Bloomin' Brands Launches $26.3 Million Bid to Acquire Bankrupt Outback Steakhouse Franchisee

Bloomin’ Brands has launched a $26.3 million stalking-horse bid to acquire the assets of its largest domestic franchisee, Out West Restaurant Group, following the operator's Chapter 11 bankruptcy filing. The proposed transaction would transfer ownership of 61 Outback Steakhouse locations across five Western states directly to the corporate parent. The move aims to preserve nearly 3,700 jobs and maintain uninterrupted service for guests.[1][2]

San Diego-based Cerca Trova Restaurant Group Holdings, which does business as Out West, filed for bankruptcy protection in Delaware on November 2. The franchisee cited a convergence of macroeconomic pressures, including sustained food inflation and rising labor expenses. Out West’s total debt swelled from $269 million in late 2020 to approximately $449 million by the time of the filing.[3][5]

The acquisition agreement sets a floor price for a court-supervised auction, preventing other buyers from bidding below the $26.3 million threshold. Bloomin’ Brands is also providing up to $5.5 million in interest-free debtor-in-possession financing to fund the franchisee's operations through the bankruptcy process. This financial lifeline ensures that vendors and employees continue to receive payment without disruption.[1][4]

Out West currently operates Outback Steakhouse locations in California, Arizona, Nevada, Colorado, and New Mexico. The franchisee’s footprint has shrunk significantly from its peak in 2018, when it managed 99 restaurants and generated more than $340 million in annual sales. Corporate executives described the bankruptcy as an isolated incident that does not reflect the broader financial health of Bloomin’ Brands.[1][5]

Navigating cost pressures

The franchisee's financial deterioration highlights the severe margin pressures facing casual dining operators in high-cost markets. Out West executives pointed specifically to state and local minimum wage increases in California, where more than half of its workforce is based. These mandated pay hikes fundamentally altered the unit-level economics of operating full-service dining rooms in the state.[3][5]

Food inflation compounded the labor challenges, stripping away the franchisee's remaining profitability. According to court filings, the cost of beef jumped by 15 to 20 percent in 2022 alone. Those commodity prices have continued to climb by up to 5 percent annually in subsequent years, leaving operators unable to pass the full cost burden onto consumers.[3]

Shifting consumer habits further eroded the franchisee's revenue base during this inflationary period. "By 2026, the pressures on the business had converged," Out West Chief Executive Officer David Goronkin noted in a court declaration. "Guest traffic and earnings continued to decline, while food, labor, and other production costs continued to rise."[3]

The financial strain became acute by late 2023, prompting Out West to negotiate a forbearance agreement with Bloomin' Brands and its lenders. That December 2023 resolution temporarily delayed franchise fee payments and halted the enforcement of default penalties. However, the franchisee ultimately exhausted its liquidity, reporting just $3.4 million in projected cash on hand at the time of Monday's filing.[1][7]

Corporate intervention strategy

By stepping in as the stalking-horse bidder, Bloomin’ Brands is executing a defensive maneuver to protect its brand equity. The parent company stated that the acquisition "gives it direct operational insight, allows it to invest in the units through its development initiatives and to mitigate disruption to guests and employees." This intervention prevents a disorderly liquidation that could damage the Outback Steakhouse image.[1][6]

The $26.3 million base purchase price remains subject to adjustments based on the franchisee's outstanding liabilities at closing. If Out West's vendor liabilities fall below $6.1 million, the purchase price will increase dollar-for-dollar to cover the shortfall. Bloomin’ Brands will also assume specific operational liabilities, including existing lease obligations and unredeemed customer gift cards.[2]

While franchisors occasionally buy out struggling operators, a corporate parent bidding to reclaim a 61-unit portfolio out of bankruptcy is a substantial capital commitment. As of June, Outback Steakhouse operated 659 domestic restaurants, with Bloomin’ Brands directly managing 544 of those locations. This acquisition would push the corporate-owned share of the domestic system past 90 percent.[3][5]

The bankruptcy court must formally approve Bloomin’ Brands as the stalking-horse bidder before the asset sale can proceed. If approved, the court will establish a timeline for competing offers, though the initial bid heavily favors the corporate parent. The asset purchase agreement includes an outside closing date of January 31, 2027, assuming no superior bids emerge during the auction.[3][7]

Operational continuity

For the nearly 3,700 employees working across the affected locations, the Chapter 11 filing brings a measure of stability rather than immediate job losses. Out West has requested customary court relief to continue paying prepetition wages, salaries, and benefits in the ordinary course of business. The $5.5 million corporate financing package ensures the franchisee can meet these payroll obligations.[1][6]

Restaurant operations will continue uninterrupted, with all 61 locations maintaining their standard hours and menus. Out West will operate as a debtor in possession under the jurisdiction of the Delaware bankruptcy court. The franchisee also intends to pay all post-petition franchise fees, royalties, and rent obligations as they come due during the reorganization process.[6]

The franchisee did take steps to trim its portfolio immediately prior to seeking court protection. Out West permanently closed 10 underperforming restaurants shortly before Monday’s filing, removing them from the proposed asset sale. Those closures followed the shuttering of three other locations earlier in the year as management attempted to stem the cash burn.[1]

Bloomin’ Brands executives emphasized that the franchisee's restructuring will not impact the parent company's broader financial liquidity. The corporate entity recently initiated its own turnaround strategy, closing more than 40 underperforming corporate locations earlier in 2026. That broader corporate effort focuses on digitizing ordering systems and upgrading the in-restaurant customer experience to drive traffic.[2][5]

The casual dining landscape

The Out West bankruptcy underscores a growing divide in the restaurant industry between well-capitalized corporate operators and highly leveraged franchisees. While Out West struggled under $449 million in debt and $45.9 million in annual interest expenses, Bloomin' Brands possessed the balance sheet strength to absorb the distressed assets. The corporate parent's stock has climbed significantly since the start of the year.[1][5]

California's operating environment remains a central focus for restaurant analysts monitoring the fallout. The state's aggressive minimum wage policies have forced operators to rethink their pricing models and labor deployment strategies. Out West's inability to balance these mandated costs with consumer price sensitivity serves as a warning sign for other heavily concentrated regional franchisees.[3]

The court-supervised process will now determine the final ownership structure of the Western US locations. If Bloomin' Brands successfully closes the transaction, it will gain full control over the brand's presence in several major metropolitan markets. The company has expressed optimism about integrating the units and applying its corporate turnaround initiatives to the newly acquired restaurants.[1][5]

The Delaware bankruptcy court is expected to rule on the stalking-horse designation and the financing package in the coming weeks. If Bloomin' Brands closes the transaction by the January 2027 deadline, it will secure full control over the brand's Western US presence. The parent company must then demonstrate that its corporate management can overcome the labor and commodity pressures that forced its largest franchisee into insolvency.[2][7]