Cheesecake Factory hits the break-even point

Off-premise sales are running at an annual rate of about $4 million a year.
Cheesecake factory
Photograph: Shutterstock

A typical branch of The Cheesecake Factory is now generating about $75,000 in weekly sales from takeout and delivery, or enough to cover operating costs while dining rooms remain closed, according to the chain’s namesake parent company.

The pace equates to $4 million in annual sales per store—still about 65% below the pre-COVID-19 level, according to executives, but high enough to push the chain past the unit-level break-even milestone. On a corporate basis, the company posted a net loss of $3.9 million for the first quarter, compared with a year-ago net profit of $27 million.

The figures were aired by management as Cheesecake prepares to reopen some dining rooms next week at a portion of their former capacity. Most of the states that have OK’d the resumption of dine-in service have limited seating to half or a quarter of pre-COVID-19 levels.

“The size of our restaurants and our flexible seating layouts will uniquely enable us to ensure ample levels of social distancing, while maintaining sufficient seating capacity to generate what we believe could be meaningful sales volumes,” company CEO David Overton said during the company’s quarterly conference call Tuesday with financial analysts. “Our teams have been nimble and innovative in the COVID-19 environment, and we believe their execution of our reopenings will be similar.”

Unlike many of its competitors, which are scaling back their menus because of state requirements the listings be replaced or sanitized after every use, Cheesecake plans to offer its usual book-like roster.

Management said the brand’s customer base has grown during the pandemic. About one-third of the consumers who have ordered delivery from the chain were first-time patrons, according to Cheesecake President David Gordon.

Gordon said he expects little resistance in rehiring employees to staff dining rooms as they reopen. Cheesecake furloughed 41,000 hourly employees as states started shutting down dining rooms.

Many of those laid-off staffers have remained in touch with their former bosses and workplaces because of Cheesecake’s offer of a daily free meal to anyone who was let go.“Having the daily meal program in place has allowed the staff to come in if they like to every day and get a meal and reconnect with the management team,” Gordon said.

Coupled with the assumption of furloughed employees’ health insurance premiums, the free meals are costing Cheesecake about $1 million a week.

“The part that will be tricky will be predicting sales levels and making sure you're aligning appropriately and really getting in front of the supply chain,” said CFO Matt Clark. That includes securing sufficient personal protective equipment (PPE) for staff, he added.

The industry will be facing an uncertain sales and cost environment for some time, Clark said. But  “we are cautiously optimistic that the environment could normalize about a year from now and enable us to recapture 2019 unit volumes,” he said.

Overton did not say how many Cheesecake-operated restaurants may reopen next week.

Currently, 32 the company’s 294 domestic restaurants are closed. Included are three Cheesecakes.

The others all offer takeout and delivery.

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