Outback franchise operator files for Chapter 11 bankruptcy

A California-based franchise operator of Outback Steakhouse has filed for Chapter 11 bankruptcy protection, seeking relief from a $449 million debt burden, according to the Los Angeles Times.

Cerca Trova Restaurant Group, also known as Out West Restaurant Group, operates 61 Outback Steakhouse locations in California, Arizona, Colorado, Nevada, and New Mexico, with the majority in California.

Company executives cited California’s minimum wage requirements as a significant factor in its financial difficulties, noting that the state’s minimum wage increased to $16.90 in January and fast-food chains must pay at least $20 an hour since 2024.

More than half of Cerca Trova’s employees work in California, according to bankruptcy filings. The company’s financial struggles have been ongoing, with debt rising from approximately $269 million in late 2020 to $449 million this year.

The company’s costs have also increased due to higher food prices, with beef prices rising by up to 5% annually since 2022. Cerca Trova was once Outback’s largest franchisee, operating 99 restaurants in 2018, but has since reduced its locations to 61.

The company is now seeking to sell its remaining restaurants in a court-supervised process. Bloomin’ Brands, the parent company of Outback, has emerged as the leading bidder, offering $26.3 million for the assets unless another buyer offers more.

Bloomin’ Brands has also agreed to provide up to $5.5 million in financing to keep the franchisee afloat during bankruptcy proceedings. The company stated the financial issues are limited to the franchise operator and do not affect its broader operations.