The Cheesecake Factory claimed this week that it will not be able to afford the rent for any of its 300 restaurants in April if the shutdown continues from the COVID-19 pandemic.
In a letter obtained by Eater Los Angeles, Cheesecake Factory chairman and CEO David Overton told all landlords that a decline in restaurant traffic “inflicted a tremendous financial blow” to its business, so much so that rent payments cannot be made. This includes affiliated restaurants, such as Rock Sugar and North Italia. He asked the landlords for patience as they mitigate this crisis.
“As you know from news reports, we have had to close numerous restaurants in order to comply with emergency governmental restrictions,” the letter stated. “In some locations, we are only allowed to provide delivery and to-go orders; in other locations, we are required to totally close. This situation is unprecedented and rapidly evolving. The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business.”
“Due to these extraordinary events, I am asking for your patience, and frankly, your help.” it continued. “We appreciate our landlords’ understanding given the exigency of the current situation.”
Representatives for the company said that Cheesecake Factory will be taking the government stimulus package into account while considering options going forward.
“In these unprecedented times, there are many factors that are changing on a daily basis given governmental regulations and landlord decisions to close properties,” he said. “We have to take both into consideration in terms of understanding the nature of our rent obligations and with respect to managing our financial position. We have very strong, longstanding relationships with our landlords. We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner.”
According to Eater, Cheesecake Factory operates 294 restaurants in 39 states, with locations in the District of Columbia, Puerto Rico, and Toronto. Shortly after the letter to the landlords, Overton announced that it would be slowing construction on unopened restaurants while tapping into a $90 million credit line.
“Since the outbreak of the coronavirus, the Cheesecake Factory has closed 27 locations across the country, and pivoted other locations to a takeout and delivery-only model — which it said just days ago was enabling the company to ‘operate sustainably at present’ — and its stock price has fallen by more than 50 percent in the past month,” reported Eater. “With 38,000 employees, the Cheesecake Factory is one of the largest restaurant employers in the country. Given its recent stock woes and the ongoing reduction in business due to the coronavirus pandemic, it seems possible that it, like many restaurants, could end up needing a bailout to survive.”
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Cheesecake Factory is not the only major establishment having to make drastic changes amid the COVID-19 pandemic. On Thursday, the fast-food giant McDonald’s announced that it would be pulling its all-day breakfast menu in order to “simplify operations” throughout this unprecedented time.
“We are working with our franchisees and local restaurants to focus on serving our most popular choices and will begin temporarily removing some items from the menu over the next few weeks,” Bill Garrett, the senior vice president of McDonald’s U.S. operations, said in a statement.