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."
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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.
Chris Sullivan, for his part, is pleased at how things are turning out. "We have at least four more years of growing Outback by 65 units a year. We hope that the Carrabba's concept will come in behind that. I'm sure there will be something else after that. And we haven't even touched on our international potential yet."
OUTBACK VERSUS THE COMPETITION
A Company of Owners
Average restaurant manager's total annual compensation:
Outback: More than $118,000
Lone Star: Up to $75,500
Each Outback manager invests $25,000 in his or her restaurant and gets 10% of the unit's cash flow, paid monthly. The average manager's annual income from cash flow is $73,600. The base annual salary is $45,000. A Lone Star manager has a base annual salary of up to $50,000 and is eligible for a bonus of $13,000, plus, after the third year of employment, stock options worth $12,500.
Sources: Smith Barney, company reports.
Return on Investment*
Outback: 52%
Lone Star: 49%
Chili's: 33%
Ground Round: 27%
Grady's: 30%
Ruby Tuesday's: 31%
Average: 33%
*Pre-rent cash flow as a percentage of restaurant investment cost.
Source: Smith Barney Inc., July 1994.
Service
Outback: Dinner only
Food Costs
Outback: 39% of sales
Lone Star: 36% of sales
Source: 1993 figures from Smith Barney, company reports.
Decentralization
Outback: One layer of management between founders and restaurant managers
Industry: Four or five layers of management between founders and restaurant managers
THE ORIGINS OF OUTBACK
Anatomy of a Partnership
The Operations Guy
Robert D. Basham, president
Age: 47
Education: B.S. in business, University of Maryland
Original career goal: FBI agent
* * *
The Real Estate Guy
Chris T. Sullivan, chairman, CEO
Age: 46
Education: B.S. in business and economics, University of Kentucky
Original career goal: banker
* * *
The Food Guy
J. Timothy Gannon, senior vice-president
Age: 46
Education: B.A. in art history, Florida State University
Original career goal: art-museum staffer
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The Sixties
1966 Gannon majors in art history at Florida State because it has an extension program in Florence, Italy. Works in Florence as a tour guide.
1968 Sullivan works as a restaurant dishwasher, cook, and bartender. "I got into this business trying to make ends meet as a college student. I come from a large family -- six kids -- and my dad didn't make a lot of money."
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The Seventies
1971 Basham: "After college I wanted to be an FBI agent. They suggested I get some business experience first. My brother owned a restaurant in Washington, D.C., so I went to work there. I found I really liked the business."
1971 Sullivan interviews for bank jobs paying $8,000 a year. Takes a $500-a-week waiter job. 1972 Joins Steak & Ale chain; soon managing a Steak & Ale unit in Rockville, Md., where Gannon is hired as a manager trainee (1973). Sullivan later is posted to Indianapolis, then Chicago.
1971 Gannon finds a job as a cook in Aspen, Colo. Moves to the Aspen Four Seasons; learns from a French chef how to prepare food from scratch. "My mother started dinner at 5:30 and served it at 6. It was full fIames, everything up high. I didn't learn anything about cooking from her."
1973 Basham joins Steak & Ale as a management trainee. Soon becomes general manager of a Steak & Ale restaurant. Later is named regional supervisor for Baltimore; Washington, D.C.; and Pennsylvania.
