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Cheesecake Factory succeeds with indulgence for the common man

The restaurant with high-calorie menus and high-grossing locations is on the rebound. With stock near an all-time high, it's easing back into expansion mode.

June 15, 2013|By Tiffany Hsu
  • Cheesecake Factory founder David Overton says: “It’s hard to make delicious food without some calories. The hard-core guest wants what they want, they have their favorites and that’s what they order.”"
Cheesecake Factory founder David Overton says: “It’s hard… (Bethany Mollenkof, Los…)

The Cheesecake Factory is at once an ostentatious den of dining and decorative excess as well as a homespun throwback to family tradition.

Witness the florid murals and French-inspired checked floors, the dozens of cheesecakes in sumptuous flavors such as white chocolate caramel macadamia and the calorie-laden dishes that regularly land the chain on extreme eating lists.

But behind the extravagant menu and interior design, there's a classically American story involving an entrepreneurial housewife and a cheesecake tweaked from a newspaper recipe.

The business has its roots in Detroit after World War II, when Evelyn Overton sold baked goods from her home kitchen so that she could keep an eye on her young children. A quarter-century later, she and her husband, Oscar, relocated to Southern California with $10,000 to their names.

Inspired by their work, their son David Overton eventually opened the first Cheesecake Factory restaurant in Beverly Hills in 1978, using money that his accountant helped raise.

"I didn't know what I was doing," Overton, 67, said recently over a lunch of sliders, iced green tea and a cup of tortilla soup. "And I really didn't like the name — I thought we had so much more to offer."

"But in the end," he said, "I couldn't think of another name."

In its first year, the Cheesecake Factory made no money. Now 35 years old and based in Calabasas, the company earns nearly $2 billion a year in revenue. Celebrities such as Halle Berry and Justin Bieber have been known to drop in, Overton said.

There are 162 Cheesecake Factory restaurants in the U.S., along with 11 eateries under the Grand Lux Cafe brand and one RockSugar Pan Asian Kitchen.

Cheesecake Factory locations gross, on average, more than any other chain in the U.S., Overton said. The Honolulu branch pulls in $20 million a year.

The company made its market debut in 1992, when Overton agreed to an initial public offering — in large part because he wanted to help his mother retire. The chain enjoyed a 25% revenue growth each year through 2007.

But when the recession hit, Overton said, he "took too long to realize that it was here to stay."

The company's stock plunged from roughly $30 a share in 2007 to $5 a share in late 2008 before management moved to scale back store openings. In recent years, the chain has had to raise food prices slightly to keep up with the increase in commodity costs.

"I should have reacted quicker," Overton said.

The company has since embraced caution. It has no plans to spin off Grand Lux and RockSugar as separate public companies, and offers few bargains or advertisements across its restaurants. Overton said his business only participates in social media because "that's the future."

But with the stock now near an all-time high at $41.46 a share, Cheesecake Factory is slowly easing back into expansion mode. It opened its first licensed international location in Kuwait last year, recently launched an eatery in Dubai and has several more on the way in Asia.

Barring remote states such as Alaska and the Dakotas — where the chain "probably won't go" — Overton said the Cheesecake Factory is also growing in the 40 states with current locations. Many of the new openings are in the suburbs, where stores smaller than the customary 10,000-square-foot urban restaurants are "working out well," he said.

These days, the Cheesecake Factory offers more than 200 menu items and more than 30 cheesecakes. It's a far cry from opening day, when the menu was two pages and featured a dozen cheesecakes.

"When I trust my own taste buds, that's what people like," he said. "I'm not a gourmet and I don't try to be. The common man likes my taste."

Often, that means heaping portions drenched in salt and butter.

The Cheesecake Factory regularly ends up on the Xtreme Eating list compiled by the nonprofit advocacy group Center for Science in the Public Interest. This year, its Bistro Shrimp Pasta entree was called out for being crammed with 3,120 calories and 89 grams of saturated fat — equal to three orders of classic lasagna and a slice of tiramisu from the Olive Garden, according to the group.

The average adult should cap daily consumption at 2,000 calories and 20 grams of saturated fat, the group said.

The restaurant chain has recently tried to be more welcoming to scale-watchers, launching a so-called Skinnylicious menu two years ago with 52 dishes featuring less than 590 calories each. There's also a gluten-free menu in the works with more than 70 items.

But, at its core, the Cheesecake Factory is an indulgent brand, Overton said.

"It's hard to make delicious food without some calories," he said. "Going out to a restaurant like this is very celebratory. The hard- core guest wants what they want, they have their favorites and that's what they order."

Another factor in the chain's appeal: its ambience.

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