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Restaurant Chain Work Valued at $60 Million

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CHICAGO ( -- Outback Steakhouse has put its advertising creative account into review and is working on menu changes to boost sales, according to the company.
A new chief executive and chief operating officer are making changes designed to boost Outback's sagging sales.

Recently named CEO Bill Allen and President and Chief Operating Officer Paul Avery made statements to analysts in a question-and-answer session that lasted nearly two and half hours. In March, co-founders Chris Sullivan and Bob Basham stepped down as CEO and chief operating officer, respectively, retaining co-chairmanship. Yesterday's move followed a two-day marketing review.

Economy blamed
The chain blamed the economy for its struggles in the Midwest and North Central regions and is testing a value menu there with smaller portions and smaller prices.

"I think it's time for us to evolve the marketing," Mr. Avery said. He said the marketer is interviewing ad agencies, including "the one we continue to use, but we're looking at shaking that up a bit." He didn't identify the other agencies.

Outback's current agency is independent David and Goliath, Los Angeles. He said new ads start in September. A spokesman for the agency referred calls to Outback, which didn't return calls by press time.

On the agency's Web site it claimed that Outback had 83% advertising awareness compared to competitors who outspent them at a level of two to one. Figures from TNS Media Intelligence put Outback's measured media spending at about $60 million. Rival Applebee's spent $126 million.

New marketing focus
Calling marketing the No. 1 focus of the organization, Mr. Avery said advertising spending this year for the first time would exceed $100 million as the company shifted spending to national media. As a result, the company pulled its support from spot TV and billboards, which backfired. "We're putting spot TV back in several markets ... that will take effect in July," Mr. Avery said. "We need to get back into marketing on a regional, local, individual unit basis."

After ending 2004 with a 3% gain in same store sales, that figure fell to 0.4% in the first quarter and was down 1.1% in April and up 1.5% in May.

Outback also is rethinking its menu mix and limited-time offers. Executives admitted that it eliminated too many items, especially appetizers, in an effort to speed up cooking times and improve quality. Now its adding items back to the menu.

Change 10%-15% of menu
So far, the chain has been reticent to use a revolving menu in order to avoid displeasing customers that have grown accustomed to certain items, like steaks Bloomin' Onions. "It is my sense we need to evolve the menu more," Mr. Avery said. He plans to change 10% to 15% of the menu annually going forward. One item that has gotten the attention of management is the 6-ounce sirloin steak on the children's menu that adults have been ordering for takeout.

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