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5 things to know about the Cheesecake Factory-Fox Restaurant merger

Phoenix-based Fox Restaurant Concepts will not be ‘Cheescake-ized’ in acquisition, CEO said

The Cheesecake Factory Inc. has agreed to acquire Phoenix, Ariz.-based Fox Restaurant Concepts in a deal valued at $353 million on Wednesday, just before the company’s earnings call for the second quarter ended July 2. Specifically, the Cheesecake Factory will acquire FRC for $178 million in cash at closing and an added $45 million that will be paid over the next four years.

The announcement of the acquisition — which includes buying out the remaining interest in the 20-unit North Italia and 23-unit, fast-casual Flower Child brands from the company’s initial investment in 2016 — comes on the heels of a mixed second quarter for the Calabasas, Calif.-based, casual-dining brand. Same-store sales increased 1% as compared with a 1.4% increase for the same quarter last year.

But the big news following the closing of the second quarter was the major acquisition of Fox Restaurant Concepts.

Here are five key takeaways from the merger announcement and subsequent interview with Cheesecake Factory president David Gordon and founder of Fox Restaurant Concepts, Sam Fox.

  1. The Fox Restaurant Concepts plans 20% growth rate for North Italia

Both Cheesecake Factory and Sam Fox see 20% national growth rate potential for the entire portfolio of small multiunit and independent brands under the Fox Restaurant Concepts umbrella. But the Cheesecake Factory will be homing in on casual-dining Italian restaurant brand North Italia especially:

“North Italia is doing well in many geographies, we believe it has strong national brand appeal and will be able to grow at about that pace in near future,” David Gordon told NRN in an interview.

He declined to expand on the geographic markets they hope to enter with the North Italia brand.

  1. Sam Fox is focusing on Flower Child

Although North Italia and several members of the Fox Restaurant team will be making the move to Calabasas, Calif., Flower Child and the rest of the smaller brands in the Fox portfolio will still operate out of Phoenix:

“Sam will continue to stay focused on Flower Child,” David Gordon told NRN. “Flower Child is a wonderful fast-casual restaurant where everything is nutritious and made fresh from scratch. We are confident they will continue to grow.”

  1. Fox Restaurant Concepts will focus on off-premise

 A year after Cheesecake Factory’s exclusive partnership announcement with DoorDash, FRC will be able to take advantage of it too:

“We’ve been slowly moving our whole system over to DoorDash as we speak,” Sam Fox told NRN. “The partnership with Cheesecake allows us to do that and learn from the things that they’ve been doing so well in that area. I think we will continue to lean into off-premise.”

  1. Sam Fox and his team will be an “incubation engine” for the Cheesecake Factory

During the earnings call, David Gordon said that the Cheesecake Factory is looking to Fox Restaurant Concepts to “develop concepts of the future” which can then be optioned to expand nationally:

“We’re set up to be an incubator and to work on things that we’re already nimbler with in some of these things,” Sam Fox told Nation’s Restaurant News.

“We continue to look at what’s out there to develop what’s next.”

  1. Think “synergy” but not copycat

 When asked during the earnings call if the Cheesecake Factory plans to merge menu and operations ideas, the team mentioned the idea of “synergy” but not mimicry:

“We want to keep their concepts very much the way they are and not Cheesecake-ize them, in terms of what they are offering guests and we want to keep ours the same,” CEO David Overton said during the call on Wednesday.

The Cheesecake Factory reported revenue of $602.6 million in the second quarter of fiscal 2019, as compared with $587.3 million in the same quarter the year prior. Net income was $35.5 million or $0.79 per share, as compared with $28.353 million or 62 cents per share, the same quarter the year prior.

As of July 2, the Cheesecake Factory, Inc. has 219 restaurants nationwide with one opening during the previous quarter. 


Contact Joanna Fantozzi at [email protected] 
Follow her on Twitter: @joannafantozzi

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