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.

Jamba: Big dollars won't be coming through a straw

The blenders will keep whirring, but Jamba Juice expects a still-in-test food menu to generate as much as one-fifth of the smoothie chain’s future sales.   

“I don’t think that 20% target for the overall mix longer term would be out of the question,” CEO James White told investors last week.   

His optimism is based on a six-unit test of food options like sandwiches, wraps and salads, which are now being rolled into 200 California stores for a more extended trial.   

White also cited research indicating that 27% of Jamba’s drink customers consume their smoothies with food, purchased currently from other sources.   

“They’d welcome high quality health foods offered at Jamba locations,” White said in a conference call with analysts. “In fact, when asked many of them have wondered what’s taken us so long.”   

Right now, the only Jamba product that can’t be sucked through a straw is the steel-cut oatmeal introduced earlier this year. “It actually beat any of our internal projections and gave us great confidence to move forward on the current plan,” White said.   

That new emphasis on food “transforms our business model and company” by drawing new customers and increasing sales from current fans, he contended.   

Meanwhile, the franchisor is continuing to pursue a licensing program that’ll soon put the Jamba name on a variety of retail products. One of the more unusual is a blender from Think Wow Toys that kids can use to churn up their own smoothies. 

Smudging the line between restaurants, retailers

Once upon a time, restaurateurs and their investors questioned the wisdom of dabbling in retail. If consumers can eat your specialties at home, they reasoned, why bother visiting the restaurant?

But today, with supermarkets sporting all sorts of products emblazoned with restaurant logos, investors are asking a decidedly different question: Why aren’t you jumping on that (Bob Evans-brand) gravy train?

David Overton, CEO of The Cheesecake Factory, was grilled on that point by a financial analyst last week. “Well, we haven't decided to sell any of our actual dinner items or restaurant items yet,” danced Overton. “It's something that we could look at. We have been asked to do so…[but] the 70-something million people that came in the restaurant last year is where we're concentrating. I still think that's our greatest game at this point.”

Cheesecake, which just recently made concessions to such profound trends as discounting and offering mini-portions, may find the ranks of retail holdouts to be a lonely place. Panera Bread Co. ran through enough menu initiatives during an investment conference call on Thursday to suggest steroids testing for its R&D staff. One of the bigger ones, literally, mentioned by CEO Ron Shaich was a possible move into the retail sale of bulk baked goods.

He explained that units of the bakery-café chain have started retailing multipacks of muffins, scones and bagels. “You will see us focus on selling more seasonal breads at retail,” added Shaich. “We will regularly celebrate our gift worthy breads, things like Panettone, holiday bread, Irish soda bread, hot cross buns and a variety of sweet breakfast breads. We will also merchandise our breads to our guests for everyday use.”

Panera will be selling the baked goods through its own retail outlets rather than supermarkets, a twist that’s also being embraced by Starbucks. Its new retail push, the sale of Via instant coffees for home mixing, will be undertaken through the coffee giant’s own cafes, not a Piggly Wiggly or a King Kullen.

Other restaurants chains recently conferring with investors about retail initiatives include Bob Evans and California Pizza Kitchens, neither of which is a stranger to that alternative sales channel.

Indeed, Bob Evans is as much of a grocery-product supplier as it is a restaurant operator, a role it continues to expand by adding heat-and-eat products bearing the brand of its namesake restaurant chain. In its most recent quarter, for instance, the company added nine new retail choices, including “family-sized” portions of such comfort foods as mac and cheese and mashed potatoes.

But it also raised what should be a yellow light for restaurateurs branching into retail: During the most recent quarter, supermarket sales of Bob Evans-brand products decreased on a volume basis for the first time in more than seven years, executives noted.