Outback Steakhouse’s largest U.S. franchisee filed for Chapter 11 protection, putting 61 restaurants in five Western states into bankruptcy proceedings as its debt reached approximately $449 million.
San Diego-based Out West Restaurant Group, which also operates under the name Cerca Trova Restaurant Group, made the filing in Delaware on Monday. Its locations are expected to remain open while the case moves forward, so customers may see little immediate disruption even as the company’s ownership and finances come under court supervision.
The numbers explain why the filing matters. The company’s debt increased from $269 million in 2020 to about $449 million in 2026. At the same time, customer traffic and earnings weakened. Revenue also fell approximately 35% during the COVID-19 pandemic, adding another severe hit to a business already facing rising expenses.
The Franchisee Was Squeezed by Falling Sales and Rising Costs
CEO David Goronkin described the pressure in court filings: fewer guests and weaker earnings arrived while food, labor, and other production expenses kept increasing. The company therefore faced a damaging combination, with less money coming in and more money required to operate its restaurants.
California has been especially difficult for the franchisee because more than half of its employees work there and the state’s minimum wages have been rising. That exposure made labor costs a major part of the financial strain, on top of food and other operating expenses.
Bloomin Brands Offers a Possible Exit
Bloomin Brands, Outback’s parent company, has offered $26.3 million for the franchisee’s assets and up to $5.5 million in emergency financing. The proposal gives the struggling operator a potential source of cash while the bankruptcy case is handled.
Bloomin Brands has characterized the trouble as an isolated franchisee issue rather than a problem involving the entire company. The 61 restaurants are expected to keep operating during the proceedings, but the future of the locations will depend on what happens with the proposed asset deal and the court process.
The Restaurant Industry Is Taking Another Hit
The Out West filing arrived only weeks after Meritage Hospitality Group, one of Wendy’s largest franchise operators, sought Chapter 11 protection on September 17. Meritage reported a $31.5 million loss in 2025 and another $23.1 million loss during the first half of 2026.
That company pointed to soft sales, heavy discounting, and poor marketing as contributors to its losses. Persistently high beef prices added to the pressure. Coming so close to the Out West case, the Wendy’s franchisee’s collapse suggests that financial stress is not limited to one restaurant brand or one cost category.
Why It Matters
These filings matter because they show how quickly a familiar restaurant operation can become financially unstable when weaker traffic collides with higher costs. Employees, customers, franchise owners, and parent companies all have a stake in what happens next. The restaurants are expected to stay open, which offers some immediate continuity, but bankruptcy still creates uncertainty around ownership, investment, and long-term operations. The proposed purchase and emergency financing may provide room to reorganize, yet neither one by itself answers whether the business can restore a healthier balance between sales and expenses.
At the broader industry level, the two cases point to a difficult equation for casual dining. When fewer people visit, discounting can pressure sales further, while wages, food, and other operating costs continue to consume more of each dollar earned. That does not establish that every chain faces the same outcome, and Bloomin Brands has described the Out West problem as isolated. It does show why the filing deserves attention beyond one company: restaurants can remain open to the public even while their financial structure is being rebuilt. The unresolved issue is whether new money and a possible asset sale can address the operating pressures that produced the debt in the first place.
Source: The Liberty Daily
