Outback's Biggest Franchisee Goes Bankrupt, and Outback Bids First

The loan principal barely moved. It has sat at about $129 million for years while interest piled on top of it, and the senior secured debt owed by Outback Steakhouse's largest U.S. franchisee grew from about $140 million in November 2020 to roughly $319.9 million. On Nov. 2, the company stopped waiting for a buyer to rescue it.

Cerca Trova Restaurant Group Holdings, which does business as Out West Restaurant Group, filed for Chapter 11 in Delaware with 61 Outback restaurants and about 3,669 employees, according to a first-day declaration from CEO David Goronkin. The buyer already lined up is the franchisor. Bloomin' Brands said in a filing with the SEC that it signed a stalking horse agreement on Nov. 1 to buy substantially all of Out West's assets for $26.3 million, plus liabilities that include future lease obligations and unredeemed gift cards.

The size of that number tells you what is being sold. The restaurants serve about 7.9 million guests a year at an average ticket near $37, the declaration says. In fiscal 2025, interest expense ran about $45.9 million, more than five times the company's covenant EBITDA (the earnings measure its lenders use to test the loan). A business paying five dollars of interest for every dollar of that earnings figure is not being priced on profit. It is being priced on continuity.

The company began as T-Bird Restaurant Group, incorporated in 1994 to develop Outback in California. For 20 years it grew one restaurant at a time, each owned through its own limited partnership with local investors and a managing partner who ran the store. By 2014 it had about 56 California locations. An affiliate of private equity firm H.I.G. Capital bought it in January 2015, and in April 2017 it bought 45 company-run Outbacks in Arizona, Colorado, Nevada and New Mexico from Bloomin', becoming the exclusive developer in all five states. By 2018 it operated 99 restaurants with more than $340 million in annual sales.

That expansion was financed with debt, and the earnings it assumed never showed up. Casual dining traffic fell, and successive California minimum wage increases pushed labor costs up in the state where most of its workers are. By the end of 2018, the company could no longer meet the covenants on its senior credit facility. The pandemic then cut revenue by about 35%. In December 2020, lenders agreed to hold off on remedies, and Bloomin' waived about $5.7 million in royalty and marketing fees and deferred about $18.1 million more.

Sales recovered in 2021 and 2022. The capital structure did not. The senior loans matured on April 25, 2022, and could not be repaid or refinanced, so the company has lived on forbearance agreements ever since, with default interest added to the balance each period.

"By 2026, the pressures on the business had converged," Goronkin wrote. "Guest traffic and earnings continued to decline, while food, labor, and other production costs continued to rise." The Los Angeles Times focused on the California labor piece of that story; about 54% of the company's employees work in the state, according to the filing.

The search for an exit has been long. Out West tried to sell itself in 2018 with North Point Advisors, in 2022 with Piper Sandler, in 2025 through extended talks with one prospective buyer, and since June 2026 through Brookwood Associates. It closed three restaurants in the first half of this year and 10 more just before filing, none of which are part of the sale. Cash fell from about $9.7 million at the end of fiscal 2023 to about $5.7 million on Oct. 25. In August, a California court approved a $1.6 million wage-and-hour settlement the company says it cannot pay without draining its liquidity, and two new class actions arrived over the summer. Its largest unsecured creditors are Performance Food Group, owed more than $4 million, and Matern Law Group, owed more than $1.6 million, Nation's Restaurant News reported.

For Outback, this is less a franchisee failure than a structural decision. As of June 28, the chain had 659 U.S. restaurants: 544 run by Bloomin' and 115 by franchisees. Out West operated 71 of those franchised units, more than 60%, before its pre-filing closures. If the sale closes, Restaurant Dive noted, Bloomin' would take direct control of an outright majority of its U.S. franchised locations.

Bloomin' framed the purchase as a way in, not a rescue. Owning the restaurants, it said in the filing, "gives it direct operational insight" and lets it invest in the units through its development initiatives. It is also lending up to $5.5 million in interest-free debtor-in-possession financing, which will be credited against the purchase price, while Out West keeps paying post-petition royalties and rent on leases Bloomin' guaranteed.

The move fits a pattern we have tracked this fall, as franchisors buy back the middle of their systems when big operators falter. It also stands in contrast to Wendy's, which ended up fighting its bankrupt operator Meritage over which stores close instead of bidding for the units.

The bidding procedures set a Dec. 8 deadline, an auction on Dec. 11 if anyone else shows up, and a sale hearing on Dec. 15. The auction will answer one narrow question: whether anyone values 61 Outbacks more than the company that owns the brand. Four failed sale processes suggest the answer, and that the operator that carried Outback to the West Coast will hand it back.