The Cheesecake Factory Inc. has brought full-service North Italia under its corporate umbrella and is working to do the same for fast-casual Flower Child as it continues to blend in its four-year-old Fox Restaurant Concepts acquisition, executives said Tuesday.
Calabasas Hills, Calif.-based Cheesecake Factory agreed to buy Sam Fox’s Phoenix, Ariz.-based restaurant incubator company in July 2019 in a deal valued at $353 million. While Cheesecake has brought North Italia into its corporate management and plans to complete a similar move for Flower Child within the next few quarters, executives told the Piper Sandler Growth Frontiers conference Tuesday in Nashville, Tenn., that they are looking at FRC’s Culinary Dropout and the Henry as the next growth vehicles.
“We like all the concepts,” said David Gordon, Cheesecake Factory president, during a fireside chat. “Certainly Culinary Dropout has proven probably be the next horse in the race.” Gordon said the Culinary Dropout concept has exhibited strong average unit volumes and moved into new states. Culinary Dropout’s website cities six locations in Arizona and one each in Colorado and Texas. “Opening soon” designations are applied to four 2023 locations in Alabama, Georgia, North Carolina and Texas.
“Guest acceptance of the concept seems to be going very, very well,” Gordon added.
The Henry, another Fox Restaurant Concept, has five units in Arizona, California, Florida and Texas. The just-opened Miami unit is “doing really well,” Gordon said.
For growth, he added “we have a plethora to choose from.”
“We'll continue to refine them, make sure that the financial models in the right place,” Gordon added. “If we want to pull the trigger on one of them and grow it as a growth vehicle domestically, OK.”
Matthew Clark, the Cheesecake Factory’s chief financial officer, added that Italian concepts continue be popular among consumers. “There is a lot of white space,” he added, “to operate a little bit more contemporary and benefit from the scale but still have people believe it's their local Italian concept.” He also noted that alcohol sales are 25% to 30% of total, which makes margins attractive.
Cheescake currently has 33 Flower Childs in operation with several more openings planned, given slow permitting processes.
“We will be fully integrated into Cheesecake by the end of the year, if not early in the first quarter,” Gordon said. “We would anticipate being able to leverage the same scale of Cheesecake.”
Flower Child sits in a position Gordon called high-end fast casual.
“We like to call it more of a lifestyle brand,” he said. “It has sort of a healthy halo, but there's something there for everybody. It doesn't skew particularly only female as an example. You can go to Flower Child and get macaroni and cheese and steak.”
Gordon also said the level of hospitality is higher than in typical fast casual.
“You're going to order at the counter,” he said. “Everything is made from scratch. It's not an assembly line where you're just building a bowl type of experience. The food's going to be brought to you on china — a real plate.” As the brand moves beyond the pandemic, it continues to post about 55% to 60% off-premises sales and units do average unit volumes of about $4 million with a 60-40 lunch-dinner split, executives said.
Gordon said Cheesecake Factory would look to expand Flower Child at about a 20% growth rate, similar to what it has done with North Italia.
“Sam Fox and the team there have done a good job of refining the concept over the past 12 months,” he said. Flower Child just finished rolling out a new kitchen management system to speed throughput and assure that off-premises sales do not slow the dine-in experience.
“There's also the ability for a guest to order off a kiosk if they'd like to do that,” Gordon said, “and make that even faster or order off an app through a loyalty program.”
The Cheesecake Factory’s loyalty program, which was launched in June, has given the company new tools to reach guests, he added, referring to customer relationship management functions.
“We've never had a traditional CRM, so our overarching goal is to get as much data about our guests as we can possibly get,” Gordon said. That will allow more targeted marketing, he added. Loyalty rewards are also distributed through Cheesecake’s exclusive third-party delivery provider, DoorDash, he said.
The Cheesecake Factory owns and operates 323 restaurants throughout the United States and Canada under brands that include The Cheesecake Factory, North Italia and a collection within the Fox Restaurant Concepts business. Internationally, 30 Cheesecake Factory restaurants operate under licensing agreements.
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