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WIKI ANALYSIS
Cheesecake Factory (NYSE: CAKE) operates 127 upscale casual dining restaurants under its namesake in the United States. The company also includes 10 Grand Lux Cafes, a growing secondary chain with a more upscale design [1]. The company is unique in that it offers both a broader menu selection and more upscale experience than many of its more casual peers. It is also able to compete with more upscale restaurants, by pricing its selections on the lower end of the upscale casual dining spectrum. Because Cheesecake Factory restaurants operate near capacity, opportunities for same store sales growth are limited. Instead the company has achieved steady growth over last five years by growing its number of stores. By the end of their fiscal year 2007, CAKE aims to open 21 new stores. At the same time, CAKE has successfully established both Grand Lux and Cheesecake Factory as two distinct brands in the eyes of consumers, giving the company the opportunity grow both concepts without fear of cannibalization.
Business Financial
Because their restaurants run at or near capacity, same store sales for The Cheesecake Factory are limited. In fact, CAKE posted negative same store sales growth in 2007.
Key Trends and Forces
- Rising costs creep up on profits-Along with labor and rent costs, rising commodity costs may depress profits Because the Cheesecake Factory has year-long contracts for many of their commodities, they are partially protected against this.
- Economic trends mean consumers spend less-Consumer spending on casual dining is discretionary in nature. In times of economic recession consumer's quickly decrease expenditures on services like dining. For example, in 2007,with oil prices flirting with the $100 mark, consumers faced higher expenditures on necessity items leaving less money to devote to luxury goods and services. The subprime crises has also made access to credit difficult for consumers thereby further reducing their appetite for non-essential goods and services.
- Physical challenges for expansion- Much of Cheesecake's success depends on finding the right locations, which may become more difficult as the company expands. Recently the company has opened new stores in Connecticut, New Jersey, Massachusetts, Arizona, Indiana and Pennsylvania. Such speedy growth may become more difficult as the company works to expand its Lux Cafe brand as well. One major factor affecting the company's ability to expand profitably is the overall health of the commercial real estate market. If rental prices in this market are high, achieving profitability for any one location becomes more difficult.
Competition
The Cheesecake Factory (both as the namesake restaurant and second project, Grand Lux Café) competes in the casual dining segment, which is defined as full-service restaurants serving moderately-priced food in a casual setting. The Cheesecake Factory has lower prices than their upscale competitors.
Some of The Cheesecake Factory's competing companies are:
| Company | Chains (if applicable) | Same Restaurant Sales Increase (Decrease) |
|---|---|---|
| Cheesecake Factory [4] | Cheesecake Factory, Grand Lux Cafe | (0.6%) |
| Darden Restaurants (DRI) [5] | Olive Garden, Red Lobster, Bahama Breeze | 1.5% |
| McCormick & Schmick's Seafood Restaurants (MSSR)[6] | 3.0% | |
| P.F.Chang's China Bistro (PFCB) [7] | P.F. Chang's China Bistro, Pei Wei Asian Diner, Taneko Japanese Tavern | (1.6%) |
| Brinker International (EAT) [8] | Chili's, On the Border, Macaroni Grill, Maggiano's | (3.2)% |
References
- ↑ 2006 Annual Report, Part one, pg1
- ↑ 2006 Annual Report, page 2
- ↑ 2006 Annual Report, page 69
- ↑ Cheesecake Factory Restaurants 2006 Annual Report, page 28
- ↑ Darden Restaurants 2007 Annual Report, page 22
- ↑ McCormick & Schmick's Seafood Restaurants 2006 Annual Report, page 36
- ↑ Brinker International 2007 Annual Report, page 57
- ↑ Brinker International 2007 Annual Report, page 57
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