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New Cheesecake Unit in Mass

Zacks Equity Research

In a bid to boost business, several U.S.-based restaurateurs are at present focused on unit expansion. Calabasas Hills, CA-based upscale casual dining restaurateur, The Cheesecake Factory Inc. (CAKE), which operates as many as 178 units worldwide, is geared to expand its presence in the lucrative domestic market. With the resurgence of consumer confidence, management has accelerated its unit openings and plans to unveil another nine units in 2013.

Recently, the restaurateur opened an outlet in Chestnut Hill, Massachusetts. The location is a major regional shopping center, which is strategically positioned on Route 9 near Boston. Cheesecake Factory’s restaurants are primarily located in or near malls and shopping centers to attract upper-class customers The 8,635 square-feet restaurant accommodates around 225 guests and is expected to drive traffic with its broad platter and chic ambience.

Apart from this unit, the company operates six other restaurants in Massachusetts. The state’s restaurant industry acts as a major catalyst of its economic development and, according to the National Restaurant Association, is projected to generate around $13.2 billion revenues in 2013. We believe that the high demand and spending ability of the state which are the major factors behind the sector’s growth has caught the attention of Cheesecake Factory.

We believe, the Zacks Rank #3 (Hold) company’s venture into the underserved market of Massachusetts, one of the most densely populated U.S. states, will add to its sales.

In the domestic market, apart from the traditional units, management is focusing on formats of different sizes and scales to cater to local demand. The better-than-expected returns from its smaller units have encouraged the company to focus more on the smaller sites to spur ROI.

Some other players in the restaurant industry which look attractive at present include Cracker Barrel Old Country Store, Inc. (CBRL), DineEquity, Inc. (DIN) and Bob Evans Farms, Inc. (BOBE). All the companies hold a Zacks Rank #2 (Buy).

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