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Cheesecake Factory posts tempered results, aims to grow acquired restaurants

FRC concepts, North Italia comprise bulk of new units in 2020

The Cheesecake Factory reported Q3 2019 results. For the 13 weeks ended October 1, revenues were $586.5M, up 2.4 percent from last year’s same quarter. Comparable Cheesecake Factory restaurant sales for Q3 were 0.4 percent. The polished, casual-dining chain is fresh off the acquisition of North Italia and Fox Restaurants Concepts. Financial results of those companies’ restaurants were not included in the third quarter results as their purchase was not finalized until October 2.

The Cheesecake Factory posted diluted net income per share for the quarter of $0.36, compared to $0.61 for the same quarter last year. Q3 non-GAAP adjusted diluted net income per share decreased to $0.59, from $0.61 last year. In the adjustment, the company posted an adjustment of $0.05 per share for acquisition costs. After three quarters, The Cheesecake Factory posted $1.76 per share, compared to $1.79 last year. However, it reported $2.04 on an adjusted basis, up 9.1 percent from last year’s $1.87.

Regarding the acquisitions, The Cheesecake Factory expects to provide a more supportive infrastructure to North Italia. As previously announced, The Calabasas Hills, Calif.-based restaurant company began the integration of North Italia into its HQ operations. However, it will leave the North Italia brand primarily intact due to its premium positioning in the market.

[Related article: The Cheesecake Factory completes North Italia, FRC acquisitions]

“Our operators again managed their restaurants well despite the softer industry….Earlier this month, we completed the acquisitions of North Italia and Fox Restaurant Concepts, reinforcing our leadership position in experiential dining,” said David Overton, chairman and chief executive officer, The Cheesecake Factory. “The integration of North Italia is on track.”

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Expansion continues. The company will open another four Cheesecake Factory restaurants in the balance of 2019. Additionally, a Flower Child restaurant opened in the third quarter in McLean, Va. Executives expect to also open another unit of this emerging fast-casual chain in the fourth quarter. In addition, a North Italia restaurant opens in the fourth quarter.

Furthermore, two internationally-license restaurants opened this year, Its second restaurant in Abu Dhabi opened in the third quarter. Also, a Cheesecake Factory was recently unveiled in Macau. Another two international locations will open in the fourth quarter of this year.

Overton was also positive about a delivery agreement signed with DoorDash, which is basically an extension and renegotiation. The new deal adds North Italia and FRC locations to the service. According to an investor presentation shared by Cheesecake Factory executives, to-go sales have increased more than 50% since 2013.

Off-premises sales now account for 16 percent of total sales. And 35 percent of those sales are delivery orders. Online ordering accounts for 13 percent of transactions and phone ordering accounts for 50 percent, so there is still plenty of legroom and opportunity there.

Moreover, The Cheesecake Factory will open another 20 restaurants in 2020, according to Overton. FRC and North Italia units will make up about two-thirds of new locations opening. The Cheesecake Factory operates 289 namesake, FRC and North Italia restaurants. Internationally, it also licenses another 24 namesake units.

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Photo credit: The Cheesecake Factory

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