Outback Franchisee Files Chapter 11, Closes 10 Restaurants

Bloomin' Brands has agreed to buy the assets of its bankrupt Outback Steakhouse franchisee Cerca Trova Restaurant Group for $26.3 million, subject to higher competing offers. The deal, signed November 1, came one day after Cerca Trova filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware.

Cerca Trova operates as Out West Restaurant Group, one of Outback Steakhouse's largest franchisees. The San Diego-based company runs 61 Outback Steakhouse restaurants across California, Arizona, Colorado, Nevada and New Mexico, and employs around 3,669 workers.

Outback Steakhouse, the Australian-themed casual dining chain, had more than 660 U.S. restaurants as of the end of last year, according to parent company Bloomin' Brands. The majority of those locations are already company-owned.

Why did Cerca Trova file for bankruptcy?

Court records show the franchisee filed for bankruptcy in order to sell the majority of its assets. On the same day it filed its petition, the company moved to reject the leases on 10 restaurant locations 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. Those locations are not part of the proposed sale to Bloomin' Brands.

The company had also closed three underperforming locations earlier this year, court documents show.

Which Outback Steakhouse locations closed in October?

The closures span four states. The ten restaurants shut between October 11 and October 25 are:

Arizona

• 4871 East Grant Road, Tucson
• 1860 East McKellips Road, Mesa

California

• 7575 Beach Blvd., Buena Park
• 25261 N. The Old Road, Valencia
• 26652 Portola Parkway, Foothill Ranch

Colorado

• 7065 Commerce Center Drive, Colorado Springs
• 15 West Springer Drive, Highlands Ranch
• 2066 South Abilene Street, Aurora
• 8601 West Cross Drive, Littleton

Nevada

• 3645 South Virginia Street, Reno

How long has the financial pressure been building?

Court documents show the company has faced growing financial challenges since 2018, driven by 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 pressures that led to the bankruptcy filing.

What happens next?

The $26.3 million purchase agreement remains subject to competing higher offers through the court process, meaning another bidder could still top Bloomin' Brands' price. Because most Outback Steakhouse locations are already company-owned, the parent's bid would fold the franchisee's remaining restaurants back into corporate operations.

Whether any of the ten recently closed restaurants reopen is an open question. Fast Company reached out to Bloomin' Brands to ask whether it plans to reopen the closed locations and will update its story if it receives a reply. For now, the closures stand as the coda to a seven-year squeeze that shrinking traffic and rising labor, food and production costs placed on one of the chain's biggest operators.