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Emerging Brands

With Fox deal done, Cheesecake Factory embarks on a new growth plan

The acquisition provides a standout operator with a standing concept-development lab.
Photograph: Shutterstock

The Cheesecake Factory has completed its complex acquisition of Fox Restaurant Concepts (FRC), sparking one of the industry’s more unusual strategies for sustaining the long-range growth and relevance of a mature powerhouse.

The plan is intended to provide Cheesecake with a steady stream of market-tested casual-dining and fast-casual concepts. Acquirer and acquiree will essentially operate as two companies, each with its own headquarters. FRC, a mixed collection of concepts hatched by founder Sam Fox, will serve as the development lab and early testing center for brands. Ventures that appear to have legs will then be transferred to Cheesecake for expansion and ongoing operation.

The model has already yielded one new growth vehicle for Cheesecake, the high-volume North Italia full-service Italian chain. FRC grew the homegrown concept to 21 locations in 10 states. Now the brand becomes part of Cheesecake, which has disclosed plans to open four or five North Italias in 2020, or roughly the same as the number of Cheesecake-brand restaurants that are expected to fire up their ovens. 

We have a solid pipeline already identified for 2020 for North to achieve that target,” Cheesecake CFO Matt Clark told financial analysts when the acquisition was announced at the end of July.

Executives revealed at that time that each North Italia generates about $7 million in annual sales.

The next concept to transition from FRC to Cheesecake is likely to be Flower Child, Fox’s health-focused fast-casual operation. With 22 branches already open, the chain was scheduled to become part of Cheesecake even before the acquisition of FRC was announced.

Other FRC brands that could be transferred to Cheesecake’s “active” portfolio include Doughbird, a casual operation specializing in pizza and rotisserie chicken; Culinary Dropout, a full-service venture specializing in classic dishes such as fried chicken, ribs and burgers; The Arrogant Butcher, a place specializing in upscale riffs on classic comfort foods; and Wildflower, a casual spot offering what FRC calls new American cuisine.

The stalwart of FRC is Olive & Ivy, a polished-casual venture specializing in Mediterranean cuisine.

Neither Cheesecake nor FRC franchises.

When the multiphase acquisition is completed, Cheesecake will have spent $441 million for access to the brands and Sam Fox’s brain. About $88 million of that total has already been paid to Fox, and his partners during the past three years as Cheesecake’s investment in North Italia and Flower Child. Under a previous agreement, Cheesecake had purchased an equity stake and first rights to buy the brand.

Another $308 million was paid by Cheesecake for FRC at the closing on the deal. About $130 million of that amount was specifically for the portion of North Italia that the buyer didn’t already own.

An additional $45 million is due to be paid over the next four years, provided FRC hits certain performance milestones. 

Yet to be revealed is how access to the FRC concepts might affect expansion of Cheesecake’s homegrown upstart, the fast casual Social Monk Asian Kitchen, which currently has just one branch open.

Cheesecake has already indicated that it has no current plans to expand its other self-started concepts, Grand Lux Cafe and RockSugar Southeast Asian Kitchen. 

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