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Cheesecake Factory on Expansion Spree, Opens Outlet in Orlando

Zacks Equity Research

To expand presence in the domestic market, The Cheesecake Factory Incorporated CAKE announced the opening of its new restaurant in Orlando, FL. The restaurant, located in Vineland Pointe, will offer more than 250 menu items along with over 50 signature cheesecakes and desserts.

As of Dec 10, 2019, the company operates 294 full-service company-owned restaurants in the United States and Canada under brands including The Cheesecake Factory, North Italia, and a collection within the Fox Restaurant Concepts subsidiary. Internationally, the company operates 25 restaurants under licensing agreements along with two bakery production division.

Expansion & Sales-Building Efforts Bode Well

Cheesecake Factory continues to focus on expanding in domestic and international markets. In 2019, the company plans to open five company-owned restaurants — including the Gainesville, FL location that was opened during the fiscal third quarter.

Internationally, the company opened its second restaurant in Abu Dhabi and debuted in Macau in fiscal third quarter. During fiscal fourth quarter, it expects to open three additional locations and one North Italia restaurant. Overall, the company expects to open six locations in 2019 under licensing agreements.

Management believes that the company is likely to open more than 20 new restaurants — including as many as six Cheesecake Factory locations, six North Italia restaurants and eight restaurants within the FRC subsidiary — by 2020.



Notably, shares of the company have outperformed the Zacks Retail - Restaurants industry in the past three months. Cheesecake Factory has been benefiting from its diverse menu, operational distinction and unique ambiance appeal to customers along with expansion initiatives. Various initiatives to boost sales like menu innovation, roll out of an improved server training program, launch of mobile payment app and focus on delivery have been driving growth. Notably, menu-innovation and advanced digital capabilities are primary forte of the company.

In order to stay afloat in the competitive environment, this Zacks Rank #3 (Hold) company is committed to bolster its sales. In fact, Cheesecake Factory’s efforts to improve guest experience have been stabilizing sales since the fourth quarter of fiscal 2017.

However, rising costs stemming from increase in wage rate scenario is a concern. Pre-opening costs of outlets, given the company’s unit expansion plans and expenses related to sales initiatives, are adding to its woes.

Key Picks

Some better-ranked stocks in the same space are Chuy's Holdings, Inc CHUY, Arcos Dorados Holdings Inc ARCO and Brinker International, Inc EAT. Chuy's Holdings sports a Zack Rank #1 (Strong Buy), whereas Arcos Dorados and Brinker International carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chuy's Holdings has three-five year expected earnings per share growth rate of 17.5%.

Arcos Dorados’ and Brinker International’s current year earnings are expected to rise 72.2% and 8.1%, respectively.

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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
 
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