CEO is cutting salary by 20 percent.
The Cheesecake Factory announced Friday that it furloughed 41,000 hourly workers and reduced the salary of executives and some employees.
The company said the furloughed workers will retain their health benefits until June and will be provided a daily complimentary meal from their restaurant.
The brand is also reducing the salary of CEO David Overton by 20 percent. The board of directors is taking a 20 percent reduction in compensation, as well. All corporate workers and bakery administration employees have had their pay reduced between 10 percent to 20 percent.
Feeling the financial pressure from COVID-19, Overton wrote in a letter dated March 18 that The Cheesecake Factory won’t pay rent in April due to the large drop in traffic and damaged cash flow.
The restaurant said it’s in discussions with landlords about ongoing rent obligations, including the potential deferral, abatement, and restructuring of rent. Many of the Cheesecake Factory units are either in malls or mall adjacent.
The Cheesecake Factory, which has transitioned to off-premises, temporarily closed 27 units across its concepts, including two Cheesecake Factory units. The brand drew down $90 million from its revolving credit facility to bolster its cash flow and curtailed its planned unit growth for the year. The company’s stock has fallen more than 50 percent in the past month.
The company operates 294 units across the U.S. and Canada. That includes North Italia and Fox Restaurant Concepts, which it bought for north of $350 million this past summer. Those companies will not pay rent in April either.
The decision to not pay rent and furlough employees is a result of financial suffering that full-service chains are experiencing across the country. According to Black Box Intelligence’s Daily Tracker, year-over-year comps for full-service brands declined 74 percent on average in recent days.
The Cheesecake Factory joins a list of other brands that have recently laid off employees because of the COVID-19 pandemic.
Landry’s, which operates more than 600 locations and 60 brands, temporarily laid off 40,000 employees, or 70 percent of its workforce. Restaurants operating by takeout are bringing in just 4 to 5 percent of normal sales.
J. Alexander’s said Tuesday that it furloughed 3,400 employees and that it’s operating a carryout model that will only drive 10 to 20 percent of normal weekly sales. Golden Corral said during a virtual town hall meeting that it closed its 35 corporate stores and furloughed 2,290 employees.
Luby’s announced Tuesday morning that it temporarily closed 35 restaurants and furloughed more than half of its corporate office. That’s in addition to the 39 units it closed earlier. Now only 37 locations under the brand remain open. For the corporate staff that remains, salaries have been cut by 50 percent.
Craftworks Holdings, parent of Logan’s Roadhouse and Old Chicago Pizza, made a similar move this week by furloughing most of its 18,000 employees and closing all of its restaurants after a bankruptcy sale fell through.