Cheesecake Factory Inc.CAKE

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

With an upscale decor, an extensive menu, and a reputation for decadent desserts, Cheesecake Factory is a leading upscale casual dining chain. With only 160 restaurants under the Cheesecake, Grand Lux, and RockSugar brand names, this chain has excellent Read more

Bulls Say

Spending at casual-dining restaurants should get a boost over the long run from baby boomers entering their peak earning years, population growth, and an increasing desire for convenience in a time-pressed society.

The company boasts the two most productive restaurant chains in casual dining. The average Cheesecake restaurant delivered sales of about $9.9 million in 2008.

Management is starting a third concept, RockSugar Pan Asian Kitchen, which features the flavors of Southeast Asia. The first restaurant opened in the summer of 2008.

Cheesecake has significant opportunity to increase takeout sales. A vast majority of its restaurants offer curbside service. The chain is also testing a catering program. Read more

Bears Say

In a challenging environment for the consumer, casual dining has hit its roughest patch ever. Rising unemployment, plummeting home values, tightening credit, and weakening consumer confidence has led to a widespread decline in guest traffic.

Well over a third of the company's restaurants are in Arizona, California, Florida, and Nevada, regions hard-hit by the economic slowdown.

Applebee's, Chili's, and other chains have become more promotional with bargain deals.

The company must deal with minimum-wage increases and volatile food and energy costs. Read more

Strategy

Cheesecake continues to manage the business for the long term, with a near-term focus on stimulating sales and controlling costs. Building the cash balance is also a priority. As a result, the company Read more

Management

David Overton cofounded the business with his parents and has overseen the expansion from one restaurant in 1978 to two chains with more than 150 units today. Overton serves as both chairman and CEO, roles we believe should be split for better corporate Read more

Profile

The company operates 146 upscale casual dining restaurants under the Cheesecake Factory name throughout the United States. They offer around 200 menu items, including 40 Read more

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