Outback Steakhouse: Throw Another, Um, Steak On The Barbie, Mate

Stuffed kangaroos and koalas hang from walls decorated with maps of the land down under. The menu features such items as kookaburra wings, bloomin' onions, and walkabout soup. But truth be told, mate, the Outback Steakhouse Inc. chain is about as Australian as an afternoon at Wrigley Field. There isn't even a single genuine Aussie recipe in the kitchen, concedes Chairman Chris Sullivan. "It's only Australian in the way we talk about it."

Not that anyone is complaining. Systemwide sales at Tampa-based Outback, including company-owned restaurants, joint ventures, and franchises, shot from $34 million in 1990 to $91 million in 1991. Despite some analysts' claims that its stock is overvalued, Outback continues to sizzle. First-quarter sales gained 158%, thanks in part to the opening of six new restaurants. Earnings for the quarter totaled $2.3 million, a 153% gain.

Sullivan and co-founder Robert Basham may not be Australian, but they do have lots of restaurant experience. Sullivan, 43, ran the Bennigan's chain before splitting off to develop a string of Chili's restaurants in Florida. Basham, 45, is also a veteran of Bennigan's. He last worked as regional operations director at Chili's. They formed Outback four years ago and now have 55 restaurants. Along with Operations Vice-President J. Timothy Gannon, they aim to open 25 to 30 new restaurants this year and next.

QUEUING UP. Outback's secret is big steaks at low prices, with an average bill of only $15 a person. The company saves money by converting inexpensive space in strip centers instead of building stand-alone stores like Bennigan's or Chili's. And the restaurants, which serve only dinner, are sparsely decorated. "Their 'box' is not a high investment, so they deliver a lot of value to the plate," observes Malcolm Knapp, a New York food-service consultant.

In many Outback markets, that value has customers waiting in line for up to 90 minutes to order beefy steaks--at a time when the nation is supposedly turning to healthier foods. Knapp figures it's a matter of indulging when eating out. "When they go out, they really want a good steak," he says. "This is a treat."

One of the innovations that may give Outback some longevity is its management system. Every Outback general manager must pay $25,000 for a 10% stake in the restaurant. General managers, whose names appear above the front door, must also sign five-year service contracts guaranteeing they'll stick around. "We wanted stability," explains Basham. "The GMs have a whole lot of interest in taking care of business."

Still, many wonder how long Outback can last. "There are big lines, and the food is only good, not great," says Tom Feltenstein, a West Palm Beach (Fla.) food-service consultant. "It doesn't have that 'come back' feeling." That hasn't seemed to worry investors. At 29, Outback's shares are trading at some 43 times earnings. "To buy at the current multiplier would be kind of silly," offers Knapp. Then again, so is naming a plate of chicken after the kookaburra--but it seems to be working.

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