Delivery and Customer Service Fuel The Cheesecake Factory’s Comeback
After gaining momentum last year and turning two positive quarters toward the end of 2019, The Cheesecake Factory is continuing its positive streak. Delivery, online ordering, and improved customer satisfaction all contributed to a successful fourth quarter for the California-based company.
The Cheesecake Factory ended its 40th year of operation with a 1.9 percent increase in same-store sales, which exceeded the company’s expectations. During Q4 the 200th location opened and the company estimates that more than a million guests have dined in its restaurants. Chief financial officer Matt Clark expects the brand to maintain positive results throughout 2019 and reach the long-term target by maintaining 1–2 percent growth of same-store sales each quarter.
Continuous expansion of the company’s footprint continues to fuel the brand’s turnaround. Over the last quarter Cheesecake Factories opened in Temecula, California; Lubbock, Texas; and Chattanooga, Tennessee, which allowed the company to meet its development goal for 2018.
“There was significant pent-up demand from The Cheesecake Factory brand in these markets and with the three centers undergoing meaningful redevelopment, we saw great opportunities to bring the concept to these locations,” said chief executive officer David Overton on a February 20 conference call. “To date, sales levels have exceeded our expectations.”
Growth expectations for 2019 include opening six Cheesecake Factory restaurants and the company’s first fine-casual concept, Social Monk Asian Kitchen, is slated to open in late February or early March.
The deal to acquire North Italia and Flower Child, which is projected to cost $150 million, is still in the works, but if the deal goes through The Cheesecake Factory’s footprint will expand to 14 North Italia locations and bring another fast casual into its portfolio.
"Major development for the coming year will be the likely acquisition of North Italia at the end of 3Q19 for an estimated $150 millon," BTIG analyst Peter Saleh said in a Thursday morning note. Chief financial officer Matthew Clark expects there will be 22–23 North Italia locations by the end of the year if the deal goes through.
Winning with off-premises
After inking an exclusive deal with delivery company DoorDash, The Cheesecake Factory has been able to develop the off-premises segment of its business, which is paying off.
“Our off-premises business continues to grow, reaching 14 percent of total sales during 2018 versus 12 percent in the prior year,” president David Gordon said on the call. “Off-premises contribution increased further during the fourth quarter to about 15 percent, and that trend has continued into 2019.”
Delivery makes up 27 percent of all off-premises sales, Overton said. Since launching online ordering, the company has seen an increase to 12–13 percent, which is up from 9–10 percent. There is still plenty of room to grow in this area.
Guests are returning more frequently after using The Cheesecake Factory’s off-premises services—an opportunity the brand is capitalizing on.
“We continued to see more guests utilizing our online-ordering platform for pickup,” Gordon said. “Online ordering and delivery are great channels to increase guest frequency and awareness of The Cheesecake Factory as an everyday occasion. We believe the growth we have seen in off-premises lunch sales validates the cheesecakes.”
In December, The Cheesecake Factory celebrated its 40th anniversary and partnership with DoorDash by offering free cheesecake slices to guests who ordered through the delivery service.
“We again received tremendous publicity around this event. And within five minutes of launch, we increased the offer to 60,000 slices to meet the incredible demand that we had,” Gordon said.
The two companies will continue to use creative marketing to highlight the partnership throughout the next year. The Cheesecake Factory was featured in DoorDash’s national TV ad campaign in January and Gordon said customers can be on the lookout for more promotions and campaigns from them over the next year.
“We look forward to continuing to collaborate in creative ways to keep The Cheesecake Factory top of mind, as an excellent delivery option,” Gordon said.
The changes in off-premises options are resulting in positive returns through various metrics that The Cheesecake Factory analyzes. Improvements in guest satisfaction scores across service, food quality, and base of experience have extended across both dine-in and off-premises experiences.
As far as pricing and the possibility of increases in the near future, Overton said guests won’t have to worry about any major changes anytime soon.
“Our goal all along from a guest perspective is been to keep the prices in line with the guest experience you would have within the restaurant,” he said. “ So we would not anticipate raising the prices ... and we feel very good about the current deal we have in the commission structure that we have today.”
Excellence in Service
Forbes named The Cheesecake Factory as one of the “100 Best Companies to Work For,” for the sixth year in a row. “And once again we were the only restaurant company on the list,” Overton said.
Operators and employees are helping drive the brand’s turnaround and subsequent success.
“Our people are our greatest resource and enable us to deliver delicious, memorable experiences for our guests every day,” Overton said. “This accolade is a testament to our strong culture, industry-leading training, and tangible career advancement we provide for our staff members and managers. We believe these attributes will continue to differentiate us as an employer of choice, a position that is even more critical today to support continued success in the restaurant industry.”