What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stockton investing. Today's video is all about the cheesecake factory, the iconic american mid-scale restaurant and cheesecake distributor, they're famous for their massive menu imposing restaurant locations and dining experience. Despite the name, they serve a wide range of food from american, burgers and italian pasta to thai dishes like their bang, bang, chicken and shrimp. The indoor atmosphere of almost all cheesecake factory restaurants is made to feel upscale and extravagant leading into the idea of experiential.

Dining customers can feel like the cheesecake factory is itself a destination rather than just a place to eat and, of course, their namesake cheesecakes have stood. The test of time and continue to be attraction to repeat customers. All of these factors have contributed to making the cheesecake factory one of the most successful mid-scale restaurant chains in the u.s and canada. They are a publicly traded company with billions of dollars of revenue and hundreds of millions of dollars of annual profits.

But since the kovid 19 pandemic struck in early 2020, the restaurant industry as a whole has been under pressure. Countless smaller companies have gone under the cheesecake factory seem to have made it out alive, but just barely in this video we'll examine how the cheesecake factory rose to fame and fortune its struggles and what the post pandemic restaurant industry has in store for it. The cheesecake factory can trace its roots back to the 1940s and 50s evelyn overton, a detroit mother of two used, a recipe that she found in a local newspaper to bake. Her quote original unquote.

Cheesecake people loved it so much that she started baking her own cheesecakes. In a kitchen in her basement and supplying them to local businesses, although her husband's job and their two children prevented them from being able to expand the business after the children left the house, she decided to pursue her passion for cheesecake for real in 1972. She and her husband left michigan and moved to los angeles to start a formal cheesecake business. They opened a small bakery called the cheesecake factory bakery and started supplying evelyn's famous cheesecakes to la restaurants.

The business enjoyed modest success for several years, slowly but surely growing within the los angeles market. In the late 70s, one of evelyn's sons david, had the insight to realize the potential in making the cheesecake business into a restaurant business of its own and started the first cheesecake factory restaurant in beverly hills. The restaurant was an overnight success and the company has only grown ever since this is an american story too. I mean you, take something and then you watch it grow.

What's the secret to cheesecake? Well, i think you know it started as a family business. My mother got the recipe out of a newspaper. She made it in her basement in detroit for 25 years they went in and out of businesses she uh sold her home had ten thousand dollars to their her name. They were in their 50s drove across country and started a little one in 1972 in la and people loved the cheesecake, the principal used to stand on on the corner to get the overton cheesecake on bake sale day.

It people responded in the 1990s, the cheesecake factory expanded beyond california. For the first time, david overton, the son of evelyn, and now the leader of the company focused on finding trophy sites for their new restaurants. He built the restaurants to see hundreds of guests at a time and either offer dramatic views or have oversized architectural features inside the restaurant, such as majestic staircases in 1992. He and his mother took the company public by selling 35 million dollars worth of common stock.

They proceeded to open about two stores per year after that a growth rate that would also accelerate into the 2000s and 2010s. The cheesecake factory enjoyed incredible success in the 2000s ceo david overton credits, their success to their large menus, the opulent field of restaurants and, of course, their highly popular and high margin. Cheesecakes, it's a brilliant concept, because not only do you have to just go there for dinner, but you got to go for the cheesecake because it's the cheesecake factory, so you end up getting everybody not only to just order an entree but also dessert. It's true, but we have you know over 250 items on the menu.

There truly is something for everyone. You do have one of the the you do have one of the biggest menus i've ever seen at a restaurant. How can you do that offer so many items? I think if we weren't busy, we couldn't, but i didn't know what i was. I don't know what i was, what it sounded like yogi, berra yeah, i didn't know what i was doing.

I had never worked in a restaurant, so i didn't know what i could or couldn't do, and so when i opened it then i just figured out how to do it as a result of their success with customers, the cheesecake factory was able to grow into a Model business, they earned a long list of awards for their corporate environment reputation and their product. In 2012, even the healthcare industry used the cheesecake factory as a case study the company's ability to provide a quality product with remarkable consistency across hundreds of locations and menu items. Impressed harvard medical professor atul gawande enough to write about it in the new yorker, because the new yorker magazine wrote this article saying that you had a lot of things that you could teach from your experiences with healthcare yeah. I think dr gwandy.

It's not that i teach he's looking at us as a model. He thinks we're the gold standard uh of the restaurant business. We do so many things right. We train, we innovate uh, we cut costs and we and we completely uh change the menu twice a year and he's never had a bad meal and he says how can we cook a thousand meals a day and get consistency? Wouldn't that be a great model for the healthcare industry, so he's taking us and not linking us as much as saying these guys know what they're doing over the years, they've really built a model that works.

Why can't we be more like them, but not everything about the cheesecake factory has been met with positivity. Their huge menus have been publicly criticized for their huge caloric contents. Various magazines have called it things like the worst family restaurant in america, and if you look at the nutrition information on some of their menu items, you can start to see why it's difficult to find even just an appetizer, that's less than 1 000 calories according to Their own menu and entrees are even bigger, then, if you make it to the star course of the restaurant dessert you're. Looking at about 1 370 calories for the first cheesecake on the list, the chocolate caramelicious cheesecake made with snickers to put those calorie numbers into perspective.

Take the popular, fast casual chain, chipotle their website estimates that a relatively standard burrito with the tortilla chicken brown rice, black beans, fajitas and some salsas comes in at about 900 calories, and most people would consider a chipotle burrito to be at least one full meal. But the cheesecake factory is constantly looking for ways to stay competitive in their industry. They do offer the skinnylicious menu, which is designed to provide tasty meals to people with an eye on calories like the rest of their menu. The offerings are numerous with more skinnylicious dishes available than some other restaurants offer on their entire menus.

In the later part of the 2010s, however, changing public tastes started, challenging the cheesecake factory lower end. Restaurants, like mcdonald's and chipotle, began upping their food quality and higher and sit down. Restaurants began offering more competitive prices. These factors began squeezing the mid-tier restaurant industry, the cheesecake factory's high, fixed cost of running their extravagant stores in prime locations, had made them dependent on having a steady stream of diners coming to their restaurants with increased competition for the first time in their history, they started Having trouble keeping their restaurants full their revenue, growth decelerated compared to their expenses and their operating income has fallen almost every year since 2016., then just as they are dealing with these issues, kovit hit, of course, the pandemic spilled armageddon for brick and mortar retail and restaurants.

All over the world, the cheesecake factory, with their expensive restaurant locations in prime areas, were one of the hardest hit. As early as april of 2020, just a couple months into the stay-at-home orders, they told their landlords that they would not be able to make their rent payments all over the country, but with strong leadership and the ability to secure hundreds of millions of dollars of financing. They were able to make it out of 2020.. They were even able to return to significant positive operating cash flow by the second quarter of 2021..

It now seems that the company has resumed expanding across the country with more than 10 new restaurants opened or planned to open in 2021 alone, their stock price has now tripled from its pandemic lows with the economy. Finally, reopening and people going back outside again it's looking more and more like the cheesecake factory will continue dominating the mid-scale restaurant industry in the us. Alright guys that wraps it up for this video. What do you think about the cheesecake factory, both as a restaurant and a business? Let us know in the comments section below if you enjoyed this video, make sure to leave a like and subscribe, so you don't miss future uploads in the meantime.

Thank you. So much for watching and we'll see you in the next one wall, street millennial, signing out.