An activist investor in The Cheesecake Factory has suggested spinning off North Italia, Flower Child, and Culinary Dropout into a separately traded public company, a Wall Street Journal report said.
A report Monday cited sources saying Houston-based JCP Investment Management, which has a reported stake with another activist in Englewood, Colo.-based Red Robin Gourmet Burgers Inc., has a 2% holding in Calabasas Hills, Calif.-based Cheesecake Factory.
The Cheesecake Factory owns and operates more than 300 locations. That includes restaurants from its 2019 acquisition of Fox Restaurant Concepts of Phoenix, Ariz.
“JCP has privately argued to Cheesecake Factory executives that three of its restaurant brands in particular would be better off as a separate company focused on faster growth: North Italia, an Italian casual-dining concept; Flower Child, a health-focused fast-casual chain; and Culinary Dropout, a gastropub known for its pretzel bites and fried chicken,” the Wall Street Journal noted.
Fox Restaurants also recently opened a fifth unit of casual-dining brand Doughbird in Dallas. Flower Child is a fast-casual concept.
JCP has told The Cheesecake Factory that it would be willing to invest in the spun-off entity to help growth, the report said.
A Cheesecake Factory spokesperson said the company is aware of JCP’s investment. “We regularly engage with shareholders and consider their perspectives,” the spokesperson said.
For the second quarter ended July 2, The Cheesecake Factory’s net income was $52.4 million, or $1.08 per share, compared to $42.7 million, or 87 cents a share, in the same quarter a year ago. Revenues were $904 million compared to $866.2 million in the prior-year period.
Second quarter same-store sales were up 1.4% at the Cheesecake Factory and up 2% at North Italia, executives said.
JCP was founded in 2009 by James Pappas, who had previously worked in investment banking. Pappas last year joined the board of directors of United Natural Foods, a wholesale distributor. Pappas also served on smoothie chain Jamba’s board before it was sold to Focus Brands in 2018.
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