The Cheesecake Factory, one of the most popular sit-down restaurant chains in the country, says it will not be able to make upcoming rent payments for any of its storefronts on April 1 because of significant loss of income due to the coronavirus crisis.
The Calabasas Hills-based company informed all of its landlords in a letter dated March 18 (reproduced below) that a severe decline in restaurant traffic has decreased its cash flow and “inflicted a tremendous financial blow” to business. Cheesecake Factory’s affiliated restaurants, such as Rock Sugar and North Italia, will also not make April 1 rent payments.
Company chairman and CEO David Overton writes, “Due to these extraordinary events, I am asking for your patience, and frankly, your help.” He continues, “we appreciate our landlords’ understanding given the exigency of the current situation.” The letter says that the company hopes to resume paying rent as soon as possible.
When asked for comment regarding the non-payment of rent on April 1, Cheesecake Factory representatives said the following:
In these unprecedented times, there are many factors that are changing on a daily basis given governmental regulations and landlord decisions to close properties. We have to take both into consideration in terms of understanding the nature of our rent obligations and with respect to managing our financial position. We have very strong, longstanding relationships with our landlords. We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner.
The Cheesecake Factory was founded in Beverly Hills in 1972 and maintains its original location on Beverly Drive, with 39 locations in California. In total, it operates 294 restaurants in 39 states, plus the District of Columbia, Puerto Rico, and Toronto, Canada. In 2019, the company also acquired Phoenix-based Fox Restaurants, including North Italia, Flower Child, and The Henry. Most of the company’s landlords are malls, including Simon and Westfield.
In telling landlords that it will not able to pay rent, the Cheesecake Factory essentially confirms that it is in the same position that many independent restaurateurs currently find themselves in. In a statement to investors on March 23 — five days after the letter to landlords — the Cheesecake Factory announced that it would curtail development of unopened restaurants and tap into a $90 million credit line to increase its available cash. Since the outbreak of the coronavirus, the Cheesecake Factory has closed 27 locations across the country, and pivoted other locations to a takeout and delivery-only model — which it said just days ago was enabling the company to “operate sustainably at present” — and its stock price has fallen by more than 50 percent in the past month.
With 38,000 employees, the Cheesecake Factory is one of the largest restaurant employers in the country. Given its recent stock woes and the ongoing reduction in business due to the coronavirus pandemic, it seems possible that it, like many restaurants, could end up needing a bailout to survive.