By raising menu prices and squeezing supplier costs, The Cheesecake Factory is confident it can leverage its market position to offset climbing raw material costs and maintain year-on-year revenue growth rates of 22%. To continue its success though, the chain must position itself carefully in the marketplace.
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The ever-popular Cheesecake Factory has announced a plan to offset rises in its fresh fish and meat costs by squeezing both suppliers and customers. Fortunately, the restaurant chain benefits from long waiting times and a dedicated consumer base, and, in the short term at least, it can afford to manage costs this way.
Indeed, according to Michael Dixon, vice president of finance, about two-thirds of the company’s commodities have already been contracted for, meaning the company will be in a strong position going into talks with other suppliers for next year.
In addition, the company has strong expansion plans: there were three new restaurant openings in Q3 and a further five are planned for Q4, including a 14,500 square foot restaurant in Honolulu, Hawaii. The company expects to open as many as 14 Cheesecake Factory and two Grand Lux Cafe locations in 2004, including three in the first quarter. At the end of September 2003, the company operated 68 upscale, casual dining restaurants under The Cheesecake Factory name. It currently operates three upscale casual dining restaurants branded ‘Grand Lux Cafe’ in Los Angeles, Chicago and Las Vegas.
Such growth is well planned in terms of the trends in US consumers’ eating out. The US foodservice industry has seen the number of meals served grow from 22.7 billion to 25.7 billion between 1997 and 2002. Such figures highlight the shift from meals eaten at home towards meals eaten out. However, with an already mid- to high-tier average cheque of $15.78, The Cheesecake Factory must take care not to price itself out of the market. The foodservice areas seeing the most growth are more likely to be the mid- to low-tier restaurants.
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