Washington Post on Cheesecake Factory.
August 3, 2002
Wait of Success
By Sabrina Jones
One Saturday night last winter, John and Heather Amos came to town hoping for a quick dinner before catching an act at a comedy club.
But they wanted to eat at the Cheesecake Factory. That meant that after the 40-minute drive from their home in Centreville, the Amoses collided with the early crowd at the two-level, glass-enclosed restaurant on Wisconsin Avenue NW. It was around 7:15 when they waded through the bodies pressed together in the entryway to add their name to the waiting list. They were told they might have to cool their heels for more than two hours. They took a pager, found a spot by the first-floor bar and grimaced between sips of Pinot Grigio. By 8:40 they were worrying that they would lose their reservation for the 10:30 show at the Improv.
No wonder, the Amoses said, they visit the restaurant only once a year or so. They have run into similar lines at the chain's two other area restaurants, at White Flint Mall in Bethesda and Baltimore's Inner Harbor.
"We've been here at 5 p.m., and they still tell us it's a two-hour wait," said Heather Amos, 34.
And yet there they were, once again.
To some, a two-hour wait may be too high a price to pay for a $6.95 slice of cheesecake. But the lines seem only to enhance the draw of the Cheesecake Factory, which has weathered shaky economic times that have bruised some other chain restaurants. Even without advertising, the Calabasas Hills, Calif.-based chain of 52 restaurants has developed a phenomenally loyal following among customers from Beverly Hills to Bethesda. In fact, word of mouth precedes its arrival in every new market.
But the restaurant's mystique doesn't seem to owe all that much to the 35 flavors of its incredibly sweet trademark cheesecake. Nor does it have to do with America's legendary appetite, as people often surmise, given the Great Dane-size portions that emerge from Cheesecake Factory kitchens. Rather, it seems to be an inspired combination of decor and what Cheesecake Factory founder David Overton once called "kicked-up coffee-shop food."
In other words, a visually interesting, even opulent, setting in tandem with food that's not intimidating.
The would-be diners waiting in those seemingly permanent lines may be interested to know that they help the typical Cheesecake Factory ring up $11 million in sales a year. That's about $1,000 per square foot, the highest among the nation's restaurant chains, according to Richard Papiernik, financial editor of Nation's Restaurant News, a trade publication. That's more than three times the industry average of $254 per square foot for restaurants with average checks of $15 to $25, according to the Washington-based National Restaurant Association.
Cheesecake Factory sites are in some of the nation's best -- meaning most expensive -- restaurant locales, according to analysts who cover the company, which has been publicly traded since 1992.
As habitues know, Cheescake Factory's food is outlined in an 18-page spiral-bound menu that resembles the kind of glossy visitor's guide you might find in a four-star hotel, including full-page ads. Nearly as overwhelming as the size of the servings is the number of items offered: 200, covering the gamut from a $9.95 asparagus, portobello mushroom and artichoke omelet to $15.95 grilled pork chops to a 1,560-calorie slice of carrot cake cheesecake.
There are nachos and salads and chicken every which way. "We say, 'There are no veto votes when it comes to Cheesecake Factory,' " Overton said in a 2000 interview with Nation's Restaurant News, alluding to the kiss of death for a specialty restaurant when one member of a dinner party pipes up with, "Anything but Mexican/Chinese/fish." Not here.
For all the lush murals, palm trees and faux Egyptian columns, the average guest check, including drinks and dessert, is $15.70.
"I think the food is good, for a reasonable price," said Heather Amos, minutes before 9 p.m., when her pager finally started to vibrate. "You could get lesser-quality food and pay the same amount."
The chain calls itself "King of the Doggy Bags," a reference to those serving sizes. Servers often warn visitors that an appetizer alone may be enough to satisfy their hunger, that entrees are large enough to serve as two or more meals.
Of course, there are some who do not like the chain.
"Critics never love Cheesecake Factory," Overton told Nation's Restaurant News. "They don't understand it. We take every recipe and, on purpose, 'Cheesecake-ize' it so it's not like any other rendition of the Caesar salad or of a chicken this or a chicken that."
Cheesecake Factory had only four restaurants, all in the Los Angeles area, when it decided in 1991 to open a restaurant in Washington, in the new Chevy Chase Pavilion. That was followed by the White Flint store in 1994 and the 1996 opening at Baltimore's Inner Harbor.
Anyone who has tried to eat at one of these restaurants won't be surprised to learn that all three carry heavy traffic loads and more than meet the chain's average of more than 3,000 customers a day, company officials said.
The company last month announced a plan to open 12 restaurants this fiscal year, including sites in Fort Lauderdale, Fla., Summerlin, Nev., and Edina, Minn.
But a chain is a chain, right? It expands, the lines form, the quality starts to drop, the lines fade away? Maybe, maybe not.
"Customers know the difference between going to lunch at an Applebee's and a TGI [Friday]'s and having lunch at a Cheesecake Factory," said David Farkas, senior editor of Chicago-based Chain Leader, a monthly magazine that covers restaurant chains. "Cheesecake Factory is also . . . more of a destination restaurant than a restaurant in a neighborhood."
"Everybody likes it," said Lynne Collier, a restaurant analyst with Stephens Inc. in Dallas. "It's one of the few restaurants I cover where I don't get complaints about service, and I don't get complaints about food."
But there is some backlash to the company's success. Cheesecake Factory was ranked by readers in last month's issue of Washingtonian magazine as the No. 1 "restaurant not worth the wait," just ahead of Outback Steakhouse and District hot spot Lauriol Plaza.
"If they have any trouble attracting people, it's because the lines are so long," said Farkas, unwittingly echoing Yogi Berra's famous line, "That place is so popular no one goes there anymore."
That doesn't seem to be the case, judging from the chain's financial standing. Its second-quarter 2002 income climbed 30 percent to $13.2 million on revenue of $165.4 million, which rose 25 percent from the second quarter last year. Sales at restaurants open at least a year were also up 1.6 percent -- so much for shorter lines -- the 40th straight quarter of positive same-store sales.
Everything at the company appears to be super size, not just the portions or the Egyptian columns. Cheesecake Factory's stock sells for about 40 times the estimated 2002 earnings per share, prompting some to call it overpriced. The company has boosted its original blueprint from 150 U.S. restaurants to as many as 200.
But Cheesecake Factory is tiny in one way: In the Nation's Restaurant News listing of top 100 chains, Cheesecake, No. 1 in estimated sales per unit, is No. 99 for the total number of units. Fifty-two locations is a far cry from Outback's 667, Olive Garden's 490 or even Bennigan's 279.
Born in a Basement
The Cheesecake Factory story dates to 1949, in the Detroit basement of Oscar and Evelyn Overton. Evelyn Overton baked New York-style cheesecakes for her husband's employer, who would order additional cheesecakes as gifts. Overton expanded the business into a small-scale wholesale bakery that continued to operate out of the basement. Her son David and daughter Rénee folded pink cardboard cake boxes for a penny a box.
In the early 1970s, after studying law and playing rock 'n' roll in California, David Overton persuaded his parents to move to the West Coast to set up a full-time cheesecake bakery. The Cheesecake Factory bakery opened in 1972. Six years later, Overton opened a Cheesecake Factory restaurant in Beverly Hills as a showcase for his mother's product. The first menu featured cappuccino, omelets, sandwiches, desserts -- and huge portions.
It took him 13 years to branch out beyond California but only 10 years after that to open 47 more restaurants.
Cheesecake Factory's interest 20 years later in the Washington area is no surprise, given what became the chain's business model. It puts restaurants where there are 250,000 people within five miles, with household incomes of $50,000 to $75,000, said Howard Gordon, senior vice president of business development and marketing. The Wisconsin Avenue restaurant did even better, with an average household income of $96,603 and an estimated population of 532,034, according to market research firm Claritas Inc. The average household income around the White Flint store is $102,683, Claritas says.
Three-quarters of Cheesecake Factory's locations are in shopping centers, and the chain became known as a mall anchor because of the crowds it draws. The company is considering opening in affluent Tysons Corner, Gordon said.
When looking for locations, the company can compete with such highbrow retail tenants as Macy's and Nordstrom for prominent spots in malls, said Collier, the restaurant analyst. Cheesecake Factory estimates that its landlords sometimes pay 30 percent to 40 percent of its building costs.
White Flint Mall may be an example of why landlords would do that. The mall "was dying," said Gregg Urich, who was the restaurant's general manager when it opened in 1994 and who now runs the Old Hickory Grille restaurant in Falls Church. "People were eating on [Rockville] Pike. Where they were eating, they were shopping. They weren't doing it at White Flint Mall. [Tenants] would come up to me and say, 'Man, I'm glad you're here.' " Some merchants told him that after the Cheesecake Factory opened, their sales increased up to 30 percent, he said.
Other chains, including Dave & Buster's and P.F. Chang's, followed, and helped further revitalize the mall, Urich said.
The company's goal of opening 18 to 20 units a year may run into problems, depending on the economy and industry factors, Papiernik said.
"My biggest concern is the staffing, the training that's involved and the ability to get staff to match the people who they have in there now," Papiernik said. "There's a lot of good hiring and training that goes into that. There's been a lot of building plans in the industry that have been held back by the lack of proper staffing."
But the Cheesecake Factory's idea of offering moderately priced food to affluent people in upscale neighborhoods has an upside for the staff and the neighbors. In the Washington area, the white-shirted servers earn a base wage of $3.38 an hour, but each can pocket more than $150 a night in tips. Analysts estimate that a Cheesecake Factory general manager can earn more than $100,000 a year, double the industry average, and is offered such incentives as stock options and leased BMWs.
Night Out
One recent evening in the District, the Cheesecake Factory demonstrated its appeal to young and old, professionals and students, dates and colleagues, for business and pleasure.
Shaneka Harris, a 19-year-old Howard University political-science major, treated her date, Howard advertising major Derrick Simpson, 21, to dinner at the Wisconsin Avenue Cheesecake Factory, a welcome change from takeout pizza and McDonald's, she said. The restaurant is also convenient, across the street from the Friendship Heights Metro stop, Harris said above the chatter and pop music.
"It's too noisy to be romantic, but it's not that bad," Harris said as she waited for her order of chicken and pasta. "It's better than going to Ruby Tuesday's or TGI Friday's. This is a little more upscale."
Downstairs, District lawyer Catherine Schmitt relaxed with two of her co-workers during a "girls' night out." Her law firm, Tobin, O'Connor & Ewing, has its offices upstairs and has ordered Cheesecake Factory meals for the staff, including some of her favorites: chicken tenders, Southern fried chicken salad and blackout cake, a chocolate cake filled with chocolate chips and covered with almonds.
"We've done business meetings over lunch here," said Schmitt, who lives in Bethesda.
Burr Ault, vice president of leasing of Lowe Enterprises Mid-Atlantic, which manages Chevy Chase Pavilion, said the Cheesecake Factory, which is across the street from high-end retailer Neiman Marcus, has been a consistent draw for the mall. Its steady flow of customers has attracted the interest of other retailers, who expect a spillover of customers, Ault said.
"Retailers view the presence of Cheesecake Factory as a positive because of the customer profile and because of the success of the restaurant," Ault said. "The kind of customer that goes to a Cheesecake Factory is a customer that national retailers are interested in being exposed to."
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