Outback Steakhouse Franchisee Files for Bankruptcy Amid Rising Costs

Cerca Trova Restaurant Group Holdings, one of the largest Outback Steakhouse franchisees, has filed for Chapter 11 bankruptcy protection. The company, which owns 61 restaurants across the West Coast, cited a confluence of factors including rising food costs, labor expenses, and decreased customer traffic.

In a court filing, Chief Executive Officer David Goronkin stated that by 2026, "pressures on the business had converged," leading to declining guest traffic and earnings while costs for food, labor, and other operational necessities continued to escalate. The franchisee is proposing to sell its assets to Outback's parent company, Bloomin’ Brands, for $26.3 million.

Cerca Trova has also faced significant legal challenges, including a $1.6 million wage-and-hour class action settlement approved by a California court in the summer. The company, which employs nearly 3,670 people, is also defending against two new class action lawsuits in California alleging failure to pay overtime and minimum wages, and the denial of meal or rest breaks. The franchisee indicated that making the settlement payments would significantly impact its liquidity.

The company's financial difficulties are compounded by rising minimum wages in California and increased food prices. Beef, a key expense, saw a 15% to 20% increase in 2022, with additional increases of about 5% annually since then, according to court documents. Cerca Trova reported approximately $3.6 million in cash on hand at the time of its bankruptcy filing.

At its peak in 2018, Cerca Trova operated 99 Outback locations and generated approximately $340 million in annual sales, making it the largest Outback franchisee. The company also operates locations in Arizona, Colorado, Nevada, and New Mexico. It incurred debt during the pandemic, and despite sales recovery, struggled with accruing interest.

A spokesperson for Bloomin’ Brands emphasized that this bankruptcy is an "isolated situation involving the franchisee" and does not impact the corporate operations, financing, or liquidity of the parent company.