Consumers are feeling the pinch of inflation, economic uncertainty and now a government shutdown with no end in sight.
That’s according to The Cheesecake Factory, which on Tuesday warned of consumer softness that worsened this month and could continue into the beginning of next year. In particular, it cited the nearly monthlong government shutdown for leaving consumers in limbo.
“Everybody wants to be able to plan their lives and add jobs to the economy and all of those attributes that help drive restaurant sales,” said Matt Clark, the chain’s CFO, during an earnings call Tuesday. “But, you know, I think we're going to be cautious until we see that turn.”
With that in mind, the 216-unit chain said it expects to see total revenue decline approximately 1% in the fourth quarter compared to the third. For next year, it predicted total sales growth of 4% to 5% over 2025, with sales improving as the year goes on.
Clark noted that the projections are based in large part on what the chain observed during the last government shutdown, in 2019.
“We saw a very, very similar trend in the industry. And it was about a six to eight month period of time,” he said. “So we're sort of planning on that without any better information. And we'll manage the business appropriately.”
As for its most recent quarter, The Cheesecake Factory was stable, but nonetheless showed some wear and tear from the difficult consumer environment. Same-store sales rose 0.3% from July through September, the chain’s worst same-store sales result since the first quarter of 2024. That included a 2.5% traffic decline and negative 1.2% menu mix, offset by 4% higher prices.
Though mix was negative, it was an improvement over recent quarters, which the chain attributed to a new line of low-priced bites. More customers have been opting to add bites such as meatball sliders and avocado toast to their meals, which is boosting check sizes.
The chain has also found success with a line of bowls, which have become one of the most-ordered new items that it has introduced in recent years.
Both bowls and bites figure into the chain’s plans to weather the consumer slump heading into next year. In particular, their lower price points will help soften the blow of menu price inflation. In the fourth quarter, effective pricing will be 2.5% higher than last year, and that will drop again to around 2% in the first half of 2026.
“By the time we get to, say, the middle of the second quarter, we'll have gone through three pretty significant menu changes, all enhancing the value proposition,” Clark said. “We'll have a materially lower effective price point. So, you know, those things certainly will benefit us, we believe, in terms of traffic as well as the mix side of things.”
Despite the muted same-store sales result last quarter, The Cheesecake Factory delivered an impressive performance on the bottom line. Restaurant-level margins increased 60 basis points, to 16.3%. Executives attributed the growth to improvements in retention for both managers and hourly staff, as well as record-high employee engagement scores.
“We definitely take credit for the benefits that we've seen related to the retention. And those do ripple through to productivity,” Clark said. He also noted that there is some “job hugging” going on in a tough labor market, which has helped reduce turnover.
The quarter was a mixed bag for Cheesecake’s two largest sister concepts, North Italia and Flower Child.
The 46-unit North Italia struggled, with a same-store sales decline of 3%, including a 6% traffic decline. The company blamed the depressed consumer environment and also noted some sales cannibalization from new unit openings.
Fast casual Flower Child, meanwhile, continued to soar, reporting a same-store sales increase of 7%. It shined despite a slowdown at other fast-casual brands like Chipotle and Cava.
Gordon said Flower Child’s menu variety, food quality, service and pricing power have helped it stand out from the pack.
“As we move Flower Child into new markets or existing markets, we continue to see an affinity for the brand being very, very strong. And we would anticipate that continuing into the future,” he said. “We're looking forward to continuing the growth of Flower Child, getting more restaurants open next year and bringing it across the country.”
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