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Tuesday, Dec 6, 2022
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Cheesecake to Buy Fox for $353 Million

Cheesecake Factory Inc. has signed a deal to acquire Fox Restaurant Concepts, a Phoenix-based group that operates 45 restaurants, including original brands North Italia, Flower Child and Zinburger, across nine states and Washington, D.C. The acquisition will cost the Calabasas restaurateur $308 million at closing, plus an additional $45 million over the next four years for a total price of $353 million. The deal is expected to close by the end of the third quarter. “There is so much alignment between our two companies as leaders in experiential dining,” Cheesecake Factory President David Gordon told the Business Journal via email. “We share the same passion for operational excellence and have very similar cultures.” The company indicated it will finance the purchase with existing cash and incremental debt. David Tarantino, a restaurant analyst with Robert W. Baird & Co. wrote in a recent report: “With these new brands, CAKE expects to achieve revenue growth of 8 percent annually on units +6 to 7 percent (with North Italia and Fox Concepts growing by 20 percent per year). … For 2020, CAKE expects the acquisition to contribute roughly $450 million in aggregate revenue and roughly $70 million of incremental restaurant profit.” The report noted that pre-opening expenses and increased interest on the debt used to fund the transaction means the acquisition likely won’t impact Cheesecake Factory’s 2020 earnings per share. The deal didn’t come out of the blue. In 2016, Cheesecake Factory invested in a minority stake of the North Italia and Flower Child concepts for $88 million — $44 million for each brand — anticipating a future majority or full ownership acquisition of either or both concepts. North Italia is an Italian casual concept with 20 locations in nine states. Flower Child is a healthy fast-casual chain with 22 locations in nine states. This year, after successfully fueling growth for the brands, the companies reconvened to execute the acquisition of North Italia’s remaining interest. “As we were working through the planned integration, it became evident that the combination of our two companies, which are really two of the most experiential and entrepreneurial restaurant companies, could drive greater value as one organization,” said Gordon. Cheesecake Factory is shelling out $130 million for the rest of North Italia and $178 million at closing for FRC, including Flower Child. After the transactions close, North Italia’s operations will move to Cheesecake Factory’s corporate support center in Calabasas. FRC will operate as a wholly owned subsidiary. Sam Fox, FRC’s founder and chief executive, will continue to lead the company from Phoenix.

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