Read the case study, “The Organization of Outback Steakhouse” at the end of Chapter 16 and answer the following questions in your post:
- From an organizational perspective, can Outback continue to grow with so little organizational structure?
- What kind of organizational structure would you suggest for Outback Steakhouse?
This is the case study
Chris Sullivan, Bob Basham, Trudy Cooper, and Tim Gannon—cofounders of the Outback Steakhouse concept—began their restaurant careers as a busboy, dishwasher, server, and chef’s assistant, respectively. So how did they manage to build one of the all-time most successful restaurant concepts? Their careers may have had humble beginnings, but they had the money to excel. Chris and Bob met at Bennigan’s (part of Steak and Ale). They honed their management skills under the mentorship of industry legend Norman Brinker, who later financed Chris and Bob’s franchised chain of Chili’s restaurants in Georgia and Florida. They later sold the Chili’s restaurants back to Brinker for $3 million. This seed money allowed them to develop a restaurant concept they had been toying with.The concept was for a casual themed steakhouse, and because the partners did not like a western theme (it had already been done by others), they opted for an Australian theme because, at the time, there was a lot of hype about Australia. Australia had just won the America’s Cup (a major sailboat race held every four years), and the movie “Crocodile” Dundee was popular. As with all new restaurant concepts, they searched for a suitable name. Beth Basham came up with the idea of Outback for the name of the steakhouse—she wrote it on a mirror in lipstick. The Outback themed concept was just what the partners wanted—a casual, fun, family atmosphere and the highest-quality food, which is reflected in Outback’s 40 percent food cost (the industry norm for steakhouses is about 36 percent). Chris and Bob asked Tim Gannon, who at the time hardly had enough money to buy the gas to drive to Tampa, to join them. Organizationally, each of the partners “brought something to the table.” Chris was the visionary, Bob the operations person, Tim the chef, and Trudy the trainer. Later they realized they needed a numbers guy, and in 1990 Bob Merritt became chief financial officer (CFO).Instead of fancy marketing research, the partners did lots of talking and observation on what people were eating—remember, this was a time when eating red meat was almost taboo. The partners figured that people were not eating as much red meat at home, but when they dined out they were ready for a good steak.Initially, the partners thought of setting up one restaurant and then a few more, which would allow them to spend more time on the golf course and with their families. So the success of Outback surprised the partners as well as the Wall Street pundits. The organization grew quickly, and by the mid-1990s more than 200 stores were open; they also signed a joint venture partnership with Carrabba’s Italian Grill, giving them access to the high-end Italian restaurant segment.Same-store sales increased year after year, and the partners looked forward to 500 or even 600 units. Financial analysts were amazed at the rise in Outback’s stock. So, to what can we attribute Outback’s success? It’s a well-defined and popular concept, has a great organizational mantra of “No Rules—Just Right,” and serves the best-quality food and service in a casually themed Australian outback–decor restaurant. The typical Outback is a little more than 6,000 square feet, with about 35 tables seating about 160 guests and a bar area that has 8 tables and 32 seats. Outback’s target market is “A” demographics and a “B” location, which is often a strip mall. Another aspect of Outback’s organization is that servers handle only three tables at a time; this increases their guest contact time and allows for more attention to be paid to each table. They also offer an Australian-themed menu with a higher flavor profile than comparable steakhouses. The design of the kitchen takes up about 45 percent of the restaurant’s floor space—12 percent more than other similar restaurants. This extra space represents a potential loss of revenue, but that is the way Outback wanted it done because they realized the kitchen does not run well when it’s being “slammed” on a Friday or Saturday night.There is no organization chart at Outback Steakhouse; everyone at the unpretentious corporate headquarters in Tampa is there to serve the restaurants. There is no corporate human resources department, but applicants are interviewed by two managers and must pass a psychological profile test that gives an indication of the applicant’s personality. Outback provides ownership opportunities at three levels in the organization: individual restaurant level, multistore joint venture and franchises, and an employee stock ownership plan. Because there is no middle management, franchisees report directly to the president. Outback’s founders had fun setting up the concept and want everyone to have fun too—they sometimes drop in on a store and ask employees if they are having fun. Not only are they doing that—they are laughing all the way to the bank!
Walker, John R. Introduction to Hospitality Management, 3/e for Ashford University, 3rd Edition. Pearson Learning Solutions. VitalBook file.