What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-24 compared with 2020-03-12 · 151 added, 109 removed, 285 unchanged (48% of the section changed)

1 unchanged sentence

We are culinary forward and relentlessly focused on hospitality.

We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory(R), North Italia(R) and a collection within the Fox Restaurant Concepts ("FRC") subsidiary.

Internationally, 26 The Cheesecake Factory(R) restaurants operate under licensing agreements.

We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® , North Italia ® and a collection within our Fox Restaurant Concepts business.

Internationally, 27 The Cheesecake Factory ® restaurants operate under licensing agreements.

Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers.

1 unchanged sentence

In 1978, their son, David Overton, our Chairman of the Board and Chief Executive Officer, led the creation and opening of the first The Cheesecake Factory restaurant in Beverly Hills, California.

In 1992, the Company was incorporated in Delaware as The Cheesecake Factory Incorporated (referred to herein as the “Company” or as “we,” “us” and “our”) to consolidate the restaurant and bakery businesses of its predecessors operating under The Cheesecake Factory ® mark.

In 1992, the Company was incorporated in Delaware as The Cheesecake Factory Incorporated (referred to herein as the “Company” or as “we,” “us” and “our”).

Our executive offices are located at 26901 Malibu Hills Road, Calabasas Hills, California 91301, and our telephone number is (818) 871-3000.

3 unchanged sentences

The content of our website is not incorporated by reference into this Form 10-K.

On October 2, 2019, we completed the acquistion of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC"), including Flower Child and all other FRC brands (the "Acquisition").

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC"), including Flower Child and all other FRC brands (the "Acquisition").

The results of operations, financial position and cash flows of the acquired businesses are included in our consolidated financial statements as of the acquisition date.

1 unchanged sentence

Fiscal years 2020, 2019 and 2018 each consisted of 52 weeks and fiscal year 2021 will also consist of 52 weeks.

COVID-19 Pandemic

We have experienced significant disruptions to our business due to the COVID-19 pandemic and related suggested and mandated social distancing and shelter-in-place orders, which initially resulted in the temporary closure of a number of restaurants across our portfolio while the remaining locations shifted to an off-premise only operating model on an interim basis.

The impacts of the COVID-19 pandemic on our business are discussed in further detail throughout this Business section, Item 1A - Risk Factors, and Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

The Cheesecake Factory

4 unchanged sentences

Most of our locations are closed on Thanksgiving and Christmas.

All items on our menu, except alcoholic beverages, are available for off-premise consumption, which represented approximately 16% of our restaurant sales for fiscal year 2019.

We work with a third party to provide delivery service, which is now available at nearly all of our restaurants.

In addition, we offer online ordering for to-go sales at all of our domestic locations.

All of our restaurants offer a full-service bar where our entire menu is served.

Alcoholic beverage sales represented 12% of The Cheesecake Factory restaurant sales for fiscal year 2019.

Alcoholic beverage sales represented 9% of The Cheesecake Factory restaurant sales for fiscal year 2020 compared to 12% in fiscal 2019, primarily due to lower alcoholic beverage sales associated with off-premise orders, which increased significantly during the COVID-19 pandemic.

All items on our menu, except alcoholic beverages where disallowed by regulation, are available for off-premise consumption.

Off-premise sales represented approximately 43% of our restaurant sales for fiscal year 2020, an increase from approximately 16% in fiscal 2019 as most of our restaurants shifted to an off-premise-only operating model at the beginning of the COVID-19 pandemic and consumer behavior shifted toward off-premise dining throughout the pandemic.

We work with a third party to provide delivery service, which is now available at all of our restaurants.

In addition, we offer online ordering for to-go sales at all of our domestic locations.

The Cheesecake Factory menu features approximately 250 items, including items presented on supplemental menus, such as our SkinnyLicious ® menu that offers innovative items at 590 calories or less.

Our core menu offerings include appetizers, pizza, seafood, steaks, chicken, burgers, small plates, pastas, salads, sandwiches and omelettes, including “Super” food choices and a selection of gluten-free items.

Examples of menu offerings include Chicken Madeira, Cajun Jambalaya Pasta, Thai Lettuce Wraps, Avocado Eggrolls, California Guacamole Salad and our Bacon-Bacon Cheeseburger.

Examples of menu offerings include Chicken Madeira, Cajun Jambalaya Pasta, Thai Lettuce Wraps, Avocado Eggrolls, Vegan Cobb Salad and our Bacon-Bacon Cheeseburger.

Our ability to create, promote and attractively display our unique line of desserts is also important to the competitive positioning and financial success of our restaurants.

We offer approximately 45 varieties of proprietary cheesecake and other desserts in our restaurants.

Our brand identity and reputation for offering premium desserts results in a significant level of dessert sales, representing approximately 16% of The Cheesecake Factory restaurant sales for fiscal year 2019.

Our brand identity and reputation for offering premium desserts results in a significant level of dessert sales, representing approximately 21% of The Cheesecake Factory restaurant sales for fiscal year 2020, up from 16% in fiscal 2019, primarily driven by increased dessert incident rates on off-premise orders during the COVID-19 pandemic.

Competitive Positioning

8 unchanged sentences

This backdrop has made it even more challenging to improve customer traffic.

However, we believe the COVID-19 pandemic could drive a contraction in restaurant supply and in turn, could result in more favorable conditions to grow customer traffic and comparable restaurant sales.

We also compete with other restaurants and retail establishments for quality sites and qualified staff and managers to operate our restaurants.

(See Item 1A — Risk Factors — “Our inability to grow comparable restaurant sales could materially adversely affect our financial performance.”)

(See Item 1A — Risk Factors — Risks Related to the Restaurant Industry— “Our inability to grow comparable restaurant sales could materially adversely affect our financial performance.”)

The key elements that drive our total customer experience and help position us from a competitive standpoint include the following:

6 unchanged sentences

We also regularly introduce new and innovative cheesecakes and other baked desserts.

In 2019, we launched the Pineapple Upside-Down Cheesecake in conjunction with National Cheesecake Day.

In 2020, we launched the Chocolate Caramelicious Cheesecake Made with Snickers ® in conjunction with National Cheesecake Day, as well as the Low-Licious Cheesecake, a low carb, no sugar-added and gluten-free offering.

We generally update The Cheesecake Factory menus twice each year and our philosophy is to use price increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer traffic levels.

3 unchanged sentences

The average check for each customer, including beverages and desserts, was approximately $28.90, $23.50 and $22.60 for fiscal 2020, 2019 and 2018, respectively.

Fiscal 2020 average check reflects the impact of higher off-premise channel mix, as most of our restaurants shifted to an off-premise-only operating model at the beginning of the COVID-19 pandemic and consumer behavior shifted toward off-premise dining throughout the pandemic.

We account for each off-premise order as one customer for traffic measurement purposes.

Therefore, average check is higher as most off-premise orders are for more than one customer.

Commitment to Excellent Service and Hospitality through the Selection, Training and Retention of High-quality Staff Members.

3 unchanged sentences

By providing extensive training, our goal is to encourage our staff members to develop a sense of personal commitment to our core values and culture of excellence.

(See “Restaurant Operations, Management and Staffing” below.) Our commitment to people-focused programs and creating a great workplace for all of our staff and managers contributed to The Cheesecake Factory being named to Fortune magazine’s list of “100 Best Companies to Work For ® ” in February 2020, for the seventh year in a row.

High-quality, High-Profile Restaurant Locations and Flexible Site Layouts.

1 unchanged sentence

We have the flexibility to design our restaurants to accommodate a wide array of urban and suburban site layouts, including multi-level locations.

Our restaurants feature large, open dining areas, high ceilings where available and a contemporary kitchen design.

Our restaurants feature large, open dining areas, high ceilings where available, a contemporary kitchen design and a bakery counter that features our desserts while also serving as a strategic location to facilitate our off-premise sales.

The layouts are flexible, permitting tables and seats to be easily rearranged to accommodate small and large parties, thus permitting more effective utilization of seating capacity.

Interior and exterior patio seating, either or both of which are available at approximately 95% of our restaurants, allow for additional customer capacity at a comparatively low occupancy cost per seat.

During the COVID-19 pandemic, we have also been able to access additional space to augment our outdoor seating capacity in some locations.

Exterior patio seating is generally available as weather permits.

11 unchanged sentences

Accordingly, we intend to continue developing The Cheesecake Factory restaurants in high-quality, high-profile locations that meet our rigorous site standards.

We regularly negotiate leases for potential future locations and plan to open as many locations in any given year as there are sites available that meet our site selection criteria.

It is difficult for us to precisely predict the timing of our new restaurant openings due to many factors that are outside of our control.

(See Item 1A — Risk Factors — “Our inability to secure an adequate number of high-quality sites for future restaurant openings could adversely affect our ability to grow our business.”) We have the flexibility in our restaurant designs to penetrate a wide variety of markets across varying population densities in both existing and new markets.

We continue to target approximately 300 Company-owned and operated The Cheesecake Factory restaurants domestically over time, as well as the potential for an additional eight to ten locations in Canada.

Subject to our broader capital allocation strategy, we plan to open as many locations in any given year as there are sites available that meet our site selection criteria.

It is difficult for us to precisely predict the timing of our new restaurant openings due to many factors that are outside of our control , including the effects of the COVID-19 pandemic.

(See Item 1A — Risk Factors — Risks Related to Our Business— “Our inability to secure an adequate number of high-quality sites for future restaurant openings could adversely affect our ability to grow our business.”) We have the flexibility in our restaurant designs to penetrate a wide variety of markets across varying population densities in both existing and new markets.

We continue to target approximately 300 Company-owned and operated The Cheesecake Factory restaurants domestically over time.

The locations of our restaurants are critical to our long-term success, and we devote significant time and resources to analyzing each prospective site.

12 unchanged sentences

Average sales per productive square foot (defined as all interior square footage plus seasonally adjusted exterior patio square footage) for restaurants open for the full year were approximately $716, $986 and $978 for fiscal 2020, 2019 and 2018, respectively.

Fiscal 2020 average sales per location and average sales per productive square foot reflect the impact of the COVID-19 pandemic on our business.

Fiscal 2020 average sales per square foot adjusted for interior capacity restrictions related to the COVID-19 pandemic was $1,127.

The variance as compared to fiscal 2019 was primarily due to an increase in off-premise sales.

Fluctuations in both average sales per location and average sales per productive square foot generally track with comparable restaurant sales trends.

1 unchanged sentence

We currently lease all of our restaurant locations and utilize capital for leasehold improvements and furnishings, fixtures and equipment (“FF&E”) to build out our restaurant premises.

Total costs are targeted at approximately $900 to $1,000 per interior square foot for The Cheesecake Factory restaurants.

Our distinctive design and decor requires a higher investment per square foot than is typical for the casual dining industry.

Total costs are targeted at approximately $1,000 per interior square foot for The Cheesecake Factory restaurants.

Our distinctive design and decor require a higher investment per square foot than is typical for the casual dining industry.

However, our restaurants have historically generated annual sales per square foot that are also typically higher than our competitors.

7 unchanged sentences

Additionally, our new restaurants usually require a period of time after reaching normal traffic levels to achieve their targeted restaurant-level operating margins due to cost of sales and labor inefficiencies commonly associated with new, highly complex restaurants such as ours.

Restaurant Operations, Management and Staffing

Restaurant Operations

Our ability to consistently execute a complex menu offering items prepared daily with high-quality, fresh ingredients in an upscale casual, high-volume dining environment is critical to our overall success.

We employ detailed operating procedures, standards, controls, food line management systems and cooking methods and processes to accommodate our extensive menu and to drive sales productivity.

However, the successful day-to-day operation of our restaurants remains critically dependent on the ability, dedication and engagement of our General Managers (“GMs”), Executive Kitchen Managers (“EKMs”) and all other management and hourly staff members working at our restaurants.

Competition among restaurant companies for qualified management and staff remains very high.

(See Item 1A — Risk Factors — “If we are unable to successfully recruit and retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance.”)

We believe that the high average sales volumes and popularity of our restaurants allow us to attract and retain high-quality, experienced restaurant-level management and other operational personnel.

Each restaurant is generally staffed with one GM, one EKM and an average of six to ten additional kitchen and front-of-the-house managers, depending on the size and sales volume of each restaurant.

Each restaurant is generally staffed with one General Manager (“GM”), one Executive Kitchen Manager (“EKM”), and an average of six to ten additional kitchen and front-of-the-house managers and approximately 170 hourly staff members, both depending on the size and sales volume of each restaurant.

Our GMs and EKMs possess an average of more than ten years of experience with the Company.

This tenure and knowledge drives our high productivity and contributes to our ability to deliver an exceptional customer experience.

When the closure of our dining rooms in March 2020 due to the COVID-19 pandemic necessitated the furloughing of approximately 41,000 hourly staff members, we made the decision to retain our restaurant management teams which we believe enabled us to adapt quickly to a mandated off-premise only operating model and reopen indoor dining rooms safely when allowed.

All newly-recruited restaurant managers complete an extensive training program during which they receive both classroom and on-the-job instruction in areas such as food quality and safety, customer service, financial management, staff relations and safely serving alcohol.

4 unchanged sentences

Our EKMs report to their GMs, but are also supervised by an Area Kitchen Operations Manager responsible for between eight and ten restaurants.

Our restaurant field supervision organization also includes our Senior Vice President of Operations, Chief Culinary Officer, an operations services team and our performance development department who are collectively responsible for day-to-day operations, managing new restaurant openings and training for all operational managers and staff.

Our restaurant field supervision organization also includes our Senior Vice President of Restaurant Operations, Senior Vice President of Kitchen Operations, an operations services team and our performance development department who are collectively responsible for day-to-day operations, managing new restaurant openings and training for all operational managers and staff.

To enable us to more effectively compete for, and retain, the highest quality restaurant management personnel, we offer an innovative and comprehensive compensation program for our restaurant GMs and EKMs.

3 unchanged sentences

We believe that these awards encourage our GMs and EKMs to think and act as business owners, assist in retention of restaurant management and align our managers’ interests with those of our stockholders.

Our restaurant GMs are responsible for selecting and training hourly staff members for their respective restaurants.

Each restaurant is staffed, on average, with approximately 170 hourly staff members.

We require each hourly staff member to participate in a formal training program for his or her respective position in the restaurant, under the supervision of other experienced staff members and restaurant management.

We strive to foster enthusiasm and commitment in our staff members, and respect for one another, through daily staff meetings and dedicated time for training.

We solicit suggestions concerning restaurant operations and other aspects of our business through an annual engagement survey, GM and workgroup meetings, a website dedicated to receiving staff member input and other means, fostering a highly-engaged workforce.

Our commitment to people-focused programs and creating a great workplace for all of our staff and managers contributed to The Cheesecake Factory being named to Fortune magazine’s list of the “100 Best Companies to Work For ® ” in February 2020, for the seventh year in a row.

The list is published annually based on a culture review and surveys of current staff members to identify and recognize companies that create positive work environments with high employee morale and fulfillment.

In 2019, we were also named to the Fortune “100 Best Workplaces for Women ® ,” “100 Best Workplaces for Diversity ® ,” and “100 Best Workplaces for Millennials ® .” In addition, in February 2020 we received the Workplace Legacy Award from Black Box Intelligence/People Report, which recognizes leaders in the restaurant industry who have demonstrated a commitment to balancing people and profits.

This is the fifth year in a row that the company received an award from Black Box.

Preopening Costs for New Restaurants

11 unchanged sentences

In addition, these licensees purchase bakery products branded under The Cheesecake Factory ® mark from us.

We project each international licensed location to contribute approximately $0.01 in annual earnings per share (“EPS”), on average, once the location has been in operation for a full year.

As of March 11, 2020, our international licensees operated the following The Cheesecake Factory restaurants:

Once the operating environment normalizes from the COVID-19 pandemic and assuming full capacity conditions are ultimately permitted in each jurisdiction, we project each international licensed location to contribute approximately $0.01 in annual earnings per share (“EPS”), on average, once the location has been in operation for a full year.

As of February 24, 2021, our international licensees operated the following The Cheesecake Factory restaurants:

Licensee Location

13 unchanged sentences

Due to the complexities of opening The Cheesecake Factory restaurants in other countries, including, but not limited to, the selection and design of appropriate sites, construction of our complex restaurant designs, training of licensees’ staff members, approval of supply sources and exportation of our bakery products to new countries, the number and timing of new openings in foreign countries may vary from expectations.

(See Item 1A — Risk Factors — “We face a variety of risks and challenges related to our international operations and global brand development efforts, any of which could materially adversely affect our financial performance.”)

(See Item 1A — Risk Factors — Risks Related to Our Business— “We face a variety of risks and challenges related to our international operations and global brand development efforts, any of which could materially adversely affect our financial performance.”)

Consumer Packaged Goods

Given the strong affinity for The Cheesecake Factory(R) brand, in 2017 we began leveraging opportunities in the consumer packaged goods channel.

We now partner with third-party manufacturers to offer a variety of products marketed under The Cheesecake Factory At Home(R) mark.

Given the strong affinity for The Cheesecake Factory ® brand, in 2017 we began leveraging opportunities in the consumer packaged goods channel.

We now partner with third-party manufacturers to offer a variety of products marketed under The Cheesecake Factory At Home ® mark.

These offerings include our Famous "Brown Bread,"

baking mixes and refrigerated puddings available in retail stores nationwide, as well as ice cream which was recently launched.

refrigerated puddings and ice cream available in select retail stores nationwide.

We are actively evaluating other synergistic, on-brand licensing opportunities to add incremental revenue streams to our business.

8 unchanged sentences

North Italia offers an assortment of wines, beers and house-made cocktails.

Alcoholic beverage sales represented approximately 30% of North Italia sales for fiscal year 2019.

Alcoholic beverage sales represented 24% of North Italia sales for fiscal year 2020 compared to 29% for the fourth quarter of fiscal 2019.

This decrease was primarily due to lower alcoholic beverage sales associated with off-premise orders, which increased significantly during the COVID-19 pandemic.

North Italia restaurants are generally open seven days a week for lunch, dinner and weekend brunch.

1 unchanged sentence

North Italia's operations have been relocated to the Company's corporate headquarters to help scale the concept nationally.

With Italian cuisine the number one ethnic food category in the United States, coupled with strong national reception of the North Italia concept to-date, we believe there is potential for 200 domestic locations over time, which supports our plan for approximately 20% annual unit growth.

We target an average unit size of approximately 5,000 to 6,500 square feet.

Average sales per location for North Italia restaurants is approximately $7 million, or approximately $1,200 per square foot, utilizing sales since the Acquisition on an annualized basis.

We target an average unit size of 5,000 to 6,500 square feet and average sales per mature location of approximately $7 million, or approximately $1,200 per interior square foot.

FRC operates as an independent subsidiary in Phoenix, Arizona.

2 unchanged sentences

Flower Child is a potential opportunity for us to diversify our portfolio in a strong and growing niche.

Other FRC potential growth concepts include The Henry, Culinary Dropout and Blanco, which together with the othe FRC brands, serve as an ecosystem for talent, menu and design development.

We target approximately 20% annual unit growth for the aggregate portfolio, driven primarily by the anticipated growth of the Flower Child concept, complemented by additional market tests of the potential growth concepts.

Other FRC potential growth concepts include Culinary Dropout and Blanco, which together with the other FRC brands, serve as an ecosystem for talent, menu and design development.

We expect to target approximately 15% to 20% annual unit growth for the aggregate FRC portfolio as the operating environment for the restaurant industry normalizes from the COVID-19 impact, driven primarily by the anticipated growth of the Flower Child concept, complemented by additional market tests of the potential growth concepts.

Unit sizes range from approximately 3,500 to 15,000 square feet.

The FRC restaurants generate sales of approximately $1,000 per square foot, on average, utilizing sales since the Acquisition on an annualized basis.

The FRC restaurants target sales of approximately $1,000 per interior square foot, on average.

Bakery Operations

1 unchanged sentence

Our facility in California accommodates both production operations and corporate support personnel, while our facility in North Carolina houses production operations and a distribution center.

In fiscal 2018, we completed an infrastructure modernization of our California facility.

We produce approximately 70 varieties of proprietary cheesecakes and other baked desserts using high-quality ingredients for The Cheesecake Factory and Grand Lux Cafe restaurants and for international licensees and third-party customers.

6 unchanged sentences

We also currently sell a selection of our cakes online and in catalogs domestically through an agreement with an upscale retailer.

Items produced for outside accounts are marketed under The Cheesecake Factory Bakery ® and The Cheesecake Factory At Home ® marks and other private labels and were previously marketed under The Cheesecake Factory ® and The Dream Factory ® marks.

We also sell baked goods internationally under The Cheesecake Factory Bakery ® , The Cheesecake Factory At Home ® , The Cheesecake Factory ® and The Dream Factory ® marks and have entered over 30 countries with our brands.

Items produced for outside accounts are marketed under The Cheesecake Factory At Home ® marks and other private labels.

We also sell baked goods internationally in approximately 25 countries under The Cheesecake Factory At Home ® mark.

Offering our cheesecakes and other baked desserts internationally is important to our branding, creating awareness and driving demand, not only for bakery products but for the international expansion of our restaurants.

Other Concepts

We also operate Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen.

We also operate Grand Lux Cafe and Social Monk Asian Kitchen.

At present, we have no plans to open additional locations of these concepts.

4 unchanged sentences

Each Grand Lux Cafe features an on-site bakery which produces a selection of signature desserts, and a full-service bar.

RockSugar Southeast Asian Kitchen

RockSugar Southeast Asian Kitchen features a Southeast Asian menu and design elements in an upscale casual dining setting.

RockSugar Southeast Asian Kitchen showcases the cuisines of Thailand, Vietnam, Malaysia, Singapore, Indonesia and India with approximately 75 dishes served “family-style” to create an atmosphere that encourages sharing and conversation.

Examples of menu offerings include Shaking Beef, Thai Basil Cashew Chicken, Ginger Fried Rice and Crispy Samosas.

RockSugar Southeast Asian Kitchen also features a full-service bar with an extensive wine list and exotic cocktails and offers freshly-made desserts that infuse traditional French flair into nearly a dozen Asian-influenced items.

Social Monk Asian Kitchen

12 unchanged sentences

We mitigate the risk of supply shortages and obtain competitive prices by utilizing multiple qualified suppliers for substantially all our ingredients and supplies.

Certain of our suppliers were adversely impacted by the COVID-19 pandemic and as a result, we experienced certain shortages of food items and other supplies at our restaurants, none of which had a material impact on our operations.

We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand.

We continue to evaluate the possibility of entering into similar arrangements for other commodities and also periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities.

We continue to evaluate the possibility of entering into similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities.

As of the end of fiscal 2020, we had no hedging contracts in place.

2 unchanged sentences

Information Technology

This information technology discussion relates to The Cheesecake Factory, North Italia, Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen restaurants.

We are in the process of reviewing the information technology systems and infrastructure for the FRC brands other than North Italia.

This information technology discussion, unless otherwise noted, relates to The Cheesecake Factory, North Italia, Grand Lux Cafe and Social Monk Asian Kitchen restaurants.

We have completed our assessment of the information technology systems and infrastructure for the FRC brands and are in the process of implementing identified improvements.

Our technology-enabled business solutions are designed to provide effective financial controls, cost management, improved efficiencies and enhanced customer experience.

2 unchanged sentences

Our restaurant point of sale and back-office systems provide information regarding daily sales, cash receipts, inventory, food and beverage costs, labor costs and other controllable operating expenses.

The Cheesecake Factory restaurants offer online ordering for to-go sales, and the point of sale system is integrated with our delivery provider to drive efficiencies in the restaurants and enhance the customer delivery experience.

We utilize a customer satisfaction measurement platform that leverages the “Net Promoter Score” methodology at all of our restaurants.

Our restaurants offer online ordering for to-go sales, and the point of sale system is integrated with our delivery provider to drive efficiencies in the restaurants and enhance the customer delivery experience.

We utilize a customer satisfaction measurement platform that leverages the “Net Promoter Score” methodology.

The data and analytics provided by this software provide us with actionable insights to better understand what customer experience opportunities should be addressed, while reinforcing positive staff behaviors.

Our kitchen management system provides automated routing and cook line balancing, and synchronizes order completion, ticket time and cook time data, promoting more efficient levels of labor and productivity without sacrificing quality.

To enable a safer and improved customer experience in response to the COVID-19 pandemic, we implemented remote greeting and QR code menu capabilities as well as a touchless payment option.

Our kitchen management system, which is in place at The Cheesecake Factory, Grand Lux Cafe and Social Monk Asian Kitchen restaurants, provides automated routing and cook line balancing, and synchronizes order completion, ticket time and cook time data, promoting more efficient levels of labor and productivity without sacrificing quality.

We leverage our recipe viewer system to ensure timely and accurate recipe updates, and to provide instructional media content and detailed procedures enabling our staff to consistently prepare our highly complex, diverse menu across all locations.

1 unchanged sentence

We also employ a web-based notification and tracking solution to contact our restaurants and monitor progress in the event of a needed product withdrawal or recall.

Restaurant hardware and software support is provided by both our internal support services team at our corporate center as well as third-party vendors for remote and on-site restaurant support.

Restaurant hardware and software support is provided by both our internal support services team as well as third-party vendors.

Each restaurant has a private high-speed wide area connection to send and receive critical business data as well as to access web-based applications securely as well as a failover capability whereby a secondary public circuit is used to automatically establish a secure connection to our private network if the primary connection becomes unavailable.

We employ modern restaurant switching and routing technology that allows us to leverage and support contemporary security standards and practices and employ wireless capability for a variety of mobile uses.

All of our core and critical applications are housed in an external tier 3 data center.

To mitigate business interruptions, we utilize a disk-based data backup and replication infrastructure between our onsite and external data centers so all data is replicated nightly between the two sites.

We employ a multi-discipline security incident response plan to recognize, manage and resolve cybersecurity threats, and require cybersecurity awareness training for all staff members who have access to our cyber systems.

All of our core and critical applications are housed in external tier 3 data centers.

To mitigate business interruptions, we utilize a disk-based data backup and replication infrastructure between our onsite and external data centers, so all data is replicated nightly between the sites.

We also maintain cyber risk insurance coverage to further reduce our risk profile.

Security of our financial data and other sensitive information remains a high priority for us, led by our information technology department in conjunction with an interdepartmental information security council representing all of our key functional areas.

We utilize a private key infrastructure, ensuring only trusted devices can access our network and require secure sockets layer (SSL) certificates for access to sites outside our network.

To further enhance our cybersecurity protection, we added a third-party security operations center (SOC) provider to monitor and analyze internal network traffic for potential malicious content.

Also, in an effort to further secure our customers’ credit card information, we employ a robust encryption and tokenization platform for all credit card transactions in our restaurants, ensuring no credit card data is stored in our internal systems.

We utilize a public key infrastructure, ensuring only trusted devices can access our network, employ Intrusion Detection and Intrusion Prevention (IDS/IPS) that scans data in transit detecting and preventing the execution of harmful code and require secure sockets layer (SSL) certificates for access to sites outside our network.

To further enhance our cybersecurity protection, we utilize a third-party security operations center (SOC) provider to monitor and analyze internal network traffic for potential malicious content.

Also, in an effort to further secure our customers’ credit card information, we employ a robust end-to-end encryption and tokenization platform for all credit card transactions in our restaurants, ensuring no credit card data is stored in our internal systems.

This includes equipment that can also process smart payment cards, commonly referred to as EMV (Europay, Mastercard, Visa).

(See Item 1A — Risk Factors — “Information technology system failures or breaches of our network security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial performance.”)

(See Item 1A — Risk Factors — Risks Related to Information Technology and Cyber Security — “Information technology system failures or breaches of our network security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial performance.”)

Marketing and Advertising

The Cheesecake Factory

We rely on our reputation, as well as our high-profile locations, media exposure and positive “word of mouth,” to maintain and grow market share and historically have not used significant paid national advertising through television, radio or print, or use significant discounting.

We rely on our reputation, as well as our high-profile locations, media exposure and positive “word of mouth,” to maintain and grow market share.

Historically, we have not used significant paid national advertising through television, radio or print, nor significant discounting for on-premise dining occasions.

We utilize a social media and digital marketing strategy that allows us to engage regularly with our customers outside of our restaurants, including communication and paid advertising on Facebook ® , Instagram ® , YouTube ® , Twitter ® , Snapchat ® , Pinterest ® and other social media platforms, influencer marketing, Google search advertising and direct email to customers.

In 2019, we tested a television commercial with a highly-targeted media buy, and we are considering additional targeted media buys in the future.

(See Item 1A — Risk Factors — “ Any inability to effectively use and manage social media could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance .”)

(See Item 1A — Risk Factors — Risks Related to Our Business — “Any inability to effectively use and manage social media could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance.”)

Public relations is another important aspect of our marketing approach, and we frequently appear on local and national television in connection with a variety of promotional opportunities, such as National Cheesecake Day, to perform cooking demonstrations and other brand-building exposure.

We generated approximately 35 billion media impressions in fiscal 2020 at minimal cost to us.

We partner with several premiere third-party gift card distributors, contributing to our brand awareness and gift card sales.

To raise awareness in the off-premise channel, we execute marketing campaigns with our third-party delivery provider and through our online ordering platform.

In addition, we work with several premiere third-party gift card distributors, contributing to our brand awareness and gift card sales, as well as our consumer packaged goods licensees on co-branded marketing campaigns.

We also attempt to build awareness and relationships with retailers located in the same developments, shopping center operators, local hotel concierges, neighborhood groups and others in the community.

1 unchanged sentence

At times, we also engage in marketing and advertising opportunities in selective local markets.

In addition, we partner with our third-party delivery provider and consumer packaged goods licensees on co-branded marketing campaigns.

Our international licensees are committed to opening each new restaurant with marketing that can be comprised of a mix of elements including print, billboards, digital and radio.

6 unchanged sentences

Seasonality and Quarterly Results

While seasonal fluctuations generally do not have a material impact on our quarterly results, year-over-year comparisons can be significantly impacted by the number and timing of new restaurant openings and associated preopening costs, the timing of holidays, the impact from inclement weather, the additional week in a 53-week fiscal year, other variations in revenues and expenses and, in the period covered by this report, by the Acquisition in the fourth quarter of fiscal 2019.

While seasonal fluctuations generally do not have a material impact on our quarterly results, year-over-year comparisons can be significantly impacted by the number and timing of new restaurant openings and associated preopening costs, the timing of holidays, the impact from inclement weather, the additional week in a 53-week fiscal year, other variations in revenues and expenses and, for the fiscal 2020 versus fiscal 2019 comparisons, by the impact of the COVID-19 pandemic and results of the Acquisition.

Because of these and other factors, our financial results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

2 unchanged sentences

We continuously seek to improve our food safety and sanitation policies and procedures.

Our work and management processes are verified by routine restaurant management reviews, third-party health inspection audits and regulatory agency inspections.

In addition, our bakery facilities are Safe Quality Food (SQF) certified in alignment with the Global Food Safety Initiative’s Global Markets Program.

The following discussion on suppliers and traceability applies to The Cheesecake Factory, Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen restaurants and to our bakeries.

Our work and management processes are verified by routine restaurant management reviews, third-party health inspection/food safety audits and regulatory agency inspections.

In addition, our bakery facilities are Safe Quality Food certified in alignment with the Global Food Safety Initiative’s Global Markets Program.

The following discussion on suppliers and traceability applies to The Cheesecake Factory, Grand Lux Cafe and Social Monk Asian Kitchen restaurants and to our bakeries.

We are in the process of reviewing these processes for the FRC brands.

In selecting suppliers, we look for key performance indicators relating to sanitation, operations and facility management, good manufacturing and agricultural practices, product protection, recovery and food security.

In addition to measuring and testing food safety and security practices, we strive to ensure that all our food suppliers have annual food safety and quality system audits.

1 unchanged sentence

We utilize a web-based notification and tracking solution to efficiently contact our restaurants and monitor our progress in the event of a product withdrawal or recall.

(See Item 1A — Risk Factors — “Concerns relating to food safety, food-borne illness, pandemics and other diseases could reduce customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially adversely affect our financial performance.”)

(See Item 1A — Risk Factors — Risks Related to the Restaurant Industry — “Concerns relating to pandemics and other diseases, food safety and food-borne illness could reduce customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially adversely affect our financial performance.”)

Government Regulation

4 unchanged sentences

As a provider of food products, we are subject to a comprehensive regulatory framework that governs the manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States , including the Federal Food, Drug and Cosmetic Act, the Public Health Security and Bioterrorism Preparedness Response Act of 2002, the Federal Food Safety Modernization Act and regulations concerning nutritional labeling under the Patient Protection and Affordable Care Act of 2010.

(See Item 1A — Risk Factors — “Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining preferences could negatively impact our operations and competitive position, which could materially adversely affect our financial performance.”)

In order to serve alcoholic beverages in our restaurants, we must comply with alcoholic beverage control regulations which require each of our restaurants to apply to a state or other governmental alcoholic beverage control authority for licenses and permits to sell alcoholic beverages on the premises.

(See Item 1A — Risk Factors — Risks Related to the Restaurant Industry — “Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining preferences could negatively impact our operations and competitive position, which could materially adversely affect our financial performance.”)

In order to serve alcoholic beverages in our restaurants or off-premise where permitted, we must comply with alcoholic beverage control regulations which require us to apply to a state or other governmental alcoholic beverage control authority for licenses and permits.

In addition, we are subject to dram shop statutes in most of the jurisdictions in which we operate, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

To help mitigate this risk, we carry liquor liability coverage as part of our existing comprehensive general liability insurance.

Various federal, state, local and foreign laws govern our operations and our relationships with our staff members, including such matters as minimum wages, breaks, scheduling, exempt classifications, equal pay, overtime, tip credits, fringe benefits, leaves, safety, working conditions, provision of health insurance and citizenship or work authorization requirements.

Various federal, state, local and foreign laws govern our operations and our relationships with our staff members, including such matters as minimum wages, breaks, scheduling, exempt classifications, equal pay, overtime, tip credits, fringe benefits, leaves, safety, working conditions, provision of health insurance, the COVID-19 pandemic and citizenship or work authorization requirements.

In California, we are subject to the Private Attorneys General Act (“PAGA”) which authorizes employees to file lawsuits to recover civil penalties on behalf of themselves, other employees and the State of California for labor code violations.

We must also comply with local, state and federal laws protecting the right to equal employment opportunities and prohibiting discrimination and harassment in the work place.

We have training and awareness programs in place for these areas and plan to further expand the curriculum in fiscal 2020.

We must also comply with local, state and federal laws protecting the right to equal employment opportunities and prohibiting discrimination and harassment in the workplace.

We have training and awareness programs in place for these areas and further expanded the curriculum in fiscal 2020.

We are also subject to the regulations of the Department of Homeland Security, the U.S.

17 unchanged sentences

We have also registered various internet domain names, including, without limitation, “www.thecheesecakefactory.com,” “northitaliarestaurants.com,” and “www.foxrc.com,” as well as derivations of these and other domain names to include international country codes.

(See Item 1A — Risk Factors — “Our failure to adequately protect our intellectual property could materially adversely affect our financial performance.”)

Charitable Giving

The Cheesecake Factory Oscar and Evelyn Overton Charitable Foundation (“Foundation”) was created as a means to give back to the communities that our restaurants serve, as well as to unite our staff members in charitable causes.

Since the inception of its annual Invitational Charity Golf Tournament, the Foundation has raised $3.7 million, including $0.3 million in fiscal 2019, for the City of Hope Comprehensive Cancer Center, a leading research and treatment center for cancer, diabetes and other life-threatening diseases in Southern California.

Our staff members volunteer their time to the Foundation to serve holiday meals to low-income individuals and families in 13 Salvation Army centers across the United States at our annual Thanksgiving Day Feast.

Additionally, the Foundation provides sponsorships for teams of our staff members who work directly with non-profit organizations in their communities supporting a variety of local and national initiatives.

In addition to the efforts of the Foundation, the Company directly participates in a variety of charitable endeavors.

Through nationwide food donation programs, we regularly donate surplus food from our restaurants to local food rescue operations for distribution to soup kitchens and shelters.

(See Item 1A — Risk Factors — Risks Related to Our Business — “Our failure to adequately protect our intellectual property could materially adversely affect our financial performance.”)

Human Capital

At the heart of our culture is the belief that our people are our most important resource.

We depend on our staff members to successfully execute all aspects of our day-to-day operations that differentiate our concepts.

Our ability to attract highly-motivated staff members and retain an engaged, experienced team is key to successful execution of our strategy.

While we continue to operate in a competitive labor environment, we believe our people practices contribute significantly to our ability to attract talent and to The Cheesecake Factory restaurants’ industry-leading retention rates, which are consistently in the top tenth percentile of the upscale casual dining industry with respect to both restaurant management and hourly staff.

(See Item 1A — Risk Factors — Risks Related to the Restaurant Industry — “If we are unable to successfully recruit and retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance.”)

Retention and engagement of our staff members, one of our top priorities, is fostered by our investment and support particularly in the following areas:

Cultivating and maintaining our culture is a key strategic focus.

Our core values and purpose reflect who we are and how our staff members interact with one another, as well as with our customers and other external stakeholders.

Our purpose – to nurture bodies, minds, hearts and spirits – and our values – quality in everything we do;

passion for excellence;

integrity, respect and responsibility;

people – our greatest resource;

service-mindedness;

dynamic leadership;

high performance and create a sustainable future – are the foundation of our company culture.

We seek to embed our purpose in everything we do by cultivating a sense of pride and belonging to the Company and our brands.

We are proud of the way our people nurture one another and extend that nurturing to our customers and communities.

Diversity, Equity and Inclusion

We strive to offer an atmosphere of inclusion and belonging for all.

We believe the cultural alignment we cultivate around respect and inclusion builds trust and promotes teamwork to achieve our common goals.

Furthermore, when our people feel valued and respected for their worth as individuals, they are better able to maximize their potential at work and more likely to share their perspectives, opinions and ideas, which contributes to our ability to innovate.

With underrepresented talent making up nearly two-thirds of our workforce, we are committed to providing equal opportunities and seek to ensure there is equity in hiring, development and advancement.

We continue to work to increase the percentage of both underrepresented and female talent in our senior leadership across the organization.

To that end, we sponsor developmental support groups, such as The Cheesecake Factory Women’s Network Group, which helps advance women into senior-level positions.

In 2020, we strengthened our commitment to fostering an inclusive environment by forming a Diversity, Inclusion and Belonging Steering Committee to establish strategy, goals and accountability.

Key accomplishments included formulating an official statement that articulates our commitment to diversity, inclusion and belonging, conducting listening sessions between executives and staff members from underrepresented groups and providing education to our entire management team aimed at developing their inclusive leadership skills.

We are proud to have been recognized by Fortune and Great Place to Work® as a Best Workplace for Diversity for two consecutive years, a Best Workplace for Women for four consecutive years and a Best Workplace for Millennials for five consecutive years.

Development and Training

We invest significant resources to ensure our people receive, what we believe to be, industry-leading training in order to maximize their potential.

On average, our hourly staff members at The Cheesecake Factory restaurants receive approximately 130 hours of training per year through a combination of online coursework and in-person learning and development.

Our managers receive approximately 350 hours of training and development annually, on average.

Besides company-provided job training, we also encourage the pursuit of educational opportunities at The Cheesecake Factory and North Italia restaurants through our tuition reimbursement and free high school equivalency and associate degree programs for kitchen staff members.

In addition, we strive to provide our staff with career advancement opportunities.

Our robust training and educational programs allow us to fill a significant portion of our management positions with internal candidates.

Benefits and Wellness

We believe access to healthcare is a compelling benefit for many staff members and we offer healthcare benefits to our hourly staff members who work a minimum of 25 hours per week, on average.

We attempt to provide a robust suite of benefits and wellness offerings, including access to free mental health resources, autism coverage and resources, diabetes and chronic disease care management, a maternal health program and adoption assistance.

Employee Engagement

We believe that engaging our workforce is a key factor in our business success and in turn, have developed programs to promote enthusiasm and commitment, while providing a sense of belonging.

We measure our performance in this area through an annual engagement survey and pulse surveys throughout the year.

These surveys give staff company-wide the opportunity to share honest feedback about their work experience.

Based on survey results, leaders across the company are tasked with responsibility for creating action plans to address and respond to staff feedback.

Listening to our staff members is an essential part of building an engaged workforce, and we provide additional avenues for staff to share their ideas and concerns, including our internal crowdsourcing innovation website and our Careline, which staff can use to confidentially express their concerns.

As of December 29, 2020, we employed approximately 42,500 people, with approximately 41,000 in our restaurants and the remainder in our corporate center, FRC headquarters and bakery operations.

We believe our efforts in developing and engaging our workforce and creating a great workplace for all of our staff members, have been effective, as evidenced by our recognition as one of the Fortune “100 Best Companies to Work For®” in 2020 for the seventh consecutive year.

In addition, in 2020 we received the Workplace Legacy Award from Black Box Intelligence/People Report, which recognizes success in balancing superior people practices and best-in-class operational results in the restaurant industry.

Another key aspect of our culture is giving back to the communities where our staff live and work, and uniting our staff members around charitable causes personal to them.

Since 2008, we have donated over $5.3 million to Feeding America, and we use the annual campaign as an opportunity to engage our teams in a culturally-aligning company-wide service program.

In addition, through our nationwide food donation program, we regularly donate surplus food from our restaurants to local food rescue operations.

Since the program’s inception in 2007, we have donated more than 5.8 million pounds of food, including approximately 620,000 pounds in fiscal 2020.

We also contribute to Feeding America ® , the nation’s largest domestic hunger-relief organization, through specially-designated cheesecake sales, periodic meal donation campaigns in conjunction with our delivery provider and participation in Feeding America’s annual campaign to bring awareness to and help fight domestic hunger by donating peanut butter to local food banks.

In fiscal 2019, we donated $0.3 million to Feeding America through sales of our Pinapple Upside-Down cheesecake and Very Cherry Ghirardelli ® cheesecake, bringing our total contributions to $4.9 million over the past twelve years.

Nationwide in fiscal 2019, our staff members collected approximately 250,000 pounds of peanut butter for donation to Feeding America’s annual campaign.

Additionally, we partner with the California Community Foundation to provide a method for our staff members to assist other staff members in need through our The Cheesecake Factory “HELP” fund.

Sustainability

We strive to achieve excellence and quality in everything we do.

As a part of this commitment, we continue to develop a sustainability program that is aligned with our culture and values, is operationally feasible given the complexity of our restaurants and is financially responsible.

We regularly examine all aspects of our business in an effort to identify, create and implement meaningful and sustained change.

For more information, please visit the “Sustainability” and “Sustainable Sourcing” pages on our website at www.thecheesecakefactory.com .

The contents of our website are not incorporated by reference into this Form 10-K.

As of December 31, 2019, we employed approximately 46,250 staff members, of which approximately 44,900 worked in our restaurants, approximately 700 worked in our bakery operations and approximately 650 worked in our corporate center, FRC headquarters and restaurant field supervision organizations.

Our staff members are not covered by any collective bargaining agreements, and we consider our relations with our staff members to be favorable.

Our commitment to people-focused programs and creating a great workplace for all our staff and managers contributed to The Cheesecake Factory being named to Fortune magazine’s list of “100 Best Companies to Work For ® ” in February 2020, for the seventh year in a row, among other human resources awards.

We have similarly promoted our teams’ participation in community volunteer events, and through our gift card program, we contribute to local fundraising events for community non-profit organizations.

We also believe our sustainability programs and initiatives like restaurant-based composting and recycling and replacing our off-premise packaging with materials that reduce the use of plastics and improve recyclability serve to foster pride in our staff.

COVID-19 Pandemic

Key to our management of human capital during the COVID-19 pandemic were our decisions to 1) obtain adequate personal protective equipment for our staff and require the use of face masks by our restaurant teams in addition to any jurisdictional requirements in an effort to keep our teams and customers safe;

2) institute a special paid time off program with the goal of ensuring that hourly staff and managers could afford to take adequate time off from work to care for their health and 3) retain our restaurant management teams which we believe enabled us to adapt quickly to a mandated off-premise only operating model and reopen indoor dining rooms safely when allowed.

When the closure of our dining rooms in March necessitated the furloughing of approximately 41,000 hourly staff members, the Company funded a variety of support programs in an effort to provide them with stability, including a complimentary daily meal, continuation of insurance benefits during the furlough and contributions to a COVID assistance fund that provided $2.6 million in financial grants during fiscal 2020 to staff members in need.

Grants were funded through donations from the Company and its staff members.

In more recent instances where we have been required to return to off-premise only restaurant operations in certain jurisdictions, we have continued to offer the complimentary daily meal and benefit protections to our furloughed teams.

We believe these benefits have assisted us in maintaining a connection to furloughed staff with the goal of returning them to work as soon as dining rooms reopen.

Corporate Social Responsibility (“CSR”)

In addition to being a leader in experiential dining that strives to provide excellent food, service and hospitality to our customers, we also contribute to the well-being of our staff, local communities and the environment we all share.

We regularly examine multiple aspects of our business in an effort to identify, create and implement meaningful and sustained change.

For more information, please review our CSR report on the Corporate Social Responsibility page on our website at www.thecheesecakefactory.com .

The contents of the CSR report and our website are not incorporated by reference into this Form 10-K.

Executive Officers of the Registrant

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business