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10 brands winning on food quality: Consumer Picks 2017 The Cheesecake Factory

Cheesecake Factory looks to future growth with investments and new concepts

Expanding portfolio leverages expertise, says CEO David Overton

The Cheesecake Factory Inc. has been expanding its portfolio of brands, both investing in existing concepts and creating its own, with an eye on future growth, executives said Tuesday.

The Calabasas Hills, Calif.-based company will be opening its first fast-casual Social Monk Asian Kitchen, a pan-Asian concept developed in house, in the fourth quarter in Thousand Oaks, Calif., and maintains investments in the casual-dining North Italia and fast-casual Flower Child, developed by Phoenix, Ariz.-based Fox Restaurant Concepts.

David Overton, Cheesecake Factory CEO and chairman, said the opportunities for the legacy high-volume big-box Cheesecake Factory units is limited.

“There won’t be one on every street corner,” Overton said in a second-quarter analysts call.

“At some point we’ll get to that 300 number of Cheesecake Factories, and we’re trying to ready ourselves so we can continue growth,” added Matthew Clark, Cheesecake’s chief financial officer, about the company’s diversification strategy. “And we’re doing it ahead of time, so it will make an impact on our growth rate when we need it.”

Clark said the North Italia and Flower Child investments, made in November 2016, continue to perform as expected. “Both concepts are doing well,” he said. Flower Child, which recently opened in Atlanta, has 11 locations in five states and North Italia has 13 units in six states.

The younger brands can use Cheesecake’s expertise in supply chain, information technology and operations, Overton said, while maintaining the legacy of the “special” Cheesecake Factory brand.

“We think that there is some white space in various opportunities in the U.S.,” Overton said, “and Social Monk happens to be one of those.”

A toehold in the fast-casual market, he said, “offers some positive synergies with respect to, say, real estate planning and a much smaller footprint. it’s a smaller labor component. So, it’s really looking at basically leveraging our expertise and diversifying the risk portfolio of the company while also keeping Cheesecake Factory special.”

The company expects to open as many as six restaurants in fiscal 2018, including Social Monk and one Grand Lux Cafe, scheduled to open later this month.

With special charges in the second quarter ended July 3, The Cheesecake Factory’s net income declined 25.7 percent, to $28.4 million, or 61 cents a share, from $38.2 million, or 78 cents a share, in the same period a year ago. Revenues increased 4 percent to $593.2 million from $569.7 million in the prior-year quarter.

Same-store sales at The Cheesecake Factory restaurants increased 1.4 percent in the quarter.

Also Tuesday, Cheesecake Factory announced it was entering into an exclusive delivery agreement with DoorDash, expanding its platform with that third-party provider.

Overton said The Cheesecake Factory’s delivery and take-out business continues to grow, increasing to about 13 percent of the concept’s sales, about 2 percent over the same quarter of 2017.

“Delivery business continues to be strong and very stable,” he said. “DoorDash is our main partner, and we’re actually executing a new agreement with DoorDash to become our exclusive partner. And they’ll take over the 37 restaurants that currently are being operated by our other partner.”

The expanded deal with provide Cheesecake Factory with more operational delivery data and marketing opportunities, the company said.

To promote the new delivery pact, DoorDash foregoing delivery fees on all orders from The Cheesecake Factory and Grand Lux Cafe through Aug. 5.

The Cheesecake Factory owns and operates 213 restaurants in the United States, Puerto Rico and Canada., including 198 Cheesecake units, 13 Grand Lux Cafes and two RockSugar Southeast Asian Kitchens. The company licenses 21 Cheesecake Factory restaurants internationally.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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