The Organization of Outback Steakhouse
Chris T. Sullivan, Bob Basham, Trudy Cooper, and Tim Gannon—co-founders of the Outback Steakhouse concept—began their restaurant careers as a busser, dishwasher, server, and chef’s assistant, respectively. So how did they manage to build one of the all-time most successful restaurant concepts? Their careers may have had humble beginnings, but they had the money to excel. Sullivan and Basham met at Bennigan’s. They honed their management skills under the mentorship of industry legend Norman Brinker, who later financed Sullivan and Basham’s franchised chain of Chili’s restaurants in Georgia and Florida. They later sold the Chili’s restaurants back to Brinker for $3 million. This seed money allowed them to develop a restaurant concept with which they had been toying.
The concept was for a casual-themed steakhouse. Because the partners did not want to do a Western theme (it had already been done by others) and because at the time there was a lot of interest in Australia, they opted for an Australian theme. Australia had just won the America’s Cup (a major yacht race held every four years) and the movie Crocodile Dundee was popular. As with all new restaurant concepts, they searched for a suitable name. Beth Basham came up with the idea of “Outback” for the name of the steakhouse—she wrote it on a mirror in lipstick. The Outback-themed concept was just what the partners wanted—a casual, fun, family atmosphere and the highest-quality food, which is reflected in Outback’s 40-percent food cost (the industry norm for steakhouses is about 36 percent). Sullivan and Basham asked Tim Gannon, who at the time hardly had enough money to buy the gas to drive to Tampa, to join them. Organizationally, each of the partners brought something to the table. Sullivan was the visionary, Basham the operations person, Gannon the chef, and Cooper the trainer. Later, they realized they needed a numbers guy, and in 1990, Bob Merritt became CFO.
Instead of fancy marketing research, the partners did lots of talking and observation of what people were eating—during the 1990s, much as today, eating red meat was frowned upon. The partners figured that people were not eating as much red meat at home, but when they dined out, they were ready for a good steak.
Initially, the partners thought of setting up one restaurant and then a few more, which would allow them to spend more time on the golf course and with their families. So the success of Outback surprised the partners as well Wall Street. The organization grew quickly, and by the mid-1990s, more than 200 stores were open; the partners also signed a joint venture partnership with Carrabba’s Italian Grill, giving them access to the high-end Italian restaurant segment.
Same-store sales increased year after year, and the partners looked forward to 500 or even 600 units. Financial analysts were amazed at the rise in Outback’s stock. So, to what can we attribute Outback’s success? It’s a well-defined and popular concept, it has a great organizational mantra of “No Rules—Just Right,” and it has the best-quality food and service in a casually themed Australian outback–decor restaurant. The typical Outback is a little more than 6,000 square feet, with about 35 tables seating about 160 guests and a bar area that has eight tables and 32 seats. In Outback’s organization, servers handle only three tables at a time; this increases their guest contact time and allows for more attention to be paid to each table. Outback also offers an Australian-themed menu with a higher flavor profile than comparable steakhouses. The design of the kitchen takes up about 45 percent of the restaurant’s floor space—12 percent more than other similar restaurants. This extra space represents a potential loss of revenue, but this is the way Outback wanted it done because they realized the kitchen does not run well when it’s being “slammed” on a Friday or Saturday night.
There is no organizational chart at Outback Steakhouse; everyone at the unpretentious corporate headquarters in Tampa is there to serve the restaurants. There is no corporate human resources department; applicants are interviewed by two managers and must pass a psychological profile test that gives an indication of the applicant’s personality. Outback provides ownership opportunities at three levels in the organization: individual restaurant level, multistore joint venture and franchises, and an employee stock ownership plan. Because there is no middle management, franchisees report directly to the president. Outback’s founders had fun setting up the concept and want everyone to have fun, too—they sometimes drop in on a store and ask employees if they are having fun. Not only are they doing that—they are laughing all the way to the bank!
Discussion Question
What kind of organizational structure would you suggest for Outback Steakhouse?
Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.
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