California-based restaurant chain operator files for bankruptcy as it blames state’s brutal wage laws

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A major California-based Outback Steakhouse franchise operator has gone bust, blaming the Golden State’s soaring labor costs, sky-high food prices and dwindling customers for pushing its restaurant empire to the brink.

San Diego-based Cerca Trova Restaurant Group, also known as Out West Restaurant Group, filed for Chapter 11 bankruptcy protection Monday in Delaware, seeking relief from a staggering $449 million debt burden, according to the Los Angeles Times.

The struggling company operates 61 Outback Steakhouse restaurants across California, Arizona, Colorado, Nevada and New Mexico, with the majority of its locations concentrated in the Golden State.

And company executives say California’s punishing minimum wage requirements have only made an already brutal financial situation worse.

California’s statewide minimum wage jumped to $16.90 an hour in January, while fast-food chains have been required to pay workers at least $20 an hour since 2024.

Although Outback Steakhouse is exempt from the higher fast-food wage mandate, its operators still face mounting payroll expenses under the state’s broader wage laws.

More than half of Cerca Trova’s employees work in California, according to bankruptcy filings.

“By 2026, the pressures on the business had converged,” CEO David Goronkin said in court documents cited by the Times. “Guest traffic and earnings continued to decline, while food, labor, and other production costs continued to rise.”

The company’s financial woes have been brewing for years.

Its debt has ballooned from approximately $269 million in late 2020 to $449 million this year, as inflation, rising operating expenses and shrinking customer traffic hammered its bottom line.

Even the chain’s signature steaks have become increasingly expensive to serve, with beef prices climbing as much as 5% annually since 2022, according to court filings.

The franchise operator was once Outback Steakhouse’s largest franchisee, boasting 99 restaurants in 2018 before shrinking to its current 61 locations.

Now, the company is looking to unload its remaining restaurants in a court-supervised sale.

Outback parent company Bloomin’ Brands has emerged as the leading bidder, offering $26.3 million to acquire the struggling operator’s assets unless another buyer comes forward with a better deal, per Newsweek.

The Florida-based restaurant giant has also agreed to provide up to $5.5 million in financing to keep the franchisee afloat during bankruptcy proceedings.

Bloomin’ Brands insisted the financial meltdown was limited to the franchise operator and would not disrupt its broader business.

A Bloomin’ Brand spokesperson told the Post the bankruptcy is “an isolated situation involving the franchisee and does not affect Bloomin’ Brands’ corporate operations, financing, or liquidity.”

The filing marks another blow to California’s battered restaurant industry.

A major Carl’s Jr. franchise operator, Friendly Franchisees Corporation, recently sought Chapter 11 protection through subsidiary Sun Gir, citing California’s $20 fast-food minimum wage as a significant contributor to its financial troubles.

The wage hike’s economic consequences remain fiercely debated, with critics arguing it has squeezed restaurant operators while supporters maintain its impact has been limited.

Meanwhile, casual-dining chains nationwide have been struggling to lure inflation-weary Americans back through their doors. 

Red Lobster filed for bankruptcy in 2024, while Oprah-backed True Food Kitchen recently sought Chapter 11 protection and shuttered three Southern California locations.

Outback has also experienced declining foot traffic, with parent company Bloomin’ Brands reporting a 2.8% year-over-year drop in customer visits during the second quarter.

For now, the steaks will keep sizzling at Cerca Trova’s restaurants, even as the company fights to survive its financial crisis.

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