This is an English adaptation of a FoodBud historical article originally published on May 9, 2022.
The Cheesecake Factory began in Detroit, Michigan, in 1940. Evelyn Overton found a cheesecake recipe in a local newspaper, which inspired her own “original cheesecake.” Her cakes became popular enough that she considered opening a small shop, but she paused that plan to raise her two young children, David and Renee. Instead, she moved her baking equipment into the family basement and supplied cheesecakes to several leading local restaurants.
In 1972, after the children had grown, Evelyn and her husband Oscar moved to Los Angeles and opened a small The Cheesecake Factory Bakery, selling Evelyn’s original cheesecakes to restaurants across the city. By then, Evelyn could make more than 20 kinds of cheesecakes and other desserts.
Their son David Overton later saw an opportunity for a restaurant built around a broad dessert selection. In 1978, the first The Cheesecake Factory restaurant opened in Beverly Hills, California, and was immediately successful.
Under David Overton, the menu kept expanding. Ellen DeGeneres once joked on her talk show that The Cheesecake Factory menu ran 21 pages and had 250 items.
The brand expanded from one store to major shopping centers across the United States and then into international markets, including China. The group now also operates brands including North Italia.
As of March 29, The Cheesecake Factory operated 306 company-owned restaurants, including 208 The Cheesecake Factory locations. It also had 29 franchised international stores. The group’s other company-owned concepts included 29 North Italia locations, 31 Other FRC locations, and 38 other-brand restaurants.
The Cheesecake Factory acquired North Italia and Fox Restaurant Concepts, including Flower Child, in October 2019 for $308 million. A few months later, the COVID-19 pandemic hit. At the peak of the pandemic, the company carried out large-scale layoffs, cutting 41,000 hourly workers. During its most difficult period, it raised $200 million from Roark Capital, a major North American restaurant-chain investment platform whose website listed investments or acquisitions involving 25 restaurant brands.
Although The Cheesecake Factory is famous for cheesecake, its operating model is not that of a bakery-focused chain. It is closer to an upscale casual full-service restaurant business, with a bias toward large-format stores.
In Q1 2022, The Cheesecake Factory reported revenue of $790 million, up 26.5% year over year, and net income of $23.163 million. In 2021, revenue was $2.93 billion and net income was $49.13 million.
For the core The Cheesecake Factory brand, 2021 sales were $2.29 billion, up 44%. Average weekly sales per restaurant increased from $149,000 in 2020 to $213,000 in 2021, up 43.1%.
North Italia generated 2021 sales of $170 million, up 48%, driven mainly by a 45% increase in traffic and a 3% increase in average check. Average weekly sales per restaurant rose from $90,000 in 2020 to $127,000 in 2021, up 42%.
In 2021, North Italia and the Fox Restaurant Concepts brands generated combined sales of $440 million.
Bakery sales through third-party channels were $66.2 million in 2021, compared with $66.6 million in 2020.
Cost structure in 2021 was: food costs at 22.3% of sales, labor at 36.6%, other operating costs including rent, utilities, and marketing at 27%, and depreciation and amortization at 3.1%.
The Cheesecake Factory menu had about 235 items, including around 45 proprietary cheesecakes and other desserts. The rest of the menu covered appetizers, salads, pizza, steak, pasta, and other categories.
The company’s target was to raise menu prices by 2%-3% annually.
Average check was $23.50 in 2019, $28.90 in 2020, and $29.30 in 2021.
Alcohol and beverage sales accounted for 11% of total sales in 2021, compared with 9% in 2020 and 12% in 2019.
Off-premise sales, including delivery and takeout, accounted for 32% of sales in 2021, down from 43% in 2020.
At the end of 2021, The Cheesecake Factory’s company-owned portfolio had 308 restaurants: 208 The Cheesecake Factory locations, 29 North Italia locations, 31 Flower Child locations, and 40 other-brand restaurants.
Internationally, The Cheesecake Factory had three franchisees, with 29 stores mainly in the Middle East, Mexico, and China.
In China, the franchise partner was Hong Kong-based Maxim’s. It operated six stores across Hong Kong, Macau, Beijing, and Shanghai. Maxim’s rights also allowed expansion into Taiwan, with potential opportunities in other Asian markets including Japan, South Korea, Singapore, Malaysia, and Thailand.
The company expected to open 17-19 restaurants in 2022, including five The Cheesecake Factory locations, five to seven North Italia locations, and seven other-brand locations, including three Flower Child stores.
Average annual sales per The Cheesecake Factory restaurant were $10.7 million in 2019, $7.8 million in 2020, and $11.1 million in 2021.
Site selection focused mainly on shopping centers. Evaluation criteria included nearby demographic data, average household income, and historical and expected population growth.
Build-out cost averaged $1,000 per square foot. The Cheesecake Factory restaurants ranged from 5,000 to 21,000 square feet, or 464 to 1,951 square meters. Opening timelines ranged from six to 18 months.
In mature markets, pre-opening costs for a typical restaurant averaged about $1.7 million to $2.0 million.
A typical restaurant had one general manager and one kitchen manager, supported by six to 10 kitchen staff and around 160 hourly workers. Staffing varied by store size and sales volume. General managers reported to regional operations directors, each of whom oversaw six to eight stores. Each regional operations director reported to one of four vice presidents.
New The Cheesecake Factory restaurants typically saw an opening effect, with initial sales well above later steady-state operating levels. Traffic generally stabilized three to six months after opening.
North Italia is positioned as an upscale casual Italian restaurant chain. Its food is made fresh daily, including appetizers, salads, pasta, and pizza, with a beverage program covering wine, beer, and house-made cocktails. In 2021, beverage sales accounted for 25% of sales. At the end of 2021, North Italia had 29 stores.
The Cheesecake Factory’s target was to reach 200 North Italia restaurants in the United States, with annual growth of 20%. A typical North Italia restaurant averaged 6,000-7,000 square feet, or 557-650 square meters. Mature-market average annual sales per restaurant were $7.2 million.
According to Fox Restaurant Concepts’ website, the group had 12 brands, the largest of which was Flower Child. Its main feature was customizable menus, freshly prepared food, and sourcing of local organic ingredients. At the end of 2021, there were 28 Flower Child stores and 31 stores under other brands.
Fox Restaurant Concepts’ annual store growth rate was 15%-20%, mainly driven by Flower Child. Store sizes ranged from 3,500 to 15,000 square feet, or 325 to 1,394 square meters. The target sales productivity was $1,000 per square foot.
The Cheesecake Factory operated two bakery production facilities. In addition to supplying its own restaurants, it produced about 60 proprietary cheesecakes and other baked products for other brands and third-party customers.
Note: forward-looking store targets, price targets, capital-raising figures, and acquisition figures are historical as of the original 2022 article.