Outback Menu Goes Leaner On Prices

Facing massive losses, Outback Steakhouse's parent company is pushing back against the recession by introducing a low-priced menu, planning a major advertising blitz and slashing costs.

The new menu will include 15 meals for less than $15, the company said Monday in a conference call with analysts.

Still, the challenges continue to mount for Tampa-based OSI Restaurant Partners. A franchisee that owns 41 Outback Steakhouses in California has defaulted on $33 million in loans, according to new documents filed with the Securities and Exchange Commission.

OSI had guaranteed the franchisee's loans and was forced to pay Bank of America the amount of its back debt. The company in default, called T-Bird Nevada, is controlled by Tommy Shannon, a Floridian who once led an effort to buy the Tampa Bay Buccaneers.

OSI and T-Bird have filed lawsuits against each other concerning the default.

On Monday, OSI revealed it lost $739 million on revenue of $3.9 billion in 2008. Most of that in essence is a paper loss.

OSI's business has deteriorated so much that it wrote down the value of its "goodwill," which is the value of its brand name, stature in the restaurant industry and other intangible assets.

OSI's restaurants are being pounded by the recession. Sales at Outback Steakhouses open for at least 18 months, called comparable store sales, fell by 9.5 percent in the fourth quarter of 2008 compared with the same period a year earlier.

The company also owns Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse & Wine Bar, Roy's, Cheeseburger in Paradise and Blue Coral Seafood & Spirits.

To cope, OSI has "re-engineered" its menu to cut food costs and reduce entree prices, said OSI Chief Financial Officer Dirk Montgomery. It tested the new menu in 30 Outback restaurants and began expanding it last week. Ads now will emphasize lower prices.

Among the new entrees at Outback are savory pepper mill steak, which is slices of New York strip steak encrusted with cracked black pepper and served atop potato wedges, and shrimp en fuego, which is large crispy shrimp, mushrooms and tomatoes in a creamy sauce.