Outback's full plate
Profits dip a bit, but this year a Cheeseburger in Paradise debuts in Tampa and the Lee Roy Selmon chain ventures into Largo and St. Petersburg.
By SCOTT BARANCIK
Published April 28, 2005
TAMPA - Six-hundred miles is a long way to drive for a cheeseburger and a pina colada.
Though Outback Steakhouse Inc. is based in Tampa, its nearest Cheeseburger in Paradise restaurants is in Myrtle Beach, S.C.
But the Jimmy Buffett-themed Cheeseburger chain plans to debut a Tampa site this year, making it the last of Outback's eight brands to open locally. Meanwhile, Outback's two-store Lee Roy Selmon's chain plans to cross the bay into Pinellas County this year with locations in St. Petersburg and Largo.
Outback executives had plenty of good news to share Wednesday at the company's annual shareholder meeting. Most of its brands are running on all cylinders and primed for growth, even as three of the 1,206-store company's longtime kingpins - outgoing chief financial officer Bob Merritt and recently resigned CEO and chief operating officer Chris Sullivan and Bob Basham - leave its executive suite.
Still, 2004 was "not a great year by our standards," said Sullivan, who served as master of ceremonies and remains board chairman.
Earnings fell last year for the first time in company history, dropping 7 percent to $156-million. Merritt blamed events largely beyond Outback's control: the hurricanes that hit Florida and the worst commodity pricing in company history. Higher gas prices discouraged some customers from driving and raised the cost of getting food deliveries, he said. Natural-gas price increases raised cooking expenses, as did rising beef and dairy prices. Even so, the company remained profitable and its balance sheet healthy.
Several Outback chains need retooling. Among them is Paul Lee's Chinese Kitchen, which debuted in 2004 and has three locations, including Citrus Park. CEO Bill Allen, Sullivan's successor, said the chain's management has had a number of surprises, including lower-than-desired liquor consumption by customers, disappointing late-night traffic and more families than expected. He said a modified prototype will open this year in Las Vegas.
The Outback Steakhouse chain - the company's dominant brand with 888 locations, or 74 percent of the total - is proving troublesome in terms of return on investment, new chief operating officer Paul Avery said Wednesday. The company is considering introducing a smaller, less expensive format for future locations, a strategy being pursued by its 176-store Carrabba's Italian Grill chain.
Several smaller Outback chains are performing exceptionally well:
BONEFISH GRILL: The homegrown St. Petersburg concept Outback acquired in 2001 is being given more money to grow than any of the eight brands and has the potential of reaching $1-billion in annual revenues, Avery said. The 72-store chain opened 24 locations in 2004 and is expected to open nearly 40 this year. By comparison, the company expects to open about 25 domestic Outback Steakhouse locations in 2005.
CHEESEBURGER IN PARADISE: Avery said the 14-store chain has "unbelievable potential" and is Outback's best performer in terms of alcohol sales, typically the most profitable item on a menu. Liquor accounts for 33 percent of sales at the chain, which has pared its menu choices in order to reduce labor costs.
ROY'S: Outback's 19-store, high-end joint venture with chef Roy Yamaguchi saw higher sales in 2004 at all 17 stores that had been open for at least a year, and seven locations had sales in excess of $4-million apiece.
FLEMING'S PRIME STEAKHOUSE & WINE BAR: The high-end, 32-store chain saw its same-store sales rise an "unheard of" 15.4 percent in 2004, Avery said. Its Newport Beach, Calif., location had revenues of $9.4-million. Avery did not address the news that competitor Ruth's Chris Steak House of Metairie, La., is planning to go public in a bid for expansion-related cash.
LEE ROY SELMON'S: Avery's comments on the future of this brand may have been the morning's biggest surprise.
Founded in 2000, the chain has two locations, both in Hillsborough County, and Outback executives have long described it as having extremely limited and local growth potential. Selmon is best known as a former star defensive lineman for the Tampa Bay Buccaneers and the former athletic director at the University of South Florida.
CEO Allen seemed to seal the southern-cooking chain's fate last week when he told Wall Street analysts that "if it is not a big (chain) idea, it probably does not belong here."
But at Wednesday's meeting, held at Outback's A La Carte Event Pavilion, Avery said the company hopes to open as many as four Selmon's restaurants this year and four in 2006, possibly beyond the Tampa Bay area or even across state borders.
Selmon thinks Outback would do well to open just the two Pinellas locations this year. In an interview Wednesday, he said many Pinellas residents cross the bay to eat at the Boy Scout Boulevard restaurant in Tampa.
Shareholders also approved the selection of retired Army Gen. Tommy Franks to the Outback board of directors.