BJRI BJs Restaurants Inc

The Cheesecake Factory Inc. (CAKE) recently announced its plan to double its domestic cheesecake factory units from the current 150.

CAKE reaffirmed its development target of 6–9 units this year. The timeline for most of the openings will be back-end loaded. During the first quarter, the company opened one new The Cheesecake Factory restaurant in Texas.

Apart from the traditional unit, management is exercising different sized formats depending on the needs of the market. Its smaller-prototype models (4 to date) are generating above $1,000 per square feet, which is well above targeted returns. In addition to the 8,000 square feet design, the company will open a 7,200 square feet restaurant this year in Danbury, Connecticut.

The Cheesecake Factory’s expansion plans go beyond its domestic boundaries. In January the company inked a deal with Kuwait-based Alshaya group of companies to build and operate 22 Cheesecake Factory restaurants over the next five years in five countries, namely United Arab Emirates, Kuwait, Bahrain, Qatar and the Kingdom of Saudi Arabia. The agreement also included growth plans in other markets in the Middle East and North Africa, Central and Eastern Europe, Russia and Turkey. Management sees a fondness for American dining brands in these regions and seeks to capitalize on this in full.

In addition, the company is evaluating other international markets and potential partners. Cheesecake management believes its agreement with foreign partners provides another stream for revenue growth along with its existing domestic operations.

The company is also concentrating on its other two brands, Grand Lux Cafe and RockSugar Pan Asian Kitchen, for future growth. Presently the company has 13 restaurants under the Grand Lux Café mark and one under the RockSugar Pan Asian Kitchen.

Management expects to have one Grand Lux Cafe open by the end of the first quarter next year. However, the company remains skeptical about the expansion of RockSugar as it is a unique brand featuring the flavors of Southeast Asia and generally gets a higher check average compared with Cheesecake Factory. Given the slow economic recovery, management prefers to take a wait-and-see approach for the spread of this brand and remains in search of a site where the concept could be successful.

The company’s close competitors include BJ's Restaurants Inc. (BJRI )  and Krispy Kreme Doughnuts Inc. (KKD). Cheesecake currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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