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Saturday, Jun 3, 2023

In Major Menu Redo, Cheesecake Factory Lightens Up

The Cheesecake Factory, long known for its heaping helpings, is rolling out a new menu with smaller-sized versions of many of its dishes as the number of diners at many casual restaurants thins. In what the Calabasas Hills restaurant chain calls its “most extensive menu change in a decade,” Cheesecake has added a larger selection of lunch-sized portions priced about $3 below the original versions. “We’ve always had lunch-size portions for certain dishes, and there are people who use appetizers as meals,” said Howard Gordon, senior vice president, business development and marketing for Cheesecake Factory, which is known by diners for its generously-sized portions. “What we decided to do is expand that to include different favorites in lunch-size portions. We’ve also added some smaller salads and factory combinations.” Cheesecake, which has always offered a selection of its menu in smaller, lunch-size portions, has expanded those offerings, making its salads and many of its favorite dishes like meat loaf, shepherd’s pie and salmon dishes as well as its so-called factory combinations, like Steak Diane with shrimp scampi, available in the smaller versions. Cheesecake’s menu revamp also includes a number of new dishes and salads available in lunch size as well as dinner size versions. “We do two menu changes a year, and we usually put on or take off about six or seven items,” Gordon said. “This year, we put on 16 new food items, eight new drinks and five new desserts, so it was pretty extensive.” Gordon, who noted that the company has even redesigned its menus, said the changes were made to accommodate diners who had been asking for smaller portions. “For dinner, everyone wants their full size portion,” said Gordon. “For lunch, a lot of people don’t have that much time. They want to be able to get in, order and get back to the office and they didn’t want to take home as much food at lunch.” Traffic down At the same time, diners have not exactly been rushing to casual dining restaurants in recent months. For the second quarter ended July 4, Cheesecake Factory said its comparable restaurant sales were down by 1.2 percent. Same-store sales at Darden Restaurant Inc.’s Red Lobster chain were down 2 percent in July while its Olive Garden units saw a modest 2 percent to 3 percent increase. Company-owned Outback Steakhouses saw same store sales decrease 4.7 percent for the month of July. And while Denny’s Corp reported same store sales rose 3 percent for the month, most of that increase was due to a rise in the average check. Guest counts fell 1.1 percent. “The vast majority of restaurants we look at are facing issues,” said Lynne Collier, an equity analyst with Stephens Inc. in Dallas. “It seems the higher-end with check averages of $50 to $60 are faring okay. But the mid-level casual dining restaurant like Outback or Cheesecake with a $10 to $20 average check seems to not be doing as well.” Stephens maintains a market in Cheesecake common stock. Analysts say they began to see restaurant sales slow down last summer, but the trend reversed earlier this year and many attributed the weaker sales to one-time events like Hurricane Katrina. Economic issues But in recent months, as sales again shifted downward, there’s been increasing concern that many of the economic factors hitting the middle market higher gas prices and interest rates along with the slowdown in the housing market could be impacting the restaurant industry for a longer term. Analysts said that Cheesecake’s menu changes are an effort to coax customers back to the restaurant. “Obviously they’re putting out these smaller menu portions to entice consumers to come in when budgets are tight,” said Eric Wold, an equity analyst at Merriman Curhan Ford & Co., who said he is not convinced that the smaller portions will do much good. “They’re known for their very large portions,” Wold said. “Your core customers are going to go there no matter what. Now you’re going to have your core customer ordering smaller portions, so your check is going to be lower anyway.” MCF does not have a position in the company. Although no one is yet certain, it is beginning to appear that mid-price restaurants like Cheesecake, where the average check is in the range of $12 to $17, are going to feel the impact of new gas-price economics the hardest. Customers may be trading down to fast food restaurants, especially since many of those companies have added expanded selections including healthier items and value-oriented meals. But for those stuck in the middle, there are few options, analysts said. Advertising can put the restaurant’s name at the top of diners’ minds, but it hardly matters if they’re not willing to spend the money to dine out. Some said the $3 difference could help bring some diners back to the restaurant, but they too noted that Cheesecake is taking a risk with its strategy. “To provide a little smaller portion size at a little lower price makes sense in my view,” said Collier. “Financially, our hope is they drive traffic. But the negative is you get a bunch of people who choose the lower price, and it reduces the check average.”

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