Cheesecake Factory Inc. is finding that it can help improve sales by taking food directly to consumers.
The Calabasas Hills, Calif.-based chain said this week that its same-store sales increased 1.1 percent in the quarter ended Jan. 3 — the 28th straight quarter of positive same-store sales.
It also outpaced the casual-dining sector by 400 basis points at a time when consumers largely abandoned dine-in concepts. Indeed, Cheesecake wasn’t immune to the issue, as its own traffic fell 1.8 percent in the quarter, and its same-store sales weakened in December.
Many casual-dining executives are finding some hope in delivery, and Cheesecake could be providing the blueprint. The company said it has delivery in half of its 194 locations through a partnership with DoorDash, and has hopes to continue expanding the service into more locations this year.
“We’re seeing incremental sales in many locations,” CEO David Overton said on the company’s fourth quarter earnings call Wednesday. “In fact, our to-go business increased in 2016 and we believe delivery was a key contributor to this growth.”
Company executives believe that they are offsetting costs associated with using the third-party delivery service by reduced costs in the store. Customers don’t use napkins or plates, and they don’t take up hosts’ or servers’ time, executives said.
And the orders are larger. Consumers who have food deliver tend to order more of it, and at Cheesecake Factory they’re ordering more, well, cheesecake. “It’s really margin neutral,” Overton said. “And we are seeing a higher average check with delivery orders, with desserts contributing the majority of that.”
The increase in to-go orders, of about 1 percent systemwide to 11 percent of sales, wasn’t just delivery — consumers are making more to-go orders, period. Yet the company believes delivery was a significant contributor to that increase, and believes it could be a major factor in the future.
Executives did say delivery worked better in areas where the service is already well established. They said they plan to work with DoorDash as long as they can and could use other services in markets where DoorDash can’t or won’t go to. “We’ll go as far as we can with DoorDash,” Overton said.
Peter Saleh, analyst with BTIG, said that Cheesecake’s results in the period were “impressive given their widening gap to the industry.”
He also believes that the rollout to delivery to more locations could start contributing to same-store sales in the coming quarters. Saleh estimates delivery could provide a 2 percentage point lift to same-store sales once the service rolls out.
Cheesecake Factory stock rose nearly 2 percent on Thursday on the company’s fourth quarter report.
Revenues in the quarter increased 14 percent to $603.1 million from $526.8 million in the same period a year ago — the company’s quarter included an extra week. Net income increased 19 percent to $32.4 million, or 68 cents per share, from $27.2 million, or 56 cents.
Labor costs increased 80 basis points in the quarter, to 33.6 percent of sales. The company said wage rates increased 5 percent in the period, offset in part by higher prices.
Executives noted that the company has been able to produce strong earnings growth despite the wage rate inflation. But they also talked about finding cost savings.
“We’ll continue to seek other cost efficiencies, other cost savings as we did in 2016,” Douglas Benn, the company’s CFO, said on the call.
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze