The Cheesecake Factory Inc. anticipates its large capacity dining rooms to be an advantage as restaurants reopen for dine-in service amid coronavirus restrictions, the company said in federal filings Wednesday.
The large size of Cheesecake Factory units — between 7,500 and 10,000 square feet — will be an advantage, the company said, noting that “our flexible seating layouts will uniquely enable us to ensure ample levels of social distancing while maintaining sufficient seating capacity to generate what we believe could be meaningful sales volumes.”
The Calabasas Hills, Calif.-based company, in an updated investor presentation filed with the Securities and Exchange Commission, said its anticipated reopening plan calls for a gradual return to normal operations, “although social distancing restrictions are expected to impact on-premise dining for some time.”
The company plans to reopen dining rooms in jurisdictions that allow at least 50% capacity use.
The company said 32 locations remain temporarily closed, but operating Cheesecake locations are doing an average annualized $4 million in off-premise sales. Traditionally, when operating at full capacity, Cheesecake Factory restaurants posted an average $10.7 million in sales.
“For the first quarter of fiscal 2020, off-premise sales accounted for approximately 22% of Cheesecake Factory sales, reflecting the acceleration that began from the social distancing and shelter-in-place orders,” said David Gordon, Cheesecake Factory president, on the May 5 first-quarter earnings call.
Since then, average weekly sales nearly doubled from first-quarter off-premise levels, including a solid lift to average check as well, he said.
“On an annualized basis, recent weekly Cheesecake Factory off-premise sales would equate to nearly $4 million per unit on average, and we are seeing this strength across both the lunch and dinner day parts,” Gordon said.
With possible rent relief, the $4 million in off-premise sales is a cash-flow breakeven point, said Matthew Clark, Cheesecake chief financial officer.
The off-premise sales mix will remain elevated as in-store volumes begin to rebuild, he said, and that is “consistent with what we have seen in China's ongoing recovery to date. We believe over time, off-premise volumes will moderate somewhat as consumers become more comfortable going out again and on-premise sales continue to build.
For the first quarter ended March 31, Cheesecake Factory’s swung to a loss of $3.9 million, or nine cents a share, from a profit of $27 million, or 60 cents a share, in the prior-year period. Revenues rose 2.6% to $615.1 million from $599.5 million in the same quarter last year, reflecting acquisitions.
Same-store sales at Cheesecake Factory restaurants declined 12.9% in the first quarter with the COVID-19 impact.
David Overton, Cheesecake CEO and chairman, said in the earnings call: “It goes without saying that COVID-19 and the containment measures are having an unprecedented impact on the restaurant industry. This forced us to change the way we do business overnight.”
The Cheesecake Factory owns and operates 294 restaurants throughout the United States and Canada under brands that incljude The Cheesecake Factory, North Italia and a collection within the Fox Restaurant Concepts subsidiary. The company licenses 26 Cheesecake units Internationally.
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