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Just right
By JEFF HARRINGTON, Times Staff Writer It started as a simple friendship some 30 years ago. Just two golfing buddies. One, Walter Baldwin, owned a struggling Tampa insurance agency. His friend, Chris Sullivan, was a young restaurant manager at Steak & Ale. Sullivan had turned to his friend Baldwin to insure his home and an auto or two. So when the restaurant manager and two associates opened their own steakhouse in Tampa in 1988, "Naturally . . . old money-grubbing Walter was over there talking to them about their commercial insurance," said Walter Baldwin, now 73 and retired. Sullivan's steakhouse, of course, grew into the global Outback Steakhouse chain. Baldwin's insurance business became DavisBaldwin, the biggest privately owned agency in the state before its recent acquisition by banking giant Wachovia Corp. More than 900 stores and 70,000 employees later, Outback still has no insurance personnel on its staff. It relies on DavisBaldwin almost entirely for its insurance needs. Outback's slogan is "No Rules. Just Right," and this relationship certainly breaks with convention. In fact, Outback's outsourcing is a case study of the corporate "relationship building" that marketing gurus constantly preach but companies seldom achieve. If a customer phones in a complaint, about anything from a tough steak to a fall on a sidewalk, to an 800 number for one of Outback's half-dozen chains, the call is routed to DavisBaldwin offices. There an employee dutifully answers "Outback Steakhouse" or "Carrabba's" or whatever. If Outback employees have insurance issues, from health coverage to on-the-job injuries, they, too, call an 800 line staffed by DavisBaldwin. Lowry Baldwin, Walter's son and the current chief of DavisBaldwin, views Outback as more than a client. "It's really been a mentoring relationship," he says. "The growth of their business has offered a great business model for us to learn from, to emulate. . . . Our company has grown as they have grown." If not for Outback, DavisBaldwin would not have devoted part of its staff to administer insurance benefits for other companies. Nor would it have developed expertise in investigating complaints and insurance lawsuits against its clients. Both functions have grown into divisions of DavisBaldwin that serve clients beyond Outback. In an age when most multinational companies shop around for the cheapest vendor or the one with the biggest breadth, Outback took a chance with DavisBaldwin. Typically, when a restaurant chain grows, it creates support operations in house or outsources them to a large national or multinational agency. Even Outback turned its marketing campaign over to a national ad agency after determining it had grown beyond the scope of a Tampa agency. Still, Outback prides itself on long-lasting relationships with law firms and other service vendors. And DavisBaldwin is the prime example. "I can't think of another relationship where we rely so completely on someone for outsourcing," Outback chief financial officer Bob Merritt said. The restaurateur tried for three years to develop a similar bond with a technology company, but it didn't work out. "They didn't get the partnership component. They kept trying to turn it into a one-way street," Merritt said. "We eventually gave up and brought it all in-house." Learning the ropesChris Sullivan is one of the bay area's biggest success stories, with an ownership stake in the Tampa Bay Devil Rays and active civic and political involvement in addition to clout as Outback's chief executive. Starting out 30 years ago, the University of Kentucky graduate interviewed for jobs with banks but wound up taking a waiter's job that paid $50 a week. After moving into management at Steak & Ale, Sullivan joined with co-worker Bob Basham in building 24 restaurants in three years. The two transferred to the Bennigan's chain for a similar restaurant buildout before entering into a joint venture with Brinker International to launch the Chili's restaurant brand throughout Florida and Georgia. The two built 14 Chili's restaurants in three years before cashing out. Each came out with about $1.5-million in Brinker stock. Searching for a place to invest their money, they seized on the Crocodile Dundee craze and came up with the concept for an Australian steakhouse open for dinner only. The duo was joined by Tim Gannon, offering expertise in developing the menu, and Outback Steakhouse was under way. The first Outback opened in March of 1988 on Henderson Boulevard in Tampa. Walter Baldwin and his wife, Sally, were among the opening night guests. Baldwin recalls the scene: an active bar, good food, plenty of young patrons. Yet he had his doubts about the location. "I told Sally when we left, 'I don't know whether they're going to make it here,"' Baldwin said. "So that's why I'm not in the restaurant business." Meeting changing needsOutback grew quickly, recruiting Bob Merritt as financial chief in 1990 to guide the company into going public. Merritt recalls Lowry Baldwin coming to his office shortly after he joined. A tall stack of insurance forms sat on the desk between them. Merritt shoved the stack toward Baldwin. "I said, 'I never want to see these again' and (Baldwin) gulped," Merritt said. "I said, he's now my insurance guy. It was radical, absolutely." Walter Baldwin said with a business relationship based on friendship he felt an even stronger duty to be competitive on every renewal. "Don't take the friendship for granted, because if you do, you're not going to have the account for long." Merritt said Outback never would have stuck with DavisBaldwin through the years if the company didn't actively respond to the restaurateur's growing needs. In 1994, prodded by Outback, the insurance agency created a unit that would answer customer complaints and, if necessary, stay with the complaints through litigation and settlements. A year later, DavisBaldwin added a unit to guide Outback employees with insurance claims and coverage questions. Most recently, with terrorism concerns and high reinsurance rates pushing property insurance dramatically upward, DavisBaldwin counseled Outback to self-insure some of its risk and cut down its premiums. Val Harwell, DavisBaldwin's chief operating officer and point person on the Outback relationship, said her staffers observe in an Outback restaurant once a year to get a better feel for the corporate culture. They've tagged along when new managers and proprietors attend an intensive training program called the Walkabout at Outback Steakhouse and Passeggiata (Italian for "promenade" or "to walk about") at Carrabba's. Harwell said it didn't take long to pick up the essence of the company: an emphasis on fun and service. She observed how servers are trained to sit down or kneel when they go table to table to help establish a rapport with customers. "They only give the servers three tables -- no more -- to give their undivided attention to the customer," Harwell said. DavisBaldwin has other longstanding relationships with bay area companies. It has handled insurance for 25 years for AmeriSteel Corp., for instance, even as the steelmaker was passed from Japanese to Brazilian owners. None of its clients, however, seem as special as a certain faux Australian steakhouse. Just ask the two dozen DavisBaldwin staffers assigned to Outback. "The 25 people that are working on this," Lowry Baldwin said, "will do anything for that relationship." -- Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.
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From the Times Business report
From the AP
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