In March of 1988, Outback Steakhouse opened up the doors at its first location in Tampa, Fla. (via Outback Steakhouse). Just a few decades later, the company has expanded into nearly 700 locations across the United States. With a meaty-heavy menu that focuses on several cuts of grilled and specially seasoned steak, Outback has amassed a reputation for hearty meals.
According to Outback, a big part of its strategy is to offer generous portions that are moderately priced. The average cost of a steak at Outback clocks in at around 20 bucks a pop, which is reasonable compared to some of the fancier steakhouses around that may offer higher quality at a hefty price (via Fast Food Menu Prices). If you’re wondering how Outback can offer its signature steaks and other menu items at a decent cost, look no further. We did a little digging, and we finally know why Outback Steakhouse is so cheap.
Outback buys Choice steak in bulk
Cuts of beef come in different grades that measure its quality, but what’s the difference between Choice beef and Prime beef? According to the U.S. Department of Agriculture, Prime beef comes from young cattle and contains a higher level of marbling, which is a thin web of fat that extends throughout the cut of beef. Only about 3% of beef in the U.S. is graded as Prime, which makes it more expensive (via Serious Eats). Choice beef is still tender, high-quality beef, but has a little less marbling than beef that’s been graded Prime.
According to Beef Magazine, Outback Steakhouse is one of the top purchasers of beef in the United States and also claims the title as the largest retailer of Choice beef in the country. By purchasing Choice steak in bulk instead of the more expensive Prime beef, Outback saves money, and this allows the company to pass those savings down to consumers on its menu. Sure, you could splurge on a pricier Prime cut of steak at a more extravagant restaurant. At the end of the day, though, sometimes you just want a decent steak for a solid deal — and that’s exactly Outback’s niche in the market.
The pasta is microwaved
For many of us, pasta is the ultimate comfort food. Simple and filling, there’s nothing quite like a nourishing bowl of hot noodles bathed in a nice sauce made from scratch. Unfortunately, Outback Steakhouse isn’t exactly well-known for its pasta dishes — and maybe there’s a good reason for that.
Outback only features one pasta dish on its menu — the Queensland Chicken and Shrimp Pasta — which comes with fettuccini in alfredo sauce. Most of the time, you can’t really go wrong with fettuccini Alfredo: it’s creamy, cheesy, and super satisfying. According to a previous Outback Steakhouse employee on Quora, however, you may want to steer clear. The restaurant used to make the pasta sauce from scratch and cook it all in a pan, but now, it outsources the sauce and warms everything up in the microwave. Convenience is a double-edged sword: it’s nice when something is cheap and easy, but that usually translates into lower quality. There’s no doubt that this change was motivated to cut costs and keep prices cheap, considering it takes more time and labor to cook a sauce from scratch for every order than it does to use a pre-made sauce that’s nuked in the microwave.
Lowering prices increases sales
On the surface, it may seem counterintuitive, but lowering prices can actually end up helping a company by increasing sales. Such is the case for Outback Steakhouse: according to the Tampa Bay Times, Outback lowered its prices when it first introduced its new menu. The result? Cathie Koch, a spokesperson for the company Bloomin’ Brands (which owns Outback Steakhouse), says that dropping prices led to even more sales because guests were ordering more drinks, appetizers, and upgraded steak dishes.
By smartly promoting its new menu through discounted prices, Outback attracted more attention and sparked a willingness in its customer base to order more food. Not only did this raise awareness about Outback’s updated menu, but it also increased sales. According to Entrepreneur, it’s important to lower prices at the right time to have the best impact. Outback chose to lower prices toward the beginning of the pandemic when there was a lot of economic uncertainty and consumers were cost-conscious, which could be a reason it worked so well (via Restaurant Business). For Outback, temporarily lowering the cost of some menu items is a way to advertise and boost its revenue, which helps the company maintain its affordable prices.
It uses worse cuts for well done steaks
According to the National Resources Defense Council (NRDC), finding ways to reduce food waste can save businesses money. The NRDC estimates that anywhere from 22-33 billion pounds of food are wasted in U.S. restaurants every year. What can restaurants do to minimize this issue? For Outback, a part of the answer is saving its less-than-perfect cuts of steak for the right opportunity.
According to a previous Outback Steakhouse employee on Reddit, worse cuts of steak are used for customers who ask for their steaks to be cooked well done. Presumably, the theory is that any imperfections in the cut will be much less noticeable when the steak is cooked well done and charred into oblivion. This prevents those less desirable cuts from being potentially sent back by other diners who might have ordered them less cooked and noticed the steak’s inferior quality. The tactic allows Outback to make money, even on those stray cuts of beef that aren’t top-notch. Less waste makes the company more money, which helps stabilize costs.
Its restaurants are massive
If you’ve ever walked into an Outback Steakhouse, you’ve probably noticed that the restaurant is impressively large. In fact, the sheer size of Outback’s restaurants seems to be something the company takes pride in, considering that one of the details on Outback’s official fact sheet states that its average restaurant size is 6,000 square feet and comes equipped with an island bar and room to accommodate around 200 guests (via Outback). Compared to the average American restaurant, Outback’s sizeable locations are in the upper tier of the norm, which tends to range between 1,000-6,000 square feet (via Small Biz Genius).
How does this play into Outback’s revenue and prices? According to Lightspeed, a business consultant company, size really does matter when it comes to how much revenue a restaurant can generate. The concept is simple: when a restaurant has more space to accommodate more diners, the restaurant can make more money. Better sales for Outback means stable and affordable prices on its menu.
Outback buys its onions in bulk
Outback Steakhouse has become famous for its "Bloomin’ Onion" appetizer — and rightfully so. Not only is it delicious, but the sheer size of it is truly something to behold. For those of you who have missed out on this legendary appetizer thus far, here’s the deal: gigantic onions are cut into petals, fried golden brown, fanned out on an appetizer plate like an edible flower, and paired with a tangy dipping sauce. According to The Daily Meal, each onion has about 200 petals, and Outback orders over 14 million pounds of onions per year.
By ordering its onions in massive quantities, Outback is saving money. According to U.S. News and World Report, buying items in bulk almost always results in a cheaper price per unit. Considering that Outback flies through so many onions to feed the fans of its "Bloomin’ Onion," buying them in bulk is a great way to reduce costs and keep up with demand. Who would’ve thought that a bulbous root vegetable could have so much appeal?
Some cooks are paid a below-average wage
Cooks are the unsung heroes of every restaurant. They are often out of sight, but they shouldn’t be out of mind, considering the fruits of their labor is the entire reason you dine out and spend good money on a solid meal. Like most restaurants, Outback Steakhouse doesn’t always compensate its hard-working culinary aficionados very much — especially considering Outback’s average sales per unit is about $3 million dollars a year as of 2021 (via Statista).
According to Indeed, the average hourly wage for a line cook at Outback Steakhouse is about $15 an hour. This is just under the average U.S. hourly wage, which is approximately $16 an hour (via Statista). Both of these facts are even more striking when you consider that minimum wage would be $26 an hour today if wages increased at the same rate as productivity (via CBS News). By keeping labor costs low, Outback is escalating its profit margin, which keeps the prices down on its menu.
Outback is improving its curbside pickup
There’s no doubt that the pandemic has had a profound effect on the restaurant industry. According to Forbes, it accelerated the appetite for curbside pickup options at restaurants, and that trend is probably here to stay. Outback Steakhouse has picked up on this trend and recognizes its potential for the company.
Christopher Meyer, executive vice president of Bloomin Brands, says that catering to an increased demand for curbside pickup is good for the company’s profitability because there are fewer service labor costs (via PYMNTS). Meyer adds that curbside pickup is "leading the way" with Outback’s sales off-premises. A part of the way Outback is improving its curbside pickup process is through its updated app (via Hospitality Tech). Gail Seanor, Outback’s vice president of digital innovation, says that the company is looking at ways to include curbside pickup through its app. It already provides diners with new perks, like being able to join the waitlist or pay directly from the table. By giving customers more digital options and working to improve curbside pickup, Outback is cutting back labor costs, which helps the restaurant keep its menu affordable.
The restaurant is retaining its employees
At the beginning of the pandemic, CEO David Deno did something pretty incredible — he decided to forgo his salary and redirect that money to employees and their benefits (via FSR Magazine). Perhaps even more amazing is that despite lockdowns and restrictions, the company chose to maintain its payrolls and didn’t lay off its workers (via Nation’s Restaurant News). While this was highly respectable on a moral level, it’s important to understand that this was also financially beneficial for the company in the long term.
Deno explains that the company wanted to make sure employees could return to work right when restrictions lifted, and also added that the company wanted to avoid recruiting and training new employees. This was a smart move, considering that cost of turnover is really expensive for businesses (via Forbes). By not laying off workers during the pandemic and retaining its employees, Outback reduced its rate of turnover, which kept hiring and training costs down. Maneuvers like these, combined with digital marketing efforts, helped Outback’s sales grow even beyond pre-pandemic levels (via Nation’s Restaurant News). The company’s increase in revenue will help ensure that all of your favorite menu items stay reasonably priced.
Outback is broadening its reach
It’s important for restaurants to find new ways to reach younger demographics in order to stay relevant. According to Hiveage, one effective way to do that is by targeting non-traditional demographics. This means looking for social causes or activities that resonate with younger generations.
Danielle Vona, chief marketing officer for Bloomin’ Brands, says that the restaurant has realized that Outback seems to connect with sports fans. Upon learning this, Outback has decided to sign a dozen student athletes to broaden its presence in university athletics and local communities. These student athletes will have bundle meals available through Outback’s online ordering platforms. Outback will also financially reward these selected students and give back to the community through philanthropic efforts. By reaching out to younger generations, Outback is creating new relationships that will expand the company’s target audience. Doing so is an effort to broaden the company’s reach and increase sales, which helps keep prices low.
Outback has a special tool to improve efficiency
In a testament to the "Bloomin’ Onion’s" mass appeal, 1 in every 4 appetizers that Outback Steakhouse sells is a "Bloomin’ Onion" (via Food Beast). According to The Daily Meal, there was a point in the company’s history when cooks were preparing each "Bloomin’ Onion" appetizer by hand, which must have been extremely time-consuming and labor-intensive. To solve this problem and keep up with demand, Outback decided to come up with a gadget to speed along the process (via Yahoo News).
This special tool does all of the cutting for Outback’s bloomologists (yes, that’s the official job title). This takes most of the meticulous handwork out of the equation for the cooks and saves tons of preparation time. By incorporating these special tools in its kitchens, Outback is able to meet the demand for its "Bloomin’ Onions" faster, which helps increase sales. This boost in revenue is another way the company can ensure stable pricing.
Prices may not stay cheap for long
With all of that said, there’s a good chance that these cheaper prices won’t last too much longer. Even though Outback Steakhouse just reported a nearly 30% increase in revenue compared to the same quarter from the year before, the company is poised to raise prices (via Nation’s Restaurant News). The reasoning? CEO David Deno is blaming the price increases on inflation and labor costs, even though the company’s sales are soaring. The average check at Outback Steakhouse has increased by 7% over the past 2 years.
An initial 3% price increase was initially discussed, but now Deno says the price increase will be ratcheted up even higher at 5%. The good news is that a 5% increase probably won’t amount to much on an individual basis: on a $20 steak, that really just come out to an extra buck. Still, as we all know, every dollar counts these days.