In the summer of 2017, Outback saw its traffic trends start to strengthen. The brand jumped 130 basis points from the first quarter to the second, which marked the highest result in two years. Although still negative at 0.8 percent, it compared rather nicely to the prior year’s 5.9 percent decline. And it kicked off a six-period run of positive results that just ended in the first quarter of fiscal 2019, announced April 26.

Here’s what that traffic stretch looks like:

• Q1 2017: -2.1 percent
• Q2 2017: -0.8 percent
• Q3 2017: 0.1 percent
• Q4 2017: 4.3 percent
• Q1 2018: 2.2 percent
• Q2 2018: 0.6 percent
• Q3 2018: 0.9 percent
• Q4 2019: 0.9 percent
• Q1 2019: -0.5 percent

Unlike the two years Outback slugged through sagging guest counts, this quarter’s decline doesn’t raise the same kind of alarm. In many ways, Bloomin’ Brands figured to take a hit in Q1 given that it measured against a period where Outback was discounting much heavier than it is today. Yet same-store sales grew an impressive 3.5 percent in Q1—the ninth consecutive quarter of positive comp sales. This came as the chain slashed traditional discounting by 17 percent relative to last year. When you consider that trade-off, 755-unit Outback’s ability to lose just 0.5 percent in traffic, year-over-year against 2018’s best quarter, was an impressive metric.

READ MORE: Fleming’s seizes the fine-dining segment for Bloomin’.

The chain, as it has for the last two years, drove sales through more sustainable and long-term avenues: better ROI on marketing and the growth of its loyalty platform, Dine Rewards. During that stretch, Outback reduced advertising spend by $25 million as it turned away from mass marketing to what it calls “mass personalization.” Customer segmentation built on the data Bloomin’ collects from more than 8.5 million people in its rewards base. Guest-centric communications instead of broad, promotional incentives that attempt to reach everyone. The benefits of these changes showed up in Q1 in the form of increased average check, the company said, which rose 4 percent.

Bloomin’ didn’t break out pricing in the quarter, only to say it would be “very prudent in our thoughts around menu pricing moving forward.” Deno said earlier in the year the chain would have “moderate pricing increases below inflation, because we want to make sure that the customer experiences top notch.”

The chart below shows what Outback’s same-store sales streak looks like during this turnaround.

Outback’s brass has touted these operational improvements for a while now. But they put a price tag on them last week. CEO Dave Deno, who stepped into the role in March, said during a conference call that, over the past three years, Bloomin poured north of $50 million into the customer experience. This breaks down as $30 million toward food quality—portion enhancements and reducing complexity—and $20 million in service, training, and labor.

Furthermore, Outback spent upward of $400 million in remodels to contemporize the brand and improve curb appeal. It plans to update 300 additional units in the next three years. “Customers have taken notice as we have seen strengthening brand health measures,” Deno said. Bloomin’ previously projected capital expenditures between $175 million to $200 million in 2019.

Outback is currently testing multiple interior remodel prototypes, he added. Beyond freshening décor and ambiance, the units are reconfigured to handle a surge in off-premises orders. These units have expanded off-premises rooms to serve higher order volumes.

Outback isn’t just satisfying a shift in its own business with this change—its preparing for a future where dine-in traffic makes up a smaller piece of the overall pie. Dining out of home represents an $870 billion slice of the restaurant industry. For casual-dining brands, it’s roughly $86 billion of that competitive set, according to The NPD Group.

So as Bloomin’ invests in guest-facing initiatives and four-wall experiences—as the $50 million proves—it must extend beyond traditional reach if it wants to balance out lower guest counts in the coming months and years—something all restaurants grapple with.

Forty-six percent of Baby Boomers order less than one meal per month via delivery, per NPD. For millennials, it’s 29 percent who order one or more meals per week via delivery. As these consumer segments continue to swap prominence, the at-home opportunity, which currently represents about $750 billion, is going to become an every bigger target for sit-down restaurants.

Relocations and remodels play into the off-premises opportunity for Bloomin’ Brands.

Outback is keyed into that, executives said. In another effort to refresh its assets and meet the changing demand, Deno said, the chain is relocating restaurants as quickly as quality sites become available. And these units are better served for off-premises as well. The chain moved about 50 stores since 2012, including 14 last year. Deno said these units are generating sales lifts in excess of 30 percent and there’s room for another 50 or so, not to mention opening 50 incremental new stores that are also designed for the to-go boom. Before relocation, the venues averaged $2.9 million AUVs. After: $4.1 million.

As of the end of Q1, delivery was live in 550-plus locations across Outback and Carrabba’s. Deno said the business has proven profitable. “Now that the business is reaching scale, we will begin augmenting existing local marketing efforts with additional tactics to drive awareness. We remain very excited about the incremental opportunity it represents as we capitalize on the growing consumer demand for enjoying restaurant meals at home,” he said.

There are some stores, about 50 or so, where off-premises mix 20 percent of total sales. For the whole system, though, it upped 19 percent at Carrabba’s and Outback in Q1, year-over-year, to represent 14 percent of the business.

Bloomin’ is seeing lower average checks for off-premises orders, which runs counter to limited-service brands. But that’s typical in the casual space since you have to factor in the loss of one of the restaurant’s highest-margin items—beverages. At Bloomin’, the company reports average ticket on dine-in business at $54. For off-premises, it’s $27 for to-go and $42 for delivery. At Outback and Carrabba’s, executives believe that 14 percent of total mix can turn into 25 percent over time as they track toward 80 percent delivery potential.

Deno said better awareness should boost guest check. “The incrementality piece is important for us, and we’re seeing the incrementality in that business,” he said. “Secondly, I think how we market it, how we service it, using e-commerce to help grow that guest check because what we see when people order stuff online as opposed to calling, they build the guest check.”

Bloomin’ also has its own delivery network, which allows it to tweak the operating model as it sees fit, CFO Chris Adkins Meyer said.

“And we can make changes that can enhance profitability, enhance the experience for our guests. That is one of the advantages we have with having our own drivers,” he said.

Outback is relocating restaurants as fast as quality sites become available.

A healthy report

Bloomin’s stock popped nearly 7 percent in the wake of the Q1 report to $20.95. The company’s earnings of $64.3 million, or 69 cents per share (adjusted earnings were 75 cents per share), beat a call of 74 cents. Revenue totaled $1.13 billion.

Blended, the company’s same-store sales rose 2.4 percent. Every brand was positive: Carrabba’s (0.3 percent); Bonefish (1.9 percent); and Fleming’s (0.6 percent).

In addition, Bloomin’s adjusted operating margins grew 70 basis points, year-over-year, on a comparable basis.

Returning to the data story unfolding at Bloomin’, Deno said the company’s Dine Rewards platform is driving strong engagement and cross fertilizing visits across the portfolio. Instead of national deals, the company can generate visits with offers like Dine Rewards member-only invitations to theme dinners. An example: Carrabba’s Carnevale event.

These brand-appropriate programs drive frequency and allow Bloomin’ to keep removing unprofitable discounting. The company has pushed this strategy throughout all of its brands. In Q4, Bonefish decided to reduce the number of gift cards sold through discount channels. Some of these charge higher fees. Reducing reliance on these made financial sense for Bloomin’ but impacted Q1 traffic by about 150 basis points since more holiday gift cards are redeemed in this period, Meyer said. Fleming’s also absorbed a short-term hit from removing legacy value offerings, such as its 567 bar menu. In total Bloomin’ drove a 20 percent reduction in discounting throughout the 68-unit fine-dining chain’s system and turned the focus to improved execution, consistency, and better profitability.

Adjusted operating income margin was 7.8 percent in Q1, up 80 basis points after adjusting 2019 for the impact of a lease accounting change. This improvement in operating margin was accelerated by positive comps, improved check average, and less discounts. Also, by ongoing productivity efforts, Meyer said, particularly with food waste.

“I’m just glad that we’ve gone on this journey over the last couple of years to attack unprofitable discounting and to reinvest in the customer experience,” Deno said