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.

A thin sliver of Cheesecake Factory news

Cheesecake Factory has given its newest concept a menu overhaul. The Asian flavored Rock Sugar, still in the single-store test phase, has just been outfitted with a new bill of fare, though company CEO David Overton didn't divulge details during Cheesecake's recent conference call with analysts.

He did divulge, however, that Cheesecake may not be interested in opening more than one additional Rock Sugar at the current time.

"I’m only going to maybe look for one [more], and it’s going to be a very, very special prime location because we have to build that brand in the right places," said Overton, as recounted in a transcript provided by the website SeekingAlpha.com.
"It’s not just one of those things that we’re just going to open in any mall at this particular time."

During the call late last week, Overton also revealed the company plans to scale down the size of its secondary concept, Grand Lux Cafe. Cheesecake is also interested in "bringing the decor down a little."

A downsizing of the company's namesake brand has yielded a new prototype that "is here to stay," said Overton. "We’ve built a couple of them and we’re very happy with the size, with the volume that they’re able to do, so we’ll move forward with that." He projected that 10 to 12 of the smaller Cheesecakes will be constructed during the next two years.