Friday, February 11, 2011

What Cheesecake Factory is thinking

Cheesecake Factory’s quarterly analysts call revealed some interesting details of the casual-dining giant's post-Recession strategy.

For instance, executives explained why you won’t see frozen Navajo sandwiches, a Cheesecake specialty, in the freezer case of your nearest SuperValue. The company’s menu signatures are usually too expensive to sell well in mass-market supermarkets, explained CEO David Overton.

“That’s why we have done so well in the warehouse clubs,” where the slighter markup makes Cheesecake-branded products a bargain, said Overton. He pegged the company’s sales through that channel at $30 million to $40 million, minimum.

Overton also noted that all of the chain’s salad greens are now organic, and that stores already offer a choice of brown or white rice. Cheesecake Factories also serve sweet potato fries, which some perceive as more healthful than the standard version.

Health will continue to be a concern as the chain evolves its menu, said Overton. But he noted that the effort will be a process, not a wholesale changeover, a reflection of consumer preferences. The company has restaurants in 12 areas that already require chain operations to post calorie counts on the menu, and “there’s been virtually no change in what people are buying,” he said. “They’re not buying less desserts. So when people go out to eat, they really want what they want.”

Portfolio managers participating in the call pressed the Cheesecake officials for their views on buying or starting a new chain with all the cash they have on hand. The executives didn’t respond squarely to the quasi-suggestion that they diversify, noting that the company could double in size just from the expansion of its namesake brand.

Overton did note that a new smaller-sized Grand Lux Café will make its debut later this year, and that a RockSuger Pan Asian Kitchen, Cheesecake’s upstart concept, will add a unit.

In one of the strangest asides I can recall from an analysts’ conference call, Overton also cited a news report that nose jobs are increasing in number and that economists read that as a positive omen for the economy.

Hey, the man has built one of the most phenomenal sales machines in the business. If plastic surgery is a gauge for him, I suggest we start a rhinoplasty index.

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