OUTBACK STEAKHOUSE: GOING INTERNATIONAL

1. BACKGROUND:

_ Outback Steakhouse is an American casual dining restaurant chain based

in Tampa, Florida with over 1200 locations in 22 countries throughout

North and South America, Europe, Asia, and Australia. It was founded in

February 1988 in Tampa by Bob Basham, Chris T. Sullivan, Trudy Cooper

and Tim Gannon, and is now owned and operated in the United States

by OSI Restaurant Partners, and by other franchise and venture

agreements internationally.

_Canadian Outback restaurants began in 1996. In March 2009, Outback

Steakhouse Canada abruptly closed all nine locations in the province of

Ontario, citing poor economic conditions. In June 2009, an Outback

restaurant reopened in Niagara Falls, but has since closed. After closing

one location in 2012 and a second in 2013, only one Outback location in

Canada continues to operate in Edmonton, Alberta.

_ In 1997, Outback entered the South Korean market through the franchise

agreement with Aussie Chung Inc. Currently, there are 101 Outback

Steakhouse locations throughout South Korea. On June 14, 2007, OSI

Restaurant Partners completed a stock repurchase plan, and the company

is now privately held.

_ In April 2012, Bloomin' Brands, the current owner of Outback

Steakhouse, filed with the SEC to raise up to $300 million in an initial public

offering.
2. OUTBACK’S START-UP STRATEGY

_ The Company's strategy is to differentiate its restaurants by emphasizing

consistently high-quality food and service, generous portions at moderate

prices and a casual atmosphere suggestive of the Australian Outback.

3. DIFFERENTIATION STRATEGY – ANALYSE WITH 4

PERSPECTIVE OF BALANCE SCORECARD

i. Outback differentiate itself by the excellence of its food

and by offering a dining experience that would be

cheerful, fun, and comfortable

 Quality performance:

 Because of the food of Outback steakhouse chain story

are made from raw meterials, so quality of food is

paramount. The costs for raw meterials of Outback

were among the highest in the industry.

 Besides that their emphasis on quality extended to

service, their “Principles and beliefs” was “No rules,

just right”, it means employees would do whatever

was needed to meet the needs and preferences of

customers.

 Quality and service were achieved through a

management model which contrasted sharply with that

of most other restaurant chains.

 Staff training:
  Because they belive that customer, employee and table

are integrally related.

 Sepecifically, outback’s management model and

approach reflect the importance they place on fighting

employee turnover. One of their catchphrases is “fully

staffed, fully trained”. Because they belive that

customer, employee and table are integrally related.

 The employee who stay for a long time in their jobs,

they have time to master their jobs, become familiar

with their regular customer’s preferences and learn to

operate as teams; that the combination of mastery,

memory, and calm is more likely to afford customers

themselves a relaxing, enjoyable experience; and that

diners who are not hustled thrugh their meals are

more likely to come back.

 In short, low employee turnover leads to well-paced

table turnover, which ultimately leads to low customer

turnover.

 Speed:

 Outback never assign their servers to cover more than

three tables; the industry standard is five or six… a

wide range of customer choose to dine with outback

on a variety of occasions…it has to be the customer

 who sets the pace for the meal, not the server of the

kitchen staff. But for that to happen their servers need

time to firgure out the mood and expectations of a

given table on a given evening, and the kitchen has to

be well enough staffed and equipped to turn around

orders without delay.

 Range of product:

 All of Outback’s kitchens are at least 2500 square feet

and keeping lots of cool air flowing through them. The

kitchen occupy half of the typical casual restaurant,

because of they want to offer a bigger menu than the

typical casual restaurant, so they give the cooks and

prep people the space to pull it off.

 Cost reduction:

 First, to reduce the hidden costs of longer hours of

opening: the cost of extra staff and employee

turnover, Outback decide to serve only diner.

Futhermore, the disruptive effects of shift changes,

and the fact that employees who worked lunchtime

would be tired in the evening, the time when they

needed to be at their freshest. Similarly for the food:

food prepared in the morning would lose its freshness

by evening
  Second, “The suburbs are our outback”, Outback

located in residential areas rather than downtown. This

reinforced the merits of evening-only opening, kept

rents low, and encouraged cutomer and employee,

loyalty.

 Supplier relation:

 Because of the quality of raw materials, Outback

viewed suppliers as partners and was committed to

work with them to ensure quality and to develop long-

term relationships.

 HR development:

 Outback’s management and ownership structure was

unusual. Each of Outback’s directly owned restaurants

was a separate partnership where Outback Steak

house, Inc. was the gneral partner owning between

71% to 90%. Each restaurants was headed by a

“managing partner”, while between 10 and 20

restaurant within an area were overseen by a regional

manager, who has call a “joint venture partner” or

“JVP”.

 All managing partners, most of whom start as hourly

employees, must invest $25000 of their own money,

not because Outback needs the capital, but because

 their financial contributions mcke them committed

investors in the bussiness they will be runing.

 Outback’s JVPs, who number around 60, must invest

$50000. whereas the managing partners focus on

operations and community relations the Japes focus on

monitoring performance, finding and developing the

new locations, and identifying and developing new

manager managing partnersm and Japes like

themselves. The Japes are the only management layer

between the six operations executives at headquarters

and the managing partners at the individual

restaurants.

 HR management was also distinctly different from

most restaurant chains’. Outback’s approach is “tough

on results, but kind with people”. Employee selection

was rigorous and included aptitude tests, psychological

profiles, and interviews with at least two managers.The

goal was to create an entrepreunerial climate that

emphasize learning and personal growth. All

employees were eligible for health insurance and the

company’s stock ownership plan. All employees were

expected to contribute to continuos innovation and

improvement.
4. WHY GO INTERNATIONAL?

_ Since the creation in 1988, Outback Steakhouse Inc had been very

successful. But, “Us market could accommodate at least 550-600 Outback

Steakhouse restaurants”. The company is use to open 70 new stores

annually. In 4 to 5 years, the US market would be saturated. As a

consequence, the growth is not sustainable in the US market. When

Outback go international, they can increase global market share

i. Use basic financial perspective (Net income):

 Financial health was in good condition for bussiness

development. From 1990 to 1994, the average yearly

increase in Net income was 202%, but in 1995 was 141%

due to saturation.

 The international market offers the unlimited growth

opportunities for the development of Outback. The US

market is too small for the sucessful dinning concept of the

company. Besides that, some casual restaurants chains

already located outside US usually get more profit than

what they were getting from US market.

5. HOW OUTBACK WILL OVERCOME AND/OR RESOLVE THE

HIGHLIGHTED OVERSEAS EXPANSION PROBLEMS/ISSUES

ENCOUNTERED BY US RESTAURANT CHAINS, TO ENSURE

SUCESSFUL STRATEGY IMPLEMENTATION

i. Encountered Problems Overseas of other restaurant chains:

 Market demand:

 Disposable income of customers

 Urbanization

 Demographics

 Host social, economic and lifestyle factors

 National preferences – Adaptation to local differences

necessary

 Cultural and social factors

 Critical influences on customer preferences with regard to

menus, restaurant facilities and overall ambience

 Different employee management practices

 Different entrepreneurial potential

 Infrastructure

 Transportation

 Communication

 Basic utilities such as power and water

 Locally available supplies were important elements in the

decision to introduce a particular restaurant concept

 Ability to get resources to its location

o Raw materials for food preparation

o Equipment for manufacture of food served

o Mobility for employees and customers essential

 Raw material supplies

 _ Need of local supplies of food and drink

_ Problems finding supplies in:

* Sufficient quantity

* Of consistent quality

* At stable prices

_ Physical distance can adversely affect a franchise concept and

arrangement

_ Long distances create communication and transportation

problems

* Complex process of sourcing supplies

* Overseeing operations

* Providing quality management services to franchisees

_ Build up own Supply Chain costs:

* Management Time

* Money and could be substantial

 Regulations and trade restrictions

 Import restrictions are relatively unimportant, when food is

locally sourced

 Import of Restaurant equipment sometimes difficult and

expensive

 Restrictions on foreign direct investments only in

developing countries

 National regulations relating to food standards, business

licensing and business contracts (far more challenging)

  Establishing new business in other countries then US is

more difficult acc. to regulations

 Franchise Agreements = difficult area

o Complex contractual agreements between

franchisor and franchisee

o Regarding trademark licensing, royalty payments,

requirements for Quality Control and Quality

Monitoring

o Mostly no restrictions on franchising of foreign

countries published and usual franchise terms are

viewed as restraints on commerce

 Employment laws, restrictions and system

o Dismiss or lay off employees

o Requirements for union recognition and national

bargaining arrangements over wages and work

conditions

ii. Outback’s SWOT analysis

 Strength

 Excellent in Human Resource

 Differentation strategy

 Weaknesss

 Narrow product line – restricting main product to

beef
  Lack of innovation

 Hours of operation

 Serving only dinners

 Opportunity

 Diversify menu offering

 Vertically integrated backwards

 Expand bussiness internationally

 Threat

 Economic downturn

 New entrance will be coming up with new innovations

 Relaxed structure may not work well in nation that

respect hierarchy

 Health cocerns over red meat lumption

iii. Porter’s five forces analysis

 Threat of new entrances: High

 The risk is very high in the restaurant industry

 Low capital investments required to enter

 Competes with the casual diners , fast food chains

and super markets

 High-end grocery stores offer variety of complete

meals
  Costs customer absolutely nothing to switch to a

different restaurant

 Intra-industry competition: High

 Restaurant industry is fragmented

 Many global and local chains operating in industry

 Buyer bargaining power: High

 Customers have a lot of options to choose from

 The buyers do not depend on the supplier

 They can purchase from anyone

 Unless if they have an alliance with supplier as

in the case of Outback Steakhouse

 Supplier bargaining power: Medium

 The suppliers are many

 Products they supply can be supplied by

many others

 Threat of substitutes: High

 Any restaurant can satisfy the customers' need (the

need to satisfy hunger)

 Diner segment, fast food chains and grocers, who

have comparably, lower prices

 Outback Steakhouse decreases this threat by adding

distinctive competencies:
  Cheerful Environment

 Delicious Food

 Affordable Prices

iv. The international expansion strategy

 Find the right franchisee partners

 Franchise the international operation with domestic

company owned stores HERE and franchisees THERE

(abroad)

 Biggest decision is how to pick the franachise partner. "We

are going to select a person who has synergy with us, who

thinks like us, who believes in the principles and beliefs." I

have learned that people (in other countries) think very

different than Americans.

 Finding the right franchisee is difficult, because Outback

Steakhouse is not present in countries abroad

o Intensive control of standards necessary

o Regulations and trade restrictions in foreign

countries

 Nevertheless interviews of applicants possible in the US

for abroad or in the Internatinally.

 Focus on the strength

 Suppliers have to check to build up plants abroad

 o Outback wants to be a opportunity for their

suppliers internationally

o Outback has a high loyality to their suppliers (never

changed suppliers) and expecting the same of them

 Forcing suppliers to build up plants abroad could exceed

their abilities

o Bankruptcy of suppliers could lead to shortage of

supply abroad and in the US

 Large distance abroad, instead of nearer location to

USA leads to higher cost and being present at the

location abroad

 Easier handling and control of suppliers closer to home

country (e.g. Canada, Mexico or Latin America)

 Searching of new supplier abroad would increase costs due

to controlling, bulding-up same understanding of business

and quality, to get same standardand "to get together".

 Only to support operation instead of active handling and

providing solutions for franchisees the "going

international" project will not succeed

 Geographical expension

 First close to home, then tackle latin america and the

FarEas

 Going International as very long-term project:

 o "The first year will be Canada. Then we'll go to

Hawaii. Then we'll go to South America and then

develop our relationships in the Far East, Korea,

Japan ... the Orient."

o "The secound year we'' begin a relationship in Great

Britain and from there a natural progression

throughout Europe

o Connerty believed that his experience in developing

outback Franchisees in the US uexpension

6. CONCLUSION:

_ The strategies to build long-term relationships with suppliers and the

treatment of employees will be transferable because host countries

want the companies to spend money when they expand abroad.

_ To maintain the image, as a semi-upscale diner the company cannot

overcrowd areas with many restaurants, this will take away from the

image. This is a good strategy to keep when expanding internationally,

because it will still be focusing on the middle to upper class crowds at

dinnertime.

_ Since Outback has already developed and sustained relationships with

suppliers in the U.S., they could opt to keep these suppliers as long as

they are willing to move internationally with Outback. However, Outback

must remember that if these suppliers move internationally, they will

need to deal with many issues as well that may limit their areas of

expansion.