Archive for January, 2010|Monthly archive page

Is The Cheesecake Factory The Worst Trend of the Decade? – Not According to Customers, Stock Price

I recently read a piece on the 10 worst dining trends of the last decade where David Chang, famed chef of the Momofuku Noodle Bar in NYC, declared The Cheesecake Factory the worst.  Well David, this graph of the CAKE ticker symbol performance over the past year begs to differ (nearly 3x increase over last 12 months)

I’ve gushed about my love of The Cheesecake Factory before (Sorry Chef Chang) and I have a new found appreciation for how they operate.  In spite of the terrible economic environment for casual dining restaurants, The Cheesecake Factory continues to outperform the likes of Applebee’s and Chili’s yet The Cheesecake Factory is in the higher end of the casual dining spectrum.  The average menu price is also more than Applebee’s or Chili’s.  How does the team at Cheesecake Factory do it?  Here are the three methods they use to deliver value and drive business results at the same time.  They will work for your business too:

1. Pay attention to competitors and out innovate them.  In March, several restaurants offered cheap eats to increase foot traffic and sales.  The Cheesecake Factory was one of the few that succeeded in driving sales.  Instead of discounting existing entrees with a 2 for $20 style promotion, they launched a new menu called “snacks and small plates” that was designed to be combined to create an entire meal.  This tapas-like menu had been in the works for prior to the economic downturn according to company CMO Mark Mears.

2.  Offer customer choice without damaging the brand.  The Cheesecake Factory approach to providing consumer value enhanced the existing brand.  They created a new set of items that appealed to budget conscious consumers without cannibalizing sales from existing entrees.  The Cheesecake Factory experienced an increase in the average check size after introducing snacks and small plates as consumers spent more on drinks and of course cheesecake to accompany their “value meals.”  This is one of the reasons that Cheesecake Factory enjoys an impressive $10 million in revenue per location.

3.  Leverage social media to offer value while building loyalty.  The Cheesecake Factory is promoting Twitter and Facebook to build connections with its fans.  This helps to reduce customer acquisition costs by using loyal Cheesecake Factory fans to promote Cheesecake Factory messages.  During Cheesecake Factory’s “12 Days of Cheesecake”, they were able to increase the follower base from 2500 to 5000 in the space of a few weeks through a retweet contest.   While Cheesecake Factory’s Twitter efforts are just beginning, they have invested in Facebook over 250K Facebook fans.

To get 2010 off to a great start, take a page out of The Cheesecake Factory recipe book for success.

  • See what what your competitors are doing and do it better
  • Make sure what you do to match your competitors efforts to meet customer demand fits your brand and delivers bottom-line results
  • Experiment with social media to lower your customer acquisition costs and build customer loyalty by giving your customers something in return for delivering your message

Happy New Year.  Have a piece of cheesecake!!!

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