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Roark Capital invests $200M in The Cheesecake Factory

Roark investment may put future of FRC concepts, North Italia in play

The Cheesecake Factory has found a new investor in Roark Capital, a retail-focused private equity firm. The polished, casual-dining chain revealed it had taken a $200M infusion from Roark for convertible preferred stock. The investment is timely after The Cheesecake Factory took on a big investment of its own last year.

Its acquisition of the remaining stake of North Italia it didn’t already own and Fox Restaurant Concepts (FRC), including Flower Child, racked up some big bills last year. When the ink settled in November, the total acquisition outlay was $308M for FRC, with a future set of additional installment payment commitments totaling $45M. The North Italia purchase added another $130M outlay.

Currently, the COVID-19 health crisis is impacting restaurants across the country. The Cheesecake Factory restaurants have operated with about 30 percent of their normal revenues, meaning they had plummeted from an average of more than $10M in sales. About 30 restaurants among the company’s various concepts have shuttered.

[Related article: The Cheesecake Factory finalizes the acquisition of Fox Restaurant Concepts and North Italia]

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As a result of the acquisition, the Cheesecake Factory Board of Directors will expand from eight to nine members. Roark Capital President Paul Ginsberg will join the board as an independent member.

“We believe The Cheesecake Factory, North Italia and the FRC brands are uniquely positioned to maintain their leadership in experiential dining and look forward to a partnership with the board and management team to drive long-term value for all shareholders,” he said.

Roark Capital has a longstanding record of helping retail franchise brands grow, playing their hand for the long term. Typically, Roark Capital has invested in food brands that can be easily franchised. The investment could signal a strategic shift in the way The Cheesecake Factory’s FRC investment will be treated, in addition to potential growth plans for Flower Child, a better-for-you fast casual with plenty of leg room for growth.

For seasoned observers within the restaurant industry, the strategic investment by Roark may end up having more weight on the future and direction of Fox Restaurant Concepts and North Italia, than on The Cheesecake Factory.

On matters of the financial transaction, The Cheesecake Factory was advised by Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, while Latham & Watkins LLP served as the restaurant company’s legal advisor. Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal advisor to Roark Capital.

Photo credit: Eatery Pulse Media (North Italia, featured)

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