Cheesecake Factory (NASDAQ:CAKE) reported third-quarter fiscal 2026 revenue above $1 billion for the second consecutive quarter, as traffic growth, menu innovation and digital engagement supported record sales volumes and margin expansion.
Chairman and Chief Executive Officer David Overton said total revenue exceeded $1 billion and that margins and earnings finished above the company’s expectations. The Cheesecake Factory restaurant brand produced 15.2% comparable-sales growth and annualized unit volumes above $13.9 million during what management described as typically the industry’s slowest quarter.
“Comparable sales and traffic growth meaningfully outperformed the broader casual dining industry,” Overton said, citing continued demand for the brand and market-share gains.
Traffic, Digital Engagement Drive Core Brand Results
President David Gordon said the core Cheesecake Factory business generated 9.5% traffic growth, outperforming the Black Box Casual Dining Index by 940 basis points. Growth was broad-based across regions, dayparts, days of the week and sales channels, while off-premise sales remained approximately 21% of sales.
Management attributed the performance to restaurant-level execution, employee retention, menu innovation and the expansion of the Cheesecake Rewards program and mobile app. The company said its broad made-from-scratch menu and offerings including Bowls and Bites have helped drive frequency.
Gordon said the company is increasingly using the visual appeal and breadth of its menu to generate shareable social-media content and reach new consumers. Management highlighted traction with younger guests, though Chief Financial Officer Matt Clark said it was still early to assess the long-term frequency patterns of those guests.
Clark said the company has seen consistent sales trends over the past four months, regardless of the timing of organic social-media activity. He added that the rewards program has generated twice as many weekly member acquisitions since the launch of the app compared with the period before the app’s introduction.
The company reported third-quarter traffic growth of 9.5%, menu pricing of 2.4% and favorable mix of 3.3%. Clark said mix benefited in part from higher sales of Cajun Salmon, a higher-priced entrée that gained social-media attention, as well as higher alcohol incidence rates. The Cajun Salmon had already been on the menu before its increased attention, Gordon said.
The Cheesecake Factory’s restaurant-level profit margin rose 240 basis points year over year to 18.7%.
Other Concepts Show Mixed Performance
Flower Child continued to outperform its segment, according to management. Comparable sales rose 11% in the third quarter, while two-year comparable sales growth accelerated to 18%. The concept generated annualized unit volumes of $5.1 million and mature restaurant-level margins of 20.2%, up 280 basis points from the prior year.
The company expects to accelerate Flower Child development beginning in 2027 after investing in its real-estate pipeline, leadership team and operating infrastructure. Management expects to open 11 to 13 Flower Child locations next year, compared with as many as seven in 2026. Clark said Flower Child’s build-out costs have been about $2.8 million to $3 million, with current unit volumes and margins producing what he described as strong cash-on-cash returns.
North Italia, however, reported a 3% comparable-sales decline in the quarter. Annualized unit volumes were $7.2 million, while mature restaurant-level margin declined to 13.2% from 15.7% a year earlier, primarily due to sales deleverage.
Gordon said North Italia has introduced a new menu with more accessible prices, refreshed its happy-hour offerings, increased media investment in two markets and begun implementing a kitchen-management system intended to improve throughput and order coordination.
The company also opened two Culinary Dropout restaurants during the quarter, in Omaha and Salt Lake City.
Financial Results and Capital Allocation
Total third-quarter revenue was $1.033 billion, above the high end of management’s prior range. Adjusted diluted earnings per share were $1.02, while GAAP diluted earnings per share were $1.19. Quarterly net income totaled $61.3 million, and adjusted EBITDA rose 38% from the prior year to $98.7 million.
- Cheesecake Factory restaurant sales increased 16% to $754.4 million.
- North Italia sales rose 11% to $93 million.
- Other FRC sales increased 16% to $90.3 million.
- Flower Child sales rose 17% to $56.5 million.
- External bakery sales totaled $12.6 million.
Clark said cost of sales declined 60 basis points as a percentage of sales, aided by lower dairy costs and sales mix related to lower external bakery sales, partially offset by higher beef and seafood costs. Labor expense declined 80 basis points as a percentage of sales, primarily due to sales leverage, while other operating expenses declined 50 basis points.
The company recorded $11.2 million in pre-opening costs, compared with $6.6 million in the prior-year period, reflecting six restaurant openings during the quarter versus two a year earlier. It also recorded $12.9 million in pre-tax net income, primarily related to the final true-up of contingent consideration from the FRC acquisition.
At quarter-end, Cheesecake Factory had $585.3 million of available liquidity, including $249.3 million in cash and $336 million available under its revolving credit facility. Debt outstanding totaled $575 million, representing convertible senior notes due in 2030. The company spent approximately $58 million on capital expenditures during the quarter and returned $16.6 million to shareholders through $14.2 million in dividends and $2.4 million of share repurchases.
Outlook Calls for Continued Development
For the fourth quarter, the company expects revenue of $1.04 billion to $1.05 billion and adjusted net income margin of about 5.8% at the midpoint of that range. Management expects low-single-digit commodity inflation, low- to mid-single-digit labor inflation, approximately $68 million of general and administrative expense, $30 million of depreciation and $13 million of pre-opening expense to support 13 openings.
Clark said the fourth-quarter outlook assumes that third-quarter sales momentum remains durable, but models the final three holiday-heavy weeks of the quarter at 3% pricing and flat traffic because those weeks are typically near capacity. The outlook also incorporates a 1% deduction for holiday-calendar shifts.
The company remains on track to open as many as 26 restaurants in 2026, including as many as five Cheesecake Factory locations, eight North Italia restaurants, seven Flower Child locations and six FRC restaurants. It expects cash capital expenditures of approximately $210 million for the year.
For fiscal 2027, the company is targeting approximately $4.425 billion in total revenue, as many as 27 restaurant openings and full-year net income margin of 6.0% to 6.1%. About three-quarters of planned 2027 openings are expected in the second half of the year. Management expects approximately $220 million in capital expenditures next year.
Clark cautioned that the company considers its recent sales acceleration to be early and said its 2027 assumptions are more closely aligned with its historical growth algorithm. Still, management said it believes the rewards platform, digital engagement, social-media momentum, restaurant execution and development pipeline provide multiple avenues for profitable growth.
About Cheesecake Factory (NASDAQ:CAKE)
The Cheesecake Factory Incorporated is a restaurant company best known for The Cheesecake Factory, a full-service casual dining brand offering an extensive menu of American and international-inspired dishes, along with a broad selection of cheesecakes and other desserts. The company also operates North Italia, an Italian restaurant concept, and owns Fox Restaurant Concepts, which develops and operates additional restaurant brands, including Flower Child and Culinary Dropout.
The company was founded by David Overton, who opened the first Cheesecake Factory restaurant in Beverly Hills, California, in 1978 after his parents began a cheesecake business.
