Deciding what to order has always been one of the hardest things for anyone eating at the Cheesecake Factory. That’s because the chain has a huge, ever-evolving menu that gives diners more choices than most restaurants offer.
The chain’s food diversity continues to be a driver, CEO David Overton said during the company’s third-quarter earnings call.
“Culinary innovation continues to be an important contributor to our sales growth and a key point of differentiation,” he said. “…Our broad, made-from-scratch menu allows us to respond to changing guest preferences and offer compelling choices across a wide range of price points.”
The chain delivered comparable sales growth of 15.2% and annualized unit volumes of more than $13.9 million.
“Comparable sales and traffic growth meaningfully outperformed the broader casual dining industry, underscoring healthy demand for our brand and continued market share gains,” he added.
Newer, younger customers were also a driver, but their behavior bucked current restaurant trends. They weren’t hunting for bargains or cutting back on drinks, but they did skip one thing — the cheesecake.
Cheesecake Factory finds a new audience
Overton made it clear that growing the company’s base was important for its future.
“We are especially encouraged by the traction we are seeing with our younger guests. The Cheesecake Factory has always had broad appeal, and our ability to attract the next generation of guests reinforces the enduring relevance of the brand,” he said.
CFO Matthew Clark shared some added color on the chain’s newer and younger customers.
“So what we’re seeing is that the guests that are coming in, they’re not bargain hunters. They’re wanting experiential dining, and they’re getting the full Cheesecake Factory experience, as we say,” he said.
And, many of those guests are both younger and new to the chain.
“The data that we have shows that a very large percentage of the guests that are coming in are younger, in general, and so it’s always important for brand relevancy to continuously refresh that pipeline,” he shared.
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Customers overall, he shared, have been buying more alcohol, but sales for the chain’s signature item have topped out.
“I also think it’s important to note, when you look at The Cheesecake Factory overall and why guests are coming in, the experiential nature — in fact, we’re up in alcohol incident rates, right? And we’re flat on cheesecakes, even though we’re still at an all-time high,” he said.
Why is Cheesecake Factory winning?
Before the company reported earnings, Citi analysts expected the company to post “its best quarterly comp in over 10 years,” driven by changes in marketing strategy, the rewards app launch, and what they describe as growing relevance with younger consumers,” Investing.com reported.
One analyst noted that evidence should support “the idea that traffic growth has legs.”
That’s exactly what happened, and President David Gordon explained what the company has been doing to drive its success.
“This performance reinforces our conviction in our strategy and reflects our continued focus on several key priorities: best-in-class operational execution supported by industry-leading retention, menu innovation and the ongoing growth and evolution of our Cheesecake Rewards and marketing efforts,” he said.
RTM Nexus CEO Dominick Miserandino thinks that Cheesecake Factory has positioned itself well to feel special across multiple generations.
“Cheesecake Factory has a menu that practically needs a table of contents, but that’s part of its appeal. You can go with five friends who all want something different, and everyone finds something. The portions are generous, and the place feels like an occasion. Younger consumers may be watching their spending, but they’re still willing to pay for a night out that feels worthwhile,” he said.
Cheesecake Factory sales are rising
Third-quarter total sales at The Cheesecake Factory restaurants were $754.4 million, up 16% from the prior year.
Jon Tower with Citi asked about the company’s social media marketing efforts during the call, and Gordon responded.
“The strategy over the past couple of years, as you know, has been to leverage the new rewards platform and to make sure that our member acquisition and activation of those new members continues to grow, and we saw that through all of Q3, great momentum in that program,” he said.
The company, he added, has also embraced social media.
“We’ll continue leveraging that visual appeal of the menu and all the social commentary to create those culturally relevant moments and amplify any organic engagement that we can where we feel it’s appropriate, increasing that brand awareness and bringing new guests into the fold,” he said.
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Cheesecake Factory has something for everyone
When my family lived close to a Cheesecake Factory location, we often went there because the depth of the menu made it a good compromise choice. If I wanted pasta, my wife wanted a salad, and our son wanted pizza or chicken tenders, we could all be satisfied.
The chain was also a good location for work celebrations or even business meetings for all the same reasons.
Placer.ai credited the chain’s strong numbers to its approach to value, “making a traditionally higher-priced dining experience easier to justify.”
“After five straight quarters of decline, same-store visits to the chain turned positive in Q2 and accelerated to 7.6% in Q3, while overall visits rose 9.7%. The turnaround coincides with a push to make the brand easier to visit,” the data showed.
And while management noted that pricier items have sold well, Placer.ai suggests that cheaper items got people in the doors in the first place.
“Management has credited lower-priced Bites and Bowls with drawing in guests and driving more frequent visits. And the sharp acceleration in Q3 traffic suggests that giving customers more affordable ways to enjoy the brand may be helping turn occasional visits into a more regular habit,” the research firm showed.
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