Outback Steakhouse has entered into a $26.3 million stalking horse agreement to buy 61 restaurants owned by franchisee Out West Restaurant Group/Cerca Trova Restaurant Group. The deal also includes “substantially all” of Out West’s other assets, according to a filing with the U.S. Securities and Exchange Commission.
The agreement coincided with Out West/Cerca Trova’s Chapter 11 bankruptcy filings on Monday.
Bloomin’ Brands agreed to provide up to $5.5 million in debtor-in-possession financing, with a concurrent decrease in the purchase price, per the SEC filing.
Bloomin’ said it was “working closely with Out West, its lenders, and other stakeholders throughout the Bankruptcy Court-supervised process as it focuses on maintaining stability in Out West’s restaurant operations, supporting Team Members and continuing to serve guests.”
The company said that buying Out West’s restaurants “gives [Bloomin’] direct operational insight, allows it to invest in the units through its development initiatives, and to mitigate disruption to guests and employees.”
According to Bloomin’s most recent 10-Q, Outback Steakhouse has about 115 franchised restaurants in the U.S. and roughly 544 company-owned units. Out West’s bankruptcy, therefore, could result in Bloomin’ taking control of an outright majority of its U.S. franchised locations.
Bloomin’ didn’t immediately respond to a request to comment on the filing or clarify if it impacted the company’s broader strategy for Outback’s franchising.
The franchisee’s operations are concentrated in the Southwest, with Cerca Trova’s Chapter 11 filing listing locations in Arizona, Nevada, New Mexico and Colorado. Out West’s filing lists significant creditors in California as well.
Outback Steakhouse closed a number of underperforming locations last year ahead of a multi-stage turnaround plan. Since those closures, the chain has invested significantly in steak quality, among other changes, which helped the brand end a streak of same-store sales declines.
Out West/Cerca Trova have not yet filed a first-day motion, which would grant greater insight into the operators’ difficulties.
