Outback Franchisee Owes $449 Million and Just Filed Chapter 11

A San Diego-based Outback Steakhouse franchisee has filed for Chapter 11 bankruptcy protection under a $449 million debt load, citing California labor costs and inflation as the primary drivers of its financial collapse.

Out West Restaurant Group — officially Cerca Trova Restaurant Group — operates 61 Outback Steakhouse locations across California, Arizona, Colorado, Nevada and New Mexico, according to court filings. That's down from 99 restaurants at its 2018 peak. The company is now seeking court authorization to sell its assets as part of the Chapter 11 restructuring (a legal process that lets a company reorganize or sell itself while shielded from creditors).

CEO David Goronkin blamed a shrinking customer base and high operational overhead in the filings. Two figures stand out. California's minimum wage reached $19.60 per hour in January. And beef prices have climbed up to 5% annually since 2022.

"By 2026, the pressures on the business had converged," Goronkin stated in court documents. "Guest traffic and earnings continued to decline, while food, labor, and other production costs continued to rise."

Who is buying the restaurants?

Parent company Bloomin' Brands, the Florida-based owner of several restaurant chains, has agreed to purchase the remaining 61 Outback locations for $26.3 million. Bloomin' is also providing up to $5.5 million in interest-free debtor-in-possession financing — a loan that keeps a bankrupt company operating during the restructuring.

For the chain's workers, the sale signals continuity rather than liquidation. For the franchisee's creditors, $26.3 million against $449 million in debt implies steep losses.

What does this mean for California operators?

The filing lands in a policy fight over labor costs. Sit-down restaurant chains were exempt from California's $20-per-hour fast-food minimum wage law passed in 2024. Even so, full-service restaurants have faced higher labor costs statewide, with the statewide minimum now at $19.60 per hour.

Entrepreneur and FOX Business contributor Marcus Lemonis addressed the bankruptcy Friday on "Fox & Friends." His message to owners was blunt.

"A lot of businesses want to make excuses now," Lemonis said. "What I say to business owners, small, medium and large. … 'These are the cards we are dealt. You're going to have to make difficult decisions.'"

Lemonis noted that many companies continue to thrive in California despite high costs and strict oversight.

"If the country is going to survive the way we want it to and prosper, we're going to have to run good businesses, regardless of what state we're in," he said.

What are the options on the table?

Lemonis framed the operator's choices as a hard trade-off with consequences that reach into politics. Raise prices, cut staff, or close — each decision cascades.

"There's a cause and effect for everything," Lemonis said. "Either I'm going to raise the prices, I'm going to cut my staff (or) I'm gonna have to close. There's always a cause and effect, and I think what these DSA candidates are gonna realize quickly is the effect is going to actually impact the people that voted for them."

The takeaway for workers and job seekers

The numbers here matter beyond one franchisee. A 38-restaurant contraction since 2018, a $19.60 wage floor, and beef inflation compounding at up to 5% a year form the operating math facing every full-service chain in the state. Out West's response — selling 61 locations to its brand parent for $26.3 million rather than closing them — suggests distressed franchisees will increasingly hand keys back to corporate owners rather than shut doors outright, keeping locations staffed under new ownership.

In plain terms: California's cost pressure is real, it's now forcing nine-figure bankruptcies, and the survivors will be operators who reprice, restaff or restructure before the debt does it for them.