tampabay.com

Outback veggie steaks? Unlikely

But the sale of OSI could bring some big changes for the chain.

By Scott Barancik
Published May 8, 2007


Investors will vote today on the proposed sale of Tampa's OSI Restaurant Partners to a private group after 16 years as a publicly traded corporation.

Forget the impact on Joe Stakeholder, who will walk away happy if the $40-per-share bid is approved, as expected.

What's the likely impact on Joe Steakholder - the loyal customer of Outback Steakhouse, Carrabba's Italian Grill and other esteemed OSI chains?

Plenty, restaurant-industry observers said in recent and, in some cases, speculative interviews.

Outback Steakhouse: Outback still brings in more profits than OSI's seven other chains combined. But it is steadily losing business to newer competitors with a better handle on what today's consumer wants. In sum: Outback is too big to fail but needs lots of fixing.

- Some of the changes may be harsh. Raymond James Financial restaurant analyst Bryan Elliott predicted that as many as 100 Outbacks in the United States will be closed under OSI's new owners, or about one in every seven. Evidence that it has been overexpanded? Sales at newly opened units have been well below those of established peers in recent years, despite the fact that new units usually sell better initially.

- More menu changes are coming. "I don't think you're going to go in there and find that it's a vegetarian restaurant, " Restaurants & Institutions editor Patricia Dailey joked. But she said Outback's menu must be updated. Among the changes Outback has been testing are healthier entrees, smaller portions and lower prices on certain dishes.

- A facelift looks likely. Not just new carpet and upgraded bathrooms. New colors inside and out, new layout, even an updated logo. Like the menu, much of the upgrading is aimed at being more pleasing to the female customers who have said they are turned off.

Secondary chains: Bonefish Grill, Fleming's Prime Steakhouse and Roy's. These newer restaurant concepts are considered growth engines that will contribute an increasing share of OSI's profits. They will change little and continue to expand.

- Next to Outback's domestic and international divisions, Carrabba's Italian Grill is OSI's biggest profit center. But like Outback, it is leaking sales at the store level, if not quite as much. It will grow, but the new owners will need to intervene before it starts fading like Outback.

Fledgling concepts: It seemed like a great idea: Marry the don't-worry-be-happy ethos of Outback with the drink-heavily-be-woozy style of singer Jimmy Buffett. In just a few years, the Cheeseburger in Paradise chain has swelled to 42 locations. Unfortunately, it remains a money-loser.

The likely outcome? Some say Cheeseburger will be shut down. Why? OSI's new owners will be looking to fund proven restaurant concepts, fix the ailing Outback and pay off their crushing new debts.

- The Lee Roy Selmon's chain may not meet precisely the same fate as Cheeseburger. It has only seven locations, is a sentimental favorite - its namesake is both an OSI director and former Tampa Bay Buccaneer - and customers say its ribs are to die for. But it probably won't grow much bigger.

- New concepts? Forget about it. The money isn't there.

Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.