One of the largest employers in the United States has revealed it will be unable to make its upcoming rent payments due to the coronavirus crisis.
The Cheesecake Factory cited the loss of income during the COVID-19 outbreak for its inability to pay the rent on its nearly 300 storefronts when April 1 comes around. The restaurant chain’s founder and CEO, David Overton broke the news in a letter to landlords last week, according to Eater.
The California-based company with 38,000 employees cited the “unprecedented and rapidly evolving” situation with the global pandemic for the impact on its business as the eatery has been forced to close some locations. Others have turned to only offering takeout due to government restrictions put in place to help stem the spread of the virus, which has claimed the lives of over 1,000 people in the U.S.
Your well-being & safety is our number one priority. As many cities transition to not allowing dine-in service, we remain open for takeout & delivery. Even when we’re apart, we can get through this together. pic.twitter.com/8uoEdXM8jL
— The Cheesecake Factory 🍰 (@Cheesecake) March 18, 2020
“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” Overton wrote. “Due to these extraordinary events, I am asking for your patience, and frankly, your help.”
“Unfortunately, I must let you know that The Cheesecake Factory and its affiliated restaurant concepts will not make any of their rent payments for the month of April 2020,” he added, saying the company did “not take this action or make this decision lightly” and hoped to resume rent payments “as soon as reasonably possible.”
Letter to Cheesecake Factor… by MatthewKang on Scribd
Founded in Beverly Hills in 1972, the company now operates 294 restaurants with locations in 39 states, the District of Columbia, Puerto Rico and Canada, according to Eater. Overton acknowledged “the impact this action will have on our landlords” and added that the company appreciated their “understanding given the exigency of the current situation.”
The closing of 27 of its stores and a 50 percent drop in stock price in the last month have also affected the restaurant chain’s profits and caused it to stop construction on unopened restaurants as well as tap into a $90 million line of credit which it informed investors about in a statement on Monday, according to Eater.
“In these unprecedented times, there are many factors that are changing on a daily basis given governmental regulations and landlord decisions to close properties,” Cheesecake Factory representatives told Eater.
“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,” the statement continued. “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.”
The Cheesecake Factory, which still has its original location on Beverly Drive, may be finding itself in the same position as countless other restaurants across the nation that may end up needing a government bailout just to survive the crisis, and the massive $2 trillion coronavirus stimulus package reportedly includes provisions to help the hotel and restaurant industries.
Twitter users reacted to the news of the Cheesecake Factory’s financial crisis.
If #CheesecakeFactory can’t budget well enough to cover a 2 week emergency how in the hell are everyday Americans supposed to make it??
— Paula Tucker (@paulatuckerlv) March 25, 2020
Exactly….they charge &25 for a bowl of spaghetti….
— I am that WOMAN (@Anitasoblessed) March 26, 2020
Cry me a river………… I’m more concerned about the small independent restaurants and the mom and pop stores and the American people that got suddenly unemployed through no fault of their own, and how I’m going to pay my own rent.
— Barbara F (@PepperLove215) March 26, 2020
The CEO of Cheesecake Factory makes $2mil per year. Nobody who owns a mom & pop restaurant can even dream of that.
CF should have been setting aside some funds for emergencies. Nobody needs $2mil per year for pushing papers.
— TentinQuarantino (@wormtoes2) March 26, 2020
The probably could’ve saved some money if they didn’t have a 40 page menu. That’s a lot of printing lol
— Stephen Rodriguez (@Stephen42720545) March 26, 2020
My mortgage is due on the 1st as well. I need a bailout.
— Fri3ndsD0ntLi3 (@Li3D0nt) March 26, 2020
Closed for two weeks and your business fails. Bad business model.
— Silvia Lejasbunde (@SilviaxLej) March 26, 2020
F**k it! If Cheesecake Factory won’t pay their rent on April 1, then I won’t either!
What’s good enough for the makers of the Reese’s Peanut Butter Chocolate Cheesecake is good enough for me! pic.twitter.com/eJeVXC9iuh
— Russell Drew (@RussOnPolitics) March 26, 2020
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