Bloomin’ Brands Inc., parent to the Outback Steakhouse chain, began its first day of trading on what company officials have dubbed “Bloomin’ Wednesday.”
Late Tuesday, on the eve of the Nasdaq debut, the company slashed the price of the stock to $11 per share, lower than the previous target of $13 to $15 per share, and the size of the offering was reduced to 16 million from the 21 million stated earlier.
The company’s stock opened at $11.60 and by midday had climbed roughly 12 percent.
The day marks a return to the public market for Tampa-based Bloomin’ Brands, previously known as OSI Restaurant Partners Inc., which was a public company before being taken private in mid-2007 by a group including private-equity firms Bain Capital and Catterton Partners. Bain will continue to hold a majority stake in the company following the IPO, and Catterton will hold a minority position.
Liz Smith, Bloomin’ Brands chair and chief executive, and David Deno, the company’s chief financial officer and executive vice president, spoke with Nation’s Restaurant News early Wednesday to talk about the future of Outback, along with sister brands Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, and Roy’s.
The company's stock price was lowered late Tuesday to $11 and it opened at $11.60. Can you speak about that?
Smith: We are really excited about Bloomin’ Wednesday and having completed this IPO process. For us, it’s a real day of celebration. We have assembled a group of dream team investors and I couldn’t be happier about the quality of it. This is day one of our journey and we’re going to continue to execute our strategy and build on that nine to 10 quarters of above-market [same-store sales] growth, and frankly, the stock price will take care of itself.
What will a return to the public markets mean for the core brands going forward?
Smith: It was the right time for us. We had an incredible three years of brand rejuvenation and renovation. We’ve really enhanced our management team and structure. We’ve always had the best operators in the business, but now we have some incredible talent that we’ve also brought in to balance that. So the timing was right to step back in the public spotlight. What it means for us is always continuing to deliver a superior experience across all five brands. Our mission is nurturing these founder-inspired brands and delivering the best experience. That doesn’t change.
When you joined the company in late 2009, the recession had taken a toll; same-store sales were in negative double digits at that point. What really turned things around for Outback?
Smith: We always had this portfolio of founder-inspired brands that were the highest quality out there. When you walk into our restaurants, they do not feel like they were conceived around a conference room table. So we had that positive DNA, and customers always remarked, even in toughest of times, that the quality you get for the price was unmatched. But, honestly, we had a lot of work to do. We had not changed much in 20 years. We hadn’t really changed our menu or updated our ambiance.
We needed to keep what was special about the brand, and to contemporize all around the customer’s 360-degree experience. So what you’ve seen is tremendous innovation on the menu over the last couple of years. We’re still the best of steak, but we’ve added lighter, more female-friendly entrees. We added price points all along the pricing spectrum that significantly drove up our value scores for both Outback and Carrabba’s. You can still get your Bloomin’ Onion, but you can get incredible non-fried appetizers. We’re really proud of the fact that 40 percent of our entrees are under 600 calories. So we kept what was amazing about the brand, and innovated and contemporized the menu.
We took the same approach with the ambiance. Our box was dated, frankly. We hadn’t done the necessary upgrades. Our Australia was a little bit circa Crocodile Dundee, and we really updated the ambiance to be more Hugh Jackman. We’re still Aussie, and we’re still fresh, and we’re still unpredictable and we still delight. We’re Australia 2012.
How can Outback stay relevant as new, more contemporary casual-dining chains steal market share?
Smith: Outback has never been more relevant or vital. All the changes we’ve made have made the brand feel new again. We have that vitality. You look at the nine quarters of strong comp store sales growth — significantly above the industry — you see a brand that is 24 years young.
We are rocking at Outback right now. A great measure of that is Outback has buzz value. We’re showing up on the ESPYs, we’re showing up on “30 Rock.” It’s a great time to be an Outbacker.
Are some investors concerned about commodity costs, given that Outback is so beef-centric?
Deno: Beef is 30 percent of the purchasing basket ... From our concepts, we also have a very large purchase of seafood, produce and dairy. Also, we’re a buyer of— but not chicken wings, which have been under pressure recently — but our chicken breast prices are quite benign. So we think we’re in really good shape from a food price management perspective.
Where are you on remodels for Outback?
Smith: We will finish this year with 300, and we’ll do another 150 next year. And then the fleet will be caught up and we’ll being doing 10 percent per year to never get behind again and to always keep it fresh. So we’re halfway through the addressable fleet right now.
What sort of lift have you seen from the remodels?
Smith: We’ve seen a 3-percent traffic lift and have 18 months of this under our belt. It’s sticking in the base and we’re really pleased with it.
Carrabba’s is up next for remodels. Is there a new design under development now?
Smith: We’re taking the exact same successful playbook from Outback and we’re updating Carrabba’s, which needs it. We just finished our prototype in seven remodeled [units]. They’re in test now. All indications are that they are achieving exactly what we’d hoped.
What sort of design changes are you looking at?
Smith: Carrabba’s has always had an amazing quality; when you walk in the door you feel like you’re getting a warm hug. It is an authentic Italian restaurant. But, very similar to Outback, we need to contemporize it.
We need to continue to showcase our exhibition cooking. At Carrabba’s we use scratch recipes, fresh ingredients and no microwaves, so the centerpiece will always be that wonderful exhibition kitchen. But we also need to showcase our fresh ingredients and contemporize our seating. Think of the move as kind of going from old Italy to new, vibrant Italy. It’s a terrific redesign.
There are reports out today of a lawsuit filed by a founder of Bonefish Grill about the movement of top managers to other brands and violations of the original agreement. Can you comment?
Smith: We can’t really comment on pending litigation.
What is it about Bonefish Grill that makes it the growth vehicle for the company?
Smith: Everything about this brand is right on trend and relevant. We have built this unbelievable supply chain, where we have what I call our fish whisperers all over the world. When a fresh catch comes in we’re able to get it on boats or planes, and the food is unbelievable. We have fresh fish specials every six to eight weeks.
What I hear most often from people is that Bonefish is the ultimate unchain chain. There’s no way it feels like a chain restaurant — the food quality, the specials, the rotations. You walk in and you get that big city bar vibe and feel. We have handcrafted cocktails. It’s a complete contemporary experience, and you get all that for a $23.50 price point, and I think that really blows people away.
Does it have a higher percentage of bar sales compared with other brands in the company?
Smith: Yes. It’s mid 20s, and for casual dining, that’s quite high. Outback is around 12 percent.
Is the company planning on opening about 30 Bonefish Grills next year?
Smith: Yes, approximately, and those will all be company owned.
And you’re opening 15 to 17 Carrabba’s?
Roy’s was a brand that was on the market for a while, and the company was looking to spin it off. What is the thinking now?
Smith: Roy’s had been on market for a while. But it had record sales and profit last year. It’s doing terrifically well. It, too, has had nine consecutive quarters [of positive same-store sales growth], and we’re continuing to innovate on the menu to drive traffic. So it is not on the market now. It has been a really standout performer for us.
Clarification: An earlier version of this story was altered to reflect clarifications made by Bloomin' Brands after publication.