To Our Shareholders,
As we reflect on the past year, we are pleased to report that The Cheesecake Factory has once again demonstrated its
resilience and ability to adapt to a dynamic operating environment. 2022 marked another year of evolution and growth for
our company thanks to the hard work and dedication of our staff members and the enduring appeal of our concepts. We
further reinforced our position as a leader in experiential dining through our ongoing commitment to delivering exceptional
guest experiences and driving growth across our diverse portfolio of high-quality concepts.
In 2022 we were also especially proud to celebrate a significant milestone in our company’s history, the 50th anniversary
of our bakery. This achievement showcases the rich history and expansion of this business from a small bakery opened in
1972 by Oscar and Evelyn Overton to the two vertically integrated bakery facilities that produce over 60 award-winning
desserts and baked goods to be sold in over 20 countries. A distinct competitive advantage we will continue to leverage,
our signature desserts and high-quality cheesecakes are an essential element of the strong affinity for The Cheesecake
Factory brand as illustrated by our industry-leading dessert sales of 17% for fiscal 2022.
As we continue our journey further into this new decade, we will leverage our fundamental strengths − our relentless focus
on menu innovation, service, hospitality and operational excellence − to navigate the evolving landscape and drive growth.
These pillars form the foundation of our success and have made The Cheesecake Factory one of the most differentiated
restaurant concepts in the casual dining industry for over 45 years and through numerous economic cycles.
Our success is due in no small part to our incredible team of dedicated staff members, who share our passion for delivering
excellent hospitality and creating delicious, memorable experiences for our guests. Our 46,000 restaurant staff members
operate 318 restaurants, including our flagship concept, The Cheesecake Factory, North Italia, and Fox Restaurant
Concepts (FRC), supported by our nearly 1,500 staff members in our corporate office, FRC headquarters and our two
bakery facilities.
As a testament to our strong culture and commitment to our employees, we are honored to have been named to the Fortune
magazine "100 Best Companies to Work For" list for the tenth consecutive year and the PEOPLE Companies that Care®
list for a second year. We are proud to stand out as the only restaurant company to have made the Fortune 100 list for ten
straight years, which provides a powerful recruiting advantage amidst a competitive labor backdrop and highlights the
industry-leading training and career advancement opportunities we provide our staff members. These accolades along with
our commitment to fostering a diverse and inclusive workplace support our belief that we are uniquely well-positioned
with respect to attracting and retaining talent in the restaurant industry as we continue to remain an employer of choice in
a tight labor market.
Our commitment to delivering distinct, high quality dining experiences and exceptional hospitality remains at the core of
our strategy, as we remain focused on the long-term drivers of success that have made us a leader in casual dining. In terms
of financial performance, we accomplished the majority of our key financial objectives for 2022. We attribute this
primarily to the strength of our brands, our belief that we have the best operators in the business, and our strategic approach
to managing our business for long-term growth while effectively managing through headwinds.
In 2022, we achieved record annual revenue of $3.3 billion, driven by comparable sales growth and a total of 13 new
restaurant openings across our portfolio, highlighting the strength of our concepts and our ability to gain market share.
Further to this point, year-over-year sales increased 10% at The Cheesecake Factory restaurants, 33% at North Italia and
30% at FRC excluding Flower Child. Notably, our average unit volumes for The Cheesecake Factory restaurants exceeded
$12 million, with strong contributions from the off-premise channel which continued to be a key driver of growth,
accounting for 25% of total sales in 2022. Note fiscal year 2022 consisted of 53 weeks and fiscal year 2021 consisted of
52 weeks.
Despite the challenging operating environment, we generated nearly $160 million in cash flow from operations for the
year. Our strong financial position has enabled us to accelerate our new unit development and return $105 million to our
shareholders through a combination of dividends and share repurchases. We believe our solid liquidity position along with
our expected cash flow levels will support our long-term growth objectives as well as our capital shareholder return
programs.
In 2023, we are planning to open as many as 20 to 22 new restaurants, including five to six The Cheesecake Factory
restaurants, five to six North Italia restaurants, and as many as ten other FRC restaurants, including three to four Flower
Child locations. We also expect to open two to three international locations under licensing agreements and continue
exploring additional opportunities for international expansion, building on the success of our existing licensing
agreements.
Longer-term, we believe our portfolio of differentiated, high quality concepts, combined with our strong financial position,
will support sustained unit growth and diversification in the coming years. Our target for long-term annual unit growth is
7%, which we believe will place us among the top performers in the casual dining industry. Our concepts deliver some of
the most compelling unit economics in the industry and position us to drive significant accretive growth over time. It is
our continued belief that with the strength of our restaurant concepts, operations teams and balance sheet, we are well
positioned to provide our guests with exceptional dining experiences and drive long-term value for our shareholders. We
feel confident we are poised to take advantage of our increased scale to deliver meaningful earnings growth and generate
robust cash flows going into 2023.
In closing, I would like to express my heartfelt appreciation to our talented team members, who continue to deliver
exceptional experiences to our guests. To our shareholders, restaurant guests, bakery customers, suppliers and international
partners, we thank you for your unwavering support and partnership. Your confidence in our brands and our team fuels
our passion for excellence and innovation. We look forward to accomplishing our goals together and continuously striving
for excellence as a leader in experiential dining in the years to come. As we move forward, we will continue to embrace
change, adapt to evolving market conditions and pursue opportunities to drive profitable, sustainable growth and enhance
shareholder value. We enter 2023 with optimism and a clear vision for the future, confident that our diverse, talented team
and strong financial foundation can propel us to new heights.
Best regards,
David Overton
Founder, Chairman and Chief Executive Officer
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 January 3, 2023
or
☐ 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)
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 ☒
Securities registered pursuant to Section 12(g) of the Act: None
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant period pursuant to §240.10D-1(b). ☐
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, June 28, 2022, was
$1,348,045,845 (based on the last reported sales on The Nasdaq Stock Market on that date).
As of February 21, 2023, 51,653,084 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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 June 1, 2023.
THE CHEESECAKE FACTORY INCORPORATED
INDEX
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 6. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 40
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . 54
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . 55
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . 56
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
PART IV
Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
1
Forward-Looking Statements
PART I
Certain information included in this Form 10-K and other materials we have filed or may file with the
Securities and Exchange Commission (“SEC”), as well as information included in our oral or written statements, 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,
statements regarding corporate social responsibility (“CSR”) and in our CSR report, the effects of the COVID-19
pandemic and other geopolitical and macroeconomic factors on our financial condition and our results of operations,
financial guidance and projections as well as expectations of our future financial condition, results of operations, sales,
target growth rates, cash flows, corporate strategy, plans, targets, goals, objectives, performance, growth potential,
competitive position and business, and statements regarding our ability to: leverage our competitive strengths, including
developing, investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory® brand to other
retail opportunities; maintain our aggregate sales volumes; 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; and utilize our capital effectively. These
forward-looking statements may be affected by various factors including: the COVID-19 pandemic and related
containment measures, including the potential for quarantines or restrictions on in-person dining; supply chain
disruptions; demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational
damage to us or any of our brands; economic, public health and political conditions that impact consumer confidence
and spending, including rising interest rates, periods of heightened inflation and market instability, of the COVID-19
pandemic and other health epidemics or pandemics, and armed conflicts; acceptance and success of The Cheesecake
Factory in international markets; acceptance and success of North Italia and the FRC 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 laws and regulations related
to COVID-19 impacting restaurant operations and customer access to off- and on-premises dining; 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, and our ability to successfully manage our lease arrangements with landlords; the economic
health of suppliers, licensees, vendors and other third parties providing goods or services to us; the timing of our new
unit development; compliance with debt covenants; strategic capital allocation decisions including with respect to share
repurchases or dividends; the ability to achieve projected financial results; economic and political conditions that impact
consumer confidence and spending; the resolution of uncertain tax positions with the Internal Revenue Service and the
impact of tax reform legislation; 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 risks, 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.
2
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.
Summary Risk Factors
Our business is subject to a number of risks and uncertainties. These risks are more fully described in the
section titled “Risk Factors” included in Part I, Item 1A of this report. These risks include, among others, the following:
• The COVID-19 pandemic significantly disrupted our business and its ongoing effects and other geopolitical
macroeconomic events are having and may continue to have an adverse impact on our operating environment.
• The impact global and domestic economic conditions have on consumer discretionary spending could
materially adversely affect our financial performance.
• Our inability to grow comparable restaurant sales 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.
If we are unable to offset higher labor costs, our cost of doing business will significantly increase.
•
• Pandemics, epidemics, endemics and other public health emergencies, or food safety and food-borne illness
could reduce customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of
litigation.
• 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.
• 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.
• Labor organizing could harm our operations and competitive position in the restaurant industry.
• Adverse weather conditions, natural disasters and public health emergencies, including as a result of climate
change, could unfavorably impact our restaurant sales.
• Acts of violence at or threatened against our restaurants or the centers in which they are located, including civil
unrest, customer intimidation, active shooter situations and terrorism, could unfavorably impart our restaurant
sales
• Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase
our cost of doing business.
• Our financial performance could be materially adversely affected if we fail to retain, or effectively respond to a
•
•
loss of, key executives
If we are unable to staff 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.
If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we may
experience data loss, increased costs or other harm.
• Our 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.
• 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.
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.
3
• Our inability to maintain a secure environment for customers’ and staff members’ personal data could result in
liability and harm our reputation.
• Our failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm
our financial condition.
• Our convertible senior notes due 2026 and the incurrence of any additional indebtedness could limit the cash
flow available for our operations.
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 318 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory®, North Italia® and a collection within our Fox Restaurant
Concepts (“FRC”) business. Internationally, 30 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”). 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 websites is not
incorporated by reference into this Form 10-K.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting
purposes. Fiscal year 2022 consisted of 53 weeks. Fiscal years 2021 and 2020 each consisted of 52 weeks. Fiscal year
2023 will consist of 52 weeks.
COVID-19 Pandemic, Geopolitical and Other Macroeconomic Impacts to our Operating Environment
We have experienced significant disruptions to our business as federal, state and local restrictions have
fluctuated over time to mitigate the spread of the COVID-19 virus. While most of our restaurants operated with no
restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of
accelerating case counts during which we incurred increased restaurant staff absenteeism and temporary shifts in
consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels. We
have incurred and may continue to incur additional costs to address government regulations and the safety of our staff
members and customers.
In addition, we experienced labor shortfalls relative to our sales levels in certain parts of our workforce and/or
geographies as we reopened our dining rooms after the lifting of mandatory social-distancing regulations related to the
COVID-19 pandemic. During fiscal 2021, we also began to experience certain supply shortages and transportation
delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were
exacerbated by geopolitical unrest. The aggregate impact of these and other geopolitical and macroeconomic factors
contributed to significantly increased commodity and wage inflation and other increased costs. We have also
encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in
obtaining licenses and permits and in the timeline required to complete the overall leasing process with landlords.
4
The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events
could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. If these factors significantly impact our cash flow in the future, we may again
implement mitigation actions such as suspending share repurchases, not declaring future dividends, increasing
borrowings under our credit facility or modifying our operating strategies. Any of these measures may have an adverse
impact on our business and materially adversely affect our financial performance.
The Cheesecake Factory
As of February 27, 2023, we operated 210 The Cheesecake Factory restaurants, which 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.
All of our restaurants offer a full-service bar where our entire menu is served. During fiscal 2022, alcoholic
beverage sales represented 12% of The Cheesecake Factory restaurant sales. We offer all items on our menu, except
alcoholic beverages where disallowed by regulation, for off-premise consumption, sales of which comprised
approximately 25% of The Cheesecake Factory restaurant sales during fiscal 2022. We work with a third party to
provide delivery service from all of our locations and offer online ordering for to-go sales at all of our domestic
locations.
The Cheesecake Factory menu features approximately 235 items, exclusive of beverage and dessert items and
including items presented on supplemental menus, such as our SkinnyLicious® menu that offers innovative items at 590
calories or less. Our menu offerings include appetizers, pizza, seafood, steaks, chicken, burgers, small plates, pastas,
salads, sandwiches and omelettes, including a selection of vegan and gluten-free items.
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 17% of The Cheesecake Factory sales during fiscal
2022.
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 positioned
above core casual dining, with standards that are closer to fine dining. Upscale casual dining is differentiated by freshly
prepared and innovative food, flavorful recipes with creative presentations, unique restaurant layouts, eye-catching
design elements and more personalized service. 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, personnel,
location, décor and value. We compete directly and indirectly with national and regional casual dining restaurant chains,
as well as independently-owned restaurants. In addition, we face competition from fast casual and quick-service
restaurants, grocery stores and meal kits that have increased the quality and variety of their food products in response to
consumer demand. We also compete with other restaurants and retail establishments for quality sites and staff and
managers to operate our restaurants.
5
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, further enhancing the variety, quality and price points offered and keeping 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 2022, we launched the Classic Basque
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 supporting both our margin objectives and
customer traffic levels. We have historically targeted menu price increases of approximately 2% to 3% annually,
utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies. Due to the inflationary cost
pressures we experienced in fiscal 2022, we implemented price increases above our historical levels to support our
longer-term restaurant-level margin objectives. Future near-term pricing actions are likely to be at levels above historical
norms to keep pace with any significant cost increases. We will continue to consider the cost environment and consumer
price sensitivity when evaluating future menu price increases. In addition, on a regular basis, we carefully consider
opportunities to adjust our menu offerings or ingredients to help manage product availability and cost.
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 $29.40 during fiscal 2022.
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,
Development and Training” 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 2022, for the ninth consecutive year.
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, a
contemporary kitchen design and a bakery counter that features our desserts while also serving as a strategic location to
facilitate our off-premise sales. 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
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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. In accordance with our broader capital allocation strategy, we plan to
open as many locations in any given year as there are sites available that meet our site selection criteria and for which we
can negotiate acceptable lease terms, obtain necessary permits, complete construction, and recruit and train personnel.
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.
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 population density, as well as site-specific
characteristics such as visibility, accessibility and proximity to activity centers such as shopping centers and competitive
influences. 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. We expect the majority of our new restaurants to vary between 7,000 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
type and availability of the leased space we intend to occupy, as well as our ability to obtain goods, materials, permits
and adequate staffing, and is subject to delays either due to factors outside of our control or to our selective timing of
restaurant openings. In recent years, we have encountered delays in opening new restaurants due to supply chain
challenges, as well as to longer lead times in obtaining licenses and permits.
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
$12.1 million and $11.8 million on a 53-week and 52-week basis, respectively, for fiscal 2022. 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 $1,116 and $1,089 on a 53-week
and 52-week basis, respectively, for fiscal 2022. Fluctuations in both average sales per location and average sales per
productive square foot generally track with comparable restaurant sales trends.
We currently lease all of our restaurant locations and utilize capital for leasehold improvements and furnishings,
fixtures and equipment to build out our restaurant premises. Our distinctive design and decor require a higher investment
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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. Total construction costs to build our restaurant
premises average approximately $1,000 per interior square foot. However, these costs 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.
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 margins due to actual-to-
theoretical food cost inefficiencies and labor productivity inefficiencies commonly associated with new, highly complex
restaurants such as ours.
Restaurant Operations
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.
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 General Manager (“GM”), one Executive Kitchen Manager (“EKM”), and an average of six to ten
additional kitchen and front-of-the-house managers and approximately 170 hourly staff members, both 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 drive our high productivity and contribute 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 in turn reports to a Regional Vice
President of Restaurant Operations. Our EKMs report to their GMs but are also supervised by an Area Kitchen
Operations Manager. Our restaurant field supervision organization also includes our Senior Vice President of Restaurant
Operations, Senior Vice President of Kitchen Operations, 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.
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Restaurant-Level Preopening Costs
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. Restaurant-level preopening costs for a typical location
in an established market average approximately $1.0 million to $1.5 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.
Restaurant-level preopening costs can fluctuate significantly from period to period, based on the number and
timing of restaurant openings and the specific costs incurred for each restaurant. These 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.
Restaurant-level 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 restaurant-level
preopening costs within the two months immediately preceding and the month of a restaurant’s opening.
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. As of February 27, 2023, 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
7
1
1
1
3
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(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 Thailand and Taiwan, with the
opportunity to expand the agreement to include Japan, South Korea, Malaysia and Singapore.
We are actively working to extend and expand the agreements with our current licensees in their primary
geographies and are also exploring potential opportunities to expand our licensing business into Western Europe.
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
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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.
Consumer Packaged Goods
Given the strong affinity for The Cheesecake Factory® brand, we leverage opportunities in the consumer
packaged goods channel by partnering with third-party manufacturers to offer a variety of products marketed under The
Cheesecake Factory At Home® mark, including our Famous “Brown Bread,” refrigerated puddings and ice cream
available in select retail stores nationwide. We continue to evaluate other synergistic, on-brand licensing opportunities to
add incremental revenue streams to our business.
North Italia
North Italia is a modern interpretation of Italian cooking in the upscale casual dining segment. North Italia
strives to be a modern Italian restaurant with a neighborhood feel, offering classic Italian favorites with a fresh twist
made from scratch daily. Contemporary design and décor elements including large dining rooms, high ceilings and open
kitchen layouts coupled with a focus on exceptional hospitality and high-quality, personalized service creates a warm,
lively atmosphere for guests to create memorable experiences. The menu features a broad selection of delicious,
handcrafted dishes including appetizers, salads, fresh pastas, pizzas and entrees, and each restaurant includes unique
menu items tailored to local markets. North Italia offers an assortment of wines, beers and house-made cocktails which
represented 25% of North Italia sales in fiscal 2022. The average check for each customer, including beverages and
desserts, for fiscal 2022 averaged approximately $32.00 for lunch and approximately $41.50 for dinner. Our North Italia
restaurants are generally open seven days a week for lunch, dinner and weekend brunch. Currently, we operate 33 North
Italia restaurants.
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% average annual unit growth. Average sales per mature location, defined as open
prior to 2020 and adjusted to exclude impaired locations, for North Italia restaurants were approximately $8.0 million for
fiscal 2022, or approximately $1,300 per productive square foot on a 53-week basis. We target an average North Italia
unit size of 6,000 to 7,000 square feet, and total construction costs average approximately $650 per interior square foot.
Restaurant-level preopening costs for a typical location in an established market average approximately $0.5 million to
$0.7 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.
Fox Restaurant Concepts
FRC operates as an independent subsidiary in Phoenix, Arizona and serves as an incubation engine, innovating
new food, dining and hospitality experiences to create fresh, exciting concepts for the future. With over a dozen evolving
restaurant brands launched to-date, 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
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Culinary Dropout and Blanco, which together with the other FRC brands, serve as an ecosystem for talent, menu and
design development. Currently, we operate 30 and 35 Flower Child and other FRC locations, respectively.
We target approximately 15% to 20% average annual unit growth for the aggregate FRC portfolio, driven
primarily by the anticipated growth of Flower Child, complemented by additional market tests of the potential growth
concepts. Average sales per location open for the full year for the FRC restaurants were approximately $5.8 million for
fiscal 2022, or approximately $1,000 per interior square foot. FRC unit sizes range from approximately 3,500 to 15,000
square feet, and total construction costs average approximately $500 per interior square foot, depending on the concept.
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. We produce
approximately 60 varieties of proprietary cheesecakes and other baked desserts using high-quality ingredients for The
Cheesecake Factory restaurants and for international licensees and third-party customers.
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. Additionally, we 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 At Home® and The Cheesecake Factory Bakery® marks, as well as private labels.
We sell baked goods internationally in approximately 20 countries under The Cheesecake Factory At Home®
mark. 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.
Human Capital
At the heart of our culture is the belief that our people are the foundation of our success. We depend on our staff
members to effectively execute all aspects of our day-to-day operations that differentiate our concepts. Our ability to
attract highly motivated staff members and retain an engaged, experienced team is key to successful execution of our
strategy. While we continue to operate in a competitive labor environment, we believe our people practices contribute
significantly to our ability to attract talent and to The Cheesecake Factory restaurants’ historically industry-leading
retention rates.
Retention and engagement of our staff members is fostered by our investment and support particularly in the
following areas:
Culture
Cultivating and maintaining our culture is a key strategic focus. Our core values and purpose reflect who we are
and how our staff members interact with one another, as well as with our customers and other external stakeholders.
Our purpose – to nurture bodies, minds, hearts and spirits – and our values – quality in everything we do;
passion for excellence; integrity, respect and responsibility; people – our greatest resource; service-mindedness; dynamic
leadership; high performance and create a sustainable future – are the foundation of our company culture. We seek to
embed our purpose in everything we do by cultivating a sense of pride and belonging to the Company and our brands.
We are proud of the way our people nurture one another and extend that nurturing to our customers and communities.
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We believe our efforts to build and maintain a strong culture have contributed to two notable recognitions in
2022. We were named to the FORTUNE 100 Best Companies to Work For® list for a ninth consecutive year and the
PEOPLE Companies that Care® list for a second consecutive year.
Diversity, Equity, Inclusion and Belonging
We strive to offer an atmosphere of inclusion and belonging for all. We believe the cultural alignment we
cultivate around respect and inclusion builds trust and promotes teamwork to achieve our common goals. Furthermore,
when our people feel valued and respected for their worth as individuals, they are better able to maximize their potential
at work and more likely to share their perspectives, opinions and ideas, which contributes to our ability to innovate. We
created our Diversity, Equity, Inclusion and Belonging working group to help provide focus, feedback and ideas in this
important area.
We are committed to providing equal opportunities and seek to ensure there is equity in hiring, development
and advancement. In 2022, we continued our inclusive leadership training for above-restaurant leadership and restaurant
managers and reviewed our interview processes for key above-restaurant leadership to enhance opportunity and
development for candidates at The Cheesecake Factory and North Italia concepts. We also sponsored developmental
support groups, such as The Cheesecake Factory Women’s Network Group, with the goal of advancing women into
senior-level positions. Our Female Kitchen Leader’s Program paired new female managers with an advisor to provide
extra support with navigating kitchen environments, which tend to be predominantly male. The Leaders of Color
Program provided networking and development opportunities for managers from diverse racial or ethnic groups. As of
January 3, 2023, approximately 47% of The Cheesecake Factory and North Italia staff members were women and
approximately 72% of our The Cheesecake Factory and North Italia staff members were racially or ethnically diverse.
Further details on representation can be found in the CSR Report (see “Corporate Social Responsibility” below). To
enhance opportunity and development for participants in these groups, we reinstated certain programs in 2022 that had
been paused during the COVID-19 pandemic, such as in-person conferences.
We are committed to conducting pay analyses among our The Cheesecake Factory and North Italia restaurants,
as well as our bakery and corporate teams, to help ensure that we are paying fairly and equitably. In 2021, we retained a
third-party consulting firm to conduct an independent pay equity analysis of our area managers, restaurant managers,
corporate field and corporate support center staff to identify risks and determine if there were unexplained base pay gaps
in our organization by gender or race. To help ensure that we are paying fairly and equitably, we are committed to
conducting both internal reviews and external third-party audits and verification. We have also trained our recruiters to
help enable them to identify and address pay equity issues during the hiring process utilizing internal reporting and
partnership with the compensation team.
Development and Training
We invest significant resources to ensure our people receive, what we believe is industry-leading training in
order to maximize their potential. Our hourly staff members and managers receive a considerable amount of training
through a combination of in-person learning and development and online coursework. In addition to company-provided
job training, we encourage the pursuit of educational opportunities at The Cheesecake Factory and North Italia
restaurants through free high school equivalency and associate degree programs. In 2022, we expanded availability of
these programs to include all hourly staff members (previously, only kitchen staff were eligible). We also strive to
provide our staff with career advancement opportunities, and our fiscal 2022 internal management promotion rate at The
Cheesecake Factory and North Italia concepts was 53%.
Benefits and Wellness
We believe access to healthcare is a compelling benefit for many staff members, and we offer healthcare
benefits to our hourly staff members who work a minimum of 25 hours per week, on average. We provide a robust suite
of benefits and wellness offerings, including free mental health resources, free tutoring to support our staff and
managers, and access to chronic disease care management, substance abuse treatment, a maternal health program,
financial wellness resources and adoption assistance. The Cheesecake Factory and North Italia staff, as well as our
bakery and corporate teams, have paid sick time available to them starting at hire and are eligible to earn vacation time.
Our continued management of human capital related to the COVID-19 pandemic during fiscal 2022 focused on keeping
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our teams and customers safe, adhering to local requirements and providing paid time off for our hourly staff and
managers to care for their health.
In fiscal 2022, we also sought to provide staff with additional benefit through implementation of an earned
wage access program that allows staff who qualify to receive up to 50% of their earned wages the day after they work a
shift.
Employee Engagement
As of January 3, 2023, we employed approximately 47,500 people, with approximately 46,000 in our
restaurants and the remainder in our corporate support center, FRC headquarters and bakery operations. We believe that
engaging our workforce is a key factor in our business success and in turn, have developed programs to promote
enthusiasm and commitment, while providing a sense of belonging. We measure our performance in this area through an
annual engagement survey and pulse surveys throughout the year. These surveys give staff company-wide the
opportunity to share honest feedback about their work experience. Based on survey results, leaders across the Company
are tasked with responsibility for creating action plans to address and respond to staff feedback. Listening to our staff
members is an essential part of building an engaged workforce, and we provide additional avenues for staff to share their
ideas and concerns, including our internal crowdsourcing innovation website and our Careline, which staff can use to
confidentially express their concerns, as well as restaurant townhalls where our staff can bring their ideas and concerns
forward. Our staff members are not covered by any collective bargaining agreements, and we consider our staff member
relations to be good.
A significant part of our employee engagement strategy involves staff appreciation and recognition efforts.
After pausing them during the pandemic, we reinstated key cultural events such as our week-long team appreciation
celebrations, manager recognitions, Commitment to Excellence staff member awards and new menu rollout all-staff
meetings.
Giving Back
Another key aspect of our culture is giving back to the communities where our staff live and work, as well as
uniting our staff members around charitable causes personal to them. We provide donations to Feeding America and
participate in their annual campaign as an opportunity to engage our teams in a culturally-aligning company-wide
service program. We have similarly promoted our teams’ participation in community volunteer events, and through our
gift card program, we contribute to local fundraising events for community non-profit organizations. Additionally, we
provide a method for our staff members to assist other staff members in need through our The Cheesecake Factory
“HELP” fund.
We also participate in a nationwide food donation program which redirects surplus food away from landfills to
local food banks and non-profit organizations, and believe our sustainability programs and initiatives like restaurant-
based composting and recycling and replacing our off-premise packaging with materials that reduce the use of plastics
and improve recyclability serve to foster pride in our staff.
Corporate Social Responsibility
For us, the term “Corporate Social Responsibility” or “CSR” informs how we operate in relation to our people
and communities, natural environment and our supply chain. We evaluate our business and how we operate our
corporate-owned restaurants in an effort to identify, create and implement meaningful and sustained change. The
Corporate Governance and Nominating Committee of our Board is responsible for reviewing the Company’s
sustainability and CSR policies. For more information, please review our CSR report on the Corporate Social
Responsibility page on our website at www.thecheesecakefactory.com. The contents of the CSR report and our website
are not incorporated by reference into this Form 10-K.
Purchasing and Distribution
Our purchasing philosophy is designed to procure quality ingredients, supplies and services for our operations
from reliable sources at competitive prices and consistent with our sustainability goals. We research and evaluate various
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ingredients and products in an effort to maintain high quality, be responsive to changing consumer tastes and manage
costs. Should any items from a particular supply source become unavailable, we generally believe that these items could
be obtained, or alternative products substituted, in sufficient quantities from other sources to allow us to avoid any long-
term material adverse effects that could be caused by such unavailability.
In order to maximize purchasing efficiencies and to obtain the freshest ingredients that meet our required
standards, each restaurant’s management determines the quantities of food and supplies needed for their location and
orders the items from qualified local, regional, national and international 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 relatively rapid turnover of the perishable commodities 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.
The cost of products and services used in our operations are subject to volatility due to the relative availability
of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events
such as the COVID-19 pandemic, geopolitical events, economic conditions or other unforeseen circumstances. Climate
change may further exacerbate a number of these factors. During fiscal 2021, we began to experience certain supply
shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages
continued in fiscal 2022 and were exacerbated by geopolitical unrest. The aggregate impact of these and other factors
contributed to significant cost inflation.
We attempt to 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. While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these
efforts may not be successful or yield our intended benefits. We continue to evaluate the possibility of entering into
similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial
instruments, to assist us in managing risk and variability associated with such commodities. As of the end of fiscal 2022,
we had no hedging contracts in place.
Information Technology
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 systems are designed to enhance the guest experience, protect guest information and allow our
staff to focus on delivering the best experience possible. We have implemented systems for touchless/online menu,
ordering and payment, inventory management, labor management, recipe management, kitchen order orchestration and
table management. Our kitchen order orchestration tool is designed to route items in such a way that balances the
workload across multiple stations to ensure our guests receive the highest quality menu items. Our labor management
tool delivers optimized scheduling based on business demands and staff availability coupled with web and app-based
access delivering flexibility to our staff. Guest payment data is of the utmost importance, and we employ measures to
help ensure every payment is secured and encrypted.
Information and data security is a priority for us and is led by our information technology department in
conjunction with an interdepartmental information security council representing our key functional areas. We employ a
multi-discipline security approach to recognize, manage and resolve cybersecurity threats, and require cybersecurity
awareness training for all staff members with access to our cyber systems. This approach includes continuous monitoring
and detection programs, network security precautions, encryption of critical data, and in-depth security assessment of
vendors and incident response guidelines. We continue to invest and innovate around the areas of protection of systems,
sensitive data, technology, and processes using third-party and in-house tools and resources. We remain focused on
protecting against new and emerging risks utilizing our tools and security teams and continue to review and make
strategic investments in our systems to help keep the Company’s, our guests’, and our team members’ data secure. We
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maintain a disaster recovery plan and protect against business interruption by backing up our major systems. In addition,
we periodically scan our environment for any vulnerability, perform penetration testing and engage third parties to assess
the effectiveness of our data security practices. A third party conducts regular network security reviews, scans, and
audits. The Audit Committee of the Board of Directors reviews with management steps the Company has taken to
monitor or mitigate significant cybersecurity risk and the effectiveness of these practices.
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. Historically, we have not used significant paid national advertising through
television, radio or print, nor significant discounting for on-premise dining occasions. 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 social media platforms such as Instagram® and TikTok® and other, influencer
marketing, Google search advertising and direct email to customers. We refreshed our website in 2022, including our
online ordering capabilities. We also are currently testing a guest rewards program pilot for potential national rollout in
2023.
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 8.5 billion media
impressions in fiscal 2022 at minimal cost to us. To raise awareness in the off-premise channel, we execute marketing
campaigns with our third-party delivery provider and through our online ordering platform. In addition, we work with
several premiere third-party gift card distributors, contributing to our brand awareness and gift card sales, as well as our
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 factors such as significant differences in year-over-year inflation, the
number and timing of new restaurant openings and associated preopening costs, the timing of holidays, inclement
weather and the additional week in a 53-week fiscal year. Therefore, our financial results for any quarter or fiscal year
are not necessarily indicative of the results that may be achieved for the full fiscal year or subsequent fiscal years.
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. Adherence is monitored through routine
restaurant management reviews, third-party health inspection/food safety audits and regulatory agency inspections. In
addition, our bakery facilities are Safe Quality Food certified in alignment with the Global Food Safety Initiative’s
Global Markets Program. Our restaurants and bakery facilities also follow regulatory guidelines required for conducting
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and managing ingredient and product traceability. We utilize a web-based solution to efficiently contact our restaurants
and monitor progress in the event of a product withdrawal or recall.
In selecting suppliers, we utilize key performance indicators relating to sanitation, operations and facility
management, good manufacturing and agricultural practices, product protection, government inspections and
compliance, recovery and food security. We perform annual food safety and quality system audits for certain suppliers,
while others are audited every other year or as needed.
Government Laws and Regulations
Our Company is subject to numerous federal, state, local and foreign laws and regulations. Each of our
restaurants is subject to various laws and regulations, including license and permit requirements, that regulate many
aspects of our business, including, among other things, alcoholic beverage control, health, sanitation, labor, immigration,
zoning and public safety. We are also subject to various environmental regulations governing areas such as water usage,
sanitation disposal and transportation mitigation.
Our international business exposes us to additional laws and regulations, including, without limitation, antitrust
and tax requirements, anti-boycott legislation, import/export and customs regulations and other international trade
regulations, privacy laws, anti-terrorism laws and anti-corruption laws.
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 order to serve alcoholic beverages in our restaurants or off-premise where permitted, we must comply with
alcoholic beverage control regulations which require us to apply to a state or other governmental alcoholic beverage
control authority for licenses and permits. 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. Dram shop litigation may result in
significant judgments, including punitive damages. We attempt to mitigate this risk by carrying liquor liability insurance
coverage.
Various federal, state, local and foreign laws and regulations govern our operations as they relate to 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, the COVID-19 pandemic and
citizenship or work authorization requirements. We must also comply with local, state and federal laws and regulations
protecting the right to equal employment opportunities and prohibiting discrimination and harassment in the workplace.
We regularly review and update our training and awareness programs addressing these concerns. 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 laws and regulations which prohibit discrimination on the basis of
disability with respect to public accommodations and employment. We take steps to ensure our places of public
accommodation and our website comply with the requirements of the ADA and related state and local laws and
regulations. We also make reasonable accommodations for the employment of disabled persons as required by
applicable laws and regulations.
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 tips.
We are subject to laws and regulations relating to information security, privacy, cashless payments and
consumer credit, protection and fraud. We make efforts to comply with an increasing number of data privacy laws,
regulations and industry standards regarding the protection of personally identifiable information and protected health
information.
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Trade Names, Trademarks and Other Intellectual Property
We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other
intellectual property (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 “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 any infringement of it. Generally, with appropriate renewal and use, the registration of
our Intellectual Property will continue indefinitely. We have also registered various internet domain names, including,
“www.thecheesecakefactory.com,” “www.northitalia.com,” and “www.foxrc.com.”
Executive Officers of the Registrant
David Overton, age 76, 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 58, 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 53, 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 61, 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 56, 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.
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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. The risk factors set
forth below are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as
an affirmative statement that such risks or conditions have not materialized, in whole or in part.
Risks Related to the COVID-19 Pandemic and Other Geopolitical and Macroeconomic Events
The COVID-19 pandemic significantly disrupted our business and its ongoing effects and other geopolitical and
macroeconomic events are having and may continue to have an adverse impact on our operating environment.
We have experienced significant disruptions to our business as federal, state and local restrictions have
fluctuated over time to mitigate the spread of the COVID-19 virus. While most of our restaurants operated with no
restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of
accelerating case counts during which we incurred increased restaurant staff absenteeism and temporary shifts in
consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels. We
have incurred and may continue to incur additional costs to address government regulations and the safety of our staff
members and customers.
In addition, we experienced labor shortfalls relative to our sales levels in certain parts of our workforce and/or
geographies as we reopened our dining rooms after the lifting of mandatory social-distancing regulations related to the
COVID-19 pandemic. During fiscal 2021, we also began to experience certain supply shortages and transportation
delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were
exacerbated by geopolitical unrest. The aggregate impact of these and other geopolitical and macroeconomic factors
contributed to significantly increased commodity and wage inflation and other increased costs. We have also
encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in
obtaining licenses and permits and in the timeline required to complete the overall leasing process with landlords.
The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events
could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. If these factors significantly impact our cash flow in the future, we may again
implement mitigation actions such as suspending share repurchases, not declaring future dividends, increasing
borrowings under our credit facility or modifying our operating strategies. Any of these measures may have an adverse
impact on our business and materially adversely affect our financial performance.
Risks Related to the Restaurant Industry
The impact global and domestic economic conditions have on consumer discretionary spending could materially
adversely affect our financial performance.
The COVID-19 pandemic and other geopolitical and macroeconomic events have had a significant impact on
global and domestic economies and will likely continue to do so for some time in the future. Dining out is a
discretionary expenditure that historically has been influenced by domestic and global economic conditions, including,
but not limited to: the COVID-19 pandemic, geopolitical instability, including armed conflicts, supply shortages, interest
rates above recent historical norms, unemployment, significant cost inflation, consumer confidence, consumer
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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 (such as significant cost
inflation and interest rates above recent historical norms); 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; and 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 from fast casual and quick-service
restaurants, grocery stores and meal kits that have increased the quality and variety of their food products in response to
consumer demand. 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, promote and deliver a higher degree of
perceived value, our customer traffic could suffer.
We utilize menu price increases in an effort to offset inflation of key operating costs. However, our menu price
increases may be insufficient to meaningfully offset increased costs and may, if not accepted by customers, result in
reduced customer traffic and unfavorable menu mix shifts (i.e. customers reducing their spend by purchasing fewer
menu items or lower cost menu items). These risks became more pronounced fiscal 2022, as persistent supply shortages
and a worsening inflationary environment significantly increased our costs causing us to implement pricing actions
above our historical levels to protect margins. (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.”)
In recent years we have generated a higher mix of sales from off-premise channels as consumers have
increasingly demonstrated a preference for convenience and at-home dining due to COVID-19. Growing competition in
off-premise channels or our inability to differentiate our concepts in these channels could negatively impact our
comparable restaurant sales 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, the quality of our 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 or disparate treatment based upon
race, gender, national origin, religion or other class, allegations of sexual harassment, politically motivated accusations
or other negative publicity, could damage our reputation. Any failure of our third-party delivery provider to represent our
brands in a favorable manner could damage our reputation. These concerns are exacerbated by the speed with which
negative information can 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.
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Over the past several years we have experienced and continue to experience significant labor cost inflation, which
has and may continue to significantly increase our cost of doing business.
Low unemployment coupled with increases in minimum wages and minimum tip credit wages, extensions of
personal and other leave policies, other governmental regulations affecting labor costs, reduced levels of legal
immigration and a diminishing pool of potential staff members, which has been exacerbated by potential staff members
choosing to exit the workforce, in general and hospitality industry, in particular, especially in certain localities, have and
may continue to significantly increase our labor costs and make it more difficult to fully staff our restaurants, any of
which could materially adversely affect our financial performance.
We believe it is becoming increasing likely that the United States federal government will significantly increase
the federal minimum wage and tip credit wage (or eliminate the tip credit wage) and require significantly more mandated
benefits than what is currently required under federal law. Should this occur, other jurisdictions that have historically
mandated higher wages and greater benefits than what is required under federal law may seek to further increase wages
and mandated benefits. 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, any
wage increase and/or expansion of benefits mandates will 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.
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 given that 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. Any significant changes to the healthcare insurance
system could also impact our health care costs. Material increases in health care costs could materially adversely affect
our financial performance.
While we seek to offset labor cost increases through menu price increases, more efficient purchasing practices,
productivity improvements, greater economies of scale and by offering a variety of health plans to our staff members,
including lower cost high deductible health plans, 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.
The impacts of and our failure to effectively respond to pandemics, epidemics, endemics and other public health
emergencies, or food safety and food-borne illness, 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.
The COVID-19 pandemic significantly disrupted our business and its ongoing effects may continue to do so for
the foreseeable future. The impacts of and our failure to effectively respond to future pandemics, epidemics, endemics
and other public health emergencies may also significantly disrupt our business.
We also 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 help 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 in our supply chain could cause our ingredients to be
contaminated, which could be difficult to detect and jeopardize the safety of our food. 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.
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Publicized food safety concerns, regardless of accuracy, whether specifically concerning food served at any of
our restaurant brands, desserts produced at our bakeries, any products bearing our branding or regarding our third-party
suppliers or service providers, or the food supply more generally, could negatively affect consumer demand for our
restaurants and products, 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 it may
become difficult to adequately staff our restaurants if our customers or staff members become infected with a pathogen
which was actually or alleged 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. 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 products 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.
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 subject to numerous federal, state, local and foreign laws and regulations. Each of our restaurants is
subject to various laws and regulations, including license and permit requirements, that regulate many aspects of our
business, including, among other things, alcoholic beverage control, health, sanitation, labor, immigration, zoning and
public safety. 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. We are also subject to
various environmental regulations governing areas such as water usage, sanitation disposal and transportation mitigation.
The United States and other countries are expanding the type, nature and scope of laws and regulations governing other
environmental matters, such as climate change, reducing greenhouse gas emission and water consumption. We may
incur significant additional costs to comply with these laws and regulations and may incur legal liability in the event of
our failure to do so.
Our international business exposes us to additional laws and 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 — Risks Related to the Restaurant
Industry — “Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to
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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 or off-premise where permitted, we must comply with
alcoholic beverage control regulations which require us to apply to a state or other governmental alcoholic beverage
control authority for licenses and permits. 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. Dram shop litigation may result in
significant judgments, including punitive damages. Various federal, state, local and foreign laws and regulations govern
our operations as they relate to 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. Significant increases in minimum wage rates,
including the tip credit wage rate 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 laws, 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 must also comply with local, state and federal laws and regulations protecting the right to equal
employment opportunities and prohibiting discrimination and harassment in the workplace. 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.
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. 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.
Our facilities must comply with applicable requirements of the Americans with Disabilities Act of 1990
(“ADA”) and related federal, state and foreign laws and regulations which prohibit discrimination on the basis of
disability with respect to public accommodations and employment. We are also subject to laws and regulations relating
to information security, privacy, cashless payments and consumer credit, protection and fraud.
Many laws and regulations governing our business and operations also extend to independent third-party
service providers we engage to perform certain services. While we take precautions to help 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 as a joint employer for failures by our independent
third-party service providers to comply with applicable laws. Additionally, some jurisdictions 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. The U.S. Department of Labor recently introduced proposed
rules the effect of which, if adopted, would be to establish a new independent contractor standard for employees
nationwide. If these measures are successful, delivery costs will significantly increase and/or these companies may alter
their operations or choose to no longer operate within such jurisdiction, either of which result could significantly impact
our off-premise sales.
Any changes to the numerous laws governing our business or operations may create challenges for us. While
we subscribe to certain services and have established procedures to identify legal and regulatory changes, we may not be
able 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.
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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 response to any of these new
requirements. Our failure to quickly and effectively adapt to any significant shift in consumer dining preference could
cause our or our licensees’ 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.
Adverse weather conditions, natural disasters and public health emergencies, including as the result of climate
change, could unfavorably impact our restaurant sales, which could materially adversely affect our financial
performance.
Adverse weather conditions, natural disasters and public health emergencies can impact customer traffic, make
it more difficult to fully staff our restaurants and, more severe events, such as hurricanes, earthquakes, tornadoes,
blizzards, wildfires and other natural disasters and public health emergencies, such as the COVID-19 pandemic, have
resulted in and may in the future result in restaurant closures, underutilization of outdoor patio dining and curtailed
operations, impediments to availability of staff and supplies and increased commodity costs, sometimes for prolonged
periods of time. These effects may become more pronounced in the future as climatologists predict climate change and
global warming may cause extended droughts and certain adverse weather conditions and natural disasters to become
more frequent, more severe and less predictable over time. 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 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 civil
unrest, customer intimidation, 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
civil unrest, customer intimidation, active shooter situations and terrorist activities, may result in damage and 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.
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Risks Related to Our Business
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.
The cost of products and services used in our operations are subject to volatility due to the relative availability
of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events
such as the COVID-19 pandemic, geopolitical events, economic conditions or other unforeseen circumstances. Climate
change may further exacerbate a number of these factors. During fiscal 2021, we began to experience certain supply
shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages
continued in fiscal 2022 and were exacerbated by geopolitical unrest. The aggregate impact of these and other factors
contributed to significant cost inflation.
We attempt to 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. While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these
efforts may not be successful or yield our intended benefits. Due to the inflationary cost pressures we experienced in
fiscal 2022, we implemented price increases above our historical levels to support our longer-term restaurant-level
margin objectives. Future near-term pricing actions are likely to be at levels above historical norms to keep pace with
any significant cost increases. We will continue to consider the cost environment and consumer price sensitivity when
evaluating future menu price increases. In addition, on a regular basis, we carefully consider opportunities to adjust our
menu offerings or ingredients to help manage product availability and cost. However, we can provide no assurance that
these efforts will be successful.
We continue to evaluate the possibility of entering into similar arrangements for other commodities and
periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability
associated with such commodities. As of the end of fiscal 2022, we had no hedging contracts in place. Products and
services 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. Goods 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, geopolitical unrest 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 are under scrutiny for possibly posing
social and environmental risks, including from an animal welfare and sustainability perspective. We use many of these
products and ingredients and have adopted a comprehensive Sustainable Sourcing Policy under which, among other
things, we commit to a buying preference 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 publicity before we are able to do so, regardless of factual basis. Additionally, while we
make significant efforts to help ensure we will have a sufficient ongoing supply of sustainable products at a reasonable
cost, because there is currently a smaller market for certain of these products, any condition affecting the demand for or
supply of these products may cause significant cost and supply volatility. For example, during fiscal 2022, we
experienced supply shortages and significant price volatility with respect to certain sustainable products, which largely
resulted from challenges related to the COVID-19 pandemic and a growing framework of laws mandating the use of
sustainable products. For these and other reasons, 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 generally employ strategies to mitigate the impact these fluctuations have on
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their businesses, neither we nor they can be assured such strategies will be successful. Commodity price fluctuations
have and may continue to impede our international licensees’ profitability, which may hamper their ability to grow and
negatively impact our ability to expand our brand internationally.
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 our other senior executives. 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 staff 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.
Similar to the restaurant industry and broader economy, we have experienced and continue to experience labor
shortfalls relative to our sales levels in certain parts of our workforce as we have reopened our dining rooms after the
lifting of mandatory social-distancing regulations related to the COVID-19 pandemic and have expanded our bakery
production. If we are unable to attract and retain qualified personnel, our restaurants and bakery operations could be
short staffed, we may be forced to incur overtime expenses, and our ability to operate and expand our concepts
effectively and to meet our customers’ demand could be limited, any of which could materially adversely affect our
financial performance.
If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we 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, we rely on third-party vendors to provide 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. Our vendors’ systems have experienced cybersecurity breaches, including credential stuffing attacks in
which compromised user credentials were used to breach the systems, and may be vulnerable to a variety of risks,
including, without limitation, 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,
ransomware, breaches of the algorithms they or their third-party service providers use to encrypt and protect data and
other malicious or disruptive events (each, a “Security Incident” and collectively, “Security Incidents”).
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 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 and mandated employment relationships between
companies that facilitate third-party delivery services and their service personnel. (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 continue to review options to expand the use of third-party providers in other areas. Our general practice is
to seek to work with service providers that are leading performers in their industries and with technology vendors that
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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, as result of any
Security Incident, could significantly harm our operations and reputation, which could materially adversely affect our
financial performance.
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 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 and bakery
businesses in the United States and in other 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 ensure
success in every case and cannot possibly find all infringing uses of our Intellectual Property. Furthermore, we have not
registered all our Intellectual Property throughout the world, and 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.
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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
include, among other risks, political instability, governmental corruption, war and threats of war, 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 products and services 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 and licensed restaurants 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 to enable their staff members to effectively execute our operating processes and
procedures, and we 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 licensees’ international restaurants, for which we are the sole source of supply. A failure to
adequately supply bakery products to our or our licensees’ international restaurants could affect the customer experience
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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 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 acquisitions of other
companies, expansion of our brand to other retail opportunities and/or other initiatives. Many risks are inherent in any
such merger and acquisition activity, development, investment arrangement, expansion of our brand or other initiative,
including, without limitation:
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complexities associated with combining independent companies with separate businesses, customers,
employees, cultures and systems;
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 initiatives; and
diversion of management’s attention and focus from existing operations to the expansion of our brand to non-
restaurant items.
In addition to these risks, we may not achieve the intended results of any such expansion opportunities or other
initiatives, which could materially adversely affect our financial performance.
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. 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 to support 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 personnel 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 licensees’
operations could suffer, which could make it more difficult for us to grow our brand internationally and materially
adversely affect our financial performance.
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We have and may again 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. At any given time, we may be monitoring a number of 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. During fiscal 2022, we recorded impairment of assets and lease terminations expense of $31.4
million primarily related to the impairment of long-lived assets for three The Cheesecake Factory, one Other FRC and
three Other restaurants. (See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further
discussion of impairment of long-lived assets.)
We test our goodwill and other indefinite-lived intangible assets 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. We cannot accurately predict the amount and timing of any impairment of these assets. Should
the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our
financial performance. (See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further
discussion of impairment of intangible assets.)
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, 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;
obtaining, on a timely basis, all governmental licenses and permits necessary to construct and operate our
restaurants, which has become more challenging beginning in 2022 as we have and may continue to experience
longer than usual governmental delays in the licensing and permitting process;
obtaining, on a timely basis, all third-party consents necessary to construct and operate our restaurants;
successfully managing 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.
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. In recent years, we have experienced an increase in wage and hour
litigation, particularly in California.
We are involved in legal proceedings, including litigation, arbitration and other claims, investigations,
inspections, audits, inquiries and similar actions with litigants and other government governmental authorities. Legal
proceedings, including class or collective actions can be expensive and disruptive. Some of these suits may purport or
may be determined to be class or collective actions and/or involve parties seeking large and/or indeterminate amounts
and may remain unresolved for several years. For example, we are currently a defendant in a number of cases containing
class or collective-action allegations, or both, in which the plaintiffs have brought claims under federal and state wage
and hour laws. 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, staff member health benefits, employment practices and certain other insurable
risks. Several 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 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.
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Risks Related to Information Technology and Cyber Security
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. This reliance has grown recently as
we have had to rely to a greater extent on systems such as online ordering, contactless payments, online reservations,
systems supporting a remote workforce and the like. 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 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 and have 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.
Despite these efforts, we can provide no assurance that these measures will successfully prevent all Security
Incidents or mitigate losses resulting from a Security Incident. For example, during the past year we learned of a
potential compromise of employee credentials that could be used to access our corporate network. While we were able to
address this incident through remediation efforts including rotating the credentials at issue and did not experience any
significant impacts as a result, we cannot provide assurances that future cyber incidents will not occur or that they will
not materially adversely affect our business and financial performance.
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 result in
liability and harm our reputation, 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, storage, handling, use, disclosure and security of this information is regulated by U.S.
federal, state and local and foreign laws and regulations. For instance, the California Consumer Privacy Act (“CCPA”),
which became effective on January 1, 2020 and the California Privacy Rights Act (“CPRA”) which became effective on
January 1, 2023 (the CCPA and CPRA are collectively referred to as “California Privacy Laws”), provide California
residents broad rights with respect to their personal data, including the right to know about the personal information a
business collects about them, the right to delete personal information collected from them, the right to opt-out of the sale
of their personal information and the right to non-discrimination for exercising their rights under the California Privacy
Laws. In addition, the California Privacy Laws provide a private right of action for certain data breaches coupled with
statutory damages under certain circumstances. Compliance with the California Privacy Laws and other laws relating to
the protection of personal information involve significant costs and could result in significant liability in the event we
allow an unauthorized disclosure of personal information.
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
31
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 have implemented a robust end-to-
end encryption and tokenization technology, a public key infrastructure, to help ensure that only trusted devices can
access our network, and Intrusion Detection and Intrusion Prevention (IDS/IPS) that scans data in transit detecting and to
help prevent the execution of harmful code. In addition, we utilize a third-party security operations center (SOC)
provider to monitor and analyze internal network traffic for potential malicious content. 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.
Risks Related to Our Indebtedness
Any failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm
our financial condition.
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement”
and the credit facility provided thereunder, the “Revolver Facility”).
Under the Revolver Facility, we are subject to the following financial covenants as of the last day of each fiscal
quarter: (i) a maximum ratio of net adjusted debt to EBITDAR (the “Amended Net Adjusted Leverage Ratio”) of 4.25
and (ii) a minimum ratio of EBITDAR to interest and rent expense of 1.90. The Loan Agreement also contains
customary events of default that include, among others, non-payment of principal, interest or fees, violation of
covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgements, cross
defaults to material indebtedness and events constituting a change of control. The occurrence of an event of default could
result in the termination of commitments under the New Revolver, the declaration that all outstanding loans are
immediately due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding
letters of credit.
Any failure to maintain financial covenants under the Loan Agreement or to have sufficient liquidity to either
repay or refinance the then outstanding balance at expiration of the Loan Agreement, or upon any violation of the
covenants, could materially adversely affect our financial performance. In addition, the Loan Agreement contains, and
any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to
operate our business, raise capital or make payments under our other indebtedness. (See Note 10 of Notes to
Consolidated Financial Statements in Part IV, Item 15 for further discussion of our long-term debt.)
In addition, our increased indebtedness related to our acquisition of Fox Restaurant Concepts 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.
The indenture governing our outstanding Notes will not restrict us from incurring additional indebtedness, and
the Notes and the incurrence of any additional indebtedness could limit the cash flow available for our operations,
expose us to risks that could adversely affect our business, financial condition and results of operations and
impair our ability to satisfy our obligations under the Notes.
In June 2021, we completed the offering of $345.0 million aggregate principle amount of convertible senior
notes due 2026 (“Notes”) and issued $175.0 million of shares of our common stock (the “Issuance”). The Notes and
Issuance are collectively referred to as the “Offerings.” We used the net proceeds from the Offerings to fund
32
approximately $457.3 million payable in connection with the cash-settled conversion of 150,000 shares of our previously
outstanding Series A convertible preferred stock and the share-settled conversion of the remaining 50,000 shares of
Series A convertible preferred stock into approximately 2.4 million shares of our common stock. (See Notes 10 and 15
of Notes to Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of these events.)
As of January 3, 2023, we had approximately $475 million in principal amount of consolidated indebtedness.
The indenture governing the Notes does not contain any meaningful restrictive covenants and does not prohibit us or our
subsidiaries from incurring additional indebtedness in the future. Accordingly, we may incur a significant amount of
additional indebtedness to meet future financing needs. The incurrence of indebtedness could have significant negative
consequences for our security holders and our business, results of operations and financial condition by, among other
things:
•
•
•
•
•
•
increasing our vulnerability to adverse economic and industry conditions;
limiting our ability to obtain additional financing;
requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness,
which will reduce the amount of cash available for other purposes;
limiting our flexibility to plan for, or react to, changes in our business;
diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon
conversion of the Notes; and
placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better
access to capital.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash
reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future.
If we fail to comply with covenants or to make payments under our indebtedness when due, then we would be in default
under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in
full.
The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could
depress the trading price of our common stock and the Notes.
We have the right to elect to settle conversion of the Notes either entirely in cash or in combination of cash and
shares of common stock. Our election to convert Notes into common stock may further dilute the economic and voting
rights of our existing stockholders and/or reduce the market price of our common stock. In addition, the market’s
expectation that conversions may occur could depress the trading price of our common stock even in the absence of
actual conversions. Moreover, the expectation of conversions could encourage the short selling of our common stock,
which could place further downward pressure on the trading price of our common stock.
We may also conduct future offerings of our common stock, preferred stock or other securities that are
convertible into or exercisable for our common stock to finance our operations or fund acquisitions, or for other
purposes. In addition, we have reserved approximately 4.0 million shares of common stock for grant under our The
Cheesecake Factory Incorporated Stock Incentive Plan as of January 3, 2023. If we issue additional shares of our
common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial
amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of
our common stock may significantly decline. In addition, our issuance of additional shares of common stock will dilute
the ownership interests of our existing common stockholders.
Hedging activity by investors in the Notes could depress the trading price of our common stock.
We expect that many investors in the Notes, including potential purchasers of the Notes, will seek to employ a
convertible note arbitrage strategy. Under this strategy, investors typically short sell a certain number of shares of our
common stock and adjust their short position over time while they continue to hold the Notes. Investors may also
implement this type of strategy by entering into swaps on our common stock in lieu of, or in addition to, short selling
shares of our common stock. This market activity, or the market’s perception that it will occur, could depress the trading
price of our common stock.
33
Provisions in the indenture governing the Notes could delay or prevent an otherwise beneficial takeover of us.
Certain provisions in the Notes and the indenture governing the Notes could make a third-party attempt to
acquire us more difficult or expensive. For example, if a takeover constitutes a “fundamental change” (which is defined
in the indenture governing the Notes to include certain change-of-control events and the delisting of our common stock),
then noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes
a “make-whole fundamental change” (which is defined in the indenture governing the Notes to include, among other
events, fundamental changes and certain additional business combination transactions), then we may be required to
temporarily increase the conversion rate for the Notes. In either case, and in other cases, our obligations under the Notes
and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or
removing incumbent management, including in a transaction that holders of our common stock may view as favorable.
We may be unable to raise the funds necessary to repurchase the Notes for cash following a fundamental change,
or to pay the cash amounts due upon conversion, and our other indebtedness limits our ability to repurchase the
Notes or pay cash upon their conversion.
Noteholders of our outstanding Notes may, subject to limited exceptions, require us to repurchase their Notes
following a “fundamental change” (which is defined in the indenture governing the Notes) at a cash repurchase price
generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. In
addition, all conversions of the Notes will be settled partially or entirely in cash. We may not have enough available cash
or be able to obtain financing at the time we are required to repurchase the Notes or pay the cash amounts due upon
conversion. In addition, applicable law, regulatory authorities and the Loan Agreement or any future indebtedness may
restrict our ability to repurchase the Notes or pay the cash amounts due upon conversion. For example, the Loan
Agreement restricts us from paying cash upon conversion of the Notes in an amount that exceeds the sum of (i) the
principal amount being converted and (ii) any payments received by us or any of our subsidiaries pursuant to the
exercise, settlement or termination of any related permitted bond hedge transaction.
Furthermore, the Loan Agreement places several restrictions on our ability to repurchase the Notes upon a
fundamental change. Under the Loan Agreement we are permitted to repurchase Notes upon a fundamental change only
if (i) no default of event of default exists and (ii) our pro forma net adjusted leverage ratio (as measured in accordance
with the Loan Agreement) does not exceed 4.25 to 1.00 and our EBITDAR to interest and rental expense ratio (as
measured in accordance with the Loan Agreement) is at least 1.90 to 1.00.
Our failure to repurchase the Notes or pay the cash amounts due upon conversion when required will constitute
a default under the indenture governing the Notes. A default under the indenture governing the Notes or the fundamental
change itself could also lead to a default under the Loan Agreement and agreements governing our other or future
indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have
sufficient funds to satisfy all amounts due under the such indebtedness and the Notes.
Risks Related to Owning Our Stock
The market price of our common stock is subject to volatility.
During fiscal 2022, the price of our common stock fluctuated between $26.05 and $44.65 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.
34
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 any financial guidance we provide 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, failure to 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, our inability to obtain additional capital at market
terms, or our failure to repurchase stock as expected or pay or increase dividends 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 pay or increase dividends.
While our Board declared a quarterly dividend in the second quarter of fiscal 2022 and has declared quarterly
dividends since then, following the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business
and in conjunction with the terms of our Loan Agreement, there are no assurances that our Board will continue to declare
quarterly dividends. Our ability to pay or to increase dividends on our common stock will depend on our ability to do so
under the Loan Agreement or any future credit agreement as well as 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. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for
further discussion of our long-term debt.) Our failure to pay a dividend or to increase it over time may negatively impact
investor confidence in us and may negatively impact our stock price.
We cannot guarantee that our share repurchase program will be utilized to the full value approved or that it will
enhance long-term stockholder value.
Our Board of Directors has authorized a share repurchase program of up to 61.0 million shares, of which
approximately 5.8 million shares remained available for repurchase as of January 3, 2023. The share repurchase program
does not have an expiration date, does not require the Company to purchase a specific number of shares and may be
modified, suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.
The timing and total amount of share repurchases will depend upon market conditions and other factors and may be
made from time to time in open market purchases, privately negotiated transactions, accelerated share repurchase
programs, issuer self-tender offers or otherwise. Future decisions to repurchase shares are at the discretion of the Board
of Directors and are 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 Fox Restaurant Concepts LLC acquisition agreement (the “FRC
Acquisition”), our share price and current market conditions. The timing and number of shares repurchased are also
subject to legal constraints and covenants under the Loan Agreement that limit share repurchases based on a defined
ratio. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion
of our long-term debt.) In addition, the Inflation Reduction Act of 2022 introduced a 1% excise tax on share repurchases,
which increases the costs associated with repurchasing shares of our common stock. Even if our share repurchase
program is fully implemented, it may not enhance long-term stockholder value or may not prove to be the best use of our
cash. Share repurchases could have an impact on the trading price of our common stock, increase the volatility of the
price of our common stock or reduce our available cash balance such that we will be required to seek financing to
support our operations.
35
Our stock price could be adversely affected by future sales or other dilution of our equity.
Subject to Nasdaq Listing Rules and certain restrictions on the issuance of convertible indebtedness under the
Loan Agreement, 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.
General Risk Factors
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 2017 enactment of Federal legislation commonly referred to as the Tax Cuts
and Jobs Act, The Coronavirus Aid, Relief, and Economic Security Act of 2020 , and the Inflation Reduction Act of
2022 (collectively, the “Tax Acts”), 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 Acts, 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 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. 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.
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.
36
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 approximately 22,000 square feet of leased office
space.
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. Below is a table showing the number of Company-owned restaurants by
location.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Cheesecake
Factory
North Italia Other FRC Other
Total
1
4
6
1
—
—
1
3
2
—
—
—
—
—
1
—
—
—
—
—
—
—
—
1
—
—
—
1
—
—
—
1
—
—
—
2
7
—
2
—
—
—
33
—
23
3
2
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
3
—
—
—
—
—
35
—
6
3
2
—
—
1
1
4
—
—
1
—
—
—
—
—
1
—
—
—
—
—
3
1
—
1
1
1
—
—
—
—
—
—
—
13
—
1
—
—
—
40
3
39
50
8
3
1
4
24
11
2
1
8
2
1
2
2
1
7
7
2
2
3
1
9
11
1
13
6
3
7
2
6
1
1
1
11
41
2
10
5
3
1
318
2
6
38
3
3
1
2
20
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
6
18
2
7
5
3
1
210
37
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 1,450 holders of record of our common stock at February 14, 2023, and we estimate there were
approximately 156,700 beneficial stockholders on that date.
On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million
shares to 61.0 million shares. Under this authorization, we have cumulatively repurchased 55.1 million shares at a total
cost of $1,765.6 million through January 3, 2023 with 0.7 million shares repurchased at a cost of $21.6 million during
the fourth quarter of fiscal 2022. Our share repurchase program 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. The timing and number
of shares repurchased are subject to legal constraints and financial covenants under our credit facility that limit share
repurchases based on a defined ratio.
The following table presents our purchases of our common stock during the fiscal quarter ended January 3,
2023 (in thousands, except per share data):
Period
September 28 — November 1, 2022 . . . . . . . . . .
November 2 — November 29, 2022 . . . . . . . . . .
November 30 — January 3, 2023 . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Number of Shares Maximum Number of
Shares that May Yet
Be Purchased Under the
Plans or Programs
Total
Number
of Shares
Average
Price Paid
Purchased as Part of
Publicly Announced
Purchased (1) per Share Plans or Programs
31.64
34.55
32.24
255 $
169
240
664
253
156
240
649
6,256
6,086
5,847
(1) The total number of shares purchased includes 14,607 shares withheld upon vesting of restricted share awards
to satisfy tax withholding obligations.
Our Board declared a quarterly dividend in the second quarter of fiscal 2022 and has declared quarterly
dividends since then, following the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business
and in conjunction with the terms of our Loan Agreement. Future decisions to pay or to increase or decrease dividends or
to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including
limitations pursuant to the terms and conditions of the Loan Agreement and applicable law. (See Item 1A — Risk
Factors — “Our stock price could be adversely affected if we are unable to pay or increase dividends.”)
38
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 S&P 600
Restaurants 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.
12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22
70
85 $
93 $
The Cheesecake Factory Incorporated . . . . . . . . . . . . . . . . . . . . $ 100 $
88 $ 109 $ 121 $ 150 $ 128
S&P 400 Midcap Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100 $
NASDAQ US Benchmark TR Index (1) . . . . . . . . . . . . . . . . . . . $ 100 $
95 $ 124 $ 150 $ 189 $ 152
S&P 600 Restaurants Index (2) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100 $ 109 $ 121 $ 153 $ 146 $ 115
87 $
82 $
(1) Underlying data provided by Nasdaq Global Indexes.
(2) The S&P 600 Restaurants Index is a comprehensive restaurant industry index that includes casual dining, fast
casual and quick-service constituents.
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.
39
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting
purposes. Fiscal year 2022 consisted of 53 weeks, while fiscal year 2021 consisted of 52 weeks. Fiscal year 2023 will
consist of 52 weeks. The following MD&A includes a discussion comparing our results in fiscal 2022 to fiscal 2021. For
a discussion comparing our results from fiscal 2021 to fiscal 2020, 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 December 28, 2021, filed with the SEC on February 22, 2022.
COVID-19 Pandemic , Geopolitical and Other Macroeconomic Impacts to our Operating Environment
We have experienced significant disruptions to our business as federal, state and local restrictions have
fluctuated over time to mitigate the spread of the COVID-19 virus. While most of our restaurants operated with no
restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of
accelerating case counts during which we incurred increased restaurant staff absenteeism and temporary shifts in
consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels. We
have incurred and may continue to incur additional costs to address government regulations and the safety of our staff
members and customers.
In addition, we experienced labor shortfalls relative to our sales levels in certain parts of our workforce and/or
geographies as we reopened our dining rooms after the lifting of mandatory social-distancing regulations related to the
COVID-19 pandemic. During fiscal 2021, we also began to experience certain supply shortages and transportation
delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were
exacerbated by geopolitical unrest. The aggregate impact of these and other geopolitical and macroeconomic factors
contributed to significantly increased commodity and wage inflation and other increased costs. We have also
encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in
obtaining licenses and permits and in the timeline required to complete the overall leasing process with landlords.
The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events
could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. If these factors significantly impact our cash flow in the future, we may again
implement mitigation actions such as suspending share repurchases, not declaring future dividends, increasing
borrowings under our credit facility or modifying our operating strategies. Any of these measures may have an adverse
impact on our business and materially adversely affect our financial performance.
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 318 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory® (210 locations), North Italia® (33 locations), Flower Child®
(30 locations) and a collection of other FRC brands (35 locations). Internationally, 30 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.
40
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 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 long-term capital allocation priority, with
a focus on opening our concepts in premier locations within both new and existing markets. We plan to continue
expanding The Cheesecake Factory and North Italia concepts, and in addition, our FRC subsidiary serves as an
incubation engine, creating additional concepts for potential future growth. For The Cheesecake Factory concept, we
target an average cash-on-cash return on investment of approximately 20% to 25% at the unit level, calculated by
dividing restaurant-level profit (earnings before interest, taxes, depreciation and amortization and preopening costs) by
our cash investment. We target an average cash-on-cash return on investment of approximately 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.
For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing
average check and maintaining 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, as we believe there is opportunity for a longer-term elevation of our off-premise mix
compared to pre-COVID-19 pandemic levels. We are continuing our efforts on a number of initiatives, including menu
innovation, a greater focus on increasing customer throughput in our restaurants, leveraging 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 variations are driven by menu price increases and/or changes in menu mix. 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 supporting both our margin objectives and customer traffic levels. In prior years,
we have targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help
mitigate cost pressure in higher-wage geographies. Due to the inflationary cost pressures we are experiencing, we
implemented menu price increases above our historical levels in the first and third quarters of fiscal 2022 and also
implemented an incremental price increase in the fourth quarter of fiscal 2022 to support our longer-term restaurant-level
margin objectives. Future near-term pricing actions are likely to be at levels above historical norms to keep pace with
any significant cost increases. In addition, on a regular basis, we carefully consider opportunities to adjust our menu
offerings or ingredients to help manage product availability and cost.
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 recapture our pre-COVID-19 pandemic
margins and longer-term to drive margin expansion, by leveraging incremental sales to increase 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 employ a balanced capital allocation strategy, comprised of: investing in new restaurants that are
expected to meet our targeted returns, repaying borrowings under our Revolver Facility and returning capital to
shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity
compensation program and supports our earnings per share growth. Future decisions to pay or to increase or decrease
41
dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors,
including limitations pursuant to the terms and conditions of the Loan Agreement and applicable law.
Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7%, in
aggregate across concepts, and comparable sales growth), combined with margin expansion, planned debt repayments
and an anticipated capital return program will support 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/(loss) expressed as percentages of revenues.
2022 2021
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 % 100.0 %
Costs and expenses:
Food and beverage costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.6
Labor expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.7
Other operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.7
6.2
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.8
Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.0
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4
Acquisition-related contingent consideration, compensation and amortization expense . . . . . . . . . . . .
0.4
Preopening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.8
22.3
36.6
27.0
6.4
3.1
0.6
0.7
0.5
97.2
Income/(loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2)
Income/(loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.0
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3)
1.3
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Undistributed earnings allocated to Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.3 %
Net income/(loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.8
(0.4)
2.4
(0.1)
2.5
(0.6)
(0.2)
1.7 %
Fiscal 2022 Compared to Fiscal 2021
Revenues
Revenues increased 12.8% to $3,303.2 million for fiscal 2022, including approximately $78.4 million
contributed by the 53rd week, compared to $2,927.5 million for fiscal 2021, primarily due to an increase in comparable
restaurant sales, reflecting the impact of the COVID-19 pandemic in fiscal 2021, as well as additional revenue related to
new restaurant openings.
The Cheesecake Factory comparable sales increased by 7.0%, or $162.5 million, from fiscal 2021 and increased
10.6% from fiscal 2019. The increase from fiscal 2021 was primarily driven by increased customer traffic of 6.8%
primarily due to the impact of the COVID-19 pandemic in the prior year, and an increase in average check of 0.2%
(based on an increase of 5.9% in menu pricing, partially offset by a 5.7% negative change in mix). Sales through the off-
premise channel comprised approximately 25% of our restaurant sales during fiscal 2022 as compared to 32% in fiscal
2021. However, off-premise sales mix remains elevated versus the pre-pandemic level of 16% during fiscal 2019, even
as customers continue to return to on-premise dining. We account for each off-premise order as one customer for traffic
measurement purposes. Therefore, average check is generally higher for off-premise orders as most of these orders are
42
for more than one customer. In turn, the lower mix of sales in the off-premise channel during fiscal 2022 compared to
fiscal 2021 comprised approximately 2% of the negative change in mix with a positive correlative impact to traffic. We
implemented effective menu price increases of approximately 3.25%, 4.25% and 2.8% in the first, third and fourth
quarters of fiscal 2022, respectively. The Cheesecake Factory average sales per restaurant operating week increased
7.3% to $228,741 in fiscal 2022 from $213,165 in fiscal 2021. Total operating weeks at The Cheesecake Factory
restaurants increased 2.7% to 11,052 in fiscal 2022 compared to 10,758 in the comparable prior year period. Excluding
the impact of the 53rd week in fiscal 2022, total operating weeks increased 0.8% to 10,841.
North Italia comparable sales increased approximately 15% from fiscal 2021 and increased approximately 22%
compared to fiscal 2019. The increase from fiscal 2021 was primarily driven by increased customer traffic of 11%
primarily due to the impact of the COVID-19 pandemic in the prior year, and an increase in average check of 4.0%
(based on an increase of 5.5% in menu pricing, partially offset by a 1.5% negative impact from mix). North Italia
average sales per restaurant operating week increased 12.1% to $142,532 in fiscal 2022 from $127,146 in fiscal 2021.
Total operating weeks at North Italia increased 18.6% to 1,604 in fiscal 2022 compared to 1,352 in the prior year.
Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 16.2% to 1,571.
Restaurants become eligible to enter the comparable sales base in their 19th month of operation. At January 3,
2023, there were four The Cheesecake Factory restaurants and eight North Italia restaurants not yet in the comparable
sales base. International licensed locations and restaurants that are no longer in operation, including those which we have
relocated, are excluded from comparable sales calculations.
Food and Beverage Costs
Food and beverage costs consist of raw materials and ingredients used in the food and beverage products sold in
our restaurants and to our third-party bakery customers. As a percentage of revenues, food and beverage costs were
24.6% for fiscal 2022 compared to 22.3% for fiscal 2021, primarily due to inflation across most categories in excess of
menu price increases (1.9%). Beginning in the fourth quarter of fiscal 2022, we retitled this income statement line item
from “Cost of Sales” to “Food and Beverage Costs.” This is a title change only, and there is no difference in the
classification of items within this category of costs.
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.”)
For new restaurants, food and beverage costs are typically 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 production
labor, including associated fringe benefits, were 36.7% and 36.6% in fiscal 2022 and fiscal 2021, respectively. This
increase was primarily due to wage rate inflation in excess of menu price increases (0.8%), offset by a decrease in group
medical insurance costs due to lower claim activity (0.8%) in fiscal 2022.
For new restaurants, labor expenses are typically 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 all other restaurant-level operating costs, the major components
of which are occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), dining room and
to-go supplies, repairs and maintenance, janitorial expenses, credit card processing fees, marketing including delivery
commissions, and incentive compensation, as well as bakery production overhead. As a percentage of revenues, other
43
operating costs and expenses were 26.7% and 27.0% in fiscal 2022 and fiscal 2021, respectively. This variance was
primarily driven by sales leverage within occupancy and building costs (0.2%) and increased restaurant-level incentive
compensation expense (0.2%).
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 were 6.2% and 6.4% for fiscal 2022 and fiscal 2021,
respectively. This variance was primarily driven by lower corporate incentive compensation expense (0.2%).
Depreciation and Amortization Expenses
As a percentage of revenues, depreciation and amortization expenses were 2.8% in fiscal 2022 compared to
3.1% in fiscal 2021 primarily due to sales leverage.
Impairment of Assets and Lease Termination Expenses
During fiscal 2022, we recorded impairment of assets and lease terminations expense of $31.4 million primarily
related to the impairment of long-lived assets for three The Cheesecake Factory, one Other FRC and three Other
restaurants that are primarily located in areas which have not fully recovered from the pandemic.
During fiscal 2021, we recorded impairment of assets and lease terminations expense of $18.1 million primarily
related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants.
See Notes 1 and 6 of Notes to Consolidated Financial Statements in Part 1V, Item 15 of this report for further
discussion of our long-lived and intangible assets.
Acquisition-Related Contingent Consideration, Compensation and Amortization Expense/(Benefit)
We recorded a $13.4 million and $19.5 million of expense during fiscal 2022 and 2021, respectively, of
acquisition-related contingent consideration, compensation and amortization. In fiscal 2022, the fair value of the
contingent consideration and compensation liability increased by $4.7 million due to a $8.3 million increase in the fair
value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and
estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per
the FRC acquisition agreement. In fiscal 2021, we recorded a $15.3 million increase in the contingent consideration and
compensation liability due to the impact of an amendment to the FRC acquisition agreement that, among other things,
extended the measurement period through fiscal 2026, as well as to an increase in fiscal 2021 revenues and estimated
future revenues utilized in the fair value calculation.
Preopening Costs
Preopening costs were $16.8 million for fiscal 2022 compared to $13.7 million for fiscal 2021. We opened 13
restaurants in fiscal 2022 comprised of three The Cheesecake Factory, four North Italia, three Other FRC and three
Other locations compared to 14 restaurants in fiscal 2021 comprised of two The Cheesecake Factory, six North Italia,
four Other FRC and two Other locations. Restaurant-level 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 in preopening costs 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. Preopening costs can fluctuate significantly from period to period based on the number, mix and
timing of restaurant openings and the specific preopening costs incurred for each restaurant. The increase in preopening
cost from fiscal 2021 primarily relates to a higher number of managers in reserve for pending openings, partially offset
by decreased number of openings.
44
Interest and Other Expense, Net
Interest and other expense, net was $6.0 million in fiscal 2022 compared to $10.7 million in fiscal 2021. This
decrease was primarily due to higher interest expense in the prior year ($3.5 million), mainly related to our interest rate
swap, which was terminated in June 2021.
Income Tax Benefit
In fiscal 2022, we had an income tax benefit of $10.2 million, an effective tax rate of (31.1%), compared to an
income tax benefit of $0.8 million, an effective tax rate of (1.1%), in fiscal 2021. The change was due primarily to a
higher proportion of employment credits in relation to income before income taxes (48.7%) and our reserve for uncertain
tax positions in fiscal 2021 (12.6%). These favorable factors were partially offset by a higher proportion of non-
deductible losses as compared to non-taxable gains in fiscal 2021 on our investments in variable life insurance contracts
used to support our non-qualified deferred compensation plan (“Non-Qualified Plans”) in relation to income before
income taxes (12.6%), the benefit to our net operating loss carryback recorded in fiscal 2021 of our decision to
accelerate payment of certain FICA taxes deferred pursuant to the CARES Act (6.3%), a tax shortfall in fiscal 2022
related to equity compensation (5.5%) and a higher proportion of state taxes expense in relation to income before income
taxes (4.7%). (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 common share the impact of items we do not consider indicative of our
ongoing operations. To reflect the potential impact of the conversion of our Series A preferred stock into common stock
for the period that it was outstanding prior to the conversion on June 15, 2021, we exclude the preferred dividend and
assume all convertible preferred shares have been converted into common stock. (See Note 15 of Notes to Condensed
Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our preferred stock.) 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.
45
Following is a reconciliation from net income and diluted net income per common share to the corresponding
adjusted measures (in thousands, except per share data):
2022
2021
Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,123 $ 49,131
18,661
4,581
4,917
18,139
19,510
2,354
7,139
(11,679)
112,753
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributed to Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COVID-19 related costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related contingent consideration, compensation and amortization expenses . . . . . . .
Termination of interest rate swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of adjustments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,241 $
—
—
—
31,387
13,368
—
—
(11,637)
Diluted net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed impact of potential conversion of Series A preferred stock into common stock (3) . . . .
COVID-19 related costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related contingent consideration, compensation and amortization expenses . . . . . . .
Termination of interest rate swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of adjustments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income per share (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.86 $
—
—
—
—
0.62
0.27
—
—
(0.23)
1.51 $
1.01
0.35
0.09
(0.08)
0.09
0.34
0.37
0.04
0.13
(0.22)
2.13
(1) Represents incremental costs associated with the COVID-19 pandemic such as additional sanitation, personal
protective equipment, sick and vaccination pay, and healthcare benefits. During fiscal 2021, we recorded $4.9
million for these costs with approximately $4.6 million reflected in labor expenses and $0.3 million in other
operating expenses.
(2) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments
assumes a 26% tax rate.
(3) Represents the impact of assuming the conversion of Series A preferred stock into common stock (0 and
4,431,140 shares for fiscal 2022 and fiscal 2021, respectively), resulting in an assumption of 50,414,160 and
51,959,879 weighted-average common shares outstanding for fiscal 2022 and fiscal 2021, respectively.
(4) Adjusted net income per share may not add due to rounding.
46
Fiscal 2023 Outlook
This discussion contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, as codified in Section 27A of the Securities Act, and Section 21E of the Exchange 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.
Based on recent trends and assuming no material operating or consumer disruptions, we anticipate total revenue
for fiscal 2023 to be approximately $3.5 billion to $3.6 billion, with The Cheesecake Factory average sales per location
reaching approximately $13 million. Including the 3.5% February 2023 price increase, we will have 10.5% pricing in
The Cheesecake Factory menu, and we will evaluate the level of pricing for the summer menu based on inflationary
trends.
During fiscal 2023, we currently estimate total inflation across our commodities, total labor (factoring in the
latest trends in wage rates and channel mix, as well as in other components such as payroll taxes and benefits) and other
operating costs and expenses to be in the mid-single digit range. However, there remains measurable risk associated with
cost fluctuations driven by the current environment. We estimate preopening costs of approximately $24 million. Based
on these factors, we expect fiscal 2023 net income margin of approximately 4% at the mid-point of the estimated
revenue range.
We plan to open as many as 20 to 22 new restaurants in fiscal 2023, including five to six The Cheesecake
Factory restaurants, five to six North Italia restaurants and 10 restaurants within our FRC business, which includes three
to four Flower Child locations. We anticipate approximately $165 to $175 million in cash capital expenditures to support
this level of unit development, as well as required maintenance on our restaurants. Restaurant opening dates may be
impacted by supply chain challenges and permit approval delays.
Total revenue for the first quarter of fiscal 2023 are expected to be approximately $850 million to $880 million.
We anticipate commodity inflation of approximately 10% to 12% and expect labor inflation of approximately 6%. Based
on these factors, we expect first quarter fiscal 2023 net income margin of approximately 3% to 3.5%.
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. Typically, cash flows generated from operating activities are our principal source of liquidity, which
we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and
investment in our corporate and information technology infrastructures. However, given the impact of the COVID-19
pandemic on our operations, during fiscal 2020 we increased borrowings under our then-existing credit facility and
issued convertible preferred stock to increase our liquidity. During fiscal 2021, we used net proceeds from issuing
convertible senior notes and additional common stock to fund the repurchase of the majority of our Series A preferred
stock and the conversion of the remaining Series A preferred stock into common stock, simplifying our capital structure
and eliminating future convertible preferred stock dividends. We also utilized a portion of the net proceeds to reduce
borrowings under our then-existing credit facility.
Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of
our restaurant locations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded
indebtedness in our capital structure. We are not limited to the use of lease arrangements as our only method of opening
new restaurants. However, we believe our operating lease arrangements continue to provide appropriate leverage for our
capital structure in a financially efficient manner.
47
During fiscal 2022, our cash and cash equivalents decreased by $74.9 million to $114.8 million. The following
table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing
activities (in millions):
Fiscal Year
2022
2021
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 161.9 $ 213.0
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related deferred consideration and compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt issuance, net of issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issuance, net of issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock cash-settled conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(112.5)
(18.3)
—
—
130.0
(130.0)
—
—
0.1
(42.3)
(63.1)
(66.9)
(17.0)
334.9
167.1
—
(150.0)
(443.8)
(18.7)
24.8
(0.3)
(5.8)
Cash Provided by Operating Activities
Cash flows from operations decreased by $51.1 million from fiscal 2021 primarily due to lower net income, the
timing of payroll disbursements in relation to the fiscal 2022 versus 2021 year-end dates, higher gift card redemptions
and lower accrued incentive compensation. These factors were partially offset by collection of our fiscal 2020 net
operating loss carryback refund in fiscal 2022, the payback in fiscal 2021 of payroll taxes that were deferred in fiscal
2020 under the CARES Act and higher non-cash impairment expense in fiscal 2022. Typically, our requirement for
working capital has not been 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.
Property and Equipment
Capital expenditures for new restaurants, including locations under development as of each fiscal year-end,
were $55.1 million and $31.7 million for fiscal 2022 and 2021, respectively. Capital expenditures also included $51.8
million and $30.1 million for our existing restaurants and $5.6 million and $5.1 million for bakery and corporate
capacity and infrastructure investments in fiscal 2022 and 2021, respectively.
We opened 13 restaurants in fiscal 2022 comprised of three The Cheesecake Factory, four North Italia, three
Other FRC and three Other locations compared to 14 restaurants in fiscal 2021 comprised of two The Cheesecake
Factory, six North Italia, four Other FRC and two Other locations. We expect to open as many as 20 to 22 new
restaurants in fiscal 2023 across our portfolio of concepts. We anticipate approximately $165 to $175 million in capital
expenditures to support this level of unit development, as well as required maintenance on our restaurants.
Acquisition-Related Deferred Consideration and Compensation
During fiscal 2022 and 2021, we made payments of $11.1 million and $17.0 million, respectively, for deferred
consideration related to the FRC acquisition. During fiscal 2022, we also made a payment of $7.2 million for deferred
consideration and contingent consideration related to the FRC acquisition.
48
Convertible Senior Notes
On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes
(“Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted. The net proceeds
from the sale of the Notes were approximately $334.9 million after deducting issuance costs related to the Notes. At
January 3, 2023, the conversion rate for the Notes was 13.0675 shares of common stock per $1,000 principal amount of
the Notes, which represents a conversion price of approximately $76.53 per share of common stock. In connection with
the cash dividend that was declared by our Board on February 16, 2023, on March 21, 2023 we will adjust the
conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in
accordance with the terms. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report
for further discussion of the Notes.)
Common Stock Issuance
On June 15, 2021, we issued 3.125 million shares of our common stock for $175.0 million. In connection with
the issuance, we incurred direct and incremental costs of $8.0 million.
Credit Facility
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement”
and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates
in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with
revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit.
The Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could
provide for an additional $200 million in revolving loan commitments. Our obligations under the Revolver Facility are
unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Revolver Facility. During
fiscal 2021, we utilized a portion of the net proceeds from our Notes and common share offerings to reduce the balance
on our then-existing credit facility by $150.0 million. On October 6, 2022, we repaid the outstanding balance under the
prior credit facility and borrowed the same amount on the Revolver Facility. As of January 3, 2023, we had net
availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in
standby letters of credit under the Revolver Facility.
Under the Revolver Facility, we are subject to financial covenants, as well as to customary events of default
that, if triggered, could result in acceleration of the maturity of the Revolver Facility. Subject to certain exceptions, the
Revolver Facility also limits 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. At January 3, 2023, we were in compliance with all covenants in
effect at that date. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for
further discussion of our long-term debt.)
Series A Preferred Stock
During the second quarter of fiscal 2021, we paid a cash dividend on our Series A preferred stock of $5.1
million. Additionally, during the second quarter of fiscal 2021, we paid $457.3 million in connection with the cash-
settled conversion of 150,000 shares of our outstanding Series A preferred stock (effected through a repurchase
agreement), and the share-settled conversion of the remaining 50,000 shares of our outstanding Series A preferred stock
into 2,400,864 shares of our common stock, of which $13.6 million was deemed to be a dividend. (See Note 15 of Notes
to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our preferred stock.)
Common Stock Dividends
Common stock dividends of $42.3 million and $0.3 million were paid in fiscal 2022 and 2021, respectively.
The increase is primarily due to the resumption of our quarterly dividend in the second quarter of fiscal 2022 after the
suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms
of our Loan Agreement. As further discussed in Note 15 of Notes to Consolidated Financial Statements in Part IV, Item
15 of this report, in February 2023, our Board declared a quarterly dividend to be paid in March 2023. Future decisions
49
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 Loan Agreement and applicable law, and other such factors that the Board considers
relevant.
Share Repurchases
On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million
shares to 61.0 million shares. Under this authorization, we have cumulatively repurchased 55.1 million shares at a total
cost of $1,765.6 million through January 3, 2023. We repurchased 2.0 million shares at a cost of $63.1 million during
fiscal 2022 compared to 0.1 million shares at a cost of $5.8 million fiscal 2021. This increase is primarily due to the
resumption of our share repurchase program in the second quarter of fiscal 2022 after the suspension that began in fiscal
2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement.
Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that
results from equity compensation grants and to supplement our earnings per share growth. Our share repurchase program
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. Future decisions to repurchase shares are at the discretion of the Board and are
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 FRC 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 our credit facility that limit
share repurchases based on a defined ratio. (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.)
Contractual Obligations and Commercial Commitments
The following table summarizes our undiscounted contractual obligations and commercial commitments as of
January 3, 2023 (amounts in millions):
Payment Due by Period
Total
Less than
More than
1 Year 1‑3 Years 4‑5 Years 5 Years
Contractual obligations
Recorded contractual obligations:
Operating leases liabilities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,021.0 $ 142.8 $ 267.2 $ 271.4 $ 1,339.6
—
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Acquisition-related deferred consideration . . . . . . . . . . . . . . . . . .
Uncertain tax positions (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
— — 468.0
—
—
3.8 —
468.0
11.3
3.8
11.3
—
Unrecorded contractual obligations:
Purchase obligations (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate obligations (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4
133.4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,886.4 $ 342.1 $ 316.2 $ 754.7 $ 1,473.4
112.1
75.9
16.4
28.8
1.0
14.3
129.9
252.4
Other commercial commitments
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
31.5 $ 31.5 $ — $ — $
—
(1) Includes $845.1 million related to options to extend lease terms that are reasonably certain of being exercised.
(See Note 11 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of
leases.)
(2) 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.)
(3) Includes obligations for inventory purchases, equipment purchases, information technology and other
miscellaneous commitments. Amounts exclude agreements that are cancelable without significant penalty.
50
(4) 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 FRC acquisition agreement also included a contingent consideration provision which is payable annually
from 2022 through 2027 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. The liability for this contingent
consideration provision was $28.6 million at January 3, 2023. See Note 2 in Notes to Consolidated Financial Statements
in Part IV, Item 15 of this report for discussion of the fair value measurement for this liability. 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.
Cash Flow Outlook
We believe that our cash and cash equivalents, combined with expected cash flows provided by operations and
available borrowings under the Revolver Facility, will provide us with adequate liquidity for the next 12 months and the
foreseeable future.
As of January 3, 2023, 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.
Critical Accounting Estimates
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.
Contingent Consideration and Compensation Liability
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. This
contingent consideration and compensation is payable annually from 2022 through 2027 and is based on achievement of
revenue and profitability targets for the FRC brands other than North Italia and Flower Child. The fair value of the
contingent consideration and compensation liability is determined utilizing a Monte Carlo model based on estimated
future revenues, margins, volatility factors and discount rates, 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 $276.0 million at
January 3, 2023 and $0 to $204.0 million at December 28, 2021. During fiscal 2022, the fair value of the contingent
consideration and compensation liability increased by $4.7 million to $28.6 million due to an $8.3 million increase in the
fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and
estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per
the FRC acquisition agreement. The fair value of the contingent consideration and compensation liability is highly
subjective, and results could change materially if different estimates and assumptions were used.
Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized and are 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, assumptions
related to the COVID-19 pandemic, wage, product and services inflation, competitive environment, macroeconomic and
industry conditions, results of prior impairment tests and share price performance. Any adverse change in these factors
could have a significant impact on the recoverability of these assets and could have a material impact on our
51
consolidated financial statements. If the qualitative assessment indicates that it is more likely than not that an impairment
exists, then a quantitative assessment is performed.
The quantitative assessments require the use of estimates and assumptions regarding future cash flows and asset
fair values. For the goodwill impairment test, the estimated fair value of the reporting units is determined using a blend
of the income approach using a discounted cash flow analysis and the market capitalization approach. The fair value of
the trade names and trademarks is estimated using the relief from royalty method. Key assumptions include projected
revenue growth and operating expenses, discount rates, royalty rates and other factors that could affect fair value or
otherwise indicate potential impairment. Estimates of revenue growth and operating expenses are based on internal
projections and consider historical performance and forecasted growth, including assumptions related to the COVID-19
pandemic, the cost environment and macroeconomic and industry conditions. The discount rate is based on the estimated
cost of capital that reflects the risk profile of the related business. These estimates, as well as the selection of comparable
companies and valuation multiples used in the market approaches, are subjective, and our ability to realize future cash
flows and asset fair values is affected by factors such as changes in economic conditions and operating performance.
These fair value assessments could change materially if different estimates and assumptions were used.
We did not record any impairment charges related to indefinite-lived intangible assets in fiscal 2022 or 2021.
We recorded impairment charges related to indefinite-lived intangible assets of $180.8 million in fiscal 2020. (See Note
1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of these
impairments.)
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 and asset fair values. Key assumptions include projected
revenue growth and operating expenses, as well as forecasting asset useful lives and selecting an appropriate discount
rate. Estimates of revenue growth and operating expenses are based on internal projections and consider the restaurant's
historical performance, the local market economics and the business environment. The discount rate is based on the yield
curve rate for U.S. Treasury securities with a duration that coincides with the period covered by the cash flows. These
estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as
changes in economic conditions and operating performance.
In fiscal 2022, we recorded $31.4 million of expense primarily related to the impairment of three The
Cheesecake Factory, one Other FRC and three Other restaurants. In fiscal 2021, we recorded $16.3 million of expense
primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants. In
fiscal 2020, we recorded $36.2 million of expense primarily related to the impairment of one The Cheesecake Factory,
one North Italia, two Other FRC and six Other restaurants, as well as lease termination costs and accelerated
depreciation for one The Cheesecake Factory and seven Other restaurants. (See Note 1 in Notes to Consolidated
Financial Statements in Part IV, Item 15 of this report for further discussion related to long-lived asset impairment.)
Leases
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.
52
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.
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, the value
of the operating lease asset and liability and the term over which leasehold improvements for each restaurant are
depreciated. These judgments may produce materially different amounts of operating lease assets and liabilities, rent
expense and interest expense than would be reported if different assumptions were used.
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, the tax deductibility of certain other items 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 anticipate realization of a significant portion of our deferred tax assets through the reversal of existing
deferred tax liabilities. Realization of some of our deferred tax assets, in particular those which have statutorily limited
time periods within which they must be used, is dependent on generating sufficient taxable income in the relevant
jurisdictions prior to expiration of these time periods. Although realization is not assured, management believes it is
more likely than not that our deferred tax assets, net of valuation allowances, will be realized. The amount of deferred
tax assets considered realizable could be reduced, however, if estimates of future earnings and taxable income in the
carryforward periods are reduced.
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 that the position would be sustained on its technical merits upon
examination by tax authorities, taking into account available administrative remedies and litigation. Assessment of
uncertain tax positions requires significant judgments relating to the amounts, timing and likelihood of resolution.
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.
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” 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.
The cost of products and services used in our operations is subject to volatility due to the relative availability of
labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events such
as the COVID-19 pandemic, geopolitical events, economic conditions or other unforeseen circumstances. Climate
change may further exacerbate a number of these factors. During fiscal 2021, we began to experience certain supply
shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages
53
continued in fiscal 2022 and were exacerbated by geopolitical unrest. The aggregate impact of these and other factors
contributed to significant cost inflation.
We attempt to 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. While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these
efforts may not be successful or yield our intended benefits. We continue to evaluate the possibility of entering into
similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial
instruments, to assist us in managing risk and variability associated with such commodities. As of the end of fiscal 2022,
we had no hedging contracts in place.
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. Goods 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,
geopolitical unrest and varying global demand. We may not have the ability to increase menu prices or vary menu items
in response to food commodity price increases. For fiscal 2022 and 2021, a hypothetical increase of 1% in food costs
would have negatively impacted food and beverage costs by $8.1 million and $6.5 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 Loan Agreement that is indexed to market rates. Based on outstanding borrowings
at January 3, 2023 and December 28, 2021, a hypothetical 1% rise in interest rates would have increased interest expense
by $1.3 million on an annual basis. (See Note 10 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 Non-Qualified Plans 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 January 3, 2023 and December 28,
2021, 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 $2.0
million and $2.3 million at January 3, 2023 and December 28, 2021, 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
None.
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
54
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 January 3, 2023.
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 January 3, 2023 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 January 3,2023.
The effectiveness of our internal control over financial reporting as of January 3, 2023 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
There have been no 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 the three months ended January 3, 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
55
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 June 1, 2023 (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,” “Compensation of Named Executive Officers” 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 ACCOUNTANT 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.
56
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 58 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
91.
ITEM 16. FORM 10-K SUMMARY
None.
57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, Los Angeles, CA, Auditor Firm ID: 185) . . .
59
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
Consolidated Statements of Income/(Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
Consolidated Statements of Comprehensive Income/(Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . .
64
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
58
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 January 3, 2023 and December 28, 2021, the related consolidated statements of
income/(loss), comprehensive income/(loss), stockholders’ equity and series A convertible preferred stock, and cash
flows for each of the years in the three-year period ended January 3, 2023, and the related notes (collectively, the
consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of
January 3, 2023, 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 January 3, 2023 and December 28, 2021, and the results of its operations and its
cash flows for each of the years in the three-year period ended January 3, 2023, 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 January 3, 2023 based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
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
59
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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Evaluation of long-lived assets for impairment
As discussed in Notes 1, 6 and 11 to the consolidated financial statements, the Company assesses the potential
impairment of long-lived assets 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. If the carrying amount of an asset group exceeds
its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the
carrying amount of the asset group exceeds the fair value of the asset group. The Company’s property and
equipment, net, and operating lease asset balances as of January 3, 2023 were $746.1 million and $1,269.0 million,
respectively. Based upon the analyses performed, the Company recognized pre-tax impairment charges for long-
lived assets of $31.4 million in fiscal 2022.
We identified the evaluation of long-lived assets for impairment as a critical audit matter. The evaluation of the
assumptions used in the undiscounted cash flow analysis and determination of fair value of certain long-lived assets
resulted in the application of challenging auditor judgment. These assumptions include revenue growth and the
operating margin.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of 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 and operating margin assumptions. For
certain restauant asset groups, we performed sensitivity analyses over the revenue growth and operating margin
assumptions to assess the impact of changes in those assumptions on the Company’s determination of the
undiscounted cash flow and fair value of these restaurant asset groups. We compared the Company’s prior year
revenue growth and operating margin assumptions to current year actual results to assess the Company’s ability to
accurately forecast. We evaluated the Company’s revenue growth and operating margin assumptions for certain
restaurant asset groups by comparing the assumptions to the restaurant asset groups’ historical and peer group
performance.
/s/ KPMG LLP
We have served as the Company’s auditor since 2018.
Los Angeles, California
February 27, 2023
60
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
January 3,
2023
December 28,
2021
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114,777 $
105,511
21,522
55,559
48,399
345,768
189,627
100,504
36,173
42,839
36,446
405,589
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
746,051
741,746
Other assets:
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
251,524
1,268,986
162,891
1,683,401
251,701
1,241,237
157,852
1,650,790
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,775,220 $
2,798,125
LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gift card liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,638 $
219,808
139,099
231,133
656,678
54,086
211,182
131,818
239,187
636,273
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 14)
Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; none issued . . . . . . . . . . . . . . . .
Stockholders’ equity:
Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized;
none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, $.01 par value, 250,000,000 shares authorized; 106,323,117 and 105,365,678 shares issued at
January 3, 2023 and December 28, 2021, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, 55,149,520 and 53,139,172 shares at cost at January 3, 2023 and December 28, 2021,
468,032
1,233,497
125,010
466,017
1,218,269
147,400
—
—
—
—
1,063
887,485
1,170,078
1,054
862,758
1,169,150
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,765,641)
(982)
292,003
(1,702,509)
(287)
330,166
Total liabilities, Series A convertible preferred stock and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . $
2,775,220 $
2,798,125
See the accompanying notes to the consolidated financial statements.
61
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(In thousands, except per share data)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses:
Food and beverage costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Labor expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . .
Acquisition-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related contingent consideration, compensation and
amortization expenses/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preopening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income/(loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income/(loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct and incremental Series A preferred stock issuance costs . . . . . . . . . . .
Undistributed earnings allocated to Series A preferred stock . . . . . . . . . . . . .
Net income/(loss) available to common stockholders . . . . . . . . . . . . . . . . . . .
2022
Fiscal Year
2021
2020
$ 3,303,156 $ 2,927,540 $ 1,983,225
810,926
1,211,951
881,627
205,753
92,380
31,387
—
653,133
1,072,628
792,311
186,136
89,654
18,139
—
458,332
778,586
616,069
157,644
91,415
219,333
2,699
13,368
16,829
3,264,221
38,935
(6,043)
32,892
(10,231)
43,123
—
—
—
43,123 $
(3,872)
19,510
10,456
13,711
2,330,662
2,845,222
(347,437)
82,318
(8,599)
(10,698)
(356,036)
71,620
(102,671)
(753)
(253,365)
72,373
(13,485)
(18,661)
(10,257)
—
(4,581)
—
49,131 $ (277,107)
$
Net income/(loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.87 $
0.86 $
1.03 $
1.01 $
(6.32)
(6.32)
Weighted-average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,815
50,414
47,529
48,510
43,869
43,869
See the accompanying notes to the consolidated financial statements.
62
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
2022
Fiscal Year
2021
2020
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive (loss)/gain:
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain/(loss) on derivative, net of tax . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss)/gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to Series A preferred stockholders . .
Total comprehensive income/(loss) available to common stockholders . . . . $
43,123 $
72,373 $ (253,365)
(695)
—
(695)
42,428
—
42,428 $
114
34
(3,464)
3,464
(3,350)
3,498
(256,715)
75,871
(23,742)
(23,540)
52,331 $ (280,457)
See the accompanying notes to the consolidated financial statements.
63
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE
PREFERRED STOCK
(In thousands)
Series A Convertible
Preferred Stock
Shares
Amount
Additional
Accumulated
Other
Common Stock Paid-in
Shares Amount Capital
Retained Treasury Comprehensive
Earnings
Stock
Loss
Total
$
— 97,685 $
—
—
—
—
—
—
977 $ 855,989
—
—
—
—
—
—
$ 1,408,333 $ (1,693,122) $
—
—
—
(253,365)
—
—
(435) $ 571,742
— (253,365)
114
(3,464)
114
(3,464)
Balance, December 31, 2019 . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . .
Change in derivative, net of tax . . . . . . . . . . . . . .
Cash dividends declared common stock,net of
forfeitures, $0.36 per share . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . .
Common stock issued under stock-based
compensation plans . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . .
Series A preferred stock issuance . . . . . . . . . . . . .
Series A preferred stock direct costs . . . . . . . . . . .
Paid-in-kind Series A preferred stock dividend,
including beneficial conversion feature . . . . . . .
Balance, December 29, 2020 . . . . . . . . . . . . . . . .
Cumulative effect of adopting ASU 2020-06 . . . . .
Balance, December 29, 2020, as adjusted . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . .
Change in derivative, net of tax . . . . . . . . . . . . . .
Cash dividends declared common stock, net of
forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . .
Common stock issued under stock-based
compensation plans . . . . . . . . . . . . . . . . . . . .
Common stock issuance . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . .
Series A preferred stock cash-settled conversion. . .
Series A preferred stock conversion to common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deemed dividends on Series A preferred stock . . . .
Cash dividends declared Series A preferred stock,
$25.35 per share . . . . . . . . . . . . . . . . . . . . . .
Balance, December 28, 2021 . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . .
Cash dividends declared common stock, net of
forfeitures, $0.81 per share . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . .
Common stock issued under stock-based
compensation plans . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . .
Balance, January 3, 2023 . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
200
—
—
—
—
200
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
637
—
—
189,743
10,257
323
—
—
—
18,248
—
218,248 98,645
(4,763)
—
213,485 98,645
—
—
—
—
—
—
—
—
—
759
—
—
—
—
—
—
(150) (160,114)
436
3,125
—
—
(50)
—
(53,371)
—
2,401
—
—
7
2
—
—
—
—
986
—
986
—
—
—
—
8
5
31
—
—
24
—
—
21,550
(16,376)
—
—
—
609
—
—
—
—
—
—
(10,257)
—
(3,621)
—
—
—
878,148
—
878,148
—
—
—
—
24,778
23,177
167,019
—
(283,637)
4,763
(18,248)
—
1,110,087 (1,696,743)
—
1,114,850 (1,696,743)
—
—
—
72,373
—
—
588
—
—
—
—
—
—
—
—
—
(5,766)
—
53,273
—
—
(13,591)
—
—
—
—
(16,376)
21,557
—
—
—
—
611
(3,621)
—
(10,257)
—
(3,785)
—
(3,785)
—
34
3,464
(18,248)
288,693
4,763
293,456
72,373
34
3,464
—
—
588
24,786
23,182
—
167,050
—
—
(5,766)
— (283,637)
—
—
53,297
(13,591)
—
(287)
—
(695)
(5,070)
330,166
43,123
(695)
—
—
— 105,366
—
—
—
—
—
1,054
—
—
—
862,758
—
—
(5,070)
—
1,169,150 (1,702,509)
—
—
43,123
—
—
—
—
788
—
8
—
24,644
(42,195)
—
—
—
—
—
(42,195)
24,652
1
169
—
—
—
—
— 106,323 $ 1,063 $
83
—
—
—
—
(63,132)
887,485 $ 1,170,078 $ (1,765,641) $
—
—
84
(63,132)
(982) $ 292,003
See the accompanying notes to the consolidated financial statements.
64
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
43,123 $
72,373
$
(253,365)
2022
Fiscal Year
2021
2020
Adjustments to reconcile net income/(loss) to cash provided by operating activities:
Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,380
31,327
(18,646)
24,426
(12,266)
14,651
(12,725)
(11,960)
(18,404)
13,739
17,586
8,634
(9,939)
161,926
Cash flows from investing activities:
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(112,464)
(680)
329
(112,815)
Cash flows from financing activities:
Acquisition-related deferred consideration and compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt direct and incremental costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock direct and incremental costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock cash-settled conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock conversion direct and incremental costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issuance direct and incremental costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used in)/provided by 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosures:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
(18,316)
130,000
(130,000)
—
—
—
—
—
—
—
—
—
84
(42,272)
(63,132)
(123,636)
(325)
(74,850)
189,627
114,777 $
7,233 $
14,688 $
9,346 $
9,586
13,031
4,343
89,654
17,937
(20,849)
22,988
(24,816)
715
(3,478)
(1,137)
(4,106)
(9,227)
(3,678)
26,527
50,103
213,006
(66,943)
(606)
(1,061)
(68,610)
(17,000)
—
(150,000)
345,000
(10,074)
—
—
(443,751)
(74)
(18,661)
175,000
(7,950)
24,786
(337)
(5,766)
(108,827)
(27)
35,542
154,085
189,627
91,415
208,066
(67,228)
21,350
15,148
(32,263)
7,921
8,563
22,958
(6,019)
(2,005)
(3,324)
(8,309)
2,908
(50,329)
(585)
—
(50,914)
(17,250)
90,000
(100,000)
—
—
200,000
(10,257)
—
—
—
—
—
611
(15,791)
(3,621)
143,692
(17)
95,669
58,416
154,085
13,045
2,968
5,007
$
$
$
$
See the accompanying notes to the consolidated financial statements.
65
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
relentlessly focused on hospitality. We currently own and operate 318 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory® (210 locations), North Italia® (33 locations) and a collection
within our Fox Restaurant Concepts (“FRC”) business. Internationally, 30 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.
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.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting
purposes. Fiscal year 2022 consisted of 53 weeks. Fiscal years 2021 and 2020 each consisted of 52 weeks. Fiscal year
2023 will consist of 52 weeks.
Beginning in the fourth quarter of fiscal 2022, we retitled the income statement line item “Cost of Sales” to
“Food and Beverage Costs.” This is a title change only, and there is no difference in the classification of items within
this category of costs.
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.
COVID-19 Pandemic, Geopolitical and Other Macroeconomic Impacts to our Operating Environment
We have experienced significant disruptions to our business as federal, state and local restrictions have
fluctuated over time to mitigate the spread of the COVID-19 virus. While most of our restaurants operated with no
restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of
accelerating case counts during which we incurred increased restaurant staff absenteeism and a temporary shift in
consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels. We
have incurred and may continue to incur additional costs to address government regulations and the safety of our staff
members and customers.
In addition, we experienced labor shortfalls relative to our sales levels in certain parts of our workforce and/or
geographies as we reopened our dining rooms after the lifting of mandatory social-distancing regulations related to the
COVID-19 pandemic. During fiscal 2021, we also began to experience certain supply shortages and transportation
delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were
exacerbated by geopolitical unrest. The aggregate impact of these and other geopolitical and macroeconomic factors
contributed to significantly increased commodity and wage inflation and other increased costs. We have also
encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in
obtaining licenses and permits and in the timeline required to complete the overall leasing process with landlords.
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The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events
could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. If these factors significantly impact our cash flow in the future, we may again
implement mitigation actions such as suspending share repurchases, not declaring future dividends, increasing
borrowings under our credit facility or modifying our operating strategies. Any of these measures may have an adverse
impact on our business and materially adversely affect our financial performance.
Cash and Cash Equivalents
Amounts receivable from credit card processors, totaling $19.1 million and $17.5 million at January 3, 2023
and December 28, 2021, 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.
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 from our bakery customers to be minimal
due to the payment histories and general financial condition of our larger bakery accounts. Concentration of credit risk
related to other receivables is limited as this balance is comprised primarily of amounts due from our gift card
distributors, insurance providers and delivery partner.
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 reasonably certain 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furnishings, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 years
10 to 30 years
3 to 15 years (1)
5 years
(1) Other than certain types of restaurant equipment with estimated useful lives that equal or exceed the reasonably
certain lease term, in which case the reasonably certain lease term is utilized.
Gains and losses related to property and equipment disposals are recorded in depreciation and amortization
expenses.
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Impairment of Long-Lived Assets and Lease Termination Expenses
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 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.
Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash
flows are largely independent of the cash flows of other assets and liabilities. Impairment testing is performed at the
individual restaurant asset group level, which is inclusive of property and equipment and lease right-of-use assets.
Recoverability is assessed by comparing the carrying value of the assets to the undiscounted cash flows expected to be
generated by those 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 2022, we recorded $31.4 million of expense primarily related to the impairment of long-lived assets for
three The Cheesecake Factory, one Other FRC and three Other restaurants. In fiscal 2021, we recorded $16.3 million of
expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other
restaurants. In fiscal 2020, we recorded $36.2 million of expense primarily related to the impairment of long-lived assets
for one The Cheesecake Factory, one North Italia, two Other FRC and six Other restaurants, as well as lease termination
costs and accelerated depreciation for one The Cheesecake Factory and seven Other restaurants. These amounts are
recorded in impairment of assets and lease terminations on the consolidated statements of income/(loss).
Intangible Assets
The following table presents components of intangible assets, net (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Indefinite-lived intangible assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade names and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transferable alcoholic beverage licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total indefinite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,451 $
234,077
7,683
243,211
Definite-lived intangible assets, net:
Licensing agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-transferable alcoholic beverage licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total definite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,092
3,221
8,313
251,524 $
1,451
233,767
7,446
242,664
5,690
3,347
9,037
251,701
Goodwill and other indefinite-lived intangible assets are not amortized and are 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, assumptions
related to the COVID-19 pandemic, wage, product and services inflation, competitive environment, macroeconomic and
industry conditions, results of prior impairment tests and share price performance. Any adverse change in these factors
could have a significant impact on the recoverability of these assets and could have a material impact on our
consolidated financial statements. If the qualitative assessment indicates that it is more likely than not that an impairment
exists, then a quantitative assessment is performed. The quantitative assessments require the use of estimates and
assumptions regarding future cash flows and asset fair values. Key assumptions include projected revenue growth and
operating expenses, discount rates, royalty rates, valuation multiples and other factors that could affect fair value or
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otherwise indicate potential impairment. Such assessments could change materially if different estimates and
assumptions were used.
We performed our annual impairment assessment of indefinite-lived intangible assets as of the first day of the
fourth quarters of fiscal 2022 and 2021 and concluded there was no impairment. During the first quarter of fiscal 2020,
we determined it was necessary to perform an interim assessment of our goodwill, trade names and trademarks due to
the decrease in our stock price coupled with the dining room closures related to the COVID-19 pandemic and significant
decline to the equity value of our peers and overall U.S. stock market. Based on the results of this assessment, we
recorded goodwill impairment expense related to the Other FRC, North Italia and Flower Child operating segments of
$33.8 million, $27.7 million and $17.9 million, respectively. In addition, we recorded impairment expense of $101.0
million related to trade names and trademarks. We performed our annual assessment of indefinite-lived intangible assets
as of the first day of our fiscal fourth quarter of fiscal year 2020 and concluded there was no further impairment of these
assets, other than $0.4 million of expense related to 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. We performed our annual impairment
assessment of definite-lived intangible assets as of the first day of the fourth quarters of fiscal 2022 and 2021. We
concluded there was no impairment for fiscal 2022 and recorded $1.3 million of impairment expense in fiscal 2021
related to licensing agreements. During the first quarter of fiscal 2020, we determined it was necessary to perform an
interim assessment of our licensing agreements and we recorded impairment expense of $2.3 million related to licensing
agreements. Amortization expenses related to our definite-lived intangible assets were $0.5 million, $0.7 million and
$0.7 million for fiscal 2022, 2021 and 2020, respectively. Definite-lived intangible assets will be amortized over one to
53 years.
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.
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 five to seven 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. Deferred
and recognized revenue for new minimum guarantees for consumer packaged goods and for new site and development
agreements were immaterial in all periods presented.
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/(loss). We recognized $7.0 million, $6.8 million and $7.6 million of gift card breakage in fiscal years 2022, 2021
and 2020, 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.
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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
2022, we deferred and recognized previously deferred revenue of $27.3 million and $23.6 million, respectively, related
to promotional programs. During fiscal 2021, we deferred and recognized previously deferred revenue of $27.5 million
and $15.2 million, respectively, related to promotional programs. During fiscal 2020, we deferred and recognized
previously deferred revenue of $11.6 million and $11.2 million, respectively, related to promotional programs.
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 if specified co-tenancy requirements are not 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 leases for our restaurant locations, automobiles and certain restaurant
equipment are 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 material lease and those that don’t qualify for the short-term
exclusion to determine its appropriate classification as an operating or finance lease. All of the leases evaluated meet the
criteria for classification as operating leases. For restaurant leases that existed as of the adoption of ASC 842, we
continued to apply our historical practice of excluding executory costs, and only minimum base rent was 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
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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 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. Rent expense is included in other operating costs and expenses in the consolidated statements of
income/(loss).
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, the value
of the operating lease asset and liability and the term over which leasehold improvements for each restaurant are
depreciated. These judgments may produce materially different amounts of operating lease assets and liabilities, rent
expense and interest expense than would be reported if different assumptions were used.
Self-Insurance Liabilities
We retain 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. 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.
Stock-Based Compensation
We maintain stock-based incentive plans under which equity awards may be granted to staff members,
consultants and non-employee directors. 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
$21.0 million, $18.3 million and $16.0 million in fiscal 2022, 2021 and 2020, 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.
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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.
We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and record a valuation
allowance if, based on all available evidence, we determine that some portion of the tax benefit will not be realized. In
evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future
taxable income, tax planning strategies (when applicable) and results of recent operations. If we later determine that we
would be able to realize our deferred tax assets in excess of their net recorded amount, we adjust the deferred tax asset
valuation allowance and reduce income tax expense.
We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit from an
uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the
relevant taxing authorities based solely on its technical merits, taking into account available administrative remedies and
litigation. If this threshold is met, we recognize only the portion of the tax benefit that has a greater than 50% likelihood
of being realized upon ultimate resolution. We record a liability for any portion of the tax benefit that does not meet
these recognition and measurement criteria and we adjust this liability through income tax expense in the period in
which the uncertain tax position is effectively settled, when the statute of limitations expires for the relevant taxing
authority to examine the tax position or when new information becomes available. We recognize interest and penalties
related to uncertain tax positions in income tax expense.
Net Income/(Loss) per Share
Basic net income/(loss) per share is computed by dividing net income/(loss) available to common stockholders
by the weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock
awards. At January 3, 2023, December 28, 2021 and December 29, 2020, 2.5 million shares, 2.1 million shares and 2.0
million shares, respectively, of restricted stock and restricted stock units issued were unvested and, therefore, excluded
from the calculation of basic earnings per share for the fiscal years ended on those dates.
Diluted net income/(loss) per share is computed by dividing net income/(loss) available to common
stockholders by the weighted-average number of common stock equivalents outstanding for the period. Common stock
equivalents for our convertible senior notes due 2026 (“Notes”) are determined by application of the if-converted
method, and common stock equivalents for outstanding stock options and restricted stock are determined by the
application of the treasury stock method.
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Holders of our Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A preferred stock”)
participated in dividends on an as-converted basis when declared on common stock. As a result, our Series A preferred
stock met the definition of a participating security which required us to apply the two-class method to compute both
basic and diluted net income per share. The two-class method is an earnings allocation formula that treats participating
securities as having rights to earnings that would otherwise have been available to common stockholders. In addition, as
our Series A preferred stock was a participating security, we were required to calculate diluted net income per share
under the if-converted method in addition to the two-class method and utilize the most dilutive result. In periods where
there is a net loss, no allocation of undistributed net loss to preferred stockholders was performed as the holders of our
Series A preferred stock were not contractually obligated to participate in our losses.
2022
Fiscal Year
2020
2021
(In thousands, except per share data)
Basic net income/(loss) per common share:
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,123 $ 72,373 $ (253,365)
(13,485)
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,257)
Direct and incremental Series A preferred stock issuance costs . . . . . . . . . . . . .
—
Undistributed earnings allocated to Series A preferred stock . . . . . . . . . . . . . . .
(277,107)
Net income/(loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . .
43,869
Basic weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6.32)
Basic net income/(loss) per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(18,661)
—
(4,581)
49,131
47,529
—
—
—
43,123
49,815
1.03 $
0.87 $
Diluted net income/(loss) per common share:
Net income/(loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . .
Reallocation of undistributed earnings to Series A preferred stock . . . . . . . . . . .
Net income/(loss) available to common stockholders for diluted EPS . . . . . . . .
Basic weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of equity awards (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income/(loss) per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
43,123
—
43,123
49,815
599
50,414
49,131
85
49,216
47,529
981
48,510
0.86 $
1.01 $
(277,107)
—
(277,107)
43,869
—
43,869
(6.32)
(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock
units of 3.3 million, 1.9 million and 4.0 million for fiscal 2022, 2021 and 2020, respectively, were excluded
from the diluted calculation due to their anti-dilutive effect. No shares of common stock equivalents related to
the Notes were included in the diluted calculation due to their anti-dilutive effect.
Comprehensive Income/(Loss)
Comprehensive income/(loss) 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/(loss), unrealized
gains/(losses) on our interest rate swap and translation gains/(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/(loss) 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/(loss) in interest and other expense, net.
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Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity, which is intended to simplify the accounting and measurement of
convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement was
effective for fiscal years beginning after December 15, 2021 and early adoption was permitted. The guidance allowed for
either full retrospective adoption or modified retrospective adoption. We adopted this guidance in the first quarter of
fiscal 2021 utilizing the modified retrospective method and, accordingly, recorded a $4.8 million cumulative adjustment
to retained earnings to reverse previously-recorded beneficial conversion features. As further discussed in Note 10, we
issued certain Notes during the second quarter of fiscal 2021, and the accounting for these instruments was based on the
guidance in ASU 2020-06. Additionally, the impact on diluted earnings per share of the Notes was calculated based on
the if-converted method, as further described in Note 1.
2. 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):
Assets/(Liabilities)
Non-qualified deferred compensation assets . . . . . . . . . . . . . $
Non-qualified deferred compensation liabilities . . . . . . . . . .
Acquisition-related deferred consideration . . . . . . . . . . . . . .
Acquisition-related contingent consideration and
Level 1
January 3, 2023
Level 2
Level 3
78,542 $
(78,286)
—
— $
—
(10,751)
—
—
—
compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(28,565)
Assets/(Liabilities)
Non-qualified deferred compensation assets . . . . . . . . . . . . . $
Non-qualified deferred compensation liabilities . . . . . . . . . .
Acquisition-related deferred consideration . . . . . . . . . . . . . .
Acquisition-related contingent consideration and
compensation liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 1
December 28, 2021
Level 2
Level 3
92,588 $
(92,012)
—
— $
—
(21,642)
—
—
—
—
—
(23,894)
Changes in the fair value of non-qualified deferred compensation assets and liabilities are recognized in interest
and other expense, net in our consolidated statements of income/(loss). Changes in the fair value of the acquisition-
related deferred and contingent consideration and compensation liability are recognized in acquisition-related contingent
consideration, compensation and amortization expenses in our consolidated statements of income/(loss).
74
The following table presents a reconciliation of the beginning and ending amounts of the fair value of the
acquisition-related contingent consideration and compensation liability categorized as Level 3 (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23,894 $
(7,187)
11,858
28,565 $
7,465
—
16,429
23,894
The fair value of the Acquisition-related contingent consideration and compensation liability 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 utilized to determine the fair value of the acquisition-related contingent consideration and compensation liability
was $0 to $276.0 million at January 3, 2023 and $0 to $204.0 million at December 28, 2021. Results could change
materially if different estimates and assumptions were used. During fiscal 2022, the fair value of the contingent
consideration and compensation liability increased by $4.7 million due to an $8.3 million increase in the fair value
primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and estimated
future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per the FRC
acquisition agreement. The increase in the fair value of the contingent consideration and compensation liability during
fiscal 2021 was primarily due to a $15.3 million decrease related to the impact of an amendment to the Acquisition
agreement that, among other things, extended the measurement period through fiscal 2026, as well as to an increase in
fiscal 2021 revenues and estimated future revenues utilized in the fair value calculation, partially offset by amortization.
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.
At both January 3, 2023 and December 28, 2021, we had $345.0 million aggregate principal amount of Notes
outstanding. The estimated fair value of the Notes based on a market approach as of January 3, 2023 and December 28,
2021 was approximately $282.9 million and $309.8 million, respectively, and determined based on the estimated or
actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period. The
decrease in the fair value of the Notes was primarily due to a decline in our stock price from the date of the issuance of
Notes. See Note 10 for further discussion of the Notes.
3. Accounts and Other Receivables
Accounts and other receivables consisted of (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Gift card distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bakery customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landlord construction contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delivery partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37,586 $
16,561
10,529
9,492
7,757
23,586
105,511 $
38,564
18,457
9,193
2,811
6,873
24,606
100,504
75
4. Inventories
Inventories consisted of (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Restaurant food and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bakery finished goods and work in progress (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bakery raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30,783 $
17,250
7,526
55,559 $
27,877
7,951
7,011
42,839
(1) The increase in bakery finished goods and work in progress inventory primarily relates to lower than typical
levels at December 28, 2021 due to challenges ramping back up after the initial COVID-19 shutdown, as well
as higher valuations at January 3, 2023 due to the significant cost inflation experienced during fiscal 2022.
5. Prepaid Expenses
Prepaid expenses consisted of (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Gift card contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,886 $
28,513
48,399 $
18,468
17,978
36,446
(1) The primary cause for the increase in other prepaid expenses is that our January 2023 rent payments fell before
the fiscal 2022 year-end date compared to the January 2022 rent payments which fell after the fiscal 2021 year-
end date.
6. Property and Equipment
Property and equipment consisted of (in thousands):
Fiscal year ended
January 3, 2023
December 28, 2021
Land and related improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furnishings, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant smallwares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,852 $
44,138
1,225,860
584,924
60,861
36,494
36,675
Property and equipment, total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,004,804
(1,258,753)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
746,051 $
15,852
44,049
1,188,848
550,416
54,853
35,285
35,071
1,924,374
(1,182,628)
741,746
Depreciation expenses related to property and equipment for fiscal 2022, 2021 and 2020 were $92.1 million,
$89.4 million and $91.1 million, respectively. Repair and maintenance expenses for fiscal 2022, 2021 and 2020 were
$89.1 million, $77.4 million and $61.8 million, respectively. Net expense for property and equipment disposals was $1.6
million, $1.1 million and $0.6 million, in fiscal 2022, 2021 and 2020, respectively.
76
7. Other Assets
Other assets consisted of (in thousands):
Non-qualified deferred compensation assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred income taxes (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
78,542 $
76,245
8,104
162,891 $
92,588
57,634
7,630
157,852
Fiscal year ended
January 3, 2023 December 28, 2021
(1) See Note 18 for further discussion of our income taxes.
8. Gift Cards
The following tables present information related to gift cards (in thousands):
Gift card liabilities:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Activations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemptions and breakage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
211,182 $
152,368
(143,743)
219,808 $
184,655
144,892
(118,365)
211,182
Fiscal year ended
January 3, 2023 December 28, 2021
Gift card contract assets: (1)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
18,468 $
16,440
(15,022)
19,886 $
17,955
15,852
(15,339)
18,468
Fiscal year ended
January 3, 2023 December 28, 2021
(1)
Included in prepaid expenses on the consolidated balance sheets.
9. Other Accrued Expenses
Other accrued expenses consisted of (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Salaries and wages (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Staff member benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and sales taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
71,872 $
43,402
27,332
24,861
12,713
10,751
40,202
231,133 $
67,649
67,489
28,489
22,944
8,009
11,250
33,357
239,187
(1) The decrease in accrued salaries and wages was primarily due to the timing of payroll disbursements in relation
to the fiscal 2022 versus 2021 year-end dates.
77
10. Long-Term Debt
Credit Facility
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement”
and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates
in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with
revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit.
The Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could
provide for an additional $200 million in revolving loan commitments. Our obligations under the Revolver Facility are
unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Revolver Facility.
During fiscal 2021, we utilized a portion of the net proceeds from our Notes and common share offerings to
reduce the balance on our then-existing credit facility by $150.0 million. On October 6, 2022, we repaid the outstanding
balance under the then-existing credit agreement and borrowed the same amount on the Revolver Facility. As of January
3, 2023, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance
and $31.5 million in standby letters of credit under the Revolver Facility.
Under the Revolver Facility, we are subject to the following financial covenants as of the last day of each fiscal
quarter: (i) a maximum ratio of net adjusted debt to EBITDAR (the “Amended Net Adjusted Leverage Ratio”) of 4.25
and (ii) a minimum ratio of EBITDAR to interest and rent expense (“EBITDAR Ratio”) of 1.90. The Amended Net
Adjusted Leverage Ratio includes a rental expense multiplier of six as compared to eight in the Amended Credit
Agreement. At January 3, 2023, we were in compliance with all covenants in effect at that date.
Borrowings under the Loan Agreement bear interest, at the Company’s election, at a rate equal to either: (i) the
sum of (A) adjusted term SOFR (as defined in the Loan Agreement, the “Term SOFR Rate”) plus (B) a rate variable
based on the Amended Net Adjusted Leverage Ratio, ranging from 1.00% to 1.75%, or (ii) the sum of (A) the highest of
(x) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (y) the
greater of the rate calculated by the Federal Reserve Bank of New York as the federal funds effective rate or the rate that
is published by the Federal Reserve Bank of New York as the overnight bank funding rate, in either case, plus 0.50%,
and (z) the one-month Term SOFR Rate plus 1.00%, plus (B) a rate variable based on the Net Adjusted Leverage Ratio,
ranging from 0.00% to 0.75%. The Company will also pay a fee variable based on the Net Adjusted Leverage Ratio,
ranging from 0.125% to 0.25%, on the daily amount of unused commitments under the Loan Agreement. Letters of
credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the
adjusted SOFR plus other customary fees charged by the issuing bank. We paid certain customary loan origination fees
in conjunction with the Loan Agreement.
We are also subject to customary events of default that, if triggered, could result in acceleration of the maturity
of the Revolver Facility. Subject to certain exceptions, the Revolver Facility also limits 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.
Convertible Senior Notes
On June 15, 2021, we issued $345.0 million aggregate principal amount of convertible senior notes due 2026
(“Notes”). The net proceeds from the sale of the Notes were approximately $334.9 million after deducting issuance costs
related to the Notes.
The Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future
senior, unsecured indebtedness; (ii) senior in right of payment to our existing and future indebtedness that is expressly
subordinated to the Notes; (iii) effectively subordinated to our existing and future secured indebtedness, to the extent of
the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future
indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred
equity, if any, of our subsidiaries. The Notes were issued pursuant to, and are governed by, an indenture (the “Base
Indenture”) between us and a trustee (“Trustee”), dated as of June 15, 2021, as supplemented by a first supplemental
78
indenture (the “Supplemental Indenture,” and the Base Indenture, as supplemented by the Supplemental Indenture, the
“Indenture”), dated as of June 15, 2021, between the Company and the Trustee.
The Notes accrue interest at a rate of 0.375% per annum, payable semi-annually in arrears on June 15 and
December 15 of each year, beginning on December 15, 2021. The Notes will mature on June 15, 2026, unless earlier
repurchased, redeemed or converted. Before February 17, 2026, noteholders will have the right to convert their Notes
only upon the occurrence of certain events. From and after February 17, 2026, noteholders may convert their Notes at
any time at their election until the close of business on the second scheduled trading day immediately before the maturity
date. We will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of
our common stock. However, upon conversion of any Notes, the conversion value, which will be determined over an
“Observation Period” (as defined in the Indenture) consisting of 30 trading days, will be paid in cash up to at least the
principal amount of the Notes being converted. The initial conversion rate is 12.7551 shares of common stock per $1,000
principal amount of Notes, which represents an initial conversion price of approximately $78.40 per share of common
stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain
events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the
Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. At
January 3, 2023, the conversion rate for the Notes was 13.0675 shares of common stock per $1,000 principal amount of
the Notes, which represents a conversion price of approximately $76.53 per share of common stock. In connection with
the cash dividend that was declared by our Board on February 16, 2023, on March 21, 2023 we will adjust the
conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in
accordance with the terms.
The Notes are redeemable, in whole or in part (subject to certain limitations described below), at our option at
any time, and from time to time, on or after June 20, 2024 and on or before the 30th scheduled trading day immediately
before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus
accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per
share of our common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not
consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the
date we send the related redemption notice; and (ii) the trading day immediately before the date we send such notice.
However, we may not redeem less than all of the outstanding Notes unless at least $150.0 million aggregate principal
amount of Notes are outstanding and not called for redemption as of the time we send the related redemption notice. In
addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note,
in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it
is converted after it is called for redemption.
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then,
subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Notes at a cash
repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any,
to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain
business combination transactions involving us and certain de-listing events with respect to our common stock.
The Notes will have customary provisions relating to the occurrence of “Events of Default” (as defined in the
Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the
payment of interest on the Notes, will be subject to a 30-day cure period); (ii) our failure to send certain notices under
the Indenture within specified periods of time; (iii) our failure to comply with certain covenants in the Indenture relating
to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series
of transactions, all or substantially all of our assets and our subsidiaries, taken as a whole, to another person; (iv) a
default by us in our other obligations or agreements under the Indenture or the Notes if such default is not cured or
waived within 60 days after notice is given in accordance with the Indenture; (v) certain defaults by us or any of our
significant subsidiaries with respect to indebtedness for borrowed money of at least $20,000,000; (vi) the rendering of
certain judgments against us or any of our significant subsidiaries for the payment of at least $25,000,000, where such
judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on
which all rights to appeal have been extinguished; and (vii) certain events of bankruptcy, insolvency and reorganization
involving us or any of our significant subsidiaries.
79
If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not
solely with respect to a significant subsidiary of ours) occurs, then the principal amount of, and all accrued and unpaid
interest on, all of the Notes then outstanding will immediately become due and payable without any further action or
notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to us, or
noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to us and the Trustee,
may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become
due and payable immediately. However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy
for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Indenture
consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a
specified rate per annum not exceeding 0.50% on the principal amount of the Notes.
As of January 3, 2023, the Notes had a gross principal balance of $345.0 million and a balance of $338.0
million, net of unamortized issuance costs of $7.0 million. The unamortized balance of issuance costs was recorded as a
contra-liability and netted with long-term debt on our condensed consolidated balance sheets. Total amortization expense
was $2.0 million and $1.1 million in fiscal 2022 and fiscal 2021, respectively and was included in interest expense in the
consolidated statements of income/(loss). The effective interest rate for the Notes was 0.96% as of January 3, 2023.
11. Leases
Components of lease expense were as follows (in thousands):
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140,351 $ 131,834 $
81,585
116
73,909
283
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
222,052 $ 206,026 $
2022
Fiscal year
2021
2020
129,431
58,863
414
188,708
Supplemental information related to leases (in thousands, except percentages):
Fiscal Year
2022
2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
149,624 $
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 . . . . . . . . . . . . . . . . . . . . . . .
86,187
15.2
5.0 %
138,715
50,953
15.6
5.1 %
As of January 3, 2023, the maturities of our operating lease liabilities were as follows (in thousands):
142,798
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
129,087
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,126
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136,831
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134,632
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,339,573
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,021,047
Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(648,452)
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,372,595
Operating lease liabilities include $845.1 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $169.1 million of legally binding minimum lease payments for leases signed but
not yet commenced.
80
12. Derivative
We terminated our interest rate swap agreement, which was designated as a cash flow hedge, in fiscal 2021.
This interest rate swap, which would have matured on April 1, 2025, was established to manage our exposure to interest
rate movements on our credit facility. The interest rate swap entitled us to receive a variable rate of interest based on the
one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802%. The notional amount of the swap
agreement was $280.0 million through March 31, 2023 and $140.0 million from April 1, 2023 through April 1, 2025.
The differences between the variable LIBO rate and the interest rate swap rate were settled monthly. Prior to
termination, the interest rate swap was determined to be an effective hedging agreement.
For derivatives designated as a cash flow hedge, changes in fair value are initially included as a component of
accumulated other comprehensive loss (“AOCL”) and subsequently reclassified to earnings as interest expense when the
hedged forecasted transaction occurs. Any ineffective portion of changes in the fair value are immediately recognized in
earnings as interest expense. We classify cash inflows and outflows from derivatives within operating activities on the
consolidated statements of cash flows. No gains or losses representing amounts excluded from the assessment of
effectiveness were recognized in earnings in fiscal 2021 or fiscal 2020.
The following table summarizes the changes in AOCL, net of tax, related to the interest rate swap (in
thousands):
Fiscal year ended
December 28, 2021 December 29, 2020
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3,464) $
2,514
950
3,464
— $
—
(4,612)
1,148
(3,464)
(3,464)
We classified this interest rate swap within Level 2 of the valuation hierarchy described in Note 3. Our
counterparty under this arrangement provided monthly statements of the market values of this instrument based on
significant inputs that were observable or could be derived principally from, or corroborated by, observable market data
for substantially the full term of the asset or liability. The impact on the derivative liability for our and the counterparty’s
non-performance risk to the derivative trade was considered when measuring the fair value of derivative liability.
13. Other Noncurrent Liabilities
Other noncurrent liabilities consisted of (in thousands):
Fiscal year ended
January 3, 2023 December 28, 2021
Non-qualified deferred compensation liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred consideration (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration and compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
78,286 $
—
28,565
18,159
125,010 $
92,012
10,392
23,894
21,102
147,400
(1)
The decrease during fiscal 2022 represents payment of deferred consideration per the Acquisition agreement.
14. Commitments and Contingencies
Purchase obligations, which include inventory purchases, equipment purchases, information technology and
other miscellaneous commitments, were $129.9 million and $139.5 million at January 3, 2023 and December 28, 2021,
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
81
construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were
$252.4 million and $151.6 million at January 3, 2023 and December 28, 2021, respectively.
The Acquisition agreement included a deferred consideration provision, of which the remaining balance of
$11.3 million is due in fiscal 2023. The Acquisition agreement also included a contingent consideration provision of
which the remainder is payable annually from 2023 through 2027 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. The liability for this contingent consideration provision was $28.6 million at January 3, 2023. See Note 2
for discussion of the fair value measurement of this liability. 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.
As credit guarantees to insurers, we had $31.5 million and $29.9 million at January 3, 2023 and December 28,
2021, 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
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. The total
accrued liability for our self-insured plans was $71.9 million and $67.6 million at January 3, 2023 and December 28,
2021, respectively.
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. On November 10, 2022, the parties participated in voluntary mediation and reached a
tentative settlement on the wage citation. The settlement is subject to documentation and final agency approval. We have
reserved an immaterial amount for settlement purposes.
On June 22, 2018, the Internal Revenue Service issued a Notice of Deficiency in which they disallowed a
portion 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 assigned docket
number 18150-18 to our case. On April 29, 2022, the parties filed a Settlement Stipulation and a Proposed Stipulated
Decision (the “Decision”) with the tax court stipulating to the amount of income tax deficiency. On May 11, 2022, the
court entered the Decision in accordance with the stipulation of the parties. We have recorded an immaterial amount in
connection with the Decision.
Within the ordinary course of our business, we are subject to private lawsuits, government audits and
investigations, 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, investigations, 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.
82
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
$3.3 million, excluding accrued potential bonuses of $2.0 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 January 3, 2023. 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 and Series A Convertible Preferred Stock
Common Stock Issuance
On June 15, 2021, we issued 3.125 million shares of our common stock for $175.0 million. In connection with
the issuance, we incurred direct and incremental costs of $8.0 million.
Common Stock - Dividends and Share Repurchases
To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our then-existing
credit agreement, in March 2020, our Board suspended the quarterly dividend on our common stock. Prior to this
suspension, our Board declared cash dividends of $0.36 per common share for the first quarter of fiscal 2020. Our Board
resumed our quarterly dividend in the second quarter of fiscal 2022, declaring $0.81 per common share during fiscal
2022. 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 Loan Agreement and applicable law, and such other factors that
the Board considers relevant. (See Note 10 for further discussion of our long-term debt.)
On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million
shares to 61.0 million shares. Under this authorization, we have cumulatively repurchased 55.1 million shares at a total
cost of $1,765.6 million through January 3, 2023. During fiscal 2022, 2021 and 2020, we repurchased 2.0 million, 0.1
million and 0.1 million shares of our common stock at a cost of $63.1 million, $5.8 million and $3.6 million,
respectively. The increase from fiscal 2021 to 2022 is primarily due to the resumption of our share repurchase program
in the second quarter of fiscal 2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our
business and in conjunction with the terms of our Loan Agreement. Our objectives with regard to share repurchases have
been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our
earnings per share growth. Repurchased common stock is reflected as a reduction of stockholders’ equity in treasury
stock.
Our share repurchase program 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. Share repurchases may be made from time
to time in open market purchases, privately-negotiated transactions, accelerated share repurchase programs, issuer self-
tender offers or otherwise. Future decisions to repurchase shares are at the discretion of the Board and are 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 covenants under our credit facility that limit share repurchases based
on a defined ratio. (See Note 10 for further discussion of our long-term debt.)
83
Series A Convertible Preferred Stock
On April 20, 2020, we issued 200,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share
(the “Series A preferred stock”) for an aggregate purchase price of $200 million, or $1,000 per share. In connection with
the issuance, we incurred direct and incremental costs of $10.3 million, including financial advisory fees, closing costs,
legal expenses, a commitment fee and other offering-related expenses. These direct and incremental costs reduced the
Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020,
the first measurement date. Upon adoption of ASU 2020-06 in the first quarter of fiscal 2021, we recorded a $4.8 million
cumulative adjustment to retained earnings to reverse beneficial conversion features recorded during fiscal 2020.
The Series A preferred stock ranked senior to our common stock with respect to dividends and distributions on
liquidation, winding-up and dissolution upon which each share of Series A preferred stock would be entitled to receive
an amount per share equal to the greater of (i) the purchase price (without giving effect to the commitment fee), plus all
accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred
stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.
On June 15, 2021, we paid $443.8 million in connection with the cash-settled conversion of 150,000 shares of
our outstanding Series A preferred stock (effected through a repurchase agreement), which was recognized through
additional paid in capital. We also share-settled the conversion of the remaining 50,000 shares of our outstanding Series
A convertible preferred stock into 2,400,864 shares of our common stock. These are both based on the then current
Liquidation Preference per share of $1,067.42 and conversion price of $22.23.
During the first quarter of fiscal 2021, we declared a cash dividend of $5.1 million, or $25.35 per share, on the
Series A preferred stock. During the second quarter of fiscal 2021, $13.6 million in payments were made in connection
with the conversion of the Series A preferred stock, consisting of $3.9 million, or $19.72 per share, of accrued dividends
and $9.7 million of an inducement, which is also deemed to be a dividend.
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.
On March 24, 2022, our Board approved an amendment to our The Cheesecake Factory Incorporated Stock
Incentive Plan to increase the number of shares of common stock reserved for grant under the plan to 19.8 million shares
from 17.5 million shares. This amendment was approved by our stockholders at our annual meeting held on May 23,
2022. Approximately 4.7 million of these shares were available for grant as of January 3, 2023.
Stock options generally vest at 20% per year and expire eight to ten 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.
84
The following table presents information related to stock-based compensation, net of forfeitures (in thousands):
2022
Fiscal Year
2021
2020
Labor expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,753
309
13,288
21,350
5,245
Total stock-based compensation, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,399 $ 17,342 $ 16,105
8,856 $
311
13,821
22,988
5,646
9,590 $
321
14,515
24,426
6,026
Capitalized stock-based compensation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
226 $
194 $
207
(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.
Stock Options
We did not issue any stock options during fiscal 2022 or 2021. The weighted-average fair value at the grant
date for options issued during fiscal 2020 was $6.66 per share. The fair value of options issued was estimated utilizing
the Black-Scholes valuation model with the following weighted-average assumptions: (a) an expected option term of 6.9
years, (b) expected stock price volatility of 25.7%, (c) a risk-free interest rate of 1.5% and (d) a dividend yield on our
stock of 3.6%.
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 2022 was as follows:
Weighted-
Average
Exercise Price
Shares
(In thousands)
Outstanding at beginning of year . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or cancelled . . . . . . . . . . . . . . . . . . . . . .
Outstanding at end of year . . . . . . . . . . . . . . . . . .
1,716 $
— $
(2) $
(29) $
1,685 $
(Per share)
46.14
—
40.16
48.19
46.11
Weighted-
Average
Remaining
Contractual
Term
(In years)
Aggregate
Intrinsic Value (1)
5.1 $
(In thousands)
0
4.2 $
0
0
Exercisable at end of year . . . . . . . . . . . . . . . . . .
1,119 $
48.10
3.2 $
(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.
85
The total intrinsic value of options exercised during fiscal 2022, 2021 and 2020 was $4.9 million, $7.1 million
and $0.1 million, respectively. As of January 3, 2023, total unrecognized stock-based compensation expense related to
unvested stock options was $2.5 million, which we expect to recognize over a weighted-average period of approximately
1.7 years.
Restricted Shares and Restricted Share Units
Restricted share and restricted share unit activity during fiscal 2022 was as follows:
Weighted-
Average
Outstanding at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
(In thousands)
Fair Value
(Per share)
44.82
36.84
45.35
41.53
41.93
2,123 $
941 $
(407) $
(145) $
2,512 $
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 2022, 2021 and
2020 was $36.84, $49.57 and $37.94, respectively. The fair value of shares that vested during fiscal 2022, 2021 and
2020 was $18.5 million, $15.4 million and $15.6 million, respectively. As of January 3, 2023, total unrecognized stock-
based compensation expense related to unvested restricted shares and restricted share units was $50.2 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 2022, 2021 and 2020 was $2.1 million, $2.1
million and $1.8 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
2022, 2021 and 2020 was $1.4 million, $1.2 million and $1.3 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. 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/(loss).
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
86
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 $14.0 million and $15.3 million as of January 3, 2023 and December
28, 2021, 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):
2022
Fiscal Year
2021
2020
Income/(Loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,892 $ 71,620 $ (356,036)
Income tax provision/(benefit):
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,520 $ 15,746 $ (38,414)
4,895
2,971
4,350
(35,443)
20,096
8,415
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,733)
(913)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,646)
Total benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (10,231) $
The following reconciles the U.S. federal statutory rate to the effective tax rate:
(20,434)
(415)
(20,849)
(52,607)
(14,621)
(67,228)
(753) $ (102,671)
2022
Fiscal Year
2021
2020
U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and district income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.9
Credit for FICA taxes paid on tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66.4)
Other credits and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10.7)
0.0
Impact of net operating loss carryback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.7
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2.3)
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.8
Non-deductible executive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31.1) %
21.0 % 21.0 % 21.0 %
4.2
(24.2)
(4.2)
(6.3)
(2.9)
0.0
10.3
0.3
0.7
(1.1) %
2.6
2.1
0.3
3.4
0.6
(0.4)
0.0
(0.1)
(0.7)
28.8 %
On March 27, 2020, the CARES Act was signed into law. Intended to provide economic relief to those
impacted by the COVID-19 pandemic, the CARES Act includes provisions allowing for the carryback of net operating
losses generated in fiscal years 2018, 2019 and 2020 and technical amendments regarding the expensing of qualified
improvement property (“QIP”). During fiscal 2021, we filed a refund claim in the amount of $18.4 million for our fiscal
2020 net operating loss carryback, which was received during fiscal 2022. In January 2022, we filed amended returns for
tax years 2018 and 2019 requesting total refunds of $21.3 million for credits released by our fiscal 2020 loss carryback.
These refunds have not yet been received. The effects of these claims were primarily included in our fiscal 2020
provision for income taxes, using estimates based on the best information available at the time we prepared our fiscal
2020 consolidated financial statements, and were adjusted to as-filed actual amounts in our fiscal 2021 provision for
income taxes. These adjustments had a minor effect on our fiscal 2021 provision for income taxes. In our fiscal 2021
provision for income taxes, we also recorded the effects of accelerating the remittance of certain FICA taxes that had
been deferred pursuant to the CARES Act. The accelerated remittance increased the value of our fiscal 2020 loss
carryback by $4.3 million. We made no further adjustments in our fiscal 2022 provision for income taxes relating to
these amounts.
87
Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):
January 3, 2023
December 28, 2021
Deferred tax assets:
Staff member benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and foreign net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
31,325 $
14,374
323,094
35,928
57,710
21,331
10,769
2,435
604
497,570
(1,223)
496,347 $
36,295
12,897
315,403
33,075
34,871
19,103
10,122
3,005
1,063
465,834
(1,036)
464,798
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(113,565) $
(8,151)
(8,399)
(5,285)
(283,921)
(781)
(420,102) $
(109,019)
(7,312)
(7,802)
(5,087)
(277,220)
(724)
(407,164)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
76,245 $
57,634
At January 3, 2023 and December 28, 2021, we had $56.5 million and $33.6 million, respectively of U.S.
federal credit carryforwards which begin to expire in 2038 and $1.6 million and $1.7 million, respectively, of state hiring
and investment credits which begin to expire in 2024. At January 3, 2023 and December 28, 2021, we had $2.5 million
and $2.7 million, respectively of foreign net operating loss carryforwards which begin to expire in 2038 and $46.6
million and $64.6 million, respectively, of state net operating loss carryforwards with statutory carryforward periods
ranging from 5 years to no expiration period. The earliest year that a material state net operating loss will expire is 2032.
We assess the available evidence to estimate if these carryforwards and our other deferred tax assets will be
realized. We concluded that a substantial portion of our deferred tax assets are more likely than not to be realized by
reversals of existing taxable temporary differences and that forecasted future taxable income, exclusive of reversing
temporary differences, will result in realization of a substantial portion of the remainder. We did not need to consider tax
planning strategies in this analysis. Based on this evaluation, at January 3, 2023 and December 28, 2021 we carried a
valuation allowance of $1.2 million and $1.0 million, 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 2015.
88
At January 3, 2023, we had a reserve of $3.8 million for uncertain tax positions, all of which would favorably
impact our effective income tax rate if resolved in our favor. A reconciliation of the beginning and ending amount of our
uncertain tax positions is as follows (in thousands):
2022
Fiscal Year
2021
2020
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions related to current period tax positions . . . . . . . . . . . . . . . . . . . . . . . .
Reductions related to settlements with taxing authorities . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,799 $
227
(54)
(1,185)
3,787 $
655 $
4,157
(13)
—
4,799 $
704
—
(49)
—
655
At January 3, 2023 and December 28, 2021, we had $2.2 million and $3.6 million, respectively of accrued
interest and penalties related to uncertain tax positions. None of the balance of uncertain tax positions at January 3, 2023
related 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, the businesses for which our management reviews discrete financial information for
decision-making purposes, are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands,
our bakery division and Grand Lux Cafe. 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 (Flower Child, our bakery division and Grand Lux
Cafe) along with our businesses that don’t qualify as operating segments are combined in Other. Unallocated corporate
expenses, capital expenditures and assets are also combined in Other.
89
Segment information is presented below (in thousands):
Revenues:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income/(loss) from operations:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization :
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets and lease termination expenses:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preopening costs:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2022
2,528,043
228,622
237,552
308,939
3,303,156
220,765
13,934
23,577
(219,341)
38,935
66,539
5,713
6,231
13,897
92,380
19,701
—
3,909
7,777
31,387
9,525
4,305
1,361
1,638
16,829
65,996
14,818
18,895
12,755
112,464
1,625,073
306,642
301,618
541,887
2,775,220
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Fiscal Year
2021
2,293,225
171,901
182,175
280,239
2,927,540
242,599
8,624
16,323
(185,228)
82,318
65,987
4,078
4,802
14,787
89,654
11,904
—
1,305
4,930
18,139
4,868
4,510
3,188
1,145
13,711
31,832
12,539
13,524
9,048
66,943
1,653,161
270,029
276,369
598,566
2,798,125
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2020
1,585,008
102,585
96,856
198,776
1,983,225
45,540
(77,371)
(77,026)
(238,580)
(347,437)
67,514
3,608
4,090
16,203
91,415
3,261
71,782
73,049
71,241
219,333
4,206
2,578
1,324
2,348
10,456
33,154
8,436
3,754
4,985
50,329
1,671,733
270,218
308,866
496,237
2,747,054
(1)
Fiscal 2022, 2021 and fiscal 2020 include $13.4 million, $19.5 million and $(1.2) million, respectively, of
acquisition-related expenses. These amounts were recorded in acquisition-related costs and acquisition-related
contingent consideration, compensation and amortization expenses in the consolidated statements of
income/(loss).
20. Subsequent Events
On February 16, 2023, our Board declared a quarterly cash dividend of $0.27 per share to be paid on March 21,
2023 to the stockholders of record of each share of our common stock at the close of business on March 8, 2023.
90
EXHIBIT INDEX
Exhibit
No.
2.1
2.2
Form of Reorganization Agreement(P)
Item
File Number
33-479336
Form
Amend.
No. 1
to
Form S-1
Incorporated by
Reference from
Exhibit Number
2.1
Filed with
SEC
8/17/92
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#
10-Q
000-20574
2.1
11/8/19
2.3
First Amendment to Option Exercise
10-Q
000-20574
2.2
11/8/19
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#
2.4
Membership Interest Purchase Agreement,
10-Q
000-20574
2.3
11/8/19
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#†
2.5
First Amendment to Membership Interest
10-Q
000-20574
2.4
11/8/19
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#
Second Amendment to Membership Interest
Purchase Agreement, dated as of June 1,
2021, by and among The Cheesecake Factory
Restaurants, Inc., Fox Restaurant Concepts
LLC, and SWF Posse LLC, as Seller’s
representative#†
Third Amendment to Membership Interest
Purchase Agreement, dated as of January 7,
2022, by and among The Cheesecake Factory
Restaurants, Inc., Fox Restaurant Concepts
LLC, and SWF Posse LLC, as Seller’s
representative#†
2.6
2.7
10-Q
000-20574
2.1
8/4/21
10-K
000-20574
2.7
2/22/22
3.1
Restated Certificate of Incorporation of The
10-Q
000-20574
3.2
8/6/18
Cheesecake Factory Incorporated
91
Exhibit
No.
3.2
Item
Bylaws of The Cheesecake Factory
Incorporated (Amended and Restated on
October 26, 2022)
3.3
Certificate of Elimination of Series A Junior
Participating Cumulative Preferred Stock of
The Cheesecake Factory Incorporated
Form
8-K
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
3.1
Filed with
SEC
11/01/22
10-Q
000-20574
3.1
8/6/18
3.4
Certificate of Designations of The
8-K
000-20574
3.1
4/20/20
Cheesecake Factory Incorporated, dated
April 20, 2020
4.1
Description of The Cheesecake Factory
10-K
000-20574
4.1
3/11/20
Incorporated’s Securities Registered Pursuant
to Section 12 of the Securities Exchange Act
4.2
4.3
Indenture, dated as of June 15, 2021, between
The Cheesecake Factory Incorporated and
U.S. Bank National Association, as trustee
First Supplemental Indenture, dated as of
June 15, 2021, between The Cheesecake
Factory Incorporated and U.S. Bank National
Association, as trustee
8-K
000-20574
4.1
6/15/21
8-K
000-20574
4.2
6/15/21
4.4
Form of certificate representing the 0.375%
8-K
000-20574
4.2
6/15/21
Convertible Senior Notes due 2026 (included
as Exhibit A to Exhibit 4.3)
10.1.1 Employment Agreement, effective as of
April 1, 2017, between The Cheesecake
Factory Incorporated and David M. Overton*
8-K
000-20574
99.2
2/22/17
10.1.2 First Amendment to Employment
8-K
000-20574
99.2
2/21/18
Agreement, effective as of April 1, 2018,
between The Cheesecake Factory
Incorporated and David M. Overton*
10.2
10.3
10.4
Employment Agreement, effective as of
March 3, 2016, between The Cheesecake
Factory Incorporated and David M. Gordon*
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*
10-K
000-20574
10.6
3/2/17
8-K
000-25074
99.1
6/13/17
10-Q
000-25074
10.10
5/11/18
10.5
Employment Agreement, effective as of
10-K
000-20574
10.8
3/4/19
February 13, 2019, between The Cheesecake
Factory Incorporated and Keith T. Carango*
92
Exhibit
No.
10.6.1 Amended and Restated The Cheesecake
Factory Incorporated Executive Savings
Plan*
Item
Form
10-K
File Number
000-25074
Incorporated by
Reference from
Exhibit Number
10.20
Filed with
SEC
3/2/17
10.6.2 First Amendment to The Cheesecake Factory
10-K
000-25074
10.11.1
2/28/18
Incorporated Executive Savings Plan as
amended and restated November 7, 2016*
10.7.1 Form of Indemnification Agreement*
8-K
000-25074
10.7.2 Indemnification Agreement, dates as of April
10-Q
000-25074
99.1
10.2
12/14/07
6/22/20
20, 2020, between The Cheesecake Factory
Incorporated and Paul D. Ginsberg*
10.8.1 Inducement Agreement dated as of July 27,
8-K
000-25074
99.3
8/2/05
2005
10.8.2 First Amendment to Inducement Agreement
10-K
000-25074
10.36
2/23/11
dated as of March 1, 2010
10.8.3 Second Amendment to Inducement
Agreement dated as of May 7, 2015
10-K
000-25704
10.24
3/2/17
10.9.1 The Cheesecake Factory Incorporated 2010
DEF 14A
000-20574
Appendix A
4/21/11
Stock Incentive Plan as amended April 7,
2011*
10.9.2 The Cheesecake Factory Incorporated 2010
DEF 14A
000-20574
Appendix A
04/19/13
Stock Incentive Plan as amended effective as
of February 27, 2013*
10.9.3 The Cheesecake Factory Incorporated 2010
DEF 14A
000-20574
Appendix A
4/17/14
Stock Incentive Plan as amended April 3,
2014*
10.9.4 The Cheesecake Factory Incorporated 2010
DEF 14A
000-20574
Appendix A
4/17/15
Stock Incentive Plan as amended May 28,
2015*
10.9.5 The Cheesecake Factory Incorporated 2010
DEF 14A
000-20574
Appendix A
4/25/17
Stock Incentive Plan as amended April 5,
2017*
10.10 Form of Grant Agreement for Executive
10-Q
000-20574
Officers under 2010 Stock Incentive Plan*
10.11 Form of Grant Agreement for Executive
10-Q
000-20574
10.1
10.1
11/4/10
8/10/12
Officers under the 2010 Stock Incentive Plan,
for equity grants made after August 2, 2012*
10.12 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*
8-K
000-20574
99.1
3/7/14
93
Exhibit
No.
10.13 Form of Notice of Grant and Stock Option
Item
Agreement and/or Stock Unit Agreement
under the 2010 Stock Incentive Plan, for
equity grants made after March 3, 2016*
10.14.1 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*
10.14.2 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*
10.14.3 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*
10.14.4 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*
10.14.5 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
8-K
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
99.2
Filed with
SEC
3/4/16
10-K
000-25074
10.24.1
2/28/18
10-K
000-25074
10.24.2
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
10.14.6 Form of Standard Notice of Grant and
10-K
000-25074
10.24.6
2/28/18
Restricted Share Agreement I under the 2010
Stock Incentive Plan, for equity grants made
after February 15, 2018*
10.14.7 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*
10.14.8 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*
8-K
000-20574
99.3
2/21/18
10-Q
000-20574
10.2
5/6/19
10.15.1 The Cheesecake Factory Incorporated Stock
8-K
000-20574
10.1
6/5/19
Incentive Plan*
94
Exhibit
No.
10.15.2 The Cheesecake Factory Incorporated Stock
Incentive Plan, as amended March 24, 2022*
Item
Form
8-K
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
10.1
Filed with
SEC
5/23/22
10.15.3 Form of Notice of Grant and Stock Unit
10-Q
000-20574
10.1
6/22/20
Grant Agreement for Directors under The
Cheesecake Factory Incorporated Stock
Incentive Plan*
10.15.4 Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for Executive Officers under The
Cheesecake Factory Incorporated Stock
Incentive Plan*
10.15.5 Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement under The Cheesecake Factory
Incorporated Stock Incentive Plan*
10.15.6 Form of Notice of Grant and Restricted Share
Agreement for MEP I under The Cheesecake
Factory Incorporated Stock Incentive Plan*
10.16 2015 Amended and Restated Performance
Incentive Plan (Amended and Restated on
September 2, 2020)*
10-K
000-20574
10.15.3
2/22/22
10-K
000-20574
10.15.4
2/22/22
10-K
000-20574
10.15.5
2/22/22
8-K
000-20574
10.1
9/8/20
10.17.1 Third Amended and Restated Loan
10-Q
000-20574
10.1
11/8/19
Agreement with JPMorgan Chase Bank,
National Association dated as of July 30,
2019
10.17.2 First Amendment, dated as of May 1, 2020,
8-K
000-20574
10.1
5/5/20
to the Third Amended and Restated Loan
Agreement, dated as of July 30, 2019,
between The Cheesecake Factory
Incorporated, JPMorgan Chase Bank, N.A.,
as administrative agent, and the lenders from
time to time part thereto
10.17.3 Second Amendment to the Third Amended
and Restated Loan Agreement, dated as of
March 30, 2021, among The Cheesecake
Factory Incorporated, JPMorgan Chase Bank,
N.A., as administrative agent, and the lenders
party thereto
10.18.1 Registration Rights Agreement, dated April
20, 2020, by and between The Cheesecake
Factory Incorporated and RC Cake Holdings
LLC
8-K
000-20574
10.1
4/5/21
8-K
000-20574
10.2
4/20/20
95
Item
Exhibit
No.
10.19 Form of Notice of Grant and Stock Option
Agreement and/or Restricted Share
Agreement for Executive Officers under The
Cheesecake Factory Incorporated Stock
Incentive Plan
10.20 Repurchase Agreement, dated as of June 10,
2021 among The Cheesecake Factory
Incorporated and RC Cake 1 LLC, RC Cake
2 LLC and RC Cake 3 LLC
Form
10-Q
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
10.02
Filed with
SEC
5/3/21
8-K
000-20574
10.1
6/15/21
10.21
Conversion Agreement, dated as of June 10,
8-K
000-20574
10.2
6/15/21
2021 among The Cheesecake Factory
Incorporated and RC Cake Holdings LLC
10.22 Fourth Amended and Restated Loan
10-Q
000-20574
10.1
11/02/22
Agreement, with JPMorgan Chase Bank,
National Association dated as of October 6,
2022
21.1
List of Subsidiaries
23.1
Consent of Independent Registered Public
Accounting Firm — KPMG LLP
—
—
31.1
Rule 13a-14(a)/15d-14(a) Certification of the
—
Principal Executive Officer
31.2
Rule 13a-14(a)/15d-14(a) Certification of the
—
Principal Financial Officer
32.1
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
—
—
—
—
—
32.2
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
—
—
—
—
—
—
Filed
herewith
Filed
herewith
Filed
herewith
Filed
herewith
Filed
herewith
Filed
herewith
96
Exhibit
No.
Item
Form
File Number
Incorporated by
Reference from
Exhibit Number
101.1 The following materials from The
—
—
—
Cheesecake Factory Incorporated’s Annual
Report on Form 10-K for the year ended
January 3, 2023, 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 January 3, 2023, formatted
in iXBRL (included with Exhibit 101.1)
Filed with
SEC
Filed
herewith
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.
97
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 27th day of
February, 2023.
SIGNATURES
THE CHEESECAKE FACTORY INCORPORATED
By:
/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
98
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.
99
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)
February 27, 2023
February 27, 2023
/s/ CHERYL M. SLOMANN
Cheryl M. Slomann
Senior Vice President, Controller and
February 27, 2023
Chief Accounting Officer
(Principal Accounting Officer)
/s/ EDIE A. AMES
Edie A. Ames
Director
February 27, 2023
/s/ ALEXANDER L. CAPPELLO
Alexander L. Cappello
Director
/s/ KHANH COLLINS
Khanh Collins
/s/ ADAM S. GORDON
Adam S. Gordon
Director
Director
/s/ JEROME I. KRANSDORF
Jerome I. Kransdorf
Director
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
/s/ JANICE MEYER
Janice Meyer
Director
February 27, 2023
/s/ LAURENCE B. MINDEL
Laurence B. Mindel
Director
/s/ DAVID B. PITTAWAY
David B. Pittaway
Director
February 27, 2023
February 27, 2023
/s/ HERBERT SIMON
Herbert Simon
Director
February 27, 2023
100
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
We consent to the incorporation by reference in the registration statements (Nos. 333-118757, 333-167298, 333-176115,
333-190110, 333-198042, 333-206278, 333-219789 and 333-232949) on Form S-8 and (Nos. 333-239361 and 333-
256963) on Form S-3 of our report dated February 27, 2023, with respect to the consolidated financial statements of The
Cheesecake Factory Incorporated and the effectiveness of internal control over financial reporting.
EXHIBIT 23.1
/s/ KPMG LLP
Los Angeles, California
February 27, 2023
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:
I have reviewed this annual report on Form 10-K of The Cheesecake Factory Incorporated;
1.
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.
February 27, 2023
/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
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 31.2
I, Matthew E. Clark, certify that:
I have reviewed this annual report on Form 10-K of The Cheesecake Factory Incorporated;
1.
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.
February 27, 2023
/s/ MATTHEW E. CLARK
Matthew E. Clark
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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
EXHIBIT 32.1
In connection with the Annual Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-K
for the period ended January 3, 2023 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)
(2)
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.
February 27, 2023
/s/ DAVID OVERTON
David Overton
Chairman of the Board and Chief Executive Officer
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
EXHIBIT 32.2
In connection with the Annual Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-K
for the period ended January 3, 2023 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)
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.
February 27, 2023
/s/ MATTHEW E. CLARK
Matthew E. Clark
Executive Vice President and Chief Financial Officer
DIRECTORS AND OFFICERS
Board of Directors
David Overton
Chairman of the Board and Chief
Executive O cer
The Cheesecake Factory Incorporated
Keith T. Carango
President – Bakery Division
Scarlett May
Executive Vice President, Secretary and
General Counsel
Edie A. Ames
Chief Executive O cer
Tastes on the Fly Airport Restaurant Group
SHAREHOLDER INFORMATION
Independent Accountants
Alexander L. Cappello
Chairman and Chief Executive O cer
Cappello Global, LLC
KPMG LLP
Los Angeles, California
Khanh Collins
Chief Operating O cer
Sustainable Restaurant Group
Adam S. Gordon
Managing Director
Gordon Property Group
Jerome I. Kransdorf
President, Retired
JaK Direct
Transfer Agent, Registrar and Dividend
Payments
Computershare Shareholder Services
P.O. Box 505005
Louisville, KY 40233-5005
(800) 962-4284
Janice L. Meyer
Co-Founder and Managing Partner
Rellevant Partners
Laurence B. Mindel
Managing Partner
Poggio Trattoria
David B. Pittaway
Vice Chairman, Senior Managing Director,
Senior Vice President, Secretary and Chief
Compliance O cer
Castle Harlan, Inc.
Inquiries
Communications regarding lost certificates
and name and address changes should be
directed to our Transfer Agent. Other investor
inquiries should be directed to:
Etienne Marcus
Vice President, Finance and Investor Relations
The Cheesecake Factory Incorporated
26901 Malibu Hills Road
Calabasas Hills, CA 91301
(818) 871-3000
Herbert Simon
Chairman Emeritus
Simon Property Group, Inc.
Executive O cers
David Overton
Chairman of the Board and
Chief Executive O cer
David M. Gordon
President
Matthew E. Clark
Executive Vice President and
Chief Financial O cer
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
The content of our websites and Corporate Social
Responsibility Reports are not incorporated by reference
into this Annual Report.
26901 MALIBU HILLS RD
CALABASAS HILLS, CA 91301
WWW.THECHEESECAKEFACTORY.COM