cheesecake factory
TRANSCRIPT
The Cheesecake Factory Inc
COMPANY STRATEGIC OUTLOOK
4/4/2014
Submitted by: Aziz Mohammad Ghani
Aziz Ghani : [email protected] 1416-856-6737
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The Cheesecake Factory Inc
Table of ContentsIntroduction....................................................................................................................................3
Current Performance....................................................................................................................3
Mission & Vision............................................................................................................................4
Objective.........................................................................................................................................4
Current strategy.............................................................................................................................4
Corporate Governance..................................................................................................................6
PESTEL..........................................................................................................................................7
Porters 5..........................................................................................................................................8
Internal Environment..................................................................................................................10
Marketing.................................................................................................................................10
Finance......................................................................................................................................10
Research & Development........................................................................................................11
Operation & Logistics..............................................................................................................11
Human Resources....................................................................................................................12
Information Technology..........................................................................................................12
Strategic Alternatives..................................................................................................................12
Strategic Recommendation.........................................................................................................15
Implementation............................................................................................................................17
Evaluation and control................................................................................................................18
Pro Forma.....................................................................................................................................18
Contingency Plan.........................................................................................................................19
Reference......................................................................................................................................20
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The Cheesecake Factory Inc
IntroductionThe Cheesecake Factory was founded in 1972 by Oscar and Evelyn Overton. Mr. and Mrs.
Overton started a small bakery in the Los Angeles area. Their son, David Overton, who is the
current chairman of the Board and Chief Executive Officer led the initiative by opening the First
The Cheesecake Factory restaurant in Beverly Hills, California in the year 1978.The company
has managed to grow into a national chain of restaurants throughout America. As of 2013, The
Cheesecake Factory has 181 Company owned upscale, casual, full-service dining restaurants in
which 169 are under The Cheesecake Factory® mark, 11 under the Grand Lux Cafe® mark and
one under the RockSugar Pan Asian Kitchen® mark.The Company has two bakery production
facilities which are used to offer cheesecakes and other baked goods to its restaurants. Any
excess capacity of the Company’s bakery production facilities is used to leverage its brand
identity with consumers through sales to external customers. (The Cheesecake Factory Inc.,
2013)
Current PerformanceSince its opening, Cheesecake has expanded into four countries, mainly in the Middle East. The
company currently has 181 locations in the US, 2 in the UAE, 1 in Kuwait, 1 in Saudi Arabia and
1 in Puerto Rico. The company reported employing approximately 35,500 employees as of 2013,
this includes employees at its head office, restaurants and bakery. Cheesecake experienced a
revenue increase even though the industry is against intense competition from other restaurants.
The company reported a revenue of $1,877.9 million in 2013, $1,809 million in 2012 and
$1,757.6 million in 2011. The increase in revenue is 3.8% when comparing 2013 sales with
2012, reasons as to why Cheesecake experienced this revenue gain is due to the company
increasing its menu price by 1.8%, adding new entrees and dishes into its menu and opening
more locations. The company reported a net income of $114.36 million in 2013, $98.42 million
in 2012 and $95.72 million in 2011, this is an increase of more than 14% in net income when
comparing 2013 figures with 2012. Revenue per employee is $52,899 and net profit per
employee is $3,221. (The Cheesecake Factory Inc., 2013)
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The Cheesecake Factory Inc
Mission & VisionThe Cheesecake’s mission is “To create an environment where absolute guest satisfaction is
our highest priority.” The company’s goal is to excel customer satisfaction through consistent
high quality dishes and service. The company strives to increase its presence by expanding
continuously in different regions and by increasing product offerings in relation to consumer
demand. Cheesecake endeavours to hire the most qualified staff to enable it in providing the best
hospitality service amongst other restaurants.
Cheesecake Factory gives a better insight into the company’s culture and beliefs through its
vision statement, its vision statement is "Through a shared commitment to excellence, we are
dedicated to the uncompromising quality of our food, service, people and profit, while taking
exceptional care of our guests and staff. We will continuously strive to surpass our own
accomplishment and be recognized as a leader in our industry.”
ObjectiveThe Cheesecake factory’s onward objective prospects are based on a number of elements in its
operation. Cheesecake anticipates maintaining its position in the industry and expects to prevail
amongst competitors. Its objectives reflect current and future goals The Cheesecake Factory
aspires to achieve. The following is the list of these objectives:
Growing comparable Restaurant Sales and Overall Revenue
Identify retail locations to open new stores and attract new customers.
Increase profit margins.
Increase dividend payments and share repurchase.
Current strategyThe cheesecake Factory’s current strategy allowed it to become a successful restaurant in the
restaurant industry. Since the company’s founding it has been become a restaurant with annual
revenues of over $1 billion, the strategic factors augmenting it in the restaurant business are the
following:
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The Cheesecake Factory Inc Award-Winning, extensive and innovative menu, bar and bakery programs. The company
offers a broad menu for its dining customers, all of the menu items are daily made at each
restaurant with the highest quality and fresh ingredients. The company updates its menu
twice a year to respond to the new trends in consumer preference and as well as changes
eating habits. The bakery production facility produces over 70 assortments in baked
desserts and cheesecakes (The Cheesecake Factory Inc., 2013).
Commitment to excellent service and hospitality through the selection, training and
retention of high quality staff members. Cheesecake aims to create an environment where
the guests experience must be satisfactory, one of the aspects in allowing to deliver a high
standard of service is through staff members who are extensively trained and with a sense
of personal commitment to the company’s core values (The Cheesecake Factory Inc.,
2013).
High quality, high profile restaurant locations and flexible site layouts. Cheesecake opens
up restaurants locations in high profile areas, with a unique layout of design to
accommodate consumers who are tourists, corporate clients or local residents (The
Cheesecake Factory Inc., 2013).
Distinctive restaurant design and décor. The company strives to give the restaurants a
high energy and upscale ambient setting. Cheesecake constantly upgrades its design and
does regular maintenance in maintaining the restaurant interior design to give it a new
look (The Cheesecake Factory Inc., 2013).
Value Proposition. Cheesecake offers meals that are freshly made with generous portions
and value pricing. The company has begun to offer food items in its menu which are
specifically targeted towards consumers who are diet conscious and have allergies
towards gluten (The Cheesecake Factory Inc., 2013).
Vertical integration of our bakery operations. Cheesecake bakes its own cheesecake and
desserts, this allows the company to increase its profit and have control over the quality
of its products. The company can easily adapt to changes in its product and can easily
deliver the required amount needed by each restaurant (The Cheesecake Factory Inc.,
2013).
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The Cheesecake Factory IncCorporate GovernanceThe Board of Directors elected by stockholders makes significant decisions in the company. The
board is responsible for hiring senior management, and making sure they lead the company
towards achieving its goals. The Board of Directors must be qualified and independent in its
decision-making. A Lead Director is elected from the Board to directly work with the CEO and
senior management to set agendas and goals for the company (The Cheesecake Factory Inc.,
2013).
Directors
David Overton Chairman of the Board of Directors and Chief Executive Officer
Alexander L.
Cappello
Chairman, Compensation Committee and a member of the Audit
Committee
Jerome I. Kransdorf Chairman of the Company’s Governance Committee, Lead
Director, and a member of the Compensation Committee
Laurence B. Mindel Member of the Company’s Compensation Committee and
Governance Committee
David B. Pittaway Chairman of the Audit Committee
Douglas L. Schmick Member of the Company’s Audit Committee
Herbert Simon Member of the Company’s Compensation Committee and
Governance Committee
Senior Management Team
David Overton Chairman and Chief Executive Officer
David M. Gordon President
Douglas W. Benn Executive Vice President and Chief Financial Officer
Cheryl M.
Slomann
Vice President, Controller and Chief Accounting Officer
Debby R. Zurzolo Executive Vice President, Secretary and General Counsel
Max S. Byfuglin Pesident,The Cheesecake Factory Bakery Incorporated
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The Cheesecake Factory Inc
PESTELPolitical
The Cheesecake Factory’s domestic operations are exposed to federal and state laws which can
affect its business, the government is continuously changing the regulations in labor laws,
zoning, alcoholic beverage control and public health concerns. The international segment of the
company is exposed to political instability, customs regulations and trade embargoes, this is due
to the nature of operating a business in the Middle East region.
Economical
The Cheesecake factory is a restaurant that provides high quality dining. The latter is considered
to be upscale and higher in price compared to other restaurants in geographical areas of the
company’s operation. The bureau of labor statistics reported an unemployment rate of 6.7% in
the recent public release; this is a much lower value when compared to the recession f 2008-
2009. In case of an economic downturn The Cheesecake factory can be negatively impacted due
to consumers being easily attracted towards cheaper options to curb their cravings for meals and
baked goods (BUREAU OF LABOR STATISTICS, 2014).
Social factors
The Cheesecake Factory is known for its large variety and specialty dishes. According to the
study done by IBIS world, the market for restaurants has been experiencing a small growth in the
past 5 years. According to IBIS the growth rate had only been 2.7%, making it a $91 billion
dollar industry in the US. Restaurant sales are getting a hit due to consumers becoming health
conscious and cooking at home, or some preferring a cheaper option by curbing their cravings at
a fast food restaurant. However a restaurants ambient is still attractive for the society as it can be
a social hangout place and something one rewards themselves too after a week of hard work
(IBISWORLD, 2014).
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The Cheesecake Factory IncTechnological factors
The Cheesecake Factory is highly dependent on the technology it has implemented in its
operation. Technology has enabled the company to lower its management cost, improve guest
service and increase efficiency. The company is one of the few restaurants in the US that have a
system that automatically routes and balances the cook line while at the same time considering
the recipe that will be needed to prepare the food item. The internet has also enabled advertising
to be done through social media, via mobile means and search engine marketing, making it one
of the cheapest and efficient ways to market a product (The Cheesecake Factory Inc., 2013).
Legal factors
Cheesecake Factory can get involved in legal matters with its customers, employees and
suppliers due to disagreements and damages caused while doing business. A recent encounter is
that a plaintiff alleged that Cheesecake Factory Violated the California Labor Code and
California Business and Professions Code by demanding employees to purchase uniforms for
work. Also, a similar lawsuit covering a different period of time is pending in the law court. This
situation is likely to be reproduced in similar or other legal matters during the course of its
business (The Cheesecake Factory Inc., 2013).
Environmental factors
There are no environmental factors such as weather, climate or climate change affecting
Cheesecake Factory operations as of present, however the Company might be exposed to some
of these factors in future
Porters 5 Threat of new entrants
The threat of new entrants is high due to low entry barriers within the industry. The Cheesecake
Factory is competing in an industry were independent entrepreneurs can easily startup a
restaurant serving fine dishes. The startup cost for a restaurant is an average of $200,000
according to small business association of Canada, and with customer demand for dine in
restaurants on the rise this can attract many entrepreneur minded individuals in starting up their
own restaurant.
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The Cheesecake Factory IncBargaining power of buyers
The bargaining power of buyers is high due to The Cheesecake Factory competing in an industry
that is highly competitive. The restaurant industry consists of competitors that have a stronger
market positioning and a larger customer base. Customers will always have the option of
choosing amongst the many restaurants available in the industry, consumers will always give
preference to competitors who offer the most attractive product, better promotion and the most
convenience. The market The Cheesecake Factory is currently operating in will always be
competitive and will not be the only player dominating the market.
Bargaining power of suppliers
The bargaining power of suppliers is moderate due to The Cheesecake Factory having long term
and short term contract with its suppliers. The company has established relationship with
numerous suppliers, these suppliers are able to provide The Cheesecake with high quality food
supplies for a low price. However the company enters into long term contracts with suppliers
who provide its equipment and commodity products due to unpredictable demand and supply of
these products, this puts the company in a weak position when the supplier decides to increase
the price.
Threat of substitute products
The threat of substitute products is high. The Cheesecake Factory currently offers a diversified
menu, but there are many other options for customers. Customers have a vast options to curb
their cravings, they can always prepare home made food, microwavable meals, café’s, and many
other options. It all comes down to the customer's preference, if they want to be served in an
upscale ambience then they will enjoy a meal at The Cheesecake Factory, or else they can
always make their meal at home.
Rivalry amongst existing competitors
The rivalry among competitors in the restaurant industry is high. The Cheesecake Factory aims
to gain a competitive advantage through factors such as services, product quality, pricing and
location. Consumers are spending less toward restaurants due to health and financial reasons, this
makes the competition more stiff as they are competing on who will be able to cater the most
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The Cheesecake Factory Incwhen spending is declining. The Cheesecake Factory is also experiencing fierce competition
from fast food restaurants and mobile food stands due to the low prices and wide variety offered.
Internal Environment
MarketingCheesecake believes it does not require implementing a traditional method of marketing instead
it has taken a different path to market their product. The company employs a low cost strategy of
marketing that allows it to soar to unprecedented achievements. Cheesecake gains its market
share through high profile locations and positive word of mouth. The company also utilizes the
internet by advertising on social media sites like Twitter and Facebook and sending emails to
registered customers about updates and promotions that are happening in the restaurant (The
Cheesecake Factory Inc., 2013).
Finance Cheesecake Factory has been experiencing positive growth from the time of establishment, it has
seen its revenue increase for the past 5 years. It recorded $1.87 billion dollars in revenue for the
year 2013, and it also achieved its highest net profit in 2013 for the amount of $114.35 million
dollars, thus giving Cheesecake an increase of 16% when comparing 2012 net profit. The
company currently has $61.7 million dollars cash and cash equivalents on its balance sheet and
no long term debt (Please refer to the bottom for full financial analysis of the past 5 years)
Efficiency Ratios 2009-12 2010-12 2011-12 2012-12 2013-12 TTM
Days Sales Outstanding 2.72 3.03 2.86 2.61 2.39 2.39
Days Inventory 8.96 6.08 6.48 7.08 7.77 7.77
Payables Period 14.20 8.95 8.69 10.32 9.95 9.95
Cash Conversion Cycle -2.52 0.16 0.64 -0.63 0.21 0.21
Receivables Turnover 134.12 120.53 127.74 139.74 152.43 152.43
Inventory Turnover 40.72 60.05 56.37 51.53 47.00 47.00
Fixed Assets Turnover 1.94 2.15 2.32 2.38 2.41 2.41
Asset Turnover 1.46 1.60 1.71 1.71 1.69 1.69
Profitability 2009-12 2010-12 2011-12 2012-12 2013-12 TTM
Tax Rate % 16.52 26.44 25.88 26.54 26.91 26.91
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The Cheesecake Factory Inc
Net Margin % 2.67 4.92 5.45 5.44 6.09 6.09
Asset Turnover (Average) 1.46 1.60 1.71 1.71 1.69 1.69
Return on Assets % 3.91 7.88 9.33 9.31 10.32 10.32
Financial Leverage (Average) 2.03 1.74 1.88 1.88 1.95 1.89
Return on Equity % 8.84 14.74 16.87 17.54 19.77 19.77
Return on Invested Capital % 3.46 11.48 16.22 17.54 19.77 19.77
Interest Coverage 3.19 7.61 27.26 — — —
EPS 0.71 1.35 1.64 1.78 2.10 2.10
(Morningstar Inc., 2014)
Research & DevelopmentThe research and development team aids in increasing consumer base, drive growth and improve
brand image. Cheesecake sources the most premium ingredients available to offer to its
customers; this is achieved through extensive research of the many suppliers available.
Cheesecake currently modifies its menu twice a year; this process guarantees that customers are
getting a meal that is above standard. Cheesecake currently serves more than just meals on its
menu, it continually strives to make the experience at the restaurant more memorable by testing
new concepts and adding more popular products to its menu (The Cheesecake Factory Inc.,
2013).
Operation & Logistics All of Cheesecake Factory locations need to be supplied with poultry, meat, fish, perishable
produce and dairy commodities. The company has got into a contract with a third party
distribution company that allows it to supply all Cheesecake locations nationwide, Sysco is . The
company sources its material through many suppliers; it has signed long term and short term
agreements to maintain a control over the supply and price of products (The Cheesecake Factory
Inc., 2013).
Human ResourcesCheesecake reported having 400 employees working at its head office, 800 employees in its
bakery and 34,300 in its restaurants. The employees are expected to lead the company towards
its vision and believing in its mission. Head office employees are responsible in opening new
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The Cheesecake Factory Inclocations and in assisting and training of employees operating the restaurants (The Cheesecake
Factory Inc., 2013).
Information TechnologyCheesecake is highly dependent on its information system to allow the operations of the
restaurants to run smoothly. Cheesecake uses its information technology infrastructure to assist it
in running effectively; the system assists in forecasting future sales to aid the purchasing
department in making efficient purchasing decisions. The IT network that Cheesecake has
implemented aids in analyzing trends, aid R&D and marketing teams. The restaurants use the IT
network for ordering supplies, processing payments and reporting sales to the head office.
Strategic AlternativesAlternative 1: Expand to developing countries where western restaurants are becoming a
popular trend in the society.
Alternative 2: Reduce the price on products to become a low priced restaurant when compared to
major competitors.
Alternative 3: Diversify its menu, by specializing in South Asian dishes.
Alternative 1
Expanding to countries where western restaurants like Applebee’s, TGI Fridays and other major
restaurants don’t have a presence in, expansion in those countries is through master franchising.
Pros
Cheesecake will have a competitive advantage of being the first mover.
Increase recognition of its brand internationally.
Revenue and customer base will increase.
Economies of scale by purchasing more raw material from its current suppliers.
Reduces dependence from its US locations.
Cheesecake possesses the required experience to operate a restaurant.
Developing countries are experiencing higher growth in their economy when compared
to developed economies.
No price war involved between competitors.
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The Cheesecake Factory IncCons
The political situation in developing countries is not as stable as it is in developed ones.
Being a first mover can have risks, due to being the first one in implementing a western
style restaurant in that market.
Cheesecake can lose focus on its current market.
Currencies fluctuations can affect profitability and cost.
Cheesecake Factory may need to modify their menu to meet the preference of the
consumers in the international market.
Cheesecake does not possess any experience in the market, they will be entering.
Alternative 2
Cheesecake Factory competing on price by reducing quality, cutting gross margin and
eliminating some products. By implementing this strategy they are changing their image from a
premium restaurant to a low-cost restaurant catering price conscious consumers.
Pros
Increase revenue and customer base.
Current competitors cannot implement the strategy very easily due to their operation
being very large.
A low cost strategy to implement.
Price is one of the major factors that allow consumers to decide on their purchase.
Reducing the number of products on its menu can reduce the cost of the operation, due to
fewer employees needed to prepare the food products.
Cons
Reducing the price and brand image can drive away current consumers who are brand
conscious.
Creates a price war with competitors.
Cheesecake Factory customers will get the feeling that they aren’t receiving the best
quality.
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The Cheesecake Factory Inc Restaurants will have to serve more customers for a lower profit margin.
Cheesecake Factory will be losing the premium image it has worked towards since its
establishment.
Cheesecake currently possesses experience in high quality dishes and not menu items for
the mass market.
Alternative 3
Cheesecake Factory diversifying its menu by offering South Asian dishes, currently Cheesecake
and its competitors only provide western meals and desserts, currently majority of the South
Asian restaurants is operated by family businesses and on a small scale.
Pros
Increase revenue and customer base.
Differentiate from its current competitors.
The market for South Asian meals is not penetrated by many businesses.
Can easily implement the strategy due to having the required infrastructure to implement.
A small investment is required.
Reduce dependence from western meals.
International dishes have a high profit margin, due to consumers willing to pay premium
amounts.
Cons
Store locations will need to hire a chef and make kitchen space to allow it in catering
South Asian meals to its customers.
The society we live in today is becoming more diet conscious, due to a large number of
citizens becoming overweight.
Will need to source the required ingredients to make the meals.
Not all locations of Cheesecake Factory have kitchen space or the store layout to be able
to cater South Asian meals.
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The Cheesecake Factory IncStrategic Recommendation Cheesecake is currently experiencing fierce competition in the market due to competitor’s having
a large market share in the North American market for dine in restaurants. Cheesecake reported a
net income of $114 million dollars in fiscal 2013, the amount is high when compared to prior
years, but it’s only 6.1% of its revenue. As of 2013 Cheesecake recorded having $61 million
dollars in its balance sheet as cash and cash equivalents, and its current liability is 35 million. It’s
in a strong financial position and the number of locations that it has within US has not increased
when compared to 2012 remaining at around 170-180 locations. Cheesecake has not been
successful in locating attractive locations and interested entrepreneurs to invest in opening new
restaurants. The company needs to implement a low cost strategy with a low risk to increase the
company’s total revenue.
After analyzing their current situation the most feasible strategy for Cheesecake is to expand
internationally through master franchising their concept to businesses in developing countries
where major competitors have little presence. Cheesecake expanding internationally through
master franchising will be the most suitable option for the company due to the master franchisee
bearing most of the risks. Human resources and capital are also provided by the master
franchisee to grow the franchisee within the region they have the rights for opening a restaurant.
Cheesecake will be paid a premium amount by the company for selling the rights to expand its
franchisee internationally. As per the survey done by John Hayes, Worldwide it is estimated that
master franchisee rights get sold for $100,000 - $1,000,000 dollars. The amount paid by the
master franchisee will be a motivation due to their investment being at risk if advantage is not
taken of the rights they have purchased from Cheesecake for opening and selling franchisees
within their territory. Master franchising the rights for Cheesecake increases the chances of being
successful due to the master franchisee having more knowledge of the cultural, legal and
business practices of their territory than Cheesecake Factory does (International Franchise Expo,
2014).
Many parts of the world such as South Africa, Northern Africa, Asia Pacific are experiencing
economic growth. According to analyst Elizabeth Friend’s article on consumer Foodservice in
the Middle East, she estimated the market for restaurants & café’s in the region is estimated to be
$4 billion dollars and is expected to grow furthermore annually. Restaurants are becoming a
popular place for meetings, friends and couples retreat. In Asia restaurants are replacing
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The Cheesecake Factory Incnightclubs and bars as the hangout place for many people due to females feeling more secure and
comfortable with the environment to socialize with their friends.
Currently Cheesecake has locations in the Middle East in countries where the market is still
competitive, due to major western restaurants already having a presence in those regions. Still
Cheesecake has not taken advantage of countries where TGI Fridays or major restaurants do not
have sufficient presence yet. Northern Africa and Southeast Asia is a region that has been
unpopular amongst major restaurant chains due to the weak relationship countries in that region
have with the U.S. government. Selling master franchisee rights is attractive in countries like
Algeria, Nigeria, Egypt, Lebanon, Turkey and Jordan due to the political stability is under
control and the economic growth is above average when compared to the neighboring countries.
The proposed strategy is a corporate directional strategy. The strategy is designed to generate
growth in revenue and profit. This growth will be achieved by concentration of resources in
offering current products and services. This proposed strategy is intended to achieve horizontal
growth by expanding Cheescake Factory operations in different regions.
ImplementationCheesecake will need to go through many steps to successfully expand internationally through
master franchising.
Step 1 will be to set up a marketing team that will be responsible for evaluating potential
countries that can be the most profitable for the master franchisee. There are many elements that
need to be taken into consideration to determine profitability. Elements that should be studied is
competition, labour laws, franchise laws, judicial system, tax treaties, importing regulations and
demographics.
Step 2 is to narrow the list down to 5 countries that have the highest chance of success. The
marketing team will then need to design brochures and franchising packages designed for the
region it wants to get a master franchisee to make it attractive and convincible for them to sign a
contract with Cheesecake.
Step 3 would be to register and attend the franchise trade shows in the region of interest. The
major franchise trade show held for markets in Africa is organized by International Franchise
Expo (IFE). It is an event held once a year in almost every continent. The one for the African
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The Cheesecake Factory Incmarket will be held in April of 2014 at Sandton convention centre. Aside from the IFE there are
many other franchise trade shows Cheesecake Factory’s team must attend to give the company
international exposure to potential entrepreneurs who are interested in signing a contract to
become a master franchisee. According to IFE and IFA convention the registration for exhibitors
is $3,000-$6,000.
Step 4 will be to analyze potential investors who are willing to purchase the master franchising
right for the region. During this process the management team of Cheesecake must make sure
they possess the required financial resources and business experience to make it a profitable deal
for both Cheesecake and the master franchisee.
Step 5 will be to sign the contract between Cheesecake and the master franchisee, the contract
will need to clearly state the period of them possessing the rights, the goals that must be
achieved, the territory they will have rights in and the minimum standard and investment
requirement that should be invested in each restaurant.
Step 6 of the implementation process will be to train and support the master franchisee in selling
franchise locations in their territory, Cheesecake must continuously support the master franchisee
in marketing, menu items, research & development and training to facilitate the process of it
becoming a successful franchise in the new market.
Evaluation and controlOnce the strategy has been implemented, Cheesecake must assess if the new strategy is attracting
new master franchisees for new markets. Cheesecake must also make sure that the master
franchisee’s they have signed up with are successful in attracting franchisees in the market they
are operating in. Furthermore, Cheesecake must analyze the future outlook of the market the
master franchisee is operating in to determine if it is heading in the direction the company sets.
The company will need to make sure profitability is respected and every restaurant breaks even
and becomes profitable within a year of operations. Thus, a strict control on the number of
restaurants open and their performance will need to be maintained. To preserve the brand control
over menu is to be exercised in making sure that each restaurant respects the menu, implements
changes proposed in an efficient manner. Branding and decoration of each restaurant is to be
maintained and controlled as well. The above can be performed doing regular inspections.
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The Cheesecake Factory IncPro FormaCheesecake will be selling their master franchising rights to 5 territories in the first year, and to 8
territories in 2015 and the same amount of territories in 2016. The rights can be purchased for
$500,000-$1,000,000 but the average payment being received can be estimated to be $750,000.
The major cost Cheesecake will incur to attract master franchisees is by registering in franchise
exhibitions worldwide, plus the travelling and accommodation cost that will be required.
Cheesecake will need to attend at least 10 franchise shows annually to get international exposure;
the average cost of registration is around $6000 per expo. A team of 3 employees will be
travelling to attend the expo, making the travelling expense around $75,000 dollars annually plus
$50,000 each for their annual salary. The company will also be required to create brochures,
franchise information packages and promotional products to give away during the expo, the
estimated for doing this can be considered $15,000 annually.
Cheesecake
Pro Forma
Year Ended
December 31,
(In thousands) 2014 2015 2016
Revenue from selling master franchise rights $3750.00 $6000.0
0
$6000.00
Less: Franchise Expo
Shows
$60.00 $60.00 $60.00
Employees (3) $150.00 $150.00 $150.00
Travelling Cost $75.00 $75.00 $75.00
Brochures and Promotional items $15.00 $15.00 $15.00
Additional Income from implementing strategy $3450.00 $5750.0
0
$5750.00
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The Cheesecake Factory IncContingency PlanCheesecake must have a contingency plan if the proposed plan does not direct the company
towards the direction it intends to go, Cheesecake’s contingency plan must be that if the strategy
is unsuccessful Cheesecake should maintain its current status quo. Going with a no change
strategy, it will still be able to remain competitive in the industry and continue reporting an
increase in their revenue. The company’s current strategy has enabled them to report an increase
in revenue continuously in the past 5 years and maximize shareholder wealth.
ReferenceBUREAU OF LABOR STATISTICS. (2014, March 7). Employment Situation Summary. Retrieved from
BUREAU OF LABOR STATISTICS: http://www.bls.gov/news.release/empsit.nr0.htm
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