OUTBACK STEAKHOUSE: GOING INTERNATIONAL 1. BACKGROUND: _ Outback Steakhouse is an American casual dining restaurant chain based in Tampa, Florida with over 1200 locations in 22 countries throughout North and South America, Europe, Asia, and Australia. It was founded in February 1988 in Tampa by Bob Basham, Chris T. Sullivan, Trudy Cooper and Tim Gannon, and is now owned and operated in the United States by OSI Restaurant Partners, and by other franchise and venture agreements internationally. _Canadian Outback restaurants began in 1996. In March 2009, Outback Steakhouse Canada abruptly closed all nine locations in the province of Ontario, citing poor economic conditions. In June 2009, an Outback restaurant reopened in Niagara Falls, but has since closed. After closing one location in 2012 and a second in 2013, only one Outback location in Canada continues to operate in Edmonton, Alberta. _ In 1997, Outback entered the South Korean market through the franchise agreement with Aussie Chung Inc. Currently, there are 101 Outback Steakhouse locations throughout South Korea. On June 14, 2007, OSI Restaurant Partners completed a stock repurchase plan, and the company is now privately held. _ In April 2012, Bloomin' Brands, the current owner of Outback Steakhouse, filed with the SEC to raise up to $300 million in an initial public offering. 2. OUTBACK’S START-UP STRATEGY _ The Company's strategy is to differentiate its restaurants by emphasizing consistently high-quality food and service, generous portions at moderate prices and a casual atmosphere suggestive of the Australian Outback. 3. DIFFERENTIATION STRATEGY – ANALYSE WITH 4 PERSPECTIVE OF BALANCE SCORECARD i. Outback differentiate itself by the excellence of its food and by offering a dining experience that would be cheerful, fun, and comfortable ❖ Quality performance: • Because of the food of Outback steakhouse chain story are made from raw meterials, so quality of food is paramount. The costs for raw meterials of Outback were among the highest in the industry. • Besides that their emphasis on quality extended to service, their “Principles and beliefs” was “No rules, just right”, it means employees would do whatever was needed to meet the needs and preferences of customers. • Quality and service were achieved through a management model which contrasted sharply with that of most other restaurant chains. ❖ Staff training: • Because they belive that customer, employee and table are integrally related. • Sepecifically, outback’s management model and approach reflect the importance they place on fighting employee turnover. One of their catchphrases is “fully staffed, fully trained”. Because they belive that customer, employee and table are integrally related. • The employee who stay for a long time in their jobs, they have time to master their jobs, become familiar with their regular customer’s preferences and learn to operate as teams; that the combination of mastery, memory, and calm is more likely to afford customers themselves a relaxing, enjoyable experience; and that diners who are not hustled thrugh their meals are more likely to come back. • In short, low employee turnover leads to well-paced table turnover, which ultimately leads to low customer turnover. ❖ Speed: • Outback never assign their servers to cover more than three tables; the industry standard is five or six… a wide range of customer choose to dine with outback on a variety of occasions…it has to be the customer who sets the pace for the meal, not the server of the kitchen staff. But for that to happen their servers need time to firgure out the mood and expectations of a given table on a given evening, and the kitchen has to be well enough staffed and equipped to turn around orders without delay. ❖ Range of product: • All of Outback’s kitchens are at least 2500 square feet and keeping lots of cool air flowing through them. The kitchen occupy half of the typical casual restaurant, because of they want to offer a bigger menu than the typical casual restaurant, so they give the cooks and prep people the space to pull it off. ❖ Cost reduction: • First, to reduce the hidden costs of longer hours of opening: the cost of extra staff and employee turnover, Outback decide to serve only diner. Futhermore, the disruptive effects of shift changes, and the fact that employees who worked lunchtime would be tired in the evening, the time when they needed to be at their freshest. Similarly for the food: food prepared in the morning would lose its freshness by evening • Second, “The suburbs are our outback”, Outback located in residential areas rather than downtown. This reinforced the merits of evening-only opening, kept rents low, and encouraged cutomer and employee, loyalty. ❖ Supplier relation: • Because of the quality of raw materials, Outback viewed suppliers as partners and was committed to work with them to ensure quality and to develop long-term relationships. ❖ HR development: • Outback’s management and ownership structure was unusual. Each of Outback’s directly owned restaurants was a separate partnership where Outback Steak house, Inc. was the gneral partner owning between 71% to 90%. Each restaurants was headed by a “managing partner”, while between 10 and 20 restaurant within an area were overseen by a regional manager, who has call a “joint venture partner” or “JVP”. • All managing partners, most of whom start as hourly employees, must invest $25000 of their own money, not because Outback needs the capital, but because their financial contributions mcke them committed investors in the bussiness they will be runing. • Outback’s JVPs, who number around 60, must invest $50000. whereas the managing partners focus on operations and community relations the Japes focus on monitoring performance, finding and developing the new locations, and identifying and developing new manager managing partnersm and Japes like themselves. The Japes are the only management layer between the six operations executives at headquarters and the managing partners at the individual restaurants. • HR management was also distinctly different from most restaurant chains’. Outback’s approach is “tough on results, but kind with people”. Employee selection was rigorous and included aptitude tests, psychological profiles, and interviews with at least two managers.The goal was to create an entrepreunerial climate that emphasize learning and personal growth. All employees were eligible for health insurance and the company’s stock ownership plan. All employees were expected to contribute to continuos innovation and improvement. 4. Why go international? _ Since the creation in 1988, Outback Steakhouse Inc had been very successful. But, “Us market could accommodate at least 550-600 Outback Steakhouse restaurants”. The company is use to open 70 new stores annually. In 4 to 5 years, the US market would be saturated. As a consequence, the growth is not sustainable in the US market. When Outback go international, they can increase global market share i. Use basic financial perspective (Net income): • Financial health was in good condition for bussiness development. From 1990 to 1994, the average yearly increase in Net income was 202%, but in 1995 was 141% due to saturation. • The international market offers the unlimited growth opportunities for the development of Outback. The US market is too small for the sucessful dinning concept of the company. Besides that, some casual restaurants chains already located outside US usually get more profit than what they were getting from US market. 5. HOW OUTBACK WILL OVERCOME AND/OR RESOLVE THE HIGHLIGHTED OVERSEAS EXPANSION PROBLEMS/ISSUES ENCOUNTERED BY US RESTAURANT CHAINS, TO ENSURE SUCESSFUL STRATEGY IMPLEMENTATION i. Encountered Problems Overseas of other restaurant chains: ❖ Market demand: • Disposable income of customers • Urbanization • Demographics • Host social, economic and lifestyle factors • National preferences – Adaptation to local differences necessary ❖ Cultural and social factors • Critical influences on customer preferences with regard to menus, restaurant facilities and overall ambience • Different employee management practices • Different entrepreneurial potential ❖ Infrastructure • Transportation • Communication • Basic utilities such as power and water • Locally available supplies were important elements in the decision to introduce a particular restaurant concept • Ability to get resources to its location o Raw materials for food preparation o Equipment for manufacture of food served o Mobility for employees and customers essential ❖ Raw material supplies _ Need of local supplies of food and drink _ Problems finding supplies in: * Sufficient quantity * Of consistent quality * At stable prices _ Physical distance can adversely affect a franchise concept and arrangement _ Long distances create communication and transportation problems * Complex process of sourcing supplies * Overseeing operations * Providing quality management services to franchisees _ Build up own Supply Chain costs: * Management Time * Money and could be substantial ❖ Regulations and trade restrictions • Import restrictions are relatively unimportant, when food is locally sourced • Import of Restaurant equipment sometimes difficult and expensive • Restrictions on foreign direct investments only in developing countries • National regulations relating to food standards, business licensing and business contracts (far more challenging) • Establishing new business in other countries then US is more difficult acc. to regulations • Franchise Agreements = difficult area o Complex contractual agreements between franchisor and franchisee o Regarding trademark licensing, royalty payments, requirements for Quality Control and Quality Monitoring o Mostly no restrictions on franchising of foreign countries published and usual franchise terms are viewed as restraints on commerce • Employment laws, restrictions and system o Dismiss or lay off employees o Requirements for union recognition and national bargaining arrangements over wages and work conditions ii. Outback’s SWOT analysis ❖ Strength • Excellent in Human Resource • Differentation strategy ❖ Weaknesss • Narrow product line – restricting main product to beef • Lack of innovation • Hours of operation • Serving only dinners ❖ Opportunity • Diversify menu offering • Vertically integrated backwards • Expand bussiness internationally ❖ Threat • Economic downturn • New entrance will be coming up with new innovations • Relaxed structure may not work well in nation that respect hierarchy • Health cocerns over red meat consumption

iii. Porter’s five forces analysis ❖ Threat of new entrances: High • The risk is very high in the restaurant industry • Low capital investments required to enter • Competes with the casual diners , fast food chains and super markets • High-end grocery stores offer variety of complete meals • Costs customer absolutely nothing to switch to a different restaurant ❖ Intra-industry competition: High • Restaurant industry is fragmented • Many global and local chains operating in industry ❖ Buyer bargaining power: High • Customers have a lot of options to choose from • The buyers do not depend on the supplier ✓ They can purchase from anyone ✓ Unless if they have an alliance with supplier as in the case of Outback Steakhouse

❖ Supplier bargaining power: Medium • The suppliers are many • Products they supply can be supplied by many others ❖ Threat of substitutes: High • Any restaurant can satisfy the customers' need (the need to satisfy hunger) • Diner segment, fast food chains and grocers, who have comparably, lower prices • Outback Steakhouse decreases this threat by adding distinctive competencies: ✓ Cheerful Environment ✓ Delicious Food ✓ Affordable Prices iv. The international expansion strategy ❖ Find the right franchisee partners • Franchise the international operation with domestic company owned stores HERE and franchisees THERE (abroad) • Biggest decision is how to pick the franachise partner. "We are going to select a person who has synergy with us, who thinks like us, who believes in the principles and beliefs." I have learned that people (in other countries) think very different than Americans. • Finding the right franchisee is difficult, because Outback Steakhouse is not present in countries abroad o Intensive control of standards necessary o Regulations and trade restrictions in foreign countries • Nevertheless interviews of applicants possible in the US for abroad or in the Internatinally. ❖ Focus on the strength • Suppliers have to check to build up plants abroad o Outback wants to be a opportunity for their suppliers internationally o Outback has a high loyality to their suppliers (never changed suppliers) and expecting the same of them • Forcing suppliers to build up plants abroad could exceed their abilities o Bankruptcy of suppliers could lead to shortage of supply abroad and in the US Large distance abroad, instead of nearer location to USA leads to higher cost and being present at the location abroad • Easier handling and control of suppliers closer to home country (e.g. Canada, Mexico or Latin America) • Searching of new supplier abroad would increase costs due to controlling, bulding-up same understanding of business and quality, to get same standardand "to get together". • Only to support operation instead of active handling and providing solutions for franchisees the "going international" project will not succeed ❖ Geographical expension • First close to home, then tackle latin america and the FarEas • Going International as very long-term project: o "The first year will be Canada. Then we'll go to Hawaii. Then we'll go to South America and then develop our relationships in the Far East, Korea, Japan ... the Orient." o "The secound year we'' begin a relationship in Great Britain and from there a natural progression throughout Europe o Connerty believed that his experience in developing outback Franchisees in the US would provide the guidelines for overseas expension 6. CONCLUSION: _ The strategies to build long-term relationships with suppliers and the treatment of employees will be transferable because host countries want the companies to spend money when they expand abroad. _ To maintain the image, as a semi-upscale diner the company cannot overcrowd areas with many restaurants, this will take away from the image. This is a good strategy to keep when expanding internationally, because it will still be focusing on the middle to upper class crowds at dinnertime. _ Since Outback has already developed and sustained relationships with suppliers in the U.S., they could opt to keep these suppliers as long as they are willing to move internationally with Outback. However, Outback must remember that if these suppliers move internationally, they will need to deal with many issues as well that may limit their areas of expansion.