Menu prices at The Cheesecake Factory were 10.5% higher in the second quarter than they were a year ago. But same-store sales rose just 1.5% as customers visited less and ordered less food when they did.
Traffic was down 3.7% in the period year over year at the 211-unit chain, while menu mix fell 5.4%.
CFO Matt Clark blamed some of the slowdown on a “difficult optical lap” of last year. “So-called revenge buying was in place and we saw heightened levels [a year ago],” he said.
Still, the chain’s 10.5% price hike is among the highest in the industry. Full-service menu price inflation averaged 6.2% in June, according to the Bureau of Labor Statistics.
Executives argued that Cheesecake is simply catching up with the rest of the industry, and still lags cumulative menu price inflation by about 2%.
That has given it room, it believes, to raise prices further. They will be 9% higher this quarter and 7.5% higher in Q4. “I think this just helps us get this last leg back,” Clark said.
Nor is the chain concerned that the higher prices are damaging its value perception. It just completed an annual customer survey, and “our value scores are pretty stable,” said President David Gordon. “We’ve seen nothing in scores or behavior that would give us pause.”
Traffic did improve as the second quarter went on and is “getting pretty close to break-even” now, Clark added.
“When we look at the underlying traffic, it’s pretty stable in our business,” he said. “The underlying purchase behavior is very stable.”
In fact, he said the second quarter was the most predictable in three years in terms of the puts and takes. As such, higher prices did have the intended effect of easing costs. Both food and beverage and labor costs decreased 130 basis points as menu pricing outpaced inflation, bringing the company closer to its goal of returning restaurant-level margins to pre-pandemic levels.
“Our objective this year is to rebuild our profitability and to develop the sales levers to grow off of this base,” Clark said.
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