The Cheesecake Factory announces that it would not be able to pay its April rent in a bid to keep its finances intact amid the growing coronavirus outbreak.
The decision of the Cheesecake Factory to withhold payments was based on a huge decline in restaurant traffic. This has led to slower cash flow and “inflicted a tremendous financial blow” to business, the Calabasas Hills-based company stated in a letter.
Cheesecake Factory’s affiliated restaurants, like Rock Sugar and North Italia, would not be able to fulfill April 1 rent payments.
"We have very strong, longstanding relationships with our landlords," The Cheesecake Factory said in a statement.
"We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner."
Most locations of The Cheesecake Factory would still operate for takeout and delivery. The company noted that it was able to "operate sustainably at present under this model."
The Cheesecake Factory's stock dropped sharply in pre-market trading but soared by 1.2% to $19.10 at 11:36 PM as the broader market rallied.
Company chairman and Chief Executive Officer David Overton writes, “Due to these extraordinary events, I am asking for your patience, and frankly, your help.”
“We appreciate our landlords’ understanding given the exigency of the current situation,” he added.
Moreover, the Cheesecake Factory explained that it had drawn extra $90 million on its revolving credit facility to shore up its cash on hand and has frozen its plans to open new branches this year.
The Cheesecake Factory currently manages 294 restaurants, such as North Italia locations and other concepts, in the U.S. and Canada. Meanwhile, 26 locations run under licensing agreements in other countries.
The Cheesecake Factory first opened in Beverly Hills in 1972, with its original location still existing on Beverly Drive and 39 locations in California.
Since the news on the coronavirus outbreak broke, the company has shut down 27 branches across the country, and turned other locations to a takeout and delivery-only model
