More on the results
Headed into the summer of 2017, The Cheesecake Factory reeled off 29 consecutive quarters of positive gains, proving its standing as one of the most consistent high-performers in casual dining. The chain’s comps then turned negative at 0.5 percent in Q2 of that year and dropped 2.3 percent (hurricane effect), and 0.9 percent in the ensuing periods. It got back in the green to start fiscal 2018 with a 2.1 percent hike, and then reported a 1.4 percent lift in Q2 2018 before this past quarter’s positive 1.5 percent result.
In many ways, these low-single digit gains might just be the new normal for The Cheesecake Factory. In the brand’s five-year plan, it calls for comps growth of 1–2 percent and unit growth of 5 percent. The restaurants are still running a casual-dining leading $10.6 million in average-unit volume with average checks of $22.
The traffic landscape and cost picture have simply shifted dramatically from the days when The Cheesecake Factory was putting together robust comp-sales calendars, stacked one after another, year after year.
Here’s a look at same-store fiscal results dating back to 2011.
- 2018 (year to date): 0.8 percent
- 2017: 0.4 percent
- 2016: 3.8 percent
- 2015: 4.1 percent
- 2014: 2.6 percent
- 2013: 3.3 percent
- 2012: 4.2 percent
- 2011: 4 percent
David Overton, chairman and CEO, said, “within the four walls, our operators drove year-over-year improvements in food efficiency and labor productivity.”
Wage inflation moderated from the second quarter and group medical insurance costs normalized. The Cheesecake Factory also ended the quarter with lower overtime year-over-year as it continues to focus on fully staffing restaurants, Overton added.
This past quarter broke down with pricing 2.9 percent, a positive mix of 0.6 percent, and traffic down 2 percent.
In Q2, labor took a major bite out of the company’s results. Labor costs were up to 35.8 percent, and group medical costs lifted $4.5 million compared to the previous year, which in turn decreased profits by 7 cents.
In Q3, labor was 35.2 percent of revenues, an increase of about 30 basis points from the same period last year. This is primarily attributable to hourly labor, specifically higher wages, Clark said.
“With our history of continuous improvement, we will seek additional efficiencies in our restaurants to help offset pressure on the labor line and we will also further enhance our market based pricing strategy in higher wage geographies to support our objective of maintaining flat restaurant level margins,” he said.
The labor inflation rate was about 6 percent in the quarter, and Clark said The Cheesecake Factory is expecting much of the same in Q4.
Off-premises comprised 13.5 percent of The Cheesecake Factory’s sales during Q3. This time last year, it was 12 percent. Chain president David Gordon said the company still believes 60–70 percent incrementality is the target for delivery business.
Broken down: The Cheesecake Factory’s delivery accounts for 25 percent; take-out, phone-in ordering two-thirds; and new online ordering through the platform launched earlier in the year around 10–12 percent.
“With regard to our guests that opt to pick up their order, we're seeing good initial traction with our online ordering platform available through our website for all Cheesecake Factory restaurants nationwide. We will continue to focus on raising awareness of this new channel via in restaurant and to go marketing supported by some local search advertising,” Gordon said.
During the third quarter, The Cheesecake Factor transitioned to an exclusive national delivery partnership with DoorDash. “This agreement also augments our collaborative marketing opportunities throughout the year,” Gordon added.
Growth on the horizon
The Cheesecake Factory continues to expand. It expects to open five restaurants in fiscal 2019, including The Cheesecake Factory in Lynnwood, Washington, a suburb of Seattle and Grand Lux Cafe in Atlanta, which both opened during the third quarter. It expects to open three additional Cheesecake Factory restaurants during the remainder of the year as well.
Internationally, the company plans a licensed unit for Monterrey, Mexico, in Q1 2019. “Including this restaurant, we expect as many as five to six locations to open under licensing agreements in 2019. Domestically, we continue to believe there is potential for 300 Cheesecake Factory locations and I feel good about the real estate opportunities lining up for 2019,” Overton said.
There are currently 199 domestic Cheesecake Factory stores. Internationally, there are 21 operating under licensing agreements.