As The Cheesecake Factory moves forward with development, staffing seems to have stabilized. June hourly applicant flow grew to record levels, leading to the most hires in any single month this year. The company’s staffing is now 3 percent higher than prior to the pandemic, and in July, labor needs have been at record lows.
Commodity inflation was 200 basis points higher year-over-year, driven by spot pricing in the dairy and produce categories. Labor costs grew 90 basis points, fueled by higher wages. The company plans to take a 4.25 percent price increase, which will put the year-over-year pricing at 7.5 percent once the latest hike is fully deployed. That’s still below overall full-service menu price inflation, coming in at 8.9 percent in June.
In terms of consumer sentiment, Clark emphasized that Cheesecake Factory skews toward higher-income consumers, to the tune of $100,000-plus, and the same is true for North Italia and the rest of Fox Restaurant Concepts. So while some brands (McDonald’s, Chipotle, Wingstop) have seen degradation from the lower-end consumer, The Cheesecake Factory has been quite insulated from any impact. Clark added that restaurants do have value too, with items ranging from $5-$6 to $30 and large portions being “incredibly shareable.”
“What we have seen historically, if there is a little bit of a dip is remind people that our number one competitor are the white table cloth independent mom-and-pops, and I think we probably will be able to take some market share, because we’re keeping so much value, and the prices that those groups have had to take and their menu is substantially more than what we're taking,” Clark said.
The CFO said sales performances have been more impacted on a regional basis, directly related to whether COVID case counts are going up or down. If it were recession-related, there’d be more broad-based declines, similar to what it saw during the Great Recession, Clark said. Check averages are trending normally, as well as attachments and desserts.
“That being said, there could be a little bit of a slowdown,” Clark said. “I mean, I think the media has fueled that tremendously. And the scare factor alone probably is what is creating as much as anything else. Our guide for the third quarter factors in that we are a couple of points below where we were in June, and we believe most of that is due to the virus moving through different parts of the geography. The latest week we had is better than the weeks we had before that. So we're actually seeing it come back up already.”
If The Cheesecake Factory senses bigger changes in the marketplace down the line, president David Gordon said the brand can pull its promotional lever within two weeks, whether it’s through DoorDash or something with online ordering.
The company is also piloting a rewards program, which in the future would help the chain deploy said promotions in a more targeted manner, Clark said. The Cheesecake Factory is about 30 days into its five-restaurant test in the Houston market. There are currently 20,000 members, exceeding the concept’s expectations.
“And our plan is to continue to measure the data and the ROI of the program throughout the remainder of this year, whether we decide to do another small beta this year is still to be determined, but our plan would still be to move forward at some point next year with a full launch of the program that all continues to go well,” Gordon said.