Table of Contents - UCA | Faculty Sites at the University of ...faculty.uca.edu/davidk/MKTG4355/Spring 2003/Outback Goes... · Web viewIn the past, Outback had not relied much on

TABLE OF CONTENTS

Executive Summary......................................................................................................................2

IntroductionHistory..................................................................................................................................3Marketing Strategy...........................................................................................................4-5Problem Identification.........................................................................................................6

Analysis of the IndustryThe Competition...............................................................................................................7-8The Environment.................................................................................................................9

Canada...............................................................................................................................9Germany............................................................................................................................9Japan............................................................................................................................9-10Mexico............................................................................................................................10Korea...............................................................................................................................10The United Kingdom......................................................................................................10

SWOT Analysis of the FirmStrengths............................................................................................................................11Weaknesses........................................................................................................................11Opportunities................................................................................................................11-12Threats................................................................................................................................12

Recommendations.................................................................................................................13-14

AppendixBalance Sheet.....................................................................................................................15Cash Flows.........................................................................................................................16Income Statement.........................................................................................................17-18Ratios.................................................................................................................................19References..........................................................................................................................20Current Locations Map and Table.....................................................................................21

EXECUTIVE SUMMARY

Outback Steakhouse is faced with the issue of expanding into international markets because of U.S. market saturation. To facilitate the decision-making process for expanding overseas, certain guidelines for going global have been developed.

The first guideline for Outback is to adapt accordingly to their international target markets. Each market will be different and must be treated as such. Outback must keep its own identity, while adapting to the cultural trends of each country. To do this, Outback should incorporate local management into its restaurants. The local management will be able to advise Outback on traditions, taste preferences, and even local etiquette. Outback may even find it necessary to change some dishes offered on their menu.

The second guideline mentions Outback’s locations in foreign markets. Instead of the usual “B-locations with A-demographics,” Outback might have to locate in bigger, more trafficked areas. In international markets, these are the areas that typically attract the most tourism – an important aspect to Outback’s movement overseas. They are also areas that include a higher concentration of people who are more progressive and who have higher incomes.

The third guideline for going global focuses on Outback’s suppliers. With their current suppliers, Outback is likely to incur high costs in transportation of supplies overseas. This will, in turn, cause Outback’s menu prices to rise. Instead of this, Outback should use its local management teams to identify new suppliers. The local management will, once again, be able to guide Outback in determining which suppliers are likely to carry on their quality standards. Supplier can then be found in either the host country or surrounding countries and new long-term relationships can be formed.

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INTRODUCTION

HistoryIn 1988, four business partners, each who had previous restaurant experience, opened

Outback Steakhouse in Tampa, FL. They wanted to create an eating establishment that provided its customers outstanding food at an excellent price in a casual Australian atmosphere. At the time, the four entrepreneurs saw a reduction of in-home red meat consumption due to price and health factors, but consumers were still going out to restaurants for great steaks. Therefore, they saw an opportunity to open a restaurant that provided quality steaks at an affordable price. The Australian theme, fun atmosphere, and quality food has made Outback one of the greatest restaurant successes in America, where the failure rate of other restaurants is 75%.

The success of Outback is measured by its sales and profits, but they are the results of putting their People- customers, purveyors, neighbors, and partners- first. The heart of Outback is their solid foundation on core beliefs, purpose, principals, and goals. In creating Outback, the founders used its principals and beliefs as a guide to everything that the company does. Outback believes that if they take care of their People, then the institution of Outback will take care of itself. Five principals support their guide to success- hospitality, sharing, quality, fun, and courage. These principals require that Outback deliver the following commitments to its Outbackers: clear direction, preparation, involvement, affecting one’s own destiny, a fair hearing, sharing in the success of Outback, commitment, having a good time, and compassion. Outback’s commitments to their principals and beliefs ensure that the institution will take care of itself.

Now that Outback has almost reached market saturation in the United States, they plan to develop new dining themes and expand into the international market. Some of the new dining themes that the company has created are Carrabba’s Italian Grills, Flemming’s Prime Steakhouse and Wine Grill, Roy’s, Zazarac, Lee Roy Selmon’s, and Bonefish Grills. Now their concentration is on growing their international presence. In doing this, it is very important for the company not to jeopardize their principals and beliefs. Therefore, how should Outback expand into the international markets while holding true their principals and beliefs?

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Marketing StrategyOutback’s commitments to concentrated service and serious food are the main driving

forces of their marketing strategy. Their strategy centers on the basic concept of providing a quality product, excellent service, and generous portions at moderate prices in an atmosphere that suggests the Australian Outback. Outback has positioned itself between expensive and bargain steakhouses, thus increasing their target market. They seek to capture a target market whose consumers prefer quality food in a fun atmosphere, but do not wish to pay the high prices like those at expensive steakhouses. Since Outback does not heavily rely on advertising, they market the company through PR events, such as sponsorships.

Since quality is one of the most important aspect of Outback, they buy only the best ingredients and the best supplies. Forty percent of Outback’s total costs are attributed to their high quality food. Although this is higher than the industry’s average, they feel that the best competitive advantage to have in the restaurant industry is having the highest quality food. Their commitment to serious food is also the number one reason why Outback opens up at 5:00 PM. This allows time for a prep crew to come in during the morning and prepare everything fresh for the evening. Everything from the salad dressings to the croutons are made fresh daily. The only thing in the restaurant that is precooked are the ribs, which are prepared during the day. Right before the restaurant opens, the manager performs a line check to ensure that all the food tastes perfect. The manager also checks every plate of food before it goes out to the customer to ensure that everything looks perfect.

The target market is also very important to Outback. Their primary market consists of people who are between the ages of 20 to 40 who enjoy a fun atmosphere, quality food, full flavor, concentrated service, and is often considered middle-class. Since they are very concerned about their customers, they try to cater to their needs in order to attract them to the restaurant. One way they do this is by their “No Rules, Just Right” motto. This means that any changes or additions that a customer wants to any entrée are no problem. This also includes preparing dishes that are not even on the menu.

Outback’s location is also important to their success. They try to avoid the high-traffic lunch areas, and instead locate their restaurants in areas that are more suited for the dinner and night crowds. The company describes its locations as being “B-locations with A-demographics”. They also like to be one of the first restaurants in a growing and upcoming city so that in the future they are considered to be well established and a community favorite.

In the past, Outback had not relied much on advertising, but instead they relied mostly on word of mouth. As the company grew and developed, national ad campaigns were initiated that focused on television commercials and billboards. Outback avoids coupons and print ads, and these are usually only offered as part of a package being offered by a charity or sports event. In fact, Outback is very focused on community involvement and charity events. Each restaurant is involved in community participation and service. The corporate office is also involved in non-profit activities such as the Outback Bowl. However, they are most involved with charity events. Every time a new restaurant is opened in a community, they choose a charity in which all of the first night’s profits are donated towards. Outback is constantly looking for community charities and events to provide food for and to help raise money. People want to be associated with and feel like a part of a restaurant and this is one way Outback advertises itself. The main reason they do this is to give back to the community and show the community that they are concerned about its well-being.

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In order to achieve a fun and laid-back atmosphere, the founders chose an Australian theme to set Outback apart from others. The Australian theme is part of everything - from the décor on the walls and the color of the ceiling to the uniforms that the Outbackers wear. Instead of calling their workers employees, they call them “Outbackers”, which creates a sense of pride in the workforce. The Outbackers are valued and given more benefits than most of the competitors in the industry, which enables the restaurants to have the best employees and the best service. The Outbackers are important to the restaurant because they connect the restaurant to the customers. In order to give the best possible service, the servers are limited to a three-table section. This allows for concentrated service, which also helps to distinct Outback from the rest of its competitors.

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Problem IdentificationGiven the fact that Outback Steakhouse Inc. is nearing market saturation, but wish to

continue their sales and revenue growth, the decision must be made as to if and how they should expand internationally. Management believes that Outback can accommodate 550-600 steakhouses, but by growing at a rate of about 70 stores annually, U.S. market will hit saturation within 4-5 years. Therefore, Outback must consider expanding worldwide like other U.S. restaurants, and capitalizing on foreign markets. It is evident that given the company’s past financial position, they must seek other markets to continue their growth. Graph 1 shows how the company’s revenue continues to grow as they add more restaurants to the company. The company has already explored opening new restaurant concepts within the U.S, but an international expansion gives an even greater opportunity for the company to grow. This report seeks to identify guidelines for Outback to use when considering each foreign market.

Years Sales Restaurants

1994 $577,000 224

1995 $827,000 320

1996 $1,077,000 421

1997 $1,368,000 519

1998 $1,668,000 604

1999 $1,992,000 686

2000 $2,329,000 756

2001 $2,621,000 870

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Sales are in Millions.

Graph 1

Table 1

ANALYSIS OF THE INDUSTRY

The CompetitionIn a broad sense, Outback is classified as a casual dining restaurant and is compared to

others such as Red Lobster, Olive Garden, and Macaroni Grill, just to name a few. However, Outback’s true competitors are those who have a mid-price range and who serve the same types of foods. These competitors include Applebee’s, Chili’s, TGI Friday’s, Bennigan’s, Hooters, Ruby Tuesday, and other local steakhouses. If you consider the fact that Outback makes every food item from scratch, the restaurant has no competitors. It is also the only restaurant that focuses on such extreme service. In food quality and service, they have no competitors. Table 2 reports the top 10 casual dining restaurants in 2002:

Applebee’s was founded in Atlanta, Georgia by Bill and T.J. Palmer. The Palmers envisioned a restaurant that would provide full service, consistently good food, reasonable prices and quality service in a neighborhood setting. In 1998, Applebee’s became the first casual dining concept with 1,000 restaurants. Today, with more than 1,500 restaurants, Applebee’s is the world’s largest casual dining concept. For each of the past 10 years (1993-2002), Applebee’s has opened more than 100 new restaurants. The company estimates the development potential of the Applebee’s concept in the United States to be at least 2,300 restaurants.

In 1968, the original Red Lobster was introduced to America in Lakeland, Florida. Company founder Bill Darden had a vision that great service was fundamental to success. By the late 1970s and early 1980s, Red Lobster had 350 restaurants. In 1995, Red Lobster (along with the Olive Garden and, later, Bahama Breeze) was integrated into Darden Restaurants. The menu changed and became broader and more upscale. To maintain their leadership position in a changing environment, they paired their menu with a new, attractive atmosphere. Their architecture took on the new life that people see today.

Brinker International is one of the largest restaurant corporations. They operate Chili’s, Macaroni Grill, On The Border, Maggiano’s, and Cozymel’s. Founded in 1975, the company has grown to over 1,200 restaurants worldwide with 90,000 employees and system-wide sales exceeding $3 billion annually. The culture is driven by integrity, teamwork, passion, and a

Ranking Restaurant1 Applebee’s2 Red Lobster3 Outback4 Chili’s5 Olive Garden6 TGI Friday’s7 Ruby Tuesdays8 Bennigans9 Macaroni Grill10 Hooters

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Table 2

commitment to make sure each guest has an enjoyable dining experience when they visit one of the restaurants. Brinker International's mission is to be the very best in the business.

T.G.I. Friday’s is credited as being the first American casual dining chain and has been a favorite pastime for millions of guests since 1965. It has become a leader in the industry by creating a unique atmosphere with great food and beverage presentation as well. T.G.I. Friday’s has popularized many items, including potato skins and frozen drinks. Friday’s offers a wide selection of appetizers, entrees salads, pasta dishes and innovative entrees in an attempt to stay on top of trends. Realizing that an important part of a restaurant appeal is its atmosphere, T.G.I. Friday’s offers a comfortable, relaxing environment.

Exhibit 1 displays the number of stores that some of the various restaurants have.

Restaurant Domestic Stores International StoresOutback 689 50Applebee’s 819 9Darden Restaurants1 1,211 US & Canada onlyBrinker International2 1,268 90TGI Friday’s 682 37Hooters 300 12

Exhibit 2 displays the number of countries in which the restaurants have stores in for 2000.

Restaurant Number of CountriesTGI Friday’s 53Chili’s 20Outback 13Applebee’s 10Red Lobster 0

Exhibit 3 displays the sales from various casual dining restaurants in 2001.

Restaurant Sales in 2001Darden Restaurants1 $4,368,701Brinker International2 $3,040,377Outback Steakhouse Incorporated3 $2,621,000Applebee’s $744,344

1Darden Restaurants includes all restaurants owned by the company including Red Lobster, Olive Garden, and

Bahama Breeze. 2Brinker International includes Chili’s, Macaroni Grill, On The Border, Maggiano’s, and

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Cozymel’s. 3Outback Steakhouse Incorporated includes all restaurants owned by OSI, including Carrabba’s Italian Grill, Fleming’s Prime Steakhouse and Wine Bar, Roy’s, Zazarac, Lee Roy Selmon’s, and Bonefish Grills.

The Environment*Even though Outback’s consideration is for a venture abroad, it is important that the

environment of the U.S. is looked at as well. A strong domestic foundation is necessary for the success of an international expansion. For the past two years, the US has been experiencing a recession, resulting in more unemployment. Because of this unemployment, rising gas prices, and the threat of war, the U.S. population is more reluctant to spend money. As people start to cut back on their spending, dining out could be one of the first things taken out of their budgets - especially dining out at a restaurant with prices like those of Outback. The threat of war has a great impact on the economy of the United States and creates a large amount of economic uncertainty. It is hard to know when, if at all, this economic downturn will change its direction. Many countries abroad may develop a negative perception of the U.S. if it decides to go to war with Iraq. As a result, a large part of the international market might not be supportive of a restaurant based out of the United States.

CanadaCanada serves as a somewhat hopeful prospective location for Outback. In the past, U.S.

goods and services have been well received in their stable market. It is important to note, however, that there are significant cultural and language differences between the US and Canada, as well as between certain regions of Canada itself. Conflict often arises between the English-speaking and French-speaking areas and has even gone as far as possibly separating Canada into two separate countries. This threat has made foreign investors hesitant to move into the country in the past.

GermanyA unique feature of Germany is the unusually even distribution of industry and

population. This can serve as a challenge to a firm because there is not much opportunity for regional concentration around a heavily populated area. On a positive note, Germans do appreciate high quality food products, such as those of Outback, and will reject less expensive items if they do not possess a sufficient amount of quality. Consequently, Germans also have the philosophy that German products are “simply the best”, which might make them reluctant to even try an American-based restaurant.

JapanIt has been well known that Japan’s market is not as open as the United States’. While

the US government has made efforts to help U.S. business people “open doors”, most of the responsibility has remained in the hands of the individual firm. Entering the Japanese market is expensive and generally requires four things: financial and management capabilities and a Japanese-speaking staff within the country, modification of products to suit Japanese consumers, a long term approach to maximizing market share and achieving reasonable profit levels, and careful monitoring of Japanese demand, distribution, competitors, and government. Even though all of these challenges to market entry exist, Japan has ranked as the second largest importer of U.S. goods and services in the past. Japanese consumers have previously been characterized as conservative and brand conscious but have recently become more individualistic. This is largely due to the 18 to 21 year olds who have a large amount of disposable income. Japanese consumers are willing to pay high prices for quality goods, but their standards of quality are very high. U.S. firms whose products and services possess this level of quality, along with a

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competitive edge, must still be willing to take on the high cost of initial market entry. For those that are willing to pay the price, Japan can offer a respectable market share and promising profit levels.

MexicoMexico has experienced some economic struggle due to a large devaluation of the peso.

Despite the government’s efforts to stabilize the peso, the country has been experiencing a serious recession, seeing inflation as high as 50%. With U.S. financial assistance, Mexico has been restoring stability to its financial markets. Although the PRI party was in power for 60 years, Mexico is slowly evolving into a multi-party democracy. Even though Mexico has not had a great amount of economic success over the years, it has remained the third largest trading partner of the United States.

KoreaAlthough the Korean War left South Korea in ruins, the country has experienced

tremendous growth and has been identified by the U.S. Department of Commerce as a “Big Emerging Market”, led by export development and entrepreneurship. Over the years, North Korea has often been seen in the media as a politically disrupt country through stories of student demonstrations, nuclear problems, and trade disputes. However, the political environment of South Korea has been stable enough over the last few years to support a great amount of economic expansion. South Korea is a “modern, cosmopolitan, fast-paced, and dynamic country” that has a vast amount of opportunities for American businesses. Even though South Korea has ranked as high as the United States’ sixth largest export market, US firms still face obstacles when entering its market, such as customs clearance procedures and regulations for labeling, sanitary standards, and quarantine.

United KingdomCommon language, legal heritage, and business practices have built a strong business

relationship between the United Kingdom and the United States. The UK has been the U.S.’s fourth largest trading partner and the largest market for U.S. exports in Europe. The UK has recently become more efficient by making changes to their taxation, regulation, and privatization policies. The country also possesses a high degree of labor flexibility. Thanks to a shared cultural heritage and a warm relationship with the U.S., the United Kingdom sees U.S. goods and services as attractive purchases. British policy emphasizes free enterprise and open competition, making the UK the target of 40% of all U.S. investments in the European Union. Due to their successful relationship, the United Kingdom now serves the United States as a gateway to the rest of Europe. The close relationship between the U.S. and UK is expected to continue with the help of excellent physical and communications infrastructure and a friendly business and political environment.

*The environment mentioned in our report is current as of 2003. The analysis of each individual country is current as of the publication of our reference (see Appendix: References: Country Summaries).

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SWOT ANALYSIS OF THE FIRM

Internal StrengthsOutback Steakhouse possesses many internal strengths. In 1994 and early 1995, it was

regarded as one of the biggest success stories in corporate America and was the fastest growing U.S. steakhouse chain. Outback’s restaurants generate $2.10 for every $1 invested in the facility - an amount is well over the $1.20 to $1 that is considered strong for the industry. One of their many strengths lies in their connection to their suppliers. The company views their suppliers as “partners” in their success and is committed to working with their suppliers to develop and maintain long-term relationships. As a result, Outback has never changed suppliers. Outback is committed to purchasing only the highest quality ingredients and supplies for its restaurants.

Outback also has a phenomenal relationship with its employees. The company uses aptitude tests, psychological profiles, and interviews as part of its employee selection process and requires every applicant to interview with two managers. Its wait staff enjoys higher income from tips than in restaurants that serve lunch and dinner, thanks to its dinner-only concept. This concept has also led to effective utilization of systems, staff, and management. Additionally, their wait staff also reports feeling less worn out than other restaurant employees because each waiter or waitress handles no more than three tables at a time. This allows their employees to offer customers more individualized attention and provides for better tip opportunities. Restaurant management staff works only 50-55 hours per week, compared to the average of 70 hours found in the industry. Store managers also earn an annual salary and bonus of over $100,000, compared to an industry average of about $60,000-$70,000. What’s more, Outback’s management turnover is only 5.4 percent as opposed to the industry average of 30-40 percent.

Internal WeaknessesOutback’s biggest internal weakness is its food costs, which make up about 40% of its

total costs. Because of the company’s dedication to providing the highest quality ingredients, it does maintain one of the highest food costs of the industry. Along with this, Outback limits itself to only a few suppliers in order to maintain long-term relationships. These relationships may prove to be too costly once Outback expands into the international market. The costs of using their current suppliers internationally could then raise the food prices of their international locations and limit the size of the market that can afford their food.

External OpportunitiesSeveral opportunities are available to Outback as they consider going abroad. So far,

several other U.S. restaurants have found success overseas with substantial sources of revenue. Some of this success is contributed to the popularity of U.S. food themes abroad and the driving force of universal cultural trends, rising incomes, improved international transportation and communication, rising educational levels, increased numbers of women entering the work force, demographic concentrations of people in urban areas, and the willingness of younger generations to try new products. Also, franchised restaurants generally performed better than freestanding units overseas. Finally, the GATS, or General Agreement on Trade in Services, was designed to

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liberalize trade in services. GATS seeks to “reduce or eliminate governmental measures that prevent services from being freely provided across national borders or that discriminate against firms with foreign ownership.”

External ThreatsOutback must also consider the threats of entering an international market. For example,

while several U.S. restaurant chains have moved into the foreign market, casual dining operators are slower about entering these markets than fast-food operators. Franchising abroad is also an issue with two sides to it. While franchiser-franchisee relationships often bring in favorable sales and profits, these relationships are also often difficult to maintain. International franchisers frequently encounter problems finding supplies in sufficient quantity, of consistent quality, and at stable prices compared to those in domestic markets. Related to this, there is the issue of infrastructure. A weak infrastructure in international markets may cause problems in transportation, communication, or even utilities such as electricity. This can then complicate the process of sourcing supplies, overseeing operations, or providing quality management services to franchisees. Additionally, there are the issues related to restrictive trade policies. While GATS has made a positive step in this direction, not all countries openly accept it. Many countries have not even made their feelings about franchises publicly known. Finally, Outback must take each country’s market into account. Religion, age distribution, and educational level – including literacy rates – influence the location, operations, and menu of restaurants in foreign countries.

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RECOMMENDATIONS – GUIDELINES FOR GOING GLOBAL

1. When going global, it is important that Outback determine its international target market, whether it will be travelers or locals. Regardless of the market, Outback must examine the foreign market that it plans to enter and adapt to its culture in a number of ways. Failure to adapt to each market could lead to the failure of their restaurants overseas.

With the help of a local management team, the transition from America to a location abroad should not be too difficult to handle. The company must examine the tastes of each potential country and customize the menu to fit the needs and tastes of that market. In addition, Outback should become familiar with cultural expressions, values, and common behaviors that characterize the market that it is going to enter. Then, management will be able to train the employees of that restaurant accordingly, making sure that customers are treated in a way to which they are accustomed. While it is important that Outback molds its locations abroad to fit the appropriate cultures, it is also important that the Australian theme and American feel are maintained.

2. Outback should locate in larger cities where there is a bigger market of travelers, higher income levels, and areas that are fairly Americanized. In order for Outback to be able to survive, they must be able to tap into a target market as suggested before. This target market will most likely be located in the urban markets where there is more diversity and technology. This recommendation will not follow the usual Outback strategy of “B-locations with A-demographics” because their usual strategy might limit their target market overseas.

Outback’s target market in the United States is the consumer who wants a great dinner with good food at a quality price. However, the availability of food differs in other countries as well as the tolerance for new food choices. Larger cities will have more people who have different tastes and preferences. Outback would be offering products totally different than the tradition in many foreign countries and the consumers in larger cities will be more progressive and receptive to new concepts. Also, the larger urban areas will have more business and industry as compared to the more agricultural and blue-collar nature of rural areas. The people with higher incomes will be better able to afford Outback’s menu, which might be unaffordable to people in other countries as compared with our own. One last important aspect of locating in urban areas is that the restaurant would have more available suppliers and be closer to transportation and communication channels.

In choosing locations in other countries, Outback should also consider the actual placement of their restaurants in the cities. Outback needs to locate near business districts and tourist areas. This is where there will be many travelers who are accustomed to Outback and will feel comfortable with the quality and familiarity. Business people and tourists would also fit into the international target market. Many countries are very receptive to American concepts and Outback would be able to capitalize on this opportunity.

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3. The pricing of the menu will be a major concern because the incomes are not as high overseas as they are in the United States. For instance, in China, McDonald’s is considered a luxury to many people, and Outback is considerably higher priced than McDonald’s. If Outback does not change its menu prices and supply options, it might limit its customer base. Supplies will be more expensive if they continue to use their current suppliers so Outback will need to find alternative supply options. This recommendation is important because Outback will have to find a way to keep their food costs from getting out of hand in international locations. On the other hand, this recommendation may not be consistent with the company’s current philosophy since Outback has such a close relationship with its current suppliers. Despite this, it is still something that will have to have careful consideration. Outback will severely limit themselves by only using their current suppliers and incur high costs in the process.

Outback should resolve this issue with the help of local management. The management should be able to guide Outback and give recommendations as to the best suppliers in the country or surrounding countries. This will cut down on shipping costs and allow Outback to form personal relationships with those who are best suited to meet their needs in each international market. Local management can also inform Outback of each country’s quality standards. Standards vary from country to country and are very important in the food industry. With help, Outback will be able to become updated on the standards of each country and choose suppliers that help them deliver quality food. By taking all of this into consideration, Outback will be able to provide quality food at the lowest possible cost to its public and create additional long-term relationships.

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APPENDIXSelected Financial Statements

Balance Sheet: *all values in millions unless otherwise specified*Assets

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

Current Assets     Cash & Equivalents $136 $132 $93 $84     Accounts Receivable $11 $11 $12 $9

     Inventories $39 $28 $26 $20

          Total Current Assets $206 $182 $143 $123Gross Fixed Assets (PP&E) $1,100 $925 $786 $672

Intangibles $94 $0 $0 $0

          Total Assets $1,238 $1,023 $852 $719

Liabilities & Stockholders’ Equity

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

Liabilities     Accounts Payable $47 $37 $34 $38

     Short-Term Debt $13 $5 $2 $2     Other Current Liabilities  $130 $126 $95 $78

          Total Current Liabilities $190 $168 $131 $118

Long-Term Debt $14 $12 $2 $39

          Total Liabilities $296 $215 $159 $170

Stockholders’ Equity     Preferred Stock Equity $0 $0 $0 $0

     Common Stock Equity $942 $808 $693 $548

          Total Stockholders’ Equity $942 $808 $693 $548

               Total Liabilities & Stockholders’ Equity $1,238 $1,023 $852 $719

Cash Flows: *all values in millions unless otherwise specified*

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Cash Flow from Operating Activities

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

     Net Cash from Continuing Operations $229 $240 $192 $187

          Net Cash from Operating Activities $229 $240 $192 $187

 Cash Flow from Investment Activities

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

          Net Cash used for Investments ($234) ($146) ($127) ($109)

 Cash Flow from Financing Activities

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

          Net Cash from (used for) Financing Activities ($11) ($55) ($56) ($34)

Net Change in Cash & Equivalents ($16) $39 $9 $44

Cash & Equivalents at Beginning of Period $132 $93 $84 $40

Cash & Equivalents at End of Period $116 $132 $93 $84

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Income Statement: *all values in millions, except per share items*Income Statement Summary

  FY End12/01

FY End12/00

FY End12/99

FY End12/98

Revenue $2,127 $1,906 $1,646 $1,403

Cost of Sales $808 $715 $620 $544

Gross Profit $1,319 $1,191 $1,026 $859

Operating ExpensesSelling, General & Administrative $1,014 $882 $752 $638

Operating Profit Before Depreciation & Amortization $305 $308 $273 $220

Depreciation & Amortization $69 $58 $51 $41

Operating Income after D & A $236 $250 $223 $180Other Income (net) ($33) ($36) ($33) ($24)

Interest Expense $2 $4 $1 ($1)Pre-Tax Income (EBT) $206 $219 $191 $155

Net Income from Continuing Operations $133 $141 $124 $101Net Income from Discontinued Operations N/A N/A N/A N/A

Net Income from Total Operations $133 $141 $124 $101Normalized Income $136 $141 $128 $101

Income from Extraordinary Gains/Losses N/A N/A N/A N/A

Total Net Income $133 $141 $124 $96

Preferred Stock Dividends N/A N/A N/A N/A

Net Income available for Common Shareholders $133 $141 $124 $96

Earnings per Share (in Dollars)     Basic EPS from Continuing Operations $1.74 $1.82 $1.61 $1.27

     Basic EPS from Discontinued Operations N/A N/A N/A N/A     Basic EPS from Total Operations $1.74 $1.82 $1.61 $1.33

     Basic EPS from Total Net Income $1.74 $1.82 $1.61 $1.27     Basic Normalized Net Income/Share $1.78 $1.82 $1.66 $1.33

     Diluted EPS from Continuing Operations $1.70 $1.78 $1.57 $1.24

     Diluted EPS from Discontinued Operations N/A N/A N/A N/A

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     Diluted EPS from Total Operations $1.70 $1.78 $1.57 $1.30

     Diluted EPS from Total Net Income $1.70 $1.78 $1.57 $1.24     Diluted Normalized Net Income/Share $1.74 $1.78 $1.61 $1.30

     Dividends Paid/Share $0.00 $0.00 $0.00 $0.00

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Ratios: All ratios based upon fiscal year end data, as indicated.Ratios

  FY End12/01

ValuationPrice to Earnings 15.0

Price to Revenue 1.12

Price to Book 2.48

Price to Cash Flow 11.8

Book Value per Share $12.25 EfficiencyReturn on Equity 15.2%

Return on Invested Capital 14.0%

Return on Assets 11.8%

Asset Turnover 1.9

Receivable Turnover 194.1

Inventory Turnover 24.2 ProfitabilityGross Profit Margin 61.7%

Net Profit Margin 6.3% LiquidityCurrent Ratio 1.1

Quick Ratio 0.8

Debt to Equity Ratio 0.03

Leverage Ratio 1.3 Comparison to IndustrySales (Revenue) 3.2%

Earnings 178.8%

Price to Book Ratio 6.5%

ReferencesHistory:

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“Outback Steakhouse Overview.” Taken from http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=osi&script=100&layout=11. © 2002 Outback Steakhouse.

Problem Identification:Graph 1 & Table 1. Take from http://www.outback.com. Financial Documents.

The Competition:“Applebee’s International Company History.” Taken from

http://ir.applebees.com/ireye/ir_site.zhtml?ticker=APPB&script=1800&layout=-7. © 2003 Applebee’s International, Inc.

“Red Lobster Seafood Restaurants – Our Company.” Taken from http://www.redlobster.com/discover/our_company/index.asp. © Red Lobster.

“Diversity – Company Information – Brinker Family Restaurants.” Taken from http://www.brinker.com/company/diversity.asp. © Brinker International. All rights reserved.

“T.G.I. Fridays ® Worldwide.” Taken from http://www.tgifridays.com/News/fri_bg.htm. © 2003 TGI Friday’s, Inc.

Table 2. “Top 10 Casual Dining Restaurants.” Taken from http://www.franchisinghelp.com.

Country Summaries:Peter, J. Paul and Donnelly, James H. “Appendix B: Country Summaries.” Marketing

Management: Knowledge and Skills, 6 th Edition . Pages 823-826. © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Financial Statements and Ratios:Balance Sheet: http://www.corporate-ir.net/ireye/ir_site.zhtml?

ticker=osi&script=950&layout=11&item_id='ps=1*pg=4' Cash Flows: http://www.corporate-ir.net/ireye/ir_site.zhtml?

ticker=osi&script=950&layout=11&item_id='ps=1*pg=6' Income Statement: http://www.corporate-ir.net/ireye/ir_site.zhtml?

ticker=osi&script=950&layout=11&item_id='ps=1*pg=8' Ratios: http://www.corporate-ir.net/ireye/ir_site.zhtml?

ticker=osi&script=950&layout=11&item_id='ps=1*pg=3'

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Current International Locations Map

Taken from http://www.outback.com/locator/

Current International Locations

Country Number of Restaurants

Korea 21Canada 19Brazil 8Hawaii 6The Caribbean 6Japan 6Mexico 4Philippines 3Hong Kong 3United Kingdom 3China 2Venezuela 1Thailand 1Singapore 1Malaysia 1Indonesia 1Australia 1Guam 1Costa Rica 1

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