The Cheesecake Factory Annual Report 2019

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FY2019 Annual Report · The Cheesecake Factory

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26901 Malibu Hills Road
Calabasas Hills, CA 91301
www.thecheesecakefactory.com

FINANCIAL HIGHLIGHTS

Revenues (in millions)

Adjusted diluted net income per share (3)

$2,483
2019

$2,332
2018

$2,261
2017

$2,276
2016

$2,101
2015

$2.61
2019

$2.51
2018

$2.60
2017

$2.83
2016

$2.37
2015

Comparable restaurant sales (1)

Cash flow from operations (in millions)

0.8%
2019

1.7%
2018

(0.8)%
2017

1.2%
2016

2.6%
2015

$219
2019

$291
2018

$239
2017

$316
2016

$248
2015

Adjusted operating income margin (2)

Restaurants open at fiscal year-end (4)

5.2%
2019

5.9%
2018

7.3%
2017

8.8%
2016

8.2%
2015

292
2019

217
2018

214
2017

208
2016

200
2015

Note: The Company completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts on October 2, 2019.

The Company’s consolidated financial statements include the results of the acquired businesses as of the date of acquisition.

(1) The Cheesecake Factory restaurants.

(2)

Operating income margin in fiscal 2019, 2018, 2017, 2016 and 2015 excludes $24,550, $17,861, $10,343, $114 and $6,011, respectively (in thousands),

related to a number of items that we do not consider indicative of our ongoing operations. Please refer to the section entitled “Non-GAAP

Measures” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Form 10-K in this

Annual Report and the 2016 Annual Report.

(3)

Diluted net income per share in fiscal 2019, 2018, 2017 and 2015 excludes ($0.25), $0.37, ($0.67) and $0.07, respectively, related to a number of

items that we do not consider indicative of our ongoing operations. Impairment charge recorded in fiscal 2016 did not impact diluted net income

per share. Please refer to the section entitled “Non-GAAP Measures” included in Item 7, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations,” of the Form 10-K in this Annual Report and the 2016 Annual Report.

(4)

Reflects all company-owned concepts.

DIRECTORS AND OFFICERS

Board of Directors

David Overton
Chairman of the Board and
Chief Executive Officer
The Cheesecake Factory
Incorporated

Edie A. Ames
President
Tastes on the Fly

Alexander L. Cappello
Chairman and
Chief Executive Officer
Cappello Global, LLC

Jerome I. Kransdorf
President Emeritus
JaK Direct

Janice L. Meyer
Co-Founder and
Managing Partner
Rellevant Partners

Laurence B. Mindel
Managing Partner
Poggio Trattoria

David B. Pittaway
Senior Managing Director,
Senior Vice President and Secretary
Castle Harlan, Inc.

Herbert Simon
Chairman Emeritus
Simon Property Group, Inc.

Executive Officers

David Overton
Chairman of the Board and
Chief Executive Officer

David M. Gordon
President

Matthew E. Clark
Executive Vice President and
Chief Financial Officer

Scarlett May
Executive Vice President,
General Counsel and Secretary

Keith T. Carango
President –
Bakery Division

Operating and Staff Officers

Donald C. Moore
Executive Vice President and
Chief Culinary Officer

Spero G. Alex
Senior Vice President –
Operations, The Cheesecake
Factory Restaurants

Dina R. Barmasse-Gray
Senior Vice President –
Human Resources

Donald C. Evans
Senior Vice President and
Chief Marketing Officer

Stan D. Harvey
Senior Vice President –
Purchasing

Marina Lubinsky
Senior Vice President and
Chief Information Officer

Brian MacKellar
Senior Vice President –
Development

Lisa A. McDowell
Senior Vice President –
Global Development

Hari Nagabhirava
Senior Vice President –
Supply Chain

Anthony R. Gressak, Jr.
Vice President –
Bakery Distributor Sales

Ashley W. Hanscom
Vice President –
Assistant Controller

Laurie A. Lambert-Gaffney
Vice President –
Staff Relations

Kurt E. Leisure
Vice President –
Risk Services

Etienne Marcus
Vice President –
Strategy and Finance

Cheryl M. Slomann
Senior Vice President –
Finance and Corporate Controller

Philip Mardirossian
Vice President –
Bakery Marketing

Charles G. Wensing
Senior Vice President –
Operations Services, Performance
Development and New Restaurant
Operations

Jack K. Belk
Senior Regional Vice President –
Restaurant Operations

Kix McGinnis Nystrom
Vice President –
Kitchen Operations

Robert Okura
Vice President –
Culinary Development and
Corporate Executive Chef

Jeffrey Nemet
Regional Vice President –
Restaurant Operations

Joseph T. Phillips
Regional Vice President –
Restaurant Operations

Steve M. Polce
Regional Vice President –
Restaurant Operations

Atallah A. Baroudi, Ph.D.
Vice President –
Food Safety and
Quality Assurance

Heather M. Berry
Vice President –
Beverage and Bakery
Operations

Megan L. Bloomer
Vice President –
Sustainability

Linda J. Candioty
Vice President –
Guest Experience

Mervin Deguzman
Vice President –
Corporate Systems

Stacy J. Feit
Vice President –
Investor Relations

Richard J. Frings
Vice President –
Compensation and Benefits

Sidney M. Greathouse
Vice President and
Senior Counsel – Legal Services

Alan B. Phillips
Vice President –
Internal Audit

Chris M. Radovan
Vice President –
Bakery Research and
Development

J. Suzanne Reed
Vice President –
Bakery Sales and Marketing

John Scott
Vice President –
Bakery Food Safety and
Quality Assurance

Joel E. Shafer
Vice President and
Senior Counsel –
Contracts

Jeff Stepler
Vice President –
Talent Selection and
Organizational Engagement

Robert L. Surbeck
Vice President –
Restaurant Systems and
International Information
Technology

Roman L. Wasylyn
Vice President –
Tax

Robert T. West
Vice President –
Information Technology

Lori R. Williams
Vice President –
Bakery Controller

SHAREHOLDER
INFORMATION

Independent Accountants

KPMG LLP
Los Angeles, California

Transfer Agent, Registrar and
Dividend Payments

Computershare Shareholder Services
P.O. Box 30170
College Station, TX 77845
(800) 962-4284

Inquiries

Communications regarding lost certificates,
and name and address changes should be
directed to our Transfer Agent. Other investor
inquiries should be directed to:

Stacy J. Feit
Vice President, Investor Relations
The Cheesecake Factory Incorporated
26901 Malibu Hills Road
Calabasas Hills, CA 91301
(818) 871-3000

Common Stock Trading

Our stock began trading on The NASDAQ Stock
Market on September 18, 1992 under the
symbol CAKE at the initial public offering price
of $2.63 (adjusted for five three-for-two stock
splits in March 1994, April 1998, June 2000,
June 2001 and December 2004). We completed
follow-on public offerings of common stock in
January 1994 and November 1997. The market
price of our common stock has not closed below
$2.63 and has closed as high as $67.14 through
December 31, 2019, our last fiscal year-end.

Website

To learn more about our Company,
please visit
www.thecheesecakefactory.com
www.northitalia.com
www.foxrc.com

To learn about our sustainability initiatives,
please visit
www.thecheesecakefactory.com/corporate-
social-responsibility/sustainability

Best Companies to Work For is a trademark of Fortune Media IP

Limited and is used under license. FORTUNE and Fortune Media

IP Limited are not affiliated with, and do not endorse products or

services of, Licensee.

The Cheesecake Factory
Lasagna Verde

TO OUR SHAREHOLDERS

A s we closed out this decade, 2019 marked a

period of evolution for The Cheesecake Factory
Incorporated, laying the foundation for accelerated

and diversified future growth. We completed the
acquisitions of North Italia and Fox Restaurant Concepts
(FRC), reinforcing our position as a leader in experiential
dining. It is this segment of the restaurant industry
where we have excelled since our founding, and where
we believe opportunities lie ahead for our company.

Our combined 46,000 staff members now operate
nearly 300 restaurants. Delivering delicious, memorable
experiences to our guests is at the heart of our mission.
We are so pleased to have added concepts with an
aligned culture and philosophy.

Our future success will continue to depend on execution
and growth at The Cheesecake Factory restaurants. We
continue to believe the brand has strong growth ahead,
with potential for 300 locations in the United States, as
well as additional opportunities in Canada. In fact, our
second Canadian location is expected to open this year.
At the same time, our international licensee partners
continue to see meaningful global growth opportunities
for the brand as well.

With the acquisitions, we will be applying our capabilities
to scale North Italia and support the FRC incubation engine
to develop concepts of the future. Following our initial
investment in two of FRC’s concepts, North Italia and
Flower Child, we forged a strong relationship with Sam Fox
at FRC. We believe the depth of this relationship gives us
an advantage in integrating our businesses and our plans to
scale. We see potential for 200 domestic locations for North
Italia over time, and believe other FRC concepts, including
Flower Child, show signs of promise of becoming national
brands, which we will carefully evaluate going forward.

Together as one entity, we believe our concepts can
drive significant growth and value. We expect to be even
better positioned to provide our guests with exceptional
dining experiences and maximize long-term value for
our shareholders.

In 2019, we served over 100 million guests and continued
to gratify our fans with restaurant openings in new and
existing markets, both domestically and abroad. We opened
five new Cheesecake Factory restaurants in Southern

T H E C H E E S E C A K E F A C T O R Y I N C O R P O R A T E D

The Cheesecake Factory
Tuna Poke

The Cheesecake Factory
Oxnard, CA

The Cheesecake Factory
Gainesville, FL

California, Florida and Michigan, while our international
licensee partners opened six locations in Mexico, Abu
Dhabi, Saudi Arabia, as well as our first restaurant in Macau.

From a financial perspective, comparable restaurant sales
growth at The Cheesecake Factory continued to outperform
the casual dining industry. Our steadfast focus on continuous
improvement and operational excellence stabilized our
restaurant-level margins, despite the challenging labor
environment, contributing to our adjusted earnings per
share growth performance within the core business.

Our restaurants continued to generate substantial free
cash flow. In addition to the long-term growth investments
we made in 2019, we again increased the dividend, which
now stands at triple its initial size. Coupled with our share
repurchases, we returned $112 million to our shareholders.

Our meticulously designed, high-energy restaurants and
warm hospitality complement our unique, made fresh from
scratch menu items, to deliver memorable experiences for
our guests every day. We are proud to have been recognized
for these efforts as the top restaurant brand for both food
quality and ambiance in the 2019 Nation’s Restaurant News
Consumer Picks survey. These distinctions underscore the
strong affinity for The Cheesecake Factory and that the
concept resonates with today’s guest.

The Cheesecake Factory experience also translates
well to off-premise occasions, as we continued to
grow this business at a healthy rate. Our high-quality
menu items, portion sizes, dessert offerings and
recently redesigned to-go packaging give us an edge
against competitors. In 2019, off-premise grew to 16% of
total sales, led by our digital offerings. We renegotiated
and extended our delivery agreement with our third-
party provider, which further improved our economics, and
we also continued to drive growth in online to-go ordering.

2 0 1 9 A N N U A L R E P O R T

North Italia
Charlotte, NC

Flower Child
McLean, VA

North Italia
Austin, TX

To continue to build on our sales-driving capabilities,
we took another step forward with our marketing
during 2019. We are utilizing additional digital marketing
channels, including year-round paid search and social
advertising, influencer marketing and collaborations to
more frequently remind guests about The Cheesecake
Factory to attain top-of-mind status. We also tested our
first Cheesecake Factory television commercial in select
markets, using a brand-building campaign to determine if
this could be a viable channel to increase awareness and
ultimately drive sales. Finally, leveraging our differentiated
dessert offering in collaborative campaigns with our
delivery provider continues to be an effective strategy
given the power of The Cheesecake Factory brand, in
spite of a more competitive delivery landscape.

As strong as The Cheesecake Factory brand is with our
guests, we also continue to distinguish ourselves as a
best-in-class workplace. For the seventh consecutive
year, The Cheesecake Factory was named to FORTUNE
magazine’s 100 Best Companies to Work For® list.
Additionally, we were also honored to be recognized
among FORTUNE’s Best Workplaces for Women, Best
Workplaces for Diversity and Best Workplaces for
Millennials. This is a testament to our strong culture,
industry-leading training and tangible career advancement
we provide for our staff members and managers. As we
have always said, our people are our greatest resource.
Continuing to attract and retain the best talent in the
industry will be crucial to our future success.

Looking ahead, we expect the acquisitions, coupled with
the strength and potential of The Cheesecake Factory
brand, to enable meaningfully accelerated long-term
annual unit growth of 7%. We believe this will be one
of the highest unit growth rates in the casual dining
industry, while providing diversification with respect to
restaurant segment, price point, real estate and labor model.

T H E C H E E S E C A K E F A C T O R Y I N C O R P O R A T E D

The Cheesecake Factory
Coral Gables, FL

The Cheesecake Factory
Riyadh, Saudi Arabia

Our decisions continue to prioritize the long-term. With
diversified concepts, meaningful unit growth drivers,
significant scale, robust cash flow and a strong balance
sheet, we believe we are positioned to drive long-term
profitable growth in today’s restaurant industry.

The Cheesecake Factory Incorporated is a leader in
experiential dining. We are culinary forward and relentlessly
focused on hospitality. Delicious, memorable experiences
created by passionate people – this defines who we are
and where we are going.

As we close out this decade, I extend my sincere gratitude
to our management team and staff members for their
hard work and dedication each and every day. And to our
community of shareholders, restaurant guests, bakery
customers, suppliers and international licensees, thank
you for your continued support and spirit of partnership.
We look forward to accomplishing our goals together in
the new decade.

Best Regards,

David Overton
Founder, Chairman and
Chief Executive Officer

2 0 1 9 A N N U A L R E P O R T

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission File Number 0-20574
THE CHEESECAKE FACTORY INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization)

26901 Malibu Hills Road
Calabasas Hills, California
(Address of principal executive offices)

51-0340466
(I.R.S. Employer
Identification No.)

91301
(Zip Code)

Registrant’s telephone number, including area code: (818) 871-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $.01 per share

Trading Symbol
CAKE

Name of each exchange on which registered
The Nasdaq Stock Market LLC (NASDAQ Global
Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller
reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Non-accelerated filer ☐

Accelerated filer ☐

Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the second fiscal
quarter, July 2, 2019, was $1,787,355,740 (based on the last reported sales on The Nasdaq Stock Market on that date).
As of February 21, 2020, 44,961,694 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.

Part III of this Form 10-K incorporates by reference information from the registrant’s proxy statement for the annual meeting of
stockholders expected to be held on May 28, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

THE CHEESECAKE FACTORY INCORPORATED
INDEX

PART I

Item 1.
Business ..................................................................................................................................................................
Item 1A. Risk Factors ............................................................................................................................................................
Item 1B. Unresolved Staff Comments ...................................................................................................................................
Item 2.
Properties ................................................................................................................................................................
Legal Proceedings ...................................................................................................................................................
Item 3.
Item 4. Mine Safety Disclosures .........................................................................................................................................

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities .................................................................................................................................................................
Item 6.
Selected Financial Data ...........................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................................
Financial Statements and Supplementary Data .......................................................................................................
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..................................
Item 9A. Controls and Procedures .........................................................................................................................................
Item 9B. Other Information ...................................................................................................................................................

PART III

Item 10. Directors, Executive Officers and Corporate Governance ......................................................................................
Item 11. Executive Compensation .........................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ................
Item 13. Certain Relationships and Related Transactions, and Director Independence ........................................................
Item 14. Principal Accounting Fees and Services .................................................................................................................

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PART IV

Item 15. Exhibits, Financial Statement Schedules ................................................................................................................
Item 16. Form 10-K Summary ..............................................................................................................................................

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Forward-Looking Statements

PART I

Certain information included in this Form 10-K and other materials filed or to be filed by us with the Securities
and Exchange Commission (“SEC”), as well as information included in oral or written statements made by us or on our
behalf, may contain forward-looking statements about our current and presently expected performance trends, growth
plans, business goals and other matters.

These statements may be contained in our filings with the SEC, in our press releases, in other written
communications, and in oral statements made by or with the approval of one of our authorized officers. These statements
are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified
in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (together with the Securities Act, the “Acts”). This includes, without limitation,
financial guidance and projections and statements with respect to the acquisition of North Italia and Fox Restaurant
Concepts LLC ("FRC") and expectations regarding accelerated and diversified revenue growth as a result of the
acquisition of North Italia and FRC, as well as expectations of our future financial condition, results of operations, cash
flows, plans, targets, goals, objectives, performance, growth potential, competitive position and business; and our ability
to: leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The
Cheesecake Factory® brand to other retail opportunities; deliver comparable sales growth; provide a differentiated
experience to customers; outperform the casual dining industry and increase our market share; leverage sales increases
and manage flow through; manage cost pressures, including increasing wage rates, insurance costs and legal expenses,
and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other
staff; manage risks associated with the magnitude and complexity of regulations in the jurisdictions where our
restaurants are located; increase shareholder value; find suitable sites and manage increasing construction costs;
profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept
internationally; support the growth of North Italia and other FRC restaurants; operate Social Monk Asian Kitchen; and
utilize our capital effectively and continue to increase cash dividends and repurchase our shares. These forward-looking
statements may be affected by factors outside of our control including: the ability to achieve projected financial results;
economic and political conditions that impact consumer confidence and spending; impact of recently enacted tax reform;
acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and
the FRC concepts, Social Monk Asian Kitchen and other concepts; the risks of doing business abroad through Company-
owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment
rates; changes in laws impacting our business, including increases in minimum wages and benefit costs; the economic
health of our landlords and other tenants in retail centers in which our restaurants are located; the economic health of
suppliers, licensees, vendors and other third parties providing goods or services to us; adverse weather conditions in
regions in which our restaurants are located; factors that are under the control of government agencies, landlords and
other third parties; the risk, costs and uncertainties associated with opening new restaurants; and other risks and
uncertainties detailed from time to time in our filings with the SEC. Such forward-looking statements include all other
statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or
phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,”
“project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on our current
expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such
statements.

In connection with the “safe harbor” provisions of the Acts, we have identified and are disclosing important
factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-
looking statements made by us, or on our behalf. (See Item 1A — Risk Factors.) These cautionary statements are to be
used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in
these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which
may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our
subsequent filings with the SEC. Because of these factors, risks and uncertainties, we caution against placing undue
reliance on forward-looking statements. Although we believe that the assumptions underlying forward-looking
statements are currently reasonable, any of the assumptions could be incorrect or incomplete, and there can be no
assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the
date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking
statements or to make any other forward-looking statements, whether as a result of new information, future events or
otherwise, unless required to do so by law.

ITEM 1.

BUSINESS

General

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and

relentlessly focused on hospitality. We currently own and operate 294 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory®, North Italia® and a collection within the Fox Restaurant
Concepts ("FRC") subsidiary. Internationally, 26 The Cheesecake Factory® restaurants operate under licensing
agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for
our restaurants, international licensees and third-party bakery customers.

Our business originated in 1972 when Oscar and Evelyn Overton founded a small bakery in the Los Angeles
area. In 1978, their son, David Overton, our Chairman of the Board and Chief Executive Officer, led the creation and
opening of the first The Cheesecake Factory restaurant in Beverly Hills, California. In 1992, the Company was
incorporated in Delaware as The Cheesecake Factory Incorporated (referred to herein as the “Company” or as “we,”
“us” and “our”) to consolidate the restaurant and bakery businesses of its predecessors operating under The Cheesecake
Factory® mark. Our executive offices are located at 26901 Malibu Hills Road, Calabasas Hills, California 91301, and our
telephone number is (818) 871-3000.

We maintain a general website at www.thecheesecakefactory.com, as well as websites for our bakery and other

subsidiaries, including www.northitalia.com and www.foxrc.com. Our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, all amendments to those reports and our proxy statements are available on
our general website at no charge, as soon as reasonably practicable after these materials are filed with or furnished to the
SEC. Our filings are also available on the SEC’s website at www.sec.gov. The content of our website is not incorporated
by reference into this Form 10-K.

On October 2, 2019, we completed the acquistion of North Italia and the remaining business of Fox Restaurant
Concepts LLC ("FRC"), including Flower Child and all other FRC brands (the "Acquisition"). The results of operations,
financial position and cash flows of the acquired businesses are included in our consolidated financial statements as of
the acquisition date.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting
purposes. Fiscal years 2019, 2018 and 2017 each consisted of 52 weeks and fiscal year 2020 will also consist of 52
weeks.

The Cheesecake Factory

The Cheesecake Factory restaurants strive to provide a distinctive, high-quality dining experience at moderate
prices by offering an extensive, innovative and evolving menu in an upscale casual, high-energy setting with attentive,
efficient and friendly service. As a result, The Cheesecake Factory restaurants appeal to a diverse customer base across a
broad demographic range. Our extensive menu and strategic selection of locations enable us to compete for substantially
all dining preferences and occasions, from the key lunch and dinner day parts to the mid-afternoon and late-night day
parts, which are traditionally weaker times for most casual dining restaurants, as well as special occasion dining. The
Cheesecake Factory restaurants are generally open seven days a week for lunch and dinner, and we offer additional
menu items for weekend brunch. Most of our locations are closed on Thanksgiving and Christmas. All items on our
menu, except alcoholic beverages, are available for off-premise consumption, which represented approximately 16% of
our restaurant sales for fiscal year 2019. We work with a third party to provide delivery service, which is now available
at nearly all of our restaurants. In addition, we offer online ordering for to-go sales at all of our domestic locations. All of
our restaurants offer a full-service bar where our entire menu is served. Alcoholic beverage sales represented 12% of The
Cheesecake Factory restaurant sales for fiscal year 2019.

The Cheesecake Factory menu features approximately 250 items, including items presented on supplemental
menus, such as our SkinnyLicious® menu that offers innovative items at 590 calories or less. Our core menu offerings
include appetizers, pizza, seafood, steaks, chicken, burgers, small plates, pastas, salads, sandwiches and omelettes,
including “Super” food choices and a selection of gluten-free items. Examples of menu offerings include Chicken

Madeira, Cajun Jambalaya Pasta, Thai Lettuce Wraps, Avocado Eggrolls, California Guacamole Salad and our Bacon-
Bacon Cheeseburger.

Our ability to create, promote and attractively display our unique line of desserts is also important to the

competitive positioning and financial success of our restaurants. We offer approximately 45 varieties of proprietary
cheesecake and other desserts in our restaurants. Our brand identity and reputation for offering premium desserts results
in a significant level of dessert sales, representing approximately 16% of The Cheesecake Factory restaurant sales for
fiscal year 2019.

Competitive Positioning

The restaurant industry is comprised of multiple segments, including fine dining, casual dining, fast casual and
quick-service. The Cheesecake Factory restaurants operate in the upscale casual dining segment, which is differentiated
by freshly prepared and innovative food, flavorful recipes with creative presentations, unique restaurant layouts, eye-
catching design elements and more personalized service. Upscale casual dining is positioned above core casual dining,
with standards that are closer to fine dining. We believe that we are a leader in upscale casual dining given the
historically high average sales per square foot of our restaurants as compared to others in this segment.

The restaurant industry is highly competitive with respect to menu and food quality, service, access to qualified

operations personnel, location, decor and value. We compete directly and indirectly for customer traffic with national
and regional casual dining restaurant chains, as well as independently-owned restaurants. In addition, we face
competition for customer traffic from fast casual and quick-service restaurants, home delivery services, mobile food
service, grocery stores and meal kits that are increasing the quality and variety of their food products in response to
customer demand. This increased competition, coupled with an oversupply of restaurants, has driven declines in casual
dining industry comparable traffic in recent years. This backdrop has made it even more challenging to improve
customer traffic. We also compete with other restaurants and retail establishments for quality sites and qualified staff and
managers to operate our restaurants. (See Item 1A — Risk Factors — “Our inability to grow comparable restaurant sales
could materially adversely affect our financial performance.”)

The key elements that drive our total customer experience and help position us from a competitive standpoint

include the following:

Extensive and Innovative Menu, Made Fresh from Scratch. Our restaurants offer one of the broadest menus in

casual dining and feature a wide array of flavors with portions designed for sharing. In contrast to many restaurant
chains, substantially all of our menu items, except those desserts produced at our bakery facilities, are prepared from
scratch daily at our restaurants with high-quality, fresh ingredients using innovative and proprietary recipes. One of our
competitive strengths is our ability to anticipate customer preferences and adapt our expansive menu to the latest trends.
We regularly update our ingredients and cooking methods, as well as create new menu items and new categories of food
offerings at our restaurants, such as our SkinnyLicious® menu, “Super” food selections and gluten-free choices, further
enhancing the variety, quality and price points offered and keep our menu relevant to our customers. All new menu items
are selected based on anticipated sales popularity and profitability. We also regularly introduce new and innovative
cheesecakes and other baked desserts. In 2019, we launched the Pineapple Upside-Down Cheesecake in conjunction
with National Cheesecake Day.

We generally update The Cheesecake Factory menus twice each year and our philosophy is to use price
increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer
traffic levels. We plan to continue targeting menu price increases of approximately 2% to 3% annually, utilizing a
market-based strategy to help mitigate cost pressure in higher-wage geographies, and expect near-term increases to be at
the higher end of this range.

Value Proposition. We believe our restaurants are recognized by customers for offering value with a large

variety of freshly prepared menu items across a broad array of price points and generous portions at moderate prices.
The average check for each customer, including beverages and desserts, was approximately $23.50, $22.60 and $21.85
for fiscal 2019, 2018 and 2017, respectively.

Commitment to Excellent Service and Hospitality through the Selection, Training and Retention of High-

quality Staff Members. Our mission is to “create an environment where absolute guest satisfaction is our highest
priority.” We strive to consistently exceed the expectations of our customers in all aspects of their experiences in our
restaurants. One of the most important aspects of delivering a consistent and dependable level of service is having a team
of experienced managers who can successfully operate our high-volume, complex restaurants. Our recruitment,
selection, training, retention and internal promotion programs are among the most comprehensive in the restaurant
industry, helping us to attract and retain qualified staff members who are motivated to consistently provide excellence in
restauranteuring and customer hospitality. By providing extensive training, our goal is to encourage our staff members to
develop a sense of personal commitment to our core values and culture of excellence. (See “Restaurant Operations,
Management and Staffing” below.) Our commitment to people-focused programs and creating a great workplace for all
of our staff and managers contributed to The Cheesecake Factory being named to Fortune magazine’s list of “100 Best
Companies to Work For®” in February 2020, for the seventh year in a row.

High-quality, High-Profile Restaurant Locations and Flexible Site Layouts. We target restaurant sites in high-

quality, high-profile locations with a balanced mix of retail shopping, entertainment, residences, tourism and businesses.
We have the flexibility to design our restaurants to accommodate a wide array of urban and suburban site layouts,
including multi-level locations. Our restaurants feature large, open dining areas, high ceilings where available and a
contemporary kitchen design. The layouts are flexible, permitting tables and seats to be easily rearranged to
accommodate small and large parties, thus permitting more effective utilization of seating capacity. Interior and exterior
patio seating, either or both of which are available at approximately 95% of our restaurants, allow for additional
customer capacity at a comparatively low occupancy cost per seat. Exterior patio seating is generally available as
weather permits. (See “New Restaurant Site Selection and Development” below.)

Distinctive Restaurant Design and Decor. We place significant emphasis on the contemporary interior design
and decor of our restaurants, which create a high-energy ambiance in a casual setting and contribute to the distinctive
dining experience enjoyed by our customers. We have evolved our restaurants’ design over time to remain current while
retaining a similar look and feel to our earlier restaurants. Our restaurants feature large, open dining areas, and where
feasible, both exterior and interior patios. We apply high standards to the maintenance of our restaurants to keep them in
“like new” condition.

Integration of our Bakery Operations. The primary role of our bakery operations is to produce innovative, high-

quality cheesecakes and other baked desserts for sale at The Cheesecake Factory restaurants and those of our
international licensees, which is important to our competitive positioning. Integration of this vital part of our brand gives
us control over the creativity and quality of our desserts and is also more profitable than buying from a third party.

New Restaurant Site Selection and Development

The Cheesecake Factory concept has demonstrated success in a variety of layouts (e.g., single or multi-level

and varying interior square feet), site locations (e.g., urban or suburban shopping malls, lifestyle centers, retail strip
centers, office complexes, entertainment centers and urban street locations — either freestanding or in-line) and trade
areas. Accordingly, we intend to continue developing The Cheesecake Factory restaurants in high-quality, high-profile
locations that meet our rigorous site standards. We regularly negotiate leases for potential future locations and plan to
open as many locations in any given year as there are sites available that meet our site selection criteria. It is difficult for
us to precisely predict the timing of our new restaurant openings due to many factors that are outside of our control. (See
Item 1A — Risk Factors — “Our inability to secure an adequate number of high-quality sites for future restaurant
openings could adversely affect our ability to grow our business.”) We have the flexibility in our restaurant designs to
penetrate a wide variety of markets across varying population densities in both existing and new markets. We continue to
target approximately 300 Company-owned and operated The Cheesecake Factory restaurants domestically over time, as
well as the potential for an additional eight to ten locations in Canada.

The locations of our restaurants are critical to our long-term success, and we devote significant time and
resources to analyzing each prospective site. We consider many factors when assessing the suitability of a site, including
the demographics of the trade area such as average household income, and historical and anticipated population growth.
Since our restaurants can be successfully executed within a variety of site locations and layouts, we are highly flexible in
choosing suitable locations. While there are common decor elements within each of our restaurant sites, the designs are
customized for the specifics of each location, including the building type, square footage and layout of available space.

Our existing restaurants range from 5,000 to 21,000 interior square feet, and we expect the majority of our new
restaurants to vary between 7,500 and 10,000 interior square feet, generally with additional exterior and/or interior patio
seating, selected appropriately for each market and specific site.

The relatively high sales productivity of our restaurants provides opportunities to obtain competitive leasing
terms from landlords. Due to the flexible and customized nature of our restaurant operations and the complex design,
construction and preopening processes for each new location, our lease negotiation and restaurant development time
frames vary. The development and opening process usually ranges from six to eighteen months, depending largely on the
availability of the leased space we intend to occupy, and can be subject to delays either due to factors outside of our
control or to our selective timing of restaurant openings.

Unit Economics

The operation of high-quality restaurants in premier locations fitting our criteria contributes to the continuing

customer appeal of The Cheesecake Factory. This popularity is reflected in our average sales per restaurant and per
square foot, which are among the highest of any publicly-held restaurant company.

Average sales per location for The Cheesecake Factory restaurants open for the full year were approximately

$10.7 million, $10.7 million and $10.6 million for fiscal 2019, 2018 and 2017, respectively. Since each of our restaurants
has a customized layout and differs in size, an effective method to measure the unit economics of our sites is by square
foot. Average sales per productive square foot (defined as all interior square footage plus seasonally adjusted exterior
patio square footage) for restaurants open for the full year were approximately $986, $978 and $962 for fiscal 2019,
2018 and 2017, respectively. Fluctuations in both average sales per location and average sales per productive square foot
generally track with comparable restaurant sales trends. (See Part II, Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations for further discussion on comparable restaurant sales.)

We currently lease all of our restaurant locations and utilize capital for leasehold improvements and furnishings,
fixtures and equipment (“FF&E”) to build out our restaurant premises. Total costs are targeted at approximately $900 to
$1,000 per interior square foot for The Cheesecake Factory restaurants. Our distinctive design and decor requires a
higher investment per square foot than is typical for the casual dining industry. However, our restaurants have
historically generated annual sales per square foot that are also typically higher than our competitors. The construction
costs to build our restaurant premises vary depending on a number of factors, including geography, the complexity of
our build-out, site characteristics, governmental fees and permits, labor and material conditions in the local market,
weather and the amount, if any, of construction contributions obtained from our landlords for structural additions and
other leasehold improvements. These costs have trended higher over the past several years due primarily to wage
inflation and the availability of trade labor in certain geographies.

In selecting sites for our restaurants, an important objective is to earn an appropriate return on investment. We

measure returns using a cash-on-cash return on investment calculated by dividing restaurant-level margin (earnings
before interest, taxes, depreciation and amortization and preopening costs) by our cash investment.

Our new restaurants typically open with initial sales volumes well in excess of their future run-rate levels. This

initial “honeymoon” effect usually results from grand opening publicity and other customer awareness activities that
generate higher than usual customer traffic, particularly in new markets. During the three to six months following the
opening of new restaurants, customer traffic generally settles into its normal pattern, resulting in sales volumes that
gradually adjust downward to their post-opening run-rate level. Additionally, our new restaurants usually require a
period of time after reaching normal traffic levels to achieve their targeted restaurant-level operating margins due to cost
of sales and labor inefficiencies commonly associated with new, highly complex restaurants such as ours.

Restaurant Operations, Management and Staffing

Our ability to consistently execute a complex menu offering items prepared daily with high-quality, fresh

ingredients in an upscale casual, high-volume dining environment is critical to our overall success. We employ detailed
operating procedures, standards, controls, food line management systems and cooking methods and processes to
accommodate our extensive menu and to drive sales productivity. However, the successful day-to-day operation of our
restaurants remains critically dependent on the ability, dedication and engagement of our General Managers (“GMs”),

Executive Kitchen Managers (“EKMs”) and all other management and hourly staff members working at our restaurants.
Competition among restaurant companies for qualified management and staff remains very high. (See Item 1A — Risk
Factors — “If we are unable to successfully recruit and retain qualified restaurant management and operating personnel
in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues,
which could materially adversely affect our financial performance.”)

We believe that the high average sales volumes and popularity of our restaurants allow us to attract and retain

high-quality, experienced restaurant-level management and other operational personnel. Each restaurant is generally
staffed with one GM, one EKM and an average of six to ten additional kitchen and front-of-the-house managers,
depending on the size and sales volume of each restaurant. Our GMs and EKMs possess an average of more than
ten years of experience with the Company. This tenure and knowledge drives our high productivity and contributes to
our ability to deliver an exceptional customer experience. All newly-recruited restaurant managers complete an extensive
training program during which they receive both classroom and on-the-job instruction in areas such as food quality and
safety, customer service, financial management, staff relations and safely serving alcohol. Managers continue their
development by participating in and completing a variety of training and development activities to assess and further
develop their skills and knowledge necessary for upward progression through our management levels. Our GMs
regularly meet to receive hands-on training, share best practices and celebrate Company successes, all of which help to
foster the unique culture of our brand.

Each restaurant GM reports to an Area Director of Operations (“ADO”) who supervises the operations of six to

eight restaurants within a geographic area. In turn, each ADO reports to one of four Regional Vice Presidents of
Restaurant Operations. Our EKMs report to their GMs, but are also supervised by an Area Kitchen Operations Manager
responsible for between eight and ten restaurants. Our restaurant field supervision organization also includes our Senior
Vice President of Operations, Chief Culinary Officer, an operations services team and our performance development
department who are collectively responsible for day-to-day operations, managing new restaurant openings and training
for all operational managers and staff.

To enable us to more effectively compete for, and retain, the highest quality restaurant management personnel,
we offer an innovative and comprehensive compensation program for our restaurant GMs and EKMs. Each participant
receives a competitive base salary and has the opportunity to earn a cash bonus based on quantitative restaurant
performance metrics. GMs are also eligible to use a Company-leased vehicle. In addition, we provide a longer-term,
equity incentive program to our GMs and EKMs based on their extended service with us in their respective positions and
their achievement of certain performance objectives. We believe that these awards encourage our GMs and EKMs to
think and act as business owners, assist in retention of restaurant management and align our managers’ interests with
those of our stockholders.

Our restaurant GMs are responsible for selecting and training hourly staff members for their respective

restaurants. Each restaurant is staffed, on average, with approximately 170 hourly staff members. We require each
hourly staff member to participate in a formal training program for his or her respective position in the restaurant, under
the supervision of other experienced staff members and restaurant management. We strive to foster enthusiasm and
commitment in our staff members, and respect for one another, through daily staff meetings and dedicated time for
training. We solicit suggestions concerning restaurant operations and other aspects of our business through an annual
engagement survey, GM and workgroup meetings, a website dedicated to receiving staff member input and other means,
fostering a highly-engaged workforce.

Our commitment to people-focused programs and creating a great workplace for all of our staff and managers

contributed to The Cheesecake Factory being named to Fortune magazine’s list of the “100 Best Companies to Work
For®” in February 2020, for the seventh year in a row. The list is published annually based on a culture review and
surveys of current staff members to identify and recognize companies that create positive work environments with high
employee morale and fulfillment. In 2019, we were also named to the Fortune “100 Best Workplaces for Women ®,”
“100 Best Workplaces for Diversity®,” and “100 Best Workplaces for Millennials®.” In addition, in February 2020 we
received the Workplace Legacy Award from Black Box Intelligence/People Report, which recognizes leaders in the
restaurant industry who have demonstrated a commitment to balancing people and profits. This is the fifth year in a row
that the company received an award from Black Box.

Preopening Costs for New Restaurants

Due to the highly customized and operationally complex nature of our upscale, high-volume concept and the

investment we make in properly training our staff to operate our restaurants, our preopening process is more extensive,
time consuming and costly than that of many restaurant chains. Preopening costs for a typical restaurant in an established
market average approximately $1.7 million to $2.0 million and include all costs to relocate and compensate restaurant
management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and
wages, travel and lodging costs for our opening training team and other support staff members. Also included are
expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other
costs necessary to relocate managers in alignment with future restaurant opening and operating needs, and corporate
travel and support activities.

Preopening costs can fluctuate significantly from period to period, based on the number and timing of restaurant
openings and the specific preopening costs incurred for each restaurant. Preopening costs vary by location depending on
a number of factors, including the proximity of our existing restaurants, the size and physical layout of each location, the
number of management and hourly staff members required to operate each restaurant, the availability of qualified
restaurant staff members, the cost of travel and lodging for different metropolitan areas, the timing of the restaurant
opening and the extent of unexpected delays, if any, in obtaining final licenses and permits to open the restaurant, which
may also depend on our landlords obtaining their licenses and permits and completing their construction activities.
Preopening costs are generally higher for larger restaurants and initial entry into new markets and lower when we
relocate a restaurant within its local market. We usually incur the most significant portion of preopening costs within the
two months immediately preceding and the month of a restaurant’s opening. Preopening costs per restaurant will also
depend on our ability to leverage planned management growth expenses.

Expansion of Licensed Locations

We currently have licensing agreements with three restaurant operators to develop and operate The Cheesecake

Factory® brand restaurants in selected international markets. Our licensees invest their capital to build and operate the
restaurants, and we receive initial development fees, site and design fees and ongoing royalties based on our licensees’
restaurant sales. In addition, these licensees purchase bakery products branded under The Cheesecake Factory® mark
from us. We project each international licensed location to contribute approximately $0.01 in annual earnings per share
(“EPS”), on average, once the location has been in operation for a full year. As of March 11, 2020, our international
licensees operated the following The Cheesecake Factory restaurants:

Restaurant Location

# of Restaurants

Licensee Location
Kuwait (1) ................................................................. Bahrain

Kingdom of Saudi Arabia
Kuwait
Qatar
United Arab Emirates

Mexico (2) ................................................................ Mexico
Hong Kong (3) .......................................................... Beijing

Total ...................................................................

Hong Kong
Macau

Shanghai

1
4
3
3
6
5
1
1
1
1
26

(1) This licensee, or its affiliates, also has the right to develop restaurants in Egypt, with the opportunity to expand

the agreement to include Algeria, Hungary, Iraq, Libya, Morocco, Poland, Russia, Slovakia, The Czech
Republic, Tunisia, Turkey and Ukraine.

(2) This licensee, or its affiliates, also has the right to develop restaurants in Chile, with the opportunity to expand

the agreement to include Argentina, Brazil, Colombia and Peru.

(3) This licensee, or its affiliates, also has the right to develop restaurants in Taiwan, with the opportunity to

expand the agreement to include Japan, South Korea, Malaysia, Singapore and Thailand.

Our corporate infrastructure includes a dedicated global development team that works with our international

licensees and coordinates the initial training, ongoing quality control, product specifications and brand oversight at our
licensed locations. Our internal audit department also performs periodic reviews of our international licensees’
compliance with our licensing agreements.

As we evaluate other international markets, we will consider opportunities to directly operate certain locations

and/or enter into licensing, joint venture or partnership arrangements with established third-party companies. We are
selective in our assessment of potential partners and licensees, focusing on well-capitalized companies that have
established business infrastructures, expertise in multiple countries, experience in operating upscale casual dining
restaurants and sound governance practices. We look to associate with companies who will protect The Cheesecake
Factory® brand and operate the concept in a high-quality, consistent manner.

Due to the complexities of opening The Cheesecake Factory restaurants in other countries, including, but not

limited to, the selection and design of appropriate sites, construction of our complex restaurant designs, training of
licensees’ staff members, approval of supply sources and exportation of our bakery products to new countries, the
number and timing of new openings in foreign countries may vary from expectations. (See Item 1A — Risk Factors —
“We face a variety of risks and challenges related to our international operations and global brand development efforts,
any of which could materially adversely affect our financial performance.”)

Consumer Packaged Goods

Given the strong affinity for The Cheesecake Factory® brand, in 2017 we began leveraging opportunities in the

consumer packaged goods channel. We now partner with third-party manufacturers to offer a variety of products
marketed under The Cheesecake Factory At Home® mark. These offerings include our Famous "Brown Bread," baking
mixes and refrigerated puddings available in retail stores nationwide, as well as ice cream which was recently launched.
We are actively evaluating other synergistic, on-brand licensing opportunities to add incremental revenue streams to our
business.

North Italia and Fox Restaurant Concepts

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant

Concepts, including Flower Child and all other FRC brands, which we expect will accelerate and diversify our revenue
growth. North Italia and the FRC concepts are highly-differentiated and deliver unique customer experiences. With our
aligned cultures and philosophies, we believe these transactions are consistent with our long-term strategy of being a
leader in experiential dining and provide a significant accretive unit growth opportunity.

North Italia is a modern interpretation of Italian cooking in the upscale casual dining segment. Dishes are

handmade from scratch daily. The menu features appetizers, salads, fresh pastas, pizzas and entrees. Examples of menu
offerings include White Truffle Garlic Bread, Tuscan Kale Salad, Bolognese, Burrata Tortelloni, Margherita Pizza,
Tuscan Half Chicken, Chicken Parmesan and Braised Short Rib. North Italia offers an assortment of wines, beers and
house-made cocktails. Alcoholic beverage sales represented approximately 30% of North Italia sales for fiscal year
2019. North Italia restaurants are generally open seven days a week for lunch, dinner and weekend brunch. We see a
number of potential synergistic attributes, including operations and real estate development, as well as significant market
opportunity for an on-trend Italian offering. North Italia's operations have been relocated to the Company's corporate
headquarters to help scale the concept nationally.

With Italian cuisine the number one ethnic food category in the United States, coupled with strong national

reception of the North Italia concept to-date, we believe there is potential for 200 domestic locations over time, which
supports our plan for approximately 20% annual unit growth. We target an average unit size of approximately 5,000 to
6,500 square feet. Average sales per location for North Italia restaurants is approximately $7 million, or approximately
$1,200 per square foot, utilizing sales since the Acquisition on an annualized basis.

FRC operates as an independent subsidiary in Phoenix, Arizona. Its concepts are diverse in industry segment,

occasions, square footage and geography. FRC's largest concept, Flower Child, operates in the fast casual dining
segment, offering a customizable menu, made fresh from scratch, featuring locally-sourced, all-natural and organic
ingredients. Flower Child is a potential opportunity for us to diversify our portfolio in a strong and growing niche. Other

FRC potential growth concepts include The Henry, Culinary Dropout and Blanco, which together with the othe FRC
brands, serve as an ecosystem for talent, menu and design development.

We target approximately 20% annual unit growth for the aggregate portfolio, driven primarily by the

anticipated growth of the Flower Child concept, complemented by additional market tests of the potential growth
concepts. Unit sizes range from approximately 3,500 to 15,000 square feet. The FRC restaurants generate sales of
approximately $1,000 per square foot, on average, utilizing sales since the Acquisition on an annualized basis.

Bakery Operations

We own and operate two bakery production facilities, one in Calabasas Hills, California, and one in Rocky
Mount, North Carolina. Our facility in California accommodates both production operations and corporate support
personnel, while our facility in North Carolina houses production operations and a distribution center. In fiscal 2018, we
completed an infrastructure modernization of our California facility.

We produce approximately 70 varieties of proprietary cheesecakes and other baked desserts using high-quality
ingredients for The Cheesecake Factory and Grand Lux Cafe restaurants and for international licensees and third-party
customers. Some of our most popular cheesecakes include the Original Cheesecake, Ultimate Red Velvet Cake
CheesecakeTM, Godiva® Chocolate Cheesecake, Oreo® Dream Extreme Cheesecake and Pineapple Upside Down
Cheesecake. Other popular baked desserts include Chocolate Tower Truffle CakeTM, Carrot Cake, Black-Out Cake and
Lemoncello Cream Torte.

The primary role of our bakery operations is to produce innovative, high-quality cheesecakes and other baked

desserts for sale at our restaurants and those of our international licensees. Integration of this vital part of our brand gives
us control over the creativity and quality of our desserts and is also more profitable than buying from a third party.

We also leverage The Cheesecake Factory brand identity and utilize our bakery production capacity by selling
cheesecakes and other baked products to external foodservice operators, retailers and distributors. Current large-account
customers include retail and supermarkets, foodservice distributors and operators, a national retail bookstore, other
restaurants and national warehouse clubs. We also currently sell a selection of our cakes online and in catalogs
domestically through an agreement with an upscale retailer. Items produced for outside accounts are marketed under The
Cheesecake Factory Bakery® and The Cheesecake Factory At Home® marks and other private labels and were previously
marketed under The Cheesecake Factory® and The Dream Factory® marks.

We also sell baked goods internationally under The Cheesecake Factory Bakery®, The Cheesecake Factory At
Home®, The Cheesecake Factory® and The Dream Factory® marks and have entered over 30 countries with our brands.
Offering our cheesecakes and other baked desserts internationally is important to our branding, creating awareness and
driving demand, not only for bakery products but for the international expansion of our restaurants.

Other Concepts

We also operate Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen. At

present, we have no plans to open additional locations of these concepts.

Grand Lux Cafe

Grand Lux Cafe is an upscale casual dining concept that offers globally-inspired cuisine with an ambiance of
modern sophistication. Using fresh ingredients, the menu of approximately 175 items at Grand Lux Cafe offers classic
American dishes and international favorites, including appetizers, pasta, seafood, steaks, chicken, burgers, salads,
specialty items and desserts. Examples of menu offerings include our Cedar Planked B.B.Q Salmon, Buffalo Chicken
Rolls and Shrimp Scampi. Each Grand Lux Cafe features an on-site bakery which produces a selection of signature
desserts, and a full-service bar.

RockSugar Southeast Asian Kitchen

RockSugar Southeast Asian Kitchen features a Southeast Asian menu and design elements in an upscale casual

dining setting. RockSugar Southeast Asian Kitchen showcases the cuisines of Thailand, Vietnam, Malaysia,
Singapore, Indonesia and India with approximately 75 dishes served “family-style” to create an atmosphere that
encourages sharing and conversation. Examples of menu offerings include Shaking Beef, Thai Basil Cashew Chicken,
Ginger Fried Rice and Crispy Samosas. RockSugar Southeast Asian Kitchen also features a full-service bar with an
extensive wine list and exotic cocktails and offers freshly-made desserts that infuse traditional French flair into nearly a
dozen Asian-influenced items.

Social Monk Asian Kitchen

In February 2019, we opened the first location of Social Monk Asian Kitchen, a fast casual Asian concept with

a modern urban feel. The menu features the cuisines of Thailand, Vietnam, Malaysia, Singapore, China, Indonesia and
India in made-to-order starters, salads, soups, sandwiches, rice and noodle bowls, classic entrees, vegetables and sides
and house-made frozen custard. The restaurant also offers beer and wine. Examples of menu offerings include Crisp
Vegetable Spring Rolls, Asian Chicken Salad, Thai Basil Cashew Chicken, Shaking Beef and Dan Dan Noodles.

Purchasing and Distribution

We strive to obtain quality menu ingredients, bakery raw materials and other supplies and services for our
operations from reliable sources at competitive prices and consistent with our sustainability goals. We continually
research and evaluate various ingredients and products in an effort to maintain high quality, be responsive to changing
consumer tastes and manage costs.

In order to maximize purchasing efficiencies and to provide the freshest ingredients for our menu items while

obtaining competitive prices for the required quality and consistency, each restaurant’s management determines the
quantities of food and supplies required for their restaurant and orders the items from local, regional and national
suppliers based upon specifications determined and terms negotiated at a corporate level. We strive to maintain
restaurant-level inventories at a minimum dollar level in relation to sales due to the high concentration and relatively
rapid turnover of the perishable produce, poultry, meat, fish and dairy commodities that we use in our operations,
coupled with the limited storage space at our restaurants. Independent foodservice distributors, including the largest
foodservice distributor in North America, deliver most items multiple times per week to our restaurants.

We purchase food and other commodities for use in our operations, based on market prices established with our

We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment

Information Technology

This information technology discussion relates to The Cheesecake Factory, North Italia, Grand Lux Cafe,

RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen restaurants. We are in the process of reviewing the
information technology systems and infrastructure for the FRC brands other than North Italia. Our technology-enabled
business solutions are designed to provide effective financial controls, cost management, improved efficiencies and
enhanced customer experience. Our business intelligence solution and data warehouse architecture provide corporate and
restaurant management with information and insights into key operational metrics and performance indicators. This

framework delivers enterprise reporting, dashboards and analytics, and allows access to metrics such as quote and wait
time accuracy, staff member retention trends, and restaurant quality and service analyses.

Our restaurant point of sale and back-office systems provide information regarding daily sales, cash receipts,

inventory, food and beverage costs, labor costs and other controllable operating expenses. The Cheesecake Factory
restaurants offer online ordering for to-go sales, and the point of sale system is integrated with our delivery provider to
drive efficiencies in the restaurants and enhance the customer delivery experience. We utilize a customer satisfaction
measurement platform that leverages the “Net Promoter Score” methodology at all of our restaurants. The data and
analytics provided by this software provide us with actionable insights to better understand what customer experience
opportunities should be addressed, while reinforcing positive staff behaviors.

Our kitchen management system provides automated routing and cook line balancing, and synchronizes order

completion, ticket time and cook time data, promoting more efficient levels of labor and productivity without sacrificing
quality. We leverage our recipe viewer system to ensure timely and accurate recipe updates, and to provide instructional
media content and detailed procedures enabling our staff to consistently prepare our highly-complex, diverse menu
across all locations. We utilize a web-based labor scheduling solution to enhance scheduling precision and staff
satisfaction. We also employ a web-based notification and tracking solution to contact our restaurants and monitor
progress in the event of a needed product withdrawal or recall.

Restaurant hardware and software support is provided by both our internal support services team at our

corporate center as well as third-party vendors for remote and on-site restaurant support. Each restaurant has a private
high-speed wide area connection to send and receive critical business data as well as to access web-based applications
securely as well as a failover capability whereby a secondary public circuit is used to automatically establish a secure
connection to our private network if the primary connection becomes unavailable. We employ modern restaurant
switching and routing technology that allows us to leverage and support contemporary security standards and practices
and employ wireless capability for a variety of mobile uses. All of our core and critical applications are housed in an
external tier 3 data center. To mitigate business interruptions, we utilize a disk-based data backup and replication
infrastructure between our onsite and external data centers so all data is replicated nightly between the two sites.

We employ a multi-discipline security incident response plan to recognize, manage and resolve cybersecurity
threats, and require cybersecurity awareness training for all staff members who have access to our cyber systems. We
also maintain cyber risk insurance coverage to further reduce our risk profile. Security of our financial data and other
sensitive information remains a high priority for us, led by our information technology department in conjunction with
an interdepartmental information security council representing all of our key functional areas. We utilize a private key
infrastructure, ensuring only trusted devices can access our network and require secure sockets layer (SSL) certificates
for access to sites outside our network. To further enhance our cybersecurity protection, we added a third-party security
operations center (SOC) provider to monitor and analyze internal network traffic for potential malicious content. Also, in
an effort to further secure our customers’ credit card information, we employ a robust encryption and tokenization
platform for all credit card transactions in our restaurants, ensuring no credit card data is stored in our internal systems.
This includes equipment that can also process smart payment cards, commonly referred to as EMV (Europay,
Mastercard, Visa). (See Item 1A — Risk Factors — “Information technology system failures or breaches of our network
security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other
liabilities, any of which could materially adversely affect our financial performance.”)

Marketing and Advertising

The Cheesecake Factory

We rely on our reputation, as well as our high-profile locations, media exposure and positive “word of mouth,”
to maintain and grow market share and historically have not used significant paid national advertising through television,
radio or print, or use significant discounting. We utilize a social media and digital marketing strategy that allows us to
engage regularly with our customers outside of our restaurants, including communication and paid advertising on
Facebook®, Instagram®, YouTube®, Twitter®, Snapchat®, Pinterest® and other social media platforms, influencer
marketing, Google search advertising and direct email to customers. In 2019, we tested a television commercial with a
highly-targeted media buy, and we are considering additional targeted media buys in the future. (See Item 1A — Risk

Factors — “Any inability to effectively use and manage social media could harm our marketing efforts as well as our
reputation, which could materially adversely affect our financial performance.”)

Public relations is another important aspect of our marketing approach, and we frequently appear on local and

national television in connection with a variety of promotional opportunities, such as National Cheesecake Day, to
perform cooking demonstrations and other brand-building exposure. We generated approximately 4.8 billion media
impressions in fiscal 2019 at minimal cost to us. We partner with several premiere third-party gift card distributors,
contributing to our brand awareness and gift card sales. We also attempt to build awareness and relationships with
retailers located in the same developments, shopping center operators, local hotel concierges, neighborhood groups and
others in the community. For restaurants opening in new markets, we strive to obtain local television, radio station and
newspaper coverage in order to benefit from publicity at low or no cost. At times, we also engage in marketing and
advertising opportunities in selective local markets. In addition, we partner with our third-party delivery provider and
consumer packaged goods licensees on co-branded marketing campaigns.

Our international licensees are committed to opening each new restaurant with marketing that can be comprised

of a mix of elements including print, billboards, digital and radio. We maintain final approval of our licensees’
marketing campaigns and social media posts to promote consistency in the look and feel of marketing efforts including
our brand, domestically and abroad.

North Italia and FRC

North Italia and FRC execute localized marketing programs focused on awareness, frequency and brand

engagement through a variety of channels, including store-level marketing, public relations, in-store events, digital
advertising, email programs and social media. Each restaurant is positioned as an individual brand with a neighborhood
connection. Additionally, the restaurant interiors and exteriors are utilized for brand engagement and messaging through
art and graphics, creating an important part of a brand experience for the customer. We believe minimal discounts ensure
compelling brand proposition for experience and value.

Seasonality and Quarterly Results

While seasonal fluctuations generally do not have a material impact on our quarterly results, year-over-year

comparisons can be significantly impacted by the number and timing of new restaurant openings and associated
preopening costs, the timing of holidays, the impact from inclement weather, the additional week in a 53-week
fiscal year, other variations in revenues and expenses and, in the period covered by this report, by the Acquisition in the
fourth quarter of fiscal 2019. Because of these and other factors, our financial results for any quarter are not necessarily
indicative of the results that may be achieved for the full fiscal year.

Food Safety and Quality Assurance

Our food safety processes and systems are designed to mitigate the risk of contamination and illness and to
ensure compliance with regulatory requirements as well as industry standards. We continuously seek to improve our
food safety and sanitation policies and procedures. Our work and management processes are verified by routine
restaurant management reviews, third-party health inspection audits and regulatory agency inspections. In addition, our
bakery facilities are Safe Quality Food (SQF) certified in alignment with the Global Food Safety Initiative’s Global
Markets Program.

The following discussion on suppliers and traceability applies to The Cheesecake Factory, Grand Lux Cafe,

RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen restaurants and to our bakeries. We are in the
process of reviewing these processes for the FRC brands. In selecting suppliers, we look for key performance indicators
relating to sanitation, operations and facility management, good manufacturing and agricultural practices, product
protection, recovery and food security. In addition to measuring and testing food safety and security practices, we strive
to ensure that all our food suppliers have annual food safety and quality system audits. Our restaurants and bakery
facilities also follow regulatory guidelines required for conducting and managing ingredient and product traceability. We
utilize a web-based notification and tracking solution to efficiently contact our restaurants and monitor our progress in
the event of a product withdrawal or recall. (See Item 1A — Risk Factors — “Concerns relating to food safety, food-

borne illness, pandemics and other diseases could reduce customer traffic to our restaurants, disrupt our food supply
chain or cause us to be the target of litigation, which could materially adversely affect our financial performance.”)

Government Regulation

We are subject to numerous federal, state, local and foreign laws affecting our business. Each of our restaurants

is subject to licensing and regulation by a number of government authorities, which may include alcoholic beverage
control, health, sanitation, environmental, labor, immigration, zoning and public safety agencies. We are also subject to
various environmental regulations, including water usage, sanitation disposal and transportation mitigation.

Our international business exposes us to additional regulations, including antitrust and tax requirements, anti-
boycott legislation, import/export and customs regulations and other international trade regulations, privacy laws, the
USA Patriot Act and the Foreign Corrupt Practices Act.

As a provider of food products, we are subject to a comprehensive regulatory framework that governs the
manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States ,
including the Federal Food, Drug and Cosmetic Act, the Public Health Security and Bioterrorism Preparedness Response
Act of 2002, the Federal Food Safety Modernization Act and regulations concerning nutritional labeling under the
Patient Protection and Affordable Care Act of 2010. (See Item 1A — Risk Factors — “Our inability to respond
appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining
preferences could negatively impact our operations and competitive position, which could materially adversely affect our
financial performance.”)

In order to serve alcoholic beverages in our restaurants, we must comply with alcoholic beverage control

regulations which require each of our restaurants to apply to a state or other governmental alcoholic beverage control
authority for licenses and permits to sell alcoholic beverages on the premises. In addition, we are subject to dram shop
statutes in most of the jurisdictions in which we operate, which generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated
person. To help mitigate this risk, we carry liquor liability coverage as part of our existing comprehensive general
liability insurance.

Various federal, state, local and foreign laws govern our operations and our relationships with our staff
members, including such matters as minimum wages, breaks, scheduling, exempt classifications, equal pay, overtime, tip
credits, fringe benefits, leaves, safety, working conditions, provision of health insurance and citizenship or work
authorization requirements. In California, we are subject to the Private Attorneys General Act (“PAGA”) which
authorizes employees to file lawsuits to recover civil penalties on behalf of themselves, other employees and the State of
California for labor code violations. We must also comply with local, state and federal laws protecting the right to equal
employment opportunities and prohibiting discrimination and harassment in the work place. We have training and
awareness programs in place for these areas and plan to further expand the curriculum in fiscal 2020. We are also subject
to the regulations of the Department of Homeland Security, the U.S. Citizenship and Immigration Services and U.S.
Immigration and Customs Enforcement.

Our facilities must comply with applicable requirements of the Americans with Disabilities Act of 1990

(“ADA”) and related federal, state and foreign statutes which prohibit discrimination on the basis of disability with
respect to public accommodations and employment. Under the ADA and related state and local laws, we take steps to
make our new or significantly remodeled restaurants, our corporate and bakery facilities and our websites readily
accessible to disabled persons. We make reasonable accommodations for the employment of disabled persons as
required by applicable laws.

A significant number of our hourly restaurant staff members receive income from gratuities. In the United

States, many of our locations participate voluntarily in a Tip Reporting Alternative Commitment (“TRAC”) agreement
with the Internal Revenue Service (“IRS”). By complying with the educational and other requirements of the TRAC
agreement, we reduce the likelihood of potential employer-only FICA tax assessments for unreported or underreported
tips.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit,
protection and fraud. An increasing number of governments and industry groups worldwide have established data
privacy laws and standards for the protection of personal information (including social security numbers), financial
information (including credit card numbers) and health information.

(See Item 1A — Risk Factors — “Changes in, or any failure to comply with, applicable laws or regulations
could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could
materially adversely affect our financial performance.”)

Trade Names, Trademarks and Other Intellectual Property

We own various types of intellectual property and have applied to register trade names, logos, service marks,

trademarks and copyrights (collectively, “Intellectual Property”) in the United States, Canada and in additional countries
throughout the world in various categories, including without limitation, restaurant services and bakery goods. We
regard our Intellectual Property, including without limitation “The Cheesecake Factory,” ”North Italia,” and a collection
with the Fox Restaurant Concepts subsidiary, as well as our trade dress, as having substantial value and as being
important to our marketing efforts. Our policy is to pursue registration of our important Intellectual Property whenever
commercially feasible and to vigorously oppose infringements of our Intellectual Property. The duration of Intellectual
Property registrations varies from country to country, and we have not registered all of our trademarks in every country
in which we now or in the future may do business. However, registrations of Intellectual Property are generally valid and
may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained. We have also
registered various internet domain names, including, without limitation, “www.thecheesecakefactory.com,”
“www.northitaliarestaurants.com,” and “www.foxrc.com,” as well as derivations of these and other domain names to
include international country codes. (See Item 1A — Risk Factors — “Our failure to adequately protect our intellectual
property could materially adversely affect our financial performance.”)

Charitable Giving

The Cheesecake Factory Oscar and Evelyn Overton Charitable Foundation (“Foundation”) was created as a
means to give back to the communities that our restaurants serve, as well as to unite our staff members in charitable
causes. Since the inception of its annual Invitational Charity Golf Tournament, the Foundation has raised $3.7 million,
including $0.3 million in fiscal 2019, for the City of Hope Comprehensive Cancer Center, a leading research and
treatment center for cancer, diabetes and other life-threatening diseases in Southern California.

Our staff members volunteer their time to the Foundation to serve holiday meals to low-income individuals and
families in 13 Salvation Army centers across the United States at our annual Thanksgiving Day Feast. Additionally, the
Foundation provides sponsorships for teams of our staff members who work directly with non-profit organizations in
their communities supporting a variety of local and national initiatives.

In addition to the efforts of the Foundation, the Company directly participates in a variety of charitable
endeavors. Through nationwide food donation programs, we regularly donate surplus food from our restaurants to local
food rescue operations for distribution to soup kitchens and shelters. Since the program’s inception in 2007, we have
donated more than 5.2 million pounds of food, including approximately 470,000 pounds in fiscal 2019.

We also contribute to Feeding America®, the nation’s largest domestic hunger-relief organization, through

specially-designated cheesecake sales, periodic meal donation campaigns in conjunction with our delivery provider and
participation in Feeding America’s annual campaign to bring awareness to and help fight domestic hunger by donating
peanut butter to local food banks. In fiscal 2019, we donated $0.3 million to Feeding America through sales of our
Pinapple Upside-Down cheesecake and Very Cherry Ghirardelli® cheesecake, bringing our total contributions to $4.9
million over the past twelve years. Nationwide in fiscal 2019, our staff members collected approximately 250,000
pounds of peanut butter for donation to Feeding America’s annual campaign.

Additionally, we partner with the California Community Foundation to provide a method for our staff members

to assist other staff members in need through our The Cheesecake Factory “HELP” fund.

Sustainability

We strive to achieve excellence and quality in everything we do. As a part of this commitment, we continue to

develop a sustainability program that is aligned with our culture and values, is operationally feasible given the
complexity of our restaurants and is financially responsible. We regularly examine all aspects of our business in an effort
to identify, create and implement meaningful and sustained change.

For more information, please visit the “Sustainability” and “Sustainable Sourcing” pages on our website at
www.thecheesecakefactory.com. The contents of our website are not incorporated by reference into this Form 10-K.

Employees

As of December 31, 2019, we employed approximately 46,250 staff members, of which approximately 44,900

worked in our restaurants, approximately 700 worked in our bakery operations and approximately 650 worked in our
corporate center, FRC headquarters and restaurant field supervision organizations. Our staff members are not covered by
any collective bargaining agreements, and we consider our relations with our staff members to be favorable. Our
commitment to people-focused programs and creating a great workplace for all our staff and managers contributed to
The Cheesecake Factory being named to Fortune magazine’s list of “100 Best Companies to Work For®” in February
2020, for the seventh year in a row, among other human resources awards.

Executive Officers of the Registrant

David Overton, age 73, serves as our Chairman of the Board and Chief Executive Officer. Mr. Overton co-

founded our predecessor company in 1972 with his parents, Oscar and Evelyn Overton. He is also a founding member
and director of our Foundation.

David M. Gordon, age 55, was appointed President of the Company in February 2013. Mr. Gordon joined our

Company in 1993 as a Manager and held operational positions, including General Manager, Area Director of Operations,
Regional Vice President and Chief Operating Officer prior to his appointment as President. He is also a director of our
Foundation.

Matthew E. Clark, age 50, was appointed Executive Vice President and Chief Financial Officer in 2017.

Mr. Clark joined our Company in 2006 as Vice President of Strategic Planning and most recently oversaw the strategy,
financial planning, treasury and risk management functions as Senior Vice President, Finance and Strategy. Earlier in his
career, Mr. Clark held a number of finance positions of increasing responsibility at Groupe Danone, Kinko’s and The
Walt Disney Company. He is also an advisory director of our Foundation.

Keith T. Carango, age 58, serves as President of The Cheesecake Factory Bakery Incorporated, our bakery

subsidiary. Mr. Carango joined our bakery operations in 1996 to lead manufacturing, and provide continuous
improvement to the bakery operation. In his most recent role of Senior Vice President and Chief Operating Officer, he
oversaw strategic planning, supply chain, manufacturing, distribution, human resources, quality assurance and finance.
Prior to joining the Company, he held manufacturing and finance roles at Frito-Lay, Inc. and Prince Foods.

Scarlett May, age 53, serves as our Executive Vice President, General Counsel and Secretary. Ms. May joined

our Company in 2018, from Brinker International, Inc., where she served as Senior Vice President, General Counsel and
Secretary from 2014 to 2018. Prior to that, she was Senior Vice President, Chief Legal Officer and Secretary for Ruby
Tuesday, Inc. following her earlier career in private practice.

ITEM 1A. RISK FACTORS

An investment in our common stock involves risks and uncertainties. In addition to the information contained
elsewhere in this Annual Report on Form 10-K and other filings that we make with the SEC, you should carefully read
and consider the risks described below before making an investment decision. The occurrence of any of the following
risks could materially harm our business, operating results, earnings per share, financial position, cash flows and/or the
trading price of our common stock (individually and collectively referred to as our “financial performance.”) In addition,

our actual financial performance could vary materially from any results expressed or implied by forward-looking
statements contained in this report, in any of our other filings with the SEC and other communications by us, both
written and oral, depending on a variety of factors, including the risks and uncertainties described below. It is not
possible for us to predict all possible risk factors or the impact these factors could have on us or the extent to which any
one factor, or combination of factors, may materially adversely affect our financial performance.

Risks Related to Our Financial Performance

The impact global and domestic economic conditions have on consumer discretionary spending could materially
adversely affect our financial performance.

Dining out is a discretionary expenditure that historically has been influenced by domestic and global economic

conditions. These conditions include, but may not be limited to: unemployment, general and industry-specific inflation,
consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home
values, population growth, household incomes and tax policy. Material changes to governmental policy related to
domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also
could affect consumer discretionary spending. Any factor affecting consumer discretionary spending may influence
customer traffic in our restaurants and average check amount, thus potentially having a material impact on our financial
performance.

Our inability to grow comparable restaurant sales could materially adversely affect our financial performance.

We strive to increase comparable restaurant sales by improving customer traffic trends and growing average

check. Changes in customer traffic and average check amount may be impacted by a variety of factors, including,
without limitation: macroeconomic conditions that impact consumer discretionary spending; perception of our concepts’
offerings in terms of quality, price, value and service; increased competition; changes in consumer eating habits; the
evolving retail landscape, which is becoming increasingly influenced by technology and a growing consumer preference
for convenience, value and experience; adverse weather conditions; demographic, economic and other adverse changes
in the trade areas in which our restaurants are located and changes in the regulatory environment.

We compete directly and indirectly for customer traffic with national and regional casual dining restaurant
chains, as well as independently-owned restaurants. In addition, we face competition for customer traffic from fast
casual and quick-service restaurants, home delivery services, mobile food service, convenience stores, grocery stores and
meal kits that are evolving the quality and variety of their food products in response to customer demand. This increased
competition, coupled with an oversupply of restaurants, has driven casual dining industry comparable traffic declines in
recent years. This backdrop has made it even more challenging to improve customer traffic. We believe that many
consumers remain focused on value and if our competitors, many of whom have significantly greater resources to market
aggressively to customers, are able to promote and deliver a higher degree of perceived value, our customer traffic could
suffer.

We utilize menu price increases to help offset inflation of key operating costs. However, our menu price

increases may be insufficient to entirely absorb or offset increased costs and, if not accepted by customers, menu price
increases could result in reduced customer traffic.

Our menu mix could be materially adversely affected if our customers purchase fewer menu items or lower cost
menu items in order to reduce their spend. Unfavorable menu mix shifts could reduce average check amount, negatively
impacting our ability to grow comparable restaurant sales.

We have generated a higher mix of sales from off-premise channels as a consumer preference for convenience
has increased. More competition in these channels and any reduction in our ability to differentiate our concepts in these
channels could negatively impact our comparable restaurant sales performance.

If our efforts to grow comparable restaurant sales are not successful, the effect, over time, would be to spread

costs across a lower level of sales, which could materially adversely affect our financial performance.

If we are unable to protect our reputation, the value of our brands and sales at our restaurants may be negatively
impacted, which could materially adversely affect our financial performance.

Our greatest asset is the value of our brands, which is directly linked to our reputation. We must protect our
reputation in order to continue to be successful and to grow the value of our brands domestically and internationally.

Negative publicity directed at any of our brands, regardless of factual basis, such as relating to the quality of our

restaurant food or consumer packaged goods, restaurant facilities, customer complaints or litigation alleging injury or
food-borne illnesses, food tampering or contamination or poor health inspection scores, sanitary or other issues with
respect to food processing by us or our suppliers, the condition of our restaurants, labor relations, any failure to comply
with applicable regulations or standards, allegations of harassment, politically motivated accusations or other negative
publicity, could damage our reputation. Any failure of our third-party delivery provider to represent our brands well
could damage our reputation. These concerns are exacerbated by the speed with which negative information may now be
disseminated through social media. (See Item 1A — Risk Factors — “Any inability to effectively use and manage social
media, could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial
performance”). Negative publicity about us could harm our reputation and damage the value of our brands, which could
materially adversely affect our financial performance.

We are experiencing significant labor cost inflation. If we are unable to offset higher labor costs, our cost of doing
business will significantly increase, which could materially adversely impact our financial performance.

Increases in minimum wages and minimum tip credit wages, extensions of personal and other leave policies,

other governmental regulations affecting labor costs and a diminishing pool of potential staff members when the
unemployment rate falls and legal immigration is restricted, especially in certain localities, could significantly increase
our labor costs and make it more difficult to fully staff our restaurants, either of which could materially adversely affect
our financial performance.

We operate in many jurisdictions where the minimum wage, other mandated benefits and labor, wage and hour

laws, require significantly more from employers than what is required under United States federal requirements. Some
jurisdictions allow tipped staff members to be paid a lower tip credit wage that is supplemented by gratuities paid by
customers. Many jurisdictions, including the United States federal and state governments, either have or plan to
significantly increase their minimum wage, tip credit wage and other benefits requirements. In addition to increasing the
overall wages paid to our minimum wage and tip credit wage earners, these increases create pressure to increase wages
and other benefits paid to other staff members who, in recognition of their tenure, performance, job responsibilities and
other similar considerations, historically received a rate of pay exceeding the applicable minimum wage or minimum tip
credit wage. Because we employ a large workforce, minimum wage and tip credit wage increases, as well as expanding
benefits mandates, have a particularly significant impact on our labor costs. Our vendors, contractors and business
partners are similarly impacted by wage and benefit cost inflation, and many have or will increase their price for goods,
construction and services in order to offset their increasing labor costs. We expect these trends will continue as minimum
wages and minimum tip credit wages continue to rise and other benefits are mandated.

Our labor expenses include significant costs related to our self-insured health, pharmacy and dental benefit

plans. Health care costs continue to rise and are especially difficult to project. These costs include very expensive new
specialty pharmaceutical products. Material increases in costs associated with medical claims, or an increase in the
severity or frequency of such claims, may cause health care costs to vary substantially from quarter-to-quarter and year-
over-year. We offer a variety of health plans to our staff members, including lower cost high deductible health plans,
with an option for participants to contribute to a personal health savings account. However, given the unpredictable
nature of actual health care claims trends, including the severity or frequency of claims, in any given year our health care
costs could significantly exceed our estimates, which could materially adversely affect our financial performance.

A great deal of uncertainty exists with respect to the future of the Patient Protection and Affordable Care Act as

amended by the Health Care and Education Affordability Reconciliation Act of 2010 (the “PPACA”) and such
uncertainty makes planning difficult year over year. Any significant changes to the healthcare insurance system,
including a further dismantling of the PPACA in whole or in part and/or implementation of a supplementary and/or
replacement healthcare insurance system, could impact our healthcare costs. Material increases in healthcare costs could
materially adversely affect our financial performance.

While we try to offset labor cost increases through price increases, more efficient purchasing practices,

productivity improvements and greater economies of scale, there can be no assurance that these efforts will be
successful. If we are unable to effectively anticipate and respond to increased labor costs, our financial performance
could be materially adversely affected.

Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase
our cost of doing business, which could materially adversely affect our financial performance.

We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment

requirements, such as certain dairy products and poultry, depending on market conditions and expected demand. We
continue to evaluate the possibility of entering into similar arrangements for other commodities and also periodically
evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated
with such commodities. Although these vehicles may be available to us, as of the end of fiscal 2019, we had chosen not
to enter into any hedging contracts due to pricing volatility, excessive risk premiums, hedge inefficiencies or other
factors. Commodities for which we have not entered into contracts can be subject to unforeseen supply and cost
fluctuations, which at times may be significant. Additionally, the cost of commodities subject to governmental
regulation, such as dairy and corn, can be especially susceptible to price fluctuation. Commodities we purchase on the
international market may be subject to even greater fluctuations in cost and availability, which could result from a
variety of factors, including the value of the U.S. dollar relative to other currencies, international trade disputes, tariffs
and varying global demand.

While we strive to engage in a competitive bidding process for our principal commodity, supply, service and
equipment requirements, because certain of these products and services may only be available from a few vendors or
service providers, we may not always be able to do so. Because of this lack of competition, we may be vulnerable to
excessive price demands, especially as they relate to the cost of products or services that are critical to our operations or
profitability.

Certain products and ingredients commonly used in food preparation have recently come under scrutiny for

possibly posing social and environmental risks, such as from an animal welfare and sustainability perspective. We have
identified some of these products and ingredients in our supply chain and have adopted a comprehensive Sustainable
Sourcing Policy under which we commit to a buying preference in our supply chain by 2025, or sooner where required,
for products and ingredients that are sustainably grown and harvested and which do not have negative social impact, and
for products from animals that are humanely raised and processed (“sustainable products”). While we are committed to
implementing these changes in as timely and commercially feasible manner as possible, there is a risk that some of our
products or ingredients may become the subject of adverse media attention before we are able to do so, regardless of
factual basis. Additionally, while we make significant efforts to ensure we will have a sufficient ongoing supply of
sustainable products at a reasonable cost, since there is currently a smaller market for certain of these products, they may
be especially susceptible to cost volatility and supply fluctuations. We cannot be certain that our supply and cost
mitigation efforts or commitment to purchase sustainable products will be successful.

Our international licensees are also subject to commodity price fluctuations. While they too employ strategies
to mitigate the impact these fluctuations have on their business, neither we nor they can be assured such strategies will
be successful. Commodity price fluctuations could impede our international licensees’ profitability and hamper their
ability to grow, which could negatively impact our ability to expand our brand internationally.

For all of these reasons, our financial performance could be materially adversely affected if we are unable to

anticipate and effectively respond to increases in our operating costs.

Our financial performance could be materially adversely affected if we fail to retain, or effectively respond to a
loss of key executives.

The success of our business continues to depend in critical respects on the contributions of David Overton, our

founder, Chairman of the Board and Chief Executive Officer, and other senior executives of the Company. The
departure of Mr. Overton or other senior executives for any reason could have a material adverse effect on our business
and long-term strategic plan. We have a succession plan that includes short-term and long-term planning elements
intended to allow us to successfully continue operations should any of our senior management become unavailable to

serve in their respective roles. However, there is a risk that we may not be able to implement the succession plan
successfully or in a timely manner or that the succession plan will not result in the same financial performance we
currently achieve under the guidance of our existing executive team.

If we are unable to successfully recruit and retain qualified restaurant management and operating personnel in
an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues,
which could materially adversely affect our financial performance.

We must continue to attract, retain and motivate a sufficient number of qualified management and operating

personnel to maintain consistency in the quality of our restaurants, both domestically and internationally. Qualified
management and operating personnel are currently in high demand. If we are unable to attract and retain qualified
people, our restaurants could be short staffed, we may be forced to incur overtime expenses, and our ability to operate
and expand our concepts effectively could be limited, any of which could materially adversely affect our financial
performance.

Concerns relating to food safety, food-borne illness, pandemics and other diseases could reduce customer traffic
to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially
adversely affect our financial performance.

We face food safety risks, including the risk of food-borne illness and food contamination (including allergen
cross contamination), which are common both in the restaurant industry and the food supply chain. While we dedicate
substantial resources and provide training to ensure the safety and quality of the food we serve, these risks cannot be
completely eliminated. Additionally, we rely on our network of suppliers to properly handle, store and transport our
ingredients for delivery to our restaurants. Any failure by our suppliers, or their suppliers, could cause our ingredients to
be contaminated, which could be difficult to detect and put the safety of our food in jeopardy. We freshly prepare our
menu items at our restaurants, which may put us at greater risk for food-borne illness and food contamination outbreaks
than some of our competitors who use processed foods or commissaries to prepare their food. The risk of food-borne
illness also may increase whenever our menu items are served outside of our control, such as by third-party food
delivery services, customer take-out or at catered events.

Adverse publicity or news reports, regardless of accuracy, regarding food quality or safety issues, illness,

injury, recalls, health concerns, government or industry findings concerning food products served by us or our licensees
or delivered by a third-party for off-premises consumption, or issues stemming from the operation of our restaurants or
bakeries, restaurants operated by our licensees, third parties with whom we may co-brand products or who sell or
distribute our products, or third parties we may use to procure materials used in our business or to deliver our products,
or generally in the food supply chain, could be damaging to the restaurant industry overall and specifically harm our
brand and reputation, which in turn could materially adversely affect our financial performance.

The demand for and availability and price of certain food items may be adversely impacted if a pathogen, such

as coronavirus, Ebola, “mad cow disease,” “SARS,” “swine flu,” avian influenza, norovirus or other virus or bacteria,
such as salmonella or E.coli, or if parasites or other toxins infect or are believed to have infected the food supply,
including the food supply chain for our restaurants or bakery facilities. Additionally, customers may avoid our
restaurants and/or it may become difficult to adequately staff our restaurants if our customers or staff members become
infected with a pathogen which was actually or claimed to be contracted at our restaurants. Any adverse food safety
occurrence may result in litigation against us. Although we carry liability and other insurance coverage to mitigate costs
we may incur as a result of these risks, not all risks of this nature are fully insurable and, even if insured, the negative
publicity associated with such an event could damage our reputation and materially adversely affect our financial
performance.

In addition to selling products throughout the world through various distribution channels, including, without
limitation, supermarkets, mass market retailers, club stores and various other food service and retail channels, our two
bakery facilities are the only sources of most of our baked desserts to our restaurants. If any of our bakery products
becomes subject to a product recall or market withdrawal, whether voluntary or involuntary, our costs to conduct such
recall or market withdrawal could be significant, restaurant sales as well as third-party sales of bakery product could be
negatively impacted and our reputation could be damaged, any of which could materially adversely affect our financial
performance.

In addition, any adverse food safety event could result in mandatory or voluntary product withdrawals or

recalls, regulatory and other investigations, and/or criminal fines and penalties, any of which could disrupt our
operations, increase our costs, require us to respond to findings from regulatory agencies that may divert resources and
assets, and result in potential civil fines and penalties as well as other legal action, any of which could materially
adversely affect our financial performance.

Information technology system failures or breaches of our network security could interrupt our operations and
subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially
adversely affect our financial performance.

We rely heavily on our in-restaurant and enterprise-wide computer systems and network infrastructure across

our operations (“Cyber Environment”), which could be vulnerable to various risks. The efficient management of our
operations depends upon our ability to protect our Cyber Environment against damage from theft, casualties such as fire,
power loss, telecommunications failure or other catastrophic events, as well as from internal and external security
breaches, denial of service attacks, viruses, worms, malware, breaches of the algorithms we and our third-party service
providers use to encrypt and protect data, including customer transaction and credit card data, and other malicious or
disruptive events (collectively, “security incidents”). We employ both internal resources and external consultants to
conduct auditing and testing for weaknesses in our Cyber Environment to reduce the likelihood of any security incident.
In addition, we developed a multi-discipline security incident response plan to help ensure that our executives are fully
and accurately informed and manage, with the help of content experts, the discovery, investigation and auditing of, and
recovery from any security incidents. However, we can provide no assurance that these measures will be successful in
preventing a security incident or mitigating losses resulting from a security incident. We have and will continue to have
greater uncertainty with respect to these risks as they relate to our newly acquired concepts until we are able to complete
a full review of their Cyber Environments and implement all identified corrective measures.

Our international licensees have access to certain elements of our intellectual property within their Cyber

Environment and may not have developed adequate processes to secure their Cyber Environments against a security
incident and may not maintain robust discovery, investigation, auditing or recovery protocols, or have the ability to
promptly and effectively respond to a security incident. Available cyber-risk insurance coverage and policy limits may
not adequately cover or compensate us in the event of a security incident. Our financial performance could be materially
adversely affected if our operations are interrupted by a security incident from which we are not able to promptly and
fully recover, if any cyber-risk insurance is unable to fully address our losses and/or if we become subjected to litigation
or regulatory action because of such an incident.

Our inability to maintain a secure environment for customers’ and staff members’ personal data could harm our
reputation and result in litigation against us, which could materially adversely affect our financial performance.

We receive and maintain certain personal information about our customers and staff members. For example, we

transmit confidential credit card information in connection with credit card transactions, and we are required to collect
and maintain certain personal information in connection with our employment practices, including the administration of
our benefit plans. Our collection and use of this information may be regulated by U.S. federal, state and local and foreign
laws and regulations. If a security incident were to occur involving loss of or inappropriate access to or dissemination of
such personal information, we may become liable under applicable law for damages (including statutory damages) and
incur penalties and other costs to remedy such an incident. Depending on the facts and circumstances of such an
incident, these damages, penalties and costs could be significant and may not be covered by insurance or could exceed
our applicable insurance coverage limits. Such an event also could harm our reputation and result in litigation against us.
Any of these results could materially adversely affect our financial performance.

Our ability to accept credit cards as a form of payment depends on us remaining compliant with standards set

by the PCI Security Standards Council (PCI). These standards require certain levels of Cyber Environment security and
procedures to protect our customers’ credit card and other personal information. We continue to evaluate additional
security enhancements and have implemented end-to-end encryption and tokenization technology at our The Cheesecake
Factory, Grand Lux Cafe, Rock Sugar Southeast Asian Kitchen and Social Monk Asian Kitchen concepts as well as
public key infrastructure that only permits known computing assets access to our network and Intrusion Detection and
Intrusion Prevention (IDS/IPS) that scans data in transit detecting and preventing the execution of harmful code.
However, we can provide no assurance that our security measures will be successful in the event of an attempted or

actual security incident. If these security measures are not successful, we may become subject to litigation or the
imposition of regulatory penalties, which could result in negative publicity and significantly harm our reputation, either
of which could materially adversely affect our financial performance. We have and will continue to have greater
uncertainty with respect to these risks as they relate to our recently acquired restaurant concepts until we are able to
complete a full review of their Cyber Environments and implement all identified corrective measures.

If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we may be
subject to certain risks and may experience data loss, increased costs or other harm, any of which could
materially adversely affect our financial performance.

In order to leverage our internal resources and information technology infrastructure, and to support our

business continuity and disaster recovery planning efforts in the event of a physical loss or damage to our corporate
facilities, we utilize third-party vendors to assist us with some of our essential business processes. For example, we rely
on a network of third-party distribution warehouses to deliver ingredients and other materials to our restaurants. In some
instances, these processes rely on technology and may be outsourced to the vendor in their entirety and in other instances
we utilize these vendors’ externally-hosted business applications.

We also utilize third parties to provide gift card distribution and transaction processing services and to perform
food delivery services. We derive substantial revenue from these aspects of our business, which could suffer in the event
of any factor that adversely impacts our vendors’ ability to provide such services. Such factors may include, without
limitation, loss of, or significant change in contractual terms of, key vendor contracts, vendor or processor failures,
technology failures, damage to the reputation of any key vendor or other similar occurrences.

We continue to review options to expand the use of third-party providers in other areas. Our practice is to work
with service providers that are leading performers in their industries and with technology vendors that employ up to date
and appropriate data security practices and internal control practices. However, we cannot guarantee that failures will not
occur. The failure of third-party vendors to provide adequate services, including protection of sensitive data, could
significantly harm our operations and reputation, which could materially adversely affect our financial performance.

Any failure to realize the anticipated benefits of our acquisition of North Italia and the remaining business of Fox
Restaurant Concepts LLC could materially adversely affect our financial performance.

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant

Concepts LLC ("FRC"), including Flower Child and all other FRC brands (the "Acquisition"). We have incurred and
expect to continue to incur significant costs in connection with the Acquisition, including accounting, legal and other
fees and expenses. Further, the Acquisition requires us to pay contingent consideration and provide financing to FRC in
an amount sufficient to support certain targets during the five years after closing, in each case, subject to the satisfaction
of certain conditions. In addition, we will incur substantial costs in connection with integrating FRC's businesses with
ours, and there can be no assurance that we will not incur a material amount of unanticipated costs.

We acquired FRC's businesses with the expectation that the Acquisition will result in various benefits

including, among others, business and growth opportunities and synergies in supply chain, real estate and other areas
over time. However, even if we are able to successfully integrate FRC's businesses with ours, there can be no assurances
that we will realize some or all of the anticipated benefits of the Acquisitions, within the anticipated timeframes, if at all.
We may experience increased competition that limits our ability to expand our business, we may not be able to capitalize
on expected business opportunities, and general industry and business conditions may deteriorate. If any of these or other
expected or unexpected factors limit our ability to achieve the anticipated benefits of the Acquisition, or if such business
opportunities, growth prospects and synergies are not realized for any other reason, our financial performance could be
materially adversely affected.

We may incur additional costs if we are unable to renew our restaurant leases on similar terms and conditions, or
at all, or to relocate our restaurants in certain trade areas, which could materially adversely affect our financial
performance.

We currently lease all of our restaurant premises and, although we may consider other arrangements, we
currently plan to continue to lease our restaurant locations in the future. Some of our leases have terms that will expire in

the next few years and beyond. Many of these leases include renewal options; some do not. While lease expirations
allow us to opportunistically evaluate the possibility of relocating certain restaurants to higher quality sites and trade
areas over time, doing so may involve additional costs, such as increased rent and other expenses related to renegotiating
the terms of occupancy of an existing lease, and the costs to relocate and develop a replacement restaurant if we choose
not to renew a lease, or are unable to do so, on favorable terms in a desirable location. In addition, we may elect to
terminate certain leases prior to their expiration dates, and we may be unable to negotiate favorable terms for such early
terminations. Additional costs related to expiring restaurant lease terms, our inability to terminate certain restaurant
leases under favorable terms or the unavailability of suitable replacement locations could materially adversely affect our
financial performance.

Any inability to effectively use and manage social media could harm our marketing efforts as well as our
reputation, which could materially adversely affect our financial performance.

Social media provides a powerful medium for consumers, staff members and others to communicate their

approval of or displeasure with a business. This aspect of social media is especially challenging because it allows any
individual to reach a broad audience with an ability to respond or react, in near real time, with comments that are often
not filtered or checked for accuracy. If we are unable to quickly and effectively respond, any negative publicity could
“go viral” causing nearly immediate and potentially significant harm to our brand and reputation, whether or not
factually accurate.

Our marketing strategy includes an emphasis on social media. As social media continues to grow in popularity,

many of our competitors have expanded and improved their use of social media, making it more difficult for us to
differentiate our social media messaging. As a result, we need to continuously innovate and develop our social media
strategies.

If we do not appropriately use and manage our social media strategies, our marketing efforts in this area may

not be successful, and any failure to effectively respond to negative or potentially damaging social media, whether
accurate or not, could damage our reputation, which could materially adversely affect our financial performance.

Our failure to adequately protect our intellectual property could materially adversely affect our financial
performance.

We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other

intellectual property (collectively, “Intellectual Property”), including The Cheesecake Factory®, North Italia®, a
collection within the Fox Restaurant Concepts subsidiary and other trademarks related to our restaurant businesses in the
United States and in additional countries throughout the world. Our Intellectual Property is valuable to our business and
requires continuous monitoring to protect. We regularly and systemically search for misappropriations of our Intellectual
Property and seek to enforce our rights whenever appropriate to do so; however, we cannot be assured of success in
every case and cannot possibly find all infringing uses of our Intellectual Property. Furthermore, we have not registered
all of our Intellectual Property throughout the world, as doing so may not be feasible because of associated costs, various
foreign trademark law prohibitions or registrations by others. Our failure or inability to protect our Intellectual Property
worldwide could limit our ability to globally expand our brand.

Our inability to effectively protect our Intellectual Property domestically or internationally could cause our

customers to believe lesser quality products or services are ours, may reduce the capacity of our Intellectual Property to
uniquely identify our products and services and/or may limit our ability to globally expand our brand, any of which
could materially adversely affect our financial performance.

We face a variety of risks and challenges related to our international operations and global brand development
efforts, any of which could materially adversely affect our financial performance.

International operations have a unique set of risks and challenges that differ from country to country, and can

include, among other risks, political instability, governmental corruption, social, religious and ethnic unrest, anti-
American sentiment, delayed and potentially less effective ability to respond to a crisis occurring internationally,
changes in global economic conditions (such as currency valuation, disposable income, unemployment levels and
increases in the prices of commodities and labor), the regulatory environment, immigration, labor and pension laws,

income and other taxes, consumer preferences and practices, as well as changes in the laws and regulations governing
foreign investment, joint ventures or licensing arrangements in countries where our restaurants or licensees are located
and local import controls.

Operations at our international Company-owned (Canada) and licensed restaurants (Middle East, Mexico and

Asia) may be negatively affected by factors outside of our control, including, but not limited to:

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difficulties in achieving the consistency of product quality and service as compared to restaurants we operate in
the United States;
changes to our recipes required by cultural norms;
inability to obtain, at a reasonable cost, adequate and reliable supplies of ingredients and products necessary to
execute our diverse menu;
availability of experienced management to operate international restaurants according to our domestic
standards;
changes in economic conditions of our licensees, whether or not related to the operation of our restaurants;
differences, changes or uncertainties in economic, regulatory, legal, immigration, social, climatic, and political
conditions, including the possibility of terrorism, social unrest, trade embargos and/or trade restrictions, which
may result in periodic or permanent closure of foreign restaurants, affect our ability to supply our international
restaurants with necessary supplies and ingredients and affect international perception of our brand;
inability of our licensees to locate profitable or suitable sites for development;
rising cost and scarcity of labor world-wide;
exchange rate fluctuations; and
currency fluctuations, trade restrictions, taxes or tariffs adversely affecting our or our licensees’ ability to
import goods from the United States and other parts of the world that are required for operating our branded
restaurants, including our cakes which are wholly manufactured in the United States.

Our international licensees are authorized to operate The Cheesecake Factory® restaurant concept in licensed

trade areas using certain of our Intellectual Property, including our proprietary systems. We provide extensive and
detailed training to our licensees so their staff members may be able to effectively execute our operating processes and
procedures and periodically audit their performance and adherence to our requirements. However, because we do not
operate these restaurants directly, we can provide no assurance that our licensees will adhere to our operating standards
to the same extent as we would.

If we or our licensees fail to effectively operate our international restaurants, or if we or they fail to receive an

adequate return on investment, and these difficulties are attributed to us or our brand, our reputation and brand value
could be harmed, our revenues from these restaurants could be diminished and our international growth may be slowed,
any of which could materially adversely affect our financial performance.

In order to support our international expansion, our bakeries supply certain of our bakery products to our
branded international restaurants. In order to supply bakery products to restaurants in other countries, we may be
required to adapt certain recipes to eliminate locally prohibited ingredients, comply with labeling requirements that
differ from those in the United States and maintain certifications required to export to such countries. In addition,
unexpected events outside of our control, such as, without limitation, trade restrictions, import and export embargos,
governmental shutdowns and disruptions in shipping, may affect our ability to transport adequate levels of our bakery
products to our or our licensee’s international restaurants, for which we are the sole source of supply. A failure to
adequately supply bakery products to our or our licensee’s international restaurants could affect the customer experience
at those restaurants, resulting in decreased sales, and could, depending upon the reason for the failure, trigger contractual
defaults on our part, any of which could materially adversely affect our financial performance.

As we continue to expand our brand internationally, we must comply with regulations and legal requirements,

including those related to immigration and the protection of our Intellectual Property. Additionally, we must comply
with domestic laws affecting U.S. businesses that operate internationally, including the Foreign Corrupt Practices Act
and anti-boycott laws, and with foreign laws in the countries in which we expand our restaurants. (See Item 1A — Risk
Factors — “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect
our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our

financial performance.”) We may incur considerable liability in the event we or our licensees fail to comply with foreign
or domestic laws relating to our or their operation of any international restaurant and can provide no assurance that our
insurance programs or contractual indemnification rights would be effective to protect against such liabilities.

We may not be able to successfully integrate FRC’s businesses or any future business we may acquire with ours.

Combining independent companies with separate businesses, customers, employees, cultures and systems is a

complex, costly and time-consuming process. We may experience material unanticipated difficulties or expenses in
connection with the integration of FRC’s businesses with ours, and this process may disrupt the business of either or
both companies. In addition, we may pursue acquisitions of other businesses and assets. Some of the difficulties related
to past and any future acquisitions could include:

consolidating and retaining management and other key employees;
integrating information, communications and other systems;
integrating purchasing, logistics, marketing and administration methods;
integrating corporate and administrative infrastructures;

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• minimizing the diversion of management’s attention from ongoing business concerns; and
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successfully managing and coordinating the growth of the combined company.

In addition, we may incur impairment charges if an acquired business does not meet the performance
expectations upon which the acquisition price was based. Many of these factors are outside of our control and any one of
them could result in increased costs, decreased revenues and diversion of management’s time and focus, which could
materially adversely impact our business, financial condition and operating results.

We may engage in expansion opportunities or other initiatives which may create risks to our business that could
materially adversely affect our financial performance.

We may engage in other means to leverage our competitive strengths, including expansion of our brand to other

retail opportunities and/or other initiatives. Many risks are inherent in any such development, investment arrangement,
expansion of our brand or other initiative, including, without limitation:

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damaging our reputation if retail products bearing our brand are not of the same value and quality that our
customers associate with our brand;
dilution of the goodwill associated with our brand as it become more common and increasingly accessible;
inaccurate assessment of value, growth potential, weaknesses, liabilities, contingent or otherwise, and expected
profitability of such ventures; and
diversion of management's attention and focus from existing operations to the expansion of our brand to non-
restaurant items.

If we do not appropriately scale our infrastructure in a timely manner we may be unable to respond to and
support our domestic or international opportunities for growth, which could materially adversely affect our
financial performance.

We continually evaluate the appropriate level of infrastructure necessary to support our operational and
development plans, including our domestic and international expansion. If market conditions improve and we are able to
identify enough high-quality sites to significantly increase the planned number of new restaurant openings in the future,
we may be unable to scale or manage the growth of our corporate and field supervision infrastructure in the short term to
appropriately support our expansion. Likewise, if sales decline, we may be unable to reduce our infrastructure quickly
enough to prevent sales deleveraging. Either circumstance could materially adversely affect our financial performance.

Our international license agreements require us to provide training and support to our licensees for their

development and operation of The Cheesecake Factory restaurants. We have dedicated certain corporate personnel to
international development and continue to utilize the talents of existing management, as we grow our international
licensing and operations infrastructure. In addition, one of the most important aspects of our restaurant operations is our
ability to deliver dependable, quality service by experienced staff members who can execute our concepts according to

our high standards. This may require training our licensees’ management in the United States and our licensees’ staff
members in the licensed territories, as well as providing support in the selection and development of restaurant sites,
product sourcing logistics, technological systems, menu modification and other areas. If, for any reason, we are unable to
provide the appropriate level of infrastructure support to our international licensees, our licensee’s operations could
suffer, which could make it more difficult for us to grow our brand internationally and materially adversely affect our
financial performance.

We may be required to record impairment charges, be unable to fully recoup landlord improvement allowances
and/or decide to discontinue operations at certain restaurants, any of which could materially adversely affect our
financial performance.

We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes

in circumstances indicate the carrying value of the assets or asset group may not be recoverable. Factors considered
include, but are not limited to, negative cash flow, significant underperformance relative to historical or projected future
operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be
disposed of significantly before the end of its previously estimated useful life and significant negative industry or
economic trends. In addition, we may incur impairment charges if an acquired business does not meet the performance
expectations upon which the acquisition price was based. At any given time, we may be monitoring certain locations,
and future impairment charges and/or closures may occur if individual restaurant performance does not improve, which
could materially adversely affect our financial performance.

We test our goodwill and other intangible assets for impairment annually or whenever events or changes in
circumstances indicate the carrying value may not be recoverable. Factors considered include, but are not limited to
historical financial performance, a significant decline in expected future cash flows, unanticipated competition, changes
in management or key personnel, macroeconomic and industry conditions and the legal and regulatory environment. We
cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other
intangible assets become impaired, there could be a material adverse affect on our financial performance.

A portion of our tenant allowances at certain premises may be subject to recoupment against percentage rent

otherwise payable for such sites. When we are unable to achieve sales in a sufficient amount to generate percentage rent
obligations, we are not able to fully recoup available allowances at affected sites, which also could materially adversely
affect our financial performance.

Our inability to secure an adequate number of high-quality sites for future restaurant openings could adversely
affect our ability to grow our business.

Our ability to grow our business depends on the availability and selection of high-quality sites that meet our

criteria. The number and timing of new restaurants opened during any given period, and their associated contribution to
the growth of our business, will depend on a number of factors including, but not limited to:

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unforeseen delays due to market conditions;
the identification and availability of high-quality locations;
an increase in competition for available premier locations;
the influence of consumer shopping trends on the availability of sites in traditional locations, such as premier
shopping centers;
acceptable lease terms and the lease negotiation process;
the availability of suitable financing for our landlords;
the financial viability of our landlords;
timing of the delivery of the leased premises to us from our landlords in order to perform build-out construction
activities;
the ability of our landlords and us to obtain all necessary governmental licenses and permits, and consents of
third parties, on a timely basis to construct and operate our restaurants;
our ability to successfully manage the complex design, construction and preopening processes for our highly
customized restaurants;
the availability and/or cost of raw materials and labor used in construction;
the availability of qualified tradespeople in the local market;

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any unforeseen engineering or environmental problems with the leased premises; and
adverse weather or other delays during the construction period.

Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our
ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our
financial performance.

We are required to comply with various federal, state and local and foreign laws and regulations, including,

without limitation, those relating to alcoholic beverage control, public health and safety, access and use by the disabled,
environmental hazards, labor and employment, such as, equal wage laws and exempt versus non-exempt employee
classifications, data security and food safety and labeling. Changes to these laws or regulations may create challenges for
us. While we subscribe to certain services and have established procedures to identify legal and regulatory changes, we
cannot be certain to identify and comply with every change on a timely basis. We may incur penalties and other costs,
sanctions and adverse publicity by failing to comply with applicable laws, any of which could materially adversely affect
our financial performance.

Our failure to obtain and/or retain licenses, permits or other regulatory approvals required to operate our

business could delay or prevent the opening and/or continued operation of any of our restaurants or bakeries, materially
adversely affecting that facility’s operations and profitability and our ability to obtain similar licenses, permits or
approvals elsewhere, any of which could materially adversely affect our financial performance.

In certain jurisdictions, we may be subject to “dram shop” statutes that generally allow a person injured by an

intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. Dram shop litigation may result in significant judgments, including punitive damages. A settlement
or judgment against us under a dram shop statute in excess of our general liability insurance coverage could materially
adversely affect our financial performance.

Significant increases in minimum wages, including the tip credit wage in certain states, paid or unpaid leaves of
absence, equal wage legislation, mandatory sick pay and paid time off regulations in a growing number of jurisdictions,
mandated health and/or COBRA benefits, or increased tax reporting, assessment or payment requirements related to our
staff members who receive gratuities, or changes in interpretations of existing employment law, including with respect to
classification of exempt versus non-exempt employees, could significantly increase our labor costs, which would
materially adversely affect our financial performance.

We are subject to federal and state laws that prohibit discrimination in the workplace and that set standards for
the design, accessibility and operation of public facilities, such as the Americans with Disabilities Act. Compliance with
these laws and regulations can be costly and failure to comply could create exposure to government proceedings and
litigation. Even a perceived failure to comply could result in negative publicity that could damage our reputation and
materially adversely affect our financial performance. In addition, various federal, state and local and foreign labor laws
and regulations govern our operations and relationships with our staff members, including, but not limited to, minimum
wages, breaks, overtime, deductions, certain benefits (including health care benefits), safety, working conditions and
citizenship and legal residency requirements. These requirements also extend to independent third-party service
providers we engage to perform certain services at our restaurants. While we take precautions to ensure that our third-
party service providers comply with applicable laws and to maintain an independent contractor relationship, we cannot
be assured such efforts will be successful, and we may incur liability vicariously as a joint employer for failures by our
independent third-party service providers to comply with applicable laws. Changes in, or any failure to comply with,
these laws and regulations could subject us to fines or other legal actions, which could materially adversely affect our
financial performance. Additionally, some jurisdiction including California have introduced (or may be planning to
introduce) legislation seeking to mandate an employment relationship between companies that facilitate third-party
delivery services and their service personnel. If these measures are successful, delivery costs will significantly increase
and/or these companies may choose to no longer operate within such jurisdictions, either of which result could
significantly impede our ability to grow off-premises sales.

Despite our efforts to maintain compliance with legal requirements, including implementation of electronic

verification of legal work status, some of our staff members may not meet legal citizenship or residency requirements. In
addition, immigration-related employment regulations may make it more difficult for us to identify and hire qualified

staff members. Our inability to maintain an experienced and qualified work force comprised of individuals who meet all
legal citizenship or residency requirements could result in a disruption in our work force, sanctions against us and
adverse publicity, any of which could materially adversely affect our financial performance.

Changes in tax laws and resulting regulations could result in changes to our tax provisions and expose us to
additional tax liabilities that could materially adversely affect our financial performance.

We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in applicable U.S. or
foreign tax laws and regulations, such as the December 2017 enactment of Federal legislation commonly referred to as
the Tax Cuts and Jobs Act (the “Tax Act”), or their interpretation and application, including the possibility of retroactive
effect and changes to state tax laws that may occur in response to the Tax Act, could affect our tax expense and
profitability. In addition, the final determination of any tax audits or related litigation could be materially different from
our historical income tax provisions and accruals. Changes in our tax provision or an increase in our tax liabilities,
whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final
determination of tax audits or litigation, could materially adversely affect our financial performance.

Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to
evolving consumer dining preferences could negatively impact our operations and competitive position, which
could materially adversely affect our financial performance.

Federal law requires restaurant operators with twenty or more locations to make certain nutritional information
available to customers. Additionally, some state, local and foreign governments also have enacted legislation regulating
or prohibiting the sale of or mandating disclosures relating to certain types and/or levels of ingredients in food served in
restaurants, such as trans fats, sodium, genetically modified organisms (GMOs) and gluten, and are taxing or considering
taxing and/or otherwise regulating high fat, high sugar and high sodium foods. While it remains unclear if and to what
extent consumers may reconsider dining preferences in response to such requirements, it is clear that consumer dining
preferences continue to evolve and these preferences may evolve more rapidly in light of these new requirements. We
must be able to quickly and effectively adapt to any significant shift in consumer dining preference. Our failure or
inability to do so could cause our or our licensee’s restaurants to lose market share, which could materially adversely
affect our financial performance.

Labor organizing could harm our operations and competitive position in the restaurant industry, which could
materially adversely affect our financial performance.

Our staff members and others may attempt to unionize our workforce, establish boycotts or picket lines or

interrupt our supply chains which could limit our ability to manage our workforce effectively and cause disruptions to
our operations, which could materially adversely affect our financial performance. Our labor costs may significantly
increase if we become unable to effectively manage our workforce and the compensation and benefits we offer to our
staff members, which also could materially adversely affect our financial performance.

If we are unable to manage risks related to our business, costs associated with litigation and insurance could
increase, which could materially adversely affect our financial performance.

We are subject to lawsuits, administrative proceedings and claims that arise in the ordinary course of business.

These matters typically involve claims by customers, staff members and others regarding issues such as food-borne
illness, food safety, premises liability, dram shop liability, compliance with wage and hour requirements, work-related
injuries, discrimination, harassment, disability and other operational issues common to the foodservice industry. We
could be materially adversely affected by negative publicity and litigation costs resulting from these claims, regardless of
their validity. Employment-related litigation, particularly with respect to claims styled as class action lawsuits, are
especially costly to defend. Also, some employment-related claims in the area of wage and hour disputes are not
insurable risks and many employment-related disputes involve uncertainty in judicial interpretation from state to state
and from federal to state court with respect to the effectiveness of arbitration agreements with our staff members,
particularly those which provide for class waivers. We have experienced an increase in wage and hour litigation, in
particular in California, where we have seen an increase in claims filed under California’s Private Attorneys General Act
(“PAGA”). PAGA allows an aggrieved staff member to bring a lawsuit on behalf of other current and former staff
members for labor code violations, including certain technical violations. PAGA claims are not subject to arbitration and

may result in exposure to additional penalties, which can be assessed separately from recovery of attorneys’ fees.
Significant legal fees and costs in complex class action litigation or an adverse judgment or settlement that are not
insured or are in excess of insurance coverage can materially and adversely affect our financial performance.

We retain financial responsibility for a significant portion of our risks and associated liabilities with respect to
workers’ compensation, general liability, employment practices, staff health benefits and certain other insurable risks. A
number of factors may significantly increase our self-insurance costs, such as conditions of the insurance market, the
availability of insurance, or changes in applicable regulations. The accrued liabilities associated with these programs are
based on our annual estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported
to us (“IBNR”). Significant judgment is required to estimate IBNR amounts, as parties have yet to assert such claims.
Our financial performance may be materially adversely affected if our actual claims costs significantly exceed our
estimates.

Our inability or failure to execute on comprehensive business continuity and disaster recovery plans following a
major disaster could interfere with our business operations, which could materially adversely affect our financial
performance.

All of our core and critical applications are housed in an external tier 3 data center, which is a location with

redundant and dual-powered servers, storage, network links and other IT components. To mitigate business
interruptions, we employ a disk-based data backup and replication infrastructure between our onsite and external data
centers. We provide support for our restaurant operations, with the exception of design and construction, from our
corporate headquarters in Calabasas, California, an area that is prone to natural disasters such as earthquakes and
wildfires. Corporate support for our bakery operations is also performed from this centralized location. If we are unable
to execute our disaster recovery procedures in whole or in part, we may experience delays in recovery and losses of data,
inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately
support field operations and other breakdowns in normal operating procedures that could expose us to administrative and
other legal claims, any of which could materially adversely affect our financial performance.

A closure of or material damage to one or both of our bakery facilities could impede our ability to supply

bakery products to our own and our international licensees’ restaurants as well as to other bakery customers. Such an
incident could also result in the loss of critical data regarding our bakery operations. Any of these events could
materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics could unfavorably impact our restaurant
sales, which could materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics can impact customer traffic at our

restaurants, make it more difficult to fully staff our restaurants and, in more severe cases, such as hurricanes,
earthquakes, tornadoes, blizzards, other natural disasters or health epidemics, such as the recent outbreak of coronavirus,
cause a temporary inability to obtain supplies, increase commodity costs and cause closures of our affected restaurants,
sometimes for prolonged periods of time, any of which could materially adversely affect our financial performance. The
recent outbreak of coronavirus in China has caused and may cause additional restaurant closures by our licensees in
affected areas and may result in restaurant closures by our international licenesses in other countries if the number of
cases in those countries rises, which decreases the amount of roylaties we receive from these licensees. Climate change
may cause adverse weather conditions and natural disasters to become more frequent and less predictable, which could
make it more difficult to accurately project year-to-year comparisons in sales and other factors affecting financial
performance. Our cash flows may be negatively impacted by delay in the receipt of proceeds under any insurance
policies or programs we maintain against certain of these risks or the proceeds may not fully offset any such losses. Any
or all of these situations could materially adversely affect our financial performance.

Acts of violence at or threatened against our restaurants or the centers in which they are located, including active
shooter situations and terrorism, could unfavorably impact our restaurant sales, which could materially
adversely affect our financial performance.

Any act of violence at or threatened against our restaurants or the centers in which they are located, including

active shooter situations and terrorist activities, may result in restricted access to our restaurants and/or restaurant

closures in the short-term and, in the long-term, may cause our customers and staff to avoid our restaurants. Any such
situation could adversely impact customer traffic and make it more difficult to fully staff our restaurants, which could
materially adversely affect our financial performance.

Our failure to establish, maintain and apply adequate internal control over our financial reporting and comply
with changes in financial accounting standards or interpretations of existing standards could limit our ability to
report our financial results accurately and timely or to detect and prevent fraud, any of which could materially
adversely affect our financial performance.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002.
These provisions provide for the identification of material weaknesses in internal control over financial reporting — a
process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in
accordance with accounting principles generally accepted in the United States. There can be no assurance that we will be
able to timely remediate material weakness in internal controls (if any) or maintain all of the controls necessary to
remain in compliance. Any failure to maintain an effective system of internal control over financial reporting could limit
our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could
materially adversely affect our financial performance. We have not fully evaluated any changes in internal control over
financial reporting associated with the Acquisition and therefore any material changes that may result from the
Acquisition have not been disclosed in this report. We intend to disclose all material changes resulting from the
Acquisition within or prior to the time of our first annual assessment of internal control over financial reporting that is
required to include these entities. Additionally, changes in accounting standards or new accounting pronouncements and
interpretations could materially adversely affect our previously reported or future financial results, which could
materially adversely affect our financial performance.

We incurred substantial indebtedness to fund the Acquisition, which could adversely affect our business, and any
failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm our
financial condition.

On July 30, 2019, we entered into a Third Amended and Restated Loan Agreement (the “New Facility”), which

We financed the Acquisition with the New Facility and cash on hand. This increased indebtedness and our

resulting higher debt-to-equity ratio, as compared to that which has existed on a historical basis, could limit our ability to
obtain additional financing in the future and have other material consequences, including:

•

increasing our vulnerability to, and limiting our flexibility in planning for, changing business and market
conditions, making us more vulnerable to adverse economic and industry conditions;
limiting our ability to use proceeds from any offering or divestiture transaction for purposes other than the
repayment of debt; and
creating competitive disadvantages compared to other companies with less indebtedness.

Under the New Facility, we are subject to certain financial covenants, limitations on cash distributions and

negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.
Any failure to maintain these debt covenants or have sufficient liquidity to either repay or refinance the then outstanding
balance at expiration of the New Facility, or upon violation of the covenants, could materially adversely affect our
financial performance. (See Note 12 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further
discussion of our long-term debt.)

Risks Related to Owning Our Stock

The market price of our common stock is subject to volatility.

During fiscal 2019, the price of our common stock fluctuated between $35.83 and $51.15 per share. The market

price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or
anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes
in financial estimates by research analysts with respect to us or others in the restaurant industry, and announcements of
significant transactions (including mergers or acquisitions, divestitures, joint ventures or other strategic initiatives) by us
or others in the restaurant industry. In addition, the equity markets have experienced price and volume fluctuations that
affect the stock price of companies in ways that have been unrelated to an individual company’s operating performance.
The price of our common stock may continue to be volatile, based on factors specific to our company and industry, as
well as factors related to the equity markets overall.

Our stock price could be adversely affected if our performance falls short of our financial guidance and/or
market expectations.

Our failure to achieve performance consistent with our financial guidance and/or market expectations could

adversely affect the price of our stock. Factors such as comparable restaurant sales that are below our target, slowing
growth of our concepts domestically, our inability to successfully integrate and realize the anticipated benefits of the
Acquisition, execute other growth opportunities, a decline in growth of our international business, any event that causes
our operating costs to substantially increase, including, without limitation, any of the events described elsewhere in
these Risk Factors, or our failure to repurchase stock as expected or pay or increase our dividend over time, could cause
our performance to fall short of our financial guidance and/or market expectations.

Our stock price could be adversely affected if we are unable to continue to pay or if we are unable to increase
dividends.

Our ability to pay and increase our dividends over time will depend on our ability to generate sufficient cash

flows from operations and capacity to borrow funds, which may be subject to economic, financial, competitive and other
factors that are beyond our control. The New Facility limits cash distributions with respect to our equity interests, such
as cash dividends and share repurchases, based on a defined ratio. (See Note 12 of Notes to Consolidated Financial
Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.) Any failure to pay or increase
our dividends over time may negatively impact investor confidence in us, and may negatively impact our stock price.

Our stock price could be adversely affected by future sales or other dilution of our equity.

We are not restricted from issuing additional common stock or preferred stock, including any securities that are

convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any
substantially similar securities. Our Board of Directors is authorized to issue additional shares of common stock and
additional classes or series of preferred stock without any action on the part of the stockholders. The Board of Directors
also has the discretion, without stockholder approval, to set the terms of any such classes or series of preferred stock that
may be issued, including voting rights, dividend rights and preferences over the common stock with respect to dividends
or upon the liquidation or winding up of our business and other terms. If we issue preferred shares that have a preference
over our common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up, or if we
issue preferred shares with voting rights that dilute the voting power of our common stock, the rights of our common
stockholders or the market price of our common stock could be materially adversely affected.

Our business and stock price could be adversely affected by the actions of activist investors.

Publicly-traded companies have increasingly become subject to activist investor campaigns. Responding to
actions of an activist investor may be a significant distraction for our management and staff, and could require us to
expend significant time and resources, including legal fees and potential proxy solicitation expenses. Any of these
conditions could materially adversely affect our financial performance.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.

PROPERTIES

Our corporate support center and one of our bakery production facilities are located in Calabasas Hills,
California. The corporate support center consists of an 88,000 square foot main facility and a 19,000 square foot training
facility on an approximately five acre parcel of land. The bakery production facility is a 60,000 square foot facility on an
approximately three acre parcel of land. Our second bakery facility located in Rocky Mount, North Carolina is a 100,000
square foot facility on an approximately 31 acre parcel of land. Our development and design department is in a 29,000
square foot facility on approximately one acre of land in Irvine, California. All of these properties are owned by the
Company. FRC's headquarters are located in Phoenix, Arizona in 22,150 square feet of leased office space.

As of March 11, 2020, we operated 294 Company-owned restaurants: 206 under The Cheesecake Factory®
mark in 39 states, the District of Columbia, Puerto Rico and Ontario, Canada; 50 within our FRC subsidiary in nine
states and the District of Columbia; 23 under the North Italia® mark in 11 states and the District of Columbia; 13 under
the Grand Lux Cafe® mark in eight states; one under the RockSugar Southeast Asian Kitchen® mark in California; and
one under the Social Monk Asian KitchenTM mark in California. All of our Company-owned restaurants are located on
leased properties, and we have no current plans to own the real estate underlying our restaurants.

The Cheesecake Factory
Company-Owned Restaurants

Location
Alabama ..........................................................................................................................
Arizona ............................................................................................................................
California ........................................................................................................................
Colorado ..........................................................................................................................
Connecticut .....................................................................................................................
Delaware .........................................................................................................................
District of Columbia........................................................................................................
Florida .............................................................................................................................
Georgia ............................................................................................................................
Hawaii .............................................................................................................................
Idaho ...............................................................................................................................
Illinois .............................................................................................................................
Indiana ............................................................................................................................
Iowa ................................................................................................................................
Kansas .............................................................................................................................
Kentucky .........................................................................................................................
Louisiana .........................................................................................................................
Maryland .........................................................................................................................
Massachusetts .................................................................................................................
Michigan .........................................................................................................................
Minnesota ........................................................................................................................
Missouri ..........................................................................................................................
Nebraska .........................................................................................................................
Nevada ............................................................................................................................
New Jersey ......................................................................................................................
New Mexico ....................................................................................................................
New York ........................................................................................................................
North Carolina ................................................................................................................
Oklahoma ........................................................................................................................
Ohio ................................................................................................................................
Oregon ............................................................................................................................
Pennsylvania ...................................................................................................................
Puerto Rico......................................................................................................................
Rhode Island ...................................................................................................................
South Carolina ................................................................................................................
Tennessee ........................................................................................................................
Texas ...............................................................................................................................
Utah .................................................................................................................................
Virginia ...........................................................................................................................
Washington .....................................................................................................................
Wisconsin ........................................................................................................................
Ontario, Canada ..............................................................................................................
Total ...........................................................................................................................

1
6
39
3
4
1
1
19
5
2
1
6
2
1
1
2
1
6
7
2
2
3
1
5
10
1
12
4
2
7
2
5
1
1
1
5
16
2
7
5
3
1
206

ITEM 3.

LEGAL PROCEEDINGS

See Note 14 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for a summary of

legal proceedings.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on The Nasdaq Global Select Market under the symbol CAKE. There were

approximately 1,000 holders of record of our common stock at February 21, 2020, and we estimate there were
approximately 43,500 beneficial stockholders on that date.

Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be

dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash
distributions pursuant to the terms and conditions of the New Facility and applicable law, and such other factors that the
Board considers relevant. (See Note 12 and 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this
report for further discussion of our long-term debt and stockholders’ equity, respectively and see Item 1A — Risk
Factors — Our stock price could be adversely affected if we are unable to continue to pay or if we are unable to increase
dividends.)

The following table presents our purchases of our common stock during the thirteen weeks ended December 31,

2019 (in thousands, except per share data):

Period
October 2 — November 5, 2019 ...................
November 6 — December 3, 2019 ...............
December 4 — December 31, 2019 ..............
Total .........................................................

Average
Price Paid
per Share
—
43.59
42.93

— $
8
2
10

Total
Number
of Shares
Purchased (1)

Total Number of Shares Maximum Number of
Shares that May Yet
Be Purchased Under the
Plans or Programs

Purchased as Part of
Publicly Announced
Plans or Programs

—
—
—
—

3,090
3,082
3,080

(1) The total number of shares purchased includes 9,690 shares withheld upon vesting of restricted share awards to

satisfy tax withholding obligations.

On July 21, 2016, our Board authorized the repurchase of up to 56.0 million shares of our common stock, we

have cumulatively repurchased 52.9 million shares at a total cost of $ 1,693.1 million through December 31, 2019,
including 9,690 shares at a cost of $0.4 million during the fourth quarter of fiscal 2019. Our share repurchase
authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be
modified, suspended or terminated at any time. (See Note 15 of Notes to Consolidated Financial Statements in Part IV,
Item 15 of this report for further discussion of our repurchase authorization and methods.)

The timing and number of shares repurchased are also subject to legal constraints and financial covenants under

the New Facility that limit share repurchases based on a defined ratio. (See Note 12 of Notes to Consolidated Financial
Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.)

Price Performance Graph

The following graph compares the cumulative five-year total return provided to stockholders on the Company’s

common stock relative to the S&P 400 Midcap Index, the NASDAQ US Benchmark TR Index and the Nation’s
Restaurant News Index. The graph assumes a $100 initial investment and the reinvestment of dividends in each of the
indices. The measurement points utilized in the graph consist of the last trading day in each calendar year, which closely
approximates the last day of the respective fiscal year of the Company. The historical stock performance presented
below is not intended to and may not be indicative of future stock performance.

12/31/14 12/31/15 12/30/16 12/29/17 12/31/18 12/31/19
The Cheesecake Factory Incorporated ..................................... $ 100 $
93 $ 123 $ 101 $
86
96 $ 114 $ 131 $ 114 $ 142
S&P 400 Midcap Index ............................................................ $ 100 $
NASDAQ US Benchmark TR Index (1) ................................... $ 100 $ 100 $ 114 $ 138 $ 130 $ 171
Nation’s Restaurant News Index (2) .......................................... $ 100 $ 114 $ 115 $ 137 $ 147 $ 177

93 $

(1) Underlying data provided by Nasdaq Global Indexes.
(2) The Nation’s Restaurant News Index (“Index”) is a comprehensive restaurant industry index. In addition to fine

and casual dining, the Index includes fast casual and quick-serve segment.

This graph shall not be deemed incorporated by reference by any general statement incorporating by reference
this Annual Report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.

$0$50$100$150$20012/31/201412/31/201512/31/201612/31/201712/31/201812/31/2019The Cheesecake Factory IncorporatedS&P 400 Midcap IndexNASDAQ US Benchmark TR Index⁽¹⁾Nation's Restaurant News Index⁽²⁾

ITEM 6.

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with our consolidated financial statements

and related notes thereto, and with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”

2019

2018

Fiscal Year (1)
2016
2017
(In thousands, except per share data)

2015

Statements of Income Data:
Revenues ........................................................................... $ 2,482,692 $ 2,332,331

$ 2,260,502

$ 2,275,719

$ 2,100,609

Costs and expenses:

Cost of sales .................................................................
Labor expenses .............................................................
Other operating costs and expenses..............................
General and administrative expenses ...........................
Depreciation and amortization expenses ......................
Impairment of assets and lease terminations ................
Acquisition-related costs ..............................................
Acquisition-related contingent consideration,
compensation and amortization expenses ....................
Preopening costs...........................................................
Total costs and expenses ............................................

561,783
899,667
631,613
160,199
88,133
18,247
5,270

532,880
834,134
566,825
154,770
95,976
17,861
—

519,388
777,595
552,791
141,533
92,729
10,343
—

526,628
759,998
540,365
146,042
88,010
114
—

504,031
684,818
500,640
137,402
85,563
6,011
—

1,033
13,149
2,379,094

—
10,937
2,213,383

—
13,278
2,107,657

—
13,569
2,074,726

—
16,898
1,935,363

Income from operations ....................................................
Gain/(loss) on investments in unconsolidated
affiliates ...........................................................................
Interest and other expense, net ..........................................
Income before income taxes .............................................
Income tax provision/(benefit) ..........................................
Net income ........................................................................ $ 127,923 $

39,233
(2,497)
140,334
13,041

103,598

118,948

152,845

200,993

165,246

(4,754)
(6,783)
107,411
8,376
99,035

(479)
(5,900)
146,466
(10,926)
$ 157,392

—

(9,225)
191,768
52,274
$ 139,494

—
(5,894)
159,352
42,829
$ 116,523

Net income per share:

Basic ............................................................................. $
Diluted .......................................................................... $

2.90 $
2.86 $

2.19
2.14

$
$

3.35
3.27

$
$

2.91
2.83

$
$

2.39
2.30

Weighted average shares outstanding:

Basic .............................................................................
Diluted ..........................................................................

43,949
44,545

45,263
46,215

46,930
48,152

47,981
49,372

48,833
50,605

Cash dividends declared per common share ..................... $

1.38 $

1.24

1.06

0.88

0.73

Balance Sheet Data (at end of period):
Cash and cash equivalents................................................. $
Total assets ........................................................................
Total long-term debt and deemed landlord
financing liability, including current portion ....................
Total stockholders’ equity .................................................

58,416 $

2,840,593

26,578
1,314,133

$
6,008
1,333,060

$
53,839
1,293,319

$
43,854
1,233,346

290,000
571,742

118,610
571,059

113,527
613,530

104,868
603,207

91,343
588,539

Restaurant Data:
The Cheesecake Factory comparable restaurant sales ......
The Cheesecake Factory restaurants open at year-end ......

0.8 %
206

1.7 %
201

(0.8) %
199

1.2 %
194

2.6 %
187

(1) Fiscal 2016 consisted of 53 weeks. All other fiscal years presented consisted of 52 weeks. The estimated impact

of the 53rd week in fiscal 2016 was an increase in revenues and diluted net income per share of approximately
$54.7 million and $0.07, respectively.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

General

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"),

which contains forward-looking statements, should be read in conjunction with our audited consolidated financial
statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this
report and the cautionary statements included throughout this report. The inclusion of supplementary analytical and
related information herein may require us to make estimates and assumptions to enable us to fairly present, in all
material respects, our analysis of trends and expectations with respect to our results of operations and financial position.

The following MD&A includes a discussion comparing our results in fiscal 2019 to fiscal 2018. For a

discussion comparing our results from fiscal 2018 to fiscal 2017, refer to “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year
ended January 1, 2019, filed with the SEC on March 4, 2019.

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and

relentlessly focused on hospitality. We currently own and operate 294 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory®, North Italia® and a collection within our FRC subsidiary.
Internationally, 26 The Cheesecake Factory® restaurants operate under licensing agreements. Our bakery division
operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international
licensees and third-party bakery customers.

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant
Concepts LLC (“FRC”), including Flower Child and all other FRC brands (the “Acquisition”). The results of operations,
financial position and cash flows of the acquired businesses are included in our consolidated financial statements as of
the acquisition date. (See Note 2 of Notes to Consolidated Financial Statements in Part I, Item 1 of this report for further
discussion of the Acquisition.)

Overview

Our strategy is driven by our commitment to customer satisfaction and is focused primarily on menu
innovation, service and operational execution to continue to differentiate ourselves from other restaurant concepts, as
well as to drive competitively strong performance that is sustainable. Financially, we are focused on prudently managing
expenses at our restaurants, bakery facilities, FRC headquarters and corporate support center, and leveraging our size to
make the best use of our purchasing power.

Investing in new Company-owned restaurant development is our top capital allocation priority, with a focus on
opening our concepts in premier locations within both new and existing markets . For The Cheesecake Factory concept,
we target an average cash-on-cash return on investment of approximately 20% to 25% at the unit level. We target an
average cash-on-cash return on investment of about 35% for the North Italia concept and 25% to 30% for the FRC
concepts. Returns are affected by the cost to build restaurants, the level of revenues that each restaurant can deliver and
our ability to maximize the profitability of restaurants. Investing in new restaurant development that meets our return on
investment criteria is expected to support achieving mid-teens Company-level return on invested capital.

Our overall revenue growth is primarily driven by revenues from new restaurant openings and increases in

comparable restaurant sales. Changes in comparable restaurant sales come from variations in customer traffic, as well as
in average check.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing

average check and stabilizing customer traffic through (1) continuing to offer innovative, high quality menu items that
offer customers a wide range of options in terms of flavor, price and value (2) focusing on service and hospitality with
the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient
options for off-premise dining. We are continuing our efforts on a number of initiatives, including a greater focus on
increasing customer throughput in our restaurants, leveraging the success of our gift card program, working with a third

party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities,
augmenting our marketing programs, enhancing our training programs and leveraging our customer satisfaction
measurement platform.

Average check is driven by menu price increases and/or changes in menu mix. We generally update The
Cheesecake Factory restaurant menus twice a year, and our philosophy is to use price increases to help offset key
operating cost increases in a manner that balances protecting both our margins and customer traffic levels. We plan to
continue targeting menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help
mitigate cost pressure in higher-wage geographies, and expect near-term increases to be at the higher end of this range.

Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and

administrative ("G&A") expenses and preopening expenses. Our objective is to stabilize our margins, and longer-term
to drive margin expansion, by maintaining flat restaurant-level margins at The Cheesecake Factory concept, leveraging
our bakery operations, international and consumer packaged goods royalty revenue streams and G&A expense over time,
and optimizing our restaurant portfolio.

We plan to maintain a balanced capital allocation strategy, comprised of: investing in new restaurants that are

expected to meet our targeted returns, repaying borrowings under the New Facility and continuing our dividend and
share repurchase program, the latter of which offsets dilution from our equity compensation program and supports our
earnings per share growth. Our ability to declare dividends and repurchase shares is subject to financial covenants under
the New Facility.

Our domestic revenue growth (comprised of our annual unit growth and comparable sales growth), combined

with international expansion, planned debt repayment, our share repurchase program and our dividend supports our long-
term financial objective of 13% to 14% total return to shareholders, on average. We define our total return as earnings
per share growth plus our dividend yield. (See Item 1A — Risk Factors — “Our stock price could be adversely affected
if our performance falls short of our financial guidance and/or market expectations.”)

Results of Operations

The following table presents, for the periods indicated, information from our consolidated statements of income

expressed as percentages of revenues.

Revenues ...................................................................................................

100.0 %

2019

Fiscal Year
2018

2017

Costs and expenses:

Cost of sales .........................................................................................
Labor expenses .....................................................................................
Other operating costs and expenses ......................................................
General and administrative expenses ...................................................
Depreciation and amortization expenses ..............................................
Impairment of assets and lease terminations ........................................
Acquisition-related costs .....................................................................
Acquisition-related contingent consideration, compensation and
amortization expenses ..........................................................................
Preopening costs ...................................................................................
Total costs and expenses ....................................................................

22.6
36.3
25.5
6.5
3.5
0.7
0.2

0.0
0.5
95.8

22.8
35.8
24.3
6.6
4.1
0.8
—

—
0.5
94.9

Income from operations ............................................................................
Gain/(loss) on investments in unconsolidated affiliates ............................
Interest and other expense, net ..................................................................
Income before income taxes......................................................................
Income tax provision/(benefit) ..................................................................
Net income ................................................................................................

4.2
1.6
(0.1)
5.7
0.6
5.1 %

5.1
(0.3)
(0.2)
4.6
0.4
4.2 %

23.0
34.4
24.4
6.2
4.1
0.5
—

—
0.6
93.2

6.8
(0.0)
(0.3)
6.5
(0.5)
7.0 %

Fiscal 2019 Compared to Fiscal 2018

Revenues

Revenues increased 6.5% to $2,482.7 million for fiscal 2019 compared to $2,332.3 million for fiscal 2018,

primarily due to additional revenue related to the acquired restaurants, new restaurant openings and positive comparable
restaurant sales.

Revenue contribution from the acquired concepts in the fourth quarter of fiscal 2019, including comparable

restaurant sales growth of approximately 4% for North Italia, totaled $92.0 million. Comparable sales at The Cheesecake
Factory restaurants increased by 0.8%, or $17.5 million, from fiscal 2018. This compares to the casual dining industry
which had approximately flat comparable sales, as measured by Knapp Track. The Cheesecake Factory comparable sales
growth was driven by average check growth of 4.0% (based on an increase of 3.1% in menu pricing and a 0.9% positive
change in mix), partially offset by a decline in customer traffic of 3.2%. We implemented effective menu price increases
of approximately 1.6% in both the first and third quarters of fiscal 2019. The Cheesecake Factory average sales per
restaurant operating week increased 0.8% to $207,310 in fiscal 2019 from $205,660 in fiscal 2018. Total operating
weeks at The Cheesecake Factory restaurants increased 1.7% to 10,520 in fiscal 2019 compared to 10,344 in the prior
year. North Italia average sales per restaurant operating week for the fourth quarter was $125,960 based on 280
operating weeks.

Restaurants become eligible to enter our comparable sales base in their 19th month of operation. At December

31, 2019, there were nine The Cheesecake Factory restaurants not yet in our comparable sales base. International
licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded
from our comparable sales calculations.

External bakery sales were $ 58.4 million for fiscal 2019 compared to $ 54.4 million for fiscal 2018.

Cost of Sales

Cost of sales consists of food, beverage, retail and bakery production supply costs incurred in conjunction with

our restaurant and bakery revenues, and excludes depreciation, which is captured separately in depreciation and
amortization expenses. As a percentage of revenues, cost of sales was 22.6% for fiscal 2019 compared to 22.8% for
fiscal 2018.

The Cheesecake Factory restaurant menus are among the most diversified in the foodservice industry and,

accordingly, are not overly dependent on a few select commodities. Changes in costs for one commodity sometimes can
be offset by cost changes in other commodity categories. The principal commodity categories for our restaurants include
general grocery items, dairy, produce, seafood, poultry, meat and bread. (See the discussion of our contracting activities
in Part II, Item 7A — “Quantitative and Qualitative Disclosures About Market Risk.”)

As has been our past practice, we will carefully consider opportunities to introduce new menu items and
implement selected menu price increases to help offset any expected cost increases for key commodities and other goods
and services. For new restaurants, cost of sales will typically be higher for a period of time after opening until our
management team becomes more accustomed to predicting, managing and servicing the sales volumes at these
restaurants.

Labor Expenses

As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery direct

production labor, including associated fringe benefits, were 36.3% and 35.8% in fiscal 2019 and fiscal 2018,
respectively. This variance was driven primarily by higher hourly wage rates.

For new restaurants, labor expenses will typically be higher for a period of time after opening while our

management team becomes more accustomed to predicting and managing the sales volumes at the new restaurants.

Other Operating Costs and Expenses

Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, common area

expenses, insurance, licenses, taxes and utilities), other operating expenses (excluding food costs and labor expenses,
which are reported separately) and bakery production overhead and distribution expenses. As a percentage of revenues,
other operating costs and expenses increased to 25.5% for fiscal 2019 from 24.3% for fiscal 2018. This increase was
primarily driven by increased rent expense related to our adoption of the new lease accounting standard and higher
marketing costs, partially offset by lower general liability costs.

G&A Expenses

G&A expenses consist of the restaurant management recruiting and training program, restaurant field
supervision, corporate support and bakery administrative organizations, as well as gift card commissions to third-party
distributors. As a percentage of revenues, G&A expenses decreased to 6.5% for fiscal 2019 versus 6.6% for fiscal 2018.

Depreciation and Amortization Expenses

As a percentage of revenues, depreciation and amortization expenses were 3.5% in fiscal 2019 compared to

4.1% in fiscal 2018. This decrease was primarily due to our adoption of the new lease accounting standard. (See Note 1
of Notes to Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our adoption of the
new lease accounting standard.)

Impairment of Assets and Lease Terminations

In fiscal 2019, we recorded $18.2 million of impairment of assets and lease termination expense related to the

of impairment of assets and lease termination expense related to the impairment of one The Cheesecake Factory
restaurant, one Grand Lux Cafe and one RockSugar Southeast Asian Kitchen and the closure of two The Cheesecake
Factory restaurants.

Acquisition-Related Costs

In fiscal 2019, we recorded $5.3 million of costs to effect and integrate the Acquisition.

Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses

In fiscal 2019, we recorded $1.0 million of acquisition-related expenses related to changes in the fair value of

the deferred and contingent consideration and compensation liabilities, as well as amortization of acquired definite-lived
licensing agreements.

Preopening Costs

Preopening costs were $ 13.1 million for fiscal 2019 compared to $10.9 million for fiscal 2018 . We opened

nine restaurants in fiscal 2019 comprised of five The Cheesecake Factory restaurants, one Social Monk Asian Kitchen,
one North Italia and two Flower Child locations, compared to five restaurants in fiscal 2018 comprised of four The
Cheesecake Factory restaurants and one Grand Lux Cafe. Preopening costs include all costs to relocate and compensate
restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff
members, and wages, travel and lodging costs for our opening training team and other support staff members. Also
included are expenses for maintaining a roster of trained managers for pending openings, the associated temporary
housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs,
and corporate travel and support activities. Preopening costs can fluctuate significantly from period to period based on
the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Gain/(loss) on Investments in Unconsolidated Affiliates

We recorded a $39.2 million gain on investments in unconsolidated affiliates in fiscal 2019 compared to a $4.8

million loss in fiscal 2018. This variance was primarily driven by the fiscal 2019 gain of $52.7 million on our
investments in North Italia and Flower Child upon acquisition of the remaining equity interests in these concepts,
partially offset by an increase in our share of pre-acquisition losses incurred by these concepts which were driven
primarily by impairment of assets and acquisition-related expenses.

Interest and Other Expense, Net

Interest and other expense, net was $2.5 million in fiscal 2019 compared to $6.8 million in fiscal 2018. This

variance was primarily due to our adoption of the new lease accounting standard under which we no longer have deemed
landlord financing liabilities and associated interest expense, partially offset by increased interest expense related to
higher outstanding debt.

Income Tax Provision/(Benefit)

Our effective income tax rate was 9.3% in fiscal 2019 compared to 7.8% in fiscal 2018. This variance was

driven primarily by a lower proportion of FICA tip credit in relation to pre-tax income partially offset by non-taxable
gains on our investments in variable life insurance contracts used to support our non-qualified deferred compensation
plan as compared to non-deductible losses in fiscal 2018. (See Note 18 of Notes to Consolidated Financial Statements in
Part IV, Item 15 of this report for further discussion of income taxes.)

Non-GAAP Measures

Adjusted net income and adjusted diluted net income per share are supplemental measures of our performance
that are not required by or presented in accordance with GAAP. These non-GAAP measures may not be comparable to
similarly titled measures used by other companies and should not be considered in isolation or as a substitute for

measures of performance prepared in accordance with GAAP. We calculate these non-GAAP measures by eliminating
from net income and diluted net income per share the impact of items we do not consider indicative of our ongoing
operations. We use these non-GAAP financial measures for financial and operational decision-making and as a means to
evaluate period-to-period comparisons. Our inclusion of these adjusted measures should not be construed as an
indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses
or generate income similar to the adjusted items.

Following is a reconciliation from net income and diluted net income per share to the corresponding adjusted

measures (in thousands, except per share data).

2019

Fiscal Year
2018

2017

Net income ............................................................................................................... $ 127,293 $ 99,035 $ 157,392
10,343
479
—
—

Impairment of assets and lease terminations (1) ...................................................
Loss on investment in unconsolidated affiliates (2) ..............................................
Gain on investment in unconsolidated affiliates (3) ..............................................
Acquisition-related costs (4) .................................................................................
Acquisition-related contingent consideration, compensation and amortization
expenses (5) ..........................................................................................................
Tax effect of adjustments (6) ................................................................................
One-time tax benefit items (7) ..............................................................................

—
(4,329)
(38,525)
Adjusted net income................................................................................................. $ 116,428 $ 115,770 $ 125,360

18,247
13,439
(52,672)
5,270

17,861
4,754
—
—

—
(5,880)
—

1,033
3,818
—

Diluted net income per share.................................................................................... $
Impairment of assets and lease terminations (1) ...................................................
Loss on investment in unconsolidated affiliates (2) ..............................................
Gain on investment in unconsolidated affiliates (3) ..............................................
Acquisition-related costs (4) .................................................................................
Acquisition-related contingent consideration, compensation and amortization
expenses (5) ..........................................................................................................
Tax effect of adjustments (6) ................................................................................
One-time tax benefit items (7) ..............................................................................
Adjusted diluted net income per share (8) ................................................................. $

2.86 $
0.41
0.30
(1.18)
0.12

2.14 $
0.39
0.10
—
—

3.27
0.21
0.01
—
—

0.02
0.09
—
2.61 $

—
(0.13)
—
2.51 $

—
(0.09)
(0.80)
2.60

(1) See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion

of impairment of long-lived assets and lease terminations expense.

(2) Represents our share of pre-acquisition losses incurred by North Italia and Flower Child.
(3) Represents gain related to the acquisition of the remaining equity interests in North Italia and Flower Child.
(See Note 2 and Note 18 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for
further discussion of the Acquisition and income taxes, respectively.)

(4) Represents our costs incurred to effect and integrate the Acquisition. (See Note 2 of Notes to Consolidated

Financial Statements in Part IV, Item 15 of this report for further discussion of the Acquisition.)
(5) Represents changes in the fair value of the acquisition-related deferred consideration and contingent

consideration and compensation liabilities, as well as amortization of acquired definite-lived licensing
agreements. (See Note 2 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for
further discussion of the Acquisition.)

(6) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments other
than the gain on investment in unconsolidated affiliates assumes a 26% tax rate for fiscal 2019 and 2018 and a
40% tax rate for fiscal 2017.

(7) Represents a benefit to our income tax provision related to the Tax Act in fiscal 2017. (See Note 18 of Notes to
Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.)

(8) Adjusted diluted net income per share may not add due to rounding.

Fiscal 2020 Outlook

This discussion contains forward-looking statements within the meaning of the Private Securities Litigation

Reform Act of 1995, as codifed in Section 27A of the Securities Act, and Section 21E of the Echange Act and should be
read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the
“Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report.

For fiscal 2020, we estimate adjusted diluted net income per share will be between $2.70 and $2.86 based on an
assumed comparable sales range of 1% to 2% at The Cheesecake Factory restaurants and approximately $425 million in
revenue contributed by North Italia and FRC. This adjusted diluted net income per share range excludes acquisition-
related costs and contingent consideration, compensation and amortization, which we expect will be approximately $8
million and $4 million, respectively. For fiscal 2020, we estimate food inflation of about 2%, wage rate inflation of
approximately 5.5% and an effective tax rate of approximately 9%.

In fiscal 2020, we plan new unit growth to accelerate with as many as 20 new restaurants. This includes six The

Cheesecake Factory restaurants, six North Italia restaurants and eight restaurants within the FRC subsidiary, which
includes as many as four Flower Child locations. We also expect as many as four locations to open internationally under
licensing agreements.

We expect fiscal 2020 net capital expenditures to range between $130 million and $140 million to support

anticipated new unit growth and ongoing maintenance needs. We will also have a $17.3 million cash outflow for
acquisition-related deferred consideration.

Liquidity and Capital Resources

Our corporate financial objectives are to maintain a sufficiently strong and conservative balance sheet to
support our operating initiatives and unit growth while maintaining financial flexibility to provide the financial resources
necessary to protect and enhance the competitiveness of our restaurant and bakery brands and to provide a prudent level
of financial capacity to manage the risks and uncertainties of conducting our business operations under various economic
and industry cycles. Our ongoing capital requirements are principally related to our restaurant expansion plans, ongoing
maintenance of our restaurants and bakery facilities, and investment in our corporate and information technology
infrastructures.

Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of
our restaurant locations. We believe our operating lease arrangements continue to provide appropriate leverage for our
capital structure in a financially efficient manner. However, we are not limited to the use of lease arrangements as our
only method of opening new restaurants. Accordingly, our lease arrangements reduce, to some extent, our capacity to
utilize funded indebtedness in our capital structure.

Historically, we have obtained capital from our ongoing operations, public stock offerings, credit facilities,
stock option exercises and construction contributions from our landlords. Our requirement for working capital is not
significant, since our restaurant customers pay for their food and beverage purchases in cash or cash equivalents at the
time of sale, and we are able to sell many of our restaurant inventory items before payment is due to the suppliers of
such items.

The following table presents, for the periods indicated, a summary of our key cash flows from operating,

investing and financing activities (in millions):

2019

Fiscal Year
2018

2017

Cash provided by operating activities .................................................... $
Additions to property and equipment ..................................................... $
Growth capital provided to unconsolidated affiliates ............................ $
Acquisition, net of cash acquired ........................................................... $
Net borrowings on credit facility ........................................................... $
Deemed landlord financing proceeds ..................................................... $
Proceeds from exercise of stock options ................................................ $
Cash dividends paid ............................................................................... $
Treasury stock purchases ....................................................................... $

$
218.8
(73.8) $
(3.0) $
(261.7) $
$
280.0
$
—
$
7.7
(60.7) $
(51.0) $

291.3 $
(102.9) $
(25.0) $
— $
— $
21.8 $
8.6 $
(56.3) $
(109.3) $

238.8
(120.8)
(18.0)
—
10.0
12.1
9.0
(49.9)
(123.0)

During fiscal 2019, our cash and cash equivalents increased by $31.8 million to $58.4 million. This increase

was primarily attributable to cash provided by operating activities and borrowings on our credit facility, partially offset
by cash paid for the Acquisition, additions to property and equipment, dividend payments and treasury stock purchases.

Capital expenditures for new restaurants, including locations under development as of each fiscal year-end,

were $40.5 million, $58.6 million and $76.5 million for fiscal 2019, 2018 and 2017, respectively. Capital expenditures
also included $29.4 million, $26.9 million and $36.5 million for our existing restaurants and $3.9 million, $17.4 million
and $7.8 million for bakery and corporate capacity and infrastructure investments in fiscal 2019, 2018 and 2017,
respectively, including an infrastructure upgrade of our California bakery in 2018.

As of December 31, 2019, we maintained a $400 million unsecured revolving credit facility (the “New
Facility”), $40 million of which could be used for issuances of letters of credit. The New Facility, which terminates on
July 30, 2024, contains a commitment increase feature that could provide for an additional $200 million in available
credit upon our request and subject to the satisfaction of certain conditions. Certain of our material subsidiaries have
guaranteed our obligations under the New Facility. During fiscal 2019, we utilized the New Facility to fund the
Acquisition. During fiscal 2019, 2018 and 2017, we utilized our previous credit facility to fund a portion of our stock
repurchases. At December 31, 2019, we had net availability for borrowings of $90.6 million, based on a $290.0 million
outstanding debt balance and $19.4 million in standby letters of credit. The New Facility limits cash distributions with
respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio. As of December
31, 2019, we were in compliance with the covenants set forth in the New Facility. (See Note 12 of Notes to Consolidated
Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt .)

On October 2, 2019 (“Closing” or “Closing Date”), we acquired North Italia and FRC, including Flower Child

and all other FRC brands. The Acquisition was completed for consideration consisting of the following components:
$286 million in cash at Closing, which was primarily funded by drawing on the New Facility; assumption of $10 million
in debt previously owed by FRC to us; a $12 million indemnity escrow amount specifically related to North Italia due
ratably over the next two years; and $45 million of deferred consideration due ratably over the next four years (including
a $13 million indemnity escrow amount specifically related to the remaining FRC business).

The acquisition agreement also included a contingent consideration provision which is payable on the fifth
anniversary of the Closing Date and is based on achievement of revenue and profitability targets for the FRC brands
other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest
any FRC brand (other than North Italia and Flower Child). We are also required to provide financing to FRC in an
amount sufficient to support achievement of these targets during the five years after Closing. (See Note 2 of Notes to
Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of the Acquisition.)

In fiscal 2012, our Board approved the initiation of a cash dividend to our stockholders, which is subject to

quarterly Board approval. Cash dividends have been declared every quarter since initiation. Future decisions to pay or to
increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance,

financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and
conditions of the New Facility and applicable law, and other such factors that the Board considers relevant.

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have

cumulatively repurchased 52.9 million shares at a total cost of $1,693.1 million through December 31, 2019, including
9,690 shares at a cost of $0.4 million during the fourth quarter of fiscal 2019. During fiscal 2019, 2018 and 2017, we
repurchased 1.1 million, 2.3 million and 2.6 million shares of our common stock at a cost of $51.0 million, $109.3
million and $123.0 million, respectively. Our share repurchase authorization does not have an expiration date, does not
require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. We make
the determination to repurchase shares based on several factors, including current and forecasted operating cash flows,
capital needs associated with new restaurant development and maintenance of existing locations, dividend payments,
debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market
conditions. The timing and number of shares repurchased are also subject to legal constraints and financial covenants
under the New Facility that limit share repurchases based on a defined ratio. (See Note 12 of Notes to Consolidated
Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.) Our objectives with
regard to share repurchases are to offset the dilution to our shares outstanding that results from equity compensation
grants and to supplement our earnings per share growth. (See Note 15 of Notes to Consolidated Financial Statements in
Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods.)

Based on our current expansion objectives, we believe that during the upcoming 12 months our cash and cash
equivalents, combined with expected cash flows provided by operations, available borrowings under the New Facility
and expected landlord construction contributions should be sufficient in the aggregate to finance our capital allocation
strategy, including capital expenditures, continuation of our dividend and share repurchase program, potential debt
repayments and obligations associated with the Acquisition.

As of December 31, 2019, we had no financing transactions, arrangements or other relationships with any

unconsolidated entities or related parties. Additionally, we had no financing arrangements involving synthetic leases or
trading activities involving commodity contracts.

Contractual Obligations and Commercial Commitments

The following table summarizes our undiscounted contractual obligations and commercial commitments as of

December 31, 2019 (amounts in millions):

Payment Due by Period

Total

Less than
1 Year

1‑3 Years 4‑5 Years

More than
5 Years

Contractual obligations
Recorded contractual obligations:

Operating leases liabilities (1) ..................................................... $ 2,030.5 $
Long-term debt ..........................................................................
Deferred consideration (2)...........................................................
Uncertain tax positions (3) ..........................................................

290.0
57.0
0.7

Unrecorded contractual obligations:

122.3 $ 249.8 $ 242.6 $ 1,415.8
—
—
—

290.0
11.2
—

—
28.5
0.7

—
17.3
—

Purchase obligations (4) ..............................................................
Real estate obligations (5) ...........................................................

118.2
176.1

87.3
37.6

24.0
15.0

6.9
11.1

—
112.4

Total ............................................................................................. $ 2,672.5 $

264.5 $ 318.0 $ 561.8 $ 1,528.2

Other commercial commitments
Standby letters of credit ............................................................... $

19.4 $

19.4 $ — $ — $ —

(1) Includes $867.2 million related to options to extend lease terms that are reasonably certain of being exercised.
(See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of
leases.)

(2) Represents acquisition-related deferred consideration. (See Note 2 of Notes to Consolidated Financial

Statements in Part IV, Item 15 of this report for further discussion of the Acquisition.)

(3) Represents liability for uncertain tax positions. (See Note 18 of Notes to Consolidated Financial Statements in

Part IV, Item 15 of this report for further discussion of income taxes.)

(4) Includes obligations for inventory purchases, equipment purchases, information technology and other

miscellaneous commitments. Amounts exclude agreements that are cancelable without significant penalty.
(5) Real estate obligations include construction commitments, net of up-front landlord construction contributions,
and legally binding minimum lease payments for leases signed but not yet commenced. Amounts exclude
agreements that are cancelable without significant penalty.

The acquisition agreement also included a contingent consideration provision which is payable on the fifth

anniversary of the Closing Date and is based on achievement of revenue and profitability targets for the FRC brands
other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest
any FRC brand (other than North Italia and Flower Child) during the five years after Closing. We are also required to
provide financing to FRC in an amount sufficient to support achievement of these targets during the five years after
Closing. (See Note 2 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further
discussion of the Acquisition.)

We expect to fund our contractual obligations primarily with operating cash flows generated in the normal

course of business.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial condition and

results of operations and also require the greatest amount of subjective or complex judgments by management.
Judgments and uncertainties regarding the application of these policies may result in materially different amounts being

reported under various conditions or using different assumptions. We consider the following policies to be the most
critical in understanding the judgment that is involved in preparing our consolidated financial statements.

Business Combination

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant

Concepts LLC. In accordance with the acquisition method of accounting for business combinations, we allocated the
purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on
preliminary estimated fair values. Our purchase price allocation methodology contains uncertainties because it requires
us to make certain assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities,
including, but not limited to, property and equipment and intangible assets. We estimated the fair value of assets and
liabilities based upon widely-accepted valuation techniques, including discounted cash flow, relief from royalty and
Monte Carlo methods, depending on the nature of the assets acquired or liabilities assumed. The process for estimating
fair values in many cases requires the use of significant estimates, assumptions and judgments, including determining the
timing and estimates of future cash flows and developing appropriate discount rates. Unanticipated events or
circumstances may occur which could affect the accuracy of our fair value estimates. We expect minor adjustments to
our purchase accounting in the first quarter of fiscal 2020 as we finalize our valuation of the acquired intangible assets.

Contingent Consideration

The acquisition agreement also included a contingent consideration provision which is payable on the fifth

anniversary of the Closing Date. The fair value of the contingent consideration was determined utilizing a Monte Carlo
model based on estimated future revenues, margins and volatility factors, among other variables and estimates, and has
no maximum payment. The fair value of the contingent consideration is highly subjective, and results could change
materially if different estimates and assumptions were used.

Intangible Assets

Goodwill and other indefinite-lived intangible assets are tested for impairment annually or on an interim basis if
events or changes in circumstances between annual tests indicate a potential impairment. Factors considered include, but
are not limited to historical financial performance, a significant decline in expected future cash flows, unanticipated
competition, changes in management or key personnel, macroeconomic and industry conditions and the legal and
regulatory environment. If the qualitative assessment indicates that it is more likely than not that an impairment exists,
then a quantitative assessment is performed. The quantitative assessment requires an analysis of several best estimates
and assumptions, including future sales and operating results, and other factors that could affect fair value or otherwise
indicate potential impairment. The goodwill impairment assessment involves valuing our reporting units that carry
goodwill and considers their projected ability to generate income from operations and positive cash flow in future
periods. The fair value assessment could change materially if different estimates and assumptions were used.

Impairment of Long-Lived Assets

We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes
in circumstances indicate that the carrying value of the assets or asset group may not be recoverable. Factors considered
include, but are not limited to, negative cash flow, significant underperformance relative to historical or projected future
operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be
disposed of significantly before the end of its previously estimated useful life and significant negative industry or
economic trends.

Assessing whether impairment testing is warranted and, if so, determining the amount of expense require the

use of estimates and assumptions regarding future cash flows, which are subject to a significant degree of judgment
based on our experience and knowledge. These estimates can be significantly impacted by changes in the economic
environment, real estate market conditions and capital spending decisions.

Leases

The reasonably certain lease term and the incremental borrowing rate for each restaurant location require

judgment by management and can impact the classification and accounting for a lease as operating or finance, as well as
the value of the operating lease asset and liability. These judgments may produce materially different amounts of rent
expense than would be reported if different assumptions were used.

Self-Insurance Liabilities

We retain the financial responsibility for a significant portion of our risks and associated liabilities with respect

to workers’ compensation, general liability, staff member health benefits, employment practices and other insurable
risks. The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle
known claims, as well as claims incurred but not yet reported to us (“IBNR”) as of the balance sheet date. Our estimated
liabilities are based on information provided by our insurance brokers and insurers, combined with our judgment
regarding a number of assumptions and factors, including the frequency and severity of claims, claims development
history, case jurisdiction, applicable legislation and our claims settlement practices. Significant judgment is required to
estimate IBNR amounts, as parties have yet to assert such claims. If actual claims trends, including the severity or
frequency of claims, differ from our estimates, our financial results could be impacted.

Income Taxes

We compute income taxes based on estimates of our federal, state and foreign tax liabilities. Our estimates
include, but are not limited to, effective state and local income tax rates, allowable tax credits, depreciation expense
allowable for tax purposes and applicable valuation allowances on deferred tax assets. Our estimates are made based on
the best available information at the time we prepare our consolidated financial statements. In making our estimates, we
consider the impact of legislative and judicial developments. As these developments evolve, we update our estimates,
which, in turn, may result in adjustments to our effective tax rate. We generally file our income tax returns within
ten months after our fiscal year-end. All tax returns are subject to audit by the applicable taxing authorities, usually years
after the returns are filed, and could be subject to differing interpretations of the tax laws.

Uncertain tax positions taken or expected to be taken in a tax return are recognized (or derecognized) in the

financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be
sustained on its technical merits upon examination by tax authorities, taking into account available administrative
remedies and litigation. A recognized tax position is then measured at the largest amount of benefit that is greater than
50% likely of being realized upon ultimate resolution. Assessment of uncertain tax positions requires significant
judgments relating to the amounts, timing and likelihood of resolution. Our actual results could differ materially from
these estimates.

Recent Accounting Pronouncements

See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for a summary of

new accounting standards.

Impact of Inflation

The impact of inflation on food costs, labor, and other supplies and services can adversely impact our financial
results. While we attempt to at least partially offset increases in the costs of key operating resources by gradually raising
prices for our menu items and bakery products and employing more efficient purchasing practices, productivity
improvements and greater economies of scale, there can be no assurance that we will be effective in doing so.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of market risks contains forward-looking statements and should be read in
conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk
Factors” included in Part I, Item 1A of this report' the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Part II, Item 7 of this report and the cautionary statements included throughout this

report. Actual results may differ materially from the following discussion based on general conditions in the commodity
and financial markets.

We purchase food and other commodities for use in our operations based on market prices established with our

suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand
factors outside of our control. We mitigate the risk of supply shortages and obtain competitive prices by utilizing
multiple qualified suppliers for substantially all of our ingredients and supplies. We negotiate short-term and long-term
agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and
poultry, depending on market conditions and expected demand. We continue to evaluate the possibility of entering into
similar arrangements for other commodities and also periodically evaluate hedging vehicles, such as direct financial
instruments, to assist us in managing risk and variability associated with such commodities. Although these vehicles may
be available to us, as of the end of our 2019 fiscal year, we had chosen not to enter into any hedging contracts due to
pricing volatility, excessive risk premiums, hedge inefficiencies or other factors. Commodities for which we have not
entered into contracts can be subject to unforeseen supply and cost fluctuations, which at times may be significant.
Additionally, the cost of commodities subject to governmental regulation, such as dairy and corn, can be especially
susceptible to price fluctuation. Commodities we purchase on the international market may be subject to even greater
fluctuations in cost and availability, which could result from a variety of factors, including the value of the U.S. dollar
relative to other currencies, international trade disputes, tariffs and varying global demand. We may or may not have the
ability to increase menu prices or vary menu items in response to food commodity price increases. For fiscal years 2019
and 2018, a hypothetical increase of 1% in food costs would have negatively impacted cost of sales by $5.6 million and
$5.4 million, respectively. (See Item 1A — Risk Factors — “Our inability to anticipate and react effectively to changes
in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect
our financial performance.”)

We are exposed to market risk from interest rate changes on our funded debt. This exposure relates to the

component of the interest rate on the New Facility and our previous credit facility that is indexed to market rates. Based
on outstanding borrowings at December 31, 2019 and January 1, 2019, a hypothetical 1% rise in interest rates would
have increased interest expense by $2.9 million and $0.1 million, respectively, on an annual basis. (See Note 12 of Notes
to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.)

We are also subject to market risk related to our investments in variable life insurance contracts used to support

our ESP to the extent these investments are not equivalent to the related liability. In addition, because changes in these
investments are not taxable, gains and losses result in tax benefit and tax expense, respectively, and directly affect net
income through the income tax provision. Based on balances at December 31, 2019 and January 1, 2019, a hypothetical
10% decline in the market value of our deferred compensation asset and related liability would not have impacted
income before income taxes. However, under such scenario, net income would have declined by $1.9 million and $1.5
million at December 31, 2019 and January 1, 2019, respectively.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements required to be filed hereunder are set forth in Part IV, Item 15 of this

report.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

The information required by this Item 9 was previously reported in the Company’s Current Report on Form 8-K

that was filed with the SEC on March 7, 2018.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that

information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms,

and that such information is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives,
and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. We carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of December 31, 2019.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by,
or under the supervision of, our principal executive and principal financial officers and effected by our Board of
Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States (“GAAP”) and includes those policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2019 based on the criteria in “Internal Control - Integrated Framework (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, our
management concluded that our internal control over financial reporting was effective as of December 31, 2019.

On October 2, 2019, we completed the acquistion of North Italia and the remaining business of Fox Restaurant
Concepts LLC ("FRC"). As permitted by the Securities and Exchange Commission, management has elected to exclude
these businesses from its assessment of internal controls over financial reporting as of December 31, 2019. North Italia's
and FRC's operations are included in the Company's 2019 consolidated financial statements for the period from October
2, 2019 to December 31, 2019 and represented 28.3% of the Company's consolidated total assets as of December 31,
2019 and 3.7% of the Company's consolidated total revenues for the year ended December 31, 2019.

The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by

KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV, Item 15
of this report.

Changes in Internal Control over Financial Reporting

As previously announced, we acquired North Italia and the remaining business of Fox Restaurant Concepts,

including Flower Child and all other FRC brands on October 2, 2019. We have not fully evaluated any changes in
internal control over financial reporting associated with the acquisition and therefore any material changes that may
result from these acquisitions have not been disclosed in this report. We intend to disclose all material changes resulting
from these acquisitions within or prior to the time of our first annual assessment of internal control over financial
reporting that is required to include these entities.

There have been no other changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during fiscal year ended December 31, 2019 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a code of ethics which applies to our Chief Executive Officer, Chief Financial Officer and

Chief Accounting Officer, who are the Company’s principal executive, financial and accounting officers, respectively,
and the Company’s other executive officers and members of the Board of Directors, entitled “Code of Ethics for
Executive Officers, Senior Financial Officers and Directors.” We have also adopted a code of ethics which applies to
other employees entitled “Code of Ethics and Code of Business Conduct.” The codes of ethics are available on our
corporate website at www.thecheesecakefactory.com in the “Governance” section of our “Investors” page. The contents
of our website are not incorporated by reference into this report. We intend to satisfy disclosure requirements under
Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Ethics for Executive
Officers, Senior Financial Officers and Directors by posting such information on our website, at the address and
location specified above, or as otherwise required by the NASDAQ Global Market.

Information with respect to our executive officers is included in Part I, Item 1 of this report. Other information
required by this item is hereby incorporated by reference from the sections entitled “Election of Directors,” “The Board
and Corporate Governance,” and ”Delinquent Section 16(a) Reports” in our definitive proxy statement for the annual
meeting of stockholders to be held on May 30, 2019 (the “Proxy Statement”).

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this item is hereby incorporated by reference to the sections entitled “Directors

Compensation,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the
Proxy Statement.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

The information required by this item is hereby incorporated by reference to the section entitled “Beneficial
Ownership of Principal Stockholders and Management” and “Equity Compensation Plan Information” in the Proxy
Statement.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item is hereby incorporated by reference to the sections entitled “Policies
Regarding Review, Approval or Ratification of Transactions with Related Persons” and “The Board and Corporate
Governance” in the Proxy Statement.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is hereby incorporated by reference to the section entitled “Independent

Registered Public Accounting Firm Fees and Services” (in the proposal entitled “Ratification of Selection of
Independent Registered Public Accounting Firm”) in the Proxy Statement.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this Report:

(a) 1. Financial statements:

The consolidated financial statements required to be filed hereunder are listed in the Index to
Consolidated Financial Statements on page 48 of this report.

2. Financial statement schedules:

All schedules have been omitted because they are not applicable, not required or the information
has been otherwise supplied in the financial statements or notes to the financial statements.

3. Exhibits:

The Exhibits required to be filed hereunder are listed in the exhibit index included herein at page
75.

ITEM 16.

FORM 10-K SUMMARY

None.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ......................................................................................

Consolidated Balance Sheets .....................................................................................................................................

Consolidated Statements of Income ...........................................................................................................................

Consolidated Statements of Comprehensive Income .................................................................................................

Consolidated Statements of Stockholders’ Equity .....................................................................................................

Consolidated Statements of Cash Flows ....................................................................................................................

Notes to Consolidated Financial Statements ..............................................................................................................

Page

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
The Cheesecake Factory Incorporated:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of The Cheesecake Factory Incorporated and
subsidiaries (the Company) as of December 31, 2019 and January 1, 2019, the related consolidated statements of
income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended
December 31, 2019, and the related notes (collectively, the consolidated financial statements). We also have audited the
Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and January 1, 2019, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019 based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired North Italia and the remaining business of Fox Restaurant Concepts LLC (FRC) during 2019,
and management excluded from its assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2019, North Italia’s and FRC’s internal control over financial reporting associated with
28.3% of total assets and 3.7% of total revenues included in the consolidated financial statements of the Company as of
and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also
excluded an evaluation of the internal control over financial reporting of North Italia and FRC.

Change in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for
revenue from contracts with customers as of January 3, 2018 due to the adoption of Accounting Standards Codification
Topic 606, Revenue from Contracts with Customers, and has changed its method of accounting for leases as of January
2, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing

such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.

Assessment of carrying value of property and equipment

As discussed in Notes 1 and 6 to the consolidated financial statements, the property and equipment, net, and impairment
of assets and lease termination balances as of and for the year ended December 31, 2019 were $832 million and $18
million, respectively. The Company assesses the potential impairment of long-lived assets, which includes property and
equipment, net, on an annual basis or whenever events or changes in circumstances indicate the carrying value of the
asset or asset group may not be recoverable.

We identified the assessment of the carrying value of property and equipment, net, as a critical audit matter. For some
restaurant asset groups, the estimated undiscounted cash flow of the asset groups were less than their carrying values,
which indicated potential impairment. This required the Company to estimate the fair value of the asset groups in order
to measure the amount of impairment expense. The estimates of undiscounted cash flow and fair value resulted in the
application of greater auditor judgment. In particular, the revenue growth rate and the operating margin assumptions
used to estimate both the undiscounted cash flow and the fair value of the restaurant asset groups were challenging to
evaluate as minor changes to those assumptions had a potential significant effect on the Company’s assessment of the
carrying value of the restaurant asset groups, and the amount of the related impairment expense.

The primary procedures we performed to address the critical audit matter included the following. We tested certain
internal controls over the Company’s long-lived asset impairment assessment process. This included controls related to
the determination of the undiscounted cash flow and fair value of the restaurant asset groups, and the related revenue
growth rate and operating margin assumptions. We performed sensitivity analyses over the revenue growth rate and
operating margin assumptions to assess their impact on the Company’s determination of the undiscounted cash flow and
fair value of the restaurant assets groups. We evaluated the Company’s forecasted revenue growth rate and operating
margin assumptions for the restaurant asset groups by comparing the assumptions to the restaurant asset groups’
historical and peer group performance. We compared the Company’s revenue growth rate and operating margin
forecasts to actual results to assess the Company’s ability to accurately forecast.

Evaluation of the acquisition-date fair values of trade names and trademarks and remeasurement of previously held
equity interests

As discussed in Notes 1, 2 and 7 to the consolidated financial statements, on October 2, 2019, the Company acquired
North Italia and the remaining business of Fox Restaurant Concepts LLC (FRC). As a result of the transaction, the
Company acquired trade names and trademarks representing the names of the restaurant concepts acquired. The
acquisition-date fair value for the trade names and trademark assets are included in intangibles acquired of $337 million.
The Company also remeasured previously held equity interests in North Italia and Flower Child immediately before the
acquisition to acquisition-date fair value of $122 million and recognized a gain of $53 million which is included in gain
on investments in unconsolidated affiliates in the consolidated statements of operations.

We identified the evaluation of the acquisition-date fair value of the North Italia, Flower Child and other FRC trade
names and trademark assets and the remeasurement of previously held equity interests in North Italia and Flower Child
as a critical audit matter. A high degree of subjective auditor judgment was involved in evaluating certain inputs to the
relief from royalty model used to determine the fair value of the trade names and trademarks, and the discounted cash
flow model used to determine the enterprise value of North Italia and Flower Child. The key inputs used in the relief
from royalty model included royalty rates, discount rates, and revenue growth rates. The key inputs used in the
discounted cash flow model included revenue growth rates, EBITDA as a percentage of revenue, and discount rates.
There was limited observable market information and the calculated fair value of such assets was sensitive to possible
changes in these key inputs.

The primary procedures we performed to address this critical audit matter included the following. We tested certain
internal controls over the Company’s acquisition-date valuation process, including controls over the key inputs listed
above. In connection with our assessment of the inputs used in the valuation, we compared forecasted revenue growth
rates and EBITDA as a percentage of revenue to historical actual results and performing sensitivity analyses to assess the
impact of changes to the forecasted revenue growth rates. In addition, we involved valuation professionals with
specialized skills and knowledge, who assisted in:

•

evaluating the selected discount rates by comparing them against discount rate ranges that were independently
developed using publicly available market data;
assessing the forecasted revenue growth rates and EBITDA as a percentage of revenue by comparing them against
revenue growth rates and EBITDA as a percentage of revenue of publicly available market data for comparable
companies;
evaluating the selected royalty rates by comparing them against publicly available royalty rates of comparable
companies; and
testing the estimates of fair values of the trade name and trademark assets and enterprise values using independently
obtained market data and comparing the results to the Company’s fair value estimates.

Evaluation of the acquisition-date fair value of contingent consideration

As discussed in Notes 1, 2 and 13 to the consolidated financial statements, on October 2, 2019, the Company acquired
North Italia and the remaining business of Fox Restaurant Concepts LLC. The acquisition agreement included a
contingent consideration provision, a portion of which was considered part of the acquisition consideration, and the
remainder of which was considered future compensation expense. The acquisition-date fair values for the acquisition
consideration and future compensation expense were $13 million and $7 million, respectively.

We identified the evaluation of the acquisition-date fair value of the contingent consideration as a critical audit matter. A
high degree of subjective auditor judgment was required in evaluating certain inputs to the Monte Carlo model used to
determine the fair value of the contingent consideration. Specifically, the key inputs included forecasted revenue growth
rates, EBITDA as a percentage of revenue and volatility rate. There was limited observable market information, and the
calculated fair value of the contingent consideration was sensitive to possible changes to these key inputs.

The primary procedures we performed to address this critical audit matter included the following. We tested certain
internal controls over the Company’s acquisition-date valuation process, including controls over the key inputs listed
above. In connection with our assessment of the revenue and EBITDA forecasts used in the valuation, we compared
forecasted revenue growth rates and EBITDA as a percentage of revenue to historical actual results. In addition, we
involved valuation professionals with specialized skills and knowledge, who assisted in:

•

assessing the selected volatility rate by comparing it against publicly available volatility rate of comparable
companies;
developing estimates of the fair values of the contingent consideration using independently obtained external
information and comparing the results to the Company’s fair value estimates; and
performing sensitivity analyses to assess the impact of reasonably possible changes to the forecasted revenue growth
rates and EBITDA.

/s/ KPMG LLP

We have served as the Company’s auditor since 2018.

Los Angeles, California
March 11, 2020

THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

December 31, 2019 January 1, 2019

Current assets:

ASSETS

Cash and cash equivalents .............................................................................................................. $
Accounts receivable .......................................................................................................................
Income taxes receivable .................................................................................................................
Other receivables............................................................................................................................
Inventories......................................................................................................................................
Prepaid expenses ............................................................................................................................
Total current assets ......................................................................................................................

58,416 $
25,619
4,626
64,683
47,225
43,946
244,515

26,578
20,928
—
68,193
38,886
40,645
195,230

Property and equipment, net .............................................................................................................

831,599

913,275

Other assets:

Intangible assets, net ......................................................................................................................
Prepaid rent ...................................................................................................................................
Operating lease assets ....................................................................................................................
Investments in unconsolidated affiliates ........................................................................................
Other .............................................................................................................................................
Total other assets ........................................................................................................................

437,207
—
1,240,976
—
86,296
1,764,479

26,209
34,961
—
79,767
64,691
205,628

Total assets .............................................................................................................................. $

2,840,593 $

1,314,133

Current liabilities:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable .......................................................................................................................... $
Income taxes payable .....................................................................................................................
Gift card liabilities .........................................................................................................................
Operating lease liabilities ...............................................................................................................
Other accrued expenses .................................................................................................................
Total current liabilities ...............................................................................................................

61,946 $
—
187,978
128,081
236,582
614,587

Deferred income taxes .....................................................................................................................
Deferred rent liabilities .....................................................................................................................
Deemed landlord financing liabilities ...............................................................................................
Long-term debt .................................................................................................................................
Operating lease liabilities ..................................................................................................................
Other noncurrent liabilities ..............................................................................................................
Commitments and contingencies (Note 14) ......................................................................................
Stockholders’ equity:

Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued ...................................
Common stock, $.01 par value, 250,000,000 shares authorized; 97,685,178 and 96,621,990
shares issued at December 31, 2019 and January 1, 2019, respectively .........................................
Additional paid-in capital ..............................................................................................................
Retained earnings ..........................................................................................................................
Treasury stock, 52,916,434 and 51,791,941 shares at cost at December 31, 2019 and January 1,
2019, respectively ..........................................................................................................................
Accumulated other comprehensive loss .........................................................................................
Total stockholders’ equity ..........................................................................................................

49,071
712
172,336
—
194,381
416,500

52,123
79,697
113,095
10,000
—
71,659

33,847
—
—
290,000
1,189,869
140,548

—

977
855,989
1,408,333

967
828,676
1,384,494

(1,693,122)
(435)
571,742

(1,642,140)
(938)
571,059

Total liabilities and stockholders’ equity ................................................................................. $

2,840,593 $

1,314,133

See the accompanying notes to the consolidated financial statements.

THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

Revenues ............................................................................................................. $ 2,482,692 $ 2,332,331 $ 2,260,502
Costs and expenses:

Fiscal Year

2019

2018

2017

561,783
899,667
631,613
160,199
88,133
18,247
5,270

Cost of sales .....................................................................................................
Labor expenses ................................................................................................
Other operating costs and expenses .................................................................
General and administrative expenses ...............................................................
Depreciation and amortization expenses .........................................................
Impairment of assets and lease terminations ....................................................
Acquisition-related costs ..................................................................................
Acquisition-related contingent consideration, compensation and amortization
expenses ............................................................................................................
Preopening costs ..............................................................................................
Total costs and expenses ...............................................................................
Income from operations .....................................................................................
Gain/(loss) on investments in unconsolidated affiliates .....................................
Interest and other expense, net ...........................................................................
Income before income taxes ...............................................................................
Income tax provision/(benefit) ............................................................................
Net income ......................................................................................................... $ 127,293 $

1,033
13,149
2,379,094
103,598
39,233
(2,497)
140,334
13,041

532,880
834,134
566,825
154,770
95,976
17,861
—

—
10,937
2,213,383
118,948
(4,754)
(6,783)
107,411
8,376
99,035 $

519,388
777,595
552,791
141,533
92,729
10,343
—

—
13,278
2,107,657
152,845
(479)
(5,900)
146,466
(10,926)
157,392

Net income per share:

Basic ................................................................................................................ $
Diluted ............................................................................................................. $

2.90 $
2.86 $

2.19 $
2.14 $

3.35
3.27

Weighted average shares outstanding:

Basic ................................................................................................................
Diluted .............................................................................................................

43,949
44,545

45,263
46,215

46,930
48,152

See the accompanying notes to the consolidated financial statements.

THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

Net income ........................................................................................................... $ 127,293
Other comprehensive gain/(loss):

2019

Fiscal Year
2018
$ 99,035

2017
$ 157,392

Foreign currency translation adjustment ............................................................
Other comprehensive gain/(loss) .....................................................................

503
503
Total comprehensive income ............................................................................... $ 127,796

(850)
(850)
$ 98,185

(88)
(88)
$ 157,304

See the accompanying notes to the consolidated financial statements.

THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

Shares of
Common Common

Stock
94,672
—
—

—
—

740
—
95,412

—
95,412
—
—

—
554

656
—
96,622

—
96,622
—
—

—
476

Stock

947
—
—

—
—

7
—
954

—
954
—
—

—
6

7
—
967

—
967
—
—

—
4

Balance, January 3, 2017 .................................
Net income .....................................................
Foreign currency translation adjustment ..........
Cash dividends declared Common stock,

$1.06 per share ...........................................
Stock-based compensation ..............................
Common stock issued under stock-based

compensation plans ....................................
Treasury stock purchases .................................
Balance, January 2, 2018 .................................
Cumulative effect of adopting the

pronouncement related to revenue
recognition, net of tax .................................
Balance, January 2, 2018, as adjusted ..............
Net income .....................................................
Foreign currency translation adjustment ..........
Cash dividends declared Common stock,

$1.24 per share ...........................................
Stock-based compensation ..............................
Common stock issued under stock-based

compensation plans ....................................
Treasury stock purchases .................................
Balance, January 1, 2019 .................................
Cumulative effect of adopting the

pronouncement related to lease accounting,
net of tax .....................................................
Balance, January 1, 2019, as adjusted ..............
Net income .....................................................
Foreign currency translation adjustment ..........
Cash dividends declared Common stock,

$1.38 per share ...........................................
Stock-based compensation ..............................
Common stock issued under stock-based

compensation plans ....................................
Treasury stock purchases .................................
Balance, December 31, 2019 ...........................

Accumulated
Other
Comprehensive
Loss

Treasury
Stock

Additional
Paid-in
Capital
$ 774,137
—
—

Retained
Earnings
$ 1,238,012
157,392
—

—
16,696

(49,738)
—

$ (1,409,889) $

—
—

9,029
—
799,862

—
—
1,345,666

—
(122,975)
(1,532,864)

—
799,862
—
—

(3,560)
1,342,106
99,035
—

—
(1,532,864)
—
—

—
20,245

(56,647)
—

—
—

8,569
—
828,676

—
—
1,384,494

—
(109,276)
(1,642,140)

—
828,676
—
—

(41,466)
1,343,028
127,293
—

—
(1,642,140)
—
—

—
19,595

(61,988)
—

—
—

Total
$ 603,207
157,392
(88)

(49,738)
16,696

9,036
(122,975)
613,530

—
—
(88)

—
—

—
—
(88)

—
(88)
—
(850)

(3,560)
609,970
99,035
(850)

—
—

(56,647)
20,251

—
—
(938)

8,576
(109,276)
571,059

—
(938)
—
503

(41,466)
529,593
127,293
503

—
—

(61,988)
19,599

—
—

7,724
(50,982)
(435) $ 571,742

587
—
97,685

6
—
977

7,718
—
$ 855,989

—
—
$ 1,408,333

—
(50,982)
$ (1,693,122) $

See the accompanying notes to the consolidated financial statements.

THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

2019

Fiscal Year
2018

2017

Cash flows from operating activities:

Net income .................................................................................................................................................. $ 127,293

99,035

$ 157,392

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization expenses ....................................................................................................
Deferred income taxes ..............................................................................................................................
Impairment of assets and lease terminations .............................................................................................
Stock-based compensation ........................................................................................................................
(Gain)/loss from investments in unconsolidated affiliates .........................................................................
Changes in assets and liabilities, net of acquired amounts:

Accounts and other receivables...............................................................................................................
Income taxes receivable/payable ............................................................................................................
Inventories .............................................................................................................................................
Prepaid expenses ....................................................................................................................................
Operating lease assets/liabilities .............................................................................................................
Other assets ............................................................................................................................................
Accounts payable ...................................................................................................................................
Gift card liabilities ..................................................................................................................................
Other accrued expenses .........................................................................................................................
Cash provided by operating activities ..............................................................................................

88,133
(2,197)
16,223
19,373
(39,233)

3,777
(5,338)
(5,766)
(4,133)
5,019
(11,989)
2,326
9,695
15,578
218,761

95,976
(5,510)
16,411
19,988
4,754

3,680
15,729
3,667
6,262
—
7,406
5,601
8,395
9,921
291,315

92,729
(25,180)
10,586
16,457
479

(7,188)
(17,315)
(7,634)
(5,227)
—
(9,034)
3,771
10,200
18,760
238,796

Cash flows from investing activities:

Additions to property and equipment ...........................................................................................................
Additions to intangible assets ......................................................................................................................
Acquisition, net of cash acquired ..................................................................................................................
Investments in unconsolidated affiliates .......................................................................................................
Loans made to unconsolidated affiliates .......................................................................................................
Proceeds from variable life insurance contract .............................................................................................
Cash used in investing activities ......................................................................................................

(73,765)
(2,100)
(261,695)
(3,000)
(22,500)
—
(363,060)

(102,909)
(3,020)
—
(25,000)
—
540
(130,389)

(120,779)
(1,654)
—
(18,000)
—
—
(140,433)

Cash flows from financing activities:

Deemed landlord financing proceeds ...........................................................................................................
Deemed landlord financing payments ..........................................................................................................
Borrowings on credit facility ........................................................................................................................
Repayments on credit facility .......................................................................................................................
Proceeds from exercise of stock options .....................................................................................................
Cash dividends paid .....................................................................................................................................
Treasury stock purchases ..............................................................................................................................
Cash provided by/(used in) financing activities ................................................................................
Foreign currency translation adjustment ..........................................................................................................
Net change in cash and cash equivalents ........................................................................................................
Cash and cash equivalents at beginning of period ...........................................................................................
Cash and cash equivalents at end of period .................................................................................................... $

—
—
335,000
(55,000)
7,724
(60,722)
(50,982)
176,020
117
31,838
26,578
58,416

21,788
(5,128)
70,000
(70,000)
8,576
(56,251)
(109,276)
(140,291)
(65)
20,570
6,008
26,578

12,128
(4,391)
85,000
(75,000)
9,036
(49,889)
(122,975)
(146,091)
(103)
(47,831)
53,839
6,008

Supplemental disclosures:

Interest paid ................................................................................................................................................. $
Income taxes paid ........................................................................................................................................ $
Construction payable ................................................................................................................................... $

1,646
20,778
6,504

$
$
$

8,156
10,149
4,585

Non-cash operating:

Settlement of sale-leaseback accounting ....................................................................................................... $

—

11,863

Non-cash investing:

Settlement of landlord sale-leaseback accounting ......................................................................................... $
$
Acquisition-related deferred consideration and compensation ...................................................................... $ (66,257) $
Fair value of previously-held equity investments ......................................................................................... $ (122,000) $
$
Loans repaid by unconsolidated affiliates as a reduction of acquisition cash ................................................ $
$
Loan to unconsolidated affiliate assumed in acquisition ............................................................................... $

12,500
10,000

—

6,824
—
—
—
—

$
$
$

$
$
$
$
$

Non-cash financing:

Settlement of landlord financing obligation for sale-leaseback leases .......................................................... $
Deemed landlord financing proceeds ............................................................................................................ $

—
—

$ (18,687) $
$
13,748
$

See the accompanying notes to the consolidated financial statements.

7,128
31,582
12,145

—

—
—
—
—
—

—
—

THE CHEESECAKE FACTORY INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Cheesecake Factory
Incorporated and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”)
and are prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”). All intercompany accounts and transactions for the periods presented have been eliminated in consolidation.

On October 2, 2019, we completed the acquistion of North Italia and the remaining business of FRC, including

Flower Child and all other FRC brands. The results of operations, financial position and cash flows of the acquired
businesses are included in our consolidated financial statements as of the acquisition date. See Note 2 for further
discussion of the Acquisition.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting

purposes. Fiscal years 2019, 2018 and 2017 each consisted of 52 weeks.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and
assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the
reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results
could differ from these estimates.

Business Combination

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of FRC. Since the
Acquisition represents a business combination achieved in stages, we remeasured our previously-held equity interests in
North Italia and Flower Child immediately before the acquisition to acquisition-date fair value and recognized a
resulting gain. In accordance with the acquisition method of accounting for business combinations, we allocated the
purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on
preliminary estimated fair values. We estimated the fair value of assets and liabilities based upon widely-accepted
valuation techniques, including discounted cash flow, relief from royalty and Monte Carlo methods, depending on the
nature of the assets acquired or liabilities assumed. We expect minor adjustments to our purchase accounting in the first
quarter of fiscal 2020 as we finalize our valuation of the acquired intangible assets. (See Note 2 for further discussion of
the Acquisition.)

Cash and Cash Equivalents

Amounts receivable from credit card processors, totaling $21.2 million and $17.3 million at December 31, 2019
and January 1, 2019, respectively, are considered cash equivalents because they are both short-term and highly liquid in
nature and are typically converted to cash within three days of the sales transaction. Our cash management system
provides for the funding of all major bank disbursement accounts on a daily basis as checks are presented for payment.

Under this system, outstanding checks are in excess of the cash balances at certain banks, which creates book overdrafts.
Book overdrafts are presented as a current liability in other accrued expenses on our consolidated balance sheet.

Accounts and Other Receivables

Our accounts receivable principally result from credit sales to bakery customers. Other receivables consist

primarily of amounts due from our gift card distributors and landlords.

Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are cash and cash equivalents

and receivables. We maintain our day-to-day operating cash balances in non-interest-bearing transaction accounts, which
are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. We invest our excess cash in a
money market deposit account, which is insured by the FDIC up to $250,000. Although we maintain balances that
exceed the federally insured limit, we have not experienced any losses related to this balance, and we believe credit risk
to be minimal.

We consider the concentration of credit risk for accounts receivable to be minimal due to the payment histories
and general financial condition of our larger bakery customers. Concentration of credit risk related to other receivables is
limited as this balance is comprised primarily of amounts due from our gift card distributors and landlords.

Fair Value Measurements

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

•

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company
to develop its own assumptions

The following tables present the components and classification of our assets and liabilities that are measured at

fair value on a recurring basis (in thousands):

Level 1

December 31, 2019
Level 2

Level 3

Assets (Liabilities)
Non-qualified deferred compensation assets ...... $
Non-qualified deferred compensation liabilities .
Acquisition-related deferred consideration .........
Acquisition-related contingent consideration
and compensation liabilities ...............................

77,228 $
(76,255)
—

— $
—
(53,933)

—
—
—

—

(13,218)

Assets (Liabilities)
Non-qualified deferred compensation assets ...... $
Non-qualified deferred compensation liabilities .
Deemed landlord financing liabilities .................

57,606 $
(57,551)
—

— $
—
(118,600)

—
—
—

Level 1

January 1, 2019
Level 2

Level 3

Changes in the fair value of non-qualified deferred compensation assets and liabilities and deemed landlord

financing liabilities are recognized in interest and other expense, net in our consolidated statements of income. Changes
in the fair value of the acquisition-related deferred and contingent consideration and compensation liabilities are
recognized in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated
statements of income.

The fair value of the acquisition-related contingent consideration and compensation liabilities was determined
utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables
and estimates and has no minimum or maximum payment. The undiscounted range of outcomes per the Monte Carlo
model was $0 to $69.2 million. Results could change materially if different estimates and assumptions were used. The
following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related
contingent consideration and compensation liabilities, categorized as Level 3 (in thousands):

Balance, January 1, 2019 ......................................................................................................................
Acquisition-date fair value .................................................................................................................
Change in fair value ............................................................................................................................
Balance, December 31, 2019 ................................................................................................................

—
12,786
432
13,218

The fair values of our cash and cash equivalents, accounts receivable, income taxes receivable, other
receivables, prepaid expenses, accounts payable, income taxes payable and other accrued expenses approximate their
carrying amounts due to their short duration.

Inventories

Inventories consist of restaurant food and other supplies, bakery raw materials and bakery finished goods and

are stated at the lower of cost or net realizable value on an average cost basis at the restaurants and on a first-in, first-out
basis at the bakeries.

Property and Equipment

We record property and equipment at cost less accumulated depreciation. Improvements are capitalized while
repairs and maintenance costs are expensed as incurred. Depreciation and amortization are calculated using the straight-
line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements
include the cost of our internal development and construction department. Depreciation and amortization periods are as
follows:

Buildings and land improvements ......................................................................................................... 25 to 30 years
Leasehold improvements ...................................................................................................................... 10 to 30 years
3 to 15 years
Furnishings, fixtures and equipment .....................................................................................................
5 years
Computer software and equipment .......................................................................................................

Gains and losses related to property and equipment disposals are recorded in depreciation and amortization

expenses.

Intangible Assets

Our intangible assets consist primarily of goodwill, indefinite-lived trade names,trademarks and transferable
alcoholic beverage licenses and definite-lived licensing agreements and non-transferable alcoholic beverage licenses.
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group
may not be recoverable based on estimated undiscounted future cash flows. If impaired, the asset or asset group is
written down to fair value based on discounted future cash flows. Amortization is recorded in acquisition-related
contingent consideration, compensation and amortization expenses in our consolidated statements of income.

Goodwill and other indefinite-lived intangible assets are not amortized but are instead tested for impairment

annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances
between annual tests indicate a potential impairment. First, we determine if, based on qualitative factors, it is more likely
than not that an impairment exists. Factors considered include, but are not limited to historical financial performance, a
significant decline in expected future cash flows, unanticipated competition, changes in management or key personnel,
macroeconomic and industry conditions and the legal and regulatory environment. If the qualitative assessment indicates
that it is more likely than not that an impairment exists, then a quantitative assessment is performed. The quantitative

assessment requires an analysis of several best estimates and assumptions, including future sales and operating results
and other factors that could affect fair value or otherwise indicate potential impairment. We also consider our reporting
units’ projected ability to generate income from operations and positive cash flow in future periods.

We evaluate the useful lives of our intangible assets, other than goodwill, at each reporting period to determine
if they are definite or indefinite-lived. A determination on useful life requires judgments and assumptions regarding the
future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry,
legislative action that results in an uncertain or changing regulatory environment and expected changes in distribution
channels), the level of required maintenance expenditures and the expected lives of other related groups of assets.

Impairment of Long-Lived Assets and Lease Terminations

We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes

in circumstances indicate the carrying value of the assets or asset group may not be recoverable. Factors considered
include, but are not limited to, negative cash flow, significant underperformance relative to historical or projected future
operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be
disposed of significantly before the end of its previously estimated useful life and significant negative industry or
economic trends. At any given time, we may be monitoring a small number of locations, and future impairment charges
could be required if individual restaurant performance does not improve or we make the decision to close or relocate a
restaurant.

We have determined that our asset group for impairment testing is comprised of the assets and liabilities of each

of our individual restaurants, as this is the lowest level of identifiable cash flows. We have identified leasehold
improvements as the primary asset because it is the most significant component of our restaurant assets, it is the
principal asset from which our restaurants derive their cash flow generating capacity and it has the longest remaining
useful life. The recoverability is assessed by comparing the carrying value of the assets to the undiscounted cash flows
expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of
the assets exceed their fair value, which is determined based on discounted future net cash flows expected to be
generated by the assets.

In fiscal 2019, we recorded $18.2 million of impairment of assets and lease termination expense related to the

impairment of two The Cheesecake Factory restaurants, one Grand Lux Cafe and Social Monk Asian Kitchen and the
closure of one Grand Lux Cafe and one RockSugar Southeast Asian Kitchen. In fiscal 2018, we recorded $17.9 million
of impairment of assets and lease termination expense related to the impairment of one The Cheesecake Factory
restaurant, one Grand Lux Cafe and one RockSugar Southeast Asian Kitchen and the closure of two The Cheesecake
Factory restaurants. In fiscal 2017, we recorded $10.3 million of impairment of assets and lease termination expense
related to three The Cheesecake Factory restaurants, including one relocation and one lease expiration, and one Grand
Lux Cafe. These amounts are recorded in impairment of assets and lease terminations on the consolidated statements of
income.

Investments in Unconsolidated Affiliates

During fiscal years 2018, 2017 and until the Acquisition on October 2, 2019, we made minority equity
investments in two restaurant concepts, North Italia and Flower Child, bringing our percentage of ownership to 49% in
both concepts immediately prior to the Acquisition. Since we held a number of rights with regard to participation in
policy-making processes, but did not control these entities prior to the Acquisition, we accounted for these investments
under the equity method. Accordingly, we recognized our proportionate share of the reported earnings or losses of these
entities on the consolidated statements of income and as an adjustment to our investments on the consolidated balance
sheets.

Prior to the Acquisition, we assessed the potential impairment of our equity investments whenever events or

changes in circumstances indicated that a decrease in value of the investment had occurred that was other than
temporary, in which case we would recognize the decrease even though it is in excess of what would otherwise be
recognized by application of the equity method. No impairment losses were recorded for these assets during fiscal years
2019, 2018 and 2017.

Revenue Recognition

Our revenues consist of sales at our Company-owned restaurants, sales from our bakery operations to our

licensees and other third-party customers, royalties from our licensees’ restaurant sales and from consumer packaged
goods sales, and licensee development and site fees. Revenues are presented net of sales taxes. Sales tax collected is
included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities.

Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues from
bakery sales are recognized upon transfer of title and risk to customers. Royalty revenues are recognized in the period
the related sales occur, utilizing the sale-based royalty exception available under current accounting guidance. Our
consumer packaged goods minimum guarantees do not require distinct performance obligations. Therefore, related
revenue is recognized on a straight-line basis over the life of the applicable agreements, ranging from one to three years.
As our development and site fee agreements do not contain distinct performance obligations, related revenue is
recognized on a straight-line basis over the life of the applicable agreements, ranging from eight to 30 years.

In fiscal 2019, we deferred revenue of $0.2 million for new minimum guarantees for consumer packaged goods
and recognized minimum guarantee revenue of $0.5 million. In fiscal 2019, we deferred revenue of $0.3 million for new
site and development agreements and recognized revenue of $0.5 million. In fiscal 2018, we deferred revenue of $0.9
million for new minimum guarantees for consumer packaged goods and recognized minimum guarantee revenue of $0.8
million. In fiscal 2018, we deferred revenue of $0.2 million for new site and development agreements and recognized
revenue of $0.4 million. Prior to the adoption of the new revenue recognition standard in 2018, we recognized revenue
for development fees upon execution of new development agreements and for site fees upon our approval of new
restaurant sites.

We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are
redeemed in our restaurants. Based on our historical redemption patterns, we can reasonably estimate the amount of gift
cards for which redemption is remote, which is referred to as “breakage.” Breakage is recognized over a three-year
period in proportion to historical redemption trends and is classified as revenues in our consolidated statements of
income. We recognized $8.0 million, $8.0 million and $7.9 million of gift card breakage in fiscal years 2019, 2018 and
2017, respectively. Incremental direct costs related to gift card sales, including commissions and credit card fees, are
deferred and recognized in earnings in the same pattern as the related gift card revenue. There were no changes to our
accounting for gift card revenue and related costs upon adoption of the new revenue recognition standard.

Certain of our promotional programs include multiple element arrangements that incorporate various
performance obligations. We allocate revenue using the relative selling price of each performance obligation considering
the likelihood of redemption and recognize revenue upon satisfaction of each performance obligation. During fiscal
2019, we deferred revenue of $7.9 million related to promotional programs and recognized $7.3 million of previously
deferred revenue related to promotional programs. During fiscal 2018, we deferred revenue of $7.0 million related to
promotional programs and recognized $5.9 million of previously deferred revenue related to promotional programs.

(See Recent Accounting Pronouncements for further discussion of our adoption of the new revenue recognition
accounting guidance.)

Leases

We currently lease all of our restaurant locations, generally with initial terms of 10 to 20 years plus two five-
year renewal options. Our leases typically require contingent rent above the minimum base rent payments based on a
percentage of revenues ranging from 2% to 10%, have escalating minimum rent requirements over the term of the lease
and require payment for various expenses incidental to the use of the property. A majority of our leases provide for a
reduced level of overall rent obligation should specified co-tenancy requirements not be satisfied. We expend cash for
leasehold improvements and furniture, fixtures, and equipment to build out and equip our leased premises. We may also
expend cash for structural additions that we make to leased premises. Generally, a portion of the leasehold improvements
and building costs are reimbursed to us by our landlords as construction contributions. If obtained, landlord construction
contributions usually take the form of up-front cash, full or partial credits against our future minimum or percentage
rents, or a combination thereof. We do not meet any of the accounting criteria under Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases, for being the owner of the asset under
construction. Many of our leases provide early termination rights permitting us to terminate the lease prior to expiration

in the event our revenues are below a stated level for a period of time, generally conditioned upon repayment of the
unamortized landlord contributions.

In addition to leases for our restaurant locations, we also lease automobiles and certain equipment that is used in

the restaurants, bakeries and corporate office. The automobile leases are the only non-real estate leases included in our
operating lease assets and liabilities. All other leases are immaterial or qualify for the short-term lease exclusion.

The assessment of whether a contract is or contains a lease is performed at contract inception. A lease is defined

as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Control is defined as having both the right to obtain substantially all the economic benefits from the use of
the asset and to direct how and for what purpose the asset is used.

At lease commencement, we evaluate each lease to determine its appropriate classification as an operating or

finance lease. All of our restaurant and automobile leases are classified as operating leases. For restaurant leases existing
at transition, we will continue to apply our historical practice of excluding executory costs, and only minimum base rent
will be factored into the initial operating lease liability and corresponding lease asset. For restaurant leases beginning
after adoption of ASC 842, we have elected the single lease component practical expedient. Operating lease assets and
liabilities are recorded on the balance sheet at lease commencement based on the present value of minimum base rent
and other fixed payments over the reasonably certain lease term. The difference between the amounts we expend for
structural costs and the construction contributions received from our landlords is recorded as an adjustment to the
operating lease asset. Lease terms include the build-out period for our leases where no rent payments are typically due
under the terms of the lease, as well as options to renew when we deem we have significant economic incentive to
exercise the extension. When determining if we have a significant economic incentive, we consider relevant factors, such
as contractual, asset, entity and market-based considerations. Option periods are included in the lease term for the
majority of our leases. Termination rights have not been factored into the lease terms since based on our probability
assessment we are reasonably certain we will not terminate our leases.

We cannot determine the interest rate implicit in our leases because we do not have access to the lessor’s

estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, we use our incremental
borrowing rate as the discount rate for our leases. Our incremental borrowing rate for a lease is the rate of interest we
would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
Because we do not generally borrow on a collateralized basis, we derive an appropriate incremental borrowing rate using
the interest rate we pay on our non-collateralized borrowings, adjusted for the amount of the lease payments, the lease
term and the effect of designating specific collateral with a value equal to the unpaid lease payments for that lease. We
apply the incremental borrowing rate on a portfolio basis given the impact of applying it on a lease by lease basis would
be immaterial.

We monitor for events or changes in circumstances that require reassessment of our leases. When a

reassessment results in the re-measurement of a lease liability, a corresponding adjustment is made to the carrying
amount of the operating lease asset. We also assess the potential impairment of our operating lease assets under long-
lived asset impairment guidance in ASC 360, Property, Plant, and Equipment: Impairment or disposal on long-lived
assets.

Rent expense included in our operating lease assets is recognized on a straight-line basis. Contingent rent
expense is recorded as incurred to the extent it exceeds minimum base rent per the lease agreement. Variable lease
payments, which primarily consist of real estate taxes, common area maintenance charges, insurance cost and other
operating expenses, are not included in the operating lease right-of-use asset or operating lease liability balances and are
recognized as incurred. The reasonably certain lease term and the incremental borrowing rate for each restaurant location
require judgment by management and can impact the classification and accounting for a lease as operating or finance, as
well as the value of the operating lease asset and liability. These judgments may produce materially different amounts of
rent expense than would be reported if different assumptions were used. Rent expense is included in other operating
costs and expenses in the consolidated statements of income.

Self-Insurance Liabilities

We retain the financial responsibility for a significant portion of our risks and associated liabilities with respect

to workers’ compensation, general liability, staff member health benefits, employment practices and other insurable
risks. The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle
known claims, as well as claims incurred but not yet reported to us (“IBNR”) as of the balance sheet date and are
recorded in other accrued expenses. Our estimated liabilities, which are not discounted, are based on information
provided by our insurance brokers and insurers, combined with our judgment regarding a number of assumptions and
factors, including the frequency and severity of claims, claims development history, case jurisdiction, applicable
legislation and our claims settlement practices.

Stock-Based Compensation

We maintain stock-based incentive plans under which equity awards may be granted to staff members and
consultants. We account for the awards based on fair value measurement guidance and amortize to expense over the
vesting period using a straight-line or graded-vesting schedule, as applicable. (See Note 16 for further discussion of our
stock-based compensation.)

Advertising Costs

We expense advertising production costs at the time the advertising first takes place. All other advertising costs

are expensed as incurred. Most of our advertising costs are included in other operating costs and expenses and were
$10.6 million, $6.1 million and $6.1 million in fiscal 2019, 2018 and 2017, respectively.

Preopening Costs

Preopening costs include all costs to relocate and compensate restaurant management staff members during the
preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our
opening training team and other support staff members. Also included are expenses for maintaining a roster of trained
managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in
alignment with future restaurant opening and operating needs, and corporate travel and support activities. We expense
preopening costs as incurred.

Income Taxes

We provide for federal, state and foreign income taxes currently payable and for deferred taxes that result from
differences between financial accounting rules and tax laws governing the timing of recognition of various income and
expense items. We recognize deferred income tax assets and liabilities for the future tax effects of such temporary
differences based on the difference between the financial statement and tax bases of existing assets and liabilities using
the statutory rates expected in the years in which the differences are expected to reverse. The effect on deferred taxes of
any enacted change in tax rates is recognized in income in the period that includes the enactment date. Income tax credits
are recorded as a reduction of tax expense.

Uncertain tax positions taken or expected to be taken in a tax return are recognized (or derecognized) in the

financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be
sustained on its technical merits upon examination by tax authorities, taking into account available administrative
remedies and litigation. A recognized tax position is then measured at the largest amount of benefit that is greater than
50% likely of being realized upon ultimate resolution. We recognize interest related to uncertain tax positions in income
tax expense. Penalties related to uncertain tax positions are recorded in general and administrative expenses.

Net Income per Share

Basic net income per share is computed by dividing net income available to common stockholders by the
weighted average number of common shares outstanding during the period, reduced by unvested restricted stock awards.
At December 31, 2019, January 1, 2019 and January 2, 2018, 1.8 million shares, 1.7 million shares and 1.7 million
shares, respectively, of restricted stock issued to staff members were unvested and, therefore, excluded from the
calculation of basic earnings per share for the fiscal years ended on those dates. Diluted net income per share includes
the dilutive effect of outstanding equity awards, calculated using the treasury stock method. Shares of common stock
equivalents of 2.3 million, 1.5 million and 1.6 million for fiscal 2019, 2018 and 2017, respectively, were excluded from
the diluted calculation due to their anti-dilutive effect.

Fiscal Year
2019
2017
2018
(In thousands, except per share data)

Net income ........................................................................................................... $ 127,293

$ 99,035

$ 157,392

Basic weighted average shares outstanding .........................................................
Dilutive effect of equity awards ...........................................................................

43,949
596

45,263
952

46,930
1,222

Diluted weighted average shares outstanding ......................................................

44,545

46,215

48,152

Basic net income per share ................................................................................... $

2.90

Diluted net income per share................................................................................ $

2.86

2.19

2.14

3.35

3.27

Comprehensive Income

Comprehensive income includes all changes in equity during a period except those resulting from investment

by and distribution to owners. Our comprehensive income consists of net income and translation gains and losses related
to our Canadian restaurant operations.

Foreign Currency

The Canadian dollar is the functional currency for our Canadian restaurant operations. Revenue and expense

accounts are translated into U.S. dollars using the average exchange rates during the reporting period. Assets and
liabilities are translated using the exchange rates in effect at the reporting period end date. Equity accounts are translated
at historical rates, except for the change in retained earnings which is the result of the income statement translation
process. Translation gains and losses are reported as a separate component in our consolidated statements of
comprehensive income and would only be realized upon the sale or upon complete or substantially complete liquidation
of the business. Gains and losses from foreign currency transactions are recognized in our consolidated statements of
income in interest and other expense, net.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

We adopted FASB Accounting Standards Codification (“ASC”) Topic 842, Leases, as of January 2, 2019, using

the alternative transition method and recorded a cumulative effect adjustment to beginning retained earnings without
restating prior periods. We elected the package of practical expedients which allowed us to carry forward our historical
lease classification, our assessment of whether a contract is or contains a lease and our initial direct costs for any leases
that existed prior to adoption of the new standard. In addition, we elected the short-term lease exclusion and the
hindsight practical expedient, which lengthened the lease term for certain of our leases to include renewal options.
Adoption of the new standard resulted in the recognition of operating lease assets and liabilities of $975.1 million and
$1,045.4 million, respectively, and a reduction to retained earnings of $41.5 million, net of tax. All prior lease-related
balances of $39.2 million of prepaid rent, $140.2 million in property and equipment, net, $6.2 million of intangible

assets, net, $82.1 million of deferred rent liabilities and $118.7 million of deemed landlord financing were reclassified
into operating lease assets or eliminated upon ASC 842 adoption.

We adopted ASC Topic 606, Revenue from Contracts with Customers, as of January 3, 2018. This accounting

guidance provides a comprehensive new revenue recognition model that supersedes most of the existing revenue
recognition requirements and requires entities to recognize revenue at an amount that reflects the consideration to which
a company expects to be entitled in exchange for transferring goods or services to a customer. Utilizing the cumulative-
effect method of adoption, we recorded a $4.8 million increase to deferred revenue and a corresponding reduction of
$3.6 million, net of tax, to retained earnings to reverse a portion of the previously-recognized development and site fees
from our international licensees. Whereas previously we recognized income and received payment upon execution of the
agreements and approval of new restaurant sites, respectively, future revenue for these items will be recorded on a
straight-line basis over the life of the applicable license agreements as the agreements do not contain distinct
performance obligations. Comparative financial information has not been restated and continues to be reported under the
accounting standards in effect for those periods. The impact of adopting this standard as compared to the previous
revenue recognition guidance was not material to our consolidated balance sheet and consolidated statements of income
and comprehensive income.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement. The update eliminates, adds and modifies certain
disclosure requirements for fair value measurements. The new standard is effective for us on January 1, 2020. We have
substantially completed our assessment of the new standard and do not expect its adoption to have a significant impact on
our consolidated financial statement disclosures.

2. Acquisition

On October 2, 2019 (the “Closing Date” or “Closing”), we completed the acquisition of North Italia and the

remaining business of Fox Restaurant Concepts LLC, including Flower Child and all other FRC brands. North Italia is a
restaurant company that operated 21 locations across ten states and Washington D.C. as of the Closing Date. FRC is a
multi-concept restaurant company that operated 10 concepts with 47 locations across eight states and Washington D.C.
as of the Closing Date. The results of operations, financial position and cash flows of the acquired businesses are
included in our consolidated financial statements as of the acquisition date.

We have concluded that the Acquisition represents a single business combination of related businesses under

common control within the scope of ASC Topic 805, Business Combinations. The acquisition date was determined to be
the Closing Date, which was the date we obtained control by legally transferring the consideration for the remaining
ownership interests, acquiring the assets and assuming the liabilities of North Italia and the remaining FRC business.

The Acquisition, which we expect will accelerate and diversify our revenue growth, was completed for
consideration consisting of the following components: $288.1 million in cash at Closing, which was primarily funded by
drawing on the New Facility; assumption of $10.0 million in debt previously owed by FRC to us; a $12.0 million
indemnity escrow amount specifically related to North Italia due ratably over the next two years; and $45.0 million of
deferred consideration due ratably over the next four years (including a $13.0 million indemnity escrow amount
specifically related to the remaining FRC businesses).

The acquisition agreement also included a contingent consideration provision, a portion of which was

considered part of the acquisition consideration, and the remainder of which was considered future compensation
expense. The acquisition-date fair values for the acquisition consideration and future compensation expense were $12.8
million and $7.3 million, respectively. The contingent consideration is payable on the fifth anniversary of the Closing
Date and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and
Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other than
North Italia and Flower Child) during the five years after Closing. We are also required to provide financing to FRC in
an amount sufficient to support achievement of these targets during the five years after Closing. The fair value of the
contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated
future revenues and volatility factors, among other variables and estimates, and has no maximum payment. The

undiscounted range of outcomes per the Monte Carlo model was $0 to $69.2 million. The fair value will be evaluated
each reporting period and the contingent consideration will be adjusted accordingly. The assumption of debt previously
owed by North Italia to us represents the effective settlement of a preexisting relationship. Since we determined the loans
were at market terms, the debt assumed was treated as purchase consideration, and no gain or loss was recorded.

Since the Acquisition represents a business combination achieved in stages, we remeasured our previously-held

equity interests in North Italia and Flower Child immediately before the acquisition to acquisition-date fair value of
$122.0 million and recognized a resulting gain of $52.7 million which is included in gain/(loss) on investments in
unconsolidated affiliates in our consolidated statements of operations. The fair value of the previously-held interests was
determined using a discounted cash flow model based on estimated future revenues, margins and discount rates, among
other variables and estimates.

The following table summarizes the preliminary calculation of goodwill based on the excess of consideration

transferred and the fair value of the previously held equity interests over the fair value of the assets acquired and
liabilities assumed (in thousands).

December 31, 2019

Purchase consideration:

Cash at closing .........................................................................................................................
Assumption of debt previously owed by FRC .........................................................................
Deferred payments ...................................................................................................................
Contingent consideration .........................................................................................................
Consideration transferred ......................................................................................................
Fair value of previously-held equity interests .......................................................................
Total ...........................................................................................................................................
Less net assets acquired: ...........................................................................................................
Current assets ...........................................................................................................................
Property and equipment ...........................................................................................................
Intangible assets .......................................................................................................................
Operating lease assets ..............................................................................................................
Other assets ..............................................................................................................................
Current liabilities .....................................................................................................................
Operating lease liabilities ........................................................................................................
Other noncurrent liabilities ......................................................................................................
Total net assets acquired .......................................................................................................
Goodwill ....................................................................................................................................

288,089
10,000
53,471
12,786
364,346
122,000
486,346

23,682
84,360
338,782
223,455
5,842
(64,814)
(202,433)
(883)
407,991
78,355

Goodwill is related to the benefits expected as result of the Acquisition, including acceleration and

diversification of our revenue growth, and of the $78.4 million recorded as preliminary goodwill, $73.1 million is
expected to be deductible for tax purposes. $29.2 million of the goodwill recorded relates to North Italia.

Property and equipment will be depreciated over useful lives of 3 years to 30 years. The fair value of acquired
property and equipment was determined under a trended original cost approach utilizing variables and estimates such as
useful lives, hold factors and economic obsolescence.

Intangible assets acquired primarily consist of trade names and trademarks that were assigned indefinite lives

based on the expected use of the assets and the regulatory and economic environment within which they are being used.
The fair value of the acquired intangible assets was determined utilizing the relief from royalty method based on
estimated future revenues, royalty rates and discount rates, among other variables and estimates. We expect minor
adjustments to our purchase accounting in the first quarter of fiscal 2020 as we finalize our valuation of the acquired
intangible assets.

Operating lease assets include values associated with favorable and unfavorable market leases that will amortize

over a weighted-average period of 15.2 years. The fair value of the operating lease assets was derived using an income
approach based on market transaction data and estimated discount rates, among other variables and estimates.

During fiscal 2019, we incurred $5.3 million of costs to effect and integrate the Acquisition, which were

expensed in accordance with ASC 805 and are included in acquisition-related costs in our consolidated statements of
operations. In addition, we incurred $1.0 million related to changes in the fair value of the deferred and contingent
consideration and compensation liabilities, as well as amortization of acquired definite-lived licensing agreements,
which are included in acquisition-related contingent consideration, compensation and amortization expenses in our
consolidated statements of operations.

Pro Forma Results of Operations (unaudited)

The following pro forma results of operations for fiscal 2019 and 2018 give effect to the Acquisition as if it had

occurred on January 2, 2018 (in thousands):

Fiscal Year

2019

2018

Revenues ........................................................................................................... $
Net income ........................................................................................................
Net income per share:

Basic .............................................................................................................
Diluted ..........................................................................................................

$
$

2,732,901
74,949

1.71
1.68

$
$

2,579,019
80,800

1.79
1.75

The above pro forma information includes combined North Italia and FRC actual revenues and net loss of $92.0

million and $1.5 million, respectively, contributed post acquisition in fiscal 2019. The most significant adjustments
included in the pro forma financial information are the elimination of the gain/(loss) on our previously-held equity
interests in North Italia and Flower Child, elimination of transaction costs, increased interest expense associated with
debt incurred to fund the Acquisition, elimination of historical FRC interest expense and corresponding income tax
effects.

In the opinion of the Company’s management, the unaudited pro forma financial information includes all

significant necessary adjustments that can be factually supported to reflect the effects of the Acquisition and related
transactions. The unaudited pro forma financial information is provided for informational purposes only and are not
necessarily indicative of what our actual results of operations would have been had the Acquisition and related
transactions been completed as of January 2, 2018 or that may be achieved in the future.

3. Other Receivables

Other receivables consisted of (in thousands):

Gift card distributors .........................................................................................
Insurance providers ...........................................................................................
Landlord construction contributions .................................................................
Other ................................................................................................................
Total ............................................................................................................

38,947
9,646
3,501
12,589
64,683

41,996
9,020
4,976
12,201
68,193

December 31, 2019

January 1, 2019

Inventories

Inventories consisted of (in thousands):

Restaurant food and supplies ............................................................................
Bakery finished goods and work in progress ....................................................
Bakery raw materials and supplies ...................................................................
Total ...............................................................................................................

25,057
16,000
6,168
47,225

18,362
13,845
6,679
38,886

December 31, 2019

January 1, 2019

5. Prepaid Expenses

Prepaid expenses consisted of (in thousands):

Gift card contract assets ...................................................................................
Other ................................................................................................................
Total ...............................................................................................................

23,172
20,774
43,946

23,388
17,257
40,645

December 31, 2019

January 1, 2019

6. Property and Equipment

Property and equipment consisted of (in thousands):

December 31, 2019

January 1, 2019

Land and related improvements ........................................................................
Buildings ..........................................................................................................
Leasehold improvements .................................................................................
Furnishings, fixtures and equipment ................................................................
Computer software and equipment ..................................................................
Restaurant smallwares ......................................................................................
Construction in progress ..................................................................................

15,852
44,049
1,158,467
548,075
55,614
34,653
23,732

15,852
44,036
1,283,233
467,051
55,434
30,268
27,975

Property and equipment, total ..........................................................................
Less: Accumulated depreciation ......................................................................
Property and equipment, net ..........................................................................

1,880,442
(1,048,843)
831,599

1,923,849
(1,010,574)
913,275

Depreciation expenses related to property and equipment for fiscal 2019, 2018 and 2017 were $88.0 million,
$93.3 million and $89.6 million, respectively. Repair and maintenance expenses for fiscal 2019, 2018 and 2017 were
$56.3 million, $55.2 million and $54.1 million, respectively. Net expense for property and equipment disposals was $0.9
million, $2.1 million and $2.5 million, in fiscal 2019, 2018 and 2017, respectively.

7. Intangible Assets, net

The following table presents components of intangible assets, net (in thousands):

December 31, 2019

January 1, 2019

Indefinite-lived intangible assets:

Goodwill .......................................................................................................... $
Trade names and trademarks ...........................................................................
Transferable alcoholic beverage licenses ........................................................
Total indefinite-lived intangible assets .........................................................

Definite-lived intangible assets, net:

Licensing agreements ......................................................................................
Non-transferable alcoholic beverage licenses .................................................
Leasehold acquisition assets ............................................................................
Total definite-lived intangible assets ............................................................
Total intangible assets, net ................................................................................. $

78,355
337,027
8,575
423,957

10,060
3,190
—
13,250
437,207

—
9,922
7,164
17,086

—
2,951
6,172
9,123
26,209

Amortization expenses related to our definite-lived intangible assets was $0.3 million, $0.6 million and $0.6
million for fiscal 2019, 2018 and 2017, respectively. Definite-lived intangible assets will be amortized over one to 56
years. We performed our annual assessment of indefinite-lived intangible assets and concluded as of the date of the test,
there was no impairment of these assets.

8. Leases

Components of lease expense were as follows (in thousands):

Operating.................................................................................................................................. $
Variable ....................................................................................................................................
Short-term ................................................................................................................................

Total ....................................................................................................................................... $

Rent expense on all operating leases (under ASC 840) was as follows (in thousands):

Fiscal Year
2019

112,048
66,689
368
179,105

Fiscal Year

2018

2017

Straight-lined minimum base rent ............................................................................................ $ 83,999 $ 83,387
19,559
Contingent rent .........................................................................................................................
38,103
Common area maintenance and taxes ......................................................................................
Total ....................................................................................................................................... $ 144,107 $ 141,049

20,147
39,961

Supplemental information related to leases (in thousands, except percentages):

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases .......................................................................... $

Right-of-use assets obtained in exchange for new operating lease liabilities ..........................
Weighted-average remaining lease term — operating leases (in years) ...................................
Weighted-average discount rate — operating leases ...............................................................

Fiscal Year
2019

103,210
262,421 (1)
16.6

5.2 %

(1) Includes $223.5 million in right-of-use assets related to the Acquisition. (See Note 2 for further discussion of

the Acquisition.)

As of December 31, 2019, the maturities of our operating lease liabilities are as follows (in thousands):

2020 .....................................................................................................................................
2021 .....................................................................................................................................
2022 .....................................................................................................................................
2023 .....................................................................................................................................
2024 .....................................................................................................................................
Thereafter .............................................................................................................................
Total future lease payments .................................................................................................
Less: Interest ........................................................................................................................
Present value of lease liabilities ...........................................................................................

122,250
124,383
125,427
121,855
120,772
1,415,777
2,030,464
(712,514)
1,317,950

Operating lease liabilities include $867.2 million related to options to extend lease terms that are reasonably

certain of being exercised and exclude $136.2 million of legally binding minimum lease payments for leases signed but
not yet commenced.

As of January 1, 2019, the aggregate minimum annual lease payments under operating leases (under ASC 840),

including amounts characterized as deemed landlord financing payments, were as follows (in thousands):

2019 .....................................................................................................................................
2020 .....................................................................................................................................
2021 .....................................................................................................................................
2022 .....................................................................................................................................
2023 .....................................................................................................................................
Thereafter .............................................................................................................................
Total .....................................................................................................................................

93,792
91,808
88,829
86,925
81,929
495,091
938,374

9. Other Assets

Other assets consisted of (in thousands):

Non-qualified deferred compensation assets ................................................................. $
Deposits ........................................................................................................................
Deferred income taxes ..................................................................................................

Total ............................................................................................................................ $

77,228 $
5,693
3,375
86,296 $

57,605
5,489
1,597
64,691

December 31, 2019

January 1, 2019

10. Gift Cards

The following tables present information related to gift cards (in thousands):

Gift card liabilities:
Beginning balance ........................................................................................................ $
Activations ...................................................................................................................
Redemptions and breakage ..........................................................................................

Ending balance .......................................................................................................... $

172,336 $
158,099
(142,457)
187,978 $

163,951
151,084
(142,699)
172,336

December 31, 2019

January 1, 2019

Gift card contract assets (1):
Beginning balance .....................................................................................................
Deferrals ....................................................................................................................
Amortization .............................................................................................................
Ending balance .......................................................................................................

23,388 $
18,378
(18,594)
23,172 $

23,814
18,669
(19,095)
23,388

December 31, 2019 January 1, 2019

(1) Included in prepaid expenses on the consolidated balance sheets.

11. Other Accrued Expenses

Other accrued expenses consisted of (in thousands):

Self-insurance ............................................................................................................
Salaries and wages ....................................................................................................
Staff member benefits ................................................................................................
Payroll and sales taxes ..............................................................................................
Deferred consideration ...............................................................................................
Other .........................................................................................................................
Total ........................................................................................................................

68,881 $
56,774
25,044
22,822
16,740
46,321

236,582 $

72,631
39,102
22,946
15,684
—
44,018
194,381

December 31, 2019 January 1, 2019

12. Long-Term Debt

On July 30, 2019, we entered into a Third Amended and Restated Loan Agreement (the “New Facility”), which

amends and restates in its entirety our prior Second Amended and Restated Loan Agreement dated as of December 22,
2015. The New Facility, which terminates on July 30, 2024, provides us with revolving loan commitments that total
$400 million (of which $40 million may be used for issuances of letters of credit). The New Facility contains a
commitment increase feature that could provide for an additional $200 million in available credit upon our request and
subject to the participating lenders electing to increase their commitments or new lenders being added to the New
Facility. At December 31, 2019, we had net availability for borrowings of $90.6 million, based on an outstanding debt
balance of $290.0 million and $19.4 million in standby letters of credit. During fiscal 2019, we utilized the New Facility
to fund the Acquisition (see Note 2 for further discussion of the Acquisition). During fiscal years 2019, 2018 and 2017,
we utilized our previous credit facility to fund a portion of our stock repurchases.

We are subject to certain financial covenants under the New Facility requiring us to maintain (i) a maximum
“Net Adjusted Leverage Ratio” of 4.75 and (ii) a minimum EBITDAR to interest and rent expense ratio (“EBITDAR
Ratio”) of 1.9, as well as customary events of default that, if triggered, could results in acceleration of the maturity of the
New Facility. The New Facility also limits cash distributions with respect to our equity interests, such as cash dividends
and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens,
investments, sales of assets, fundamental changes and other matters.

Borrowings under the New Facility bear interest, at our option, at a rate equal to either (i) the adjusted LIBO

Rate (as customarily defined) (the “Adjusted LIBO Rate”) plus a margin that is based on our net adjusted leverage ratio,
or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in
effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the
effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank
funding rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin that is
based on our net adjusted leverage ratio. Letters of credit issued under the New Facility bear fees that are equivalent to
the interest rate margin that is applicable to revolving loans that bear interest at the adjusted LIBO Rate plus other
customary fees charged by the issuing bank. Under the New Facility, we paid certain customary loan origination fees
and will pay an unused fee on the unused portion of the New Facility that is also based on our Net Adjusted Leverage

Ratio. Our Net Adjusted Leverage and EBITDAR Ratios were 3.8 and 2.5, respectively, at December 31, 2019, and we
were in compliance with all covenants in effect at that date.

Our obligations under the New Facility are unsecured. Certain of our material subsidiaries have guaranteed our
obligations under the New Facility. The New Facility will be used for our general corporate purposes, including for the
issuance of standby letters of credit to support our self-insurance programs, and to fund dividends, stock repurchases and
permitted acquisitions.

We capitalized interest expense related to new restaurant openings and major remodels totaling $0.6 million,

$0.4 million and $0.7 million in fiscal 2019, 2018 and 2017, respectively.

13. Other Noncurrent Liabilities

Other noncurrent liabilities consisted of (in thousands):

Non-qualified deferred compensation liabilities ............................................................. $
Deferred consideration ....................................................................................................
Contingent consideration and compensation liabilities ...................................................
Other ..............................................................................................................................

76,255 $
37,193
13,218
13,882

Total ............................................................................................................................. $

140,548 $

57,551
—
—
14,108
71,659

December 31, 2019 January 1, 2019

(See Note 17 for further discussion of our non-qualified deferred compensation plan.)

14. Commitments and Contingencies

Purchase obligations, which include inventory purchases, equipment purchases, information technology and

other miscellaneous commitments, were $118.2 million and $149.8 million at December 31, 2019 and January 1, 2019,
respectively. These purchase obligations are primarily due within three years and recorded as liabilities when goods are
received or services rendered. Real estate obligations, which include construction commitments, net of up-front landlord
construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were
$176.1 million and $12.6 million at December 31, 2019 and January 1, 2019, respectively.

The purchase price of the Acquisition includes a $12 million indemnity escrow amount specifically related to

North Italia due ratably over the next two years; and $45 million of deferred consideration due ratably over the next four
years (including a $13 million indemnity escrow amount specifically related to the remaining FRC businesses). The
acquisition agreement also included a contingent consideration provision which is payable on the fifth anniversary of the
Closing Date and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia
and Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other
than North Italia and Flower Child) during the five years after Closing. We are also required to provide financing to FRC
in an amount sufficient to support achievement of these targets during the five years after Closing. (See Note 2 for
further discussion of the Acquisition.)

As credit guarantees to insurers, we had $19.4 million and $20.7 million at December 31, 2019 and January 1,

2019, respectively, in standby letters of credit related to our self-insurance liabilities. All standby letters of credit are
renewable annually.

We retain the financial responsibility for a significant portion of our risks and associated liabilities with respect

On June 7, 2018, the California Department of Industrial Relations issued a $4.2 million wage citation jointly

against the Company and our vendor that provides janitorial services to eight of our Southern California restaurants,
alleging that the janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor
Code (Wage Citation Case No. 35-CM-188798-16). The wage citation seeks to recover penalties and other monetary
payments on behalf of the employees that worked for this vendor or its subcontractor. On June 28, 2018, we filed an
appeal of the wage citation. The Company’s appeal of the wage citation is tentatively scheduled for hearing in July 2020.
We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of
or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments.

On June 22, 2018, the Internal Revenue Service issued a Notice of Deficiency in which they disallowed $8.0
million of our §199 Domestic Production Activities Deduction for tax years 2010, 2011 and 2012. On September 11,
2018 we petitioned the United States Tax Court for a redetermination of the deficiency. The tax court has assigned
docket number 18150-18 to our case. We intend to vigorously defend our position in litigation and based on our analysis
of the law, regulations and relevant facts, we have not reserved for any potential future payments.

Within the ordinary course of our business, we are subject to private lawsuits, government audits,

administrative proceedings and other claims. These matters typically involve claims from customers, staff members and
others related to operational and employment issues common to the foodservice industry. A number of these claims may
exist at any given time, and some of the claims may be pled as class actions. From time to time, we are also involved in
lawsuits with respect to infringements of, or challenges to, our registered trademarks and other intellectual property, both
domestically and abroad. We could be affected by adverse publicity and litigation costs resulting from such allegations,
regardless of whether they are valid or whether we are legally determined to be liable.

At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any

pending lawsuits, audits, proceedings and claims will not have a material adverse effect individually or in the aggregate
on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations
for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, audits,
proceedings or claims. Legal costs related to such claims are expensed as incurred.

We have employment agreements with certain of our executive officers that provide for payments to those

officers in the event of an actual or constructive termination of their employment, including in the event of a termination
without cause, an acquirer failure to assume or continue equity awards following a change in control of the Company or,
otherwise, in the event of death or disability as defined in those agreements. Aggregate payments totaling approximately
$2.3 million, excluding accrued potential bonuses of $2.7 million, which are subject to approval by the Compensation
Committee, would have been required by those agreements had all such officers terminated their employment for
reasons requiring such payments as of December 31, 2019. In addition, the employment agreement with our Chief
Executive Officer specifies an annual founder’s retirement benefit of $650,000 for ten years, commencing six months
after termination of his full-time employment.

15. Stockholders’ Equity

Cash dividends of $1.38, $1.24 and $1.06 were declared during fiscal 2019, 2018 and 2017, respectively. Future

decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our
operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant
to the terms and conditions of the New Facility and applicable law, and such other factors that the Board considers
relevant. (See Note 12 for further discussion of our long-term debt.)

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have

cumulatively repurchased 52.9 million shares at a total cost of $1,693.1 million through December 31, 2019. During
fiscal 2019, 2018 and 2017, we repurchased 1.1 million, 2.3 million and 2.6 million shares of our common stock at a cost
of $51.0 million, $109.3 million and $123.0 million, respectively. Repurchased common stock is reflected as a reduction
of stockholders’ equity in treasury stock.

Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific

number of shares and may be modified, suspended or terminated at any time. Shares may be repurchased in the open
market or through privately negotiated transactions at times and prices considered appropriate by us. We make the

determination to repurchase shares based on several factors, including current and forecasted operating cash flows,
capital needs associated with new restaurant development and maintenance of existing locations, dividend payments,
debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market
conditions. (See Note 2 for further discussion of the Acquisition.) The timing and number of shares repurchased are also
subject to legal constraints and financial covenants under the New Facility that limit share repurchases based on a
defined ratio. (See Note 12 for further discussion of our long-term debt.) Our objectives regarding share repurchases are
to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our
earnings per share growth.

16. Stock-Based Compensation

We maintain stock-based incentive plans under which incentive stock options, non-qualified stock options,

stock appreciation rights, restricted shares and restricted share units may be granted to staff members, consultants and
non-employee directors. Our current practice is to issue new shares, rather than treasury shares, upon stock option
exercises, for restricted share grants and upon vesting of restricted share units. To date, we have only granted non-
qualified stock options, restricted shares and restricted share units of common stock under these plans. No grants have
been made to non-employee directors under these plans.

On April 5, 2017, our Board approved an amendment to our 2010 Stock Incentive Plan to increase the number

of shares of common stock reserved for grant under the plan to 12.7 million shares from 9.2 million shares. This
amendment was approved by our stockholders at our annual meeting held on June 8, 2017. On April 4, 2019, our Board
adopted The Cheesecake Factory Incorporated Stock Incentive Plan. This plan was approved by our stockholders at our
annual meeting held on May 30, 2019. The maximum number of shares of common stock available for grant under this
plan is 4.8 million shares plus 1.8 million shares, which, as of May 30, 2019, were available for issuance under our 2010
Stock Incentive Plan, plus 1.9 million shares which may become available for issuance under The Cheesecake Factory
Incorporated Stock Incentive Plan due to forfeiture or lapse of awards under our 2010 Stock Incentive Plan following
May 30, 2019. Approximately 6.5 million of these shares were available for grant as of December 31, 2019.

Stock options generally vest at 20% per year and expire eight years from the date of grant. Restricted shares and

restricted share units generally vest between three to five years from the date of grant and require that the staff member
remains employed in good standing with the Company as of the vesting date. Certain restricted share units granted to
executive officers contain performance-based vesting conditions. Performance goals are determined by the Board of
Directors. The quantity of units that will vest ranges from 0% to 150% based on the level of achievement of the
performance conditions. Equity awards for certain executive officers may vest earlier in the event of a change of control
in which the acquirer fails to assume or continue such awards, as defined in the plan, or under certain circumstances
described in such executive officers’ respective employment agreements. Compensation expense is recognized only for
those options, restricted shares and restricted share units expected to vest, with forfeitures estimated based on our
historical experience and future expectations.

The following table presents information related to stock-based compensation, net of forfeitures (in thousands):

Labor expenses ................................................................................................. $
Other operating costs and expenses .................................................................
General and administrative expenses ...............................................................
Total stock-based compensation ....................................................................
Income tax benefit ............................................................................................

Total stock-based compensation, net of taxes ................................................. $

2019
6,233
274
12,866
19,373
4,760
14,613

Capitalized stock-based compensation (1) ......................................................... $

226

Fiscal Year

2018

2017(2)

5,681 $
287
14,020
19,988
4,987

5,236
243
10,978
16,457
6,295
15,001 $ 10,162

262 $

239

(1) It is our policy to capitalize the portion of stock-based compensation costs for our internal development
department that relates to capitalizable activities such as the design and construction of new restaurants,

remodeling existing locations and equipment installation. Capitalized stock-based compensation is included in
property and equipment, net on the consolidated balance sheets.

(2) Fiscal 2017 stock-based compensation expense includes a $3.9 million benefit for an out-of-period adjustment

related to a correction in stock-based compensation valuation and forfeitures.

Stock Options

The weighted-average fair value at the grant date for options issued during fiscal 2019, 2018 and 2017 was
$9.84, $11.62 and $14.83 per share, respectively. The fair value of options was estimated utilizing the Black-Scholes
valuation model with the following weighted-average assumptions for fiscal 2019, 2018 and 2017, respectively: (a) an
expected option term of 6.9 years in all fiscal years presented, (b) expected stock price volatility of 26.3%, 27.8% and
24.4%, (c) a risk-free interest rate of 2.6%, 2.8% and 2.3%, and (d) a dividend yield on our stock of 2.9%, 2.5% and
1.6%.

The expected option term represents the estimated period of time until exercise and is based on historical

experience of similar options, giving consideration to the contractual terms, vesting schedules and expectations of future
staff member behavior. Expected stock price volatility is based on a combination of the historical volatility of our stock
and the implied volatility of actively traded options on our common stock. The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of grant with an equivalent remaining term. The dividend yield is based on
anticipated cash dividend payouts.

Stock option activity during fiscal 2019 was as follows:

Outstanding at beginning of year .................................
Granted .........................................................................
Exercised ......................................................................
Forfeited or cancelled ...................................................
Outstanding at end of year ...........................................

Shares
(In thousands)
1,799
307
(260)
(17)
1,829

Weighted
Average
Exercise Price
(Per share)

$
$
$
$
$

45.03
45.90
29.72
48.38
47.32

Exercisable at end of year ............................................

986

46.04

Weighted
Average
Remaining
Contractual
Term
(In years)
4.1

Aggregate
Intrinsic
Value(1)
(In thousands)
5,606
$

4.3

2.8

844

(1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal year-end and
the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that
would have been received by the option holders, had they all exercised their options on the fiscal year -end date.

The total intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $4.3 million, $6.2 million

and $11.2 million, respectively. As of December 31, 2019, total unrecognized stock-based compensation expense related
to unvested stock options was $7.0 million, which we expect to recognize over a weighted-average period of
approximately 3.0 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during fiscal 2019 was as follows:

Outstanding at beginning of year ......................................................................................
Granted ..............................................................................................................................
Vested ...............................................................................................................................
Forfeited ............................................................................................................................
Outstanding at end of year ................................................................................................

Weighted
Average
Fair
Value
(Per share)
48.08
45.02
45.26
47.19
47.76

$
$
$
$
$

Shares
(In thousands)
1,702
541
(349)
(130)
1,764

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of

grant. The weighted-average fair value for restricted shares and restricted share units issued during fiscal 2019, 2018 and
2017 was $45.02, $48.22 and $54.29, respectively. The fair value of shares that vested during fiscal 2019, 2018 and
2017 was $15.8 million, $17.8 million and $18.4 million, respectively. As of December 31, 2019, total unrecognized
stock-based compensation expense related to unvested restricted shares and restricted share units was $36.4 million,
which we expect to recognize over a weighted-average period of approximately 2.9 years.

17. Employee Benefit Plans

We have defined contribution benefit plans in accordance with section 401(k) of the Internal Revenue Code

(“401(k) Plans”) that are open to our staff members who meet certain compensation and eligibility requirements.
Participation in the 401(k) Plans is currently open to staff members from our restaurant concepts, bakery facilities,
corporate office and FRC headquarters. The 401(k) Plans allow participating staff members to defer the receipt of a
portion of their compensation and contribute such amount to one or more investment options. Our executive officers and
a select group of management and/or highly compensated staff members are not eligible to participate in the 401(k)
Plans. We currently match in cash a certain percentage of the staff member contributions to the 401(k) Plans and also
pay a portion of the administrative costs. Expense recognized in fiscal 2019, 2018 and 2017 was $1.2 million, $1.0
million and $1.0 million, respectively.

We have also established non-qualified deferred compensation plans (“Non-Qualified Plans”) for our executive

officers and a select group of management and/or highly compensated staff members. The Non-Qualified Plans allow
participating staff members to defer the receipt of a portion of their base compensation and bonuses. Non-employee
directors may also participate in the Non-Qualified Plans and defer the receipt of their earned director fees. We currently
match in cash a certain percentage of the staff member contributions to the Non-Qualified Plans and also pay for the
administrative costs. We do not match any contributions made by non-employee directors. Expense recognized in fiscal
2019, 2018 and 2017 was $1.2 million, $1.3 million and $1.0 million, respectively.

While we are under no obligation to fund Non-Qualified Plan liabilities (in whole or in part), our current

practice is to maintain company-owned life insurance contracts and other investments that are specifically designed to
informally fund savings plans of this nature. These contracts are recorded at their cash surrender value as determined by
the insurance carrier. Our consolidated balance sheets reflect investments in other assets and our obligation to
participants in the Non-Qualified Plans in other noncurrent liabilities. All gains and losses related to our non-qualified
deferred compensation assets and liabilities are reflected in interest and other expense, net in our consolidated statements
of income.

We maintain self-insured medical and dental benefit plans for our staff members. The accrued liabilities

associated with these programs are based on our estimate of the ultimate costs to settle known claims as well as claims
incurred but not yet reported to us as of the balance sheet date. The accrued liability for our self-insured benefit plans,
which is included in other accrued expenses, was $10.8 million and $10.4 million as of December 31, 2019 and January
1, 2019, respectively. (See Note 1 for further discussion of accounting for our self-insurance liabilities.)

18. Income Taxes

The provision for income taxes consisted of the following (in thousands):

Income before income taxes ....................................................................... $
Income tax (benefit)/provision:
Current:

2019

Fiscal Year
2018

2017(1)

140,334 $ 107,411 $ 146,466

Federal ..................................................................................................... $
State .........................................................................................................
Total current ..........................................................................................

8,211 $
7,027
15,238

5,082 $
8,804
13,886

7,148
7,106
14,254

Deferred:

Federal .....................................................................................................
State .........................................................................................................
Total deferred ........................................................................................

Total (benefit)/provision ...................................................................... $

(3,695)
1,498
(2,197)
13,041 $

(24,570)
(4,549)
(610)
(961)
(5,510)
(25,180)
8,376 $ (10,926)

(1) The Tax Act, which was enacted on December 22, 2017, made significant changes to how corporations are

taxed in the U.S., the most prominent of which affecting us was to lower the U.S. corporate tax rate from 35%
to 21%. In addition to the benefit of a lower rate in future years, the enactment of the Tax Act caused us to
revalue our deferred tax assets and liabilities to reflect the new rate, resulting in a benefit to our fiscal 2017
income tax provision of $38.5 million.

The following reconciles the U.S. federal statutory rate to the effective tax rate:

2019

Fiscal Year
2018

2017

U.S. federal statutory rate .............................................................................................
State and district income taxes, net of federal benefit ..................................................
Credit for FICA taxes paid on tips ................................................................................
Other credits and incentives .........................................................................................
Manufacturing deduction .............................................................................................
Deferred compensation ................................................................................................
Equity compensation ....................................................................................................
Impact of statutory rate change on deferred taxes .........................................................
Other ............................................................................................................................
Effective tax rate ..........................................................................................................

21.0 %
4.9
(12.8)
(1.4)
—
(1.7)
(0.2)
—
(0.5)
9.3 %

21.0 % 35.0 %

6.1
(16.5)
(2.5)
—
0.8
(1.5)
—
0.4
7.8 %

3.3
(9.4)
(1.9)
(2.3)
(1.5)
(4.5)
(26.3)
0.1
(7.5) %

Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):

December 31, 2019

January 1, 2019

Deferred tax assets:

Staff member benefits .................................................................................... $
Insurance reserves ..........................................................................................
Accrued rent ..................................................................................................
Deferred income ............................................................................................
Stock-based compensation .............................................................................
Tax credit carryforwards ................................................................................
Other ..............................................................................................................
Subtotal .......................................................................................................
Less: Valuation allowance .............................................................................
Total ................................................................................................................. $

27,059 $
14,157
27,582
22,725
8,794
15,754
1,958
118,029
(713)
117,316 $

22,925
15,165
10,870
17,288
8,628
1,880
1,265
78,021
(792)
77,229

Deferred tax liabilities:

Property and equipment ................................................................................. $
Prepaid expenses ............................................................................................
Inventory .........................................................................................................
Other ...............................................................................................................
Total ................................................................................................................. $

(131,120) $
(8,819)
(7,713)
(136)
(147,788) $

(107,513)
(7,929)
(6,893)
(5,420)
(127,755)

Net deferred tax liability .................................................................................. $

(30,472) $

(50,526)

At December 31, 2019 and January 1, 2019, we had $1.9 million and $2.4 million, respectively, of state tax

credit carryforwards, consisting of hiring and investment credits, which began to expire in 2013, and $0.8 million and
$0.7 million, respectively, of foreign net operating losses and $14.3 million and $3.3 million, respectively, of federal
credit carryforwards which begin to expire in 2038. We assess the available evidence to estimate if sufficient future
taxable income will be generated to use these carryforwards. Based on this evaluation, we recorded a valuation
allowance of $0.7 million and $0.8 million at December 31, 2019 and January 1, 2019, respectively, to reflect the
amount that we will likely not realize. This assessment could change if estimates of future taxable income during the
carryforward period are revised. The earliest tax year still subject to examination by a significant taxing jurisdiction is
2010.

At December 31, 2019, we had a reserve of $0.7 million for uncertain tax positions. If recognized, this amount

would impact our effective income tax rate. A reconciliation of the beginning and ending amount of our uncertain tax
positions is as follows (in thousands):

2019

Fiscal Year
2018

2017

Balance at beginning of year ..........................................................
Additions related to current period tax positions .........................
Reductions related to settlements with taxing authorities and
lapses of statutes of limitations ....................................................
Balance at end of year ....................................................................

830 $

(139)
704 $

843 $
104

(117)
830 $

829
168

(154)
843

At both December 31, 2019 and January 1, 2019, we had $0.2 million of accrued interest and penalties related
to uncertain tax positions. None of the balance of uncertain tax positions at December 31, 2019 relates to tax positions
for which it is reasonably possible that the total amount could decrease during the next twelve months based on the
lapses of statutes of limitations.

19. Segment Information

Our operating segments are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC
brands, our bakery division and Grand Lux Cafe, the businesses for which our management reviews discrete financial
information for decision-making purposes. Based on quantitative thresholds set forth in ASC 280, “Segment Reporting,”
The Cheesecake Factory, North Italia and the other FRC brands are the only businesses that meet the criteria of a
reportable operating segment. The remaining operating segments, including Flower Child, along with our businesses that
don’t qualify as operating segments are combined in Other. Unallocated corporate expenses, capital expenditures and
assets, which were previously classified in a separate Corporate line, are also combined in Other. In addition, gift card
costs, which were previously classified in The Cheesecake Factory restaurants reportable segment, are combined in
Other. Corresponding prior year balances were reclassified to conform to the current year presentation.

Segment information is presented below (in thousands):

2019 (1)

Fiscal Year
2018

2017

Revenues:

The Cheesecake Factory restaurants .......................................... $
North Italia ..................................................................................
Other FRC ..................................................................................
Other ..........................................................................................

Total ......................................................................................... $

2,180,882 $
35,268
39,335
227,207
2,482,692 $

2,127,347 $

—
—
204,984
2,332,331 $

2,057,816
—
—
202,686
2,260,502

Income/(loss) from operations:

The Cheesecake Factory restaurants (2) ...................................... $
North Italia ..................................................................................
Other FRC ..................................................................................
Other (3) ......................................................................................

Total ......................................................................................... $

258,374 $
1,608
5,309
(161,693)
103,598 $

270,829 $
—
—
(151,881)
118,948 $

281,715
—
—
(128,870)
152,845

Depreciation and amortization:

Total ......................................................................................... $

Preopening costs:

The Cheesecake Factory restaurants ........................................... $
North Italia ..................................................................................
Other FRC ..................................................................................
Other ...........................................................................................

70,971 $
829
1,037
15,296
88,133 $

9,967 $
1,297
49
1,836

80,646 $
—
—
15,330
95,976 $

9,247 $
—
—
1,690

Total ......................................................................................... $

13,149 $

10,937 $

76,186
—
—
16,543
92,729

10,891
—
—
2,387
13,278

Capital expenditures:

59,045 $

2,318
5,072
7,330

71,880 $
—
—
31,029

Total ......................................................................................... $

73,765 $

102,909 $

101,142
—
—
19,637
120,779

Total assets:

Total ......................................................................................... $

1,701,418 $
297,840
310,414
530,921
2,840,593 $

928,345 $
—
—
385,788
1,314,133 $

937,512
—
—
395,548
1,333,060

(1) We completed the acquisition of North Italia and the remaining business of FRC on October 2, 2019. The

results of the acquired businesses are included in our consolidated financial statements as of the acquisition
date. (See Note 2 for further discussion of the Acquisition.)

(2) Fiscal years 2019, 2018 and 2017 include impairment of assets and lease terminations expense of $8.9 million,

$6.6 million and $2.5 million, respectively. (See Note 1 for further discussion of these charges.)

(3) Fiscal years 2019, 2018 and 2017 include impairment of assets and lease terminations expense of $9.3 million,

$11.3 million and $7.8 million, respectively. (See Note 1 for further discussion of these charges.) Fiscal 2019
included $6.3 million of acquisition-related costs and acquisition-related contingent consideration,
compensation and amortization expense. (See Note 2 for further discussion of the Acquisition.)

20. Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for fiscal 2019 and 2018 is as follows (in thousands, except per

share data):

Quarter Ended:
Revenues (1) ......................................................... $
Income from operations (1)(2) ............................... $
Net income (1)(2) ................................................... $
Basic net income per share (4) ............................. $
Diluted net income per share (4) .......................... $
Cash dividends declared per common share ...... $

April 2, 2019

July 2, 2019

599,481
30,148
26,984
0.61
0.60
0.33

$
$
$
$
$
$

602,645
40,099
35,510
0.80
0.79
0.33

October 1, 2019
586,536
$
26,964
$
16,090
$
0.37
$
0.36
$
0.36
$

December 31, 2019
694,030
$
6,387
$
48,709
$
1.11
$
1.10
$
0.36
$

Quarter Ended:
Revenues ............................................................
Income from operations (3) .................................
Net income (3) .....................................................
Basic net income per share (4) ............................
Diluted net income per share (4) .........................
Cash dividends declared per common share .....

$
$
$
$
$
$

April 3, 2018

July 3, 2018

584,697
31,551
26,029
0.57
0.56
0.29

$
$
$
$
$
$

587,319
34,543
28,353
0.62
0.61
0.29

October 2, 2018
575,160
$
33,495
$
28,475
$
0.63
$
0.61
$
0.33
$

January 1, 2019
585,155
$
19,359
$
16,178
$
0.36
$
0.35
$
0.33
$

(1) The fourth quarter of fiscal 2019 includes revenues, loss from operations and net loss of $92.0 million, $2.1 million,
and $1.5 million, respectively related to the acquired businesses. In addition, income from operations included $3.2
million and $3.1 million of acquisition-related expense in the third and fourth quarters of fiscal 2019, respectively,
with a corresponding impact to net income of $2.4 million and $2.3 million, respectively. These amounts were
recorded in acquisition-related costs and acquisition-related contingent consideration, compensation and
amortization expense in the consolidated statements of income. (See Note 2 for further discussion of the
Acquisition.)

(2) In the fourth quarter of fiscal 2019, income from operations included impairment of assets and lease terminations
expense of $18.2 million, with an corresponding impact to net income of $13.5 million. (See Note 1 for further
discussion of these charges.)

(3) In fiscal 2018, income from operations included $2.6 million, $0.3 million and $15.0 million of impairment of assets

and lease terminations expense in the second, third and fourth quarters, respectively, with an corresponding impact
to net income of $1.9 million, $0.2 million and $11.1 million, respectively. (See Note 1 for further discussion of
these charges.)

(4) Net income per share calculations for each quarter are based on the weighted average diluted shares outstanding for

that quarter and may not total to the full year amount.

While seasonal fluctuations generally do not have a material impact on our quarterly results, the year-over-year

comparison of our quarterly results can be significantly impacted by the number and timing of new restaurant openings
and associated preopening costs, the calendar days of the we 0ek on which holidays occur, the impact from inclement
weather and other climatic conditions and other variations in revenues and expenses. As a result of these factors, our
financial results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

21. Subsequent Events

On February 18, 2020, our Board of Directors approved a quarterly cash dividend of $0.36 per share to be paid

on March 20, 2020 to the stockholders of record on March 9, 2020.

EXHIBIT INDEX

Item

Form

File Number

Incorporated by
Reference from
Exhibit Number

Amend. No. 1
to Form S-1

33-479336

10-Q

000-20574

2.1

Filed with
SEC

8/17/92

11/8/19

Exhibit
No.

2.1

2.2

2.3

2.4

2.5

3.1

3.2

3.3

4.1

Form of Reorganization Agreement(P)

Purchase Agreement, dated as of November
14, 2016, as amended by Amendment &
Option Exercise Agreement, dated as of
July 30, 2019, by and among The
Cheesecake Factory Incorporated and the
other Parties thereto#

First Amendment to Option Exercise
Agreement and Second Amendment to
Purchase Agreement and Operating
Agreement, dated as of October 2, 2019, by
and among The Cheesecake Factory
Incorporated and the other Parties thereto#

Membership Interest Purchase Agreement,
dated as of July 30, 2019, by and among
The Cheesecake Factory Restaurants, Inc.,
Fox Restaurant Concepts LLC, the Sellers
party thereto, SWF Posse LLC, as Seller’s
representative, and, solely for limited
purposes set forth therein, The Cheesecake
Factory Incorporated#†

First Amendment to Membership Interest
Purchase Agreement, dated as of October 2,
2019, by and among The Cheesecake
Factory Restaurants, Inc., Fox Restaurant
Concepts LLC, and SWF Posse LLC, as
Seller’s representative#

Bylaws of The Cheesecake Factory
Incorporated (Amended and Restated on
May 20, 2009)

Certificate of Elimination of Series A Junior
Participating Cumulative Preferred Stock of
The Cheesecake Factory Incorporated

Description of The Cheesecake Factory
Incorporated’s Securities Registerd Pursuant
to Secion 12 of the Securities Exchange Act

10-Q

000-20574

2.2

11/8/19

10-Q

000-20574

2.3

11/8/19

10-Q

000-20574

2.4

11/8/19

Restated Certificate of Incorporation of The
Cheesecake Factory Incorporated

10-Q

000-20574

8-K

000-20574

3.2

3.8

8/6/18

5/27/09

10-Q

000-20574

3.1

8/6/18

—

Filed
herewith

Exhibit
No.
10.1.1

10.1.2

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9.1

10.9.2

Item

Employment Agreement, effective as of
April 1, 2017, between The Cheesecake
Factory Incorporated and David M.
Overton*

First Amendment to Employment
Agreement, effective as of April 1, 2018,
between The Cheesecake Factory
Incorporated and David M. Overton*

Employment Agreement, effective as of
March 3, 2016, between The Cheesecake
Factory Incorporated and David M.
Gordon*

Employment Agreement, effective as of
March 3, 2016, between The Cheesecake
Factory Incorporated and W. Douglas
Benn*

Employment Agreement, effective as of
March 3, 2016, between The Cheesecake
Factory Incorporated and Debby R.
Zurzolo*

Employment Agreement, effective as of
March 3, 2016, between The Cheesecake
Factory Incorporated and Max Byfuglin*

Employment Agreement, effective as of
July 7, 2017, between The Cheesecake
Factory Incorporated and Matthew E.
Clark*

Employment Agreement, effective as of
May 14, 2018, between The Cheesecake
Factory Incorporated and Scarlett May*

Employment Agreement, effective as of
February 13, 2019, between The
Cheesecake Factory Incorporated and Keith
T. Carango*

Amended and Restated The Cheesecake
Factory Incorporated Executive Savings
Plan*

First Amendment to The Cheesecake
Factory Incorporated Executive Savings
Plan as amended and restated November 7,
2016*

Form
8-K

File Number
000-20574

Incorporated by
Reference from
Exhibit Number
99.2

Filed with
SEC
2/22/17

8-K

000-20574

99.2

2/21/18

10-K

000-25074

10.6

3/2/17

10-K

000-25074

10.7

3/2/17

10-K

000-25074

10.8

3/2/17

10-K

000-25074

10.9

3/2/17

8-K

000-25074

99.1

6/13/17

10-Q

000-25074

10.10

5/11/18

10-K

000-20574

10.8

3/4/19

10-K

000-25074

10.20

3/2/17

10-K

000-25074

10.11.1

2/28/18

10.10

Form of Indemnification Agreement*

10.11.1

Inducement Agreement dated as of July 27,
2005

8-K

000-25074

99.1

99.3

12/14/07

8/2/05

Exhibit
No.

10.11.2

Item

First Amendment to Inducement Agreement
dated as of March 1, 2010

10.11.3

Second Amendment to Inducement
Agreement dated as of May 7, 2015

10.12.1

10.12.2

10.12.3

10.12.4

10.12.5

10.13

10.14

10.15

10.16

10.17.1

The Cheesecake Factory Incorporated 2010
Stock Incentive Plan as amended April 7,
2011*

The Cheesecake Factory Incorporated 2010
Stock Incentive Plan as amended effective
as of February 27, 2013*

The Cheesecake Factory Incorporated 2010
Stock Incentive Plan as amended April 3,
2014*

The Cheesecake Factory Incorporated 2010
Stock Incentive Plan as amended May 28,
2015*

The Cheesecake Factory Incorporated 2010
Stock Incentive Plan as amended April 5,
2017*

Form of Grant Agreement for Executive
Officers under 2010 Stock Incentive Plan*

Form of Grant Agreement for Executive
Officers under the 2010 Stock Incentive
Plan, for equity grants made after August 2,
2012*

Form of Notice of Stock Option Grant and
Agreement and/or Restricted Stock Grant
Agreement for Executive Officers under the
2010 Stock Incentive Plan, for equity grants
made after March 6, 2014*

Form of Notice of Grant and Stock Option
Agreement and/or Stock Unit Agreement
under the 2010 Stock Incentive Plan, for
equity grants made after March 3, 2016*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for MEP I under the 2010 Stock
Incentive Plan, for equity grants made after
February 15, 2018*

Form

10-K

File Number

Incorporated by
Reference from
Exhibit Number

Filed with
SEC

000-25074

10.36

2/23/11

10-K

000-25704

10.24

3/2/17

DEF 14A

000-20574

Appendix A

4/21/11

DEF 14A

000-20574

Appendix A

04/19/13

DEF 14A

000-20574

Appendix A

4/17/14

DEF 14A

000-20574

Appendix A

4/17/15

DEF 14A

000-20574

Appendix A

4/25/17

10-Q

000-20574

10.1

11/4/10

10-Q

000-20574

10.1

8/10/12

8-K

000-20574

99.1

3/7/14

8-K

000-20574

99.2

3/4/16

10-K

000-25074

10.24.1

2/28/18

Exhibit
No.
10.17.2

10.17.3

10.17.4

10.17.5

10.17.6

10.17.7

10.17.8

10.18

10.19

10.20

Item
Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for MEP II under the 2010 Stock
Incentive Plan, for equity grants made after
February 15, 2018*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for MEP III under the 2010
Stock Incentive Plan, for equity grants made
after February 15, 2018*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for MEP IV under the 2010
Stock Incentive Plan, for equity grants made
after February 15, 2018*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for MEP V under the 2010
Stock Incentive Plan, for equity grants made
after February 15, 2018*

Form of Standard Notice of Grant and
Restricted Share Agreement I under the
2010 Stock Incentive Plan, for equity grants
made after February 15, 2018*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for Senior Executive under the
2010 Stock Incentive Plan, for equity grants
made after February 15, 2018*

Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement under the 2010 Stock Incentive
Plan, for equity grants made on or after
February 13, 2019*

The Cheesecake Factory Incorporated Stock
Incentive Plan*

2015 Amended and Restated Annual
Performance Incentive Plan, as amended
and restated May 28, 2015*

Third Amended and Restated Loan
Agreement with JPMorgan Chase Bank,
National Association dated as of July 30,
2019

Form
10-K

File Number
000-25074

Incorporated by
Reference from
Exhibit Number
10.24.2

Filed with
SEC
2/28/18

10-K

000-25074

10.24.3

2/28/18

10-K

000-25074

10.24.4

2/28/18

10-K

000-25074

10.24.5

2/28/18

10-K

000-25074

10.24.6

2/28/18

8-K

000-20574

99.3

2/21/18

10-Q

000-20574

10.2

5/6/19

8-K

000-20574

10.1

6/5/19

DEF 14A

000-20574

Appendix B

4/17/15

10-Q

000-20574

10.1

12/24/15

21.1

List of Subsidiaries

—

Filed
herewith

Form
—

File Number
—

Incorporated by
Reference from
Exhibit Number
—

—

Filed with
SEC
Filed
herewith

Filed
herewith

Exhibit
No.
23.1

23.2

31.1

31.2

32.1

32.2

101.1

Item

Consent of Independent Registered Public
Accounting Firm — KPMG LLP

Consent of Independent Registered Public
Accounting Firm —
PricewaterhouseCoopers LLP

Rule 13a-14(a)/15d-14(a) Certification of
the Principal Executive Officer

Rule 13a-14(a)/15d-14(a) Certification of
the Principal Financial Officer

Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002 for Principal Executive Officer

Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002 for Principal Financial Officer

The following materials from The
Cheesecake Factory Incorporated’s Annual
Report on Form 10-K for the year ended
December 31, 2019, formatted in Inline
eXtensible Business Reporting Language
(iXBRL): (i) consolidated balance sheets,
(ii) consolidated statements of income, (iii)
consolidated statements of comprehensive
income, (iv) consolidated statement of
stockholders’ equity, (v) consolidated
statements of cash flows, and (vi) the notes
to the consolidated financial statements

104.1

The cover page of The Cheesecake Factory
Incorporated’s Annual Report on Form 10-
K for the year ended December 31, 2019,
formatted in iXBRL (included with Exhibit
101.1)

—

Filed
herewith

* Management contract or compensatory plan or arrangement required to be filed as an exhibit.
# The schedules (or similar attachments) to this exhibit have been omitted from this filing pursuant to Item 601(a)(5)
of Regulation S-K. The Company will furnish copies of any such schedules or similar attachments to the SEC upon
request.

† Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii)

would be competitively harmful if publicly disclosed.

(P) This exhibit has been paper filed and is not subject to the hyperlinking requirements of Item 601 of Regulation S-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 11th day of March
2020.

SIGNATURES

THE CHEESECAKE FACTORY INCORPORATED

By:

/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints David Overton and Matthew E. Clark, and each of them, as his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name

Title

Date

/s/ DAVID OVERTON
David Overton

/s/ MATTHEW E. CLARK
Matthew E. Clark

Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)

Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

March 11, 2020

/s/ CHERYL M. SLOMANN
Cheryl M. Slomann

Senior Vice President, Controller and

March 11, 2020

Chief Accounting Officer
(Principal Accounting Officer)

/s/ EDIE A. AMES
Edie A. Ames

Director

March 11, 2020

/s/ ALEXANDER L. CAPPELLO
Alexander L. Cappello

Director

/s/ JEROME I. KRANSDORF
Jerome I. Kransdorf

Director

March 11, 2020

/s/ JANICE L. MEYER
Janice L. Meyer

Director

March 11, 2020

/s/ LAURENCE B. MINDEL
Laurence B. Mindel

Director

/s/ DAVID B. PITTAWAY
David B. Pittaway

Director

March 11, 2020

/s/ HERBERT SIMON
Herbert Simon

Director

March 11, 2020

LIST OF SUBSIDIARIES

The Cheesecake Factory Restaurants, Inc., a California corporation

Fox Restaurant Concepts LLC, an Arizona limited liability company

North Restaurants LLC, an Arizona limited liability company

EXHIBIT 21.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EXHIBIT 23.1

The Board of Directors
The Cheesecake Factory Incorporated:

We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-118757, 333-167298,
333-176115, 333-190110, 333-198042, 333-206278, 333-219789 and 333-232949) of The Cheesecake Factory
Incorporated of our report dated March 11, 2020, with respect to the consolidated balance sheets of The Cheesecake
Factory Incorporated and subsidiaries as of December 31, 2019 and January 1, 2019, and the related consolidated
statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year
period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements), and the
effectiveness of internal control over financial reporting as of December 31, 2019, which report appears in the December
31, 2019 Annual Report on Form 10-K of The Cheesecake Factory Incorporated.

Our report dated March 11, 2020 on the effectiveness of internal control over financial reporting as of December 31,
2019, contains an explanatory paragraph that states that the Company acquired North Italia and the remaining business
of Fox Restaurant Concepts LLC (FRC) during 2019, and management excluded from its assessment of the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2019, North Italia’s and FRC’s internal
control over financial reporting associated with 28.3% of total assets and 3.7% of total revenues included in the
consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal
control over financial reporting of the Company also excluded an evaluation of the internal control over financial
reporting of North Italia and FRC.

Our report dated March 11, 2020 refers to a change in the method of accounting for revenue from contracts with
customers as of January 3, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers, and to a change in the method of accounting for leases as of January 2, 2019 due to the
adoption of Accounting Standards Codification Topic 842, Leases.

/s/ KPMG LLP

Los Angeles, California
March 11, 2020

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-118757, 333-
167298, 333-176115, 333-190110, 333-198042, 333-206278, 333-219789 and 333-232949) of The Cheesecake Factory
Incorporated of our report dated February 28, 2018 relating to the financial statements which appears in this Form 10-K.

EXHIBIT 23.2

/s/ PricewaterhouseCoopers LLP

Los Angeles, California
March 11, 2020

THE CHEESECAKE FACTORY INCORPORATED
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 31.1

I, David Overton, certify that:

1. I have reviewed this annual report on Form 10-K of The Cheesecake Factory Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly

present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures

to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that

occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control

over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

March 11, 2020

/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)

EXHIBIT 31.2

I, Matthew E. Clark, certify that:

I have reviewed this annual report on Form 10-K of The Cheesecake Factory Incorporated;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

(b)

(c)

(d)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

March 11, 2020

/s/ MATTHEW E. CLARK
Matthew E. Clark
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

EXHIBIT 32.1

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-K

for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, David Overton, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial

condition and results of operations of the Company.

March 11, 2020

/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer

EXHIBIT 32.2

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-K

for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Matthew E. Clark, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

(2)

March 11, 2020

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

/s/ MATTHEW E. CLARK
Matthew E. Clark
Executive Vice President and Chief Financial Officer

FINANCIAL HIGHLIGHTS

Revenues (in millions)

Adjusted diluted net income per share (3)

$2,483
2019

$2,332
2018

$2,261
2017

$2,276
2016

$2,101
2015

$2.61
2019

$2.51
2018

$2.60
2017

$2.83
2016

$2.37
2015

Comparable restaurant sales (1)

Cash flow from operations (in millions)

0.8%
2019

1.7%
2018

(0.8)%
2017

1.2%
2016

2.6%
2015

$219
2019

$291
2018

$239
2017

$316
2016

$248
2015

Adjusted operating income margin (2)

Restaurants open at fiscal year-end (4)

5.2%
2019

5.9%
2018

7.3%
2017

8.8%
2016

8.2%
2015

292
2019

217
2018

214
2017

208
2016

200
2015

Note: The Company completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts on October 2, 2019.

The Company’s consolidated financial statements include the results of the acquired businesses as of the date of acquisition.

(1) The Cheesecake Factory restaurants.

(2)

Operating income margin in fiscal 2019, 2018, 2017, 2016 and 2015 excludes $24,550, $17,861, $10,343, $114 and $6,011, respectively (in thousands),

related to a number of items that we do not consider indicative of our ongoing operations. Please refer to the section entitled “Non-GAAP

Measures” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Form 10-K in this

Annual Report and the 2016 Annual Report.

(3)

Diluted net income per share in fiscal 2019, 2018, 2017 and 2015 excludes ($0.25), $0.37, ($0.67) and $0.07, respectively, related to a number of

items that we do not consider indicative of our ongoing operations. Impairment charge recorded in fiscal 2016 did not impact diluted net income

per share. Please refer to the section entitled “Non-GAAP Measures” included in Item 7, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations,” of the Form 10-K in this Annual Report and the 2016 Annual Report.

(4)

Reflects all company-owned concepts.

DIRECTORS AND OFFICERS

Board of Directors

David Overton
Chairman of the Board and
Chief Executive Officer
The Cheesecake Factory
Incorporated

Edie A. Ames
President
Tastes on the Fly

Alexander L. Cappello
Chairman and
Chief Executive Officer
Cappello Global, LLC

Jerome I. Kransdorf
President Emeritus
JaK Direct

Janice L. Meyer
Co-Founder and
Managing Partner
Rellevant Partners

Laurence B. Mindel
Managing Partner
Poggio Trattoria

David B. Pittaway
Senior Managing Director,
Senior Vice President and Secretary
Castle Harlan, Inc.

Herbert Simon
Chairman Emeritus
Simon Property Group, Inc.

Executive Officers

David Overton
Chairman of the Board and
Chief Executive Officer

David M. Gordon
President

Matthew E. Clark
Executive Vice President and
Chief Financial Officer

Scarlett May
Executive Vice President,
General Counsel and Secretary

Keith T. Carango
President –
Bakery Division

Operating and Staff Officers

Donald C. Moore
Executive Vice President and
Chief Culinary Officer

Spero G. Alex
Senior Vice President –
Operations, The Cheesecake
Factory Restaurants

Dina R. Barmasse-Gray
Senior Vice President –
Human Resources

Donald C. Evans
Senior Vice President and
Chief Marketing Officer

Stan D. Harvey
Senior Vice President –
Purchasing

Marina Lubinsky
Senior Vice President and
Chief Information Officer

Brian MacKellar
Senior Vice President –
Development

Lisa A. McDowell
Senior Vice President –
Global Development

Hari Nagabhirava
Senior Vice President –
Supply Chain

Anthony R. Gressak, Jr.
Vice President –
Bakery Distributor Sales

Ashley W. Hanscom
Vice President –
Assistant Controller

Laurie A. Lambert-Gaffney
Vice President –
Staff Relations

Kurt E. Leisure
Vice President –
Risk Services

Etienne Marcus
Vice President –
Strategy and Finance

Cheryl M. Slomann
Senior Vice President –
Finance and Corporate Controller

Philip Mardirossian
Vice President –
Bakery Marketing

Charles G. Wensing
Senior Vice President –
Operations Services, Performance
Development and New Restaurant
Operations

Jack K. Belk
Senior Regional Vice President –
Restaurant Operations

Kix McGinnis Nystrom
Vice President –
Kitchen Operations

Robert Okura
Vice President –
Culinary Development and
Corporate Executive Chef

Jeffrey Nemet
Regional Vice President –
Restaurant Operations

Joseph T. Phillips
Regional Vice President –
Restaurant Operations

Steve M. Polce
Regional Vice President –
Restaurant Operations

Atallah A. Baroudi, Ph.D.
Vice President –
Food Safety and
Quality Assurance

Heather M. Berry
Vice President –
Beverage and Bakery
Operations

Megan L. Bloomer
Vice President –
Sustainability

Linda J. Candioty
Vice President –
Guest Experience

Mervin Deguzman
Vice President –
Corporate Systems

Stacy J. Feit
Vice President –
Investor Relations

Richard J. Frings
Vice President –
Compensation and Benefits

Sidney M. Greathouse
Vice President and
Senior Counsel – Legal Services

Alan B. Phillips
Vice President –
Internal Audit

Chris M. Radovan
Vice President –
Bakery Research and
Development

J. Suzanne Reed
Vice President –
Bakery Sales and Marketing

John Scott
Vice President –
Bakery Food Safety and
Quality Assurance

Joel E. Shafer
Vice President and
Senior Counsel –
Contracts

Jeff Stepler
Vice President –
Talent Selection and
Organizational Engagement

Robert L. Surbeck
Vice President –
Restaurant Systems and
International Information
Technology

Roman L. Wasylyn
Vice President –
Tax

Robert T. West
Vice President –
Information Technology

Lori R. Williams
Vice President –
Bakery Controller

SHAREHOLDER
INFORMATION

Independent Accountants

KPMG LLP
Los Angeles, California

Transfer Agent, Registrar and
Dividend Payments

Computershare Shareholder Services
P.O. Box 30170
College Station, TX 77845
(800) 962-4284

Inquiries

Communications regarding lost certificates,
and name and address changes should be
directed to our Transfer Agent. Other investor
inquiries should be directed to:

Stacy J. Feit
Vice President, Investor Relations
The Cheesecake Factory Incorporated
26901 Malibu Hills Road
Calabasas Hills, CA 91301
(818) 871-3000

Common Stock Trading

Website

To learn more about our Company,
please visit
www.thecheesecakefactory.com
www.northitalia.com
www.foxrc.com

To learn about our sustainability initiatives,
please visit
www.thecheesecakefactory.com/corporate-
social-responsibility/sustainability

Best Companies to Work For is a trademark of Fortune Media IP

Limited and is used under license. FORTUNE and Fortune Media

IP Limited are not affiliated with, and do not endorse products or

services of, Licensee.

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26901 Malibu Hills Road
Calabasas Hills, CA 91301
www.thecheesecakefactory.com