Cheesecake Factory at Raymond James Conference: Strategic Growth and Expansion

On Tuesday, 04 March 2025, The Cheesecake Factory (NASDAQ: CAKE) presented its strategic outlook at the Raymond James & Associates’ 46th Annual Institutional Investors Conference. The company highlighted robust growth plans and financial health, yet acknowledged challenges in maintaining high operational standards. The Cheesecake Factory aims to leverage its strong brand and diversified portfolio to sustain growth.

Key Takeaways

• The Cheesecake Factory plans to open up to 25 new restaurants in 2025, targeting a 7% annual unit growth.
• Off-premise sales have stabilized at 21% of total sales, significantly higher than pre-pandemic levels.
• The company expects total revenues of approximately $3.8 billion for 2024, with a net income margin of 4.75%.
• Expansion plans for North Italia and Flower Child could add over $5 billion in revenue.
• Adjusted EBITDA for 2024 was reported at $329 million, with over $70 million returned to shareholders.

Financial Results

• Adjusted EBITDA: $329 million in 2024.
• Shareholder Returns: Over $70 million returned through dividends and stock repurchases.
• Revenue Guidance: Projected total revenues for 2024 are approximately $3.8 billion.
• Net Income Margin: Expected to be around 4.75% for the full year.
• Capital Expenditures: Anticipated to be between $190 million and $210 million for new unit development and maintenance.

Operational Updates

• New Restaurant Openings: 23 new restaurants opened last year, with plans for up to 25 more in 2025.
• Off-Premise Sales: Currently account for 21% of total sales, approximately $2.6 million per restaurant annually.
• Menu Innovation: Introduction of over 20 new menu items to enhance customer experience.
• Cheesecake Rewards Program: Launched in June 2023, increasing customer visits.
• Partnerships: Exclusive national delivery partnership with DoorDash.

Future Outlook

• Unit Growth Target: Long-term annual growth of 7%.
• Total Addressable Market: Potential to generate over $5 billion in additional revenue through expansion.
• North Italia and Flower Child Expansion: Plans to enter high-growth markets such as Salt Lake City and Boise, with significant expansion potential.

Conclusion

For a comprehensive understanding of The Cheesecake Factory’s strategic initiatives and financial outlook, readers are encouraged to refer to the full transcript.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference:

Brian Vaccaro, Restaurant Analyst, Raymond James: Good morning, everyone. Welcome to day two of our conference. I’m Brian Vaccaro, the restaurant analyst at Raymond James. And we’re excited to kick off day two with the management team from Cheesecake Factory. Presenting from the company is going to be David Gordon, followed by CFO, Matt Clark.

So David?

David Gordon, President, The Cheesecake Factory Incorporated: Thank you, Brian. Good morning. Thank you for attending our presentation today. Before we start, I need to remind everyone that this presentation contains forward looking statements, which are covered in detail on this slide. Now let’s get started.

The Cheesecake Factory Incorporated is a leader in experiential dining with highly differentiated, well positioned concepts that deliver a unique guest experience, which we believe creates a significant competitive advantage. We’ve driven strong performance across our portfolio, supporting our confidence in the strength of our concepts and their long term growth potential. We continue to leverage our strong foothold in the off premise channel to develop the business and have seen off premise sales stabilize at a higher level as compared to pre pandemic levels. We believe we have some of the best operators in the business with industry leading retention. We have experienced managers and staff who can successfully operate our high volume in complex restaurants.

Our operators have done an incredible job driving improved operational execution, enabling us to deliver solid top and bottom line results. And lastly, with a diversified portfolio of high quality growth vehicles, we believe we are well positioned to drive long term profitable growth moving forward. We currently operate two fifteen Cheesecake Factory restaurants throughout The United States and Canada. We believe we have a strong runway of potential growth ahead of us as we continue to open in new and existing markets, working towards an opportunity of 300 domestic Cheesecake Factory locations. This is complemented by our 33 international locations that operate under licensing agreements in The Middle East, Latin America and Asia.

North Italia is a modern interpretation of Italian cooking in the upscale casual dining segment, with dishes that are handmade from scratch daily, including all of the pizza and pastas. North also offers a thoughtfully curated selection of wines, beers and house made cocktails driving a 23% alcohol mix. We now operate 44 North Italias across 13 states plus Washington DC. With Italian cuisine being one of the most popular ethnic cuisines in the with strong national reception of the North Italia concept to date, we believe there is potential for 200 domestic locations over time, which supports our plan for approximately 20% average annual unit growth. Flower Child is a fresh health forward concept in the fast casual dining segment, offering a balanced dining experience with organic, gluten free and vegan dishes all made from scratch daily.

The menu features customizable bowls, wraps, salads, veggies and healthy proteins, catering to a broad audience seeking nutritious and flavorful dishes. Flower Child’s open kitchen design showcases meals being made fresh prepared to order, complemented by a high touch service model featuring tableside delivery and elevated presentation with real dinnerware, real silverware offering a more refined experience than your traditional fast casual. Premise dining is a significant driver of sales, accounting for over 50% of sales, supported by a dedicated takeout area for third party delivery and pickup orders. Flower Child operates 38 locations across 12 states with plant expansion into new and existing markets primarily across the Sunbelt. With the strong reception of Flower Child and the growing demand for healthy, high quality, fast casual dining options, we are incredibly bullish on its future.

With a target of 20% average annual unit growth and a potential for 700 domestic locations over time, we see significant runway for growth and are excited about Flower Child’s potential. FRC is comprised of a diverse portfolio of concepts that operate across multiple industry segments, serve a variety of dining occasions and vary in square footage and geographic presence. Excluding Flower Child, FRC operates 49 restaurants, providing an innovative ecosystem for talent, menu and design development, while also serving as a platform to incubate potential future growth concepts. Other FRC portfolio growth concepts include culinary dropout, The Henry and Blanco. In 2022, we resumed accelerating unit growth, opening 13 new restaurants across our portfolio of high quality growth concepts.

In 2023, we opened 16 new restaurants. And last year, we surpassed our own development expectations, opening 23 new restaurants, effectively achieving our stated 7% annual unit growth. Building on this momentum, we plan to open as many as 25 restaurants this year with a balanced cadence of openings throughout the year keeping us on track to meet our 7% annual unit growth target once again. Looking ahead, we believe our diverse portfolio of high quality concepts combined with strong financial position provides a solid foundation to support strong unit growth for years to come. Let me provide some key points as to why we believe Cheesecake Factory remains resilient and continues to be well positioned.

Now while the world is evolving faster than ever, the fundamentals of the restaurant industry always remain the same. Great food, great service and ambiance are still and likely will always be the hallmarks of a successful restaurant. The Cheesecake Factory is one of the most differentiated casual dining concepts with four strategic defining points that set us apart from other restaurant companies and drive our consistent performance. First and foremost, we are a leader in menu innovation and have developed one of the broadest menus in casual dining. Second, we offer a unique high energy ambiance coupled with exceptional service and hospitality.

Ambiance coupled with exceptional service and hospitality. Third, we believe we deliver best in class operational execution. And lastly, we have an integrated bakery producing our award winning desserts. At The Cheesecake Factory, culinary r and d is central to our concept. Each of our 225 menu items is made fresh from scratch in house with fresh ingredients, including more than 70 different sauces, dressings and marinades.

And we pride ourselves on offering something for everyone across varying price points, dining occasions and a wide range of cuisines. We change our menu twice a year, adding new menu items and sometimes entirely new categories. This ongoing menu innovation drives a high degree of relevance without having to discount. We are currently rolling out our latest menu, featuring over 20 new menu items across a diverse range of contemporary cuisines and categories. Highlights include five new vegetarian options, such as Asian cucumber salad, Thai stir fried noodles and honey roasted carrots four new seafood dishes, including ahi tuna and shrimp ceviche and grilled branzino Flavorful new additions influenced by international cuisines such as chicken shawarma, spicy ginger beef tenderloin, and chicken jalapeno fritters.

Classic favorites reimagined like the Double Smashed Cheeseburger and steak frites. The response from guests has been overwhelmingly positive with strong feedback on the variety and the quality of our latest menu. In addition to our innovative menu and warm hospitality, we placed significant emphasis on the distinctive interior design and decor of our restaurants, which creates a high energy ambiance in a casual setting. Our guests love our cheesecake, and our bakery is definitely an essential element in creating that cheesecake magic. This drives our industry leading dessert sales of approximately 17%.

Importantly, we maintain creative and quality control, producing over 50 innovative cheesecakes and other baked desserts for our restaurants and for those of our international licensee partners. Of course, none of what I have discussed today would be possible without our relentless focus on operational execution. Our best in class execution is the foundation of our success, ensuring we consistently deliver exceptional food quality, service and hospitality across all of our concepts and our complex high volume restaurants. This level of excellence is made possible by our strong organizational structure and experienced field operations team, many of whom are Cheesecake Factory veterans with tenures spanning fifteen to thirty six years. Industry research continues to confirm the influence of strong retention on service levels, guest sentiment and ultimately on restaurant sales.

We believe we have such incredible tenure because we focus significant accolades support our belief that we’re well positioned with These accolades support our belief that we’re well positioned with respect to attracting and retaining talent relative to many other restaurant in the restaurant industry as we continue to remain an employer of choice in a tight labor environment. The affinity for our Cheesecakes and The Cheesecake Factory brand more broadly drives strong consumer engagement and has enabled us to achieve cult like status in the restaurant industry. Unlike many of our peers, we have not historically used traditional paid advertising, instead building strong brand affinity and awareness through word-of-mouth and organic media attention. Today, we continue to do so by leveraging social media across all channels as well as broadcast, print, and digital media. Our social media presence is unmatched with more Instagram followers than any other major casual dining brand, highlighting our guest enthusiasm for interacting with us across digital platforms.

The Cheesecake Factory’s cultural influence extends beyond the restaurants With a high degree of unsolicited celebrity endorsements and references in TV shows, late night talk shows, celebrity endorsements and references, even serving as a setting in the Big Bang Theory and being featured in viral social media trends, our brand continues to be a mainstay in pop culture. Additionally, the highly visual experiential nature of dining at The Cheesecake Factory and the wow factor of our menu naturally aligned with today’s content driven digital landscape, further amplifying our reach across all media platforms. Now let’s pause for a moment to give you a glimpse of some of the great press that we have received that really underscores the tremendous affinity for The Cheesecake Factory brand as well as our position as an employer of choice in the restaurant industry. Well, this

Unidentified speaker: is wild. I saw that a cream cheese festival in New York just served the world’s largest cheesecake at 15,000 pounds. 15,000 pounds of cheesecake, which is almost as heavy as the menu at The Cheesecake Factory.

David Gordon, President, The Cheesecake Factory Incorporated: Almost. What

Matt Clark, Executive Vice President and CFO, The Cheesecake Factory Incorporated: do you order at The Cheesecake Factory, Pate? You gotta

David Gordon, President, The Cheesecake Factory Incorporated: have options. You need options.

Unidentified speaker: Would you believe, ready for this one, that there’s a burger on that menu that is perfect? In the appetizer section of the menu, there’s a very special thing called roadside sliders. Is it really a slider? These guys know what they’re doing. Mhmm.

David Gordon, President, The Cheesecake Factory Incorporated: They do.

Unidentified speaker: There’s a reason why. Ready for this one? It’s because the guy who started Cheesecake Factory, a guy named David Overton, grew up at a suburb of Detroit called Farmington. In Farmington, there was a place called Greens Hamburgers, and they sold sliders. So David Overton said that every single Cheesecake Factory they open in the world has to use fresh ground beef, onions, and he wanna make sure that it was the exact same burger that he ate as a child.

So if you eat those burgers, they’re actually eating a piece of very important piece of, his history and and the way our hamburger history.

Unidentified speaker: I think something came out. An article I think something came out, an article came out that people don’t go to

David Gordon, President, The Cheesecake Factory Incorporated: Cheesecake Factory on dates anymore. Yeah. That’s right. With Cheesecake Factory, Cheesecake Factory is solid.

Unidentified speaker: They got everything you want on that menu and the skinnylicious one.

Unidentified speaker: And if you’re a kid from the East Coast and you don’t know any restaurants in LA and you got a hot date, I’m a take you to the Cheesecake Factory.

David Gordon, President, The Cheesecake Factory Incorporated: I ended up with Skye at a Cheesecake Factory in Turkey.

Unidentified speaker: Ended with Skye.

David Gordon, President, The Cheesecake Factory Incorporated: Yeah. So she looks like she’s on the verge of of, like, saying something perfect. She actually said pop up. We’re out. Let’s just go talk.

Thank you. What do

Unidentified speaker: you think is gonna happen? Will it kill us, the AI?

Unidentified speaker: I think so.

Unidentified speaker: Yeah. You think so? Yeah.

Unidentified speaker: We’re all dead.

David Gordon, President, The Cheesecake Factory Incorporated: Do you

Unidentified speaker: think you make it to the Cheesecake Factory in Tulsa on your birthday or no?

Unidentified speaker: I I feel like we’re safe for this birthday. Five years from now and the next big birthday, we don’t know. Summer is upon us. The North Italia is kicking off its new seasonal menu. We got chef Billy with us who brought all the things.

I heard you guys were hungry. I came to feed you this morning. So a little bit of heat on there. Oh, beautiful. Some slivered red onion.

David Gordon, President, The Cheesecake Factory Incorporated: Yes.

Unidentified speaker: A fan favorite. Wow. It’s just it’s perfect. Oh my goodness. That’s gorgeous.

Unidentified speaker: Carlos, what do you do?

Unidentified speaker: I I work at the Cheesecake Factory, so

David Gordon, President, The Cheesecake Factory Incorporated: So the best part is Carlos said

Unidentified speaker: that he’ll hook us up with the brown bread, which is free. Right? Yeah. Which is so I’m glad that I can go with the Cheesecake Factory and say, Carlos said that I get the brown bread. Oh.

That’s the hookup.

David Gordon, President, The Cheesecake Factory Incorporated: As you could see, The Cheesecake Factory resonates across demographics from Gen Z to baby boomers to everybody in between. In many ways, we deliver to our guests fine dining quality at a casual dining price. This is what enables us to generate industry leading average unit volumes with a moderate check average. Leveraging our differentiated positioning, high quality made fresh from scratch menu and value proposition supported by creative on brand marketing, we’ve driven meaningful and importantly incremental growth in off premise sales. Delivery is available in all of our restaurants through an exclusive national delivery partnership with DoorDash.

With our shared focus on quality and operational excellence, this relationship has enhanced the guest delivery experience while while enabling us to realize meaningful profits in this channel. Total off premise sales have grown significantly since the pandemic and have stabilized well above pre pandemic levels, now accounting for 21% of sales. To put this in perspective, that equates to about $2,600,000 per restaurant annually on average, significantly exceeding pre pandemic levels. As part of our ongoing investment in our marketing and technology platforms to enhance the guest experience, we launched Cheesecake guest experience, we launched Cheesecake Rewards, a surprise and delight membership program in June of twenty twenty three. Our goal is to leverage data analytics and insights to engage more effectively with our guests and drive incremental sales while maintaining expectations with strong member engagement and guest satisfaction scores for members over indexing, reinforcing our confidence in the program’s momentum.

Notably, early results indicate the program is driving incremental visits from existing guests, while also attracting new guests, supporting our deliberate and strategic approach to development of the program. We are continuing to test acquisition tactics and activation campaigns to further refine the program, increase membership enrollment and to drive frequency. And with that, I’m going to turn it over to Matt to review our financial performance and growth opportunities, all reasons why we are excited about our future.

Matt Clark, Executive Vice President and CFO, The Cheesecake Factory Incorporated: Thank you, David. The unique and compelling dining experiences we create for our guests have driven consistent and competitively strong sales performance, outpacing the broader casual dining industry. Our ability to adapt to evolving market conditions has allowed us to recover faster and outperform competitors, demonstrating the strength of our brands and best in class operational execution. And most importantly, despite the dynamic environment we’ve experienced over the past few years, comparable sales and traffic at The Cheesecake Factory has continued to outperform the casual dining segment, reinforcing the resilience, relevance, and an enduring appeal of our namesake brand. Our financial strength and disciplined execution have enabled us to generate strong cash flow while investing in future growth.

In 2024, we generated adjusted EBITDA of $329,000,000 supporting unit growth while returning over $70,000,000 to shareholders through dividends and stock repurchases. With our recently strengthened balance sheet and liquidity position and sustained cash flow generation, we are well positioned to support our long term growth objectives as well as our capital shareholder return programs. Our sustained sales momentum and a competitive casual dining landscape highlights the strong consumer demand for the distinct high quality dining experiences our experiential concepts consistently deliver. Echoing David’s earlier remarks on The Cheesecake Factory’s strong performance, fourth quarter comparable sales at The Cheesecake Factory restaurants increased 1.7% year over year with annualized AUVs of $12,500,000 North Italia delivered 1% comparable sales growth in the fourth quarter with annualized AUVs of $7,900,000 Flower Child delivered a standout performance with 11% comparable sales growth versus the prior year and annualized AUVs of $4,300,000 These results demonstrate the strength and resilience of our concepts, reinforcing our confidence and their long term growth potential. Our strong full year 2024 results reflect solid top line revenue, exceptional operational execution, and significant profitability growth.

We achieved record high annual revenue and adjusted earnings per share, while also opening more new restaurants in a single year than ever before in our company’s history. While our performance was led by the strength of The Cheesecake Factory restaurants, we delivered impressive results across our portfolio, with notable profit margin expansion at North Italia and Flower Child. Our 2024 performance marked a successful achievement of our key financial and operational objectives, including comparable sales growth, margin expansion, and accelerating accretive unit growth. With this strong foundation and sustained momentum, we are well positioned to drive continued success in 2025 and beyond. I wanted to recap some of the key underlying assumptions we provided on our last earnings call in February.

Based on current trends and assuming no material operating or and consumer disruptions, we would anticipate total revenues for the year to be approximately $3,800,000,000 As we have said earlier, our goal is to effectively offset inflation with menu pricing to support our margin objectives. Assuming we achieve this goal, input costs and consumer trends remain consistent, and there are no other material exogenous factors, we would expect full year net income margin of approximately 4.75% at the revenue level I provided. We are planning for as many as 25 NROs in 2025 and anticipate approximately 190 to $210,000,000 in CapEx to support this level of unit development as well as required maintenance on our restaurants. Lastly, we plan to continue to return capital to our shareholders through our regular quarterly dividend and share repurchase program. Looking ahead, the performance of The Cheesecake Factory, North Italia Flower Tiled, and the FRC concepts continues to reinforce our confidence in the strength of our brands and their potential to drive high quality growth over the long term.

Our high quality growth strategy is driven by strong unit economics as we invest in new restaurants that we believe will achieve our targeted returns and support long term value creation. The Cheesecake Factory, North, Flower Child, and FRC all possess some of the most compelling unit economics in the industry and position us to drive significant accretive growth over time. Based on our anticipated roadmap for each brand, we expect to generate long term annual unit growth of 7%, which we believe will be one of the highest unit growth rates in the casual dining industry, while providing diversification with respect to restaurant segment, price point, real estate, and even our labor model. Our large total addressable market provides substantial runway for expansion and long term revenue growth. With The Cheesecake Factory North Italian flower child, we see meaningful white space to expand our footprint and to expand to 300.

North Italia has 44 locations with a path to 200 locations, and we plan to enter several new high growth markets in the near future, including Salt Lake City, Boise, and Oklahoma City. Flower Child operates 39 locations today and has the largest potential TAM at 700 locations. It is poised for our highest annual growth rate this year with nearly all planned new openings in the top 20 fastest growing US metro areas. At scale, these expansion opportunities have the potential to generate over $5,000,000,000 in additional revenue. Other growth concepts such as culinary dropout, the Henry and Blanco, present incremental upside potential, further strengthening our long term growth potential.

In closing, we are a leader in upscale casual dining with highly differentiated, well positioned concepts that deliver a unique guest experience, creating what we believe is a significant competitive advantage. Our business remains healthy with top line trends, improving profit margins, and solid operational execution. We are looking to build on this momentum and believe we are positioned to continue to generate our historically consistent operational and financial results and to make meaningful additional steps in 2025 towards our longer term goals in the key areas of value creation, growing restaurant comparable sales, expanding restaurant operating margins, and accelerating accretive unit growth. And then with that, we look forward to seeing everybody in our Q and A breakout session after the presentation. Thank you very much.

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