Cheesecake Plans Growth

"We are in only 45 of the top 100 US markets, and we have not yet fully penetrated any one of them, even Los Angeles, where already have nine or 10 restaurants," David Overton, chairman and CEO of the company, said during his presentation. Overton and Michael Dixon, the Cheesecake Factory's CFO, pointed out that the chain is a top-grossing performer in the upscale casual category with nearly $11 million in sales per restaurant per year.

"Upscale casual is a great segment to be in because the market is growing," Overton said. He said that the chain believes that there are "more than 350 great locations available for the Cheesecake Factory and Grand Lux Cafe brands." The Grand Lux, a new concept that the Cheesecake Factory is testing in five locations, is also an industry leader in sales volume, Overton noted.

Along with its expansion, which has pushed it to 96 restaurants that will soon grow to 100 locations, the company has plans for a new bakery, its second, in Rocky Mount, NC. The new bakery, which is expected to be operating in early 2006, is designed to reduce dependence on the company's lone California bakery and to facilitate deliveries to the East Coast as well as other locations as the chain expands into new markets.

Along with its expansion plans, the company has launched a number of initiatives designed to improve its operating efficiency, according to Overton. He cited a new kitchen display system that is being tested that is expected to expedite the filling of orders, as well as studies that are under way to improve the design of the company's kitchens to make them more efficient.

Although the Cheesecake Factory's restaurants are all successful and the company has never closed a location, Overton said the chain is nonetheless working to fine-tune its site selection process. To that end, it has gathered economic and demographic data from its restaurants around the country to be incorporated into a system that will help to identify the most suitable sites for new locations.

In its filings with the Securities and Exchange Commission this year, the Cheesecake Factory has said that it expects to end 2005 with up to 18 new restaurants, including 16 Cheesecake Factory sites and two Grand Lux Cafes.

Latest figures show that the company operates 96 restaurants under the Cheesecake Factory name, five Grand Lux Cafes, one self-service food service operation called the Cheesecake Factory Express inside the DisneyQuest family entertainment center in Orlando, FL. It licenses two bakery cafe outlets to another food service operator under the Cheesecake Factory Bakery Cafe name.