Outback Steakhouse

Case study

Outback Steakhouse

Dated:10/18/2007

Submitted by

Bharat Koganti

Outback Steakhouse was one of the fastest growing restaurant chains in North America that maintained high quality of food and service, and a relaxed ambience.

The major role, I would say, of Outback in the industry is 'being more of an analyzer'. It has gone around the world and seen that many of the companies that have gone global did not actually have a set strategy. It has also adopted an Australian theme by providing not only excellent food but also a cheerful, fun, and comfortable experience. It has learnt from its competitors, the industry, and its local and international customers who have variety of preferences. This as a result, has made them form their own strategy or their own way of doing business that actually has no rules but what is done should be right so as to meet the needs and preferences of customers. Outback does not start up business anywhere. It is basically located in residential areas(rather than downtown) but only where there is enough transportation and communication so that they don't run out of customers, raw materials and make unnecessary delays. It realized that it would be facing market saturation soon and so it analyzed its future in the international business as it saw some casual restaurants that have gone outside the United States and consequently hiking up their average sales, which was in fact way above their average sales in the United States.

Outback's Strategy:

Outback has positioned itself as a place providing not only excellent food but also a cheerful, fun, and comfortable experience. It has differentiated its restaurants in many quality ways.

It offers enough and generous quantity in each of their items they serve at moderate prices. It offers only dinner services which reduces the cost and hours of restaurant management and employees. Reducing hours proved more quality in their service. This would stop them from being tired and stressed. This would make them stay longer in their jobs, become familiar with their regular customers' preferences and learn to operate as teams. Moreover, customers would prefer and be happier to see a familiar face.

Outback has always hired experienced managers and even retained the good ones by providing them the opportunity to purchase a 10% interest in the restaurants they manage.

Above all quality of food was the most important to them and which was the central to its differentiation. The quality starts right from the raw materials supplied. Outback's food costs were among the highest in the industry. Outback followed "No rules, just right" so that employees would do whatever is needed to meet the needs and preferences of customers. This resulted in 'Outback' being very flexible at their service. Outback believes that customer, employee and the table is integrally related and each should be given equal importance. The staffs should be full and trained so as to provide the best service. Outback believed in giving the privilege to customers to set the pace for the meal, and not to the server or the kitchen staff.

Outback has an unusual management and ownership style. Each restaurant is headed by a managing partner. A regional manager called a 'Joint venture partner' (JVP) manages 10 to 20 restaurants within an area. In order for them to be committed in running the business they must invest a certain amount of money into the business. The managing partners focus on operations and community relations, whereas, the Joint Venture partners focus on monitoring performance, finding and developing news locations, and identifying and developing new managers, managing partners and even JVPs like themselves.

As outback has a very distinct business strategy and belief, it was very careful in making its choice of franchisees so as to ensure that all were committed to Outback's principles and beliefs.

Outback's 'no rules' commitment has resulted in them in innovation and improvement because this has helped them in being flexible by bringing new ideas and making changes. The servers and kitchen staffs usually bring ideas coming from their work situations and requirements and suggest them to their managers. If the managers and JVP approves, abiding by the company standards, then each is free to take it or not.

Outback has almost answered most of their questions relating to entrepreneurial, engineering and administrative. As an engineering perspective, Outback has brought necessity, comfort, and relaxation among employees as well as customers. In order to make faster service for customers and minimize stress among staffs, the management has made all their kitchens at least 2,500 square feet and also kept lots of cool air flowing through them. These kitchens occupy half of the typical Outback restaurant's floor space. The managers have hired competent and experienced staffs so as to provide their quality service. For the customers, the ambience was exquisite, fun, and comfortable.

Outback created an entrepreneurial climate among its staffs in order to emphasize on learning and personal growth.

Its administrative part was unusual and done in a neat way. Each of the managers and JVPs in Outback are entitled to invest certain money so that their financial contribution would make them committed investors in the business that they will be running. The managing partners focus on operations and community relations, whereas, the JVPs focus on monitoring, finding and developing new locations, and identifying and developing new managers. This would help them be strong in management and be competent enough.

Porter's five forces

* Buyer's power:

Food is a basic necessity for everyone. But the way in which it is served to customers is different in every restaurant. Better service attracts customers which would attract them in coming back to the same restaurant. Likewise, the ambience, comfort, fun is also considered a lot by every buyer. An excellent service along with moderate prices and generous portion of meal is an optimal way of attracting customers in this industry.

Once a bad service is shown, such as