route to entering new markets—than franchises. Because OSI continued to buy back franchises, only three geographic franchises remained. In August 2004, OSI acquired designation rights for the 76-unit Chi-Chi’s restaurant chain from the then-defunct Prandium for $42.5 million. The properties included 23 locations with owned land and buildings, 15 sale-leaseback properties with reversion rights and purchase options, 23 ground leases, and 15 leases. Included in the price were real property, furniture, fixtures, equip-ment, and liquor licenses. OSI had not disclosed final disposition, but the company had noted that it might convert the sites to one of its existing concepts under its current expansion plans. Not all of OSI’s concepts had been successful. The company shut down its two-location southern Louisiana-themed Zazarac concept because it appeared to lack broad appeal. The per person tab at Zazarac had grown to more than $46, an average higher ticket than OSI had planned for but which was required to make the concept reasonably profitable.

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