The pioneer in upscale casual dining opened its 106th and 107th Cheesecake Factories this week, with plans to open a total of 21 units this year. It also will expand its seven-unit Grand Luxe Café brand by two to three units by year-end.
"Upscale casual is a great segment to be in, because the market opportunity is growing and there are few competitors," said David Overton, chairman and CEO of Calabasas Hills, Calif.-based Cheesecake Factory. "We're only in 48 of the top 100 markets, and have not fully penetrated even one of them."
With existing restaurants operating at near-capacity, maintaining a revenue and earnings growth of 20% annually depends on expanding the number of restaurants. The company already has identified 70 to 90 sites that meet its criteria. The average Cheesecake Factory posts $11 million in revenues, despite an average check of $17, and site selection is based on a $10-million sales potential. If markets with an $8-million revenue potential are included, the store count could increase by another 100 restaurants.
"The biggest challenge for us is not finding locations," Overton added. "The biggest challenge is to continue to improve the experience for our guests."
Financing the expansion is not a problem, said Michael Dixon, SVP and CFO. "We believe that we can fund the majority of our growth from cash flow from our operations and landlord contributions," he said.
However, the company has seen some challenges lately. Macroeconomic conditions, including rising interest rates and gas prices, appear to have hurt off-peak business. To boost late-night and mid-afternoon business, the company has introduced gift cards at selected retailers, and reorganized and extended its lunch menu. It also has highlighted all-natural products, including antibiotic-free chicken, and eliminated transfats from cooking oils in its summer menus in nine Los Angeles Cheesecake Factory restaurants.
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