Editor's note: All week, Restaurant Business will run profiles of the five nominees for Restaurant Leader of the Year.
Monday: White Castle CEO Lisa Ingram
Today: Cheesecake Factory CEO David Overton
Amazon has a policy of including an empty chair in its headquarters meetings to represent the customer. The Cheesecake Factory prefers a flesh and blood representation in the person of its CEO, David Overton.
Any item on the polished-casual chain’s voluminous menu is there because Overton liked it, a gauge that has proven eerily accurate in predicting acceptance.
Chances are that a Cheesecake Factory is where it is because Overton personally OK'd the location. Many chain CEOs personally approve every new site, but few are as involved as Overton in striving to impress guests with the design and ambience, factors that he regards as part of the value his brainchild delivers. His guidelines are his own tastes and preferences (look next visit for a sky scene, an Overton signature).
He's also held the line on Cheesecake’s enormous portion sizes because he knows a serving is typically enough for two meals, another key value cue to customers. It’s a decision he says is reinforced every time he and his wife opt for a Cheesecake dinner and realize they’ll have plenty left over for the next day. (His favorite item is the Glamburger, a classic burger inspired by the sliders he loved while growing up in Michigan.)
That personal approach has served Cheesecake well in its rise from a single bakery-cafe in Beverly Hills, Calif., that Overton opened in 1978 as a marketing tool to help his parents sell cheesecakes wholesale to other businesses. Today, the Cheesecake restaurant chain extends to more than 230 Overton-approved locations worldwide. The 207 or so domestic branches each average $10.7 million annually in sales, or more than $1,000 per square foot. Takeout and delivery sales alone account for about $3.1 million per store.
Despite those high-altitude figures, business remains on the upswing. Same-store sales for the third quarter of 2021 outstripped the pre-pandemic level of 2019 by 8.3%.
The namesake brand is the foundation of what is now a diversified restaurant company with a second casual concept, North Italia, already in growth mode. About 29 are open, and Cheesecake believes the market could support at least 200 units.
The concept features what Overton calls contemporary versions of classic Italian fare, with roughly 30% of sales generated by wine, beer and other adult beverages. Average unit sales are believed to be around $7 million annually.
“We think that North could end up being up to 20% of the company,” Overton told Restaurant Business in a phone interview.
Under development for possible rollouts are the casual concepts Culinary Dropout and Blanco Tacos + Tequila and a health-oriented fast-casual operation, Flower Child. Along with North Italia, the three were developed by Fox Restaurant Concepts (FRC), a wholly owned subsidiary of the Cheesecake corporation that’s run largely independently by its founder, Sam Fox, as an incubator of concepts.
In a setup unique in the business, Fox creates and runs concepts, refining the ones with apparent legs into potentially national concepts while each grows to a handful of locations. Then the concept shifts to Cheesecake’s fold for development and ongoing operation, tapping the parent company’s deep experience in building a national brand.
Overton says his corporation has been careful about not “Cheesecake-ing” North Italia, and intends to do likewise with other FRC concepts that graduate to a growth brand in Cheesecake’s portfolio. He attests that he’s seen ample instances of a promising business being diluted by a strategic buyer that insists on imposing its methods and approaches. Cheesecake’s focus, he says, will be on providing the parent company’s expansion knowhow and benefits of scale, not on messing with an FRC brand’s DNA.
True to Overton’s reliance on what resonates with him personally, the FRC deal came about because of the relationship that flowered with Sam Fox.
“We were considering buying another concept. That went on for a few years, but there was nothing that we liked,” Overton recalls. “Through a real estate person, [FRC] called us and asked if there’d be any interest in North Italia.
“We had a meeting with Sam,” he continues. “He’s a lot like me in many ways. We hit it off right away.”
Both were strong in what Overton terms a CEO’s “soft skills”—disciplines like menu development, operations and concept design. They also recognized a fellow entrepreneur who just happened to head a successful restaurant enterprise of size.
“We got along great,” says Overton. “As we progressed with the North deal, the idea came up that we might want to buy his whole company. Finally, we said, ‘Let’s just buy his whole company.’ Sam agreed to stay on for a period of time, and we made the deal.”
I do no want to Cheesecake any of his concepts because they’re strong on their own. We spent a lot of time on how we could integrate.
That person-to-person engagement was also a factor in a deal Cheesecake struck back in April 2020, when the pandemic’s shutdown of dining rooms had restaurant companies looking for cash reserves to carry them through the crisis. Cheesecake was no exception.
The search extended to private-equity companies, which Overton mentions in a tone someone might use in announcing an upcoming visit to a dentist. But one of those was Roark Capital, the PE firm founded by Neal Aronson to build and hold a wide collection of franchise businesses. Today, that portfolio includes Buffalo Wild Wings and Dunkin’ parent Inspire Brands, along with Jamba and McAlister’s Deli franchisor Focus Brands.
Cheesecake doesn’t franchise, and Overton had never met Aronson. But, the Cheesecake CEO recalls, he liked the man and admired what he’d built. It wasn’t the typical low-ball-it-and-then-flip-it PE firm. Its stated goal was to build brands, not make a quick buck off them.
Cheesecake ended up taking a $200 million equity investment from Roark. Overton’s team repurchased most of the stake in June for $475 million. Roark retained a 4.6% stake, which the securities filings indicated would be controlled by Aronson.
What’s next?
At age 75, Overton says he’s still deeply involved with the day-to-day operations of Cheesecake, though with a focus on the soft-skills aspects of the business. He recounts how he recently convened a meeting of the whole menu R&D team at a unit, where they ordered everything on the menu and dissected it to see what could be improved.
“There were items there that I hadn’t touched in 20 years,” he recounts.
He has a longstanding leadership team to handle functions like finance. David Gordon, now president, joined Cheesecake more than 28 years ago as a unit-level manager. SVP of Operations Spero Alex has been with the company for 32 years.
I’m not a gourmet. I’m not someone who likes weird food. What I like, a great number of people like. I don’t know where I get it.
Part of Overton’s focus is on training, recruitment and talent development. Cheesecake is routinely hailed in studies as one of the restaurant industry’s best places to work. Part of that is the sheer amount of money employees can make, even at the field level. Servers earn as much as the VPs in many white-collar businesses. Many MBA holders might envy the compensation of general managers, whose tenure averages 14 years. Regional VPs average 23 years.
But culture also figures large in the company’s positive reputation as an employer, if not in the corporation’s overall success, according to its CEO.
“We strive to treat people right, Overton says. “It started out with me back in 1978, the kind of person I am, how I treat people.” He’d quit college to make a living as a drummer in a band, a route he thought would be his career path until his parents asked for help in building their Michigan-based cheesecake business. Overton convinced his mother and father to move their business to Beverly Hills, where they’d have more of a showcase, and spark a groundswell of interest by showing how consumers loved the product. The place opened to a line, without any advertising.
“My mother’s cheesecake recipe was really good,” Overton says.
We started Cheesecake to sell my parents' cheesecake. Because I didn’t recognize what not to do, I had fresh ideas. We made everything fresh because I didn’t know what a steam table was.
Overton says his days as a musician taught him the importance of being surrounded by people who are talented and whom you can trust. It also whet his appreciation of kindness, collaboration and the importance of everyone succeeding.
“We work at all of that,” he says. “We have a women’s group that we’ve created. We want to be kind.”
As for retirement, “I’m fine,” he says. “I see nothing out there that would thrill me as much as what I’m doing now does.
“I’m proud of the business, and I would think that many people would think it was great,” he says. “We certainly didn’t do it the way everyone else did.”
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