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Cheesecake Factory Now in Knoxville - Analyst Blog

By: Zacks.com
Posted: 6/26/2013 6:30:00 PM
Referenced Stocks: AEO;ARO;CAKE;YUM

In order to beef up its domestic portfolio, The Cheesecake Factory Inc. ( CAKE ), recently unveiled a new restaurant in Knoxville, Tenn. The 8,500 square foot-restaurant marks the company's debut in Knoxville.

The latest restaurant, which is located in The West Town Mall in Knoxville, can accommodate around 205 diners at a time. Cheesecake Factory's restaurants are primarily located in or near malls and shopping centers to attract upper-class customers. The West Town Mall, one of the oldest and most popular shopping centers of Knoxville, boasts stores of major American retail giants such as American Eagle Outfitters, Inc. ( AEO ) and Aeropostale, Inc. ( ARO ).

Apart from this new unit, the company operates another restaurant in Nashville, Tenn. As per the National Restaurant Association, the restaurant industry in Tennessee plays a vital role in the state's revenues. According to this research site, Tennessee's restaurants are expected to record $9.9 billion in sales in 2013. This factor has also caught the attention of another restaurateur, Yum! Brands, Inc. ( YUM ), which has been expanding in the region.

We believe that the opening of the new restaurant in Tennessee, with its attractive menu and contemporary ambience will help the company drive traffic, going ahead.

The Zacks Rank #2 (Buy) company is on a growth trajectory and intends to open 8 to 10 units in the U.S. in 2013. Apart from the traditional units, management is focusing on formats of different sizes and scales to cater to local demand. Its smaller units are generating better-than-expected returns, which has compelled the company to focus more on smaller sites to improve the return on investments.

Additionally, the company is trying to expand in the international market. In Mar 2013, The Cheesecake Factory penned a licensing agreement with Alsea, S.A.B. de C.V. to develop nearly 12 restaurants across Mexico and Chile over the next eight years. Apart from this, the company is also growing its new units in the Middle East. Management expects that its international growth will boost operating margins in 2013.



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