Outback Strategic Study & Financial Analysis: 1995

OUTBACK STEAKHOUSE, INC.
A Financial Analysis & Strategic Plan by
David Harold Moore
July, 1995

ii
• TABLE OF CONTENTS •
Title Page #
EXECUTIVE SUMMARY.................................................................................................. iii
THE OUTBACK’S PRINCIPLES & BELIEFS..................................................................... iv
PART I: A FINANCIAL ANALYSIS
INTRODUCTION............................................................................................................. 2
THE OUTBACK STEAKHOUSE, INC............................................................................... 4
THE DINNER HOUSE INDUSTRY.................................................................................. 5
THE DIRECT COMPETITION.......................................................................................... 6
Lonestar, Longhorn & Bugaboo
FINANCIAL ANALYSIS................................................................................................... 8
Liquidity................................................................................................................... 9
Profitability............................................................................................................... 10
Solvency.................................................................................................................... 12
OPERATIONAL ANALYSIS............................................................................................. 14
FINANCIAL ANALYSIS FOR SPECIFIC USERS................................................................ 15
FINANCIAL ANALYSIS CONCLUSION........................................................................... 16
PART II: STRATEGIC PLANNING
PROBLEM STATEMENT & STRATEGIES........................................................................ 18
STAKEHOLDER ANALYSIS............................................................................................. 19
S.W.O.T. ANALYSIS...................................................................................................... 21
INDUSTRY ANALYSIS.................................................................................................... 24
STRATEGY GENERATION & EVALUATION.................................................................. 26
Strategy One............................................................................................................ 27
Strategy Two............................................................................................................ 29
Strategy Three.......................................................................................................... 30
Strategy Four............................................................................................................ 34
Strategy Five............................................................................................................ 35
RECOMMENDATIONS.................................................................................................... 37
THE OUTBACK STEAKHOUSE INC. UPDATE............................................................... 38
APPENDICES
Horizontal Analysis of the Consolidated Statement of Income................................ A
Vertical Analysis of the Consolidated Statement of Income.................................... B
Graphs: Liquidity Ratios......................................................................................... C
Graphs: Profitability Ratios..................................................................................... D
Graphs: Solvency Ratios.......................................................................................... F
Strategy Action Plans.............................................................................................. H
REFERENCES.................................................................................................................. I

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•EXECUTIVE SUMMARY•
This study consists of two parts with the Outback’s Principles & Beliefs being the
introduction to the two parts. The first part is a 1994 financial statement analysis which
analyzes the Outback and their operation, the dinner house industry, the direct competition,
and the Outback’s financial strength with direct competition and industry average
comparatives. The second part takes that information and identifies a problem while
considering the strengths, weaknesses, opportunities, and threats as well as analyzing the
stakeholders and the industry in general. The second part ends up with strategy generations,
evaluations and a final recommendation on the strategies.
As the first line of the Outback’s mission statement implies, “The success of an
Outback is measured by its sales and profits”. If that is the case, then the Outback is
extremely successful. With a total of 230 units creating $451.9 million revenue and earning
$72.8 million in 1994, you see where the Outback is coming from. Since the Outback is a
visionary in the dinner/steakhouse market, they appeal to the casual dining consumer with a
certain amount of price sensitivity. This visionary leadership is in the process of being
copied and maybe improved upon by three major competitors -- Lonestar, Longhorn &
Bugaboo. However, these competitors have not as yet proven their mettle. All in all, the
Outback is in a strong financial position.
The problem, however, is that due to increased competition the Outback must
strengthen their leadership position in the market in order to keep a long-term competitive
advantage. In essence, the Outback should intensify national expansion efforts through
business format franchising with a buyback clause while investigating the international
market further; they should add on a take-out/drive through section; they should create
‘secret’ healthy menu items while practicing a regional menu engineering strategy; they
should intensify their related market expansion efforts through the Carrabba’s Italian Grill
expansion; and they should alter their current site selection strategy. As shown in the
strategy evaluations, all the strategies have excellent potential profit, they all reduce portfolio
risk, and they all are relatively inexpensive.
These strategies will strengthen their long-term competitive advantage -- the goal.

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•THE OUTBACK’S PRINCIPLES & BELIEFS•
“The success of an Outback is measured by its sales and profits. This success is the result of
our principles and beliefs about people and the most effective way to support our restaurants. These
principles and beliefs are inviolate, critical to our continued success, and shared by all who call
themselves ‘Outbackers.’ We believe that if we take care of our people -- Outbackers, customers,
suppliers, neighbors, and partners -- then the institution of Outback will take care of itself.”
OUR PRINCIPLES AND BELIEFS
Our five most important principles are hospitality, sharing, quality, fun, and courage.
HOSPITALITY is giving for the sake of giving, rather than for the sake of gaining. It is
giving to people beyond what is expected of us; it is our willingness to help them in tangible
ways; it is having a genuine concern and being action-oriented toward their comfort and
well-being.
SHARING is inviting people to participate in the fruits of our success. It includes
sharing dollars, responsibility, authority, and accountability; it is “we” made it happen rather
than “I” made it happen.
QUALITY is having a purpose and always working to improve. It is attention to detail.
It is consistently meeting and then exceeding our standards.
FUN is having a sense of humor, being able to laugh at ourselves, and celebrate
together.
COURAGE is living our principles and meeting our standards with absolute discipline
while having a “no rules” approach to consumers. It is being focused on results, sticking to
the core of our business, and accommodating the individuality of our people rather than
demanding that they accommodate us.

•INTRODUCTION•
“With a goal of 350 restaurants and $1 billion in revenues by the end of 1996, the
Outback faces increasing competition in the expanding themed steak-house arena.”
(Nation’s, 1995)
The Outback is an ‘Australian’ themed steak house that is open for dinner only. It has
a limited menu featuring beef, fresh fish, shrimp, chicken, ribs, pork, and pastas. This limited
menu in combination with the Outback’s limited operating hours is a reflection of the
company’s unconventional corporate culture. With the theme “No Rules, Just Right”
emanating from the top down (or is it the bottom up?), there is no doubting that these
unconventional methods are leading to profitable results.
Case in point; the Outback began in 1987 with one unit located in Tampa, Florida. The
Outback now consists of 230 units from coast to coast with a projected expansion rate of 70
units per year for the next half decade. The Outback has also launched a new international
division which is expected to propel the company into Europe, South America, the Middle
East and the Pacific Rim. Combine this with revenues of $451.9 million and earnings of $72.8
million in 1994 and you get a highly successful organization.
1992 1993 1994
0
50
100
150
200
250
1992 1993 1994
Total Number of RestaurantsTotal Number of Restaurants 1992
1993
1994

Furthermore, the Outback is diversifying their organization by entering the casual
Italian dinner market. The Outback currently has a 50% interest in twelve of these
restaurants which are named Carrabba’s Italian Grills. They are currently in the
development stage but show promise.
Before continuing on to the strategic financial plan, the corporate stratification should
be explained.
1992 1993 1994
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
1992 1993 1994
System-Wide Restaurant SalesSystem-Wide Restaurant Sales 1992
1993
1994

•THE OUTBACK STEAKHOUSE, INC.•
Of the 230 units only 164 are company owned. Company owned signifies an interest
of 81% to 90% ownership. The other 10% to 19% is owned by the managing partner and/or
the joint venture partner. This company strategy is one of the pillars supporting the
Outback’s financial success.
You see, a managing partner is considered the store’s proprietor. He or she puts up a
$25,000 payment as a vested interest in the unit. In return, the managing partner receives
10% of the profits generated from his or her unit. This kills two birds with one stone. The
managing partner now considers him or herself the owner of the store and will act
accordingly, and the need for a massive corporate bureaucracy has been destroyed due to the
managing partners vested interest. This one concept, in part, is what has taken Outback to
where it is today.
The compensation for these managing partners ranges anywhere from $80,000 to
$180,000 per year depending upon the store’s profits. The obvious result is practically no
management turnover, quality management, and quality food/service. The impact of this
strategy has yet to be fully discovered.
Although the managing partner was discussed above, the joint venture partner is
similar except that he or she usually operates/oversees multiple units. Again, killing the
need for a corporate bureaucracy and leaving a possible regional creativity which is needed
to succeed on a vast scale such as the Outback has done.
Now, with 164 units owned by the company that still leaves 66 units of which 54 are
franchised and the remaining 12 are considered Development Joint Venture units.
The franchised restaurants create no direct income from operations other than
franchise fees and royalties, which are included in the Company’s revenues.
The 12 Development Joint Venture Units are split 50/50 in costs as well as profits.
Fifty percent is company owned and 40% is owned by the Joint Venture Partner with the
remaining 10% owned by the managing partner.
Finally, the Outback is responsible for 100% of the costs of the new Carrabba’s Italian
Grills while the profits are split evenly between the Joint Venture Partner and the company.
[(Annual, 1994), (Nation’s, 1995), (Investext, 1994)]

•THE DINNER HOUSE INDUSTRY•
Succeeding in the competitive restaurant industry requires the ability to adapt to, or
better yet prepare for, a changing environment. The speed at which some of the changes take
place along with the daily complexities of the business can obscure the significant role which
long-term planning can play in success. Emerging socio-economic patterns and the resulting
alterations in the demographic profiles of individual restaurant patrons, as well as the
diversifying of their lifestyles, attitudes and preferences will impact the profitability of
individual restaurant businesses (Dun, 1985). It is this basic premise that has foreordained
the success of the casual dinner house market of which Outback is part.
The dinner house market is a market targeted at those who don’t wish to spend the
extra money & time for the formal environment which succeeded during the big 80’s. As the
times have changed, so have the demographics of the consumer. The new consumer is
looking for a casual environment with quality food at a reasonable price as well as quality
service in a timely manner. It is the combination of these four wants/needs created by the
consumer that have resulted in the need and success of the dinner house market.
It is this need that the Outback and their direct/indirect competitors have capitalized
on. In addition, for those who think that America is a health conscious society as a whole,
when eating out, they are wrong. The booming success of the Outback chain and other ‘non-
health’ food chains are the evidence. That is not to say that offering healthy menu items is
out. On the contrary, one must diversify the menu to capitalize on the many wants of the
consumer.
It is only through constant vigilance that allows the strong to survive!

•THE DIRECT COMPETITION•
“Outback’s guiding founders face hostile and explosive competition in the rapidly expanding
themed steak-house arena, led by such chains as Wichita Kansas based Lone Star Steakhouse &
Saloon, Atlanta based Longhorn Steaks, and Bugaboo Creek Steakhouse.” (Nations, 1995)
Due to the uniqueness of the Outback and their thriving market, the Outback has
began in a niche where competition is coming from behind -- in essence, Outback is the
industry leader. This gives the Outback a sizable edge over the competition but also allows
for the competition to capitalize on the Outback’s weaknesses. Only time will tell how well
the competition does this.
The state flag of Texas that flaps outside every Lone Star Steakhouse & Saloon is
symbolic of their ambition. They have long-term plans to open 600 restaurants throughout
the world. And as amusing as it may seem, they already have two restaurants in Australia
(Outback has none). (F&B Business, July/August, 1994)
The Lone Star Steakhouse & Saloon is similar in design and concept implementation.
However, they are open for lunch and the management compensation is not as lucrative. The
image is Country/Western which is carried throughout the restaurant with the music as well
as employee uniforms. Besides that image difference, much is similar except for overall
financial performance, which will be analyzed on the following pages. However, with 30
new units being opened during the fourth quarter of 1994 and a total of 104 units at then end
of 1994, their expansion plans are rapid as well as on track. This company is a definite long-
term threat. (Smith, 1994)
Longhorn Steaks is in the midst of an operational turnaround. The company has
significantly augmented its management team over the last year and developed a ‘new
prototype’ Longhorn restaurant, which has shown promising results in its initial markets.
With its revamped concept and a network of joint venture partners, Longhorn is poised to
resume expansion of its restaurant base at a 20+% rate over the next two years. The company
is embarking on a remodeling plan to convert existing stores to the new format with the goal
of duplicating the initial results of the first several conversions. (Raymond James &
Associates, Inc. April 7, 1995)

As of 1994 the Longhorn has a total of 49 units. Their menu selection is limited but
otherwise the concept is similar to Lone Star and therefore Outback. Their major problem
being the fine tuning of their stores as well as growth implementation. (Robinson, 1994)
Bugaboo Creek Steakhouse, based in Providence Rhode Island, owns and operates
two complementary restaurant concepts. Bugaboo Creek’s Steakhouse’s Canadian Rocky
Mountain Lodge atmosphere appeals to the family and casual dining segment. The Lodge
offers seasoned steaks, classic prime rib, roasted chicken and various electronically animated
characters which come to life as dining entertainment. Capital Grille is characterized by
luxurious appointments, top-quality menu offerings featuring steak and seafood and an
extensive wine list. The restaurants are clustered in hub and spoke configurations in and
around New England and greater Washington D.C..
Since its inception in 1990, the company has developed an operating base of six
restaurants, with expansion plans and funding in place to grow 35 units by the end of fiscal
year 1997. The Springfield Virginia Bugaboo Creek that opened the first week of March 1994
is already experiencing waiting times of over two hours and is generating weekly sales
volumes approaching the company average of $70,000. On April 25 1994, well ahead of
schedule, Bugaboo Creek opened in Peabody MA at the North Shore Mall. Volume for the
first two weeks has been significantly ahead of company average. (Hancock Institutional
Equity Services, May 23, 1994.)
It seems the Bugaboo Steakhouse is poised for success. However, I cannot comment
on Bugaboo because I have not as yet had the pleasure of dining in it. I have been to both
Longhorn (before new concept implementation) and Lonestar more than once and was not
impressed with their food when compared to the Outback Steakhouse. I do believe the
LoneStar to be the major long-term threat because of their site selection. However, Bugaboo
sounds like a well diversified company targeting a bit higher priced consumer market. So, I
believe all three combined pose a great threat to the success of the Outback’s long-term
success.
Then again, who knows, the three big boys who run Outback might plan on selling
out to General Mills when the Outback begins to hit their maturity curve. Its either that or
begin a revitalization/long-term strategy now!

•FINANCIAL ANALYSIS•
The Outback’s financial status will be based on nine ratios from the three major
categories: the Current ratio and the Quick ratio for LIQUIDITY; the Asset Turnover ratio,
Profit Margin before income tax, Return on Total Assets and Return on Common Equity for
PROFITABILITY; and finally the Debt ratio, Times Interest Earned ratio and Debt/Equity ratio
for SOLVENCY. These ratios will be compared to their direct competitors Longhorn, Lonestar,
& Bugaboo as well as the Industry Average.
The Industry Average for each has been included at the bottom of each chart and at
the end of each graph designated by a magenta bar (see Appendices C-G). This industry
average if from the 1995 Almanac of Business and Industrial Financial Ratios by Leo Troy. The
industry average is from drinking and eating places with total assets ranging from $100
million to $250 million. The Outback has total assets of $228 million at the end of the fiscal
year 1994 (Annual, 1994).
The use of this financial information is intended to serve in making financial and
business decisions critical to a company’s competitive position. Management decisions affect
the durability of the enterprise, the interests of owners, creditors, and consumers. These
demands on those responsible for the survival and success of the company have become even
more intense as markets become increasingly competitive, domestically and in the world.
With those challenges in mind, the following ratios are essential to successful financial
management. (Troy, 1995)

LIQUIDITY
CURRENT RATIO
Company 1991 1992 1993 1994
Outback 2.74 3.68 1.93 .96
Lonestar NA 10.72 13.25 3.82
Longhorn .46 3.0 5.39 3.56
Bugaboo NA .91 .68 6.78
Industry Average = 1.3 • A Measure of Liquidity
This ratio, rated highest by CPA’s as a measure of liquidity, gauges the ability of a
company to meet their short-term financial obligations should it be compelled to liquidate
their short-term assets (Troy, 1995). It is calculated by dividing current assets by current
liabilities (Gibson, 1995). Typically, the standard guideline has been a ratio of 2 to 1.
However, for the restaurant industry 1.3 is the average. As shown in the graph, Lonestar,
Longhorn and especially Bugaboo (who just went public) are gearing up for rapid expansion
and the Outback is in the thick of it with their rapid expansion in progress.
QUICK RATIO
Company 1991 1992 1993 1994
Outback 2.47 3.42 1.52 0.57
Lonestar NA 9.92 11.97 2.98
Longhorn .23 2.16 4.63 2.98
Bugaboo NA .37 .35 6.13
Industry Average = 0.8 • A Measure of Liquidity
Also known as the ‘Acid Test Ratio’, it is often used to estimate the company’s general
liquidity. The numerator is cash equivalents + marketable securities + net receivable which is
divided by current liabilities (Gibson, 1995). The conclusion is similar to the current ratio
when excluding inventories for the quick ratio - Lonestar, Longhorn & Bugaboo are
preparing for rapid expansion while the Outback is in the midst of it.

PROFITABILITY
ASSET TURNOVER RATIO
Company 1991 1992 1993 1994
Outback 2.48 1.46 1.95 1.98
Lonestar NA .44 .60 1.00
Longhorn NA 1.95 1.37 1.59
Bugaboo NA 1.63 1.53 .74
Industry Average = 1.5 • A Measure of Profitability
This profitability ratio indicates the effectiveness of the company in the use of total
assets in generating sales. Because it includes both current and fixed assets, the ratio
combines the ability of the company to convert their assets into other assets as well as the
ability of the company to sustain their sales (Troy, 1995). It is measured by dividing sales by
total assets (Gibson, 1995).
The Outback proves to be the strongest in effectiveness while the three newcomers
struggle for both growth and increased effectiveness in the use of their total assets in
generating sales. Lonestar being considerably lower, Longhorn being slightly higher than the
industry average of 1.5, and Bugaboo being well below the industry average. Again,
Outback outperforming all three.
PROFIT MARGIN BEFORE INCOME TAX
Company 1991 1992 1993 1994
Outback .11 .12 .13 .14
Lonestar .13 .25 .25 .23
Longhorn .04 .10 .07 .02
Bugaboo NA .04 .03 .10
Industry Average = .076 • A Measure of Profitability
This ratio, net income before income tax, divided by net sales, indicates the
contribution of sales to the profitability of the company. Put another way, it indicates the
amount of net income generated by a dollar of sales. Competition, capital structure, and
operating characteristics cause the margin to vary within and among industries. (Troy, 1995)

Lonestar being well above the competition and showing considerable strength in
potential profitability while Bugaboo is rising to a competitive level and Longhorn being way
below the industry average of 0.7 and the Outback consistently growing stronger.
RETURN ON TOTAL ASSETS (DUPONT)
Company 1991 1992 1993 1994
Outback .27 .18 .25 .28
Lonestar NA .11 .15 .23
Longhorn .20 .19 .10 .03
This ratio combines the turnover and profit ratios (Sales/Total Assets X Profit/Sales),
and yields the return on investment (total assets) (Gibson, 1995). The result is the end
product of the Dupont system of financial analysis (Troy, 1995).
Using this method shows that the Outback, as the leader, uses their assets
considerably more efficiently than their competitors with Lonestar quickly rising.
RETURN ON COMMON EQUITY
Company 1991 1992 1993 1994
Outback .26 .16 .21 .23
Longhorn NA .16 .07 .03
This ratio shows the profitability of the company’s operations to owners, after income
taxes. CPA’s ranked this profitability measure highest (Troy, 1995). It is computed by taking
the net income before non recurring items - preferred dividends and dividing it by the
average common equity (Gibson, 1995). The Outback shows the highest return to the
shareholder by more than twice their competition!

SOLVENCY
DEBT RATIO
Company 1991 1992 1993 1994
Outback .22 .19 .18 .25
Longhorn NA .14 .09 .12
Industry Average = .454 • A Measure of Long-term Debt Paying Ability
This ratio, total liabilities to total assets, indicates the company’s ability to pay all their
debts. It measures the creditors and owners of the company’s ability to withstand losses. It
is an indicator of the long-run solvency of the firm. (Troy, 1995)
To put it in another way, it measures the extent to which borrowed funds have been
used to finance the company's assets. All the newcomers show a reduced dependence on
debt financing while the Outback has increased slightly to help secure their position in the
market by being the first casual steakhouse throughout the country. In addition, all are
markedly less leveraged than the industry.
COVERAGE RATIO/TIMES INTEREST EARNED RATIO (EBIT)
Company 1991 1992 1993 1994
Outback 29.18 65.12 111.34 144.62
Lonestar 13.80 NA NA NA
Longhorn 20.78 NA NA NA
Bugaboo NA 2.96 4.5 13.85
Industry Average = 5.4 • A Measure of Long-term Debt Paying Ability
This ratio measures the number of times all interest paid by the company is covered
by earning before interest charges and taxes. This widely used ratio uses earnings before
interest paid and taxes (EBIT) in the numerator because interest charges are tax deductible
(EBIT divided by Interest Expense). (Troy, 1995)
The ratio indicates the company’s ability to service their debt based on their income. If
the ratio is appropriate, as the Outback proves to be, then the company is not in danger of

meeting those charges and it enhances the company’s ability to roll over debt at favorable
rates. Again, the Outback shows phenomenal stability.
TOTAL LIABILITIES TO NET WORTH (DEBT/EQUITY RATIO)
Company 1991 1992 1993 1994
Outback .29 .24 .22 0.33
Lonestar NA .07 .06 NA
Longhorn 31.68 .16 .10 NA
Bugaboo NA 2.75 2.46 NA
Industry Average = 0.8 • A Measure of Long-term Debt Paying Ability
This ratio is one of the most important on capital structure. This ratio indicates the
extent to which the company’s funds are supplied by short and long -term creditors
compared to their owners. It is an indicator of the company’s long-term debt paying ability
(Total Liabilities divided by Shareholders Equity). (Troy, 1995)
Although the two competitors, Lonestar & Longhorn, are showing immense promise,
the Outback is remaining rather steady and definitely lower than the industry average.

•OPERATIONAL ANALYSIS•
HORIZONTAL & VERTICAL ANALYSIS OF THE CONSOLIDATED STATEMENT OF INCOME
(see appendices A & B)
As shown on the Horizontal analysis of the consolidated statement of income, the
growth rate of the Outback since 1992 has been 238% as of 1994. In addition, from the goals
of the company, the Outback will continue to grow at a rapid rate till the year 2000. There is
only one falling and that is the interest income which is most likely due to the expensive
growth activities.
The Outback is a phenomenal company proving their worth in the United States and
eventually the world.
The Vertical analysis shows complete and total consistency over the last three years.
Again, a stable company with rapid expansion is a rare thing. This just reinforces the
strength of this company.

•FINANCIAL ANALYSIS FOR SPECIFIC USERS•
CREDITORS
From the facts and figures shown throughout this financial analysis, there is no doubt
that the creditors are in line to lend the Outback money. Although the liquidity of the
company is slightly lower than industry averages (Current .96 compared to 1.3 for industry
and Quick .58 compared to .8 for industry) the long-term solvency of the company is
phenomenal. As stated earlier, the short term debt paying ability is a result of the rapid
expansion currently in progress.
MANAGEMENT
Of all the stakeholders, it is management and investors that should be the most
pleased. Management is showing a high growth rate of 238% over the last three years and a
fantastic return on common equity of 23%. Since it is management’s job to maximize
shareholders wealth, I believe they have done an excellent job.
INVESTORS
The combination of all these factors show that this company is a highly recommended
investment. All indicators show increased profit for all as well as a steady/rapid growth
over the next five years. A strong recommendation would be to buy stock at the lowest
possible and hang on to it for a five year period and then unload at a peak during the fifth
year. By then the Outback should be reaching the top of their maturity curve. The only risks
being competition and the risky international venture, of which both I consider to be low in
risk due to the many management and quality factors the Outback has instituted. However,
onw must not rest on one’s laurels.

•FINANCIAL ANALYSIS SUMMARY•
Well, what is left to say about this immensely successful company. It is on the right
track and is the industry leader in almost all aspects of their operation. The competition is
years behind (at present) and the visionary leadership of this company will make this
company a high-return investment for all the stakeholders involved.
The strategic management of this company is really what makes it the winner it is.
During the strategic study, much more will be discussed which will enlighten the reader
further to what this company is all about and what I believe needs to be worked upon.
The Outback has set the new standards for the restaurant industry and only a new
visionary will knock this company off of Wall Street! And, who is to say when that will
come?

•PROBLEM STATEMENT & STRATEGIES•
PROBLEM STATEMENT
Due to increased competition, the Outback must strengthen their leadership position
in the market in order to keep a long-term competitive advantage.
STRATEGY ONE
The Outback should intensify their national expansion efforts through business format
franchising with buyback clauses while investigating the international market further.
STRATEGY TWO
The Outback should differentiate their-self from the Dinner House market by adding a
takeout/drive through section to their already successful restaurant services. (still must call
ahead).
STRATEGY THREE
The Outback should include more ‘secret’ healthy menu selections while practicing a
regional menu engineering strategy.
STRATEGY FOUR
The Outback should intensify their related market expansion efforts.
STRATEGY FIVE
The Outback should change their site selection strategy from buying B-sites to buying
high-end B-sites & low-end A-sites while reducing their market saturation strategy.

•STAKEHOLDER ANALYSIS•
The key stakeholders in the Outback Steakhouse are the Employees, the Consumers,
the Competitors, the Government, and the Stockholders. These stakeholders represent the
task environment which accounts for the greatest amount of influence on the Outback
Steakhouse.
The first and most influential stakeholder is the employee. Realizing that the
employee is the key to any service oriented company, the Outback strives to make their
employees happy. This is proven by the total loss of 10 managing partners over that last six
years (Nation’s, 1995). By making the employee happy, you begin a chain reaction. This
point can best be illustrated by any disagreeable experience you may have had in a
restaurant. That unpleasant experience was most likely a direct result of an employee
attitude. Making the employee happy is an essential cause of the Outback's success. This
does not mean they have completed the loop. As far as the restaurant industry is concerned,
there is much to be done with the front line employee as well as the back of house employees.
The second most influential stakeholder is the consumer. If the consumer does not
like the elements that are your restaurant, then you will not succeed. The atmosphere, food,
service, and price are all part of making the consumer happy. And a key point that must be
illustrated here is that you cannot just satisfy the guest anymore, you must consistently
exceed their expectations to succeed. The Outback has done so to date, but what is their next
step?
The third most influential stakeholder is the competitor. The competitor insures that
you do not become functionally obsolete. They do this by being extremely competitive which
in turn makes you become extremely competitive. Outback's major competitors at this point
are Lonestar, Longhorn & Bugaboo which were discussed earlier. Again, with the highly
competitive food service industry, you can not fall behind. You must keep up with current
trends and always work on exceeding the guest expectations.
The fourth stakeholder is the government. With the Alcohol Tobacco & Firearms
always insuring that the state and federal regulations are being followed, along with the
federal government instituting new taxes and tax reforms; such as the 1986 Tax Reform Act

which lowered business related meal write offs to 80% from the original of 100%, as well as
the increasing legislation on drinking and driving, there is no question that the government is
a major stakeholder. Outback must be a major player in the government arena maintain their
financial performance.
The fifth stakeholder is the stockholder. Stockholders consist of the general public as
well as the employees of the Outback; both being an asset to the companies future. With
pressure from the public for greater earnings and the vested interest of the employees, the
profits become a major concern. The results being shown through the 144% growth in
earnings per common share from 1992 to 1994. Let us hope they figure out ways to maintain
their growth.
All of these stakeholders; employees, consumers, competitors, government, and
stockholders play a major role in the success of the Outback Steakhouse. Without their
constant pressures, the Outback would not be where it is today. However, the question still
remains, where will they be tomorrow?

•S.W.O.T. ANALYSIS•
STRENGTHS
• Concept Design - the Outback appeals to a wide market with a casual
Australian theme.
• Managing Partner Turnover Rate - non-existent (10 in last six years).
• Menu Design - diverse, moderately priced, and “prepared from
substantially fresh products each day”.
• Consumer Loyalty - greater than fifty percent of the consumers
visit three times a month.
• Relatively Quick Table Turnover - a 45 minute average
• Rapid Growth - 85 to 230 units in three years.
• Not Constantly Innovative - not always updating current products,
services, and building design.
• High Quality Food - top distributors on all food products are used.
(41% food costs at Outback/ 30% industry average)
• Good Service - servers have a three table station maximum.
• Community Service - fund raisers, little leagues, etc.
• Value - consumer perception is great value.
• No Reservations - no holding tables creates higher table turnover.
• Management - there are managers on the floor as well as in the hot food
window expediting food at all times.
• Teamwork - all food is run as soon as it comes out by the first available
server.
• Kid Menu - extensive and generous in portions.
• Steak Cooking Procedures - steaks are undercooked which gives the
consumer the opportunity to cook-up the steak rather than costing the
company a whole new steak for a re-cook.
• Profitability - a 14% profit margin, 28% return on assets, 23% ROE.
• Solvency - 25% debt ratio, Times Interest Earned is 143.7%, & debt/equity 33%.

WEAKNESSES
• Insurance Rates - increased liability
• Alcohol Consumption Decrease - Drinking laws and MADD
• Economy - disposable income of the consumer is directly related to their
dining out expenditures.
• Not Constantly Innovative - not always updating current products, services,
and building design.
• Employee Turnover - three table stations may not generate enough tips for
servers to stay.
• Unhealthy Food - the market may discover how the Outback prepares their
food (flat grilled in butter) and boycott them (Outback Special = 144 fat grams).
• No Reservations - consumers do not like to wait for 15 minutes to 2 hours.
• Teamwork - consumers may not like other servers delivering their food
because they have not established a relationship with the other servers.
• Steak Cooking Procedures - since steaks are under-cooked the consumer must
be educated by the server which does not always happen.
• Point of Sale System - archaic in nature leaving employee theft
opportunities as well as eating up valuable server time.
• Liquidity - a current ratio of .96 and a quick ratio of .58.
OPPORTUNITIES
• National/International Expansion - franchising, joint ventures, corporate
expansion (widening global market: the European Community, NAFTA, etc.)
• Related Diversification - capitalize on their business savvy & good name and
move into related markets.
• Increased Menu Diversity - a market segment is making a move towards
healthier foods.
• Consumer Demand on Dining Out - the greatest consumer market is eating
healthier at home while increasing their “unhealthy” dining out habits.
• Strengthening of Long-Term Market Position - through site selection.

THREATS
• 1986 Tax Reform Act - business deduction from 100% - 80%
• Increased “Sin” Taxation - the taxes created especially for pleasure products
such as cigarettes and alcohol.
• M.A.D.D. - Mother Against Drunk Driving: increased legislation against
drinking and driving without creating an alternative such as public
transportation.
• Competition - coming from behind at a rapid pace.
• Healthier Food Trends - the market may make a move toward healthier
foods.

•INDUSTRY ANALYSIS•
According to Michael Porter’s five forces model each corporation is most concerned
with the intensity of competition within their industry. The level of intensity is determined
by five basic forces. The stronger these forces the more companies are limited in their ability
to earn profits. (Hunger/Wheelen pg. 99)
The first force is the threat of new entrants. The Outback has benefited from their
market niche and has become a major visionary in the industry. Their vision and rapid
growth has created a strong market position which has created a barrier to entry.
The second force is rivalry among existing firms. The local and corporate competition
is fierce. The restaurant industry is a very competitive arena. The major factors of
competition being location, price, product, and service. However, these factors are very
trend related. The market trends are fickle beasts which must be kept on top of. If you are
behind the times and your competitors are quick at spotting market trends, then you become
functionally obsolete and your “loyal” consumer moves next door as well as your profit
oriented employees!
The third force is the threat of substitute products/services. The cost of switching is
not really a consideration, when it comes to the restaurant industry. For instance, if there is a
similar product/service offered at a lower price to the consumer while at the same time
satisfying all their needs, then it costs the consumer nothing to switch. In addition, if the
economy is in a recession and the consumer has a decrease in their disposable income; the
search for a substitute begins.
The fourth force is the bargaining power of buyers. The consumer is the all mighty in
the restaurant industry. If your patron decides the prices are too high or the food & services
are not up to standards, then they have the power to either cook the food they wish at home
or switch to a comparable competitor. Although one may think that a single consumer lost is
no great detriment to the business, that is wrong. The power of "word of mouth" is immense
in the restaurant business. Your restaurant may be "the thing" today, however it can be half
"that thing" tomorrow if the consumer decides. Again, the power of buyers is great and you
must strive to exceed their expectations to keep them coming back.

The fifth and final force is the bargaining power of suppliers. The bargaining power of
suppliers is high when there are only a few suppliers. In the restaurant industry this is not
the case. There are many suppliers to choose from and the major considerations when
choosing a supplier are the services they offer, the quality of the food, as well as their
competitive prices. The only power they have is the cost of switching. So, in essence, the
bargaining power of suppliers is minimal.
The Outback is in a good position as of 1994. The level of intense competition is still
not there, but it is on its way. The Outback has created their own market niche which others
are picking up on rather quickly. These new firms will give the Outback a run for their
money. With companies like Longhorn, Lonestar, & Bugaboo searching for a weakness in the
Outback's strategy, one must be careful. Also, there is usually a substitute when the
restaurant or economy becomes lacking. The bargaining power of consumers, as stated
earlier, is the essential force in the restaurant industry whereas the power of suppliers is
minimal. Consequently, the Outback is in a good position to capitalize on, as well as
strengthen, their market niche and must do so while their competitors strive for a better
product/concept. In the restaurant industry, as with most industries, the race is always on.

•STRATEGY GENERATION & EVALUATION•
Due to increased competition, the Outback must strengthen their leadership position
in the market in order to keep a long-term competitive advantage.
As of 1994 the Outback has grown to 230 restaurants in twenty-nine states in only
eight years - they should intensify national expansion efforts through business format franchising
while investigating the international market further. A second strategy is to differentiate their self
more by adding a specialized takeout section to their restaurants. This strategy intensifies the
guaranteed profit center while further making the consumer aware of the Outback’s
availability of to-go food. The third strategy is to offer more healthy menu items while practicing
a regional menu engineering strategy. The reason behind this is simple, by offering a diverse
menu specific to region, the Outback can strengthen their market position. The fourth
strategy is to intensify their related market expansion efforts by increasing expansion efforts on
Carrabba’s Italian Grills. The final strategy is to alter their current strategy involving site
selections. The current strategy is to buy a 1.7 acre lot that costs no more than $600,000 with a
total Outback Steakhouse cost of $1.5 million that promises a return of 2 to 1 per year. I
believe this strategy to be in line with an extreme arrogance that is a result of short-term
thinking -- to think that one is invincible and one can maintain their leadership position by
maintaining all the same strategies from day one, is both arrogant and short-term.
These strategies will be evaluated with three criteria in mind. The first criterion will
be estimated cost; the second criterion will be potential profit; and the third criterion will be
reduced portfolio risk through related diversification.

STRATEGY ONE
The Outback should intensify their national expansion efforts through business format
franchising while investigating the international market further.
Franchising is a dominating force in the distribution of goods and services. It is
predicted to be the primary way of doing business by the year 2000 and according to the
United States Congress, "franchising is essentially a contractual method for marketing and
distributing goods and services of a company (franchisor) through a dedicated or restricted
network of distributors (franchisees).” Under the terms of a legal franchise contract, a
franchisor grants the right and license to franchisees to market a product/service using the
trademark and/or the business system developed by the franchisor. The franchisor, the
Outback, must provide the product, a proven marketing plan or business format,
management and marketing support, and training. In the perfect franchise arrangement,
everyone wins: the Outback expands their number of outlets and gains additional income;
the franchisee has a business of his or her own. Franchising is no longer considered a get-
rich-quick method of doing business. In fact, it is being used as a business strategy for
successfully penetrating, developing, dominating, and achieving a disproportionate share of
the restaurant market. (Khan, 92)
Business format franchising is the type of franchising the Outback should pursue. It
involves a complete business format rather than a single product or trademark. Business
format is a relatively new concept of franchising and is characterized by an ongoing business
relationship between the Outback and the franchisee. Business format franchising not only
includes product, service, and trademark, but the entire business concept itself -- a marketing
strategy and plan, operating manuals and standards, quality control, group purchasing
power, research and development, and a continuous process of training, assistance, and
guidance. The franchisee is required to comply with the Outback's guidelines pertaining to
all aspects of the business, including operating procedures, the quality of the products and
services, and the physical appearance of the business facility. There is always an ongoing
relationship between the Outback and the franchisee.

A point that must be stressed is that the broad market segment the Outback is in, the
Dinner House/Family/Steakhouse segment, has twenty-one percent of the dinner chain
market (as illustrated below). The Outback must franchise to capture not only more of their
segment, but to capture more of the entire market itself. With 230 restaurants in twenty-nine
states and Lonestar quickly rising, the further expansion potential is immense as well as
necessary.
The cost would be low when compared to pure company expansion and the potential
profit, as stated earlier, is quite large (currently 50 stores are franchised which brought $3.6
million in revenues during 1994). Another 50 stores would more than double that amount.
And, without question, you reduce portfolio risk by diversifying into new consumer markets
without the tremendous capital expense. In addition, the franchise contract should include a
buy-back clause so the entire Outback system can be company owned.
Top 100 Market ShareTop 100 Market Share
Steak
8%
Dinner House
6%
Sandwich
40%
Cafeteria
13%
Chicken
5%
Hotel
6%
Family
7%
Pizza
10%
Other
5%
Steak Dinner House Sandwich Cafeteria Chicken
Hotel Family Pizza Other

STRATEGY TWO
The Outback should differentiate their-self from the Dinner House market by adding a take-
out/drive-through section to their already successful restaurant services.
By constructing and connecting a specialized take-out addition to the kitchen, the
Outback enters a new market. With a takeout business unit added to the Outback you can
increase profits. The Outback already offers the same menu items in a to-go package but it is
not widely known or used. The proposed addition should be connected to the kitchen so as
to increase speed. The addition would have a pull up window and all orders must be called-
in in advance. This would add to the consumer service aspect of the strategy. The target
market would be local businesses for those Outbacks that are open for lunch and local
residents who wish to dine at home for dinner (there are many). The idea behind this
concept is for the consumer to call ahead with the order and when they arrive at the window,
the order is ready.
The only costs involved in this alternative are the building costs. Although these costs
would be high initially, the investment would pay off in the future due to the excellent
potential for sales and therefore profits. Additionally, by entering the takeout market, you
diversify and therefore reduce portfolio risk.
Guestimated cost per drive through unit addition $3,000
A guestimated increase of 70 entrees per week at a $14 per person average equals increased
sales of $51,000 per store.
$51,000 per store times 230 stores equals $11.7 million in increased revenue at a 14% net profit
margin before income taxes means $1,642,200 in the pocket before taxes for spending only
$690,000.

STRATEGY THREE
The Outback should include more ‘secret’ healthy menu selections while practicing a regional
menu engineering strategy.
The idea behind ‘secret’ healthy menu items is simple. The perception of many
consumers is that healthy menu items do not taste good. In addition, by offering menu items
that are not as bad for you is a proactive strategy. By educating the employees of the new
healthy menu items which are on the menu but secret, those consumers wishing for healthy
menu items need only to act like they are health conscious.
For example, I am currently a waiter at an Outback and many consumers are asking
for no butter on their menu selections. By doing this what else is being added to help with
flavor enhancement? Nothing at this time. The Outback also offers one healthy menu item
which might have a 30% repeat rate (the pasta pemberton). There are many ways to create
healthy menu items without making them taste so bad and I doubt a Creole chef would have
any idea how to do so.
I will tell you right now, that the generation ahead of me, my generation (I am 25) and
all generations behind me are health conscious. The Outback currently throws butter on
everything and flat grills their steaks while ladling them in butter. As an example, the
Outback Special has 144 grams of fat (Newsweek). Imagine if someone decides to target the
Outback as some of the worst food for you on the planet, they wouldn’t have a hard time
proving it and I doubt the publicity would be good.
Before beginning with the menu engineering section, the need to implement regional
menu items should be substantiated. As the Outback stands now, there are no menu
differences throughout the United States. The costs of this strategy may outweigh the
savings. For example, here in Las Vegas we get many spice complaints and as a reactive
response the server must now warn everyone who eats at the Outback. Also, we get many
requests for rice. A cheap healthy substitute to french fries, loaded potatoes, and butter filled
vegetables. By catering to region, the Outback would be using a more long-term strategy.
California, for example, is not very receptive to the Outback concept. Research should be
done as to why that is.

By adding new healthy menu items in addition to regional menu items in certain test
markets while practicing a menu engineering strategy, you can test your success/repeat rate
as well as your contribution margin.
Menu engineering is a marketing oriented approach to the evaluation of current and
future menu pricing, design, and content decisions. The unique feature of menu engineering
is its ability to classify menu items; not only based on menu selling price, but also based upon
the menu sales mix. It is the incorporation of these factors that will help insure proper menu
selection on the new Healthy Choice dishes as well as re-engineering certain dishes at the
regional level. In essence, menu engineering requires management to orient their-self toward
the number of dollars that a menu contributes to profitability, not just total cost percentage
monitoring. In other words, menu engineering is primarily concerned with the achievement
of target cost percentages.
The menu engineering approach requires that attention be focused on three critical
elements (Kasavana, 82):
• Consumer Demand - the overall number of consumers served.
• Menu Mix (MM) - an analysis of consumer preferences in
menu item selection (related to demand elasticity).
• Contribution Margin (CM) - an analysis of the contribution
margin (gross profit) for each menu item (related to price elasticity).
Once the contribution margin and the menu mix percentage is calculated, ranking and
classification occurs (as shown in the table on this page along with the modified BCG
Portfolio Matrix on the following page).
Pre-Matrix Table
CM MM% Classification
High High Star
Low High Plowhorse
High Low Puzzle
Low Low Dog

STARS
These are the most profitable items on a menu and may be a restaurant's prestige or
signature item. Decision action appropriate for STARS are:
• Maintain rigid specification for quality, portion size, and presentation.
• Locate this item in a highly visible position on the menu.
• Test for price elasticity.
PLOWHORSES
These menu items are relatively popular; however, they yield lower contribution
margins than the menu's average contribution margin. Plowhorse items are often demand
generators and are important to a restaurant's appeal to the price conscience market segment.
Decision actions for these items include:
• Test for price sensitivity
• Relocate to a low profile on the menu
• Combine with low cost items to achieve greater profit
• Consider portion reduction
The BCG Matrix

PUZZLES
These items yield high contribution margins but are low in popularity. The
appropriate decision actions suggested for puzzles are:
• Take the item off the menu
• Reposition and feature the item in a more popular location of the menu.
• Rename the item
• Decrease the price
DOGS
These items are the menu's losers - they are unpopular and provide a low contribution
margin. Dog decision actions are:
• Take the item off the menu.
• Use tight control methods on portions and cost.
• Keep item in inventory for requests only
As you can see, an excellent method of insuring profit, and an even better method for
evaluating the new healthy menu items as well as regional menu items. There is little cost
except in training and supply acquisitions; and by having a great diversity in food items, you
attract a larger consumer market. In addition, there is an excellent opportunity for profit that
is practically guaranteed.

STRATEGY FOUR
The Outback should intensify their related market expansion efforts.
The Outback is currently diversifying their organization by entering the casual
Italian dinner market. The Outback currently has a 50% interest in twelve of these
restaurants which are named Carrabba’s Italian Grills. They are currently in the
development stage but show promise. By intensifying the expansion on Carraba’s Italian
Grills the Outback reduces their portfolio risk. In addition, this will strengthen the company
when the Outback begins to mature and needs a revitalization strategy implemented.

STRATEGY FIVE
The Outback should change their site selection strategy from buying B-sites to buying high-end
B-sites & low-end A-sites while reducing their market saturation strategy.
Currently, the Outback practices a site selection strategy that requires a 1.7 acre lot
that costs no more than $600,000 -- a B-site. The total package for an Outback being about $1
million plus land. This total package must promise a return of 2 to 1 per year. The reasoning
behind this strategy is strong but not in line with long-term thinking.
The Outback believes they do not need A-sites located near down-town areas because
they are not open for lunch and the suburban B-sites do quite well. I would like to argue that
the suburban B-sites do quite well because of the quality of food and service the Outback
offers. For each Outback, the word of mouth advertising is immense. For this reason, I
believe the Outback strategy to be short-sighted. When the competition comes from behind
in a fast manner and chooses A-sites while offering a similar or even better product, then the
Outback B-sites have become functionally obsolete.
In congruence with the site selection strategy, the Outback practices a market
saturation strategy which is also short sighted. Again, once competition moves in with a
strong product, the consumer is given more to choose from. As it stands now, the Outback is
pretty much the casual steakhouse in every market.
The combination of these two strategies gives cause to worry about one very
important aspect that may have been overlooked. This one aspect is the cost of closing down
an actual Outback unit. One Outback unit with boards on their windows can destroy an
entire market. In fact, McDonalds will actually operate a store at a loss to prevent such a
circumstance. The reason is simple, the consumer will ask him or herself how could such a
thing happen and come to the conclusion that the Outback must be going downhill for some
bizarre reason. That is all the consumer has to think. You see, this one image in the mind of
the consumer can destroy the entire market the Outback has tried so hard to capture.

As an example, I will use the four (soon to be five) Outbacks located in the Las Vegas
area. There are currently four units in operation with the Flamingo & Pecos store being only
4.5 miles away from the Green Valley location. The rest being aproximately ten to fifteen
miles apart in a triangle formation. They will soon add a fifth in the Lakes area which will be
similar in distance.
LAS VEGAS AREA OUTBACKS
Land Cost Location YTD sales (June 30, 1995)
$485,000 Flamingo & Pecos $1.4 million
$455,000 Sunset in Green Valley $1.5 million
$475,000 Rainbow & I-95 $1.7 million
$575,000 Flamingo across from Rio $1.9 million
By having five units in the greater Las Vegas area, there is no doubt that the market
has been saturated. Secondly, by using the four units above as a basis for comparison we see
that the best site, the Rio location, may be considered a high-end B-site or a low-end A-site
due to its cost as well as its prominent location directly on Flamingo next to the Strip &
located directly across from a prominent Hotel/Casino.
By spending an extra $100,000 on land the store sales increase approximately $900,000
per year of which 14% is considered Net Profit Margin before Income taxes. So, project A
will be the low-end A-site costing $1.6 million & returning $3.8 million in sales per year for
five years and project B will be the B-site costing $1.5 million & returning $3 million in sales
per year for five years. Internal Rate of Return over a five year period for project B is
$10,299,600 and for Project A is $13,046,160. A NPV of $3 million more for project A. Enough
said!

• RECOMMENDATIONS •
I believe, and strongly recommend, that the Outback implement all five strategies.
The Outback should intensify national expansion efforts through business format franchising
while investigating the international market further; they should add on a take-out/drive
through section; they should create ‘secret’ healthy menu items while practicing a regional
menu engineering strategy; they should intensify their related market expansion efforts
through the Carrabba’s Italian Grill expansion; and they should alter their current site
selection strategy. As shown in the strategy evaluations, all the strategies have excellent
potential profit, they all reduce portfolio risk, and they all are relatively inexpensive.
Each and every strategy can be initiated now, however, it would be wise to test the
drive-through concept before complete implementation. The only major roadblock to
implementing all these strategies is the amount of manpower and time needed. These
alternatives will require a great amount of analysis and evaluation. They must be
implemented with extreme care.
Again, all the strategies need to be implemented as soon as the time and cash allows.
All are relatively easy and all are excellent avenues for growth!

• THE OUTBACK STEAKHOUSE INC. UPDATE •
(Merrill Lynch, July 31, 1995)
Second Quarter of 1995
“Ossi’s favorable performance illustrates its sustainable leadership position in the
casual dining sector. The Outback Steakhouse concept’s broad appeal and value product
continues to capture market share as measured by same store sales gains (+1/4%), despite its
enviable $3.3 million average unit volume. We are encouraged by the concept’s in new
markets which is further evidence of its broad appeal. Management also noted that the
southern California units have been improving after a prolonged period of regional economic
weakness.
However, rising labor (+0.8% of revenue) and food (+0.6% of revenue) costs offset the
sales leverage and pressured margins. The operating margin declined 0.8% to 15.8%. Labor
pressures are expected to continue due to 1) unit expansion into tighter labor markets, 2)
employee health insurance and 3) Carrabba’s expansion with labor costs at 30% of sales vs.
20% at Outback Steakhouses. The favorable trend in food costs was interrupted by a
relatively poor onion crop, augmented by California floods which pressured produce prices
during the quarter. We believe these one-time events will not impair the favorable trend in
food costs.
Management has re-engineered Carrabba’s menu to generate a more competitive
average check ($16.25) and offer a mix of entrees which improves labor productivity and
increases table turns. Management is encouraged by the favorable customer response but
there is room for improved sales and margins before the concept is as attractive an expansion
vehicle as Outback Steakhouse. The recent crop of 4 units are producing $2.5 million
annualized sales volumes and the cost structure (higher labor, lower food) provides greater
operating leverage (vs. Outback), benefiting from employee productivity and table turns.
However, a $3 million annual sales level at the current cost structure would generate
comparable margins to Outback. While we are encouraged by the Carrabba’s concept, we
don’t foresee a significant earning impact until 1997.”

page A
•APPENDICES•
HORIZONTAL ANALYSIS OF THE CONSOLIDATED STATEMENT OF INCOME
1994 94 1993 93 1992 92
REVENUES.............................................. $451,916,000 2.38 $309,749,000 1.64 $189,217,000 1.00
COSTS AND EXPENSES
Cost of revenues................................. 175,618,000 2.39 121,290,000 1.65 73,475,000 1.00
Labor and other related expenses....... 95,476,000 2.58 65,047,000 1.75 37,087,000 1.00
Other restaurant operating expenses.. 93,265,000 2.15 64,603,000 1.49 43,370,000 1.00
General & administrative expenses.... 16,744,000 1.83 12,225,000 1.33 9,176,000 1.00
(Income) from operations of affiliates (1,269,000) - (333,000) -
379,834,000 2.33 262,832,000 1.61 163,108,000 1.00
INCOME FROM OPERATIONS.................... 72,082,000 2.76 46,917,000 1.78 26,109,000 1.00
NON-OPERATING INCOME (EXPENSE)
Interest income.................................. 512,000 .36 1,544,000 1.08 1,428,000 1.00
Interest expense................................. (424,000) 1.18 (369,000) 1.03 (360,000) 1.00
88,000 .08 1,175,000 1.1 1,068,000 1.00
Income Before Elimination of Minority
Partners’ Interest and Income Taxes 72,170,000 2.66 48,092,000 1.77 27,177,000 1.00
Elimination of Minority Partners’ Interest 11,276,000 2.76 7,378,000 1.80 4,094,000 1.00
Income Before Provision for Taxes.. 60,894,000 2.64 40,714,000 1.77 23,083,000 1.00
Provision for Income Taxes....................... 21,602,000 3.18 13,922,000 2.05 6,802,000 1.00
Net Income.............................................. $39,292,000 2.41 $26,792,000 1.65 $16,281,000 1.00
Earning per Common Share...................... $0.89 2.28 $0.61 1.57 $0.39 1.00
Weighted Average Number of Common
Shares Outstanding........................... 43,997,000 1.06 43,738,000 1.05 41,504,000 1.00
PRO FORMA:
Provision for Income Taxes....................... 22,286,000 2.70 15,472,000 1.88 8,245,000 1.00
Net Income.............................................. $38,608,000 2.60 $25,242,000 1.70 $14,838,000 1.00
Earnings per Common Share..................... $0.88 2.44 $0.58 1.61 $0.36 1.00

page B
VERTICAL ANALYSIS OF THE CONSOLIDATED STATEMENT OF INCOME
1994 94 1993 93 1992 92
REVENUES.............................................. $451,916,000 100 $309,749,000 100 $189,217,000 100
COSTS AND EXPENSES
Cost of revenues................................. 175,618,000 39 121,290,000 .39 73,475,000 .39
Labor and other related expenses....... 95,476,000 .21 65,047,000 .21 37,087,000 .20
Other restaurant operating expenses.. 93,265,000 .21 64,603,000 .21 43,370,000 .23
General & administrative expenses.... 16,744,000 .04 12,225,000 .04 9,176,000 .05
(Income) from operations of affiliates (1,269,000) - (333,000) - -
379,834,000 .84 262,832,000 .85 163,108,000 .86
INCOME FROM OPERATIONS.................... 72,082,000 .16 46,917,000 .15 26,109,000 .14
NON-OPERATING INCOME (EXPENSE)
Interest income.................................. 512,000 1,544,000 1,428,000
Interest expense................................. (424,000) (369,000) (360,000)
88,000 1,175,000 1,068,000
Income Before Elimination of Minority
Partners’ Interest and Income Taxes 72,170,000 .16 48,092,000 .16 27,177,000 .14
Elimination of Minority Partners’ Interest 11,276,000 .03 7,378,000 .02 4,094,000 .02
Income Before Provision for Income
Taxes..
60,894,000 .13 40,714,000 .13 23,083,000 .12
Provision for Income Taxes....................... 21,602,000 .05 13,922,000 .05 6,802,000 .04
Net Income.............................................. $39,292,000 .09 $26,792,000 .09 $16,281,000 .09
Earning per Common Share...................... $0.89 $0.61 $0.39
Weighted Average Number of Common
Shares Outstanding........................... 43,997,000 43,738,000 41,504,000
PRO FORMA:
Provision for Income Taxes....................... 22,286,000 .05 15,472,000 .05 8,245,000 .04
Net Income.............................................. $38,608,000 .09 $25,242,000 .08 $14,838,000 .08
Earnings per Common Share..................... $0.88 $0.58 $0.36

page C
LIQUIDITY
1991 1992 1993 1994
0
2
4
6
8
10
12
14
1991 1992 1993 1994
Current Ratio
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.
1991 1992 1993 1994
0
2
4
6
8
10
12
1991 1992 1993 1994
Quick Ratio
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.

page D
PROFITABILITY
1991 1992 1993 1994
0
0.5
1
1.5
2
2.5
1991 1992 1993 1994
Asset Turnover Ratio
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.
1991 1992 1993 1994
0
0.05
0.1
0.15
0.2
0.25
1991 1992 1993 1994
Profit Margin Before Income Tax
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.

page E
1991 1992 1993 1994
0
0.05
0.1
0.15
0.2
0.25
0.3
1991 1992 1993 1994
Return On Total Assets (Dupont)
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.
1991 1992 1993 1994
0
0.05
0.1
0.15
0.2
0.25
0.3
1991 1992 1993 1994
Return on Common Equity
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.

page F
SOLVENCY
1991 1992 1993 1994
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1991 1992 1993 1994
Debt Ratio
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.
1991 1992 1993 1994
0
50
100
150
1991 1992 1993 1994
Times Interest Earned Ratio (EBIT)
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.

page G
1991 1992 1993 1994
0
0.5
1
1.5
2
2.5
3
1991 1992 1993 1994
Debt/Equity Ratio
Outback
Lonestar
Longhorn
Bugaboo
Industry Avg.

page H
•ACTION PLAN•
Action Explanation-Reason-Logic By Whom Timing
FRANCHISING Secure Leadership Market Position in
short-term then buy back later.
Immed.
IncreaseProfit
Increase Shareholder Wealth
TAKE-OUT/DRIVE-THRU Related Diversification Test
Increase Sales Volume/Profit
MENU ENGINEERING Diversify Menu Regionally Immed.
Strengthen Market Position
SITE SELECTION Decrease Market Saturation Immed.
Strengthen Long-term Market Position
RELATED DIVERSIFICATION Reduce Financial Risk Immed.
Increase Sharholder Wealth

page I
•CITED AND UNCITED REFERENCES•
Dun & Bradstreet Credit Service. Strategic Industry Study - Restaurant. 1985
Troy, Leo. Almanac of Business and Industrial Financial Ratios. 1995 pages 10-19 and 257
Annual Report. Outback Steakhouse, Inc. 1994
Hayes, Jack. Company Profile: Outback Steakhouse Nation’s Restaurant News. March 27, 1995
pages 51-86
Gibson, Charles H. Financial Statement Analysis 1995
Andrew, William P & Schmidgall, Raymond S. Financial Management for the Hospitality
Industry 1993
Schmidgall, Raymond S. Hospitality Industry Managerial Accounting 1990
Investext 1. Complete Company Records on the Outback Steakhouse, Inc. 12/31/93
Investext 2. Complete Company Records on Longhorn Steaks, Inc. 12/31/93
Investext 3. Complete Company Records on Lone Star Steakhouse & Saloon, Inc. 12/31/93
Certo & Peter. Cases In Strategic Management. 1988
Hunger & Wheelen. Strategic Management. 1993
Kahn. Restaurant Franchising. 1992
Kasavana. Menu Engineering. 1982

Outback Strategic Study & Financial Analysis: 1995

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