The Cheesecake Factory Inc. will lean into its Fox-created concepts for the lion’s share of its development this year, executives said Wednesday.
The Calabasas Hills, Calif.-based company, which acquired the Phoenix, Ariz.-based Fox Restaurant Concepts in 2019 in a deal valued at about $353 million, plans to return to unit growth after the pandemic retrenchment, with as many as 20 to 22 planned openings.
Of those, David Overton, Cheesecake Factory CEO, said on a fourth-quarter earnings call that included five to six Cheesecake Factories as well as five to six North Italia locations and 10 FRC concepts, including three to four fast-casual Flower Child units.
Overton said the development plan was accelerating as the company continued “to experience some delays in opening due to supply chain challenges and permit approval delays beyond our control,” which led the company to push some unit openings in 2023.
However, during the fourth quarter, the company opened eight new restaurants, including two Cheesecake Factory restaurants in Nashville, Tenn., and Corpus Christi, Texas, and two North Italia restaurants in The Woodlands, Texas, a suburb of Houston, and Torrance, California.
It also opened four FRC restaurants, including two Flower Child locations in Austin, Texas, and Chandler, Ariz., a Fly Bye in Phoenix, Ariz., and Pushing Daisies, FRC’s newest concept in Nashville, Tenn. In addition, one Cheesecake Factory restaurant opened internationally in the fourth quarter in Mexico.
“I believe opening eight new restaurants last quarter demonstrates our ability to execute the acceleration of our unit growth plan,” Overton added.
David Gordon, president of The Cheesecake Factory, noted that Doughbird, another Fox concept, had opened in Nashville after the fourth quarter’s end. Another Doughbird is slated for Tucson, Ariz.
Gordon said Flower Child was now up to 30 restaurants across the country and moving into new geographies. Three to four Flower Child’s are expected to open this year.
“We would anticipate the Flower Child is going to be the next concept that we will bring under our umbrella a little more closely and help continue to launch nationally,” Gordon said. “We're excited to get that going this year.”
Among the 10 FRC openings, Gordon said, Cheesecake is keeping its eyes on Blanco, a Mexican concept, and Culinary Dropout.
“We'll continue to evaluate the other FRC concepts to make sure we feel like they can have a national presence and make sure that they're hitting the margin profile that we need before we decide that we would scale them up,” Gordon said.
Overton said Cheesecake rolled out an additional menu price increase at the start of December to offset inflation “with the objective of exiting the year with cheesecake factory restaurant level margins at seasonally adjusted 2019 levels.”
Matthew Clark, Cheesecake chief financial officer, said the company expected to deploy a 3.5% menu increase in the middle of the first quarter.
Clark added that for 2023, the company expects mid-single-digit inflation and about 60% of the commodity basket is locked in price.
“This time of year,” Clark said, “we might want to be closer to 65% or so. The category that is still a little bit tricky, obviously, is ground beef — harder to get a long-term contract there — and then there's a couple of categories that we're kind of watching.
Utilities like natural gas continue to be a pressure point, he said, and insurance rates are a challenge.
“It looks like those higher costs have continued, but they're not getting worse,” Clark noted.
For the fourth quarter ended Jan. 3, Cheesecake Factory swung to a loss of $3.3 million, or 7 cents a share, from a profit of $2.1 million, or 4 cents a share, in the same period last year. Revenues were up to $892.8 million from $776.7 million in the prior-year quarter.
Same-store sales at The Cheesecake Factory restaurants increased 4% as compared to the same quarter last year. Through Feb. 21, in the first quarter-to-date, same-store sales for The Cheesecake Factory restaurants increased about 9.5% year-over-year, the company said. North Italia same-store sales in the fourth quarter were up 9%.
As of Jan. 3, the company owned and operated 318 restaurants, including 211 Cheesecake Factories, 33 North Italia units, 34 other Fox concepts and 40 other operations, including Flower Child, Grand Lux Café and Social Monk Asian Kitchen. The company has 30 licensed Cheesecake units internationally.
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