Out West Restaurant Group, one of the largest Outback Steakhouse franchisees operating 61 locations across California, Arizona, Colorado, Nevada, and New Mexico, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware, citing a massive $449 million debt load alongside mounting labor and supply chain pressures.
Parent Company Bids for Remaining Restaurant Assets
Restructuring Through Sale: Out West filed to sell its remaining 61 restaurant assets, with parent company Bloomin’ Brands (NASDAQ: BLMN) stepping in as the stalking-horse bidder.
Sudden Closures: Ahead of the bankruptcy petition, the franchisee shuttered 10 underperforming locations between October 11 and October 25 to cut occupancy costs.
Operational Headwinds: Leadership pointed to soaring beef prices, declining customer traffic, and escalating labor expenses—including California’s minimum wage reaching $19.60 per hour in January—as key drivers of the collapse.
Franchisee Accumulates Massive Debt Amid Declining Traffic
Known commercially as Out West Restaurant Group or Cerca Trova Restaurant Group, the San Diego-based franchisee manages a footprint that has shrunk significantly from its 2018 peak of 99 restaurants. According to court documents cited by Fox Business, CEO David Goronkin highlighted that guest traffic and earnings steadily deteriorated while production costs continued to climb. By the time the petition was filed, the company was carrying $449 million in debt.
The franchisee employed roughly 3,669 workers across its five-state operating region. To stanch financial bleeding ahead of the court filing, Cerca Trova filed a motion to reject the leases on 10 specific restaurant locations that were operating at a loss or at margins insufficient to cover occupancy expenses. Those closed units are excluded from the proposed asset sale.
Bloomin’ Brands Steps in as Stalking-Horse Bidder
Parent company Bloomin’ Brands (NASDAQ: BLMN) moved quickly to stabilize operations by entering into a $26.3 million stalking-horse agreement to acquire the remaining 61 operating units and substantially all other assets, according to an SEC filing. To support the restructuring, Bloomin’ also agreed to provide up to $5.5 million in debtor-in-possession financing.
Bloomin’ Brands operates roughly 544 company-owned Outback units alongside approximately 115 franchised restaurants in the U.S. Absorbing Out West’s remaining portfolio gives the parent company direct operational insight and protects the brand from further disruption in the Southwest. Meanwhile, shares of Bloomin’ Brands (NASDAQ: BLMN) traded down 6.88% at $9.75 following market disclosures regarding the restructuring.
Franchisee Distress Sparks Industry Debate Over Economic Pressures
Even though California exempted sit-down dining chains from the 2024 legislation establishing a $20-per-hour fast-food wage floor, full-service brands throughout the state still deal with high foundational labor expenses. Court filings noted that beef prices have increased by up to 5% annually since 2022.
Commenting on the broader macroeconomic climate during an appearance on Fox & Friends, entrepreneur Marcus Lemonis stated, There’s a cause and effect for everything. Either I’m going to raise the prices, I’m going to cut my staff (or) I’m gonna have to close.
Businesses nationwide, and specifically in California, face mounting demands to adjust to steep overhead expenses, while analysts note that many attribute financial distress to local economic conditions.
| Metric / Detail | Out West Restaurant Group (Cerca Trova) | Bloomin’ Brands (NASDAQ: BLMN) |
|---|---|---|
| Role in Filing | Debtor (Chapter 11 Bankruptcy) | Stalking-Horse Bidder / Parent Company |
| Active Restaurants | 61 locations (post-closures) | ~544 company-owned / ~115 franchised U.S. units |
| Total Debt / Bid Value | $449 million debt load | $26.3 million acquisition offer / $5.5M DIP financing |
| Operating Footprint | California, Arizona, Colorado, Nevada, New Mexico | National |
The restructuring process moves forward in the United States Bankruptcy Court for the District of Delaware, where stakeholders will evaluate the proposed asset sale under court supervision.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
Cerca Trova Restaurant Group Holdings, Inc. (dba Out West Restaurant Group), a San Diego, CA-based franchisee and operator of Outback Steakhouse restaurants, filed for Chapter 11 protection on Nov. 2 in the U. S. Bankruptcy Court for the District of Delaware. The company…
