Outback is no longer America's king of steaks
Source: CNN
Americans don't want Outback's Aussie-themed steaks anymore. Instead, they're craving Texas-style cuts from Texas Roadhouse and LongHorn's tender filets.
Texas Roadhouse and LongHorn's sales topped Outback's last year, and the chains' stocks are going in different directions. Texas Roadhouse's stock has increased around 15% over the last year, while shares of LongHorn-owner Darden jumped around 25%. Meanwhile, Outback parent company Bloomin' Brands' stock has tumbled more than 70% to roughly $8 a share.
As inflation pressures cut into consumers' spending, Americans are abandoning casual dining chains they don't perceive as good value such as Outback and TGI Fridays. Instead, they are shifting to Roadhouse, LongHorn, Chili's and other chains they feel offer them a better deal when they go out to dinner.
It's a steep fall for Outback, which defined the casual dining steakhouse model in the United States. Founded in 1988, customers jumped on Outback's cheap, juicy sirloin steaks and deep-fried onion blossoms during the 1990s and 2000s.
But Outback's mistakes and competitors' innovative strategies have tipped the power order in the restaurant steak wars. Outback hiked prices too high, relied too heavily on promotions to draw diners, and cut costs too far. Customers and analysts alike say food quality suffered, table service slowed and restaurants became dingy. Outback is also more expensive: The chain's check average was $29 last year — $6 above Roadhouse and $2.50 more than LongHorn.
That allowed Roadhouse to peel off Outback's budget-conscious customers, while LongHorn won diners by increasing the size of its steaks. Both chains also increased prices at a slower pace than Outback while investing in their staffs and restaurant remodels.
These factors, combined with better menu quality, has led to the success of these brands, according to RJ Hottovy, an analyst at Placer.ai. Roadhouse and Longhorn both rank at the top of the American Customer Satisfaction Index, a benchmark of consumers' opinions about restaurants and fast-food chains.
Outback was Richard Mathis's favorite restaurant in high school, even celebrating his graduation there. But he says Outback is 'consistently disappointing' these days.
'When I go into an Outback now, it feels sterile and cold. They just don't feel fun,' Mathis said. 'I want to eat and leave. I don't feel any desire to hang out there.'
He now prefers Texas Roadhouse when he goes out to eat with his wife or friends. The steak is better, the staff is friendlier and it's 'fun, bright and there's music,' he said. 'Roadhouse feels like going to a country bar.'
Although the three chains are all casual steakhouses, there are key differences that explain their divergent performance.
Outback, whose concept was based on the movie 'Crocodile Dundee,' spread nationally during the 1990s and 2000s. Although its four founders were not Australian, Outback had faux-Australian items on the menu like 'Ribs on the Barbie' and 'Walkabout Soup.' The chain sold a wider variety of casual fare beyond steaks, becoming recognized for its signature items like the 'Bloomin' Onion' and 'Alice Springs Chicken.' But the size of the menu became unwieldy for staff as the chain also offered limited-time promotions to try to spur customers to visit.
Location mattered as well. Outback for years opened restaurants around malls, but that backfired as foot traffic to malls dwindled. Outback has closed dozens of its older restaurants in recent years.
As Outback struggled, competitors stepped in.
Texas Roadhouse stuck to lower prices on most items compared to the one-off promotions at Outback. The chain also won over customers with its lively, rodeo-style restaurants, featuring wood-paneled walls, murals and upbeat country tunes. Roadhouse distinguished its brand with free peanuts, bread rolls with honey cinnamon butter and occasional line dancing by waiters.
'Roadhouse is winning because they have a much better value proposition than anybody else,' said Peter Saleh, an analyst at BTIG.
LongHorn has stood out through its upscale-dining feel and bigger steaks for similar prices to Outback's.
LongHorn started in the early 1980s as a budget-friendly roadhouse restaurant. But LongHorn ditched that concept and moved upmarket to court higher-income diners. In 2007, Darden, the owner of Olive Garden, Capital Grille and Cheddar's Scratch Kitchen, bought LongHorn.
'LongHorn has made significant investments over the years in quality, and that continues to pay off,' Darden CEO Rick Cardenas said last year. He noted that LongHorn was attracting customers trading down from fine-dining restaurants.
But Outback says it can return to its past glory.
'Consumer research shows there is an affinity for [Outback],' a spokesperson for Bloomin' Brands told CNN. 'With the investments we're making to improve operations and deliver a better guest experience, we are excited about the future potential of our business.'
Despite its recent struggles, Outback believes it can turn its business around with a new strategy and leadership.
Mike Spanos, the former chief operating officer at Delta, became CEO of Outback parent Bloomin' last year. Outback also has a new president, Pat Hafner, a 29-year veteran of the chain.
'Outback is a great business. It is a great brand,' Spanos said last month. 'It is a very fixable business.'
Outback plans to cut 20% of the menu and reduce limited-time promotions to simplify operations for restaurant staff. These promotional offers hurt Outback's profit and created bottlenecks for workers. Instead, Outback will shift to setting consistently low prices.
'We were featuring items in short promotional periods that created complexity for our operators, and we failed to drive value in our core' menu items, Spanos said.
Outback also will slow its new restaurant openings and direct its investments to remodeling current locations.
'We need to focus on getting the guest experience right before we earn the right to grow,' he said.
Chili's recent turnaround offers hope for Outback and a roadmap it can follow.
Chili's has unexpectedly pulled off its comeback thanks to upgraded French fry and chicken tender recipes, fast food-like prices and viral TikTok videos of customers pulling apart its gooey mozzarella sticks.
Chili's sales at restaurants open for at least a year increased a whopping 31% last quarter. It was Chili's third-straight quarter of double-digit sales growth.
Old Outback customers like Richard Mathis are rooting for a Chili's-like comeback.
'I love the brand and wish it was back to the way it was,' he said. 'I want to go to Outback.'
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