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Outback turnover
Bloomin' exit
Outback co-founders Chris Sullivan and Bob Basham, who turned a local steakhouse into a global brand, resign in a move that was foreshadowed, but abrupt. They are replaced by a couple of company veterans.
By SCOTT BARANCIK
Published March 9, 2005
Chris Sullivan, the innovative co-founder of a single Tampa steakhouse in 1988 that bloomed into a $3-billion global powerhouse and one of America's most-recognized brands, resigned Tuesday as CEO of Outback Steakhouse.
The brief morning announcement shuffled the executive suite at the Tampa Bay area's highest-profile corporate headquarters in what observers say was a well-planned if abrupt changing of the guard. The changes were effective immediately.
Sullivan, 57, will remain as co-chairman of the board. Bob Basham, 57, who founded the chain with Sullivan and had been the company's chief operating officer, also resigned and will serve as co-chairman.
The two were replaced by a pair of Outback veterans. Bill Allen is the new CEO, and company president Paul Avery took on the title of COO.
"I was totally caught off-guard by it," said Bill Horne, CEO of subsidiary Outback Sports. Sullivan "wants to play a lot of golf and travel and enjoy his home (in Pebble Beach, Calif.), but he'll always be involved."
If Wall Street was troubled by the succession announcement Tuesday, it didn't let on. Fewer shares of Outback stock traded hands during the day than normal, and its price dropped just one percent to $46.86 per share. Chief financial officer Bob Merritt never even mentioned the changeover during an afternoon presentation to analysts and institutional investors at a Raymond James conference in Orlando.
"This was not a Boeing situation," CIBC World Markets restaurant analyst John Glass said, referring to Monday's forced resignation by Boeing Co. CEO Harry Stonecipher, who left after his affair with a subordinate was discovered. "I don't think there's anything nefarious underneath this."
In retrospect, Sullivan's and Basham's resignations were foreshadowed. In January 2004, Outback announced it was promoting Allen and Avery while letting Basham shed the key title of company president. Tuesday's move appeared to be the second part of a two-stage succession. Sullivan and other Outback officials did not return phone calls seeking comment. .
"This (CEO succession) is probably one of the most closely held things a publicly held company does," said Rick Walsh, a spokesman for competitor Darden Restaurants in Orlando.
Whatever the thinking behind the timing, Sullivan's and Basham's resignations accomplished several objectives for Outback.
They separated the chairman and CEO roles, something corporate governance experts and investors increasingly demand as a sign of director independence and a shield against misbehavior.
They put some space between Outback and minor personal scandals that ensnared Sullivan and Basham the past couple of years: Basham, a high-profile divorce from his second wife, and Sullivan, a paternity suit that came on the heels of his third divorce.
More importantly, perhaps, the changes gird Outback for the future by replacing two 57-year-old pros with a pair of 45-year-olds presumably itching for a chance to lead.
Although Outback's Merritt did not address the changes directly when he spoke with investors in Orlando, his message fit the day: "We want to continue to keep our best people, so we've got to give them growth opportunities. . . . In our business, you lose your best people, they go down the road and they start to be your competitors."
"It's positive for morale," echoed restaurant industry analyst Glass.
Sullivan himself has a lot to look forward to. An avid golfer who partnered with pro Craig Stadler last month in Outback's pro-am tournament, he has a $11.5-million vacation home in Pebble Beach, Calif., just off several famous courses, the 17-Mile Drive and the Pacific Ocean. According to documents filed in his paternity case, he owns a $3-million home on Tampa's Davis Islands and $116-million in Outback stock.
His two children by wife Pat Sullivan are grown; his daughter recently was among those competing to be named queen of the annual Gasparilla festival.
A rising leader in Florida and a favorite of Gov. Jeb Bush, he has a full civic plate, including posts as chairman of the Florida Council of 100 business group and a director of the Scripps Florida Funding Corp.
"I think you'll still see him involved, because he has a very inquisitive nature and likes to solve problems," Darden's Walsh said.
Sullivan also can reflect with pride on the company he is turning over.
Although he credits Steak 'n' Ale founder Norman Brinker as his guru, Sullivan has emerged as an innovator in his own right in the casual-dining industry. Outback generally skips lunch service, focusing instead on the higher-priced menus and stronger liquor sales of the dinner hour. It limits servers to just a few tables each so they can turn them over more quickly. And Outback was one of the first in the industry to require restaurant managers to invest in their own store - and pay them based on a percentage of sales.
Outback takes a rigorous, MBA-style approach to the business, putting job applicants through rigorous personality and other tests, routinizing food preparation and pricing and assigning each brand to a separate, and thus loyal, group of executives.
It has enjoyed spectacular successes with concepts such as Bonefish Grill, a St. Petersburg restaurant it bought several years ago, and learned from failures and near-disasters, such as the defunct, Cajun-themed Zazarac concept.
Outback also has taken an aggressive stance on public policy, spending millions of dollars on legislative battles (such as its unsuccessful fight last year against a Florida ballot initiative to raise the minimum wage) and financing pro-business Republican candidates for office.
Sullivan's replacement, Bill Allen, had served as president of Outback's two small, upscale chains - Roy's, and Fleming's Prime Steakhouse & Wine Bar - and the fledgling Paul Lee's Chinese Kitchen. He is said to have a visionary style similar to Sullivan's.
"I think he's a very talented operator," industry analyst Glass said. "He was responsible for turning around Roy's. He was a founder of Fleming's. and he was one of the key creators in Paul Lee's along with his partner, (Arizona restaurateur) Paul Fleming. I think he's very articulate, and he's also blessed to have a very talented operating team behind him."
Avery will be a key team member. Long praised as the executive who made Outback's labor-intensive engine run smoothly, for several years Avery earned large performance bonuses when Sullivan, Basham and other senior executives earned none.
At the Raymond James investor conference in Orlando, Merritt made it clear that Outback is prepared for the future, regardless of who sits at its helm.
It has added padding on bar stools to accommodate the extra padding of its baby-boomer customers. Boomers are also chewing up its smaller steaks, which Outback recently added to its menu for the calorie-conscious.
The company also plans to build well over 100 restaurants in the United States this year, a solid majority of them brands other than its original steakhouse, including 20 to 25 Cheeseburger in Paradises, its second-newest concept. Its overseas growth plans are proceeding as well.
"There's nothing in casual dining that can't be copied by somebody else," Merritt told investors Tuesday. "What they can't copy is your execution. It is the only way to protect against competition."
Times staff researcher Kitty Bennett and staff writers Bob Harig, Amy Scherzer and Jeff Testerman contributed to this report. Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.
[Last modified March 9, 2005, 05:16:35]
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