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Outback to take lunch business national

Outback to take lunch business national

Bloomin’ Brands to drive awareness for lunch effort with marketing campaign

Outback Steakhouse is planning to expand its lunch business in 2015 and will raise awareness with a national ad campaign, executives with parent company Bloomin’ Brands said at their investor day meeting Tuesday.

Executives believe that the lunch business could present a $1 billion opportunity if the company can bring its market share at the noon meal to the same level it has at dinner (10 percent).

“We know we’re late to the game,” said Bloomin’ Brands chief executive Elizabeth Smith at the meeting, “but there is a big opportunity in front of us.”

Company executives also highlighted plans on Tuesday to continue to grow U.S. sales at a rate faster than competitors, while simultaneously increasing international expansion.

The company operates Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse & Wine Bar, in addition to Outback. Bloomin’ Brands is projecting that its concepts’ same-store sales will grow at least 1.5 percent in the coming year, while earnings per share are expected to grow 10 percent on a comparable calendar basis.

Bloomin’ is also predicting 40 to 50 new restaurant openings systemwide, and expects commodity inflation of between 4 and 6 percent, due to continued increases in beef prices. Beef is a key commodity to the company; its biggest concept, Outback, comprises 753 of Bloomin’s 1,491 locations and roughly half of the company’s $4.3 billion in sales.

Smith suggested sales could improve even greater than projections in the coming year if “green shoots” she sees in the economy lift the casual dining market. The casual dining sector has seen traffic declines for nine straight years, but job growth and consumer confidence could give the sector a lift.

“We absolutely have had improvements in the macro environment,” Smith said. “That’s good news for everybody that operates a consumer business.”

Smith said that Bloomin’ Brands’ combined concepts have consistently outperformed casual dining same-store sales tracker Knapp Track’s index by 200 basis points, and she expects that to continue in 2015. Smith said that gap would be the same even if the economy improves.

“We feel we have a very strong portfolio that [would] benefit from tailwinds,” she said. “A rising tide lifts all boats.”

Lunch at Outback could help. Roughly half of Outback restaurants currently have lunch, and that is expected to increase to 60 percent by the end of 2014. More are expected to add the daypart early next year. That should be enough for the chain to effectively advertise its lunch business, which includes a distinct menu that includes numerous combinations that start at $6.99.

“We [traditionally] relied on you walking down a street and [noticing] that Outback was open at lunchtime,” Smith said. “Now we’re going to drive that awareness.”

International development is a huge opportunity as well. Bloomin’ has been developing in international markets for 18 years, but Smith believes consumers in other countries are more eager for casual dining options given their improving household incomes.

She said the next restaurant sector to enjoy strong international growth will be dine-in restaurant chains such as Bloomin’ Brands’ concepts, not quick-service brands. “The next five to ten years will be the era of casual dining globally,” she said. Rising middle class consumers in countries like China will want “to graduate from quick service,” she said.

“It’s an exciting time to be a casual dining operator that has global capability,” Smith said.

Company long-term goals

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Bloomin’ plans to launch Carrabba’s in Brazil in 2015. Carrabba’s would be the second of the company’s brands to have an international location, following Outback. The company estimates that 12 percent of its sales will come from international restaurants in 2015, but it has a longer-term goal to increase that to 30 percent.

The company has room to grow in the U.S., particularly with Bonefish Grill. The brand currently has 201 locations, but it has the potential for at least 150 more locations, according to Bloomin’. There is room for another 50 Outback locations, and that chain is also looking to relocate 100 sites to better locations. In addition, the 66-unit Fleming’s has room for 35 more locations, the company said.

One brand that isn’t expanding in the U.S. is Carrabba’s, the Italian chain struggling with weak sales. Same-store sales fell 0.2 percent at the chain last year, and they are down 1.4 percent through the third quarter, company officials said.

When Bloomin’ went public in 2012, it considered the 244-unit Carrabba’s, along with Bonefish to be among its growth chains. Now development in Carrabba’s is “on hold” while the chain works through its sales issues.

That struggle is being felt throughout the Italian food sector — chains like Olive Garden and Macaroni Grill have also struggled in terms of same-store sales. Smith suggested that consumers are frequenting Italian chains more for special occasions these days. “The heavy Italian dining experience is driving consumers to use Italian increasingly in a more special occasion way,” she said.

The company is working to get Carrabba’s to become more of an every day experience and not a special occasion. For now, the company plans to add lighter fare and more “entry level” menu options, while reducing complexity in the operating model.

Contact Jonathan Maze at [email protected].
Follow him on Twitter at @jonathanmaze

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