Financing

Cheesecake Factory ramps up growth of non-Cheesecake brands

The company will open up to 16 North Italias, Flower Childs and other brands from its Fox Restaurant Concepts division.
North Italia exterior
Cheesecake wants to open five or six North Italias this year. / Photograph: Shutterstock

The Cheesecake Factory could open up to 22 new restaurants this year, but most of them will not be Cheesecake Factories.

Instead, it is ramping up growth in its smaller holdings: the 33-unit polished-casual North Italia and its 30-unit fast-casual sister brand, Flower Child. 

Both are part of the multibrand Fox Restaurant Concepts, which Cheesecake acquired in 2019 to serve as a sort of incubator for growth vehicles. At the time, Cheesecake had already committed to developing North Italia, and Flower Child was viewed as the next candidate for wider expansion. It has opened 12 North Italias and eight Flower Childs since then. 

In 2023, plans call for five to six new North Italias and 10 other new Fox outlets, including three to four Flower Childs. The company also expects to open five or six Cheesecake Factories.

It’s a step up from last year, when the company said it would open a total of 13 new restaurants, including four North Italias and three Flower Childs. Eight of those happened in the fourth quarter.

The flurry of openings to close out the year “demonstrates our ability to execute the acceleration of our unit growth plan” despite ongoing supply chain and permitting delays, CEO David Overton said on an earnings call Wednesday.

North Italia has consistently been a bright spot in Cheesecake’s portfolio. In the fourth quarter, North Italia’s same-store sales rose 9% year over year and 26% compared to 2019. It has done even better so far in 2023, with same-store sales up 13% and 31% vs. 2022 and 2019, respectively. 

Cheesecake wants to add new units of the concept at an annual rate of 20%.

Consumer demand is great,” said President David Gordon. “As we moved into new geographies, it continues to be accepted by those guests very, very well. So we feel great about the continued growth at North.”

As for Flower Child, it too has had success in new markets, Gordon said, and is primed for further investment.

We'd anticipate the Flower Child is going to be the next concept that we will bring under our umbrella a little more closely and help continue to launch nationally,” he said. “We're excited to get that going this year.”

Cheesecake did not report same-store sales for Flower Child or its other Fox brands, but executives indicated that they’ve been happy with their performance. 

“We wouldn't be moving forward with the 20 to 22 locations if we didn't feel we'd be hitting the returns,” CFO Matt Clark said.

Nor did executives specify what the other Fox openings would be, but Gordon noted that they have high hopes for the 12-unit Culinary Dropout gastropub and the 11-unit Blanco Cocina, a full-service Mexican concept.

We'll continue to evaluate the other FRC concepts to make sure we feel like they can have a national presence and make sure that they're hitting the margin profile that we need before we decide that we would scale them up,” he said. 

Fox operates about a dozen concepts, including the pizza-focused Fly Bye and Doughbird as well as Olive & Ivy, Wildflower and Zinburger. Brands deemed to have legs have a chance to graduate to Cheesecake’s roster for expansion.

As for Cheesecake’s 211-unit namesake brand, it continued to battle rising costs in the fourth quarter. The company raised prices  in December to help get margins back to 2019 levels, and an additional 3.5% price increase will take effect this quarter. More hikes could be in store later in the year.

“We're going to try to keep up with inflation,” said Clark, who noted that Cheesecake’s prices remain 4 percentage points below the broader market.

The chain's sales growth in the period came almost entirely from price: Same-store sales rose 4% year over year on 8.5% pricing, 0.3% traffic and negative 4.8% mix. Sales have accelerated in 2023, up 9.5% year over year.

One analyst wondered, given the chain’s margin challenges, whether Cheesecake should focus more on its core brand and less on its growth concepts. 

Clark said the company is still dealing with the fallout from the pandemic and the war in Ukraine, and that it’s determined to stay the course while the dust settles. 

“Let's see the environment stabilize a little bit and then let's pull some levers and not have sort of a knee-jerk reaction, if you will,” he said.

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