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Shopping Centers Today -> May 2001
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CHEESECAKE FACTORY HAS ITS CAKE AND EATS IT TOO
By Kimberly Pfaff
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The
Cheesecake Factory’s restaurants all feature upscale
decor with hand-painted ceilings.
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There’s been a lot of sweet talk about The Cheesecake Factory lately and that accounts for much of its success.
The Calabasas Hills, Calif., chain’s record growth has come solely from word of mouth — the firm does not advertise. And, by all accounts, people are saying good things: Sales soared to an all-time high during fiscal 2000, with total revenue rising 26% to $438.3 million.
Comparable-store sales were up 4.5% for the year, marking 34 consecutive quarters of positive comp sales since the firm’s 1992 IPO. As for sales per square foot, they’re simply among the best in the business.
That might sound like a lot of cheesecake, but there’s more to this powerhouse chain than just desserts. So, what’s the 22-year-old company’s recipe for success?
“Our niche is upscale casual dining,” said Howard Gordon, senior vice president, business development and marketing for The Cheesecake Factory. “There are a number of things we do that really keep people coming back: We’ve got the right locations; we’ve got wonderful ambience, good food, good service and price value, which is very important. Plus, the portions are big.”
Supersize meals are definitely the rule here — and The Cheesecake Factory serves them up in a warm, inviting atmosphere. The restaurants, which typically average about 10,000 square feet, all feature the same rich, upscale decor, with hand-painted ceilings and wall murals, Egyptian columns, lots of cherry wood, limestone marble and handblown glass fixtures. Adding to the upscale feel, there’s even valet parking. Not bad, considering the average check is only $15.
Industry watchers say the chain’s success can be attributed not just to any one factor, but to the confluence of many things.
“In this business, you’re only as good as your last meal,” said Allan Hickok, a senior research analyst with U.S. Bancorp Piper Jaffrey. “And I’d say that the last meal for most of The Cheesecake Factory’s customers has been consistently excellent for many years.”
That customer satisfaction is reflected in their sales figures. Cheesecake’s sales per square foot exceed $950, against an industry average of $300 to $400, Hickok said.
“They’ve got the best numbers of any chain operation in America,” he said. “They do more than double what anybody else does; it’s one of the best long-term growth stories in the industry.”
If you can’t find something to eat here, then you’re really picky. The 18-page menu aims to please a broad range of tastes, with more than 200 items (Asian, Cajun, Mexican, pastas, seafood, salads and more), and more than 50 varieties of desserts — including, of course, those imaginative cheesecakes, which range from chocolate raspberry truffle to kahlua almond fudge. That breadth of items, say industry watchers, accounts for much of the chain’s appeal.
“That menu really eliminates the veto,” noted Hickok. “So often you get a group together and one person wants Chinese, someone else wants a burger, another wants Italian. Well, here you can get whatever you want. And then they serve the food in abundant portions, so you usually take some home, and the next day when you open up your refrigerator, you’re reminded of what a great time you had.”
And the firm doesn’t have to worry too much about adding a local specialty dish to new locations, because, as Gordon noted, “With that many menu items, it’s already on there.”
Still, to stay current with the latest food trends, The Cheesecake Factory takes culinary tours around the country.
“We also have two menu changes a year,” said Gordon, “where we replace about six to 10 items that might be slower selling, with some newer items, to keep up with the trends.”
Currently, there are 40 Cheesecake Factory restaurants in nearly 20 states, and the company plans to continue adding about 10 new sites a year. New locations for 2001 include Winter Park Village in Winter Park, Fla.; Woodfield Mall in Schaumburg, Ill.; Biltmore Shopping Center in Phoenix; the newly reopened Galleria in Sherman Oaks, Calif.; and the King of Prussia Mall near Philadelphia.
While a few of the chain’s earlier restaurants are freestanding locations, The Cheesecake Factory has its eye firmly on malls for the future.
“We prefer being in shopping centers or malls, because we look for a tremendous amount of foot traffic,” said Gordon. “Right now, we’re doing nothing but malls and shopping centers. It’s very interesting, as time goes on, that we’re actually also being considered an anchor in malls, because of the amount of people we help draw in.”
Mall developers agree.
“The good thing about them is, they can really help improve your center because of the amount of traffic they can bring,” said Joe Tagliola, vice president of leasing for Los Angeles-based Westfield America, which has just completed its first deal with the chain, at Westfield Shoppingtown Valley Fair in San Jose, Calif. “If you have a center that is not as active from 6 p.m. on, they could actually help change some of the shopping patterns. It’s just a big benefit.”
“They are absolutely fabulous,” agreed Robert Michaels, president and COO of Chicago-based General Growth Properties. The REIT has several Cheesecake restaurants, including one that opened in August at Stonebriar Centre in Frisco, Texas. “Their success in my opinion is their consistency and the quality of the food. You know what you’re going to get, they’ve got popular prices, and it appeals to a wide area of consumers. It gives the image of an upscale restaurant, but the prices are popular.”
“They appeal to a very wide range of customers,” said Jim Napoli, executive vice president of leasing for Indianapolis-based Simon Property Group, which currently has several Cheesecake locations, with more in the works. “You can be a teen-ager and enjoy the food, you can be in your 20s and 30s and have a great meal, and you can be a senior and enjoy a meal that isn’t going to knock your wallet out. The helpings are ample, and the help is very well trained. Besides that, they build a beautiful restaurant — the ambience is extremely pleasing. And any time you can get a restaurant doing in excess of $1,000 a foot, in some cases $2,000 a square foot, you know they’re doing something right.”
Next on The Cheesecake Factory’s plate is the expansion of its newest concept, the Grand Lux Café, which debuted in 1999 at the Venetian Hotel in Las Vegas. A second, 12,000-square-foot location is set to open this summer at the Beverly Center in Los Angeles. As its name implies, Grand Lux offers a more upscale dining experience, which the average check at about $19. The restaurant also has a smaller menu (only about 120 items), with offerings such as lobster and veal that are not found at The Cheesecake Factory.
Already, indications are strong that this concept also has all the right ingredients: So far, the Las Vegas Grand Lux has easily performed at Cheesecake’s rate. The next location to open will be in Chicago in 2002.
Equally important to The Cheesecake Factory’s success, said Hickok, is what consumers don’t see. “This company has a very strong management team, and it’s a team that has been significantly enhanced over three or four years. And so the product that they are putting out in the community is a result of many things you don’t see — it has to do with real estate site selection, and understanding the markets, and efficient construction.
“It’s one thing to build a beautiful environment,” Hickok added. “It’s another thing to build a beautiful restaurant that makes good economic sense.”
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