Major Steakhouse Announces The Closure Of 41 Locations

The economy has been experiencing significant ups and downs over the last several years. This has led to businesses having to make challenging decisions, despite how popular, or not, they might be. 

Unforeseen Economic Instability

Ever since the start of 2020, the economy has been subjected to unforeseen instability. Prior to the COVID-19 pandemic, the economy was booming, a fact that then-President Donald Trump was using to push his re-election campaign that winter.

The economy threw a wrench in those plans, though. Massive closures of entire state economies caused significant damage to the United States GDP, though not all states were affected equally. Some states escaped the pandemic with relatively little damage, while others were affected significantly.

Nevada Suffered Greatly

States like Nevada were among those that were greatly affected by the pandemic. The gambling industry and hospitality industry are the primary drivers of state income in Nevada, and when it became clear that the new virus was  spread through person-to-person contact, Governor Steve Sisolak made the decision to shut the gaming industry down. 

This was one of the only times in Nevada’s gaming history where all of the casinos in the state were shut down at the same time, and both the Gaming Board and the people of Nevada were not happy. While the gaming industry was not the only one that was affected by the massive shut down, it was the one that suffered the most. 

Other States Suffering

Other states like Utah also suffered due to the hit to the tourism industry. Densely populated states like New York suffered due to the proximity of people in massive apartment buildings, and the country, overall, suffered significantly due to a lack of coordinated federal response to the virus and new information about transmission as it was discovered.

While the economy didn’t suffer as greatly as it could have due to financial actions of the government, the hit was still significant. Americans struggled to pay their bills, and despite many people using their pandemic funds recreationally, various industries in the country suffered.

State by State Basis

This was all handled on a very state by state basis. Some states didn’t suffer as much as others, even though they took some extreme measures in order to curb public rates of infection of the virus. 

California is an excellent example of this. Governor Gavin Newsom took an aggressive stance against COVID, shutting down massive portions of the state in order to curb infection rates, despite those who claimed that it was a violation of their rights. In spite of this, the tech industry boomed, and massive numbers of people were hired in anticipation of a spike that they were anticipating in social media and other tech sectors.

A Challenging Situation to Run

When Joe Biden was elected to the President’s office at the end of 2020, he was being handed a difficult situation for any new president. The pandemic was still ongoing, inflation was starting to grow due to the massive amounts of money that had been pushed into the economy, and unemployment had grown to massive levels due to companies making moves in anticipation of a recession. 

Economic experts predicted a recession in the wake of the pandemic, relying on historical data. In the past, recessions have always followed mass illnesses of any kind, due to the way that illness affects business and the way that the economy is run. 

Avoiding Significant Economic Downturn

Fortunately, though, Biden and the Fed managed to craft economic policy well enough that the country was able to avoid a significant economic downturn. Jobs were added back into the economy at a nearly unprecedented rate, and things appeared to be going fairly well, in spite of the challenges that came from pandemic recovery.

However, inflation threw a wrench in what would have otherwise been a fairly smooth economic recovery. Supply chain issues, increased demand on a limited supply, and massive amounts of money in the economy all contributed to inflation spiking to nearly unprecedented levels, peaking at around 9% in 2022.

Huge Numbers of New Jobs

The last factor was, in part, driven by the massive job growth that Biden touted as a significant win for the economy. Huge numbers of jobs being added to the economy month over month would ordinarily be considered a good thing, except in the case of limited worker supply.

This is what began happening after the initial wave of jobs were taken up by those who had been laid off at the beginning of the pandemic. Once that pool of workers was reduced, companies had to change their tactic when it came to hiring. They couldn’t simply offer jobs and have people take them, they had to make themselves appealing to potential workers.

Raising Wages to Appeal to Workers

For most companies, this looked like raising wages. They did this in an effort to appeal to workers who were feeling the pinch of inflation. Money wasn’t going as far, and workers were able to be pickier about which jobs they took due to the sheer number of jobs on the market.

Unfortunately, though the intention behind raising wages is good, adding more money into a hot economy only further drives inflation. The Fed raised interest rates multiple times during this time period in order to try and get inflation under control, but factors outside of the government’s control made this a challenging proposition.

Americans Caught in a Bind

This led to the American people being caught in a unique bind. There were jobs out there for them to take and earn money, but the money that they were earning still wasn’t going as far as it once did due to high inflation. 

And while recent reports have come out that suggest that, at least in part, high inflation was a result of profit-seeking by major corporations, the fact remains that the American people suffered greatly due to high prices for everyday items such as groceries and gas in their car.

Inflation Coming Down

It wasn’t until the start of 2023 that inflation started to come down, and it did come down rapidly. The Fed kept interest rates high through the entire year, even hiking rates several times in order to help the economy move in the right direction, despite public discontent from Americans.

Inflation did come down rapidly, though still not to the targeted 2% that the Fed would like to see for a healthy economy. And all the while, jobs continued to be added to the market, putting pressure on the economy as well as the American public.

Grim Public Sentiment

In spite of these positive economic indicators, public sentiment in America is still grim. Many feel that the economy is not doing well, and this is part of the reason that public approval of Joe Biden is so low.

This public opinion is pushed by factors beyond what is listed in job reports and inflation analyses. Americans can see that prices are still higher than they have been in the past, many people are turning to credit cards and loans in order to pay their bills, and this has led to Americans tightening their belts when possible, letting go of the unnecessary in their pursuit of financial wellbeing.

Multiple Industries Hit Hard

Unfortunately, this practice has hit several industries particularly hard. Various retail outlets have felt the squeeze of lower revenue as people have cut back on their spending, and restaurants in particular have started to suffer. 

There are several factors that go into the restaurant industry suffering, of course. It’s not merely the fact that people are eating out less, but it’s also the expectation of higher wages from employees. Indeed, in states like California – which recently implemented a minimum wage of $20 for some fast food industry workers – restaurants are suffering even greater losses due to high costs of living and lack of viable revenue.

Difficult Decisions to be Made

This has caused many companies to make some difficult decisions when it comes to the way that their businesses are being run. Pizza Hut decided to eliminate their company delivery driver positions in an attempt to cut costs, and other companies made the even more drastic decision to close some locations.

This is what has happened with Bloomin’ Brands, the powerhouse behind Outback Steakhouse and other popular dining locations. An announcement was recently made that the company would be closing 41 of its locations, across various restaurant brands.

A Silver Lining

“Closing restaurants is never easy. This was a business decision that has no reflection on the staff or their service,” the company said in a statement. 

A silver lining has been revealed, though. Bloomin’ Brands stated that, for their employees who would be affected by the closures, many would have the opportunity to transfer to other locations. And, for those who couldn’t, the company would provide severance packages to aid their transition into another job. 

Asset Analysis

This was a result of “asset analysis,” according to the Bloomin’ Brandon’s CEO David Deno. During the most recent earnings call, he said, “We periodically review our asset base and, in our latest review, we made the decisions to close 41 underperforming locations.”

This move is in pursuit of streamlining operations for the company, reducing overhead and increasing profit. The closures will largely affect older locations, ones with leases from the ‘90s and early 2000s.

Multiple Factors to the Decision

According to Deno, the closures were influenced by multiple factors. Sales performance and the financial investments that would be required for renovation were specifically named, and he said that the company was focused on refreshing its portfolio, and keeping its offerings up-to-date.

The closures do not mean doom and gloom for the company, though. “Despite this initiative, our confidence in our portfolio remains high,” Deno assured the stockholders at the meeting. 

Impacting Multiple Chains

The closures have impacted multiple chains across Bloomin’ Brands. These include Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar. As of last Friday, 33 restaurants had already closed in pursuit of this streamlining effort.

Outback Steakhouse is the brand that is enduring the heaviest impact, though. It has suffered the most significant number of closures, though the specific numbers and locations have not been released by Bloomin’ Brands.

A Significant Brand Powerhouse

Despite the minor reductions, Bloomin’ Brands is still a significant brand powerhouse in the United States, and the world. They have nearly 1500 restaurants currently operating worldwide, including hundreds of Outback Steakhouse’s in the United States alone.

And the company appears to be gearing up for growth. In May of 2022, the chain announced plans to open up to 100 new restaurants featuring modern, technology-enhanced designs. USA Today reported that the new focus for the company is on enhancing delivery and catering services, revealing that Bloomin’ Brands is focused on propelling itself towards a dynamic and promising future.

A Future for Bloomin’ Brands

Restaurant closures are never something to be celebrated, but they rarely happen for no reason. While it’s unfortunate that many people are at risk of losing their job due to Bloomin’ Brands’ economic adjustment, it will hopefully clear the way for a new future at the company.

In the meantime, healthy companies are the sign of a healthy economy. This minor adjustment in location density is part of a healthy, well-adjusted company that is in tune with the tide of the economy, and hopefully Bloomin’ Brands will come out of this period bigger and better than ever, not just for their stockholders but for their employees as well.