Private equity firm SkyLake Investment will rely on its premium brand image and potential growth from the expansion of delivery services to attract prospective buyers for its Outback Steakhouse Korea unit, with bidding opening Friday (May 29).

Credit Suisse, which is running the auction, distributed a 122-page information memorandum to potential bidders earlier this month that played up the company’s upscaled brand image since its concept changed from a family restaurant chain to a premium steakhouse.

SkyLake Investment acquired the Korean unit of Outback Steakhouse restaurants from Bloomin’ Brands in 2016, adding a T-bone steak to the menu and replacing frozen meat with fresh chilled products. As a result, revenues from steak sales as a percentage of total revenues grew by 20 percentage points in the four years to 2019.

Overall revenues increased at a compound annual growth rate of 8.8 percent in the same period, boosting earnings growth. In contrast, rival companies VIPS, Ashley and TGI Friday’s have had negative growth. Outback Steakhouse’s average spending per person increased from 19,209 won to 26,147 won between 2016 and 2019.

The information memorandum also identifies the company’s delivery business, set up last summer to serve demand from consumers who wanted western food delivered, as “a new growth pillar”. SkyLake Investment noted that only a fraction of western food consumed in South Korea was available for delivery.

Outback Steakhouse is expanding this sideline by setting up more cloud kitchens, which operate for online delivery only. It currently has six kitchens and plans to open 15 by 2020 and 160 by 2024. The company said it expected revenues from cloud kitchens to jump from 6 billion won in 2020 to 106 billion won in 2024, with compound annual growth of 77 percent.

It took five months for the first cloud kitchen to break even, but only two months for the sixth. The company’s first cloud kitchen recorded earnings before interest, tax, depreciation and amortization margin (EBITDA) of more than 22 percent in March, with the EBITDA margin for its five other cloud kitchens exceeding 10 percent.

“The future growth potential of Outback Steakhouse Korea with its focus on delivery services appears to be one of the key factors that could attract investors,” an industry insider said.

The first round of bidding for the entire stake in Outback Steakhouse is scheduled for Friday (May 29). Currently Lakeside Dining, a special purpose vehicle (SPV), owns 100 percent of the company, with SkyLake Investment holding 90 percent of the SPV. Two Outback Steakhouse executives have the remaining 10 percent. (Reporting by Byung-yoon Kim)