Unconventional Wisdom

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"We got some samples from Bruss and from some companies we used at Steak & Ale, and we did tastings at my house," Basham recalls. "After all my time at Steak & Ale, I thought that meat was meat, but there was a huge difference. So one of the best decisions we made was going with Bruss, even though it was a little more expensive." Until the public stock offering, when a second meat purveyor was added, Bruss handled all Outbacks. It supplies 100 of them now, shipping 140,000 pounds of precut choice steaks every week.

In striving to please Outback, Bruss is demanding of its own suppliers. "We tell them we want to pull product out of Schuyler, Nebraska, and Fort Morgan, Colorado, because we think that's where the best steers are coming from," says Gary Heymann, a Bruss vice-president who works on the Outback account. To smooth out the volatility of beef prices, Outback purchases a year in advance, locking in a price. Bruss follows suit with its vendors, the packing houses.

"We're buying about $500,000 worth of beef per restaurant," Gannon says. "All the beef buying is controlled from here, for company-owned stores and franchises alike." Gannon applies the same rigor to the other half of Outback's entrÉes, which include chicken, pasta, shrimp, and fish. "We use chicken that's never been frozen," he says. "That's tough to do, because we distribute it nationally. We started out using frozen chicken, but it was a little tougher than we liked."

The story's the same with other ingredients. Salad dressings, for instance, are made up in each restaurant using olive oil from Italy's Tuscany region. For the Parmesan cheese that's crushed up for salads on site, Gannon has 80-pound wheels brought in from Parma, Italy. "We know where the best lettuce is, the best potatoes, the best onions," he says. "We buy from the grower, who sends product to the distributors, and they follow what we're telling them is the best produce. We didn't start out like this, but we've learned to be proactive to get the best buy."

The restaurant floor plans are designed to support careful preparation of first-rate food. A typical Outback occupies about 6,000 square feet, more than half of that in kitchen space. "We'd learned that when you put too many seats in a restaurant, the kitchen can get swamped by the requests coming in," says Basham. "So we overdesigned the back of the house and underdesigned the front, so we could execute well during our busiest times." The spaciousness helps ensure unflustered food logistics; the server should be setting down a customer's steak just as the salad plate is picked up, 12 minutes after the steak order went in.

"Chris, Bob, and I have all worked as cooks and waiters and bartenders," Gannon says. "We know what it's like to have the right equipment and the right space to produce the food. We believe that if you treat employees as if you were one of them and give them the right environment, they will blow you away with their performance."

Despite their affluent lifestyle, there's no sign that the Outbackers are resting on their laurels. Concerned about overregulation, Sullivan and Basham spend time -- and money -- on Outback's own political action committee. Basham works hard to prevent the company's bootstrapping mentality from being undermined now that capital is abundant. Gannon looks for new ways to keep staff enthusiasm high. And he's always on the spy for the next smash-hit dish. He's experimenting with lobster appetizers, and he thinks Australian lamb might work as an entrÉe. "The challenge is to keep the concept fresh and exciting," he says.

Already looking to the day when Outback hits a saturation point in the United States, the company is moving into its second concept. It has entered into a joint venture with Carrabba's Italian Grill, a Houston-based company. Outback will pay the construction costs for new Carrabba's units, about $1.6 million each. Carrabba's will run the restaurants. And the two companies will split the earnings 50-50. "Outback is in its main growth thrust," says CFO Merritt, "so taking our eye off that ball to focus on a new concept wouldn't make a lot of sense. This provides a cost-effective, relatively low-risk way to get into a second concept. The new Carrabba's are doing about $2.6 million in annualized revenues, and that's well ahead of where Outback was in its first year."

There are only 12 Carrabba's for now, all in Texas and Florida. But plans call for 15 more in 1995, and a faster buildup after that. "Johnny Carrabba had been approached by a lot of people wanting to buy him out," says Basham. "He didn't want to sell, but he didn't have experience in rolling out a concept. That's what we bring to the table, along with the capital. We can help him make it a national chain." Observers applaud the venture. "It really helps Outback in an area like Tampa, where they have six or seven restaurants and they don't want to cannibalize sales," says Carlino.

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