Cheesecake Factory Report

Jennifer Ojiyi

BUSX 301, section 012 Amanda Gates March 21, 2012

Business Analysis for Cheesecake Factory Executive Summary
Cheesecake Factory’s mission statement is to create an environment where absolute guest satisfaction is their highest priority. The vision statement is that through a shared commitment to excellence, they are dedicated to the uncompromising quality of their food, service, people and profit, while taking exceptional care of their guests and staff. The Cheesecake factory is doing really well in satisfying their mission by providing a broad menu offering to satisfy their guests, but they are not managing their profit and expenses well as stated in their mission statement because over the years expense growth outpaced revenue growth as shown by the SWOT analysis below. Therefore Cheesecake Factory needs Consultants to help them better manage their revenue and expenses, in order to increase their profits, because the purpose of a business establishment is to make profit.
SWOT Analysis
The SWOT analysis gives us a summary of the company’s strengths, weaknesses, opportunities and threats. The information below would also include the competitive climate, growth strategy, and what differentiates Cheesecake factory from its competitors and its brand identity.
Cheesecake factory’s extensive menu and bakery product offering has helped differentiate it from its competitors.
Cheesecake factory’s large menu and bakery product offerings
The Cheesecake factory has extensive menu and bakery product offerings. It offers a wide variety of menu to its customers. For instance, The Cheesecake Factory Restaurant, Grand Lux Cafe, and RockSugar Pan Asian Kitchen concepts offer approximately 200, 200, and 80 menu items, respectively (“Wikinvest,” 2013). These menu items include appetizers, pizza, seafood, steaks, chicken, burgers, pasta, specialty items, salads, sandwiches, omelets and desserts. Cheesecake factory’s extensive menu is what differentiates it from other competitors. It constantly updates its menu twice each year to respond to consumer preferences and needs, as well as food trends and nutritional awareness (“Business source complete,” 2012). Cheesecake factory’s large menu and product offerings have helped attract a large customer base and thus contributing to its revenue growth (“Business source complete” 2012).
The Cheesecake factory has established a strong presence in the U.S markets over the years. It has been one of the players in the US restaurant industry (“Business source complete,” 2012). The company operates 177 restaurants comprising of 162 restaurants under the cheesecake factory brand, 14 restaurants under the brand Grand Lux Cafe and one unit under RockSugar Pan Asian Kitchen brand in California (“Yahoo Finance,” 2013). It also licensed two bakery cafes under The Cheesecake Factory Bakery Cafe mark to another foodservice operator (“Wikinvest,” 2013). Although Cheesecake factory has an advantage in providing a large menu and bakery product offerings, it still has a high pricing, unfavorable profit and small scale of operation compared to its competitors.
High pricing, Unfavorable Profit and Small Scale of Operations
The Cheesecake factory has a high priced menu option ranging from $3.95 to $31.95 (“Cheesecake Factory,” 2013). Its unfavorable profit margin is as a result of uneven growth trends in its revenue and expenses. Its expenses growth has outpaced its revenue in the last year. Cheesecake factory expenses and cost grew 9 million and revenue was down 2.7% at $464.7 million in 2012 compared to the $477.7 million in 2012 (“Wikinvest,” 2013). This led to a decline in its net profit.
The Cheesecake factory has relatively small scale of operations (“Business source complete,” 2012). The Cheesecake factory lacks scale when compared to other competitors such as Brinker International Incorporation. Brinker International Incorporation operated more than 1,689 casual dining restaurants in 49 states and 24 countries in the world such as the US, the UK, Australia, Egypt, Germany Japan, Malaysia, and Saudi Arabia. Cheesecake factory in contrast operates 177 upscale, full service casual dining restaurants mostly in the United States (“Wikinvest,” “Cheesecake factory,” 2013). Cheesecake factory has found ways to increase its scale of operations, by expanding internationally and opening new restaurants in the US.
International and Domestic Expansion
Cheesecake Factory has expanded internationally and also opened new restaurants in the US. Its expansion internationally was achieved by entering into a licensing agreement with a Kuwait-based Alshaya group of companies, a restaurant and retail operator, to build and operate The Cheesecake Factory restaurants in the Middle East (“Business source complete,” 2013). The agreement provides an advantage for the development of 22 restaurants over the next five years in five countries the United Arab Emirates, Kuwait, Bahrain, Qatar and Saudi Arabia (“Cheesecake Factory,” 2012). The agreement also provides an opportunity to expand in to other markets including the Middle East and North Africa, Central and Eastern Europe, Russia and Turkey (“Cheesecake Factory,” 2012).
The Cheesecake factory has opened six new restaurants, four in the US and two internationally in 2012. In the fiscal year 2013 it expects to open as many as eight to ten new restaurants in the US and three new restaurants internationally (“Cheesecake Factory,” 2013).
Cheesecake Factory’s expansion both internationally and domestically has helped to keep it on track with competitions in market expansion, other competition still exist in restaurant industry such as prices and the quality of food.
Competition in Price and Quality of Food and Services
Cheesecake Factory and its competitors such as Brinker International and Darden restaurants compete more on their price and quality and services and not necessarily their expansion, and the revenues and expenses they make. Consumers care more about the price and quality of goods and services because this is what they directly come to receive when they enter a restaurant. Cheesecake Factory’s pricing has been seen to be higher than that of competitors. Its pricing is 3.95 to 31.95 (“Cheesecake Factory,” 2013), while Brinker International pricing is from $6 to $17.69 (“Brinker International,” 2012). Cheesecake Factory’s quality of food on the other hand has received great feedbacks over the years.
This next section would talk about the financial performance of Cheesecake Factory using three financial indicators, operating margin, revenue, and expenses
Increase in Labor, rent and commodity cost as a contributing factor of declining operating margin
Rising labor, rent and commodity costs will depress profits (“Cheesecake factory,” 2013). In recent years the labor cost has been increasing in the US (Alison Doyle, 2013). The labor cost is also expected to increase more in 2012 as the president has called for minimum wage to be increased to $9.00 in 2013 from the $7.25 an hour since 2009. (Alison Doyle, 2013). Cheesecake Factory’s expansion to international markets would also be a major impact on the rent and commodity expansion. Ever increasing labor, rent and commodity cost would affect Cheesecake factory’s operating margin negatively. That is why Cheesecake factory’s expenses have outpaced its revenue over the years.
Cheesecake Factory’s Profit Shrinks as a result of Expenses Outpacing Revenue
Cheesecake Factory Inc.'s fourth-quarter profit shrank 26% as the restaurant operator's same-store sales were weakened by Hurricane Sandy and results were affected by the cost of closing some restaurants (“The Wall Street,” 2013). Revenue was down 2.7% at $464.7 million in 2013 compared to the $477.7 million revenue it made in 2012 (“Cheesecake factory,” 2013). Cheesecake factory’s expenses shrank, but not as much as revenue. The Cheesecake Factory’s expenses went down from $439.5 in 2011 to $436.5 in 2012 (“Cheesecake factory,” 2013). Operating margins narrowed to 6.1% from 8%. The company will be forced to either absorb the impact of higher costs and suffer from lower earnings or pass on its costs to customers by raising prices and risking losing customers. Figure 1.1 shows the difference in revenue and expenses for Cheesecake Factory

Figure 1.1 The Cheesecake Factory Report Results for Fourth Quarter of Fiscal Year. Adapted from The Cheesecake Factory, 2013.
Cheesecake factory is doing very well based on its extensive menu option that offers a wide variety of menu to consumers. Cheesecake factory has expanded both domestically and internationally, which helped increase its scale of operation. Although Cheesecake Factory has had a positive achievement, its financial performance is poor compared to that of its competitors. It is still battling trying to balance its revenue and expenses to achieve a favorable operating margin, therefore Cheesecake Factory would need consulting services.

Reference Page
Cheesecake factory Incorporated SWOT Analysis (2012). Retrieved from Business source complete database http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=bf3a497b-8c20-4cc8-bc44-22d5515f7538%40sessionmgr198&vid=4&hid=120
Cheesecake factory (Cake) (2013). Retrieved from http://www.wikinvest.com/stock/Cheesecake_Factory_(CAKE)
Cheesecake Factory 4th Quarter Net Down 26% on Restaurant Closure Cost (2013). Retrieved from http://online.wsj.com/article/BT-CO-20130220-716492.html
News Release (2013). Retrieved from http://investors.thecheesecakefactory.com/phoenix.zhtml?c=109258&p=irol-newsArticle&ID=1787128&highlight
Brinker International Annual Report. August 27, 2012. Retrieved from http://www.brinker.com/company/Brinker2012/annualreport2012.pdf
Cheesecake factory net income quarterly. December 21, 2013. Retrieved from http://ycharts.com/companies/CAKE/net_income
Allison Doyle. Minimum wage increases for 2013 (20130. Retrieved from http://jobsearch.about.com/b/2013/03/16/minimum-wage-increases-for-2013.htm