The Cheesecake Factory’s Employee Retention Drives Operational Excellence

The Cheesecake Factory is benefitting from strong operations performance while the shares remain attractively priced even after a 31% gain over the last year.

A Member of Pat McKeough’s Inner Circle recently asked for his advice on The Cheesecake Factory ,renowned for its extensive menu, generous portions, and signature cheesecakes.

Pat likes the firm’s operational excellence. The company’s track record of consistent execution is evident in its industry-leading employee retention rates which in turn facilitates superior financial performance. However, Pat notes that the company operates in competitive markets.

The Cheesecake Factory (Symbol CAKE on Nasdaq; www.thecheesecakefactory.com) is a restaurant chain.

The company started up in 1978 when David Overton opened the First Cheesecake factory restaurant in Beverly Hills, California. It was incorporated in 1992.

Cheesecake Factory currently owns and operates 363 restaurants throughout the U.S. and Canada. The company’s brands include The Cheesecake Factory (216 locations), North Italia (46 locations), and Flower Child (49 locations). The company also has more brands within its Fox Restaurant Concepts (FRC) portfolio (51 locations).

Internationally, 33 Cheesecake Factory restaurants operate under licensing agreements.

The Cheesecake Factory restaurants aim to provide a distinctive, high-quality dining experience at moderate prices. They do this by offering an extensive, innovative, and evolving menu in an upscale casual, high-energy setting.

North Italia is a modern interpretation of Italian cooking in the upscale casual dining segment. The chain strives to offer a neighbourhood feel, with classic Italian favourites.

Flower Child operates in the fast-casual dining segment. It offers a customizable menu, made fresh from scratch, featuring locally sourced, all-natural and organic ingredients.

FRC operates as an independent subsidiary based in Phoenix, Arizona. It serves as an incubator, innovating new food, dining, and hospitality experiences to create new concepts.

Cheesecake Factory also has a bakery division that runs two facilities. They produce cheesecakes and other baked products for the company’s restaurants, international licensees, and third-party bakeries. They’re located in Calabasas Hills, California, and in Rocky Mount, North Carolina.

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Cheesecake Factory drives its growth partly through new restaurant openings. In the latest quarter, ended July 1, 2025, the company opened eight new restaurants. These included two Cheesecake Factory’s, one North Italia, three Flower Child’s and two FRC restaurants. After the quarter end, the company opened opened one FRC restaurant, and one Cheesecake Factory restaurant opened internationally under a licensing agreement in Puebla City, Mexico.

For all of 2025, the company expects to open as many as 25 restaurants. That includes as many as four Cheesecake Factory restaurants, six North Italia locations, six to seven Flower Child locations, and as nine FRC restaurants.

The Cheesecake Factory delivers higher sales and profits

Cheesecake Factory’s revenue has increased consistently since the pandemic. This is due to the opening of new restaurants and strong same-restaurant sales (sales at restaurants open for at least a year). Revenue jumped 73.4%, from $1.98 billion in 2020 to $3.44 billion in 2022. In 2023, revenue increased a further 4.1%, to $3.44 billion. Revenue then rose another 4.1% in 2024 to $3.58 billion.

Cheesecake Factory’s earnings, excluding one-time items, rose from a loss of $74.9 million, or $1.49 a share, in 2020 to a profit of $112.8 million, or $2.37 a share, in 2021 as COVID restrictions subsided. In 2022, earnings dropped 32.4% to $76.2 million, or $1.53 a share, as costs rose faster than revenue. Earnings then recovered in 2023, soaring 72.9% to $131.8 million, or $2.69 a share, as costs rose less rapidly than revenue. In 2024, earnings jumped another 28.0% to $168.7 million, or $3.44 a share, as costs continued to rise less rapidly than revenue.

Meanwhile, in the three months ended July 1, 2025, Cheesecake Factory’s revenue rose 5.7%, to $955.8 million from $904.0 million a year earlier. The company earned $54.8 million, or $1.18 a share. That was up 4.5% from $52.4 million, or $1.10 a share

Cheesecake Factory operates in competitive markets—but it continues to perform well. The shares are up 31% over the last year, although the stock trades at a low 14.4 times the $3.78 a share that the company will probably earn in 2025.

Cheesecake Factory pays a quarterly dividend of $0.27 a share. (Note, the company eliminated the dividend in 2020 and reinstated it in 2022.) The stock yields 2.0%.

Recommendation in Pat’s Inner Circle: The Cheesecake Factory is okay to hold.

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