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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.12pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.01pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.25pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+2
concerns+2
failure+1
litigation+1
harm+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
15,322 words
ITEM 1A. RISK FACTORS
An investment in our common stock involves risks and uncertainties. In addition to the information contained elsewhere in this Annual Report on Form 10-K and other filings that we make with the SEC, you should carefully read and consider the risks described below before making an investment decision. The occurrence of any of the following risks could materially our business, operating results, earnings per share, financial position, cash flows and/or the trading price of our common stock (individually and collectively referred to as our “financial performance”). In addition, our actual financial performance could vary materially from any results expressed or implied by forward-looking statements contained in this report, in any of our other filings with the SEC and other communications by us, both written and oral, depending on a variety of factors, including the risks and uncertainties described below. It is not possible for us to predict all possible risk factors or the impact these factors could have on us or the extent to which any one factor, or combination of factors, may materially affect our financial performance. The risk factors set forth below are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
The impact global and domestic economic conditions have on consumer discretionary spending and our costs of operations could materially adversely affect our financial performance.
Dining out is a discretionary expenditure that is influenced by domestic and global economic conditions, including, but not limited to: geopolitical instability, including armed conflicts, supply shortages, interest rates, changes to the terms of international trade agreements, unemployment, significant cost inflation, public health emergencies, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy.
Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any factor affecting consumer discretionary spending may influence customer traffic in our restaurants and average check amount, thus potentially having a material impact on our financial performance.
In recent years, our operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation. Our commodity and wage inflationary environment began returning to more historical levels in fiscal 2024. The impact of ongoing geopolitical and macroeconomic events, including evolving government policies, and global trade and tariff dynamics, could lead to further wage inflation, product and services cost inflation, disruptions in the supply chain, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings. Any of these factors may have an adverse impact on our business and materially adversely affect our financial performance.
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Our inability to grow comparable restaurant sales could materially adversely affect our financial performance.
We strive to increase comparable restaurant sales by improving customer traffic trends and growing average check. Changes in customer traffic and average check amount may be impacted by a variety of factors, including, without limitation: macroeconomic conditions that impact consumer discretionary spending; perception of our concepts’ offerings in terms of quality, price, value and service; the competitive environment; changes in consumer eating or drinking habits; the evolving retail landscape, which is becoming increasingly influenced by technology and a growing consumer preference for convenience, value and experience; weather conditions; natural disasters; and demographic, economic and other changes in the trade areas in which our restaurants are located and changes in the regulatory environment. (See the risk factor titled “The impact global and domestic economic conditions have on consumer discretionary spending and our costs of operations could materially adversely affect our financial performance.”)
We compete directly and indirectly for customer traffic with national and regional full-service dining restaurant chains as well as independently owned restaurants. In addition, we face competition from fast casual and quick service restaurants, grocery stores and meal kits that have increased the quality and variety of their food products in response to consumer demand. We believe that many consumers remain focused on value and if our competitors promote and deliver a higher degree of perceived value, our customer traffic could suffer.
We utilize menu price increases in an effort to help offset inflation of key operating costs. However, our menu price increases may be insufficient to meaningfully offset increased costs and may, if not accepted by customers, result in reduced customer traffic and unfavorable menu mix shifts (i.e., customers reducing their spend by purchasing fewer menu items or lower cost menu items) (See the risk factor titled “Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.”)
We generate a higher mix of sales from off-premise channels as consumers have demonstrated a preference for convenience and at-home dining. Growing competition in off-premise channels, our inability to differentiate our concepts in these channels or a change in customers’ willingness to pay fees associated with third-party delivery could negatively impact our comparable restaurant sales performance.
If we are unable to protect our reputation, the value of our brands and sales at our restaurants may be negatively impacted, which could materially adversely affect our financial performance.
Our greatest asset is the value of our brands, which is directly linked to our reputation. We must protect our reputation in order to continue to be successful and to grow the value of our brands domestically and internationally.
Negative publicity directed at any of our brands, regardless of factual basis, such as relating to the quality of our restaurant food or consumer packaged goods, the quality and condition of our restaurant facilities, customer complaints or litigationalleginginjury or food-borne illnesses, food tampering or contamination or poor health inspection scores, sanitary or other issues with respect to food processing by us or our suppliers, labor relations, any failure to comply with applicable regulations or standards, allegations of harassment or disparate treatment based upon race, gender, gender identity, national origin, religion or other class, allegations of sexual harassment, politically motivated accusations or other negative publicity could damage our reputation. Any failure of our third-party delivery provider to represent our brands in a favorable manner could damage our reputation. These concerns are exacerbated by the speed with which negative information can be disseminated through social media. (See the risk factor titled “Any inability to effectively use and manage social media could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance.”) Negative publicity about us could harm our reputation and damage the value of our brands, which could materially adversely affect our financial performance.
In past years we have experienced and may again experience significant labor cost inflation, which has and may in the future significantly increase our cost of doing business.
Increases in minimum wages (including increased minimum wages in industries with which we compete for talent) and minimum tip credit wages, extensions of personal and other leave policies, other governmental regulations affecting labor costs including pay transparency and secure scheduling requirements and reduced levels of legal immigration have and may continue to significantly increase our labor costs and make it more difficult to fully staff our restaurants, any of which could materially adversely affect our financial performance.
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Certain state and localities have significantly increased their minimum wage and/or tip credit wage (or have eliminated the tip credit wage), and require significantly more mandated benefits, and other states and localities may also elect to do so. Should this occur, in addition to increasing the overall wages paid to our minimum wage and tip credit wage earners, these increases create pressure to increase wages paid to and other benefits provided to other staff members who, in recognition of their tenure, performance, job responsibilities and other similar considerations, historically received a rate of pay exceeding the applicable minimum wage or minimum tip credit wage. Because we employ a large workforce, any wage increases and/or expansion of benefits mandates will have a particularly significant impact on our labor costs. Increased restaurant labor costs could impact us more than others in our industry because we have a complex menu made fresh from scratch at our restaurants, requiring more labor at each restaurant location than some of our competitors who use processed foods or commissaries to prepare their foods. Our vendors, contractors and business partners are similarly impacted by wage and benefit cost inflation, and many have or will increase their prices for goods, construction and services in order to offset their increasing labor costs, resulting in higher operating costs for us.
Our labor expenses include significant costs related to our self-insured health, pharmacy and dental benefit plans. Healthcare costs continue to rise and are especially difficult to project given that material increases in costs associated with medical claims, or an increase in the severity or frequency of such claims, may cause healthcare costs to vary substantially from quarter-to-quarter and year-over-year. Any significant changes to the healthcare insurance system could also impact our healthcare costs. Material increases in healthcare costs could materially adversely affect our financial performance.
While we seek to offset labor cost increases through menu price increases, more efficient purchasing practices, productivity improvements, greater economies of scale and by offering a variety of health plans to our staff members, including lower cost high-deductible health plans, there can be no assurance that these efforts will be successful. If we are unable to effectively anticipate and respond to increased labor costs, our financial performance could be materially adversely affected.
Health risks associated with our restaurants or products, such as food safety concerns and food-borne illness, pandemics, epidemics, endemics and other public health emergencies could negatively impact customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially adversely affect our financial performance .
We face food safety risk, including the risk of food-borne illness and food contamination (including allergen cross contamination), which are common both in the restaurant industry and the food supply chain, including, those caused by pathogens, such as coronavirus, Ebola, mad cow disease, SARS, swine flu, avian influenza, norovirus or other virus or bacteria, such as hepatitis A, norovirus, listeria, Campylobacter, Clostridium perfringens, salmonella or E.coli, and those that may be caused by parasites, other toxins or food safety issues. While we dedicate substantial resources and provide training to help ensure the safety and quality of the food we serve, these risks cannot be completely eliminated. Additionally, we rely on our network of suppliers to properly handle, store and transport our ingredients for delivery to our restaurants. Any failure in our supply chain could cause our ingredients to be contaminated, which could be difficult to detect and jeopardize the safety of our food. We freshly prepare our menu items at our restaurants, which may put us at greater risk for food-borne illness and food contamination outbreaks than some of our competitors who use processed foods or commissaries to prepare their food. The risk of food-borne illness also may increase whenever our menu items are served outside of our control, such as by third-party food delivery services, customer take-out or at catered events.
Publicized food safety concerns, regardless of accuracy, whether specifically concerning food served at any of our restaurant brands, desserts produced at our bakeries, any products bearing our branding or regarding our third-party suppliers or service providers, or the food supply more generally, could negatively affect consumer demand for our restaurants and products, which in turn could materially adversely affect our financial performance. These concerns also extend to emerging consumer sentiments relating to phthalates, per- and polyfluoroalkyl substances, microplastics and heavy metals in the food supply.
The impacts of and our failure to effectively respond to pandemics, epidemics, endemics and other public health emergencies may also significantly disrupt our business, including, by adversely affecting, among other things, our ability to operate our business, consumer behavior, our supply chain, commodity prices, wage costs and our ability to timely open new restaurants.
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The demand for and availability and price of certain food items may be adversely impacted if any food-borne illness or other food contamination infects or are believed to have infected the food supply, including the food supply chain for our restaurants or bakery facilities. Additionally, customers may avoid our restaurants, our reputation may be damaged, and it may become difficult to adequately staff our restaurants if our food or customers or staff members become infected with a pathogen which was actually or alleged to be contracted at our restaurants. Any adverse food safety occurrence may result in litigationagainst us. Although we carry liability and other insurance coverage to mitigate costs we may incur as a result of these risks, not all risks of this nature are fully insurable. Even if insured, the negative publicity associated with such an event could damage our reputation and materially adversely affect our financial performance.
In addition to selling products throughout the world through various distribution channels, including, without limitation, supermarkets, mass market retailers, club stores and various other food service and retail channels, our bakery facilities are the only sources of most of our baked desserts to our restaurants. If any of our bakery products becomes subject to a product recall or market withdrawal, whether voluntary or involuntary, our costs to conduct such recall or market withdrawal could be significant, restaurant sales as well as third-party sales of bakery products could be negatively impacted and our reputation could be damaged, any of which could materially adversely affect our financial performance.
In addition, any adverse food safety event could result in mandatory or voluntary product withdrawals or recalls, regulatory and other investigations, and/or criminalfines and penalties, any of which could disrupt our operations, increase our costs, require us to respond to findings from regulatory agencies that may divert resources and assets, and result in potential civil fines and penalties as well as other legal action, any of which could materially adversely affect our financial performance.
Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.
We are subject to numerous federal, state, local and foreign laws and regulations. Each of our restaurants is subject to various laws and regulations, including license and permit requirements, that regulate many aspects of our business, including, among other things, alcoholic beverage control, health, sanitation, labor, immigration, zoning and public safety. Our failure to obtain and/or retain licenses, permits or other regulatory approvals required to operate our business could delay or prevent the opening and/or continued operation of any of our restaurants or bakeries, materially adversely affecting that facility’s operations and profitability and our ability to obtain similar licenses, permits or approvals elsewhere, any of which could materially adversely affect our financial performance. We are also subject to various environmental regulations governing areas such as water usage, sanitation disposal and transportation mitigation. The United States, on the federal, state and local levels, and other countries are expanding the type, nature and scope of laws and regulations governing other environmental matters, such as reducing greenhouse gas emissions, use of natural gas and water consumption, including in some cases imposing disclosure requirements with respect to such matters. (See the risk factor titled “Failure to appropriately address environmental and social matters could adversely affect our brand, business, results of operations and financial condition.”) We may incur significant additional costs and require operational changes to comply with these laws and regulations and may face fines, penalties or other sanctions, adverse publicity and incur legal liability in the event of our failure to do so.
Our international business exposes us to additional laws and regulations, including antitrust and tax requirements, anti-boycott legislation, import/export and customs regulations and other international trade regulations, privacy laws, the USA Patriot Act and the Foreign Corrupt Practices Act.
As a provider of food products, we are subject to a comprehensive regulatory framework that governs the manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States, including the Federal Food, Drug and Cosmetic Act, the Public Health Security and Bioterrorism Preparedness Response Act of 2002, the Federal Food Safety Modernization Act and regulations concerning nutritional labeling under the Patient Protection and Affordable Care Act of 2010. (See the risk factor titled “Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining preferences, could negatively impact our operations and competitive position, which could materially adversely affect our financial performance.”)
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In order to serve alcoholic beverages in our restaurants or off-premise where permitted, we must comply with alcoholic beverage control regulations which require us to apply to a state or other governmental alcoholic beverage control authority for licenses and permits. In addition, we are subject to dram shop statutes in most of the jurisdictions in which we operate, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Dram shop litigation may result in significant judgments, including punitivedamages. Various federal, state, local and foreign laws and regulations govern our operations as they relate to our staff members, including such matters as minimum wages, breaks, scheduling, exempt classifications, equal pay, overtime, tip credits, fringe benefits, leaves, safety, working conditions, provision of health insurance, and citizenship or work authorization requirements. Significant increases in minimum wage rates, including any increase in or elimination of the tip credit wage rate in certain states, paid or unpaid leaves of absence, equal wage legislation, mandatory sick pay and paid time off regulations in a growing number of jurisdictions, mandated health and/or COBRA benefits, or increased tax reporting, assessment or payment requirements related to our staff members who receive gratuities, or changes in interpretations of existing employment laws, including with respect to classification of exempt versus non-exempt employees, could significantly increase our labor costs, which would materially adversely affect our financial performance.
We must also comply with local, state and federal laws and regulations protecting the right to equal employment opportunities and prohibiting discrimination and harassment in the workplace. Compliance with these laws and regulations can be costly and failure to comply creates exposure to government proceedings and litigation. Even a perceived failure to comply could result in negative publicity that could damage our reputation and materially adversely affect our financial performance.
We are also subject to the regulations of the Department of Homeland Security, the U.S. Citizenship and Immigration Services and U.S. Immigration and Customs Enforcement. Despite our efforts to maintain compliance with legal requirements, including implementation of electronic verification of legal work status, some of our staff members may not meet legal citizenship or residency requirements. In addition, immigration-related employment regulations may make it more difficult for us to identify and hire qualified staff members. Our inability to maintain an experienced and qualified workforce comprised of individuals who meet all legal citizenship or residency requirements could result in a disruption in our workforce, sanctions against us and adverse publicity, any of which could materially adversely affect our financial performance.
Our facilities must comply with applicable requirements of the Americans with Disabilities Act of 1990 (“ADA”) and related federal, state and foreign laws and regulations which prohibit discrimination on the basis of disability with respect to public accommodations and employment. We are also subject to laws and regulations relating to information security, cybersecurity, privacy, personal information, cashless payments and consumer credit, protection and fraud. The requirements of such laws and regulations, as well as their application and interpretation, are constantly evolving and developing.
Many laws and regulations governing our business and operations also extend to independent third-party service providers we engage to perform certain services. While we take precautions to help ensure that our third-party service providers comply with applicable laws and to maintain an independent contractor relationship, we cannot be assured such efforts will be successful, and we may incur liability as a joint employer for failures by our independent third-party service providers to comply with applicable laws. Additionally, some jurisdictions have introduced (or may be planning to introduce) legislation seeking to mandate an employment relationship between companies that facilitate third-party delivery services and their service personnel.
Any changes to the numerous laws governing our business or operations may create challenges for us. While we subscribe to certain services and have established procedures to identify legal and regulatory changes, we may not be able to identify and comply with every change on a timely basis. We may incur penalties and other costs, sanctions and adverse publicity by failing to comply with applicable laws, any of which could materially adversely affect our financial performance.
Labor organizing could harm our operations and competitive position in the restaurant industry, which could materially adversely affect our financial performance.
Our staff members and others may attempt to unionize our workforce, establish boycotts or picket lines or interrupt our supply chains, which could limit our ability to manage our workforce effectively, cause disruptions to our operations and could materially adversely affect our financial performance. In addition, a labor dispute involving some or all our staff members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes could increase our costs. Further, the unionization of construction companies could cause our construction and build-out costs for new restaurants to materially increase.
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Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining preferences, could negatively impact our operations and competitive position, which could materially adversely affect our financial performance.
Federal law requires restaurant operators with twenty or more locations to make certain nutritional information available to customers. Additionally, some state, local and foreign governments also have enacted legislation regulating or prohibiting the sale of or mandating disclosures relating to certain types and/or levels of ingredients in food served in restaurants, such as trans fats, sodium, genetically modified organisms (GMOs) and gluten, and are taxing or considering taxing and/or otherwise regulating high fat, high sugar and high sodium foods. While it remains unclear to what extent consumers may reconsider dining preferences in response to such requirements, consumer dining preferences continue to evolve, and these preferences may evolve more rapidly in response to any of these new requirements. New and current medical treatments such as GLP-1 agonists may shift consumer preferences. Our failure to quickly and effectively adapt to any significant shift in consumer dining preference could cause our or our licensees’ restaurants to lose market share, which could materially adversely affect our financial performance.
Our failure to effectively develop, grow and operate North Italia, Flower Child and our other branded concepts could materially adversely affect our financial performance.
All of our restaurant concepts are subject to the risks and uncertainties described in this filing. However, there is an enhanced level of risk and uncertainty related to the operation and expansion of our less-established restaurant concepts. We acquired North Italia, Flower Child and the remainder of Fox Restaurant Concepts’ business for the purpose of accelerating unit growth and to develop innovating concepts for future growth. While we actively seek to grow these concepts, we can provide no assurance that new restaurants will be accepted in the markets targeted for expansion or that we will be able to achieve our targeted returns when opening new locations.
Adverse weather conditions, natural disasters and public health emergencies could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.
Adverse weather conditions, natural disasters and public health emergencies can impact customer traffic, make it more difficult to fully staff our restaurants and more severe events, such as hurricanes, earthquakes, tornadoes, blizzards, wildfires and other natural disasters and public health emergencies have resulted in and may in the future result in restaurant closures, underutilization of outdoor patio dining and curtailed operations, impediments to availability of staff and supplies and increased commodity costs, sometimes for prolonged periods of time. These effects may become more pronounced in the future as climate change and global warming may cause extended droughts and certain adverse weather conditions and natural disasters to become more frequent, more severe and less predictable over time. Our cash flows may be negatively impacted by delay in the receipt of proceeds under any insurance policies or programs we maintain against certain of these risks or the proceeds may not fully offset any such losses. Any or all these situations could materially adversely affect our financial performance.
Acts of violence at or threatenedagainst our restaurants or the centers in which they are located, including civil unrest, customer intimidation, active shooter situations and terrorism, could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.
Any act of violence at or threatenedagainst our restaurants or the centers in which they are located, including civil unrest, customer intimidation, active shooter situations and terrorist activities, may result in damage and restricted access to our restaurants and/or restaurant closures in the short-term and, in the long-term, may cause our customers and staff to avoid our restaurants. Any such situation could adversely impact customer traffic and make it more difficult to fully staff our restaurants, which could materially adversely affect our financial performance.
Risks Related to Our Business
Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.
The cost of products and services used in our operations are subject to volatility due to the relative availability of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events such as tariffs, the terms of international trade agreements, geopolitical events, economic conditions, public health emergencies or other unforeseen circumstances. For example, as a result of historically low cattle herd in the United States, drought, high feed and production costs,
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tariffs and other circumstances during fiscal 2025, we, along with the restaurant industry and broader market for beef, experienced high inflation around beef prices compared to historical norms, and we expect this trend to continue into the foreseeable future. Furthermore, a significant portion of our imported items experienced price increases and volatility due to tariffs and regulatory changes in 2025. We expect this trend to continue into 2026.
We attempt to negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand. We are in the process of contracting for certain key food and non-food supplies for fiscal 2026, and these efforts may not be successful or yield our intended benefits. We will continue to take the cost and inflationary environment into consideration when implementing future pricing decisions. In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and cost. However, we can provide no assurance that these efforts will be successful.
We continue to evaluate the possibility of entering into similar short-term and long-term arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities. As of the end of fiscal 2025, we had no hedging contracts in place. Products and services for which we have not entered into contracts can be subject to unforeseen supply and cost fluctuations, which at times may be significant. Additionally, the cost of commodities subject to governmental regulation, such as dairy and corn, can be especially susceptible to price fluctuation. Goods we purchase on the international market may be subject to even greater fluctuations in cost and availability, which could result from a variety of factors, including the value of the U.S. dollar relative to other currencies, international trade disputes, tariffs, geopolitical unrest and varying global demand. New or increased tariffs and other changes in U.S. trade policy could trigger retaliatory actions, including increased tariffs, by affected countries.
While we strive to engage in a competitive bidding process for our principal commodity, supply, service and equipment requirements, because certain of these products and services may only be available from a few vendors or service providers, we may not always be able to do so. Because of this lack of competition, we may be vulnerable to excessive price demands, especially as they relate to the cost of products or services that are critical to our operations or profitability.
Certain products and ingredients commonly used in food preparation are under scrutiny for possibly posing social and environmental risks, including from an animal welfare and environmental sustainability perspective. We use many of these products and ingredients and have adopted a comprehensive Sustainable Sourcing Policy under which, among other things, we have a buying preference for products and ingredients that meet our social, environmental and animal welfare qualifications (“sustainable products”). While we strive to source sustainable products, there is a risk that some of our products or ingredients may become the subject of adverse publicity or shareholder activism, regardless of factual basis. There is currently a smaller market for certain sustainable products, and any condition affecting the demand for or supply of these products may cause significant cost and supply volatility and prevent us from obtaining these products at a reasonable cost. This may become more prevalent as the European Union’s regulation of sustainably sourced commodities may cause limited inventories of sustainably sourced commodities to be diverted there. For these and other reasons, we cannot be certain that our supply and cost mitigation efforts or our efforts to purchase sustainable products will be successful. Our international licensees are also subject to commodity price fluctuations. Any strategies employed by our international licensees to mitigate the impact these fluctuations have on their businesses may not be successful. Commodity price fluctuations have and may continue to impede our international licensees’ profitability, which may hamper their ability to grow and negatively impact our ability to expand our brand internationally.
Our financial performance could be materially adversely affected if we fail to retain, or effectively respond to a loss of, key executives.
The success of our business continues to depend in critical respects on the contributions of David Overton, our founder, Chairman of the Board and Chief Executive Officer, and our other senior executives. The departure of Mr. Overton or other senior executives for any reason could have a material adverse effect on our business and long-term strategic plan. We have a succession plan that includes short-term and long-term planning elements intended to allow us to successfully continue operations should any of our senior management become unavailable to serve in their respective roles. However, there is a risk that we may not be able to implement the succession plan successfully or in a timely manner or that the succession plan will not result in the same financial performance we currently achieve under the guidance of our existing executive team.
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If we are unable to staff and retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance.
If we are unable to attract and retain qualified personnel, including due to increasingly competitive labor markets, our restaurants and bakery operations could be short staffed, we may be forced to incur overtime expenses, and our ability to operate and expand our concepts effectively, grow our business and revenues and meet our customers’ demand could be limited, any of which could materially adversely affect our financial performance. These risks may be exacerbated by anticipated changes to and the enforcement of immigration laws and regulations. (See the risk factor titled “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.”)
If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we may experience data loss, increased costs, operational disruption or other harm, any of which could materially adversely affect our financial performance.
In order to leverage our internal resources and information technology infrastructure, and to support our business continuity and disaster recovery planning efforts, we rely on third-party vendors to provide some of our essential business processes. For example, we rely on a network of third-party distribution warehouses to deliver ingredients and other materials to our restaurants. In some instances, these processes rely on technology and may be outsourced to the vendor in their entirety and in other instances we utilize these vendors’ externally hosted business applications. Our vendors’ systems are vulnerable to a variety of risks, including, without limitation, theft, casualties such as fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external cybersecurity threats, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as malfeasance by insiders, human or technological error, malicious code embedded in open-source software, or misconfigurations, “bugs” or other vulnerabilities in or issues with commercial software that is integrated into our (or our suppliers’ or service providers’) network infrastructure, products or services, security breaches, denial of service attacks, viruses, worms, malware, ransomware, social engineering/phishing, breaches of the algorithms used to encrypt and protect data and other malicious, or disruptive or unauthorized events that jeopardize the confidentiality, integrity or availability of information systems or information residing therein, including confidential information and personal information (each, a “Cybersecurity Incident” and collectively, “Cybersecurity Incidents”), and have also experienced Cybersecurity Incidents. The failure of third-party vendors to provide adequate services (especially those that may be a sole source provider of certain services), including, as result of any Security Incident, or to generally fail to employ up-to-date and appropriate data security and internal control practices, could significantly harm our operations and reputation, which could materially adversely affect our financial performance. For example, in October 2025 we experienced limited disruptions to our information technology systems as part of the Amazon Web Services outage that impacted thousands of businesses. We experienced these disruptions for a limited period of time, and they did not have a significant impact on our business. We also rely on third party services to effectively operate our restaurants including, for example, gift card distribution and transaction processing services, point-of-sale system services, online ordering services and food delivery services, and our Cheesecake Rewards ® program. We derive substantial revenue from these aspects of our business, which could suffer in the event of any factor that adversely impacts our vendors’ ability to provide such services. Such factors include, without limitation, loss of, or significant change in contractual terms of, key vendor contracts, vendor or processor failures, technology failures, changes in applicable laws or regulations, Cybersecurity Incidents, damage to the reputation of any key vendor and mandated employment relationships between companies that facilitate third-party delivery services and their service personnel. (See the risk factor titled “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.”)
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We may incur additional costs if we are unable to renew our restaurant leases on similar terms and conditions, or at all, or to relocate our restaurants in certain trade areas, which could materially adversely affect our financial performance.
We currently lease all our restaurant premises and, although we may consider other arrangements, we currently plan to continue to lease our restaurant locations in the future. Some of our leases have terms that will expire in the next few years and beyond. Many of these leases include renewal options; some do not. While lease expirations allow us to opportunistically evaluate the possibility of relocating certain restaurants to higher quality sites and trade areas over time, doing so may involve additional costs, such as increased rent and other expenses related to renegotiating the terms of occupancy of an existing lease, and the costs to relocate and develop a replacement restaurant if we choose not to renew a lease, or are unable to do so, on favorable terms in a desirable location. In addition, changing consumer preferences and demographics in a given area have in the past and may in the future cause us to relocate or terminate a restaurant lease. We may elect to terminate certain leases prior to their expiration dates, and we may be unable to negotiate favorable terms for such early terminations. Additional costs related to expiring restaurant lease terms, our inability to terminate certain restaurant leases under favorable terms or the unavailability of suitable replacement locations could materially adversely affect our financial performance.
Any inability to effectively use and manage social media could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance.
Social media provides a powerful medium for consumers, staff members and others to communicate their approval of or displeasure with a business. This aspect of social media is especially challenging because it allows any individual to reach a broad audience with an ability to respond or react, in near real time, with comments that are often not filtered or checked for accuracy. Any negative publicity could “go viral” causing nearly immediate and potentially significant harm to our brand and reputation, whether or not factually accurate. Our marketing strategy includes an emphasis on social media. As social media continues to grow in popularity, many of our competitors have expanded and improved their use of social media, making it more difficult for us to differentiate our social media messaging. As a result, we need to continuously innovate and develop our social media strategies.
If we do not appropriately use and manage our social media strategies, our marketing efforts in this area may not be successful, and any failure to effectively respond to negative or potentially damaging social media, whether accurate or not, could damage our reputation, which could materially adversely affect our financial performance.
Our failure to adequately protect our intellectual property could materially adversely affect our financial performance.
We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other intellectual property (collectively, “Intellectual Property”), including The Cheesecake Factory ® , North Italia ® , Flower Child ® , a collection within the Fox Restaurant Concepts subsidiary and other trademarks related to our restaurant and bakery businesses in the United States and in other countries throughout the world. Our Intellectual Property is valuable to our business and requires continuous monitoring to protect. We regularly and systemically search for misappropriations of our Intellectual Property and seek to enforce our rights whenever appropriate to do so; however, we cannot ensure success in every case and cannot possibly find all infringing uses of our Intellectual Property. Furthermore, we have not registered all our Intellectual Property throughout the world, and doing so may not be feasible because of associated costs, various foreign trademark law prohibitions or registrations by others.
Our inability to effectively protect our Intellectual Property domestically or internationally could cause our customers to believe lesser quality products or services are ours, may reduce the capacity of our Intellectual Property to uniquely identify our products and services and/or may limit our ability to globally expand our brand, any of which could materially adversely affect our financial performance.
We face a variety of risks and challenges related to our international operations and global brand development efforts, any of which could materially adversely affect our financial performance.
International operations have a unique set of risks and challenges that differ from country to country, and include, among other risks, political instability, governmental corruption, war and threats of war, social, religious and ethnic unrest, anti-American sentiment, delayed and potentially less effective ability to respond to a crisis occurring internationally, changes in global economic conditions (such as currency valuation, disposable income, unemployment levels and increases in the prices of products and services and labor), the regulatory environment, immigration, labor and pension laws, income and other taxes, consumer preferences and practices, as well as changes in the laws and regulations governing foreign investment, joint ventures or licensing arrangements in countries where our restaurants or licensees are located and local import controls.
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Operations at our international Company-owned and licensed restaurants may be negatively affected by factors outside of our control, including, but not limited to:
difficulties in achieving the consistency of product quality and service as compared to restaurants we operate in the United States;
Anti-American sentiment and boycotts of American brands;
changes to our recipes required by cultural norms;
inability to obtain, at a reasonable cost, adequate and reliable supplies of ingredients and products necessary to execute our diverse menu;
availability of experienced management to operate international restaurants according to our domestic standards;
changes in economic conditions of our licensees, whether or not related to the operation of our restaurants;
differences, changes or uncertainties in economic, regulatory, legal, immigration, social, climatic and political conditions, including the possibility of terrorism, social unrest, trade embargos and/or trade restrictions, which may result in periodic or permanent closure of foreign restaurants, affect our ability to supply our international restaurants with necessary supplies and ingredients and affect international perception of our brand;
inability of our licensees to locate profitable or suitable sites for development;
rising cost and scarcity of labor world-wide;
exchange rate fluctuations; and
trade restrictions, taxes or tariffs adversely affecting our or our licensees’ ability to import goods from the United States and other parts of the world that are required for operating our branded restaurants, including our cakes which are wholly manufactured in the United States.
Our international licensees are authorized to operate The Cheesecake Factory restaurant concept in licensed trade areas using certain of our Intellectual Property, including our proprietary systems. Because we do not operate these restaurants directly, we can provide no assurance that our licensees will adhere to our operating standards to the same extent as we would.
If we or our licensees fail to effectively operate our international restaurants, or if we or they fail to receive an adequate return on investment, and these difficulties are attributed to us or our brand, our reputation and brand value could be harmed, our revenues from these restaurants could be diminished and our international growth may be slowed, any of which could materially adversely affect our financial performance.
In order to support our international expansion, our bakeries supply certain of our bakery products to our branded international restaurants. In order to supply bakery products to restaurants in other countries, we are and in the future may be further required to adapt certain recipes to eliminate locally prohibited ingredients, comply with labeling requirements that differ from those in the United States and maintain certifications required to export to such countries. In addition, unexpected events outside of our control, such as, without limitation, trade restrictions, import and export embargos, governmental shutdowns and disruptions in shipping, may affect our ability to transport adequate levels of our bakery products to our or our licensees’ international restaurants, for which we are the sole source of supply. A failure to adequately supply bakery products to our or our licensees’ international restaurants could affect the customer experience at those restaurants, resulting in decreased sales, and could, depending upon the reason for the failure, trigger contractual defaults on our part, any of which could materially adversely affect our financial performance.
As we continue to expand our brand internationally, we must comply with regulations and legal requirements, including those related to immigration and the protection of our Intellectual Property. Additionally, we must comply with domestic laws affecting U.S. businesses that operate internationally, including the Foreign Corrupt Practices Act and anti-boycott laws, and with foreign laws in the countries in which we expand our restaurants. (See the risk factor titled “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.”) We may incur considerable liability in the event we or our licensees fail to comply with foreign or domestic laws relating to our or their operation of any international restaurant and can provide no assurance that our insurance programs or contractual indemnification rights would be effective to protect against such liabilities.
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Our inability to secure an adequate number of high-quality sites for future restaurant openings could adversely affect our ability to grow our business.
Our ability to grow our business depends on the availability and selection of high-quality sites that meet our criteria. The number and timing of new restaurants opened during any given period, and their associated contribution to the growth of our business, depend on a number of factors including, but not limited to:
unforeseendelays due to market conditions;
the identification and availability of high-quality locations;
an increase in competition for available premier locations;
the influence of consumer shopping trends on the availability of sites in traditional locations, such as premier shopping centers;
acceptable lease terms and the lease negotiation process;
the availability of suitable financing for our landlords;
the financial viability of our landlords;
timing of the delivery of the leased premises to us from our landlords in order to perform build-out construction activities;
the timing and extent of other construction activities in and around the shopping centers in which we plan to open;
the occupancy and tenant-mix of the shopping centers in which we plan to open.
obtaining, on a timely basis, governmental licenses and permits necessary to construct and operate our restaurants;
obtaining, on a timely basis, utility connections;
obtaining, on a timely basis, third-party consents necessary to construct and operate our restaurants;
successfully managing the complex design, construction and preopening processes for our highly customized restaurants;
the availability and/or cost of raw materials and labor used in construction;
the availability of qualified tradespeople in the local market;
any unforeseen engineering or environmental problems with the leased premises; and
adverse weather or other delays during the construction period.
We may engage in expansion opportunities or other initiatives which may create risks to our business that could materially adversely affect our financial performance.
We may engage in other means to leverage our competitive strengths, including acquisitions of other companies, expansion of our brand to other retail opportunities and/or other initiatives. Many risks are inherent in any such merger and acquisition activity, development, investment arrangement, expansion of our brand or other initiative, including, without limitation:
complexities associated with combining independent companies with separate businesses, customers, employees, cultures and systems;
damaging our reputation if retail products bearing our brand are not of the same value and quality that our customers associate with our brand;
dilution of the goodwill associated with our brand as it become more common and increasingly accessible;
inaccurate assessment of value, growth potential, weaknesses, liabilities, contingent or otherwise, and expected profitability of such initiatives; and
diversion of management’s attention and focus from existing operations to the expansion of our brand to non-restaurant items.
In addition to these risks, we may not achieve the intended results of any such expansion opportunities or other initiatives, which could materially adversely affect our financial performance.
If we do not appropriately scale our infrastructure in a timely manner, we may be unable to respond to and support our domestic or international opportunities for growth, which could materially adversely affect our financial performance.
We continually evaluate the appropriate level of infrastructure necessary to support our operational and development plans, including our domestic and international expansion. Likewise, if sales decline, we may be unable to reduce our infrastructure quickly enough to prevent sales deleveraging. Either circumstance could materially adversely affect our financial performance.
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Our international license agreements require us to provide training and support to our licensees for their development and operation of The Cheesecake Factory restaurants. This may require training our licensees’ management personnel in the United States and our licensees’ staff members in the licensed territories, as well as providing support in the selection and development of restaurant sites, product sourcing logistics, technological systems, menu modification and other areas. If, for any reason, we are unable to provide the appropriate level of infrastructure support to our international licensees, our licensees’ operations could suffer, which could make it more difficult for us to grow our brand internationally and materially adversely affect our financial performance.
We have and may again be required to record impairment charges, be unable to fully recoup landlord improvement allowances and/or decide to discontinue operations at certain restaurants, any of which could materially adversely affect our financial performance.
We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, negative cash flow, significant underperformance relative to historical or projected future operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be disposed of significantly before the end of its previously estimated useful life and significant negative industry or economic trends. At any given time, we may be monitoring a number of locations, and future impairment charges and/or closures may occur if individual restaurant performance does not improve, which could materially adversely affect our financial performance. During fiscal 2025, we recorded impairment of assets and lease terminations expense of $23.0 million primarily related to the impairment of long-lived assets. (See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further discussion of impairment of long-lived assets.)
We test our goodwill and other indefinite-lived intangible assets for impairment annually or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Factors considered include, but are not limited to, historical financial performance, a significant decline in expected future cash flows, unanticipated competition, changes in management or key personnel, macroeconomic and industry conditions and the legal and regulatory environment. We cannot accurately predict the amount and timing of any impairment of these assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial performance. (See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further discussion of impairment of intangible assets.)
A portion of our tenant allowances at certain premises may be subject to recoupment against percentage rent otherwise payable for such sites. When we are unable to achieve sales in a sufficient amount to generate percentage rent obligations, we are not able to fully recoup available allowances at affected sites, which also could materially adversely affect our financial performance.
If we are unable to manage risks related to our business, costs associated with litigation and insurance could increase, which could materially adversely affect our financial performance.
We are subject to lawsuits, administrative proceedings and claims that arise in the ordinary course of business. These matters typically involve claims by customers, staff members and others regarding issues such as food-borne illness, food safety, premises liability, dram shop liability, compliance with wage and hour requirements, compliance with pay transparency and secure scheduling requirements, work-related injuries, discrimination, harassment, disability and other operational issues common to the foodservice industry. We could be materially adversely affected by negative publicity and litigation costs resulting from these claims, regardless of their validity. Employment-related litigation, particularly with respect to claims styled as class or representative actions, such as those brought under statutes like the California Private Attorneys General Act, are especially costly to defend. Also, some employment-related claims in the area of wage and hour disputes are not insurable risks and many employment-related disputes involve uncertainty in judicial interpretation from state to state and from federal to state court with respect to the effectiveness of arbitration agreements with our staff members, particularly those which provide for class waivers.
We are involved in various legal proceedings, including litigation, arbitration and other claims, investigations, inspections, audits, inquiries and similar actions with private litigants and governmental authorities. These proceedings, especially those involving class or collective actions, can be expensive, time consuming, and disruptive to our operations. Certain cases may seek large or indeterminate amounts and may remain unresolved for several years. For example, we are currently a defendant in a number of cases asserting class or collective action claims under federal and state wage and hour laws. Significant legal fees and costs, or adverse judgments and settlements arising from complex class or representative litigation, where such amounts are uninsured or exceed available insurance coverage, can materially and adversely affect our financial performance.
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We retain financial responsibility for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, staff member health benefits, employment practices and certain other insurable risks. Several factors may significantly increase our self-insurance costs, such as conditions of the insurance market, the availability of insurance, or changes in applicable regulations. The accrued liabilities associated with these programs are based on our annual estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to us (“IBNR”). Significant judgment is required to estimate IBNR amounts, as parties have yet to assert such claims. Our financial performance may be materially adversely affected if our actual claims costs significantly exceed our estimates.
Our inability or failure to execute on comprehensive business continuity and disaster recovery plans following a major disaster or disruption could interfere with our business operations, which could materially adversely affect our financial performance.
All our core and critical applications are housed in an external tier 3 data center, which is a location with redundant and dual-powered servers, storage, network links and other information technology components. To mitigate business interruptions, we employ a disk-based data backup and replication infrastructure between our onsite and external data centers. We provide support for our restaurant operations, with the exception of FRC and the design and construction department, from our corporate headquarters in Calabasas, California, an area that is prone to and has been impacted by natural disasters such as earthquakes and wildfires. Corporate support for our bakery operations is also performed from this centralized location. If we are unable to execute our disaster recovery procedures in whole or in part, we may experience delays in recovery and losses of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support field operations and other breakdowns in normal operating procedures that could expose us to administrative and other legal claims, any of which could materially adversely affect our financial performance.
A closure of or material damage to one or both of our bakery facilities could impede our ability to supply bakery products to our own and our international licensees’ restaurants as well as to other bakery customers. Any of these events could materially adversely affect our financial performance.
Failure to appropriately address environmental and social matters could adversely affect our brand, business, results of operations and financial condition.
There has been an increasing focus from certain governmental and nongovernmental organizations, investors, customers, consumers, employees and others concerning environmental and social matters. Various regulatory authorities have imposed, and may continue to impose, mandatory substantive and/or disclosure requirements with respect to environmental and social matters. For example, we are subject to various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the State of California, and may be subject to further disclosure requirements to the extent adopted by jurisdictions in which we operate. These requirements may not always be uniform across jurisdictions and may have uncertain interpretation, which may result in increased complexity, and cost, for compliance. Any of the foregoing may require us to make additional investments in facilities and equipment, require us to incur additional costs for the collection of data and/or preparation of disclosures and associated internal controls, may impact the availability and cost of key products ingredients, and, in turn, may adversely impact our business, operating results, and financial condition. Environmental and social matters have also been the subject of increased scrutiny by regulators in different jurisdictions which may expose us to potential regulatory scrutiny or enforcement actions related to these activities.
Further, a variety of organizations measure the performance of companies on environmental and social topics, and the results of these assessments are widely publicized. In addition, many institutional investors have publicly emphasized the importance of environmental and social measures to their investment decisions. Unfavorable ratings could lead to negative investor sentiment towards us or our industry, which could negatively impact our share price as well as our access to and cost of capital. Simultaneously, public and investor sentiments as to the scale to which publicly traded companies should prioritize and focus attention and resources towards environmental and social matters vary widely, with a growing trend opposing such matters. Recently, companies have been publicly criticized and, in extreme circumstances, have been boycotted for their environmental and social policies. Further, there is growing regulatory risk from recent legislation and executive actions prohibiting certain initiatives in this space.
Our actions and/or inactions with respect to environmental and social matters could negatively impact our reputation, which could adversely impact our ability to attract and retain customers, employees or business partners. Both advocates and opponents to certain environmental and social matters are increasingly resorting to a range of activism, including media campaigns and litigation, to
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advance their perspectives. To the extent we are subject to such activism, we may experience reduced sales, increased costs or other adverse impacts to our business.
We have engaged, and expect to continue to engage, in certain voluntary corporate social responsibility initiatives and related reporting. However, such initiatives may be costly and may not have the desired effect. For example, execution of these strategies and achievement of our sustainability goals is subject to risks and uncertainties, many of which are outside of our control. As a result, there is no assurance that we will be able to successfully execute our strategies and achieve our sustainability-related goals, which could damage our reputation and consumer and other stakeholder relationships. Additionally, any perception, whether or not valid, that we have failed to achieve, or to act responsibly with respect to, such matters or to effectively respond to new or additional legal or regulatory requirements regarding greenhouse gas emissions, sustainability or social matters could result in adverse publicity or potential regulatory or investor engagement or litigation and adversely affect our business and reputation. Additionally, many of our business partners and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
Risks Related to Information Technology and Cybersecurity
Information technology system failures or breaches of our network security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial performance.
We rely heavily on our in-restaurant and enterprise-wide computer systems and network infrastructure across our operations (“Cyber Environment”), which are vulnerable to various risks. Our dependence on our Cyber Environment continues to grow as our technology systems have expanded to include online ordering, contactless payments, our Cheesecake Rewards ® program, systems supporting a remote and hybrid workforce and the like. Remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks. (See the risk factor titled “If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we may experience data loss, increased costs, operational disruption or other harm, any of which could materially adversely affect our financial performance.”) Additionally, we have, to a limited extent, incorporated artificial intelligence (“AI”) solutions into our business, and may expand our use of traditional and generative AI solutions in the future. In addition to risks generally applicable to the use of any information technology, AI solutions may be susceptible to a variety of additional risks, which include, without limitation, AI’s use and reliance on large datasets that could be the subject of breaches or misuse, potential liability associated with AI decision making and bias in training data, potential liability for failing to comply with rapidly evolving laws regulating AI, as well as ethical concerns relating to AI and machine learning.
Our Cyber Environment, and the information processed therein, including confidential information and personal information, face numerous and evolving cybersecurity risks that threaten their confidentiality, integrity and availability, including from Cybersecurity Incidents. The efficient management of our operations depends upon our ability to protect our Cyber Environment againstdamage from theft, casualties such as fire, power loss, telecommunications failure or other catastrophic events, as well as from Cybersecurity Incidents. We employ both internal resources and external consultants to conduct auditing and testing for weaknesses in our Cyber Environment, intended to help us reduce the likelihood of any Cybersecurity Incident, and have developed a multi-discipline Cybersecurity Incident response plan designed to help ensure that our executives are accurately informed and manage, with the help of content experts, the discovery, investigation and auditing of, and recovery from any Cybersecurity Incidents that we become aware of. Despite these efforts, we can provide no assurance that these measures will successfully prevent all Cybersecurity Incidents or mitigate losses resulting from a Cybersecurity Incident. Cyberattacks are accelerating on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools, including AI, that circumvent security controls, evade detection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our Cyber Environment, confidential information or business.
We and our third-party vendors have experienced Cybersecurity Incidents and we expect such attacks and incidents to continue in varying degrees. We cannot provide assurances that future Cybersecurity Incidents will not occur or that they will not materially adversely affect our business and financial performance.
Our international licensees have access to certain elements of our intellectual property within their Cyber Environment and may not have developed adequate processes to secure their Cyber Environments against a Cybersecurity Incident and may not
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maintain robust discovery, investigation, auditing or recovery protocols, or have the ability to promptly and effectively respond to a Cybersecurity Incident.
Any Cybersecurity Incident or adverse impact to the availability, integrity or confidentiality of our Cyber Environment (or information residing therein, including confidential information and personal information) could result in legal claims or proceedings (such as class actions and securities litigation), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers (which may become more likely due to new data breach notification laws including the new cybersecurity incident disclosure rules promulgated by the SEC), and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially adversely affect our business, operating results, and financial condition. Additionally, we are required to disclose material Cybersecurity Incidents pursuant to disclosure rules promulgated by the SEC. Any public disclosure relating to a material Cybersecurity Incident could harm our reputation, result in litigation and adversely affect our business, results of operations and financial condition. Finally, we cannot guarantee that any costs and liabilities incurred in relation to a Cybersecurity Incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements or our inability to maintain a secure environment for customers’ and staff members’ personal data could result in legal liability, financial penalties, reputational harm and loss of customers, which could materially adversely affect our financial performance.
We and certain of our third-party vendors receive and maintain certain personal information about our customers, staff members, business partners and others. For example, we are required to collect and maintain certain personal information in connection with our employment practices, including the administration of our benefit plans, and we collect information for a variety of other reasons, including, in connection with our Cheesecake Rewards ® program. Our collection, storage, handling, use, disclosure, processing and security of personal information is regulated by complex and continually evolving (and at times conflicting) U.S. (federal, state and local) and foreign laws, regulations, and industry standards. Many of these laws, regulations and standards are subject to change and uncertain interpretation and could result in claims, investigations or enforcement actions, changes to our business practices, penalties, increased cost of operations, or otherwise harm our business.
For instance, the California Consumer Privacy Act (“CCPA”) created individual privacy rights for California residents and increased the privacy related obligations of covered businesses handling personal information about California residents. Similar laws have been passed and taken effect in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States and creating a patchwork of overlapping but different state laws. Compliance with laws relating to privacy, security or the processing of personal information involve significant costs, increase our potential liability (including in the event we experience an unauthorized disclosure of or access to personal information), subject us to increased regulatory scrutiny and could result in us making changes to our data processing practices. Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection and privacy laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. If we are found to have breached privacy, security or consumer protection laws, regulations or standards, we may be subject to enforcement actions that require us to change our business practices in a manner which could negatively impact our revenue, as well as expose ourselves to litigation (including class action litigation), fines, civil and/or criminalpenalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation, brand and business in a manner that harms our financial position.
Further, we are subject to laws, regulations and standards covering marketing, advertising and other activities conducted by telephone, email, mobile devices and the Internet, such as the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“the CAN-SPAM Act”), the Telephone Consumer Protection Act (the “TCPA”) and similar state consumer protection and communication privacy laws, such as California’s Invasion of Privacy Act (“CIPA”). Numerous class-action suits under federal and state laws have been filed in recent years against companies who conduct telemarketing and/or SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs. There has also been a noticeable uptick in class actions wherein plaintiffs have utilized a variety of laws, including state wiretapping laws such as CIPA, in relation to companies’ use of tracking technologies, such as cookies and pixels. Actual or perceived failures to comply with requirements relating to marketing, advertising, electronic communications and the Internet, could subject us to legal proceedings, which could expose us to adverse publicity, substantial monetary damages and legal defense costs, injunctive relief and fines or penalties.
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If a Cybersecurity Incident were to occur involving loss of or unauthorized access to or dissemination of personal information, we may become liable under applicable law for damages (including statutory damages) and incur penalties and other costs to remedy such an incident. Depending on the facts and circumstances of such an incident, these damages, penalties and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits. Such an event also could harm our reputation and result in litigationagainst us. Any of these results could materially adversely affect our financial performance. (See the risk factor titled “Information technology system failures or breaches of our network security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial performance”).
We are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), a security standard applicable to companies that collect, store or transmit certain data regarding credit and debit cards, holders and transactions. These standards require certain levels of IT systems security and procedures to protect our customers’ credit/debit card and other personal information. We also rely on vendors to handle PCI DSS matters and to help with PCI DSS compliance. Compliance with PCI-DSS and implementing related procedures, technology and information security measures requires significant resources and ongoing attention. Despite our compliance efforts, we may become subject to claims that we have violated the PCI DSS based on past, present, and future business practices. Our actual or perceived failure to comply with the PCI DSS can subject us to fines, termination of banking relationships, and increased transaction fees. In addition, there is no guarantee that PCI DSS compliance will prevent illegal or improper use of our payment systems or the theft, loss or misuse of payment card data or transaction information.
In addition, we utilize a third-party security operations center (“SOC”) provider to monitor and analyze internal network traffic for potential malicious content. However, we can provide no assurance that our security measures will be successful in the event of an attempted or actual Cybersecurity Incident. Any material interruptions or failures in our payment-related systems could have a material adverse effect on our business, results of operations and financial condition. If there are amendments to PCI DSS, the cost of compliance could increase, and we may sufferloss of critical data and interruptions or delays in our operations as a result. Further, we may become subject to litigation or the imposition of regulatory penalties, which could result in negative publicity and significantly harm our reputation, either of which could materially adversely affect our financial performance.
Risks Related to Our Indebtedness
Any failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm our financial condition.
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the credit facility provided thereunder, the “Revolver Facility”).
Under the Revolver Facility, we are subject to the following financial covenants as of the last day of each fiscal quarter: (i) a maximum ratio of net adjusted debt to EBITDAR (the “Net Adjusted Leverage Ratio”) of 4.25 and (ii) a minimum ratio of EBITDAR to interest and rent expense of 1.90. The Loan Agreement also contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgements, cross defaults to material indebtedness and events constituting a change of control. The occurrence of an event of default could result in the termination of commitments under the Loan Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding letters of credit.
Any failure to maintain financial covenants under the Loan Agreement or to have sufficient liquidity to either repay or refinance the then outstanding balance at expiration of the Loan Agreement, or upon any violation of the covenants, could materially adversely affect our financial performance. In addition, the Loan Agreement contains, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further discussion of our debt.)
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In addition, our increased indebtedness and our resulting higher debt-to-equity ratio, as compared to that which has existed on a historical basis, could limit our ability to obtain additional financing in the future and have other material consequences, including: increasing our vulnerability to, and limiting our flexibility in planning for, changing business and market conditions, making us more vulnerable to adverse economic and industry conditions; limiting our ability to use proceeds from any offering or divestiture transaction for purposes other than the repayment of debt; and creating competitive disadvantages compared to other companies with less indebtedness.
The indenture governing our outstanding Notes will not restrict us from incurring additional indebtedness, and the Notes and the incurrence of any additional indebtedness could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the Notes.
As of December 30, 2025, we had approximately $644.0 million in principal amount of consolidated indebtedness, including $69.0 million aggregate principal amount of convertible senior notes due 2026 (“2026 Notes”) and $575.0 million aggregate principal amount of convertible senior notes due 2030 (“2030 Notes”). The 2026 Notes and 2030 Notes are collectively referred to as the “Notes.” The indentures governing the Notes do not contain any meaningful restrictive covenants and do not prohibit us or our subsidiaries from incurring additional indebtedness in the future. Accordingly, we may incur a significant amount of additional indebtedness to meet future financing needs. The incurrence of indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
increasing our vulnerability to adverse economic and industry conditions;
limiting our ability to obtain additional financing;
requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;
limiting our flexibility to plan for, or react to, changes in our business;
diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Notes; and
placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future. If we fail to comply with covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.
The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the Notes.
We have the right to elect to settle conversion of the Notes either entirely in cash or in combination of cash and shares of common stock. Our election to convert Notes into common stock may further dilute the economic and voting rights of our existing stockholders and/or reduce the market price of our common stock. In addition, the market’s expectation that conversions may occur could depress the trading price of our common stock even in the absence of actual conversions. Moreover, the expectation of conversions could encourage the short selling of our common stock, which could place further downward pressure on the trading price of our common stock.
We may also conduct future offerings of our common stock, preferred stock or other securities that are convertible into or exercisable for our common stock to finance our operations or fund acquisitions, or for other purposes. In addition, we have reserved approximately 6.3 million shares of common stock for grant under our The Cheesecake Factory Incorporated Stock Incentive Plan as of December 30, 2025. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock may significantly decline. In addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders.
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Hedging activity by investors in the Notes could depress the trading price of our common stock.
We expect that many investors in the Notes, including potential purchasers of the Notes, will seek to employ a convertible note arbitrage strategy. Under this strategy, investors typically short sell a certain number of shares of our common stock and adjust their short position over time while they continue to hold the Notes. Investors may also implement this type of strategy by entering into swaps on our common stock in lieu of, or in addition to, short selling shares of our common stock. This market activity, or the market’s perception that it will occur, could depress the trading price of our common stock.
Provisions in the indenture governing the Notes could delay or prevent an otherwise beneficial takeover of us.
Certain provisions in the Notes and the indenture governing the Notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a “fundamental change” (which is defined in the indenture governing the Notes to include certain change-of-control events and the delisting of our common stock), then noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes a “make-whole fundamental change” (which is defined in the indenture governing the Notes to include, among other events, fundamental changes and certain additional business combination transactions), then we may be required to temporarily increase the conversion rate for the Notes. In either case, and in other cases, our obligations under the Notes and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of our common stock may view as favorable.
We may be unable to raise the funds necessary to repurchase the Notes for cash following a fundamental change, or to pay the cash amounts due upon conversion, and our other indebtedness limits our ability to repurchase the Notes or pay cash upon their conversion .
Noteholders of our outstanding Notes may, subject to limited exceptions, require us to repurchase their Notes following a “fundamental change” (which is defined in the indenture governing the Notes) at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. Additionally, our 2026 Notes mature on June 15, 2026, unless earlier repurchased, redeemed or converted. Beginning on February 17, 2026, the noteholders may convert their 2026 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.
All conversions of the Notes will be settled partially or entirely in cash. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Notes or pay the cash amounts due upon conversion. In addition, applicable law, regulatory authorities and the Loan Agreement or any future indebtedness may restrict our ability to repurchase the Notes or pay the cash amounts due upon conversion. For example, the Loan Agreement restricts us from paying cash upon conversion of the Notes in an amount that exceeds the sum of (i) the principal amount being converted and (ii) any payments received by us or any of our subsidiaries pursuant to the exercise, settlement or termination of any related permitted bond hedge transaction.
Furthermore, the Loan Agreement places several restrictions on our ability to repurchase the Notes upon a fundamental change. Under the Loan Agreement we are permitted to repurchase Notes upon a fundamental change only if (i) no default of event of default exists and (ii) our pro forma net adjusted leverage ratio (as measured in accordance with the Loan Agreement) does not exceed 4.25 to 1.00 and our EBITDAR to interest and rental expense ratio (as measured in accordance with the Loan Agreement) is at least 1.90 to 1.00.
Our failure to repurchase the Notes or pay the cash amounts due upon conversion when required will constitute a default under the indenture governing the Notes. A default under the indenture governing the Notes or the fundamental change itself could also lead to a default under the Loan Agreement and agreements governing our other or future indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under such indebtedness and the Notes.
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Risks Related to Owning Our Stock
The market price of our common stock is subject to volatility.
During fiscal 2025, the price of our common stock fluctuated between $42.69 and $69.70 per share. The market price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes in financial estimates by research analysts with respect to us or others in the restaurant industry, and announcements of significant transactions (including mergers or acquisitions, divestitures, joint ventures or other strategic initiatives) by us or others in the restaurant industry. In addition, the equity markets have experienced price and volume fluctuations that affect the stock price of companies in ways that have been unrelated to an individual company’s operating performance. The price of our common stock may continue to be volatile, based on factors specific to our company and industry, as well as factors related to the equity markets overall.
Our stock price could be adversely affected if our performance falls short of our financial guidance and/or market expectations.
Our failure to achieve performance consistent with any financial guidance we provide and/or market expectations could adversely affect the price of our stock. Factors such as comparable restaurant sales that are below our target, slowing growth of our concepts domestically, failure to execute other growth opportunities, a decline in growth of our international business, any event that causes our operating costs to substantially increase, including, without limitation, any of the events described elsewhere in these Risk Factors, our inability to obtain additional capital at market terms, or our failure to repurchase stock as expected or pay or increase dividends over time, could cause our performance to fall short of our financial guidance and/or market expectations.
Our stock price could be adversely affected if we are unable to pay or increase dividends.
There are no assurances that our Board will continue to declare quarterly dividends. Our ability to pay or to increase dividends on our common stock will depend on our ability to do so under the Loan Agreement or any future credit agreement as well as our ability to generate sufficient cash flows from operations and capacity to borrow funds, which may be subject to economic, financial, competitive and other factors that are beyond our control. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.) Our failure to pay a dividend or to increase it over time may negatively impact investor confidence in us and may negatively impact our stock price.
We cannot guarantee that our share repurchase program will be utilized to the full value approved or that it will enhance long-term stockholder value.
As of December 30, 2025, our Board of Directors has authorized a share repurchase program of up to 61.0 million shares, of which approximately 1.1 million shares remained available for repurchase. The share repurchase program does not have an expiration date, does not require the Company to purchase a specific number of shares and may be modified, suspended or terminated at any time, which may result in a decrease in the trading price of our common stock. The timing and total amount of share repurchases will depend upon market conditions and other factors and may be made from time to time in open market purchases, privately negotiated transactions, accelerated share repurchase programs, issuer self-tender offers or otherwise. Future decisions to repurchase shares are at the discretion of the Board of Directors and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the Fox Restaurant Concepts LLC acquisition agreement (the “FRC Acquisition”), our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and covenants under the Loan Agreement that limit share repurchases based on a defined ratio. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.) In addition, the Inflation Reduction Act of 2022 introduced a 1% excise tax on share repurchases, which increases the costs associated with repurchasing shares of our common stock. Even if our share repurchase program is fully implemented, it may not enhance long-term stockholder value or may not prove to be the best use of our cash. Share repurchases could have an impact on the trading price of our common stock, increase the volatility of the price of our common stock or reduce our available cash balance such that we will be required to seek financing to support our operations.
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Our stock price could be adversely affected by future sales or other dilution of our equity.
Subject to Nasdaq Listing Rules and certain restrictions on the issuance of convertible indebtedness under the Loan Agreement, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. Our Board of Directors is authorized to issue additional shares of common stock and additional classes or series of preferred stock without any action on the part of the stockholders. The Board of Directors also has the discretion, without stockholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation or winding up of our business and other terms. If we issue preferred shares that have a preference over our common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute the voting power of our common stock, the rights of our common stockholders or the market price of our common stock could be materially adversely affected.
General Risk Factors
Changes in tax laws and resulting regulations could result in changes to our tax provisions and expose us to additional tax liabilities that could materially adversely affect our financial performance.
We are subject to income and other taxes in the United States and foreign jurisdictions. Changes in applicable U.S. or foreign tax laws and regulations, such as the 2017 enactment of Federal legislation commonly referred to as the Tax Cuts and Jobs Act, The Coronavirus Aid, Relief, and Economic Security Act of 2020, the Inflation Reduction Act of 2022, and H.R. 1, commonly referred to as H.R.1, passed the 119 th Congress and was signed into law on July 4, 2025 (collectively, the “Tax Acts”), or their interpretation and application, including the possibility of retroactive effect and changes to state tax laws that may occur in response to the Tax Acts, could affect our tax expense and profitability. In addition, we may be subject to tax audit and related litigation and the final determination of any tax audits or related litigation could be materially different from our historical income tax provisions and accruals. Changes in our tax provision or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation, could materially adversely affect our financial performance.
The U.S. Treasury Department and Internal Revenue Service have proposed the establishment of the Service Industry Tip Compliance Agreement (“SITCA”) program, which would replace the Tip Reporting Alternative Commitment (“TRAC”) that many of our locations currently use. By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only FICA tax assessments for unreported tips. If we were to not qualify for the SITCA program, as currently proposed, it could cause us to lose tax credits which could materially adversely affect our financial performance.
Our failure to establish, maintain and apply adequate internal control over our financial reporting and comply with changes in financial accounting standards or interpretations of existing standards could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could materially adversely affect our financial performance.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002. These provisions provide for the identification of material weaknesses in internal control over financial reporting - a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. There can be no assurance that we will be able to timely remediate material weakness in internal controls (if any) or maintain all of the controls necessary to remain in compliance. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could materially adversely affect our financial performance. Additionally, changes in accounting standards or new accounting pronouncements and interpretations could materially adversely affect our previously reported or future financial results, which could materially adversely affect our financial performance.
Our business and stock price could be adversely affected by the actions of activist investors.
Publicly-traded companies have increasingly become subject to activist investor campaigns. Responding to actions of an activist investor may be a significant distraction for our management and staff and could require us to expend significant time and resources, including legal fees and potential proxy solicitation expenses. Any of these conditions could materially adversely affect our financial performance.
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MD&A (Item 7)
7,639 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), which contains forward-looking statements, should be read in conjunction with our audited consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report. The inclusion of supplementary analytical and related information herein may require us to make estimates and assumptions to enable us to fairly present, in all material respects, our analysis of trends and expectations with respect to our results of operations and financial position.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal years 2025, 2024 and 2023 each consisted of 52 weeks. Fiscal year 2026 will consist of 52 weeks. The following MD&A includes a discussion comparing our results in fiscal 2025 to fiscal 2024. For a discussion comparing our results from fiscal 2024 to fiscal 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 24, 2025.
Geopolitical and Other Macroeconomic Impacts to our Operating Environment
In recent years, our operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation. Our commodity and wage inflationary environment began returning to more historical levels in fiscal 2024.
The impact of ongoing geopolitical and macroeconomic events, including evolving government policies and global trade and tariff dynamics, could lead to further wage inflation, product and services cost inflation, disruptions in the supply chain, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings. Adverse weather conditions and natural disasters may further exacerbate a number of these factors. Any of these factors may have an adverse impact on our business and materially adversely affect our financial performance.
General
The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. As of February 23, 2026, we owned and operated 368 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (216 locations), North Italia ® (48 locations), Flower Child ® (43 locations) and additional brands within our FRC portfolio (55 locations). Internationally, 35 The Cheesecake Factory ® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers.
Overview
Our strategy is driven by our commitment to deliver exceptional food and hospitality, and is centered primarily on menu innovation, service and operational execution to differentiate our concepts and drive competitively strong performance that is sustainable over the long-term. Financially, we are focused on prudently managing expenses at our restaurants, bakery facilities and corporate support center, while leveraging our scale, purchasing power and operational discipline to support financial performance.
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Investing in new Company-owned restaurant development is our top long-term capital allocation priority, with a focus on opening our concepts in premier locations within both new and existing markets. We plan to continue expanding The Cheesecake Factory, North Italia and Flower Child concepts. In addition, our FRC subsidiary serves as an incubator, innovating new food, dining and hospitality experiences to create differentiated, high-quality concepts.
Our revenue growth is primarily driven by new restaurant openings and increases in comparable restaurant sales.
For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check while maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional dining experience and (3) continuing to provide our customers with convenient options for off-premise dining. We are continuing our efforts on a number of initiatives, including menu innovation, increasing customer throughput in our restaurants, leveraging our gift card program, partnering with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities and improving the pick-up experience, augmenting our marketing programs, including our Cheesecake Rewards ® program, enhancing our training programs and leveraging insights from our customer satisfaction measurement platform.
Average check variations are driven by menu price increases and/or changes in menu mix. We generally update The Cheesecake Factory menus twice a year, and our philosophy is to use price increases to help offset key operating cost increases in a manner that supports both our margin and customer traffic objectives. Prior to fiscal 2022, we targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies. In the last three fiscal years, we implemented price increases above our historical levels, to help offset significant inflationary cost pressures. We will continue to take the cost and inflationary environment into consideration when implementing future pricing decisions. In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and cost.
Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses. Our objective is to drive margin expansion over time by leveraging incremental sales to increase restaurant-level margins at The Cheesecake Factory concept, leveraging our bakery operations, international and consumer packaged goods royalty revenue streams and G&A expense, and optimizing our restaurant portfolio.
We plan to employ a balanced capital allocation strategy, comprised of investing in new restaurants that are expected to meet our targeted returns, managing our aggregate debt levels and returning capital to shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth. Future decisions to pay, increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of our Loan Agreement and applicable law.
Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7% in aggregate across concepts and comparable sales growth) combined with margin expansion, planned debt repayments and an anticipated capital return program will support our long-term financial objective of 10% to 15% total return to shareholders, on average. We define our total return as earnings per share growth plus our dividend yield. (See Item 1A — Risk Factors — “Our stock price could be adversely affected if our performance falls short of our financial guidance and/or market expectations.”)
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Results of Operations
The following table presents, for the periods indicated, information from our consolidated statements of income expressed as percentages of revenues.
Revenues
Costs and expenses:
Food and beverage costs
Labor expenses
Other operating costs and expenses
General and administrative expenses
Depreciation and amortization expenses
Impairment of assets and lease termination expenses
Acquisition-related contingent consideration, compensation and amortization expenses
Preopening costs
Total costs and expenses
Income from operations
Interest expense, net
Loss on extinguishment of debt
Other income, net
Income before income taxes
Income tax provision
Net income
Fiscal 2025 Compared to Fiscal 2024
Revenues
Revenues increased 4.7% to $3,751.8 million for fiscal 2025 compared to $3,581.7 million for fiscal 2024, primarily due to additional revenue related to new restaurant openings. As part of our annual assessment of gift card breakage during fiscal 2025, we had a change in historical redemption pattern related to gift cards and aligned the recognition of gift card breakage to the updated estimated redemption pattern. As a result, in fiscal 2025, we recognized $17.3 million of additional gift card breakage.
The Cheesecake Factory sales increased 1.0% to $2,688.8 million for fiscal 2025 compared to $2,661.6 million for fiscal 2024. Excluding the impact of the additional gift card breakage recognized in fiscal 2025 (as discussed above), The Cheesecake Factory average sales per restaurant operating week increased 0.3% to $238,146 in fiscal 2025 from $237,349 in fiscal 2024. Total operating weeks at The Cheesecake Factory restaurants remained relatively flat with 11,218 in fiscal 2025 and 11,214 in the comparable prior year period. The Cheesecake Factory comparable sales increased by 0.1%, or $2.2 million, from fiscal 2024. The increase from fiscal 2024 was primarily driven by an increase in average check of 2.4% (based on an increase of 4.3% in menu pricing, partially offset by a 1.9% negative change from menu mix), partially offset by decreased customer traffic of 2.3%. We implemented menu price increases of approximately 2.4% and 1.5% in the first and third quarters of fiscal 2025, respectively. We are in the process of implementing an approximate 1.5% menu price increase in the first quarter of fiscal 2026. Sales through the off-premise channel comprised approximately 21% of our restaurant sales during both fiscal 2025 and fiscal 2024. We account for each off-premise order as one customer for traffic measurement purposes. Therefore, average check is generally higher for off-premise orders as most of these orders are for more than one customer.
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North Italia sales increased 15.5% to $345.9 million for fiscal 2025 compared to $299.6 million for fiscal 2024. North Italia average sales per restaurant operating week decreased 0.9% to $146,877 in fiscal 2025 from $148,231 in fiscal 2024. Average sales per restaurant operating week were impacted by the acceleration of new restaurant openings that have not matured. Total operating weeks at North Italia increased 16.5% to 2,355 in fiscal 2025 compared to 2,021 in the prior year. North Italia comparable sales decreased approximately 2% from fiscal 2024. The decrease from fiscal 2024 was primarily driven by decreased customer traffic of 5%, partially offset by an increase in average check of 3% (based on an increase of 4% in menu pricing, partially offset by a 1% negative impact from mix). We implemented menu price increases of approximately 2.0% and 1.5% in the second and fourth quarters of fiscal 2025, respectively.
Flower Child sales increased 27.8% to $185.3 million for fiscal 2025 compared to $145.0 million for fiscal 2024. Flower Child sales per restaurant operating week increased 4.0% to $87,684 in fiscal 2025 from $84,351 in fiscal 2024. Total operating weeks at Flower Child increased 22.9% to 2,113 in fiscal 2025 compared to 1,719 in the prior year. Flower Child comparable sales increased approximately 5% from fiscal 2024. The increase from fiscal 2024 includes an increase of 3% in menu pricing.
Other FRC sales increased 18.4% to $355.1 million for fiscal 2025 compared to $300.0 million for fiscal 2024. Other FRC average sales per restaurant operating week increased 0.2% to $132,733 in fiscal 2025 from $132,495 in fiscal 2024. Average sales per restaurant operating week are impacted by new restaurant openings as well as the concept mix and a decrease in comparable sales. Total operating weeks at Other FRC increased 18.2% to 2,675 in fiscal 2025 compared to 2,264 in the prior year.
Restaurants become eligible to enter the comparable sales base in their 19 th month of operation. At December 30, 2025, there were seven The Cheesecake Factory restaurants, nine North Italia restaurants and 11 Flower Child locations not yet in the comparable sales bases. International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from comparable sales calculations.
Food and Beverage Costs
Food and beverage costs consist of raw materials and ingredients used in the food and beverage products sold in our restaurants and to our third-party bakery customers. As a percentage of revenues, food and beverage costs were 21.7% for fiscal 2025 compared to 22.5% for fiscal 2024, due primarily to favorable commodity inflation across most categories (0.5%) and a shift in sales mix (0.2%).
The Cheesecake Factory restaurant menus are among the most diversified in the foodservice industry and, accordingly, are not overly dependent on a few select commodities. Changes in costs for one commodity sometimes can be offset by cost changes in other commodity categories. The principal commodity categories for our restaurants include general grocery items, dairy, produce, seafood, poultry, meat and bread. (See the discussion of our contracting activities in Part II, Item 7A — “Quantitative and Qualitative Disclosures About Market Risk.”)
For new restaurants, food and beverage costs are typically higher for a period of time after opening until our management team becomes more accustomed to predicting and managing the sales volumes at these restaurants.
Labor Expenses
As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery production labor, including associated fringe benefits, were 35.0% and 35.3% in fiscal 2025 and fiscal 2024, respectively. This decrease was primarily due to menu price increases in excess of wage rate inflation and improved staffing levels (0.5%) and the benefit from gift card breakage revenue (0.2%), partially offset by higher group medical cost due to larger claim activity (0.3%).
For new restaurants, labor expenses are typically higher for a period of time after opening while our management team becomes more accustomed to predicting and managing the sales volumes at the new restaurants.
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Other Operating Costs and Expenses
Other operating costs and expenses consist of all other restaurant-level operating costs, the major components of which are occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), dining room and to-go supplies, repairs and maintenance, janitorial expenses, credit card processing fees, marketing including delivery commissions, incentive compensation, and bakery production overhead. As a percentage of revenues, other operating costs and expenses were 27.0% and 26.7% in fiscal 2025 and fiscal 2024, respectively. This variance was primarily driven by higher facility-related costs (0.2%).
G&A Expenses
G&A expenses consist of the restaurant management recruiting and training program, restaurant field supervision, corporate support and bakery administrative organizations, as well as gift card commissions to third-party distributors. As a percentage of revenues, G&A expenses were 6.5% and 6.4% for fiscal 2025 and fiscal 2024, respectively. This variance was primarily driven by a write-down of gift card inventory in fiscal 2025 (0.2%).
Impairment of Assets and Lease Termination Expenses
During fiscal 2025, we recorded $23.0 million of expense primarily related to the impairment of long-lived assets for one North Italia, one Grand Lux Cafe and four Other FRC locations (one previously partially impaired) and lease termination expense, net related to two Grand Lux Cafes (one that closed in fiscal 2023 and one that closed in early 2026) and one Other FRC (that closed in early 2026).
During fiscal 2024, we recorded impairment of assets and lease terminations expense of $13.6 million primarily related to impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations (one previously partially impaired), partially offset by lease termination income, net for four The Cheesecake Factory restaurants (including two relocations), one Grand Lux Cafe location, one Flower Child location, one Social Monk location and one Other FRC location (that closed in early fiscal 2025).
See Notes 1 and 6 of Notes to Consolidated Financial Statements in Part 1V, Item 15 of this report for further discussion of our long-lived and intangible assets.
Acquisition-Related Contingent Consideration, Compensation and Amortization Expense
We recorded $14.4 million and $2.4 million of expense during fiscal 2025 and 2024, respectively, of acquisition-related contingent consideration, compensation and amortization. In fiscal 2025, we recorded a $10.5 million increase in the fair value of the contingent consideration and compensation liability primarily stemming from updating the probability of achievement due to passage of time as well as recent performance and $3.9 million of amortization. In fiscal 2024, we recorded $4.3 million of amortization, partially offset by a $1.9 million decrease in the fair value of the contingent consideration and compensation liability primarily stemming from a change in the volatility factors, as well as a decrease in estimated fiscal 2025 revenues and future revenues utilized in the calculation.
Preopening Costs
Preopening costs were $33.1 million for fiscal 2025 compared to $27.5 million for fiscal 2024. We opened 25 restaurants in fiscal 2025 comprised of four The Cheesecake Factory, six North Italia, nine Other FRC, and six Flower Child locations compared to 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory (including two relocations), six North Italia, eight Other FRC, and six Flower Child locations. Restaurant-level preopening costs include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members. Also included in preopening costs are expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs. Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant.
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Loss on Extinguishment of Debt
In fiscal 2025, we recorded a $15.9 million loss on early debt extinguishment. On February 28, 2025, we repurchased approximately $276.0 million aggregate principal amount of the 2026 Notes (as defined below) for aggregate consideration of $289.8 million, which included a premium of $13.8 million. The repurchase was accounted for as a debt extinguishment. In addition, we recorded $2.1 million of unamortized issuance costs. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion on our debt.)
Income Tax Provision
In fiscal 2025, we had an income tax provision of $14.5 million, an effective tax rate of 8.9%, compared to an income tax provision of $14.3 million, an effective tax rate of 8.3%, in fiscal 2024. The increase was primarily due to a change to our reserve for uncertain tax positions (2.0%), non-deductible costs in fiscal 2025 associated with the repurchase of our 2026 Notes (1.6%) and a larger amount of non-deductible executive compensation (0.6%). These factors were offset by leverage on lower income before taxes, predominantly related to employment credits (0.9%), a tax windfall in fiscal 2025 as compared to a tax shortfall in fiscal 2024 related to equity compensation (2.2%) and lower state taxes in relation to income before taxes (0.3%). (See Note 17 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.)
Non-GAAP Measures
Adjusted net income, adjusted diluted net income per share and adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) are supplemental measures of our performance that are not required by or presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly-titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. We calculate these non-GAAP measures by eliminating from net income, diluted net income per common share and EBITDA the impact of items we do not consider indicative of our ongoing operations. Additionally, EBITDA and adjusted EBITDA exclude the impact of certain non-cash transactions. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to the adjusted items.
Following is a reconciliation from net income and diluted net income per common share to the corresponding adjusted measures (in thousands, except per share data):
Net income
Impairment of assets and lease termination expenses
Acquisition-related contingent consideration, compensation and amortization expenses
Gift card adjustment, net (1)
Loss on extinguishment of debt (2)
Uncertain tax positions (3)
Tax effect of adjustments (4)
Adjusted net income
Diluted net income per common share
Impairment of assets and lease termination expenses
Acquisition-related contingent consideration, compensation and amortization expenses
Gift card adjustment, net (1)
Loss on extinguishment of debt (2)
Uncertain tax positions (3)
Tax effect of adjustments (4)
Adjusted diluted net income per common share (5)
Represents gift card breakage revenue of $17.3 million as a result of a change in historical redemption patterns, partially offset by a non-recurring $7.9 million write-down of gift card inventory.
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See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion on our debt.
Represents a reserve for uncertain tax position related to tenant improvement allowances and Section 199 deductions. Uncertain tax positions taken in a tax return are recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by tax authorities based on technical merits, taking into account available administrative remedies and litigation.
Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate.
Adjusted net income per share may not add due to rounding.
Following is a reconciliation from net income to EBITDA and adjusted EBITDA measures (in thousands):
Net income
Depreciation and amortization expenses
Interest expense, net
Income tax provision
EBITDA
Impairment of assets and lease termination expenses
Acquisition-related contingent consideration, compensation and amortization expenses
Gift card adjustment, net
Loss on extinguishment of debt
Stock-based compensation (1)
Adjusted EBITDA
See Note 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of stock-based compensation.
Liquidity and Capital Resources
Our corporate financial objectives are to maintain a sufficiently strong and conservative balance sheet to support our operating initiatives and unit growth while maintaining financial flexibility to provide the financial resources necessary to protect and enhance the competitiveness of our restaurant and bakery brands and to provide a prudent level of financial capacity to manage the risks and uncertainties of conducting our business operations under various economic and industry cycles. Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures.
Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of our restaurant locations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure. We are not limited to the use of lease arrangements as our only method of opening new restaurants. However, we believe our operating lease arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner.
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During fiscal 2025, our cash and cash equivalents increased by $131.5 million to $215.7 million. The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions):
Fiscal Year
Cash provided by operating activities
Additions to property and equipment
Repayments on credit facility
Proceeds from long-term convertible debt
Repayment on long-term convertible debt, including premium on extinguishment
Issuance cost associated with long-term debt
Proceeds from exercise of stock options
Common stock dividends paid
Treasury stock purchases, inclusive of excise tax
Cash Provided by Operating Activities
Cash flows from operations increased by $33.0 million from fiscal 2024 primarily due to higher net income after excluding non-cash activity, timing of operating lease commencements and a decrease in inventory levels, partially offset by lower gift card liabilities, a decrease in prepaid expenses during fiscal 2024 due to a higher balance in fiscal 2023 related to the timing of January rent payments and higher income tax payments. Typically, our requirement for working capital has not been significant since our restaurant customers pay for their food and beverage purchases in cash or cash equivalents at the time of sale, and we are able to sell many of our restaurant inventory items before payment is due to the suppliers of such items.
Property and Equipment
Capital expenditures for new restaurants, including locations under development as of each fiscal year-end, were $70.5 million and $99.0 million for fiscal 2025 and 2024, respectively. Capital expenditures also included $63.2 million and $53.0 million for our existing restaurants and $12.5 million and $8.4 million for bakery and corporate capacity and infrastructure investments in fiscal 2025 and 2024, respectively.
We opened 25 restaurants in fiscal 2025 comprised of four The Cheesecake Factory, six North Italia, nine Other FRC and six Flower Child locations compared to 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory, six North Italia, eight Other FRC and six Flower Child locations. We expect to open as many as 26 new restaurants in fiscal 2026 across our portfolio of concepts, with approximately one third of the openings occurring in the first half of fiscal 2026. We anticipate approximately $210 million in capital expenditures to support this level of unit development, as well as required maintenance on our restaurants. This estimate includes new restaurant construction expenses, some of which may be classified as operating lease assets instead of additions to property and equipment in the statement of cash flows.
Credit Facility
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit. The Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $200 million in revolving loan commitments. Our obligations under the Revolver Facility are unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Revolver Facility. In the fourth quarter of fiscal 2023, we borrowed and then repaid $15.0 million on the Revolver Facility. In the fourth quarter of fiscal 2024, we repaid $20.0 million on the Revolver Facility. In the first quarter of fiscal 2025, we repaid $110.0 million on the Revolver Facility. As of December 30, 2025, we had net availability for borrowings of $366.5 million, based on no outstanding debt balance and $33.5 million in standby letters of credit under the Revolver Facility.
Under the Revolver Facility, we are subject to financial covenants, as well as to customary events of default that, if triggered, could result in acceleration of the maturity of the Revolver Facility. Subject to certain exceptions, the Revolver Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters. As of
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December 30, 2025, we were in compliance with all covenants in effect at that date. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)
2030 Convertible Senior Notes
On February 28, 2025, we issued $575.0 million in aggregate principal amount of convertible senior notes (“2030 Notes”), which will mature on March 15, 2030, unless earlier repurchased, redeemed or converted. The net proceeds from the sale of the 2030 Notes were approximately $558.5 million after deducting issuance costs of $16.5 million. As of December 30, 2025, the 2030 Notes had a balance of $561.3 million, net of unamortized issuance costs of $13.7 million. As of December 30, 2025, the conversion rate for the 2030 Notes was 14.1377 shares of common stock per $1,000 principal amount of the 2030 Notes, which represents a conversion price of approximately $70.73 per share of common stock. In connection with the cash dividend that was declared by our Board on February 12, 2026, on March 4, 2026, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the 2030 Notes in accordance with the terms. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)
2026 Convertible Senior Notes
On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes (“2026 Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted. The net proceeds from the sale of the 2026 Notes were approximately $334.9 million after deducting issuance costs related to the 2026 Notes. On February 28, 2025, we used part of the net proceeds from the issuance of the 2030 Notes to repurchase approximately $276.0 million aggregate principal amount of the 2026 Notes in a privately-negotiated transaction for aggregate consideration of $289.8 million, which included a premium of $13.8 million. As of December 30, 2025, the 2026 Notes had a gross principal balance of $69.0 million and a balance of $68.8 million, net of unamortized issuance costs of $0.2 million. At December 30, 2025, the conversion rate for the 2026 Notes was 14.1644 shares of common stock per $1,000 principal amount of the 2026 Notes, which represents a conversion price of approximately $70.61 per share of common stock. In connection with the cash dividend that was declared by our Board on February 12, 2026, on March 4, 2026, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the 2026 Notes in accordance with the terms. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)
Common Stock Dividends
Common stock dividends of $52.2 million and $53.0 million were paid in fiscal 2025 and 2024, respectively. As further discussed in Note 19 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report, in February 2026, our Board declared a quarterly dividend to be paid in March 2026. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Loan Agreement and applicable law, and other such factors that the Board considers relevant.
Share Repurchases
Under authorization by our Board to repurchase up to 61.0 million shares of our common stock, we have cumulatively repurchased 59.9 million shares at a total cost of $1,983.6 million, excluding excise tax through December 30, 2025. In the first quarter of fiscal 2025, we used approximately $130.0 million of the net proceeds from the 2030 Note issuance to repurchase approximately 2.4 million shares of our common stock. In total, we repurchased 2.9 million shares at a cost of $153.9 million, excluding excise tax, during fiscal 2025. We repurchased 0.5 million shares at a cost of $18.0 million, excluding excise tax, during fiscal 2024.
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Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the FRC acquisition, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and financial covenants under our credit facility that limit share repurchases based on a defined ratio. (See Notes 14 and 19 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods and increased authorized amount under our share repurchase program, respectively.)
Contractual Obligations and Commercial Commitments
The following table summarizes our undiscounted contractual obligations and commercial commitments as of December 30, 2025 (amounts in millions):
Payment Due by Period
Less than
More than
Total
1 Year
1 ‑ 3 Years
4 ‑ 5 Years
5 Years
Contractual obligations
Recorded contractual obligations:
Operating lease liabilities (1)
Debt
Uncertain tax positions (2)
Unrecorded contractual obligations:
Purchase obligations (3)
Real estate obligations (4)
Total
Other commercial commitments
Standby letters of credit
Includes $817.4 million related to options to extend lease terms that are reasonably certain of being exercised. (See Note 11 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of leases.)
Represents liability for uncertain tax positions. (See Note 17 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.)
Includes obligations for inventory purchases, equipment purchases, information technology and other miscellaneous commitments. Amounts exclude agreements that are cancelable without significant penalty.
Real estate obligations include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced. Amounts exclude agreements that are cancelable without significant penalty.
The FRC acquisition agreement also included a contingent consideration provision which is payable annually from 2022 through 2027 and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child. The liability for this contingent consideration provision was $24.6 million at December 30, 2025. See Note 2 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of the fair value measurement for this liability.
Cash Flow Outlook
We believe that our cash and cash equivalents, combined with expected cash flows provided by operations and available borrowings under the Revolver Facility, will provide us with adequate liquidity for the next 12 months and the foreseeable future.
As of December 30, 2025, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.
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Critical Accounting Estimates
Critical accounting policies are those we believe are most important to portraying our financial condition and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgment that is involved in preparing our consolidated financial statements.
Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized and are tested for impairment annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. First, we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include, but are not limited to, historical financial performance, wage, product and services inflation, competitive environment, macroeconomic and industry conditions, results of prior impairment tests and share price performance. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
The quantitative assessments require the use of estimates and assumptions regarding future cash flows and asset fair values. For the goodwill impairment test, the estimated fair value of the reporting units is determined using a blend of the income approach using a discounted cash flow analysis and the market capitalization approach. The fair value of the trade names and trademarks is estimated using the relief from royalty method. Key assumptions include projected revenue growth and operating expenses, discount rates, royalty rates and other factors that could affect fair value or otherwise indicate potential impairment. Estimates of revenue growth and operating expenses are based on internal projections and consider historical performance and forecasted growth, including assumptions related to the cost environment and macroeconomic and industry conditions. The discount rate is based on the estimated cost of capital that reflects the risk profile of the related business. These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches, are subjective, and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance. These fair value assessments could change materially if different estimates and assumptions were used.
We did not record any impairment charges related to indefinite-lived intangible assets in fiscal 2025, 2024 or 2023. (See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of impairment testing.)
Long-Lived Assets
We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, negative cash flow, significant underperformance relative to historical or projected future operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be disposed of significantly before the end of its previously estimated useful life and significant negative industry or economic trends.
Assessing whether impairment testing is warranted and, if so, determining the amount of expense require the use of estimates and assumptions regarding future cash flows and asset fair values. Key assumptions include projected revenue growth and operating expenses, as well as forecasting asset useful lives and selecting an appropriate discount rate. Estimates of revenue growth and operating expenses are based on internal projections and consider the restaurant’s historical performance, the local market economics and the business environment. The discount rate is based on the yield curve rate for U.S. Treasury securities with a duration that coincides with the period covered by the cash flows. These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance.
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In fiscal 2025, we recorded $23.0 million of expense primarily related to the impairment of long-lived assets for one North Italia, one Grand Lux Cafe and four Other FRC locations (one previously partially impaired) and lease termination related to two Grand Lux Cafes (one that closed in fiscal 2023 and one that closed in early 2026) and one Other FRC (that closed in early 2026). In fiscal 2024, we recorded impairment of assets and lease termination expenses of $13.6 million primarily related to impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations (one previously partially impaired) and lease termination income, net for four The Cheesecake Factory restaurants, one Grand Lux Cafe location, one Flower Child location, one Social Monk location and one Other FRC location (that in early fiscal 2025). In fiscal 2023, we recorded $29.5 million of expense primarily related to the of three The Cheesecake Factory (one previously ), one North Italia (previously ), one Other FRC and two Grand Lux Cafe lease . (See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion related to long-lived asset .)
Leases
Lease terms include the build-out period for our leases where no rent payments are typically due under the terms of the lease, as well as options to renew when we deem we have significant economic incentive to exercise the extension. When determining if we have a significant economic incentive, we consider relevant factors, such as contractual, asset, entity and market-based considerations. Option periods are included in the lease term for the majority of our leases. Termination rights have not been factored into the lease terms since based on our probability assessment we are reasonably certain we will not terminate our leases.
We cannot determine the interest rate implicit in our leases because we do not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, we use our incremental borrowing rate as the discount rate for our leases. Our incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because we do not generally borrow on a collateralized basis, we derive an appropriate incremental borrowing rate using the interest rate we pay on our non-collateralized borrowings, adjusted for the amount of the lease payments, the lease term and the effect of designating specific collateral with a value equal to the unpaid lease payments for that lease.
The reasonably certain lease term and the incremental borrowing rate for each restaurant location require judgment by management and can impact the classification and accounting for a lease as operating or finance, the value of the operating lease asset and liability and the term over which leasehold improvements for each restaurant are depreciated. These judgments may produce materially different amounts of operating lease assets and liabilities, rent expense and interest expense than would be reported if different assumptions were used.
Recent Accounting Pronouncements
See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for a summary of new accounting standards.
