If the 20 months of pandemic have any bright side, The Cheesecake Factory Inc. may have found one: The COVID-19 era actually lured new consumers to the casual-dining brand, especially in its off-premises channel, and those new guests are frequent and loyal, new company research found.
David Gordon, president of the Calabasas Hills, Calif.-based company, said off-premises sales remained strong in the third quarter, nearly double 2019 levels throughout the period.
“We recently completed a consumer research study that showed that we attracted a significant number of new guests to The Cheesecake Factory throughout COVID, particularly via the off-premises channel,” Gordon said on an earnings call Wednesday.
“Notably, loyalty is very strong, evidence by a significant number of these new guests in the frequent cohort,” Gordon said. “This data further reinforces our belief that a meaningful increase in off-premises sales could be a longer-term sales driver for the Cheesecake Factory as we emerge from the pandemic.”
The Cheesecake Factory consumer study also found loyal consumers had made a “significant increase in the frequency” of their visits, Gordon added later, making about 20 visits a year now vs. about 14 before the pandemic. The study found that about a third of those new frequent guests were new consumers, and they were returning while the company was decreasing its marketing in the second quarter and into the third quarter.
“That's a great sign,” Gordon said. “Certainly, some of the marketing that we did throughout COVID has been beneficial to remind guests to come back to Cheesecake Factory.”
Those off-premises sales were nearly double the level that Cheesecake Factory saw in fiscal 2019, Gordon said. In the fiscal fourth quarter to date through Nov. 2, average weekly off-premises sales per store were $60,000, he said, which compared to average weekly sales of $213,000. That’s about 10.5% higher than in the same period of 2019, Gordon said. The off-premises sales mix was about 28% in the quarter.
“Grounded in the learnings from our consumer research, we are again utilizing some targeted off-premises marketing to further drive our performance in this channel,” he said. “For example, just last week, we celebrated Halloween with our guests with our popular treat or treat promotion, our cheesecakes are key differentiator, and these creative offers continue to drive meaningful demand.”
David Overton, The Cheesecake Factory’s CEO, said survey respondents also scored the company high on its COVID safety protocols. “We have a lot of positive feedback,” Overton said. “The guests felt very comfortable with everything that we not only said we were doing, but they were actually seen once they were in the restaurants. And I think that contributed as well.”
Matthew Clark, The Cheesecake Factory’s chief financial officer, added that the frequent guests tend to be “omnichannel.”
“They come to us with delivery and pickup and on-premises,” Clark said. I think that that speaks a lot to the value that they see, based on the quality of the food, the portions, as well as the experience when they come on-premises. … Those loyal guests, I think, view the value proposition as having gotten stronger in this environment overall.”
As the Cheesecake brands deal with wage and commodity inflation, they are looking at menu prices, executives said.
“Pricing is a little bit art and a little bit science,” Clark said, “and we do want to get it right.”
Given brand sales levels, he said, “we certainly can absorb an incremental 1% or 2%. And I don't think that we're sacrificing really on the top-line to be able to protect margins.”
For the third quarter ended Sept. 28, The Cheesecake Factory swung to a profit of $32.7 million, or 64 cents a share, from a loss of $28.3 million, or 76 cents a share, in the same period a year ago. Revenues rose to $754.5 million in the quarter compared to $517.7 million in the prior-year period.
In the third quarter, same-store sales at The Cheesecake Factory restaurants increased 41.1% year-over-year. On a two-year basis, same-store sales The Cheesecake Factory restaurants increased 8.3%.
As of Wednesday, the company said nearly all its restaurants were operating with no indoor dining restrictions.
The Cheesecake Factory owns and operates 308 restaurants throughout the United States and Canada, including North Italia and a collection within its Fox Restaurant Concepts business, which include 28 Flower Child fast-casual restaurants. Internationally, 29 Cheesecake Factory restaurants operate under licensing agreements. The company also operates two bakery facilities.
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