One of the biggest owners of Outback Steakhouse restaurants in the country filed for bankruptcy this week, citing factors including rising food costs.
Cerca Trova Restaurant Group Holdings, the owner of 61 restaurants on the West Coast, filed for Chapter 11 bankruptcy earlier this week.
It pointed to reduced foot traffic and slow pandemic recovery, along with rising food prices and unexpected labor costs.
“By 2026, the pressures on the business had converged,” Chief Executive Officer David Goronkin said in a court filing cited by Bloomberg News. “Guest traffic and earnings continued to decline, while food, labor, and other production costs continued to rise.”
Cerca Trova proposed selling its assets to Outback owner Bloomin’ Brands for a cool $26.3 million.
This past summer, a California court approved a $1.6 million wage-and-hour class action settlement against Cerca Trova, which has nearly 3,670 employees. Two new class actions were filed against the company in the state, where 31 of its locations are, according to court documents.
In one of the cases, the franchisee was accused of failing to pay overtime and minimum wages, along with not providing meal or rest breaks.
In court documents, the company said it could not make the settlement payments “without significantly impacting its liquidity.”
It was not immediately clear how the bankruptcy might affect settlement payments.
Cerca Trova has also struggled with California’s recent increases in local and state minimum wages.
The company was really sizzling back in 2018, when the group owned 99 Outback eateries with annual sales of about $340 million – making it the largest Outback franchise owner in the country.
The franchisee — with locations in Arizona, Colorado, Nevada and New Mexico, in addition to California — took on debt during the pandemic.
Although sales recovered, the group wasn’t able to get out from underneath the accruing interest.
Rising food costs also dragged on Cerca Trova. Its biggest expense was beef, which saw a 15% to 20% increase in 2022 — and about 5% annually since then, according to court documents.
The company had about $3.6 million cash on hand when it filed for bankruptcy.
A Bloomin’ Brand spokesperson said the bankruptcy is “an isolated situation involving the franchisee and does not affect Bloomin’ Brands’ corporate operations, financing, or liquidity.”
Attorneys for Cerca Trova Restaurant did not immediately respond to a request for comment.