Bloomin' Brands Agrees to Buy Bankrupt Outback Franchisee for $26.3M

Out West Restaurant Group, a major franchisee operating 61 Outback Steakhouse locations across several western states, has filed for Chapter 11 bankruptcy protection in Delaware. Tampa-based Bloomin’ Brands, the parent company of the Outback chain, has swiftly stepped in, agreeing to acquire the assets for $26.3 million through a stalking horse purchase agreement submitted to the Securities and Exchange Commission.

The bankruptcy filing affects Outback Steakhouse restaurants located in California, Arizona, Nevada, New Mexico, and Colorado, employing approximately 3,669 workers. According to court filings, Out West pointed to macroeconomic pressures, rising labor costs in California, declining guest traffic, and the lingering aftereffects of the COVID-19 pandemic as the primary drivers of its financial distress.

Out West traces its history back to 1994, originally operating as T-Bird Restaurant Group before becoming Bloomin’s first franchisee and expanding the brand to the West Coast. At its peak in 2018, the company ran 99 restaurants with annual sales exceeding $340 million, establishing itself as the largest franchisee in the Outback system. However, heavy debt financing taken on to fuel growth left the business vulnerable when sector-wide headwinds and successive wage increases in California began to squeeze earnings.

The COVID-19 pandemic further exacerbated the company's struggles, causing revenue to plummet by roughly 35% in 2020. Although sales partially rebounded in subsequent years, Out West operated under a series of forbearance agreements since 2022, causing interest to accumulate at default rates. By 2026, the company's senior secured obligations had ballooned to approximately $319.9 million, while its interest expenses heavily outpaced its earnings.

In response to the mounting financial pressure, Out West closed several underperforming locations prior to filing for bankruptcy. Despite the legal proceedings, the company's remaining restaurants will stay open for business to maintain continuity for customers and employees.

As part of the proposed transaction, Bloomin’ Brands has agreed to provide up to $5.5 million in debtor-in-possession financing to support ongoing operations during the court-supervised asset sale. Bloomin' stated that it pursued the purchase to gain direct operational insight, invest in the units through its development initiatives, and minimize disruptions for guests and staff.

A bankruptcy judge must officially approve Bloomin’ as the stalking horse bidder before the court-supervised auction process can proceed. Bloomin’ Brands characterized the franchisee's bankruptcy as an isolated incident that will not impact broader corporate operations or its overarching financial standing.