2023 ANNUAL REPORT
To Our Shareholders,
I am pleased to share that our operational and financial performance in 2023 demonstrated significant progress towards
our goal of returning to generate our historically consistent results and enhancing our profitability. Thanks to the
unwavering hard work and dedication of our teams we emerged from the volatility competitively well-positioned to
capitalize on the continued stabilization of the broader economic environment and achieved our key financial objectives
for 2023. Guided by our continuous pursuit of excellence we were able to build on our positive momentum through the
year to deliver comparable sales growth, margin expansion and record annual revenue.
This past year marked a significant milestone in our history as we celebrated the 45th anniversary of the opening of our
first restaurant in Beverly Hills in 1978. This achievement not only reflects our rich history, enduring legacy and the
timeless appeal of our namesake brand, but also our proven ability to continuously evolve and meet the changing tastes
and expectations of our guests. As a leader in experiential dining we are relentlessly focused on menu innovation as a key
point of differentiation as we believe this contributes to our broad consumer appeal and high degree of relevancy. This,
coupled with our commitment to deliver exceptional food quality, service and hospitality to provide guests with delicious,
memorable dining experiences has continued to distinguish The Cheesecake Factory as one of the most differentiated
restaurant concepts in the casual dining industry.
Our success is undeniably linked to our incredible team of over 47,000 staff members who enable us to deliver distinct,
high quality dining experiences for our guests every day. Our people are the driving force of our company, and their
passion and commitment to excellence have been the cornerstone of our achievements. We have continued to invest in our
people, providing industry-leading training and development to foster a workplace culture that has earned us a place on
Fortune magazine’s “100 Best Companies to Work For” list for the eleventh consecutive year and Fortune’s “Best
Workplaces for Millennials” list for 2023. These accolades highlight our strong culture and commitment to our staff
members, and support our belief that we are uniquely well-positioned to attract, train and retain high-quality staff members
as an employer of choice.
We generated record annual revenue of $3.4 billion in 2023, driven by positive comparable sales growth and a total of 16
new restaurant openings across our portfolio. Demonstrating the strength of our distinct concepts, year-over-year sales
increased 3% at The Cheesecake Factory restaurants, 13% at North Italia, 11% at Flower Child and 11% at FRC. Our
industry-leading annual unit volumes at The Cheesecake Factory restaurants increased to $12.2 million, as comparable
sales continued to meaningfully outperform the casual dining industry, with strong contributions from off-premise sales,
accounting for 22% of total sales in 2023. In terms of profitability for the year, our topline results coupled with strong
operational execution led to solid adjusted net income margin expansion and measurable improvement in restaurant level
margins at The Cheesecake Factory, North Italia and Flower Child.
We generated over $218 million in cash flow from operations for the year. Our strong financial position has enabled us to
execute our plan to accelerate new unit development and return over $99 million to our shareholders through a combination
of dividends and share repurchases in 2023. 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 2024, we are planning to open as many as 22 new restaurants, including three to four The Cheesecake Factory
restaurants, six to seven North Italia restaurants, six to seven Flower Child locations and six to seven FRC restaurants. We
also expect to open as many as four international locations under licensing agreements.
Our topline sales growth, margin expansion, new unit growth and solid operational execution combined with our increased
scale provides meaningful opportunity to enhance shareholder value going forward. We are looking to build on this
momentum and believe we are poised to once again generate our consistent operational and financial results and to make
tangible progress in 2024 towards our longer-term goals in the key areas of value creation: growing restaurant comparable
sales, expanding restaurant operating margins and accelerating accretive unit growth.
As we look ahead, we remain intently focused on delivering exceptional food quality, service and hospitality − the
hallmarks of our success − to drive longterm profitable sales growth. We will continue to leverage our competitive
strengths including the scale of our business, our differentiated brands, best-in-class operators and balance sheet to drive
earnings growth, generate robust cash flows, capture market share and maximize long-term value for our shareholders.
In closing, I would like to extend my sincere gratitude to all of our dedicated team members for their hard work and
commitment to deliver delicious, memorable experiences for our guests each and every day. And to our shareholders,
guests, bakery customers, suppliers and international licensees, we thank you for your continued support and partnership.
Together, we look forward to building on our legacy of excellence and embarking on the next chapter of our journey with
optimism and confidence.
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 2, 2024
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, July 4, 2023, was
$1,654,084,907 (based on the last reported sales on The Nasdaq Stock Market on that date).
As of February 20, 2024, 51,115,061 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and III of this Form 10-K incorporate by reference information from the registrant’s proxy statement for the annual meeting of stockholders
expected to be held on May 30, 2024.
THE CHEESECAKE FACTORY INCORPORATED
INDEX
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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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 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,
quarterly dividends, 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
and investing in 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 and insurance costs, and increase margins; grow
earnings; remain relevant to consumers; attract and retain qualified management and other staff; 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 The Cheesecake Factory internationally; support the growth of North
Italia, Flower Child and Other FRC restaurants; and utilize our capital effectively. These forward-looking statements
may be affected by various factors including: economic, public health and political conditions that impact consumer
confidence and spending, including rising interest rates, periods of heightened inflation and market instability, and
armed conflicts; 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; pandemics and related containment measures,
including the potential for quarantines or restriction on in-person dining; acceptance and success of The Cheesecake
Factory in international markets; acceptance and success of North Italia, Flower Child and Other 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; 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 and related permitting; compliance
with debt covenants; strategic capital allocation decisions including with respect to share repurchases or dividends; the
ability to achieve projected financial results; the resolution of uncertain tax positions with the Internal Revenue Service
and the impact of tax reform legislation; changes in laws impacting our business; 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.
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
2
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 impact global and domestic economic conditions have on consumer discretionary spending and our costs of
operations 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.
• Labor organizing could harm our operations and competitive position in the restaurant industry.
• 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.
• Our failure to effectively develop, grow and operate North Italia and our other branded concepts could
materially adversely affect our financial performance.
• Adverse weather conditions, natural disasters, climate change and public health emergencies 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 impact 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, operational disruption or other harm.
• 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.
• 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.
3
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 334 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory® (216 locations), North Italia® (37 locations), Flower Child®
(32 locations) and additional brands within our Fox Restaurant Concepts (“FRC”) portfolio (41 locations).
Internationally, 33 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, www.iamaflowerchild.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 years 2023 and 2021 each consisted of 52 weeks. Fiscal year 2022 consisted of 53 weeks. Fiscal year
2024 will consist of 52 weeks.
Geopolitical and Other Macroeconomic Impacts to our Operating Environment
During fiscal 2021 and 2022, the COVID-19 pandemic continued to affect our business during periods of
accelerated case counts in which we experienced 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. Along
with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events, causing
supply chain challenges and significantly increased commodity and wage inflation. Some of these factors continued to
impact our operating results in fiscal 2023, contributing to significantly increased commodity and other costs. We also
encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as
supply chain challenges.
The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. Any of these factors may have an adverse impact on our business and materially
adversely affect our financial performance.
The Cheesecake Factory
As of February 26, 2024, we operated 216 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.
4
All of our restaurants offer a full-service bar where our entire menu is served. During fiscal 2023, alcoholic
beverage sales represented 11% 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 22% of The Cheesecake Factory restaurant sales during fiscal 2023. 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 225 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
2023.
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.
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 2023, we launched the Cookie Dough
Lover’s Cheesecake with Pecans 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. Prior to fiscal 2022, we targeted menu price increases of approximately 2% to 3% annually,
utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies. In fiscal years 2022 and
2023, we implemented price increases above our historical levels, including an incremental price increase in the fourth
quarter of fiscal 2022, to help offset significant inflationary cost pressures. Current and future near-term pricing actions
may also be at levels above historical norms to keep pace with any significant cost increases. In addition, on a regular
5
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 $30.54 during fiscal 2023.
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 2023, for the tenth 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
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.
6
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 primarily due to delays in
permitting and landlord readiness, as well as supply chain challenges.
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
$12.2 million for fiscal 2023. 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 $1,132 for fiscal 2023. 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
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 $1,100 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.
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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 eleven
additional kitchen and front-of-the-house managers and approximately 150 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.
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.
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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 26, 2024, our international licensees operated the following The Cheesecake Factory
restaurants:
Licensee Location
Kuwait (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahrain
Restaurant Location
Kingdom of Saudi Arabia
Kuwait
Qatar
United Arab Emirates
Mexico (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Hong Kong (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beijing
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chengdu
Hong Kong
Macau
Shanghai
Thailand
# of Restaurants
1
4
3
3
6
8
1
1
1
1
3
1
33
(1) This licensee, or its affiliates, also has the right to develop restaurants in Egypt, with the opportunity to expand
the agreement to include Algeria, Hungary, Iraq, Libya, Morocco, Poland, Russia, Slovakia, The Czech
Republic, Tunisia, Turkey and Ukraine.
(2) This licensee, or its affiliates, also has the right to develop restaurants in Chile, with the opportunity to expand
the agreement to include Argentina, Brazil, Colombia and Peru.
(3) This licensee, or its affiliates, also has the right to develop restaurants in Taiwan, with the opportunity to
expand the agreement to include Japan, South Korea, Malaysia 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.
Our corporate infrastructure includes a dedicated global development team that works with our international
licensees and coordinates the initial training, ongoing quality control, product specifications and brand oversight at our
licensed locations. Our internal audit department also performs periodic reviews of our international licensees’
compliance with our licensing agreements.
As we evaluate other international markets, we will consider opportunities to directly operate certain locations
and/or enter into licensing, joint venture or partnership arrangements with established third-party companies. We are
selective in our assessment of potential partners and licensees, focusing on well-capitalized companies that have
established business infrastructures, expertise in multiple countries, experience in operating upscale casual dining
restaurants and sound governance practices. We look to associate with companies who will protect The Cheesecake
Factory® brand and operate the concept in a high-quality, consistent manner.
Due to the complexities of opening The Cheesecake Factory restaurants in other countries, including, but not
limited to, the selection and design of appropriate sites, construction of our complex restaurant designs, training of
licensees’ staff members, approval of supply sources and exportation of our bakery products to new countries, the
number and timing of new openings in foreign countries may vary from expectations.
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Consumer Packaged Goods
Given the strong affinity for The Cheesecake Factory® brand, we leverage opportunities in the consumer
packaged goods channel by partnering with various third-party manufacturers to offer a variety of products marketed
under The Cheesecake Factory At Home® mark, including our Famous “Brown Bread,” which is 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 24% of North Italia sales in fiscal 2023. The average check for each customer, including beverages and
desserts, for fiscal 2023 averaged approximately $33.60 for lunch and approximately $43.25 for dinner. Our North Italia
restaurants are generally open seven days a week for lunch, dinner and weekend brunch. Currently, we operate 37 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 location open for the full year
for North Italia restaurants were approximately $7.8 million for fiscal 2023, or approximately $1,200 per productive
square foot. We target an average North Italia unit size of 6,000 to 7,000 square feet, and total construction costs average
approximately $800 per interior square foot. Restaurant-level preopening costs for a typical location in an established
market average approximately $0.6 million to $0.8 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.
Flower Child and Fox Restaurant Concepts
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 provides us an opportunity to
diversify our portfolio in a strong and growing niche. Currently, we operate 32 Flower Child locations and target
approximately 15% to 20% average annual unit growth for this concept. Average sales per location open for the full year
for the Flower Child restaurants were approximately $4.1 million for fiscal 2023, or approximately $1,100 per interior
square foot. We target an average Flower Child unit size of 3,000 to 4,000 square feet, and total construction costs
average approximately $700 per interior square foot.
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. With over a dozen evolving restaurant
brands launched to-date, its concepts are diverse in industry segment, occasions, square footage and geography. Other
FRC potential growth concepts include Culinary Dropout and Blanco, which together with the other FRC brands, serve
as an ecosystem for talent, menu and design development. Currently, we operate 41 Other FRC locations. We target
approximately 10% to 15% average annual unit growth for the aggregate Other FRC portfolio, complemented by
additional market tests of the potential growth concepts. Average sales per location open for the full year for the Other
FRC restaurants were approximately $6.5 million for fiscal 2023, or approximately $1,100 per interior square foot. We
target an average FRC unit size of 3,500 to 15,000 square feet, and total construction costs average approximately $650
per interior square foot, depending on the concept.
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Bakery Operations
We own and operate two bakery production facilities, one in Calabasas Hills, California, and one in Rocky
Mount, North Carolina. Our facility in California accommodates both production operations and corporate support
personnel, while our facility in North Carolina houses production operations and a distribution center. In October 2023,
we announced plans for a third bakery production facility in Charleston, Indiana. 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 15 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.
We believe our efforts to build and maintain a strong culture have contributed to three notable recognitions in
2023. We were named to the FORTUNE 100 Best Companies to Work For® list for a tenth consecutive year, the
PEOPLE Companies that Care® list for a third consecutive year and the Fortune Best Workplaces for Millennials List for
a seventh year.
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. We strive to provide our staff with career advancement opportunities, and our fiscal
2023 internal management promotion rate at The Cheesecake Factory and North Italia concepts was 41%. Our hourly
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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 for all hourly staff members through
free high school equivalency and associate degree programs. We also offer a limited education reimbursement to our
staff seeking post-secondary education.
Diversity, Equity, Inclusion and Belonging
We strive to offer an atmosphere of inclusion and belonging for all. We believe the cultural alignment we seek
to 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 conduct inclusive leadership training for above-restaurant leadership and restaurant managers and regularly
review 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 offer support groups such as The Cheesecake
Factory Women’s Network Group and the Female Kitchen Leader’s Program, that provides qualified high potential
managers with programing and events to spend time with each other to network and also meet organizational leaders.
Another example is the Diverse Leaders Program, which provides networking and development opportunities for
managers from diverse racial or ethnic groups. As of January 2, 2024, approximately 47% of The Cheesecake Factory
and North Italia staff members were women and approximately 73% of The Cheesecake Factory and North Italia staff
members were racially or ethnically diverse. Further details on representation can be found in our most recent CSR
Report (see “Corporate Social Responsibility” below).
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 evaluate that we are paying fairly and equitably. We are committed to
conducting both internal reviews and external third-party audits and verification to inform this evaluation. 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.
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.
Employee Engagement
As of January 2, 2024, we employed approximately 47,900 people, with approximately 46,250 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.
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A significant part of our employee engagement strategy involves staff appreciation and recognition efforts. We
hold 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 most recent 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 expressly 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
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 pandemics, 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. While we have seen improvements in many of these areas, the absolute level of commodity
costs has remained elevated contributing to ongoing inflation above historic levels.
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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 2024, 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 2023,
we had no financial 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 cybersecurity is a priority for us and is led by a multi-disciplinary security team, overseen by
our interdepartmental Information Security Council representing our key functional areas. We have developed and
implemented a cybersecurity risk management program intended to protect the confidentiality, integrity and availability
of our critical systems and information. 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 intended to help keep the Company’s, our guests’, and our team members’ data
secure. (See Item 1C – Cybersecurity of this report for further discussion on our cybersecurity.)
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 launched our Cheesecake RewardsTM program nationally in 2023 with the objective to
leverage data analytics and insights to engage more effectively with our guests and drive incremental sales while
maintaining our restaurant level margins.
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 15.1 billion media
impressions in fiscal 2023 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.
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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
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 that may differ from U.S. 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 and/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
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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 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 currently participate in a Tip Reporting Alternative Commitment (“TRAC”) agreement
with the Internal Revenue Service (“IRS”) and we intend to apply to participate in any successor program to TRAC. By
complying with the educational and other requirements of the TRAC agreement (or its successor), 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.
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 77, 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 59, 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 54, 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,
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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 a director of our Foundation.
Keith T. Carango, age 62, 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 57, 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 Restaurant Industry
The impact global and domestic economic conditions have on consumer discretionary spending and our costs of
operations could materially adversely affect our financial performance.
Geopolitical and macroeconomic events have impacted consumer spending and our costs of operations and may
continue to do so for some time in the future. Dining out is a discretionary expenditure that is influenced by domestic
and global economic conditions, including, but not limited to: geopolitical instability, including armed conflicts, supply
shortages, interest rates (including recent interest rates above historical norms), unemployment, significant cost inflation,
health emergencies including the COVID-19 pandemic, consumer confidence, consumer purchasing and saving habits,
credit conditions, stock market performance, home values, population growth, household incomes and tax policy.
Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes
in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any factor
affecting consumer discretionary spending may influence customer traffic in our restaurants and average check amount,
thus potentially having a material impact on our financial performance.
Global and domestic economic conditions also impact our costs of operations. 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 and other macroeconomic factors,
which contributed to significant cost inflation. While we have seen improvements in many of these areas, the absolute
level of commodity costs has remained elevated. The ongoing impact of geopolitical and macroeconomic events could
lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation,
disruptions in the supply chain and delay in new restaurant openings. Any of these factors may have an adverse impact
on our business and materially adversely affect 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 (See the risk factor titled
“The impact global and domestic economic conditions have on consumer discretionary spending could materially
adversely affect our financial performance.”); 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
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consumer demand. We believe that many consumers remain focused on value and if our competitors promote and
deliver a higher degree of perceived value, our customer traffic could suffer.
We utilize menu price increases in an effort to help 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 during fiscal 2022 and 2023, as persistent
supply shortages and a heightened inflationary environment significantly increased our costs causing us to implement
pricing actions above our historical levels to help protect margins. (See the risk factor titled “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, generally beginning with the COVID-19 pandemic, we have generated a higher mix of sales
from off-premise channels as consumers have demonstrated a preference for convenience and at-home dining. Growing
competition in off-premise channels, our inability to differentiate our concepts in these channels or a change in
customers’ willingness to pay fees associated with third-party delivery 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, gender identity, 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 the risk factor titled “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.
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 (including increased minimum wages in
industries with which we compete for talent) 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 in the 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.
Certain state and localities have significantly increased their minimum wage and/or tip credit wage (or have
eliminated the tip credit wage), and require significantly more mandated benefits, and we believe it is becoming
increasing likely that the United States federal government or certain other states and localities will also elect to do so.
Should this occur, 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
increases and/or expansion of benefits mandates will have a particularly significant impact on our labor costs. Our
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vendors, contractors and business partners are similarly impacted by wage and benefit cost inflation, and many have or
will increase their prices 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. Healthcare 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 healthcare costs to
vary substantially from quarter-to-quarter and year-over-year. Any significant changes to the healthcare insurance
system could also impact our healthcare costs. Material increases in healthcare 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 may do so in the future as variants of the
underlying virus evolve. During fiscal 2021 and 2022, the COVID-19 pandemic continued to affect our business during
periods of accelerated case counts in which we experienced 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.
Along with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events,
causing supply chain challenges and significantly increased commodity and wage inflation. Some of these factors
continued to impact our operating results in fiscal 2023, contributing to significantly increased commodity and other
costs. We also encountered delays in opening new restaurants primarily due to delays in permitting and landlord
readiness, as well as supply chain challenges.
The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. Any of these factors may have an adverse impact on our business and materially
adversely affect our financial performance.
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 risk, 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.
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.
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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 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, on the federal, state and local levels, 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
emissions, use of natural gas and water consumption, including in some cases imposing disclosure requirements with
respect to such matters. (See the risk factor titled “Failure to adequately address environmental, social and governance
(“ESG”) matters, could adversely affect our brand, business, results of operations and financial condition.”) We may
incur significant additional costs and require operational changes to comply with these laws and regulations and may
face fines, penalties or other sanctions, adverse publicity and 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 the risk factor titled “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.”)
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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 any increase in or elimination of 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 creates 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, cybersecurity, privacy, personal information, cashless payments and consumer credit, protection
and fraud. The requirements of such laws and regulations, as well as their application and interpretation, are constantly
evolving and developing.
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 issued a final rule
concerning independent contractor standards for employees nationwide, which has not yet taken effect. The extent to
which this rule may impact our third-party delivery services and their service personnel is not yet known.
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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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, cause disruptions to our
operations and could materially adversely affect our financial performance. In addition, a labor dispute involving some
or all our staff members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of
disputes could increase our costs. Further, the unionization of construction companies could cause our construction and
build-out costs for new restaurants to materially increase.
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 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.
Our failure to effectively develop, grow and operate North Italia and our other branded concepts could materially
adversely affect our financial performance.
All of our restaurant concepts are subject to the risks and uncertainties described in this filing. However, there
is an enhanced level of risk and uncertainty related to the operation and expansion of our less-established restaurant
concepts. We acquired North Italia and the remainder of Fox Restaurant Concepts’ business for the purpose of
accelerating unit growth and to develop innovating concepts for future growth. While we actively seek to grow these
concepts, we can provide no assurance that new restaurants will be accepted in the markets targeted for expansion or that
we will be able to achieve our targeted returns when opening new locations.
Adverse weather conditions, natural disasters, climate change and public health emergencies 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 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
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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.
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.
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 2024, these
efforts may not be successful or yield our intended benefits. Due to the inflationary cost pressures we experienced in
fiscal 2022 and 2023, we implemented price increases above our historical levels to help support our longer-term
restaurant-level margin objectives. Recent pricing actions were and current and future near-term pricing actions may also
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.
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 2023, 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 environmental 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 2023, we experienced supply shortages with respect to certain sustainable products, which largely resulted
from challenges related to 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 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
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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.
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, operational disruption 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 incidents, including credential stuffing attacks in
which compromised user credentials were used to breach the systems, and are 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 cybersecurity threats, including from diverse threat actors, such as state-sponsored
organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as malfeasance by
insiders, human or technological error, malicious code embedded in open-source software, or misconfigurations, “bugs”
or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’)
network infrastructure, products or services, security breaches, denial of service attacks, viruses, worms, malware,
ransomware, social engineering/phishing, breaches of the algorithms used to encrypt and protect data and other
malicious, or disruptive or unauthorized events that jeopardize the confidentiality, integrity or availability of information
systems or information residing therein, including confidential information and personal information (each, a
“Cybersecurity Incident” and collectively, “Cybersecurity Incidents”).We also rely on third party services to effectively
operate our restaurants including, for example, gift card distribution and transaction processing services, point-of-sale
system services, online ordering services and food delivery services, and our Cheesecake RewardsTM program. 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, changes in
applicable laws or regulations, Security Incidents, 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 the risk factor titled “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.”)
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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
we understand 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, or to generally fail to employ up-to-date and appropriate data security and internal
control practices, 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. Delay in delivery of leased premises
from our landlords may also result in increased costs. During 2023, the timing of the delivery of the leased premises to
us from our landlords in order to perform build-out construction activities contributed to delays in opening new
restaurants. 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.
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Our inability to effectively protect our Intellectual Property domestically or internationally could cause our
customers to believe lesser quality products or services are ours, may reduce the capacity of our Intellectual Property to
uniquely identify our products and services and/or may limit our ability to globally expand our brand, any of which
could materially adversely affect our financial performance.
We face a variety of risks and challenges related to our international operations and global brand development
efforts, any of which could materially adversely affect our financial performance.
International operations have a unique set of risks and challenges that differ from country to country, and
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.
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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
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 the risk factor
titled “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.
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, which contributed to delays in opening new restaurants in 2023;
obtaining, on a timely basis, all governmental licenses and permits necessary to construct and operate our
restaurants, which has become more challenging as we are experiencing longer than usual governmental delays
in the licensing and permitting process;
obtaining, on a timely basis, all utility connections;
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;
any unforeseen engineering or environmental problems with the leased premises; and
adverse weather or other delays during the construction period.
We have encountered and expect to continue to experience delays in opening new restaurants due to delays in
permitting and landlord readiness, as well as supply chain challenges.
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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.
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 2023, we recorded impairment of assets and lease terminations expense of $29.5
million primarily related to the impairment of long-lived assets for three The Cheesecake Factory (one previously
impaired), one North Italia (previously impaired), one Other FRC and two Other restaurant lease terminations. (See Note
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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.
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.
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
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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.
Failure to adequately address environmental, social and governance (“ESG”) matters, could adversely affect our
brand, business, results of operations and financial condition.
There has been an increasing focus from certain governmental and nongovernmental organizations, investors,
customers, consumers, employees and other stakeholders concerning ESG matters. In addition, various regulatory
authorities have imposed, and may continue to impose, mandatory substantive and/or disclosure requirements with
respect to ESG matters, including climate change. For example, we may be subject to various disclosure requirements
(such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the
State of California, the International Sustainability Standards Board (ISSB) global sustainability standards, to the extent
adopted by jurisdictions in which we operate, as well as the SEC’s climate disclosure proposal, if finalized, among other
regulations or requirements. These requirements may not always be uniform across jurisdictions, which may result in
increased complexity, and cost, for compliance. Any of the foregoing may require us to make additional investments in
facilities and equipment, require us to incur additional costs for the collection of data and/or preparation of disclosures
and associated internal controls, may impact the availability and cost of key products ingredients, and, in turn, may
adversely impact our business, operating results, and financial condition. ESG matters have also been the subject of
increased scrutiny by regulators in different jurisdictions which may expose us to potential regulatory scrutiny or
enforcement actions related to our ESG activities.
Further, a variety of organizations measure the performance of companies on ESG topics, and the results of
these assessments are widely publicized. In addition, investment in funds that specialize in companies that perform well
in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance
of ESG measures to their investment decisions. Topics taken into account in such assessments include, among others,
climate change, biodiversity, labor rights, responsible sourcing, animal welfare, water consumption, waste management,
human capital and diversity, equity and inclusion matters, and the role of our board of directors in supervising various
ESG issues. Unfavorable ESG ratings could lead to negative investor sentiment towards us or our industry, which could
negatively impact our share price as well as our access to and cost of capital. To the extent ESG matters negatively
impact our reputation, it may also adversely impact our ability to attract and retain customers, employees or business
partners. Simultaneously, there are efforts by some stakeholders to reduce companies’ efforts on certain ESG-related
matters. Both advocates and opponents to certain ESG matters are increasingly resorting to a range of activism forms,
including media campaigns and litigation, to advance their perspectives. To the extent we are subject to such activism, it
may require us to incur costs or otherwise adversely impact our business.
Moreover, we have engaged, and expect to continue to engage, in certain voluntary ESG or corporate social
responsibility initiatives (such as voluntary disclosures, commitments, and goals) to improve our ESG profile. However,
such initiatives may be costly and may not have the desired effect. For example, execution of these strategies and
achievement of our goals is subject to risks and uncertainties, many of which are outside of our control. As a result, there
is no assurance that we will be able to successfully execute our strategies and achieve our sustainability and ESG-related
goals, which could damage our reputation and consumer and other stakeholder relationships. Additionally, there can be
no assurance that our stakeholders will agree with our strategies, and any perception, whether or not valid, that we have
failed to achieve, or to act responsibly with respect to, such matters or to effectively respond to new or additional legal or
regulatory requirements regarding climate change, sustainability or ESG matters could result in adverse publicity or
potential regulatory or investor engagement or litigation and adversely affect our business and reputation. Additionally,
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many of our business partners and suppliers may be subject to similar expectations, which may augment or create
additional risks, including risks that may not be known to us.
Risks Related to Information Technology and Cybersecurity
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 are 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, our Cheesecake
RewardsTM program, systems supporting a remote and hybrid workforce and the like. Remote and hybrid working
arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges
associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate
and home networks. (See the risk factor titled “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, operational disruption or other harm,
any of which could materially adversely affect our financial performance”).
Our Cyber Environment, and the information processed therein, including confidential information and
personal information, face numerous and evolving cybersecurity risks that threaten their confidentiality, integrity and
availability, including from Cybersecurity Incidents. 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 Cybersecurity Incidents. We employ both
internal resources and external consultants to conduct auditing and testing for weaknesses in our Cyber Environment,
intended to help us reduce the likelihood of any Security Incident, and have developed a multi-discipline Security
Incident response plan designed 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 that
we become aware of. Despite these efforts, we can provide no assurance that these measures will successfully prevent all
Cybersecurity Incidents or mitigate losses resulting from a Cybersecurity Incident. Cyberattacks are expected to
accelerate on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using
techniques and tools—including artificial intelligence—that circumvent security controls, evade detection and remove
forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or
incidents, or to avoid a material adverse impact to our Cyber Environment, confidential or information, or business.
We and our third-party vendors have experienced Cybersecurity Incidents and we expect such attacks and
incidents to continue in varying degrees. For example, in 2021 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. Any Security Incident or adverse impact to the
availability, integrity or confidentiality of our Cyber Environment (or information residing therein, including
confidential information or personal information) could result in legal claims or proceedings (such as class actions),
regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose
existing or future customers, and/or significant incident response, system restoration or remediation and future
compliance costs. Any or all of the foregoing could materially adversely affect our business, operating results, and
financial condition. Finally, we cannot guarantee that any costs and liabilities incurred in relation to a Cybersecurity
Incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the
future on economically reasonable terms or at all.
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Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations,
standards and other requirements and our inability to maintain a secure environment for customers’ and staff
members’ personal data could result in legal liability, financial penalties, reputational harm and loss of
customers, which could materially adversely affect our financial performance.
We and certain of our third-party vendors receive and maintain certain personal information about our
customers, staff members, business partners and others. For example, we transmit confidential credit card information in
connection with credit card transactions, we are required to collect and maintain certain personal information in
connection with our employment practices, including the administration of our benefit plans, and we collect information
in relation to our Cheesecake RewardsTM program. Our collection, storage, handling, use, disclosure and security of
personal information is regulated by complex and continually evolving (and at times conflicting) U.S. (federal, state and
local) and foreign laws, regulations, and industry standards. Many of these laws, regulations and standards are subject to
change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased
cost of operations, or otherwise harm our business.
For instance, the California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020, which
created individual privacy rights for California residents and increased the privacy related obligations of covered
businesses handling personal information about California residents. The CCPA provides for civil penalties for
violations, as well as a private right of action for certain data breaches that has increased the likelihood of, and risks
associated with data breach litigation. The CCPA was significantly amended from January 1, 2023, imposing additional
obligations on covered businesses, including additional privacy rights, limitations on data uses, and opt outs for certain
uses of sensitive information and sharing of personal information. It also created a new data protection agency
authorized to enforce the CCPA and issue substantive regulations. Similar laws have been passed in other states, and are
continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the
United States and creating the potential for a patchwork of overlapping but different state laws. Compliance with laws
relating to privacy, security or the processing of personal information involve significant costs, and could increase our
potential liability (including in the event we allow an unauthorized disclosure of or access to personal information),
subject to us increased regulatory scrutiny and result in us making changes to our data processing practices. Furthermore,
the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state
consumer protection laws against companies for online collection, use, dissemination and security practices that appear
to be unfair or deceptive. If we are found to have breached privacy, security or consumer protection laws, regulations or
standards, we may be subject to enforcement actions that require us to change our business practices in a manner which
may negatively impact our revenue, as well as expose ourselves to litigation, fines, civil and/or criminal penalties and
adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation, brand and
business in a manner that harms our financial position.
Further, we are subject to laws, regulations and standards covering marketing, advertising and other activities
conducted by telephone, email, mobile devices and the Internet, such as the Controlling the Assault of Non-Solicited
Pornography and Marketing Act (“the CAN-SPAM Act”), the Telephone Consumer Protection Act (the “TCPA”) and
similar state consumer protection and communication privacy laws, such as California’s Invasion of Privacy Act
(“CIPA”). Numerous class-action suits under federal and state laws have been filed in recent years against companies
who conduct telemarketing and/or SMS texting programs, with many resulting in multi-million-dollar settlements to the
plaintiffs. There has also been a noticeable uptick in class actions wherein plaintiffs have utilized a variety of laws,
including state wiretapping laws such as CIPA, in relation to companies’ use of tracking technologies, such as cookies
and pixels. Actual or perceived failures to comply with requirements relating to marketing, advertising, electronic
communications and the Internet, could subject us to legal proceedings, which could expose us to adverse publicity,
substantial monetary damages and legal defense costs, injunctive relief and fines or penalties.
If a Cybersecurity Incident were to occur involving loss of or inappropriate access to or dissemination of
personal information, we may become liable under applicable law for damages (including statutory damages) and incur
penalties and other costs to remedy such an incident. Depending on the facts and circumstances of such an incident,
these damages, penalties and costs could be significant and may not be covered by insurance or could exceed our
applicable insurance coverage limits. Such an event also could harm our reputation and result in litigation against us.
Any of these results could materially adversely affect our financial performance. (See the risk factor titled “Information
technology system failures or breaches of our network security could interrupt our operations and subject us to increased
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operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial
performance”).
We are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), a security standard
applicable to companies that collect, store or transmit certain data regarding credit and debit cards, holders and
transactions. These standards require certain levels of IT systems security and procedures to protect our customers’
credit/debit card and other personal information. We also rely on vendors to handle PCI DSS matters and to help with
PCI DSS compliance. Compliance with PCI-DSS and implementing related procedures, technology and information
security measures requires significant resources and ongoing attention. Despite our compliance efforts, we may become
subject to claims that we have violated the PCI DSS based on past, present, and future business practices. Our actual or
perceived failure to comply with the PCI DSS can subject us to fines, termination of banking relationships, and increased
transaction fees. In addition, there is no guarantee that PCI DSS compliance will prevent illegal or improper use of our
payment systems or the theft, loss or misuse of payment card data or transaction information.
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 Cybersecurity Incident. Any material interruptions or failures in our
payment related systems could have a material adverse effect on our business, results of operations and financial
condition. If there are amendments to PCI DSS, the cost of compliance could increase and we may suffer loss of critical
data and interruptions or delays in our operations as a result. Further, 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 Loan Agreement, 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 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.
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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
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 14
of Notes to Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of these events.)
As of January 2, 2024, 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:
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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 3.1 million shares of common stock for grant under our The
Cheesecake Factory Incorporated Stock Incentive Plan as of January 2, 2024. 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.
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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.
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 such indebtedness and the Notes.
Risks Related to Owning Our Stock
The market price of our common stock is subject to volatility.
During fiscal 2023, the price of our common stock fluctuated between $28.58 and $41.28 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
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significant transactions (including mergers or acquisitions, divestitures, joint ventures or other strategic initiatives) by us
or others in the restaurant industry. In addition, the equity markets have experienced price and volume fluctuations that
affect the stock price of companies in ways that have been unrelated to an individual company’s operating performance.
The price of our common stock may continue to be volatile, based on factors specific to our company and industry, as
well as factors related to the equity markets overall.
Our stock price could be adversely affected if our performance falls short of our financial guidance and/or
market expectations.
Our failure to achieve performance consistent with 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.
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 4.5 million shares remained available for repurchase as of January 2, 2024. 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.
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
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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, we may be subject to tax audit and related litigation and 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.
The U.S. Treasury Department and Internal Revenue Service have proposed the establishment of the Service
Industry Tip Compliance Agreement (“SITCA”) program, which would replace the Tip Reporting Alternative
Commitment (“TRAC”) that many of our locations currently use. 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. If we were to not qualify for the SITCA program, as currently proposed, it could cause us to lose tax
credits which could materially adversely affect our financial performance.
Our failure to establish, maintain and apply adequate internal control over our financial reporting and comply
with changes in financial accounting standards or interpretations of existing standards could limit our ability to
report our financial results accurately and timely or to detect and prevent fraud, any of which could materially
adversely affect our financial performance.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002.
These provisions provide for the identification of material weaknesses in internal control over financial reporting - a
process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in
accordance with accounting principles generally accepted in the United States. There can be no assurance that we will be
able to timely remediate material weakness in internal controls (if any) or maintain all of the controls necessary to
remain in compliance. Any failure to maintain an effective system of internal control over financial reporting could limit
our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could
materially adversely affect our financial performance. 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.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the
confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management
program includes a cybersecurity incident response plan.
We design and assess our program generally based on the National Institute of Standards and Technology
Cybersecurity Framework (“NIST CSF”). Although our program may not meet the technical requirements of the NIST
CSF, we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our
business. Additionally, as we accept credit cards as a form of payment, we consider the requirements of the Payment
Card Industry Data Security Standards (“PCI DSS”) in relation to our program.
Our cybersecurity risk management program includes:
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risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and
our broader enterprise information technology environment, including, by regularly scanning our environment
for vulnerabilities, performing penetration testing and engaging third parties to assess the effectiveness of our
technical cybersecurity practices.
a multi-disciplinary security team overseen by our Information Security Council, principally responsible for
managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to
cybersecurity incidents;
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our
security controls, including, third-party network security reviews, scans, and audits, on at least an annual basis;
the use of a third-party Managed Security Service Provider (MSSP) that includes a 24x7 security operations
center (SOC) that is designed to monitor and analyze suspected suspicious activity on our internal network and
remediate or escalate activity as appropriate;
regular cybersecurity awareness training for employees with access to our information systems, incident
response personnel, and senior management;
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents;
a disaster recovery plan and controls designed to protect against business interruption, including by backing up
our critical systems;
use of end-to-end encryption and tokenization technology, a public key infrastructure, designed to ensure that
only trusted devices can access our enterprise information technology network, and Intrusion Detection and
Intrusion Prevention (IDS/IPS) that scans data in transit to help detect and prevent the execution of harmful
code; and
a third-party risk management process for service providers, suppliers, and vendors who have access to our
information systems.
There can be no assurance that our cybersecurity risk management program and processes, including our
policies, controls or procedures, will be fully implemented, complied with or are effective in protecting our systems and
information. We are not currently aware of risks from known cybersecurity threats, including as a result of any prior
cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our
operations, business strategy, results of operations, or financial condition.
Cybersecurity Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to
the Audit Committee (Committee) oversight of steps the Company has taken to monitor or mitigate significant
cybersecurity risks. The Committee receives regular reports from management on our cybersecurity risks. In addition,
39
management updates the Committee, as necessary, regarding any material cybersecurity incidents, as well as any
incidents with lesser impact potential.
The Committee reports to the full Board of Directors regarding its activities, including those related to
cybersecurity. The full Board of Directors also receives briefings from management on our cyber risk management
program. Board of Directors members receive presentations on cybersecurity topics from our Chief Information Officer
(“CIO”), internal security staff and/or external experts, as appropriate, as part of the Board of Directors’ continuing
education.
Our management formed an interdepartmental Information Security Council (“ISC”), comprised of senior
executives from multiple disciplines, including our CIO and Vice President of Infrastructure Services, to assess and
manage our material risks from cybersecurity threats. The ISC has primary responsibility for our overall cybersecurity
risk management program. Our CIO, Vice President of Infrastructure Services, and others within our Information
Technology department supervise both our internal cybersecurity personnel and our retained external cybersecurity
consultants. Our CIO and Vice President of Infrastructure Services have a combined 50+ years of experience in
information technology, with increasing oversight of cybersecurity responsibilities over the past 20+ years.
Our management teams, including the ISC, our CIO, Vice President of Infrastructure Services, and others
within our Information Technology department, as appropriate, supervise efforts to prevent, detect, mitigate and
remediate cybersecurity risks and incidents through various means, which may include briefings from internal security
personnel; threat intelligence and other information obtained from governmental, public or private sources, including
external consultants engaged by us; and alerts and reports produced by security tools deployed in the information
technology environment.
40
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. In October 2023, we announced plans for a third bakery
production facility in Charleston, Indiana. 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.
The Cheesecake
Factory
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Italia
Other FRC
Other
Total
—
25
3
2
—
—
—
1
2
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
3
3
—
—
—
—
—
41
—
7
3
2
—
—
1
1
3
—
—
—
—
—
—
—
—
1
—
—
—
—
—
3
1
—
1
1
1
—
—
—
—
—
—
—
14
—
1
—
—
—
40
3
42
51
8
3
1
4
30
12
2
1
7
2
1
2
2
1
7
7
2
2
3
1
9
11
1
13
8
3
7
2
7
1
1
1
11
44
2
10
5
3
1
334
1
4
7
1
—
—
1
5
2
—
—
—
—
—
1
—
—
—
—
—
—
—
—
1
—
—
—
1
—
—
—
1
—
—
—
2
8
—
2
—
—
—
37
2
6
38
3
3
1
2
23
5
2
1
6
2
1
1
2
1
6
7
2
2
3
1
5
10
1
12
5
2
7
2
6
1
1
1
6
19
2
7
5
3
1
216
41
ITEM 3. LEGAL PROCEEDINGS
See Note 13 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 1,460 holders of record of our common stock at February 13, 2024, and we estimate there were
approximately 134,600 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 56.5 million shares at a total
cost of $1,811.7 million, excluding the excise tax, through January 2, 2024 with 0.3 million shares repurchased at a cost
of $9.8 million, excluding the excise tax, during the fourth quarter of fiscal 2023. 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 Loan Agreement 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 2,
2024 (in thousands, except per share data):
Period
October 4 — November 7, 2023 . . . . . . . . . . . . .
November 8 — December 5, 2023 . . . . . . . . . . .
December 6, 2023 — January 2, 2024 . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Total Number of Shares Maximum Number of
Shares that May Yet
Purchased as Part of
Be Purchased Under the
Publicly Announced
Purchased (1) per Share (2) Plans or Programs
Average
Price Paid
Number
of Shares
Plans or Programs
233 $ 29.72
32.89
34.04
4
81
318
233
—
69
302
4,539
4,534
4,453
(1) The total number of shares purchased includes 15,922 shares withheld upon vesting of restricted share awards
to satisfy tax withholding obligations.
(2) The dollar value of shares repurchased excludes excise tax due under the Inflation Reduction Act of 2022.
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, our Board declared a quarterly dividend in the second quarter of
fiscal 2022 and has declared quarterly dividends since then. 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 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 Item 1A — Risk
Factors — “Our stock price could be adversely affected if we are unable to pay or increase dividends.”)
During the fiscal quarter ended January 2, 2024, no director or officer of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of
Regulation S-K).
42
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.
The Cheesecake Factory Incorporated . . . . . . . . . . . . . . . . . . $ 100 $
S&P 400 Midcap Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100 $
NASDAQ US Benchmark TR Index (1) . . . . . . . . . . . . . . . . . $ 100 $
S&P 600 Restaurants Index (2) . . . . . . . . . . . . . . . . . . . . . . . . $ 100 $
12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23
89 $
84
171 $ 146 $ 167
139 $
200 $ 161 $ 203
159 $
134 $ 106 $ 126
140 $
92 $
124 $
131 $
111 $
76 $
94 $
(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.
43
Shares Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K under Item 5 is incorporated by reference to the
section entitled “Equity Compensation Plan Information” in our definitive proxy statement for the annual meeting of
stockholders expected to be held on May 30, 2024 (the “Proxy Statement”).
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 years 2023 and 2021 each consisted of 52 weeks, while fiscal year 2022 consisted of 53 weeks. Fiscal
year 2024 will consist of 52 weeks. The following MD&A includes a discussion comparing our results in fiscal 2023 to
fiscal 2022. For a discussion comparing our results from fiscal 2022 to fiscal 2021, refer to “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K
for the fiscal year ended January 3, 2023, filed with the SEC on February 27, 2023.
Geopolitical and Other Macroeconomic Impacts to our Operating Environment
During fiscal 2021 and 2022, the COVID-19 pandemic continued to affect our business during periods of
accelerated case counts in which we experienced 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. Along
with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events, causing
supply chain challenges and significantly increased commodity and wage inflation. Some of these factors continued to
impact our operating results in fiscal 2023, contributing to significantly increased commodity and other costs. We also
encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as
supply chain challenges.
The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. Any of these factors 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 334 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory® (216 locations), North Italia® (37 locations), Flower Child®
(32 locations) and additional brands within our FRC portfolio (41 locations). Internationally, 33 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.
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
44
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, innovating new food, dining and hospitality experiences to create fresh, exciting concepts.
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 and improving the pick-up experience, augmenting our marketing programs, including our
Cheesecake RewardsTM program, 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. Prior to fiscal
2022, we targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help
mitigate cost pressure in higher-wage geographies. In fiscal years 2022 and 2023, we implemented menu price increases
above our historical levels, including an incremental price increase in the fourth quarter of fiscal 2022, to help offset
significant inflationary cost pressures. Current and future near-term pricing actions may also 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
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.”)
45
Results of Operations
The following table presents, for the periods indicated, information from our consolidated statements of income
expressed as percentages of revenues.
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
100.0 %
2022
100.0 %
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 contingent consideration, compensation and amortization expenses .
Preopening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.4
35.7
26.8
6.3
2.7
0.9
0.3
0.7
96.8
3.2
(0.3)
2.9
(0.0)
2.9 %
24.6
36.7
26.7
6.2
2.8
1.0
0.4
0.4
98.8
1.2
(0.2)
1.0
(0.3)
1.3 %
Fiscal 2023 Compared to Fiscal 2022
Revenues
Revenues increased 4.1% to $3,439.5 million for fiscal 2023, compared to $3,303.2 million for fiscal 2022,
which included approximately $78.4 million contributed by the 53rd week, due to an increase in comparable restaurant
sales, as well as additional revenue related to new restaurant openings.
The Cheesecake Factory average sales per restaurant operating week increased 3.0% to $235,701 in fiscal 2023
from $228,741 in fiscal 2022. Total operating weeks at The Cheesecake Factory restaurants decreased 0.4% to 11,010 in
fiscal 2023 compared to 11,052 in the comparable prior year period. Excluding the impact of the 53rd week in fiscal
2022, total operating weeks increased 1.6% compared to 10,841 in the prior year. The Cheesecake Factory comparable
sales increased by 3.0%, or $73.6 million, from fiscal 2022 and increased 13.9% from fiscal 2019 on an operating week
basis. The increase from fiscal 2022 was primarily driven by an increase in average check of 4.0% (based on an increase
of 9.4% in menu pricing, partially offset by a 5.4% negative change from menu mix), partially offset by decreased
customer traffic of 1.0%. We implemented effective menu price increases of approximately 3.5% and 2.0% in the first
and third quarters of fiscal 2023, respectively. We are in the process of implementing an approximate 2.5% price
increase in the first quarter of fiscal 2024. Sales through the off-premise channel comprised approximately 22% of our
restaurant sales during fiscal 2023 as compared to 25% in fiscal 2022. However, off-premise sales mix remains elevated
versus the pre-pandemic level of 16% during fiscal 2019. 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 for more than one customer. In turn, the lower mix of sales in the off-premise channel during fiscal 2023
compared to fiscal 2022 comprised approximately 1% of the negative change in mix with a positive correlative impact to
traffic. In addition, both traffic and mix declined relative to the higher traffic levels and incident rates associated with the
post pandemic surge that benefited fiscal 2022. However, incident rates remained elevated versus pre-pandemic levels,
and traffic outperformed the broader casual dining industry despite the softening sales environment.
North Italia average sales per restaurant operating week increased 5.0% to $149,727 in fiscal 2023 from
$142,532 in fiscal 2022. Total operating weeks at North Italia increased 7.8% to 1,729 in fiscal 2023 compared to 1,604
in the prior year. Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 10.1% compared
to 1,571 in the prior year. North Italia comparable sales increased approximately 8% from fiscal 2022 and increased
46
approximately 31% compared to fiscal 2019 on an operating week basis. The increase from fiscal 2022 was primarily
driven by an increase in average check of approximately 5% (based on an increase of 8% in menu pricing, partially
offset by a 3% negative impact from mix), as well as increased customer traffic of 3%. We implemented effective menu
price increases of approximately 4.0% and 3.7% in the second and fourth quarters of fiscal 2023, respectively.
Flower Child sales per restaurant operating week increased 6.5% to $79,714 in fiscal 2023 from $74,852 in
fiscal 2022. Total operating weeks at Flower Child increased 4.2% to 1,599 in fiscal 2023 compared to 1,534 in the prior
year. Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 6.4% compared to 1,503 in
the prior year. Flower Child sales increased 11.0% to $127.5 million for fiscal 2023, compared to $114.8 million for
fiscal 2022. Excluding the impact of the 53rd week in fiscal 2022, total sales increased 13.1% compared to $112.7
million in the prior year.
Other FRC average sales per restaurant operating week decreased 2.0% to $138,469 in fiscal 2023 from
$141,316 in fiscal 2022. Average sales per restaurant operating week are impacted by new restaurant openings as well as
the concept mix. Total operating weeks at Other FRC increased 13.4% to 1,906 in fiscal 2023 compared to 1,681 in the
prior year. Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 15.7% compared to
1,647 in the prior year. Other FRC sales increased 11.1% to $263.9 million for fiscal 2023, compared to $237.6 million
for fiscal 2022. Excluding the impact of the 53rd week in fiscal 2022, total sales increased 13.5% compared to $232.6
million in the prior year.
Restaurants become eligible to enter the comparable sales base in their 19th month of operation. At January 2,
2024, there were nine The Cheesecake Factory restaurants and seven 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
23.4% for fiscal 2023 compared to 24.6% for fiscal 2022, primarily due to menu price increases in excess of inflation
across most categories (1.0%).
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 35.7% and 36.7% in fiscal 2023 and fiscal 2022, respectively. This
decrease was primarily due to menu price increases in excess of wage rate inflation and improved staffing levels (1.0%).
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
47
commissions, incentive compensation, and bakery production overhead. As a percentage of revenues, other operating
costs and expenses were 26.8% and 26.7% in fiscal 2023 and fiscal 2022, respectively. This variance was primarily
driven by higher marketing costs, including launch costs related to our Cheesecake RewardsTM program (0.3%), partially
offset by a decrease in off-premise costs due to sales mix (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 6.3% and 6.2% for fiscal 2023 and fiscal 2022,
respectively.
Impairment of Assets and Lease Termination Expenses
During fiscal 2023, we recorded impairment of assets and lease termination expenses of $29.5 million primarily
related to the impairment of long-lived assets for three The Cheesecake Factory (one previously partially impaired), one
North Italia (previously partially impaired), one Other FRC and two Other restaurant lease terminations.
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.
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
We recorded $11.7 million and $13.4 million of expense during fiscal 2023 and 2022, respectively, of
acquisition-related contingent consideration, compensation and amortization. In fiscal 2023, the fair value of the
contingent consideration and compensation liability decreased by $3.1 million due to a payment of $13.0 million per the
FRC acquisition agreement, partially offset by $9.9 million increase in the fair value primarily stemming from a change
in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the
calculation and amortization. In fiscal 2022, the fair value of the contingent consideration and compensation liability
increased by $4.7 million due to a $11.9 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.
Preopening Costs
Preopening costs were $25.4 million for fiscal 2023 compared to $16.8 million for fiscal 2022. We opened 16
restaurants in fiscal 2023 comprised of six The Cheesecake Factory, three North Italia, six Other FRC, and one Flower
Child location compared to 13 restaurants in fiscal 2022 comprised of three The Cheesecake Factory, four North Italia,
three Other FRC, and three Flower Child 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 2022 primarily relates to a higher number of openings and the mix of new
restaurant openings. Fiscal 2023 was also negatively impacted by delays in the timing of new restaurant openings that
resulted in additional costs.
48
Interest and Other Expense, Net
Interest and other expense, net was $8.6 million in fiscal 2023 compared to $6.0 million in fiscal 2022. This
increase was primarily due to higher interest on our Revolver Facility ($3.5 million), partially offset by higher interest
income due to higher cash balances in interest bearing accounts ($1.1 million).
Income Tax Benefit
In fiscal 2023, we had an income tax benefit of $1.3 million, an effective tax rate of (1.3%), compared to an
income tax benefit of $10.2 million, an effective tax rate of (31.1%), in fiscal 2022. The change was due primarily to a
smaller proportion of employment credits in relation to income before income taxes (49.4%), offset by a higher
proportion of non-taxable gains as compared to non-deductible losses in fiscal 2022 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 (12.1%), a lower tax shortfall in fiscal 2023 related to equity compensation (4.0%) and a
lower proportion of state taxes expense in relation to income before income taxes (3.5%). (See Note 17 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. We use these non-GAAP financial measures for financial and operational decision-making and as a
means to evaluate period-to-period comparisons. Our inclusion of these adjusted measures should not be construed as an
indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses
or generate income similar to the adjusted items.
Following is a reconciliation from net income and diluted net income per common share to the corresponding
adjusted measures (in thousands, except per share data):
2023
2022
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,351 $ 43,123
31,387
13,368
(11,637)
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,802 $ 76,241
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related contingent consideration, compensation and amortization expenses . .
Tax effect of adjustments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,464
11,686
(10,699)
Diluted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Impairment of assets and lease termination expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related contingent consideration, compensation and amortization expenses . .
Tax effect of adjustments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income per share (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.07 $
0.61
0.24
(0.22)
2.69 $
0.86
0.62
0.27
(0.23)
1.51
(1) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments
assumes a 26% tax rate.
(2) Adjusted net income per share may not add due to rounding.
49
Fiscal 2024 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 2024 to be approximately $3.6 billion. Including the 2.5% February 2024 price increase, we will have 4.5%
pricing in The Cheesecake Factory menu, and we will evaluate the level of pricing for the summer menu based on
inflationary trends.
During fiscal 2024, 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 low to mid-single digit range. However, there remains measurable risk
associated with cost fluctuations driven by the current environment. We estimate G&A expenses to be consistent with
fiscal 2023 as a percent of sales and preopening costs of approximately $28 million. Based on these factors, we expect
fiscal 2024 net income margin of approximately 4.25% at the estimated revenue.
We plan to open as many as 22 new restaurants in fiscal 2024, including three The Cheesecake Factory
restaurants, six to seven North Italia restaurants, six to seven Flower Child locations and six to seven restaurants within
our Other FRC business. We anticipate approximately $180 to $200 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 revenues for the first quarter of fiscal 2024 are expected to be between $875 million to $895 million,
including the impact from the inclement weather quarter-to-date. We anticipate commodity inflation to be in the low-
single digit range and expect labor inflation to be in the mid-single digit range. Based on these factors, we expect first
quarter fiscal 2024 net income margin of approximately 3.5% at the mid-point of the estimated revenue range.
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.
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.
50
During fiscal 2023, our cash and cash equivalents decreased by $58.5 million to $56.3 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
2023
2022
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related deferred consideration and compensation . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments on credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
218.4 $
(151.6)
(24.2)
15.0
(15.0)
(53.2)
(46.1)
161.9
(112.5)
(18.3)
130.0
(130.0)
(42.3)
(63.1)
Cash Provided by Operating Activities
Cash flows from operations increased by $56.5 million from fiscal 2022 primarily due to higher net income, a
higher payroll accrual due to the timing of payments and higher incentive compensation accrued in fiscal 2023 compared
to fiscal 2022 and the collection of our fiscal 2020 net operating loss carryback refund in fiscal 2022. These factors were
partially offset by timing of accounts payable disbursements in relation to the fiscal 2022 versus 2021 year-end dates and
higher sales tax payments in the first quarter fiscal 2023 due to the 53rd week of fiscal 2022 year. 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 $98.4 million and $55.1 million for fiscal 2023 and 2022, respectively. Capital expenditures also included $47.8
million and $51.8 million for our existing restaurants and $5.4 million and $5.6 million for bakery and corporate
capacity and infrastructure investments in fiscal 2023 and 2022, respectively.
We opened 16 restaurants in fiscal 2023 comprised of six The Cheesecake Factory, three North Italia, six Other
FRC and one Flower Child location compared to 13 restaurants in fiscal 2022 comprised of three The Cheesecake
Factory, four North Italia, three Other FRC and three Flower Child locations. We expect to open as many as 22 new
restaurants in fiscal 2024 across our portfolio of concepts, with approximately 75% of the openings occurring in the
second half of fiscal 2024. We anticipate approximately $180 to $200 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 2023 and 2022, we made payments of $11.3 million and $11.1 million, respectively, for deferred
consideration related to the FRC acquisition. During fiscal 2023 and 2022, we also made payments of $13.0 million and
$7.2 million, respectively for deferred consideration and contingent consideration related to the FRC acquisition.
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 2, 2024, the conversion rate for the Notes was 13.4936 shares of common stock per $1,000 principal amount of
the Notes, which represents a conversion price of approximately $74.11 per share of common stock. In connection with
the cash dividend that was declared by our Board on February 15, 2024, on March 5, 2024 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
51
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.)
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. On October
6, 2022, we repaid the outstanding balance under the prior credit facility and borrowed the same amount on the Revolver
Facility. In November 2023, we borrowed $15.0 million on the Revolver Facility and repaid it in December 2023. As of
January 2, 2024, we had net availability for borrowings of $236.5 million, based on a $130.0 million outstanding debt
balance and $33.5 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 2, 2024, 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.)
Common Stock Dividends
Common stock dividends of $53.2 million and $42.3 million were paid in fiscal 2023 and 2022, 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 14 of Notes to Consolidated Financial Statements in Part IV, Item
15 of this report, in February 2024, our Board declared a quarterly dividend to be paid in March 2024. 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 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 56.5 million shares at a total
cost of $1,811.7 million, excluding excise tax through January 2, 2024. We repurchased 1.4 million shares at a cost of
$46.1 million, excluding excise tax during fiscal 2023 compared to 2.0 million shares at a cost of $63.1 million fiscal
2022. 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
52
share repurchases based on a defined ratio. (See Note 14 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 2, 2024 (amounts in millions):
Payment Due by Period
Total
Less than
1 Year
1‑3 Years
4‑5 Years
More than
5 Years
Contractual obligations
Recorded contractual obligations:
Operating leases liabilities (1). . . . . . . . . . . . . . . . . . . . . . . . . $ 2,079.2 $
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions (2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
470.0
3.8
Unrecorded contractual obligations:
138.5 $ 291.3 $ 292.3 $ 1,357.1
—
—
340.0
3.5
130.0
—
—
0.3
Purchase obligations (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate obligations (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.5
222.3
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,069.2 $ 343.5 $ 698.0 $ 447.8 $ 1,579.9
78.7
126.0
101.4
414.8
19.9
43.3
2.3
23.2
Other commercial commitments
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
33.5 $
33.5 $ — $ — $ —
(1) Includes $710.3 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 17 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.
(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. Also includes the commitments associated with the
third bakery production facility.
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 $25.5 million at January 2, 2024. 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 2, 2024, 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.
53
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 FRC 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 $2.6 million to
$235.4 million at January 2, 2024 and $0 to $276.0 million at January 3, 2023. During fiscal 2023, the fair value of the
contingent consideration and compensation liability decreased by $3.1 million to $25.5 million due to a payment of
$13.0 million per the FRC acquisition agreement, partially offset by $9.9 million increase in the fair value primarily
stemming from a change in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future
revenues utilized in the calculation, and amortization. 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, 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. 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 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 2023, 2022 or
2021. (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
54
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 2023, we recorded $29.5 million of expense primarily related to the impairment of three The
Cheesecake Factory (one previously impaired), one North Italia (previously impaired), one Other FRC and two Other
restaurant lease terminations. 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. (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.
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.
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.
55
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 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 and macroeconomic events. The aggregate impact of these and other factors
contributed to significant cost inflation. While we have seen improvements in many of these areas, the absolute level of
commodity costs has remained elevated.
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 2024, 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 2023,
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 2023 and 2022, a hypothetical increase of 1% in food costs
would have negatively impacted food and beverage costs by $8.0 million and $8.1 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 2, 2024 and January 3, 2023, 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 2, 2024 and January 3, 2023, 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 $2.4 million
and $2.0 million at January 2, 2024 and January 3, 2023, 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.
56
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established and maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives,
and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. We carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of January 2, 2024.
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 2, 2024 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 2,2024.
The effectiveness of our internal control over financial reporting as of January 2, 2024 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 2, 2024 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.
57
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 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.
58
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 60 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
92.
ITEM 16. FORM 10-K SUMMARY
None.
59
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, Los Angeles, CA, Auditor Firm ID: 185) . 61
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . 66
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
60
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 2, 2024 and January 3, 2023, the related consolidated statements of income,
comprehensive income, stockholders’ equity and series A convertible preferred stock, and cash flows for each of the
years in the three-year period ended January 2, 2024, and the related notes (collectively, the consolidated financial
statements). We also have audited the Company’s internal control over financial reporting as of January 2, 2024, 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 2, 2024 and January 3, 2023, and the results of its operations and its
cash flows for each of the years in the three-year period ended January 2, 2024, 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 2, 2024 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
61
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 2, 2024 were $791.1 million and $1,302.2 million,
respectively. Based upon the analyses performed, the Company recognized pre-tax impairment charges for long-
lived assets of $29.5 million in fiscal year 2023.
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 restaurant 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 26, 2024
62
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
January 2,
2024
January 3,
2023
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,290 $
103,094
20,670
57,654
63,090
300,798
114,777
105,511
21,522
55,559
48,399
345,768
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
791,093
746,051
Other assets:
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
251,727
1,302,150
194,615
1,748,492
251,524
1,268,986
162,891
1,683,401
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,840,383 $ 2,775,220
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63,152 $
222,915
134,905
239,699
660,671
66,638
219,808
139,099
231,133
656,678
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 13)
Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; none issued . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued and outstanding . . . . . . . . . . . . . . . . . .
Common stock, $.01 par value, 250,000,000 shares authorized; 107,195,287 shares issued and 50,652,129 shares
outstanding at January 2, 2024 and 106,323,117 shares issued and 51,173,597 shares outstanding at January 3,
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock inclusive of excise tax, 56,543,158 and 55,149,520 shares at cost at January 2, 2024 and January 3,
2023, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
470,047
1,254,955
136,648
2,522,321
468,032
1,233,497
125,010
2,483,217
—
—
—
—
1,072
913,442
1,216,239
1,063
887,485
1,170,078
(1,811,997)
(694)
318,062
(1,765,641)
(982)
292,003
Total liabilities, Series A convertible preferred stock and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . $
2,840,383 $ 2,775,220
See the accompanying notes to the consolidated financial statements.
63
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(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 contingent consideration, compensation and
amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preopening costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings allocated to Series A preferred stock . . . . . . . . . . . . .
Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . .
2023
Fiscal Year
2022
2021
$ 3,439,503 $ 3,303,156 $ 2,927,540
803,500
1,227,895
922,428
217,449
93,136
29,464
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
11,686
25,379
3,330,937
108,566
(8,552)
100,014
(1,337)
101,351
—
—
13,368
16,829
3,264,221
38,935
(6,043)
32,892
(10,231)
43,123
—
—
43,123 $
19,510
13,711
2,845,222
82,318
(10,698)
71,620
(753)
72,373
(18,661)
(4,581)
49,131
$ 101,351 $
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.10 $
2.07 $
0.87 $
0.86 $
1.03
1.01
Weighted-average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,324
49,050
49,815
50,414
47,529
48,510
See the accompanying notes to the consolidated financial statements.
64
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
2023
Fiscal Year
2022
2021
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,351
Other comprehensive gain/(loss):
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on derivative, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive gain/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to Series A preferred stockholders . . . . . .
288
—
288
101,639
—
Total comprehensive income available to common stockholders . . . . . . . . . . . . . $ 101,639
$ 43,123 $ 72,373
(695)
—
(695)
42,428
—
34
3,464
3,498
75,871
(23,540)
$ 42,428 $ 52,331
See the accompanying notes to the consolidated financial statements.
65
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE
PREFERRED STOCK
(In thousands)
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
—
—
—
—
—
—
—
—
—
—
—
759
436
3,125
—
Additional
Paid-in
Amount Capital
Series A
Convertible
Preferred Stock
Shares Amount
$ 218,248
$
Common Stock
Shares
98,645
—
98,645
—
—
—
986
—
986
—
—
—
(4,763)
213,485
—
—
—
200
—
200
—
—
—
Stock
Retained
Earnings
$ 1,110,087 $ (1,696,743)
—
(1,696,743)
—
—
—
4,763
1,114,850
72,373
—
—
Accumulated
Other
Treasury Comprehensive
$
878,148
—
878,148
—
—
—
—
24,778
23,177
167,019
—
(283,637)
53,273
—
8
5
31
—
—
24
—
588
—
—
—
—
—
—
—
—
—
—
(5,766)
—
—
—
conversion . . . . . . . . . . . . . . . . . . . .
(150)
(160,114)
—
Series A preferred stock conversion to
common stock . . . . . . . . . . . . . . . . . .
(50)
(53,371)
2,401
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 . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . .
Cash dividends declared common stock, net
of forfeitures, $1.08 per share . . . . . . .
Stock-based compensation . . . . . . . . . . .
Treasury stock purchases, inclusive of
excise tax . . . . . . . . . . . . . . . . . . . . .
Balance, January 2, 2024 . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13,591)
—
105,366
—
—
—
1,054
—
—
—
862,758
—
—
(5,070)
1,169,150
43,123
—
—
(1,702,509)
—
—
—
788
—
8
—
24,644
(42,195)
—
—
—
83
—
887,485
—
—
—
—
1,170,078
101,351
—
—
(63,132)
(1,765,641)
—
—
169
—
106,323
—
—
—
872
—
1
—
1,063
—
—
—
9
—
107,195 $ 1,072 $
—
25,957
(55,190)
—
—
—
—
—
(55,190)
25,966
—
—
913,442 $ 1,216,239 $ (1,811,997) $
(46,356)
—
(694)
(46,356)
$ 318,062
$
Loss
Total
(3,785)
—
(3,785)
—
34
3,464
$ 288,693
4,763
293,456
72,373
34
3,464
—
—
—
—
—
588
24,786
23,182
167,050
(5,766)
—
(283,637)
—
—
—
(287)
—
(695)
53,297
(13,591)
(5,070)
330,166
43,123
(695)
—
—
(42,195)
24,652
—
—
(982)
—
288
84
(63,132)
292,003
101,351
288
See the accompanying notes to the consolidated financial statements.
66
THE CHEESECAKE FACTORY INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2023
Fiscal Year
2022
2021
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
101,351 $
43,123 $
72,373
Adjustments to reconcile net income 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 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 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
93,136
26,998
(15,715)
25,781
(98)
852
(2,092)
(14,694)
(27,113)
(14,504)
3,971
3,104
37,424
218,401
(151,565)
(1,658)
(274)
(153,497)
(24,243)
15,000
(15,000)
—
—
—
—
—
—
—
—
(53,207)
(46,085)
(123,535)
144
(58,487)
114,777
56,290 $
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
(112,464)
(680)
329
(112,815)
(18,316)
130,000
(130,000)
—
—
—
—
—
—
—
84
(42,272)
(63,132)
(123,636)
(325)
(74,850)
189,627
114,777 $
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
9,764 $
14,473 $
16,815 $
7,233 $
14,688 $
9,346 $
9,586
13,031
4,343
See the accompanying notes to the consolidated financial statements.
67
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 334 restaurants throughout the United States and
Canada under brands including The Cheesecake Factory® (216 locations), North Italia® (37 locations), Flower Child®
(32 locations) and a collection within our Fox Restaurant Concepts (“FRC”) portfolio (41 locations). Internationally, 33
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 years 2023 and 2021 each consisted of 52 weeks. Fiscal year 2022 consisted of 53 weeks. Fiscal year
2024 will consist of 52 weeks.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and
assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the
reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results
could differ from these estimates.
Geopolitical and Other Macroeconomic Impacts to our Operating Environment
During fiscal 2021 and 2022, the COVID-19 pandemic continued to affect our business during periods of
accelerated case counts in which we experienced 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. Along
with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events, causing
supply chain challenges and significantly increased commodity and wage inflation. Some of these factors continued to
impact our operating results in fiscal 2023, contributing to significantly increased commodity and other costs. We also
encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as
supply chain challenges.
The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer
behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and
delay in new restaurant openings. Any of these factors 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 $21.0 million and $19.1 million at January 2, 2024
and January 3, 2023, 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.
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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 these balances, 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 is 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 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.
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.
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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 2023, we recorded $29.5 million of expense primarily related to the impairment of long-lived assets for
three The Cheesecake Factory (one previously impaired), one North Italia (previously impaired), one Other FRC and
two Other restaurant lease terminations. 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. These amounts are recorded in impairment of assets and lease
terminations on the consolidated statements of income.
Intangible Assets
The following table presents components of intangible assets, net (in thousands):
Fiscal year ended
January 2, 2024 January 3, 2023
Indefinite-lived intangible assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade names and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transferable alcoholic beverage licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total indefinite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,451 $
234,341
7,923
243,715
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,602
3,410
8,012
251,727 $
5,092
3,221
8,313
251,524
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, 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 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 2023, 2022 and 2021 and concluded there was no impairment.
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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 2023, 2022 and 2021. We
concluded there was no impairment for fiscal 2023 and 2022 and recorded $1.3 million of impairment expense in fiscal
2021 related to licensing agreements. Amortization expenses related to our definite-lived intangible assets were $0.8
million, $0.7 million and $0.7 million for fiscal 2023, 2022 and 2021, respectively. Definite-lived intangible assets will
be amortized over one to 52 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. We recognized $7.3 million, $7.0 million and $6.8 million of gift card breakage in fiscal years 2023, 2022 and
2021, 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.
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
2023, we deferred and recognized previously deferred revenue of $27.5 million and $23.3 million, respectively, related
to promotional programs. 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.
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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
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.
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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.
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 15
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
$34.7 million, $24.0 million and $19.9 million in fiscal 2023, 2022 and 2021, respectively. The increase in fiscal 2023 is
primarily due to the launch of our Cheesecake RewardsTM program.
Preopening Costs
Preopening costs include all costs to relocate and compensate restaurant management staff members during the
preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our
opening training team and other support staff members. Also included are expenses for maintaining a roster of trained
managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in
alignment with future restaurant opening and operating needs, and corporate travel and support activities. We expense
preopening costs as incurred.
Income Taxes
We provide for federal, state and foreign income taxes currently payable and for deferred taxes that result from
differences between financial accounting rules and tax laws governing the timing of recognition of various income and
expense items. We recognize deferred income tax assets and liabilities for the future tax effects of such temporary
differences based on the difference between the financial statement and tax bases of existing assets and liabilities using
the statutory rates expected in the years in which the differences are expected to reverse. The effect on deferred taxes of
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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 per Share
Basic net income per share is computed by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock awards.
At January 2, 2024, January 3, 2023 and December 28, 2021, 2.9 million shares, 2.5 million shares and 2.1 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 per share is computed by dividing net income 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, restricted stock and restricted stock units are determined by the
application of the treasury stock method.
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.
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2023
Fiscal Year
2021
2022
(In thousands, except per share data)
Basic net income per common share:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,351 $ 43,123 $ 72,373
—
(18,661)
Dividends on Series A preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,581)
Undistributed earnings allocated to Series A preferred stock . . . . . . . . . . . . . . . . . . .
—
49,131
Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,351
47,529
Basic weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,324
1.03
Basic net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
—
43,123
49,815
2.10 $
0.87 $
Diluted net income per common share:
Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,351 $ 43,123 $ 49,131
85
—
Reallocation of undistributed earnings to Series A preferred stock . . . . . . . . . . . . . .
49,216
Net income available to common stockholders for diluted EPS . . . . . . . . . . . . . . . . . 101,351
47,529
Basic weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,324
Dilutive effect of equity awards (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
981
726
48,510
Diluted weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,050
1.01
Diluted net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
43,123
49,815
599
50,414
0.86 $
2.07 $
(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock
units of 2.9 million, 3.3 million and 1.9 million for fiscal 2023, 2022 and 2021, 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
Comprehensive income includes all changes in equity during a period except those resulting from investment
by and distribution to owners. Our comprehensive income consists of net income, unrealized gains 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 and would only be realized upon the sale or upon complete or substantially complete liquidation
of the business. Gains and losses from foreign currency transactions are recognized in our consolidated statements of
income in interest and other expense, net.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced
disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December
15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.
The amendments should be applied retrospectively to all prior periods presented in the financial statements.
Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures, which updates income tax disclosures related to the rate reconciliation and requires disclosure of income
taxes paid by jurisdiction. The amendment also provides further disclosure comparability. The amendments are effective
for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied
75
prospectively. However, retrospective application is permitted. Management is currently evaluating this ASU to
determine its impact on the Company’s disclosures.
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 contingent consideration and
Level 1
January 2, 2024
Level 2
Level 3
94,136 $
(93,979)
— $
—
—
—
compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(25,495)
Assets/(Liabilities)
Non-qualified deferred compensation assets . . . . . . . . . . . . . $
Non-qualified deferred compensation liabilities . . . . . . . . . .
Acquisition-related deferred consideration (1) . . . . . . . . . . . .
Acquisition-related contingent consideration and
compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 1
January 3, 2023
Level 2
Level 3
78,542 $
(78,286)
—
— $
—
(10,751)
—
—
—
—
—
(28,565)
(1) The final $11.3 million payment related to the Acquisition - related deferred consideration was made in fiscal
year 2023.
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. 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.
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 2, 2024 January 3, 2023
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28,565 $
(12,994)
9,924
25,495 $
23,894
(7,187)
11,858
28,565
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 $2.6 million to $235.4 million at January 2, 2024 and $0 to $276.0 million at January 3, 2023. Results could change
materially if different estimates and assumptions were used. During fiscal 2023, the fair value of the contingent
76
consideration and compensation liability decreased by $3.1 million due to a payment of $13.0 million per the FRC
acquisition agreement, partially offset by $9.9 million increase in the fair value primarily stemming from a change in the
volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the calculation
and amortization. During fiscal 2022, the fair value of the contingent consideration and compensation liability increased
by $4.7 million due to an $11.9 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 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 2, 2024 and January 3, 2023, 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 2, 2024 and January 3, 2023
was approximately $298.8 million and $282.9 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 increase
in the fair value of the Notes was primarily due to an increase in our stock price. 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 2, 2024 January 3, 2023
Gift card distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bakery customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landlord construction contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delivery partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
35,777 $
13,863
12,650
9,984
7,154
23,666
103,094 $
37,586
16,561
9,862
10,529
7,757
23,216
105,511
4. Inventories
Inventories consisted of (in thousands):
Restaurant food and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bakery finished goods and work in progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bakery raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32,283 $
16,230
9,141
57,654 $
30,783
17,250
7,526
55,559
Fiscal year ended
January 2, 2024 January 3, 2023
77
5. Prepaid Expenses
Prepaid expenses consisted of (in thousands):
Fiscal year ended
January 2, 2024 January 3, 2023
Gift card contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid rent (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,111 $
24,438
19,541
63,090 $
19,886
12,165
16,348
48,399
(1) The primary cause for the increase in prepaid rent expenses is a higher number of restaurants under construction
at January 2, 2024 where the lease has not yet commenced compared to the prior year.
6. Property and Equipment
Property and equipment consisted of (in thousands):
Fiscal year ended
January 2, 2024 January 3, 2023
Land and related improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furnishings, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant smallwares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
15,852 $
44,179
1,291,153
625,931
57,952
38,234
58,067
15,852
44,138
1,225,860
584,924
60,861
36,494
36,675
Property and equipment, total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,131,368
(1,340,275)
$
791,093 $
2,004,804
(1,258,753)
746,051
Depreciation expenses related to property and equipment for fiscal 2023, 2022 and 2021 were $92.9 million,
$92.1 million and $89.4 million, respectively. Repair and maintenance expenses for fiscal 2023, 2022 and 2021 were
$99.5 million, $89.1 million and $77.4 million, respectively and are recorded in other operating costs and expenses. Net
(income)/expense for property and equipment disposals was ($0.4) million, $1.6 million and $1.1 million, in fiscal 2023,
2022 and 2021, respectively.
7. Other Assets
Other assets consisted of (in thousands):
Fiscal year ended
January 2, 2024
January 3, 2023
Non-qualified deferred compensation assets (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred income taxes (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
94,136 $
91,944
8,535
194,615 $
78,542
76,245
8,104
162,891
(1) See Note 16 for further discussion of our non-qualified deferred compensation assets.
(2) See Note 17 for further discussion of our income taxes.
78
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
219,808 $
140,647
(137,540)
222,915 $
211,182
152,368
(143,743)
219,808
Fiscal year ended
January 2, 2024 January 3, 2023
Gift card contract assets: (1)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,886 $
14,957
(15,732)
19,111 $
18,468
16,440
(15,022)
19,886
Fiscal year ended
January 2, 2024 January 3, 2023
(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 2, 2024 January 3, 2023
Self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Salaries and wages (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Staff member benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and sales taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred consideration (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
71,546 $
51,040
28,951
20,365
18,973
—
48,824
239,699 $
71,872
43,402
27,332
24,861
12,713
10,751
40,202
231,133
(1) The increase in accrued salaries and wages was primarily due to the timing of payroll disbursements in relation
to the fiscal 2023 versus 2022 year-end dates.
(2) The final $11.3 million payment related to the Acquisition-related deferred consideration was made in fiscal
year 2023.
10. Long-Term Debt
Revolving 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.
79
On October 6, 2022, we repaid the outstanding balance under the then-existing credit agreement and borrowed
the same amount on the Revolver Facility. In November 2023, we borrowed $15.0 million on the Revolver Facility and
repaid it in December 2023. As of January 2, 2024, we had net availability for borrowings of $236.5 million, based on a
$130.0 million outstanding debt balance and $33.5 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 prior credit agreement.
At January 2, 2024, we were in compliance with all covenants in effect at that date.
Borrowings under the Loan Agreement bear interest, at our 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%. We 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
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
80
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 2, 2024, the conversion rate for the Notes was 13.4936 shares of common stock per $1,000 principal amount of
the Notes, which represents a conversion price of approximately $74.11 per share of common stock. In connection with
the cash dividend that was declared by our Board on February 15, 2024, on March 5, 2024 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.
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 2, 2024, the Notes had a gross principal balance of $345.0 million and a balance of $340.0
million, net of unamortized issuance costs of $5.0 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, $2.0 million and $1.1 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively and was included
81
in interest expense in the consolidated statements of income. The effective interest rate for the Notes was 0.96% as of
January 2, 2024.
11. Leases
Components of lease expense were as follows (in thousands):
2023
Fiscal Year
2022
2021
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 145,774 $ 140,351 $ 131,834
73,909
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
283
Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 232,963 $ 222,052 $ 206,026
87,047
142
81,585
116
Supplemental information related to leases (in thousands, except percentages):
Fiscal Year
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Right-of-use assets obtained in exchange for new operating lease liabilities . . . .
Weighted-average remaining lease term — operating leases (in years) . . . . . . . .
Weighted-average discount rate — operating leases . . . . . . . . . . . . . . . . . . . . . . .
145,836 $
103,661
14.9
5.3 %
149,624
86,187
15.2
5.0 %
As of January 2, 2024, the maturities of our operating lease liabilities were as follows (in thousands):
Fiscal year 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,459
146,828
Fiscal year 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
144,453
Fiscal year 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142,444
Fiscal year 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149,919
Fiscal year 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,357,092
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,079,195
Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(689,335)
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,389,860
Operating lease liabilities include $710.3 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $280.7 million of legally binding minimum lease payments for leases signed but
not yet commenced.
12. Other Noncurrent Liabilities
Other noncurrent liabilities consisted of (in thousands):
Non-qualified deferred compensation liabilities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Contingent consideration and compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
93,979 $
25,495
17,174
136,648 $
78,286
28,565
18,159
125,010
(1) See Note 16 for further discussion of our non-qualified deferred compensation assets and liabilities.
Fiscal year ended
January 2, 2024 January 3, 2023
82
13. Commitments and Contingencies
Purchase obligations, which include inventory purchases, equipment purchases, information technology and
other miscellaneous commitments, were $101.4 million and $129.9 million at January 2, 2024 and January 3, 2023,
respectively. These purchase obligations are primarily due within three years and recorded as liabilities when goods are
received or services rendered. Real estate obligations, which include construction commitments, net of up-front landlord
construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were
$414.8 million and $252.4 million at January 2, 2024 and January 3, 2023, respectively.
The FRC acquisition agreement included a contingent consideration provision of which the remainder is
payable annually from 2024 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 $25.5 million at January 2, 2024. 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 $33.5 million and $31.5 million at January 2, 2024 and January 3,
2023, 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 $71.5 million and $71.9 million at January 2, 2024 and January 3, 2023,
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
settlement of all claims. We reserved an immaterial amount for settlement purposes. Final payment under the settlement
agreement was made in October 2023 following the final agency approval.
On February 10, 2023, a class action complaint was filed against the Company in the United States District
Court for the Southern District of California (Lightoller vs. TCF Co. LLC., Case No. 3:23-cv-00272-AJB-NLS), alleging
violations of state privacy laws. The lawsuit alleges that the Company violated state wiretapping and privacy laws by
improperly tracking and/or recording the keystrokes of visitors on the Company’s website without permission. A similar
case was filed in the United States District Court for the District of Maryland on February 21, 2023 (Curd v. TCF CO.
LLC; Civil Action No. 1:23-cv-00472-JMC). On May 10, 2023, the plaintiffs in Case Nos. 3:23-cv-00272 and 1:23-cv-
00472 voluntarily dismissed their complaints against the Company without prejudice.
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
83
operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits,
audits, proceedings or claims. Legal costs related to such claims are expensed as incurred.
We have employment agreements with certain of our executive officers that provide for payments to those
officers in the event of an actual or constructive termination of their employment, including in the event of a termination
without cause, an acquirer failure to assume or continue equity awards following a change in control of the Company or,
otherwise, in the event of death or disability as defined in those agreements. Aggregate payments totaling approximately
$3.4 million, excluding accrued potential bonuses of $2.6 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 2, 2024. 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.
14. Stockholders’ Equity
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
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, our Board declared a quarterly dividend in the second quarter of
fiscal 2022 and has declared quarterly dividends since then. Our Board declared dividends of $1.08 per common share in
the aggregate during fiscal 2023. 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 56.5 million shares at a total
cost of $1,811.7 million, excluding excise tax, through January 2, 2024. During fiscal 2023, 2022 and 2021, we
repurchased 1.4 million, 2.0 million and 0.1 million shares of our common stock at a cost of $46.1 million, $63.1 million
and $5.8 million, excluding excise tax, 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 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 our Loan Agreement that limit share repurchases
based on a defined ratio. (See Note 10 for further discussion of our long-term debt.)
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,
84
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.
15. 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 3.1 million of these shares were available for grant as of January 2, 2024.
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.
85
The following table presents information related to stock-based compensation, net of forfeitures (in thousands):
2023
Fiscal Year
2022
2021
Labor expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,856
311
13,821
22,988
5,646
Total stock-based compensation, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,344 $ 18,399 $ 17,342
9,590 $
321
14,515
24,426
6,026
9,914 $
318
15,549
25,781
6,437
Capitalized stock-based compensation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
185 $
226 $
194
(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
The weighted-average fair value at the grant date for options issued during fiscal 2023 was $15.76 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 6.7 years, (b) expected stock price volatility of 45.2%, (c) a risk-
free interest rate of 4.0% and (d) a dividend yield on our stock of 2.7%. We did not issue any stock options during fiscal
2022 or 2021.
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 2023 was as follows:
Weighted-
Average
Shares
(In thousands)
Exercise Price
(Per share)
Weighted-
Average
Remaining
Contractual
Term
(In years)
Aggregate
Intrinsic Value (1)
(In thousands)
Outstanding at beginning of year . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or cancelled . . . . . . . . . . . . . . . . . . . . . .
Outstanding at end of year . . . . . . . . . . . . . . . . . .
1,685 $
40 $
— $
(175) $
1,550 $
46.11
40.42
—
48.01
45.75
4.2 $
3.8 $
Exercisable at end of year . . . . . . . . . . . . . . . . . .
1,199 $
47.11
3.1 $
0
0
0
(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.
There were no options exercised during fiscal 2023. The total intrinsic value of options exercised during fiscal
2022 and 2021 was $4.9 million and $7.1 million, respectively. As of January 2, 2024, total unrecognized stock-based
86
compensation expense related to unvested stock options was $1.5 million, which we expect to recognize over a
weighted-average period of approximately 1.3 years.
Restricted Shares and Restricted Share Units
Restricted share and restricted share unit activity during fiscal 2023 was as follows:
Weighted-
Average
Shares
(In thousands)
Fair Value
(Per share)
Outstanding at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,512 $
1,005 $
(501) $
(130) $
2,886 $
41.93
37.73
43.59
39.77
40.28
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 2023, 2022 and
2021 was $37.73, $36.84 and $49.57, respectively. The fair value of shares that vested during fiscal 2023, 2022 and
2021 was $21.8 million, $18.5 million and $15.4 million, respectively. As of January 2, 2024, total unrecognized stock-
based compensation expense related to unvested restricted shares and restricted share units was $57.1 million, which we
expect to recognize over a weighted-average period of approximately 2.9 years.
16. 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 2023, 2022 and 2021 was $2.3 million, $2.1
million and $2.1 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
2023, 2022 and 2021 was $1.3 million, $1.4 million and $1.2 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.
We maintain self-insured medical and dental benefit plans for our staff members. The accrued liabilities
associated with these programs are based on our estimate of the ultimate costs to settle known claims as well as claims
incurred but not yet reported to us as of the balance sheet date. The accrued liability for our self-insured benefit plans,
87
which is included in other accrued expenses, was $11.3 million and $14.0 million as of January 2, 2024 and January 3,
2023, respectively. (See Note 1 for further discussion of accounting for our self-insurance liabilities.)
17. Income Taxes
The provision for income taxes consisted of the following (in thousands):
2023
Fiscal Year
2022
2021
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,014 $ 32,892 $
Income tax provision/(benefit):
Current:
71,620
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,183 $
7,195
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,378
3,520 $
4,895
8,415
15,746
4,350
20,096
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,329) (17,733) (20,434)
(415)
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,715) (18,646) (20,849)
(753)
Total benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,337) $ (10,231) $
(386)
(913)
The following reconciles the U.S. federal statutory rate to the effective tax rate:
Fiscal Year
2023
2022
2021
U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and district income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . .
Credit for FICA taxes paid on tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other credits and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of net operating loss carryback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible executive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.0 %
5.4
(24.9)
(2.2)
0.0
(2.4)
1.5
(0.7)
0.8
0.2
(1.3) %
21.0 %
8.9
(66.4)
(10.7)
0.0
9.7
5.5
(2.3)
2.8
0.4
(31.1) %
21.0 %
4.2
(24.2)
(4.2)
(6.3)
(2.9)
0.0
10.3
0.3
0.7
(1.1) %
On March 27, 2020, the CARES Act was signed into law. It included provisions allowing for the carryback of
net operating losses generated in fiscal years 2018, 2019 and 2020. 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 2023 provision for
income taxes relating to these amounts.
88
Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):
January 2, 2024 January 3, 2023
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
35,932 $
14,931
324,587
38,074
74,004
22,743
10,789
1,640
674
523,374
(1,444)
521,930 $
31,325
14,374
323,094
35,928
57,710
21,331
10,769
2,435
604
497,570
(1,223)
496,347
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(121,219) $
(8,933)
(8,882)
(5,889)
(284,244)
(819)
(429,986) $
(113,565)
(8,151)
(8,399)
(5,285)
(283,921)
(781)
(420,102)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
91,944 $
76,245
At January 2, 2024 and January 3, 2023, we had $72.8 million and $56.5 million, respectively of U.S. federal
credit carryforwards which begin to expire in 2038 and $1.6 million and $1.6 million, respectively, of state hiring and
investment credits which begin to expire in 2024. At January 2, 2024 and January 3, 2023, we had $2.3 million and $2.5
million, respectively of foreign net operating loss carryforwards which begin to expire in 2038 and $27.4 million and
$46.6 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 2, 2024 and January 3, 2023 we carried a
valuation allowance of $1.4 million and $1.2 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.
At January 2, 2024, 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):
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,787 $
181
(121)
—
3,847 $
4,799 $
227
(54)
(1,185)
3,787 $
655
4,157
(13)
—
4,799
2023
Fiscal Year
2022
2021
89
At January 2, 2024 and January 3, 2023, we had $1.4 million and $2.2 million, respectively, of accrued interest
and penalties related to uncertain tax positions. $0.3 million of the balance of uncertain tax positions at January 2, 2024
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.
18. 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
and our bakery division. 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 and our bakery division) along with our businesses that do
not qualify as operating segments are combined in Other. Unallocated corporate expenses, capital expenditures and
assets are also combined in Other.
90
Segment information is presented below (in thousands):
Revenues:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,595,066 $
258,878
263,923
321,636
3,439,503 $
2,528,043 $
228,622
237,552
308,939
3,303,156 $
2023
Fiscal Year
2022
2021
2,293,225
171,901
182,175
280,239
2,927,540
Income from operations:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
297,063 $
18,515
19,422
(226,434)
108,566 $
220,765 $
13,934
23,577
(219,341)
38,935 $
242,599
8,624
16,323
(185,228)
82,318
Depreciation and amortization expenses:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
64,206 $
6,407
7,916
14,607
93,136 $
20,401 $
1,015
2,582
5,466
29,464 $
12,857 $
5,058
6,482
982
25,379 $
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 $
Capital expenditures:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
80,752 $
26,882
27,562
16,369
151,565 $
65,996 $
14,818
18,895
12,755
112,464 $
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
Total assets:
The Cheesecake Factory restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North Italia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other FRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,571,943 $
346,810
399,038
522,592
2,840,383 $
1,625,073 $
306,642
301,618
541,887
2,775,220 $
1,653,161
270,029
276,369
598,566
2,798,125
(1) Fiscal 2023, 2022 and fiscal 2021 include $11.7 million, $13.4 million and $19.5 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.
19. Subsequent Events
On February 15, 2024, our Board declared a quarterly cash dividend of $0.27 per share to be paid on March 19,
2024 to the stockholders of record of each share of our common stock at the close of business on March 6, 2024.
91
EXHIBIT INDEX
Exhibit
No.
2.1
Form of Reorganization Agreement(P)
Item
Incorporated by
Reference from
Exhibit Number
2.1
Filed with
SEC
8/17/92
File Number
33-479336
Form
Amend.
No. 1
to
Form S-1
2.2
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#†
2.3
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#†
2.4
2.5
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
Cheesecake Factory Incorporated
3.2
Bylaws of The Cheesecake Factory
8-K
000-20574
3.2
3.1
8/6/18
11/01/22
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
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
92
Exhibit
No.
4.2
4.3
Item
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
Form
8-K
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
4.1
Filed with
SEC
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
Amended and Restated Employment
10-Q
000-20574
10.1
8/7/23
Agreement, effective as of April 5, 2023,
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*
10.6.1 Amended and Restated The Cheesecake
Factory Incorporated Executive Savings
Plan*
10-K
000-25074
10.20
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
93
Exhibit
No.
10.9.1 The Cheesecake Factory Incorporated 2010
Item
Form
DEF 14A
File Number
000-20574
Stock Incentive Plan as amended April 7,
2011*
Incorporated by
Reference from
Exhibit Number
Appendix A
Filed with
SEC
4/21/11
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
10.13 Form of Notice of Grant and Stock Option
8-K
000-20574
99.2
3/4/16
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-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
94
Item
Exhibit
No.
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
10-K
File Number
000-25074
Incorporated by
Reference from
Exhibit Number
10.24.4
Filed with
SEC
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
Incentive Plan*
10.15.2 The Cheesecake Factory Incorporated Stock
Incentive Plan, as amended March 24, 2022*
8-K
000-20574
10.15.3 Form of Notice of Grant and Stock Unit
10-Q
000-20574
10.1
10.1
10.1
6/5/19
5/23/22
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-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
95
Exhibit
No.
10.16 2015 Amended and Restated Performance
Incentive Plan (Amended and Restated on
September 2, 2020)*
Item
10.17 Registration Rights Agreement, dated April
20, 2020, by and between The Cheesecake
Factory Incorporated and RC Cake Holdings
LLC
10.18 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
Form
8-K
File Number
000-20574
Incorporated by
Reference from
Exhibit Number
10.1
Filed with
SEC
9/8/20
8-K
000-20574
10.2
4/20/20
10-Q
000-20574
10.02
5/3/21
10.19 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
97.1
The Registrant’s Policy for Recover of
Erroneously Awarded Compensation
—
—
—
—
—
—
—
—
—
Filed
herewith
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 2, 2024, 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 2, 2024, 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 26th day of
February, 2024.
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.
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 26, 2024
February 26, 2024
/s/ ASHLEY W. HANSCOM
Ashley W. Hanscom
Vice President, Controller
February 26, 2024
(Principal Accounting Officer)
/s/ EDIE A. AMES
Edie A. Ames
Director
February 26, 2024
/s/ ALEXANDER L. CAPPELLO
Alexander L. Cappello
Director
February 26, 2024
/s/ KHANH COLLINS
Khanh Collins
/s/ ADAM S. GORDON
Adam S. Gordon
Director
February 26, 2024
Director
February 26, 2024
/s/ JEROME I. KRANSDORF
Jerome I. Kransdorf
Director
February 26, 2024
/s/ JANICE MEYER
Janice Meyer
Director
February 26, 2024
/s/ LAURENCE B. MINDEL
Laurence B. Mindel
Director
February 26, 2024
/s/ DAVID B. PITTAWAY
David B. Pittaway
/s/ HERBERT SIMON
Herbert Simon
Director
February 26, 2024
Director
February 26, 2024
99
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
David Overton
Chairman of the Board and
Chief Executive Officer
The Cheesecake Factory Incorporated
Edie A. Ames
Chief Executive Officer
Tastes on the Fly Airport Restaurant Group
Alexander L. Cappello
Chairman and Chief Executive Officer
Cappello Global, LLC
Khanh Collins
Chief Executive Officer
Sustainable Restaurant Group
Adam S. Gordon
Managing Director
Gordon Property Group
Jerome I. Kransdorf
President Emeritus
JaK Direct
Janice L. Meyer
Co-Founder and Managing Partner
Rellevant Partners
Laurence B. Mindel
Managing Partner
Poggio Trattoria
David B. Pittaway
Vice Chairman, Senior Managing Director,
Senior Vice President, Secretary and Chief
Compliance Officer
Castle Harlan, Inc.
EXECUTIVE OFFICERS
David Overton
Chairman of the Board and
Chief Executive Officer
David M. Gordon
President
Matthew E. Clark
Executive Vice President and
Chief Financial Officer
Scarlett May
Executive Vice President, General
Counsel, and Secretary
Keith T. Carango
President – Bakery Division
SHAREHOLDER INFORMATION
INDEPENDENT ACCOUNTANTS
KPMG LLP
Los Angeles, California
TRANSFER AGENT, REGISTRAR AND
DIVIDEND PAYMENTS
Computershare Shareholder Services
P.O. Box 505005
Louisville, KY 40233-5005
(800) 962-4284
INQUIRIES
Communications regarding lost certificates
and name and address changes should be
directed to our Transfer Agent. Other investor
inquiries should be directed to:
Etienne Marcus
Vice President, Finance and Investor Relations
The Cheesecake Factory Incorporated
26901 Malibu Hills Road
Calabasas Hills, CA 91301
(818) 871-3000
Website
To learn more about our Company,
please visit
www.thecheesecakefactory.com
www.northitalia.com
www.iamaflowerchild.com
www.foxrc.com
To learn about our sustainability initiatives,
please visit
https://www.thecheesecakefactory.com/corpor
ate-social-responsibility
The content of our websites and Corporate
Social Responsibility Reports are not
incorporated by reference into this Annual
Report.
26901 MALIBU HILLS ROAD
CALABASAS HILLS, CA 91301
WWW.THECHEESECAKEFACTORY.COM