The Cheesecake Factory Inc. intends to continue its portfolio approach to restaurant development despite activist shareholder pressure to spin off some of its developing concepts, the company said Tuesday.
The Calabasas Hills, Calif.-based company, which released earnings for the third quarter that ended Oct. 1, commented publicly on a Wall Street Journal report about an activist investor in The Cheesecake Factory that suggested spinning off North Italia, Flower Child, and Culinary Dropout into a separately traded public company.
A report in October cited sources saying Houston-based JCP Investment Management, which also has a reported stake with another activist in Englewood, Colo.-based Red Robin Gourmet Burgers Inc., has a 2% holding in Cheesecake Factory.
David Overton, Cheesecake chairman and CEO, said the company had opened 17 restaurants so far this year, including three Fox Restaurant Concepts units and one fast-casual Flower Child in the third quarter.
“We are well positioned to meet our objective of opening as many as 22 new restaurants in 2024,” Overton said in an earnings call. “Looking ahead to 2025, we expect to further accelerate our unit growth with the opening of as many as 24 new restaurants across our portfolio of concepts.”
Matt Clark, Cheesecake’s chief financial officer, added that incubating concepts was one of the company’s strengths, “but there is probably a little more development work that needs to go on.
“You are talking about concepts that have between 30 and 40 locations and $100 million to $300 million in sales,” Clark said. “And so the ability of The Cheesecake Factory ecosystem to benefit those concepts at this point in time can’t be underestimated.”
Clark said the smaller concepts can benefit from The Cheesecake Factory’s access to insurance and construction companies as well as off-premises third-party platforms.
David Gordon, president of Cheesecake, noted that off-premises sales trends remained stable at 21% of sales for the third quarter. That equates, he said, to “2.5 million in off-premises sales per restaurant, nearly double the average of our next closest peer.” Cheesecake has an exclusive agreement with DoorDash.
Gordon added that the company continues to be pleased with its year-old Cheesecake Rewards loyalty program.
“Demand continues to surpass our internal expectations, and we remain encouraged by the level of member activity and engagement that we are seeing with guest satisfaction scores for members over-indexing, reinforcing our belief that we are on the right path,” Gordon said. “As I’ve said in the past and will continue to reiterate, we are developing the program very thoughtfully and deliberately with a long-term perspective.”
For the third quarter ended Oct. 1, Cheesecake Factory net income was $30 million, or 61 cents a share, compared to $17.9 million, or 31 cents a share, in the same period a year ago. Total revenues were $865.5 million in the third quarter of fiscal 2024 compared to $830.2 million in the prior year period.
Same-store restaurant sales at Cheesecake Factory restaurants increased 1.6% in the third quarter and at North Italia 2%.
The Cheesecake Factory owns and operates 344 restaurants in the United States and Canada, including 215 Cheesecake Factories, 39 North Italias, Flower Child, and a collection of other Fox Restaurant Concepts brands. Internationally, 34 Cheesecake Factory licensed restaurants operate.
Contact Ron Ruggless at [email protected]
Follow him on X/Twitter: @RonRuggless
