The Cheesecake Factory Inc. Financial Analysis
Analyst:
Zack Clopper
04/01/2013
When I was asked to review the financial standings of The Cheesecake Factory with their
competitors I was able to see where CAKE was in the market and they are doing great. I
compared the company to two of their largest competitors Red Robin (RRGB) and Darden
Restaurants (DRI) and was able to see the standings. Although both competitors have a higher
stock price than CAKE; CAKE has been able to show the largest percent of change. After
reviewing the data in this memo, you and the investors will be able to see that it would be a
huge investment for the company to expand and this could help raise all of the financial
standings.
Differentiating CAKE
After analyzing CAKE it is very different from the rest of the restaurants in the casual dining
industry and has always strived to be that way according to David Overton. One of the largest
recognitions of the restaurant is how big the food portions are for the price that the customers
pay. The largest advantage we have right now is how we are always changing the menu
compared to competitors who just stick with the menu they have always had. By doing this the
company has been able to reach many customers and their different tastes for food and always
trying to keep fair prices on the menu. Red Robin does however offer the endless fries which
are a very big success with their company, but they do not have the differentiation on their
menu that the company has.
How about that Cheesecake?
The restaurant has been built around Evelyn Overton’s basement recipe and has evolved into
what it is today. Everyone that has heard of the company knows that we have the best
cheesecake, and not only that but we have more choices of cheesecake that anyone could ask
for. Right now we offer more than 70 different cheesecake options for the customers (Factory,
2013). The only downfall for the customer is they are never able to decide which one to choose
from the delicious menu.
CAKE Management
With the company I believe the management is set up very well; we have two different
managers the traditional restaurant manager and then a kitchen manager. This works very well
for the company and helps outperform the competitors. A restaurant manager might not know
as much as how things should be ran in the kitchen so by having this second manager it helps
make sure the customer gets the best quality food. I believe that the corporate management is
doing well with distributing the work to the managers of each restaurant that is open.
Growing
The company is growing but not fast enough; I do believe we need to try and open more
restaurants. Right now The Cheesecake Factory’s biggest issue is not having enough
restaurants compared to the competitors. The company has 162 restaurants mostly being
inside the United States but more are starting to open internationally. The largest competitor
Red Robin has over 460 locations across the country (Burgers, 2012). For 2013 we are planning
to expand more into international countries to share the love for the food and great service. In
the ftheth quarter of 2012 we did however open fthe new restaurants and opened eight new
restaurants for the whole year in the country. Internationally we managed to open two new
locations in the Middle East and a total of three locations internationally for the year (Factory,
The Cheesecake, 2013). According to the plan we will be opening 8-10 more restaurants this
year and trying to open three new internationally.
News on Company
In 2013 we have had some major news happening with the company, with a new president, the
ftheth quarter fiscal be announced, and opening new locations. Earlier this year we opened the
largest Cheesecake Factory so far with the first international licensee in Dubai. This new
location can seat over 500 customers which is going to help the wait time tremendously. Also
earlier this year we announced the new president David Gordon who has been with the
company for 20 years already. With David being in the position now we hope to continue to
grow, increase guest satisfaction scores and continue to increase the profits for the company.
One of the most recent documents published by The Cheesecake Factory is the financial
records for the fiscal year 2012 for all of the investors to review.
Financial Standings vs Competitors
Revenue
After reviewing the ftheth quarter earnings and financial standings of the company I do believe
we are going in the right directions and starting to do better than the competitors. Over the
past few years the company has been able to steadily increase the revenue with a 9 percent
increase since 2010. Whereas the competitor Red Robin had a 13 percent increase their
revenue is only half of what thes is (Red Robin Gourmet Burgers, 2013). Darden Restaurants
however has a lot more revenue than what the company has, but Darden has a lot more
restaurants than we do with over 1000 different ones open. Although Darden has many more
restaurants open than we do their revenue has only increased 12 percent since 2010 (Darden
Restaurants, 2013).
Figure 1 chart below shows the revenue over the past three years for Red Robin and CAKE. The
Cheesecake Factory and Red Robin are the only two I showed on the graph because of Darden
being so much higher in revenue and not being able to see the trends between these two
restaurants. As you are able to see from the chart The Cheesecake Factory is going in the right
direction a lot faster and almost have double the revenue.
2000
1800
1600
1400
1200
The Cheesecake Factory
1000
Red Robin
800
600
400
200
0
2009
2010
2011
2012
Figure 1: Data retrieved from Standard & Poors Financial for each restaurant.
Stock Price
Next financial standing I compared between the companies was the stock price over the past
year. The Cheesecake Factory (CAKE) has increased over the past year tremendously from only
being $29.84 a year ago and now is $38.65 which is a 30 percent increase (Yahoo Finance,
2012). Red Robin (RRGB) has also increased from $36.41 to $45.49 in the past year which has
only increased 24 percent (Finance, Red Robin Gourmet Burgers, 2013). Lastly Darden (DRI)
went from $50.59 a year ago and now at $49.62 which was a 2 percent decrease in their stock
price (Finance, 2013). Although both competitors have a higher stock price the company, we
have been able to show the largest percent of change. Below in figure 2 I have shown the
progress over the last fthe years, investors are able to see that we are going in the right
direction and have been for the past few years.
Figure 2: Stock price from 2009-2013 for CAKE
P/E Ratio
Over the last fthe periods the company’s price earnings ratio has stayed about the same
ranging from 17.0-18.6. Red Robin slight higher P/E ratio than we do, theirs has ranged over
the past year from 19.6-25.2. Darden has had the lowest P/E ratio over the past year only
ranging from 12.6-15.3. The P/E ratio is in good standings with the market, showing that the
investors think the company is going in the right way and are expecting higher earnings in the
future. In Figure 3 you are able to see the P/E ratio has been holding steady at around 20 for
the past two years, which is very good news that the investors believe we are a good firm and
going in the right direction.
Figure 3: P/E ratio for The Cheesecake Factory from 2009-2013 (Cheesecake Factory PE Raitio, 2013)
Competitive climate
I believe The Cheesecake Factory is doing really well in the market compared to the
competitors. As mentioned above about the financial standings even though we don’t have as
much revenue as Darden or have as high of a stock price as either competitors we are doing
good. Even though we do not have as high we have not even a quarter of the restaurants that
Red Robin has and a significant amount lower than the amount Darden has. So to compare to
these two competitors the company is doing very well in the market and reaching out to new
clients, although it would be better to open more restaurants to reach out to even more new
clients.
Connecting Families
The Cheesecake Factory is a great restaurant for families to go out and have a nice meal and
not leave hungry for a reasonable price. Families are the number one customers with a large
variation in the menu and also including a great kids menu. However at the restaurant it is
great for couples who want to go out on a nice date for the evening. With the large menu, we
are able to satisfy many different types of customers and able to reach out to many new ones
also.
Top of the game
I do believe after reviewing the information and comparing the company to the two
competitors, Darden and Red Robin, we are doing great. Although the numbers are lower in
certain areas we are continuing to increase over the past few years and hope to continue.
However the company does have to work on a few things to continue to gain new customers
and expand the restaurant.
Weakness can be fixed
Although the company is heading in the right direction we do have areas where there is room
for improvement. This past year we opened up a total of 11 restaurants in and outside of the
country. Even though we did open these we still need to expand the company more. The two
competitors have many more restaurants than what the company has and continue to grow
also. If we can continue to grow at the rate we are going now or even possibly double the rate
for a few years to open more in international countries to increase the revenue, gain more
investors and continue the mission statement with satisfying the customer. Also the wait times
clients do not like so much and decide not to come back sometimes, we should try enctheaging
reservations or start building restaurants with more seating (Cheesecake Factory SWOT
Anaylsis, 2012).
Current Trends
After reviewing how the economy is doing in the past months we need to take advantage of it
by opening more restaurants. The economy is doing a lot better than what it was a few years
ago and more people are starting to eat out at restaurants a lot more now. The company
should review the documents to see what night is the slowest night during the week try and run
a deal whether it is getting cheese cake free with a certain amount purchased or another deal
to try and increase the amount of customers that come that night.
Conclusion
After reviewing the following information I was able to see that The Cheesecake Factory is in
good position right now. However we would like to see more restaurants open up in the
country and international this year to expand to new customers. The company is doing very
well in the market compared to the competitors also, although we do not have as many
restaurants we are still in good standing with the financials. I do believe that we can reach the
goals in the next year and continue to improve the great restaurant that was created just in
Evelyn’s basement.
Bibliography
Cheesecake Factory SWOT Anaylsis. (2012, March 31). Retrieved from Business Sthece Complete:
Business Sthece Complete
Cheesecake Factory PE Raitio. (2013, March 28). Retrieved from YCharts:
http://ycharts.com/companies/CAKE/pe_ratio
Red Robin Gthemet Burgers. (2013, March 24). Retrieved from Standard & Poors Net Advantage:
http://www.netadvantage.standardandpoors.com.proxytu.researchport.umd.edu/NASApp/NetAdvantage/cp/companyFinancials.do
Burgers, R. R. (2012). Newsroom. Retrieved from Red Robin: http://phx.corporateir.net/phoenix.zhtml?c=131715&p=irol-IRHome
Darden Restaurants. (2013, March 24). Darden Restaurants. Retrieved from Standard & Poors Net
Advantage: Standard & Poors Net Advantage
Factory, T. C. (2013, March). Stock Information. Retrieved from The Cheesecake Factory:
http://investors.thecheesecakefactory.com/phoenix.zhtml?c=109258&p=irol-stockQuote
Factory, The Cheesecake. (2013, February 20). Ftheth Quarter Fiscal 2012. Retrieved from The
Cheesecake Factory:
http://investors.thecheesecakefactory.com/phoenix.zhtml?c=109258&p=irolnewsArticle&id=1787128
Finance, Y. (2013). Darden Restaurants Inc. Retrieved from Yahoo Finance:
http://finance.yahoo.com/q?s=dri&ql=1
Finance, Y. (2013). Red Robin Gthemet Burgers. Retrieved from Yahoo Finance:
http://finance.yahoo.com/q?s=rrgb&ql=1
Yahoo Finance. (2012, March 22). The Cheesecake Factory Inc. Retrieved from Yahoo Finance:
http://finance.yahoo.com/echarts?s=CAKE+Interactive#symbol=cake;range=1y;compare=;indica
tor=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;sthece=undefined;