The Cheesecake Factory Explores Overseas Growth

More global growth may be in The Cheesecake Factory Inc.’s future, but the company is waiting to see how its first international franchise locations perform after opening in the Middle East later this year.

David Overton, the company’s chair and chief executive, spoke to analysts Wednesday about potential growth after reporting the ninth consecutive quarter of same-store sales increases for its casual-dining brands.

Overton was calling in from Asia, where he was exploring opportunities for the company’s brands, said Douglas Benn, The Cheesecake Factory’s chief financial officer.

Though many U.S.-based restaurant chains have aggressively pushed growth internationally in recent years, The Cheesecake Factory announced its first-ever move overseas just last year. The company signed a franchise agreement with Kuwait-based Alshaya, a large franchise group that operates many brands in about 19 countries.

The franchisee plans to open 22 Cheesecake Factory restaurants in five Middle Eastern countries over the next five years and expects to launch three of them by mid-summer, Benn said. He added that Alshaya would like to expand its reach with The Cheesecake Factory in more territories. “But we’re walking before we run with them,” he said.

The company has been meeting with a number of potential partners in places like Hong Kong, Korea and Japan, where franchisees “would like to bring Cheesecake Factory brands to their part of the world,” Benn said. “We are having those discussions.”

In the U.S., the company is planning to open seven to eight new restaurants this year. One will be a Grand Lux Café, the company’s 13-unit secondary brand, which had put growth on hold since the recession hit.

Looking at first quarter results, Overton said the 1.9-percent increase in traffic was higher than the industry average for casual dining, according to data tracked by the company.

Still, The Cheesecake Factory hasn’t yet reached the peak traffic levels of pre-recession years, when restaurants were recording average unit volumes of about $11 million. Today, average unit volumes are just over $10 million, “and that difference is entirely guest-count related,” said Benn.

The company backed off slightly from projections of food cost increases for 2012. Commodity inflation would likely be up between 2 percent to 2.5 percent for the year, down from earlier estimates of about 3 percent.

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