What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-22 · 148 added, 204 removed, 241 unchanged (59% of the section changed)

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We are culinary forward and relentlessly focused on hospitality.

We currently own and operate 306 restaurants throughout the United States and Canada.

We currently own and operate 318 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® , North Italia ® and a collection within our Fox Restaurant Concepts (“FRC) business.

Internationally, 30 The Cheesecake Factory ® restaurants operate under licensing agreements.

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Our filings are also available on the SEC’s website at www.sec.gov .

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

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of 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.

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

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes.

Fiscal years 2021, 2020 and 2019 each consisted of 52 weeks and fiscal year 2022 will consist of 53 weeks.

COVID-19 Pandemic

Beginning in March 2020, COVID-19 and measures to prevent its spread led to significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of a number of restaurants across our portfolio while our remaining locations shifted to an off-premise only operating model on an interim basis.

Reopening of restaurant dining rooms resumed, generally at reduced capacity, at various points since May 2020.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, currently nearly all of our restaurants are operating with no capacity restrictions on indoor dining.

The ongoing effects of COVID-19 and its variants, including, but not limited to, consumer behavior, capacity restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our restaurants and disruptions in the supply chain, will determine the impact to our operating results and financial position.

The impact to our operations has been most notable during the periods of greatest accelerating COVID-19 case counts.

We have incurred and will continue to incur additional costs to address government regulations and the safety of our staff members and customers.

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.

Fiscal year 2022 consisted of 53 weeks.

Fiscal years 2021 and 2020 each consisted of 52 weeks.

Fiscal year 2023 will consist of 52 weeks.

COVID-19 Pandemic, Geopolitical and Other Macroeconomic Impacts to our Operating Environment

We have experienced significant disruptions to our business as federal, state and local restrictions have fluctuated over time to mitigate the spread of the COVID-19 virus.

While most of our restaurants operated with no restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of accelerating case counts during which we incurred increased restaurant staff absenteeism and temporary shifts in consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels.

We have incurred and may continue to incur additional costs to address government regulations and the safety of our staff members and customers.

In addition, we experienced labor shortfalls relative to our sales levels in certain parts of our workforce and/or geographies as we reopened our dining rooms after the lifting of mandatory social-distancing regulations related to the COVID-19 pandemic.

During fiscal 2021, we also began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic.

These shortages continued in fiscal 2022 and were exacerbated by geopolitical unrest.

The aggregate impact of these and other geopolitical and macroeconomic factors contributed to significantly increased commodity and wage inflation and other increased costs.

We have also encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in obtaining licenses and permits and in the timeline required to complete the overall leasing process with landlords.

The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delay in new restaurant openings.

If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending share repurchases, not declaring future dividends, increasing borrowings under our credit facility or modifying our operating strategies.

Any of these measures may have an adverse impact on our business and materially adversely affect our financial performance.

The Cheesecake Factory

The Cheesecake Factory restaurants strive to provide a distinctive, high-quality dining experience at moderate prices by offering an extensive, innovative and evolving menu in an upscale casual, high-energy setting with attentive, efficient and friendly service.

As of February 27, 2023, we operated 210 The Cheesecake Factory restaurants, which strive to provide a distinctive, high-quality dining experience at moderate prices by offering an extensive, innovative and evolving menu in an upscale casual, high-energy setting with attentive, efficient and friendly service.

As a result, The Cheesecake Factory restaurants appeal to a diverse customer base across a broad demographic range.

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The Cheesecake Factory restaurants are generally open seven days a week for lunch and dinner, and we offer additional menu items for weekend brunch.

Most of our locations are closed on Thanksgiving and Christmas.

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

Alcoholic beverage sales represented 11% of The Cheesecake Factory restaurant sales for fiscal year 2021 compared to 9% in fiscal 2020 and 12% in fiscal 2019.

These fluctuations were primarily due to higher alcoholic beverage incident rates associated with on-premise dining.

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

Sales through the off-premise channel comprised approximately 32% of our restaurant sales during fiscal 2021 as compared to 43% in fiscal 2020 as many customers have returned to on-premise dining, whereas consumer behavior had shifted towards the off-premise channel during the prior year period due to the pandemic.

However, off-premise sales mix remains higher than the pre-pandemic level of 16% during fiscal 2019.

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.

Currently, we operate 208 The Cheesecake Factory locations.

The Cheesecake Factory menu features approximately 235 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, Vegan Cobb Salad and our Bacon-Bacon Cheeseburger.

During fiscal 2022, alcoholic beverage sales represented 12% of The Cheesecake Factory restaurant sales.

We offer all items on our menu, except alcoholic beverages where disallowed by regulation, for off-premise consumption, sales of which comprised approximately 25% of The Cheesecake Factory restaurant sales during fiscal 2022.

We work with a third party to provide delivery service from all of our locations and offer online ordering for to-go sales at all of our domestic locations.

The Cheesecake Factory menu features approximately 235 items, exclusive of beverage and dessert items and including items presented on supplemental menus, such as our SkinnyLicious ® menu that offers innovative items at 590 calories or less.

Our menu offerings include appetizers, pizza, seafood, steaks, chicken, burgers, small plates, pastas, salads, sandwiches and omelettes, including a selection of vegan and gluten-free items.

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 19%, 21% and 16% of The Cheesecake Factory restaurant sales for fiscal 2021, 2020 and 2019, respectively.

These fluctuations were primarily driven by the varying proportions of off-premise sales which generally carry higher dessert incident rates, as compared to on-premise sales.

Our brand identity and reputation for offering premium desserts results in a significant level of dessert sales, representing approximately 17% of The Cheesecake Factory sales during fiscal 2022.

Competitive Positioning

The restaurant industry is comprised of multiple segments, including fine dining, casual dining, fast casual and quick-service.

The Cheesecake Factory restaurants operate in the upscale casual dining segment, which is differentiated by freshly prepared and innovative food, flavorful recipes with creative presentations, unique restaurant layouts, eye-catching design elements and more personalized service.

Upscale casual dining is positioned above core casual dining, with standards that are closer to fine dining.

The Cheesecake Factory restaurants operate in the upscale casual dining segment, which is positioned above core casual dining, with standards that are closer to fine dining.

Upscale casual dining is differentiated by freshly prepared and innovative food, flavorful recipes with creative presentations, unique restaurant layouts, eye-catching design elements and more personalized service.

We believe that we are a leader in upscale casual dining given the historically high average sales per square foot of our restaurants as compared to others in this segment.

The restaurant industry is highly competitive with respect to menu and food quality, service, access to qualified operations personnel, location, decor and value.

We compete directly and indirectly for customer traffic with national and regional casual dining restaurant chains, as well as independently-owned restaurants.

In addition, we face competition for customer traffic from fast casual and quick-service restaurants, home delivery services, mobile food service, grocery stores and meal kits that are increasing the quality and variety of their food products in response to customer demand.

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.”)

The restaurant industry is highly competitive with respect to menu and food quality, service, personnel, location, décor and value.

We compete directly and indirectly with national and regional casual dining restaurant chains, as well as independently-owned restaurants.

In addition, we face competition from fast casual and quick-service restaurants, grocery stores and meal kits that have increased the quality and variety of their food products in response to consumer demand.

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

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

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One of our competitive strengths is our ability to anticipate customer preferences and adapt our expansive menu to the latest trends.

We regularly update our ingredients and cooking methods, as well as create new menu items and new categories of food offerings at our restaurants, such as our SkinnyLicious® menu, “Super” food selections and gluten-free choices, further enhancing the variety, quality and price points offered and keep our menu relevant to our customers.

We regularly update our ingredients and cooking methods, as well as create new menu items and new categories of food offerings at our restaurants, further enhancing the variety, quality and price points offered and keeping our menu relevant to our customers.

All new menu items are selected based on anticipated sales popularity and profitability.

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

In 2021, we launched the Coconut Cream Pie Cheesecake in conjunction with National Cheesecake Day.

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.

In 2022, we launched the Classic Basque Cheesecake in conjunction with National Cheesecake Day.

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 supporting both our margin objectives and customer traffic levels.

We have historically targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.

Due to the cost pressures we are currently experiencing, particularly in commodities, in the first quarter of fiscal 2022, we implemented price increases above our historical levels to protect margins.

Due to the inflationary cost pressures we experienced in fiscal 2022, we implemented price increases above our historical levels to support our longer-term restaurant-level margin objectives.

Future near-term pricing actions are likely to be at levels above historical norms to keep pace with any significant cost increases.

We will continue to consider the cost environment and consumer price sensitivity when evaluating future menu price increases.

In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and cost.

Value Proposition.

We believe our restaurants are recognized by customers for offering value with a large variety of freshly prepared menu items across a broad array of price points and generous portions at moderate prices.

The average check for each customer, including beverages and desserts, was approximately $29.30, $28.90 and $23.50 for fiscal 2021, 2020 and 2019, respectively.

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

Therefore, a higher mix of off-premise sales produces a higher average check as most off-premise orders are for more than one customer.

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 has shifted toward off-premise dining during the pandemic.

The increase in average check from fiscal 2020 to fiscal 2021 reflects the impact of menu price increases, partially offset by lower off-premise mix as many customers have returned to on-premise dining.

The average check for each customer, including beverages and desserts, was approximately $29.40 during fiscal 2022.

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

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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 2021, for the eighth consecutive year.

(See “Restaurant Operations, Development and Training” 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 2022, for the ninth consecutive year.

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

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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 where indoor dining spaces were restricted.

Exterior patio seating is generally available as weather permits.

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

In accordance with 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 and for which we can obtain goods, materials and adequate staffing.

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 — “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 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.

We consider many factors when assessing the suitability of a site, including the demographics of the trade area such as average household income, and historical and anticipated population growth.

We consider many factors when assessing the suitability of a site, including the demographics of the trade area such as average household income and population density, as well as site-specific characteristics such as visibility, accessibility and proximity to activity centers such as shopping centers and competitive influences.

Since our restaurants can be successfully executed within a variety of site locations and layouts, we are highly flexible in choosing suitable locations.

While there are common decor elements within each of our restaurant sites, the designs are customized for the specifics of each location, including the building type, square footage and layout of available space.

Our existing restaurants range from 5,000 to 21,000 interior square feet, and we expect the majority of our new restaurants to vary between 7,000 and 10,000 interior square feet, generally with additional exterior and/or interior patio seating, selected appropriately for each market and specific site.

We expect the majority of our new restaurants to vary between 7,000 and 10,000 interior square feet, generally with additional exterior and/or interior patio seating, selected appropriately for each market and specific site.

The relatively high sales productivity of our restaurants provides opportunities to obtain competitive leasing terms from landlords.

Due to the flexible and customized nature of our restaurant operations and the complex design, construction and preopening processes for each new location, our lease negotiation and restaurant development time frames vary.

The development and opening process usually ranges from six to eighteen months, depending largely on the type and availability of the leased space we intend to occupy, as well as our ability to obtain goods, materials and adequate staffing, and can be subject to delays either due to factors outside of our control or to our selective timing of restaurant openings.

The development and opening process usually ranges from six to eighteen months, depending largely on the type and availability of the leased space we intend to occupy, as well as our ability to obtain goods, materials, permits and adequate staffing, and is subject to delays either due to factors outside of our control or to our selective timing of restaurant openings.

In recent years, we have encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in obtaining licenses and permits.

Unit Economics

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This popularity is reflected in our average sales per restaurant and per square foot, which are among the highest of any publicly-held restaurant company.

Average sales per location for The Cheesecake Factory restaurants open for the full year were approximately $11.1 million, $7.8 million and $10.7 million for fiscal 2021, 2020 and 2019, respectively.

Average sales per location for The Cheesecake Factory restaurants open for the full year were approximately $12.1 million and $11.8 million on a 53-week and 52-week basis, respectively, for fiscal 2022.

Since each of our restaurants has a customized layout and differs in size, an effective method to measure the unit economics of our sites is by square foot.

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 $1,019, $716 and $986 for fiscal 2021, 2020 and 2019, respectively.

Fiscal 2021 and 2020 average sales per location and average sales per productive square foot reflect the impact of the COVID-19 pandemic on our business.

Fiscal 2021 and 2020 average sales per productive square foot adjusted for interior capacity restrictions related to the COVID-19 pandemic was $1,192 and $1,127.

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 $1,116 and $1,089 on a 53-week and 52-week basis, respectively, for fiscal 2022.

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

(See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on comparable restaurant sales.)

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.

We currently lease all of our restaurant locations and utilize capital for leasehold improvements and furnishings, fixtures and equipment to build out our restaurant premises.

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

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However, these costs vary depending on a number of factors, including geography, the complexity of our build-out, site characteristics, governmental fees and permits, labor and material conditions in the local market, weather and the amount, if any, of construction contributions obtained from our landlords for structural additions and other leasehold improvements.

In selecting sites for our restaurants, an important objective is to earn an appropriate return on investment.

We measure returns using a cash-on-cash return on investment calculated by dividing restaurant-level profit (earnings before interest, taxes, depreciation and amortization and preopening costs) by our cash investment.

Our new restaurants typically open with initial sales volumes well in excess of their future run-rate levels.

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During the three to six months following the opening of new restaurants, customer traffic generally settles into its normal pattern, resulting in sales volumes that gradually adjust downward to their post-opening run-rate level.

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

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

Restaurant Operations

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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 most of our 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.

This tenure and knowledge drive our high productivity and contribute to our ability to deliver an exceptional customer experience.

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.

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Our GMs regularly meet to receive hands-on training, share best practices and celebrate Company successes, all of which help to foster the unique culture of our brand.

Each restaurant GM reports to an Area Director of Operations (“ADO”) who supervises the operations of six to eight restaurants within a geographic area.

In turn, each ADO reports to one of four Regional Vice Presidents of Restaurant Operations.

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

Each restaurant GM reports to an Area Director of Operations (“ADO”), who in turn reports to a Regional Vice President of Restaurant Operations.

Our EKMs report to their GMs but are also supervised by an Area Kitchen Operations Manager.

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.

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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.

Preopening Costs for New Restaurants

Restaurant-Level Preopening Costs

Due to the highly customized and operationally complex nature of our upscale, high-volume concept and the investment we make in properly training our staff to operate our restaurants, our preopening process is more extensive, time consuming and costly than that of many restaurant chains.

Preopening costs for a typical restaurant in an established market average approximately $1.7 million to $2.0 million and include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members.

Also included are expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs, and corporate travel and support activities.

Preopening costs can fluctuate significantly from period to period, based on the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Preopening costs vary by location depending on a number of factors, including the proximity of our existing restaurants, the size and physical layout of each location, the number of management and hourly staff members required to operate each restaurant, the availability of qualified restaurant staff members, the cost of travel and lodging for different metropolitan areas, the timing of the restaurant opening and the extent of unexpected delays, if any, in obtaining final licenses and permits to open the restaurant, which may also depend on our landlords obtaining their licenses and permits and completing their construction activities.

Preopening costs are generally higher for larger restaurants and initial entry into new markets and lower when we relocate a restaurant within its local market.

We usually incur the most significant portion of preopening costs within the two months immediately preceding and the month of a restaurant’s opening.

Preopening costs per restaurant will also depend on our ability to leverage planned management growth expenses.

Expansion of Licensed Locations

Restaurant-level preopening costs for a typical location in an established market average approximately $1.0 million to $1.5 million and include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members.

Restaurant-level preopening costs can fluctuate significantly from period to period, based on the number and timing of restaurant openings and the specific costs incurred for each restaurant.

These costs vary by location depending on a number of factors, including the proximity of our existing restaurants, the size and physical layout of each location, the number of management and hourly staff members required to operate each restaurant, the availability of qualified restaurant staff members, the cost of travel and lodging for different metropolitan areas, the timing of the restaurant opening and the extent of unexpected delays, if any, in obtaining final licenses and permits to open the restaurant, which may also depend on our landlords obtaining their licenses and permits and completing their construction activities.

Restaurant-level preopening costs are generally higher for larger restaurants and initial entry into new markets and lower when we relocate a restaurant within its local market.

We usually incur the most significant portion of restaurant-level preopening costs within the two months immediately preceding and the month of a restaurant’s opening.

Licensed Locations

We currently have licensing agreements with three restaurant operators to develop and operate The Cheesecake Factory ® brand restaurants in selected international markets.

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

Assuming the operating environment continues to normalize from the COVID-19 pandemic and assuming full capacity conditions are ultimately permitted in each jurisdiction, we project each international licensed location to contribute on average 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 27, 2023, our international licensees operated the following The Cheesecake Factory restaurants:

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(2) This licensee, or its affiliates, also has the right to develop restaurants in Chile, with the opportunity to expand the agreement to include Argentina, Brazil, Colombia and Peru.

(3) This licensee, or its affiliates, also has the right to develop restaurants in Taiwan, with the opportunity to expand the agreement to include Japan, South Korea, Malaysia, Singapore and Thailand.

(3) This licensee, or its affiliates, also has the right to develop restaurants in Thailand and Taiwan, with the opportunity to expand the agreement to include Japan, South Korea, Malaysia and Singapore.

We are actively working to extend and expand the agreements with our current licensees in their primary geographies and are also exploring potential opportunities to expand our licensing business into Western Europe.

Our corporate infrastructure includes a dedicated global development team that works with our international licensees and coordinates the initial training, ongoing quality control, product specifications and brand oversight at our licensed locations.

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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.”)

Consumer Packaged Goods

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We continue to evaluate other synergistic, on-brand licensing opportunities to add incremental revenue streams to our business.

North Italia and Fox Restaurant Concepts

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts, including Flower Child and all other FRC brands, which we expect will accelerate and diversify our revenue growth.

North Italia and the FRC concepts are highly-differentiated and deliver unique customer experiences.

With our aligned cultures and philosophies, we believe these transactions are consistent with our long-term strategy of being a leader in experiential dining and provide a significant accretive unit growth opportunity.

In addition, we are pursuing a number of synergistic opportunities with our core infrastructure, including payroll and purchasing services.

North Italia is a modern interpretation of Italian cooking in the upscale casual dining segment.

Dishes are handmade from scratch daily.

The menu features appetizers, salads, fresh pastas, pizzas and entrees.

Examples of menu offerings include White Truffle Garlic Bread, Tuscan Kale Salad, Bolognese, Burrata Anolini, Margherita Pizza, Tuscan Half Chicken, Chicken Parmesan and Braised Short Rib.

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

Alcoholic beverage sales represented 25% of North Italia sales for fiscal 2021 compared to 24% for fiscal 2020.

North Italia strives to be a modern Italian restaurant with a neighborhood feel, offering classic Italian favorites with a fresh twist made from scratch daily.

Contemporary design and décor elements including large dining rooms, high ceilings and open kitchen layouts coupled with a focus on exceptional hospitality and high-quality, personalized service creates a warm, lively atmosphere for guests to create memorable experiences.

The menu features a broad selection of delicious, handcrafted dishes including appetizers, salads, fresh pastas, pizzas and entrees, and each restaurant includes unique menu items tailored to local markets.

North Italia offers an assortment of wines, beers and house-made cocktails which represented 25% of North Italia sales in fiscal 2022.

The average check for each customer, including beverages and desserts, for fiscal 2022 averaged approximately $32.00 for lunch and approximately $41.50 for dinner.

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

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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% average annual unit growth.

We target an average unit size of 6,000 to 7,000 square feet and average sales per mature location of approximately $7.2 million, or approximately $1,200 per productive square foot.

We have implemented a number of integrative initiatives with North Italia, including operations leadership, real estate development and marketing.

FRC operates as an independent subsidiary in Phoenix, Arizona.

Its concepts are diverse in industry segment, occasions, square footage and geography.

Average sales per mature location, defined as open prior to 2020 and adjusted to exclude impaired locations, for North Italia restaurants were approximately $8.0 million for fiscal 2022, or approximately $1,300 per productive square foot on a 53-week basis.

We target an average North Italia unit size of 6,000 to 7,000 square feet, and total construction costs average approximately $650 per interior square foot.

Restaurant-level preopening costs for a typical location in an established market average approximately $0.5 million to $0.7 million and include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members.

Fox Restaurant Concepts

FRC operates as an independent subsidiary in Phoenix, Arizona and serves as an incubation engine, innovating new food, dining and hospitality experiences to create fresh, exciting concepts for the future.

With over a dozen evolving restaurant brands launched to-date, its concepts are diverse in industry segment, occasions, square footage and geography.

FRC's largest concept, Flower Child, operates in the fast casual dining segment, offering a customizable menu, made fresh from scratch, featuring locally-sourced, all-natural and organic ingredients.

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Currently, we operate 30 and 35 Flower Child and other FRC locations, respectively.

We target approximately 15% to 20% average annual unit growth for the aggregate FRC portfolio, 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 target sales of approximately $1,000 per productive square foot, on average.

We target approximately 15% to 20% average annual unit growth for the aggregate FRC portfolio, driven primarily by the anticipated growth of Flower Child, complemented by additional market tests of the potential growth concepts.

Average sales per location open for the full year for the FRC restaurants were approximately $5.8 million for fiscal 2022, or approximately $1,000 per interior square foot.

FRC unit sizes range from approximately 3,500 to 15,000 square feet, and total construction costs average approximately $500 per interior square foot, depending on the concept.

Bakery Operations

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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.

We produce approximately 60 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.

Some of our most popular cheesecakes include the Original Cheesecake, Ultimate Red Velvet Cake Cheesecake TM , Godiva ® Chocolate Cheesecake, Oreo ® Dream Extreme Cheesecake and Coconut Cream Pie Cheesecake.

Other popular baked desserts include Chocolate Tower Truffle Cake TM , Carrot Cake and Black-Out Cake.

We produce approximately 60 varieties of proprietary cheesecakes and other baked desserts using high-quality ingredients for The Cheesecake Factory restaurants and for international licensees and third-party customers.

The primary role of our bakery operations is to produce innovative, high-quality cheesecakes and other baked desserts for sale at our restaurants and those of our international licensees.

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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 and Social Monk Asian Kitchen.

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

Grand Lux Cafe

Grand Lux Cafe is an upscale casual dining concept that offers globally-inspired cuisine with an ambiance of modern sophistication.

Using fresh ingredients, the menu offers classic American dishes and international favorites, including appetizers, pasta, seafood, steaks, chicken, burgers, salads, specialty items and desserts.

Examples of menu offerings include our Cedar Planked B.B.Q Salmon, Buffalo Chicken Rolls and Shrimp Scampi.

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

Currently, we operate nine Grand Lux Cafe locations, having closed two locations subsequent to the end of fiscal 2021.

Social Monk Asian Kitchen

Social Monk Asian Kitchen is a fast casual Asian concept with a modern urban feel.

The menu features the cuisines of Thailand, Vietnam, Malaysia, Singapore, China, Indonesia and India in made-to-order starters, salads, soups, sandwiches, rice and noodle bowls, classic entrees, vegetables and sides and house-made frozen custard.

The restaurant also offers beer and wine.

Examples of menu offerings include Crisp Vegetable Spring Rolls, Asian Chicken Salad, Thai Basil Cashew Chicken, Shaking Beef and Dan Dan Noodles.

Currently, we operate one Social Monk Asian Kitchen location.

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.

At the heart of our culture is the belief that our people are the foundation of our success.

We depend on our staff members to effectively 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 or near 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:

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

Cultivating and maintaining our culture is a key strategic focus.

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

We believe our efforts to build and maintain a strong culture have contributed to two notable recognitions in 2022.

We were named to the FORTUNE 100 Best Companies to Work For ® list for a ninth consecutive year and the PEOPLE Companies that Care ® list for a second consecutive year.

Diversity, Equity, Inclusion and Belonging

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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.

Our Diversity, Inclusion and Belonging Steering Committee is responsible for establishing strategy, goals and accountability around this important area of focus.

In 2021, key activities included conducting an assessment of our diversity and inclusion efforts and providing in-depth diversity, inclusion and bias training to our above-restaurant operational leadership.

We created our Diversity, Equity, Inclusion and Belonging working group to help provide focus, feedback and ideas in this important area.

We are committed to providing equal opportunities and seek to ensure there is equity in hiring, development and advancement.

We sponsor developmental support groups, such as The Cheesecake Factory Women’s Network Group, with the goal of advancing women into senior-level positions.

Our Female Kitchen Leader’s Program pairs new female managers with an advisor to provide extra support with navigating kitchen environments, which tend to be predominantly male.

The Leaders of Color Program provides networking and development opportunities for managers from diverse racial or ethnic groups.

As of December 28, 2021, approximately 47% of our staff members were women and approximately 67% of our staff members were racially or ethnically diverse.

We annually conduct pay studies among our restaurant management and corporate teams to help ensure that we are paying fairly and equitably.

In addition, we review pay parity for hourly staff on an annual basis.

In 2022, we continued our inclusive leadership training for above-restaurant leadership and restaurant managers and reviewed our interview processes for key above-restaurant leadership to enhance opportunity and development for candidates at The Cheesecake Factory and North Italia concepts.

We also sponsored developmental support groups, such as The Cheesecake Factory Women’s Network Group, with the goal of advancing women into senior-level positions.

Our Female Kitchen Leader’s Program paired new female managers with an advisor to provide extra support with navigating kitchen environments, which tend to be predominantly male.

The Leaders of Color Program provided networking and development opportunities for managers from diverse racial or ethnic groups.

As of January 3, 2023, approximately 47% of The Cheesecake Factory and North Italia staff members were women and approximately 72% of our The Cheesecake Factory and North Italia staff members were racially or ethnically diverse.

Further details on representation can be found in the CSR Report (see “Corporate Social Responsibility” below).

To enhance opportunity and development for participants in these groups, we reinstated certain programs in 2022 that had been paused during the COVID-19 pandemic, such as in-person conferences.

We are committed to conducting pay analyses among our The Cheesecake Factory and North Italia restaurants, as well as our bakery and corporate teams, to help ensure that we are paying fairly and equitably.

In 2021, we retained a third-party consulting firm to conduct an independent pay equity analysis of our area managers, restaurant managers, corporate field and corporate support center staff to identify risks and determine if there were unexplained base pay gaps in our organization by gender or race.

To help ensure that we are paying fairly and equitably, we are committed to conducting both internal reviews and external third-party audits and verification.

We have also trained our recruiters to help enable them to identify and address pay equity issues during the hiring process utilizing internal reporting and partnership with the compensation team.

Development and Training

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Our hourly staff members and managers receive a considerable amount of training through a combination of in-person learning and development and online coursework.

In addition to company-provided job training, we encourage the pursuit of educational opportunities at The Cheesecake Factory, North Italia and Grand Lux Cafe restaurants through our tuition reimbursement and free high school equivalency and associate degree programs.

We also strive to provide our staff with career advancement opportunities, and our internal management promotion rate for fiscal 2021 was 53%.

In addition to company-provided job training, we encourage the pursuit of educational opportunities at The Cheesecake Factory and North Italia restaurants through free high school equivalency and associate degree programs.

In 2022, we expanded availability of these programs to include all hourly staff members (previously, only kitchen staff were eligible).

We also strive to provide our staff with career advancement opportunities, and our fiscal 2022 internal management promotion rate at The Cheesecake Factory and North Italia concepts was 53%.

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 provide a robust suite of benefits and wellness offerings, including free mental health resources, free tutoring to support our staff and managers, and access to chronic disease care management, a maternal health program, financial wellness resources and adoption assistance.

All staff have paid sick time available to them starting at hire and are eligible to earn vacation time.

We provide a robust suite of benefits and wellness offerings, including free mental health resources, free tutoring to support our staff and managers, and access to chronic disease care management, substance abuse treatment, a maternal health program, financial wellness resources and adoption assistance.

The Cheesecake Factory and North Italia staff, as well as our bakery and corporate teams, have paid sick time available to them starting at hire and are eligible to earn vacation time.

Our continued management of human capital related to the COVID-19 pandemic during fiscal 2022 focused on keeping our teams and customers safe, adhering to local requirements and providing paid time off for our hourly staff and managers to care for their health.

In fiscal 2022, we also sought to provide staff with additional benefit through implementation of an earned wage access program that allows staff who qualify to receive up to 50% of their earned wages the day after they work a shift.

Employee Engagement

As of December 28, 2021, we employed approximately 45,800 people, with approximately 44,500 in our restaurants and the remainder in our corporate support center, FRC headquarters and bakery operations.

As of January 3, 2023, we employed approximately 47,500 people, with approximately 46,000 in our restaurants and the remainder in our corporate support center, FRC headquarters and bakery operations.

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.

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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.

We believe our efforts in developing and engaging our workforce and creating a great workplace for all of our staff members are important, and in 2021, we were recognized by Fortune and Great Place to Work ® as one of the 100 Best Companies to Work For for an eighth consecutive year.

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

A significant part of our employee engagement strategy involves staff appreciation and recognition efforts.

After pausing them during the pandemic, we reinstated key cultural events such as our week-long team appreciation celebrations, manager recognitions, Commitment to Excellence staff member awards and new menu rollout all-staff meetings.

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

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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.

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.

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

We also participate in a nationwide food donation program which redirects surplus food away from landfills to local food banks and non-profit organizations, and 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.

Actions Related to the COVID-19 Pandemic

Our management of human capital related to the COVID-19 pandemic during fiscal 2021 included the following:

● Safety – Continued our compliance with state and local government regulations and health recommendations in an effort to keep our teams and customers safe, including providing personal protective equipment and adhering to local vaccination requirements.

● Benefits – Further expanded our paid time off program so that hourly staff and managers could take time off from work to care for their health, including paid time off to receive COVID-19 vaccines.

● Support programs – Provided a complimentary daily meal and continuation of insurance benefits to provide support to staff members impacted by closures of dining rooms.

● Management – Guaranteed approximately 95% of our restaurant management teams’ annual bonus opportunity.

Corporate Social Responsibility

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We evaluate our business and how we operate our corporate-owned restaurants in an effort to identify, create and implement meaningful and sustained change.

During fiscal 2021, in an effort to emphasize the importance of and to align with management, our Board amended our Corporate Governance and Nominating Committee charter to provide for review of the Company’s sustainability and CSR policies.

The Corporate Governance and Nominating Committee of our Board is responsible for reviewing the Company’s sustainability and CSR policies.

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

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Purchasing and Distribution

We strive to obtain quality menu ingredients, bakery raw materials, supplies and services for our operations from reliable sources at competitive prices and consistent with our sustainability goals.

Our purchasing philosophy is designed to procure quality ingredients, supplies and services for our operations from reliable sources at competitive prices and consistent with our sustainability goals.

We research and evaluate various ingredients and products in an effort to maintain high quality, be responsive to changing consumer tastes and manage costs.

In order to maximize purchasing efficiencies and to obtain the freshest ingredients that meet our required quality and consistency standards, each restaurant’s management determines the quantities of food and supplies needed for their location and orders the items from qualified local, regional, national and international suppliers based upon specifications determined and terms negotiated at a corporate level.

We strive to maintain restaurant-level inventories at a minimum dollar level in relation to sales due to the relatively rapid turnover of the perishable produce, poultry, meat, fish and dairy commodities we use in our operations, coupled with the limited storage space at our restaurants.

Should any items from a particular supply source become unavailable, we generally believe that these items could be obtained, or alternative products substituted, in sufficient quantities from other sources to allow us to avoid any long-term material adverse effects that could be caused by such unavailability.

In order to maximize purchasing efficiencies and to obtain the freshest ingredients that meet our required standards, each restaurant’s management determines the quantities of food and supplies needed for their location and orders the items from qualified local, regional, national and international suppliers based upon specifications determined and terms negotiated at a corporate level.

We strive to maintain restaurant-level inventories at a minimum dollar level in relation to sales due to the relatively rapid turnover of the perishable commodities we use in our operations, coupled with the limited storage space at our restaurants.

Independent foodservice distributors, including the largest foodservice distributor in North America, deliver most items multiple times per week to our restaurants.

During fiscal 2021, we began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic, and we expect these shortages and delays to continue in fiscal 2022.

We purchase food and other commodities for use in our operations based on market prices established with our suppliers.

Many of these commodities can be subject to market volatility driven by supply and demand factors outside of our control, including the relative availability of labor and distribution, weather, natural disasters, inventory levels, and political and economic conditions.

The cost of products and services used in our operations are subject to volatility due to the relative availability of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events such as the COVID-19 pandemic, geopolitical events, economic conditions or other unforeseen circumstances.

Climate change may further exacerbate a number of these factors.

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.

As a result of recent supply shortages that have affected the restaurant industry and broader economy, we have needed to purchase a greater portion of certain products in the spot market at a significantly higher cost than our historical contracted rates.

During fiscal 2021, we began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic.

These shortages continued in fiscal 2022 and were exacerbated by geopolitical unrest.

The aggregate impact of these and other factors contributed to significant cost inflation.

We attempt to 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.

While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these efforts may not be successful or yield our intended benefits.

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 price 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 2022, we had no hedging contracts in place.

We may not have the ability to increase menu prices or vary menu items in response to food commodity price increases.

(See Item 1A — Risk Factors — “Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.”)

Information Technology

Unless otherwise noted, this section titled “Information Technology” relates to The Cheesecake Factory, North Italia, Grand Lux Cafe and Social Monk Asian Kitchen restaurants.

We are in the process of implementing similar solutions for the FRC brands other than North Italia where warranted based on our assessments.

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

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This framework delivers enterprise reporting, dashboards and analytics, and allows access to metrics such as quote and wait time accuracy, staff member retention trends, and restaurant quality and service analyses.

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.

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.

To enable a safer and improved customer experience in response to the COVID-19 pandemic, we offer QR code menu and touchless payment options.

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.

We utilize a web-based labor scheduling solution to enhance scheduling precision and staff satisfaction.

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

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 our key functional areas.

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.”)

Our restaurant systems are designed to enhance the guest experience, protect guest information and allow our staff to focus on delivering the best experience possible.

We have implemented systems for touchless/online menu, ordering and payment, inventory management, labor management, recipe management, kitchen order orchestration and table management.

Our kitchen order orchestration tool is designed to route items in such a way that balances the workload across multiple stations to ensure our guests receive the highest quality menu items.

Our labor management tool delivers optimized scheduling based on business demands and staff availability coupled with web and app-based access delivering flexibility to our staff.

Guest payment data is of the utmost importance, and we employ measures to help ensure every payment is secured and encrypted.

Information and data security is a priority for us and is led by our information technology department in conjunction with an interdepartmental information security council representing our key functional areas.

We employ a multi-discipline security approach to recognize, manage and resolve cybersecurity threats, and require cybersecurity awareness training for all staff members with access to our cyber systems.

This approach includes continuous monitoring and detection programs, network security precautions, encryption of critical data, and in-depth security assessment of vendors and incident response guidelines.

We continue to invest and innovate around the areas of protection of systems, sensitive data, technology, and processes using third-party and in-house tools and resources.

We remain focused on protecting against new and emerging risks utilizing our tools and security teams and continue to review and make strategic investments in our systems to help keep the Company’s, our guests’, and our team members’ data secure.

We maintain a disaster recovery plan and protect against business interruption by backing up our major systems.

In addition, we periodically scan our environment for any vulnerability, perform penetration testing and engage third parties to assess the effectiveness of our data security practices.

A third party conducts regular network security reviews, scans, and audits.

The Audit Committee of the Board of Directors reviews with management steps the Company has taken to monitor or mitigate significant cybersecurity risk and the effectiveness of these practices.

Marketing and Advertising

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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 ® , TikTok ® and other social media platforms, influencer marketing, Google search advertising and direct email to customers.

We are in the process of updating our website and implementing a guest rewards program.

(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.”)

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 social media platforms such as Instagram ® and TikTok ® and other, influencer marketing, Google search advertising and direct email to customers.

We refreshed our website in 2022, including our online ordering capabilities.

We also are currently testing a guest rewards program pilot for potential national rollout in 2023.

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.

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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.

For restaurants opening in new markets, we strive to obtain local television, radio station and newspaper coverage in order to benefit from publicity at low or no cost.

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

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.

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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 and other variations in revenues and expenses, including the impact of the COVID-19 pandemic and results of the Acquisition.

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

While seasonal fluctuations generally do not have a material impact on our quarterly results, year-over-year comparisons can be significantly impacted by factors such as significant differences in year-over-year inflation, the number and timing of new restaurant openings and associated preopening costs, the timing of holidays, inclement weather and the additional week in a 53-week fiscal year.

Therefore, our financial results for any quarter or fiscal year are not necessarily indicative of the results that may be achieved for the full fiscal year or subsequent fiscal years.

Food Safety and Quality Assurance

Our food safety processes and systems are designed to mitigate the risk of contamination and illness and to ensure compliance with regulatory requirements as well as industry standards.

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/food safety audits and regulatory agency inspections, and we utilize a nutritional database consistent with the Food and Drug Administration’s recently-enacted rule regarding food and nutritional labeling of restaurant menu items.

Adherence is monitored through 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.

In selecting suppliers, we look for key performance indicators relating to sanitation, operations and facility management, good manufacturing and agricultural practices, product protection, government inspections and compliance, compliance with the Food Safety Modernization Act, recovery and food security.

We have annual food safety and quality system audits for certain suppliers, while others are audited every other year or as needed.

Our restaurants and bakery facilities also follow regulatory guidelines required for conducting and managing ingredient and product traceability.

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 — “The impact of and our failure to effectively respond to pandemics, epidemics, endemics and other public health emergencies, or 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.”)

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

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

We perform annual food safety and quality system audits for certain suppliers, while others are audited every other year or as needed.

Government Laws and Regulations

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We are also subject to various environmental regulations governing areas such as water usage, sanitation disposal and transportation mitigation.

Our international business exposes us to additional laws and regulations, including antitrust and tax requirements, anti-boycott legislation, import/export and customs regulations and other international trade regulations, privacy laws, the USA Patriot Act and the Foreign Corrupt Practices Act.

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.”)

Our international business exposes us to additional laws and regulations, including, without limitation, antitrust and tax requirements, anti-boycott legislation, import/export and customs regulations and other international trade regulations, privacy laws, anti-terrorism laws and anti-corruption laws.

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 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.

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Dram shop litigation may result in significant judgments, including punitive damages.

We try to mitigate this risk by carrying liquor liability insurance coverage.

We attempt to mitigate this risk by carrying liquor liability insurance coverage.

Various federal, state, local and foreign laws and regulations govern our operations as they relate to 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 and regulations protecting the right to equal employment opportunities and prohibiting discrimination and harassment in the workplace.

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In the United States, many of our locations participate voluntarily in a Tip Reporting Alternative Commitment (“TRAC”) agreement with the Internal Revenue Service (“IRS”).

By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only FICA tax assessments for unreported or underreported tips.

By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only FICA tax assessments for unreported tips.

We are subject to laws and regulations relating to information security, privacy, cashless payments and consumer credit, protection and fraud.

We make efforts to comply with an increasing number of data privacy laws, regulations and industry standards regarding the protection of personally identifiable information and protected health information.

(See Item 1A — Risk Factors — “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.”)

Trade Names, Trademarks and Other Intellectual Property

We own and have applied to register trade names, logos, service marks, trademarks and copyrights and other intellectual property (collectively, “Intellectual Property”) in the United States, Canada and in additional countries throughout the world in various categories, including without limitation, restaurant services and bakery goods.

We regard our Intellectual Property, including without limitation “The Cheesecake Factory,” “North Italia,” and a collection with the Fox Restaurant Concepts subsidiary, as well as our trade dress, as having substantial value and as being important to our marketing efforts.

Our policy is to pursue registration of our important Intellectual Property whenever commercially feasible and to vigorously oppose infringements of our Intellectual Property.

The duration of Intellectual Property registrations varies from country to country, and we have not registered all of our trademarks in every country in which we now or in the future may do business.

However, registrations of Intellectual Property are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.

We have also registered various internet domain names, including, without limitation, “www.thecheesecakefactory.com,” “www.northitalia.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.”)

We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other intellectual property (collectively, “Intellectual Property”) in the United States, Canada and in additional countries throughout the world in various categories, including without limitation, restaurant services and bakery goods.

We regard our Intellectual Property, including “The Cheesecake Factory,” “North Italia,” and a collection with the Fox Restaurant Concepts subsidiary, as well as our trade dress, as having substantial value and as being important to our marketing efforts.

Our policy is to pursue registration of our important Intellectual Property whenever commercially feasible and to vigorously oppose any infringement of it.

Generally, with appropriate renewal and use, the registration of our Intellectual Property will continue indefinitely.

We have also registered various internet domain names, including, “www.thecheesecakefactory.com,” “www.northitalia.com,” and “www.foxrc.com.”

Executive Officers of the Registrant

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What changed 10-K

Item 1. Business