Why unit growth and remodeling are good signs for Bloomin’ Brands
A must-read 2Q14 earnings overview of Bloomin' Brands (Part 5 of 13)
Unit growth
Besides relying on strategies to increase same-store sales like the ones we discussed in the previous part of this series, a restaurant chain may also grow revenue by opening new restaurant locations, as Market Realist’s series on Panera Bread (PNRA) discussed. Restaurants may also remodel existing locations to be more relevant to the customers.
About 65% of the company’s 1,500-plus restaurants are Outback Steakhouses. 822 of these are company-owned and 155 are franchised. Bloomin’ Brands has opened 55 new company-owned Outback restaurants, but this was mitigated by the closure of underperforming domestic and international restaurants, resulting in a flat unit growth for Outback over the year.
The company opened six new Carrabba’s restaurants, 16 new Bonefish Grill restaurants, one Fleming’s and shut down two Roy’s restaurants over a one-year period. The company netted 19 new restaurants from the same quarter ended last year in 2013.
International development
During the year Bloomin’ Brands opened four Outback restaurants internationally, three in Brazil, and one in South Korea.
To take advantage of multiple restaurant companies, you may want to consider a diversified ETF such as Vanguard Total Stock Market (VTI), which includes Bloomin’ Brands and Darden Restaurants (DRI).
Remodeling
Among other strategies, restaurants remodel their locations to stay relevant, keep the customers interested, and increase traffic. For example, McDonald’s (MCD) and Burger King (BKW) have actively remodeled their stores. Bloomin’ Brands remodeled nine Carrabba’s in the second quarter and 14 for the year. As for Outback, the management stated that it is testing its exterior remodel strategy.
Before we jump into how the same-store sales and unit growth impacted the company’s revenue, let’s look at other initiatives from Bloomin’ Brands’ management to boost sales.
Browse this series on Market Realist:
