Cheesecake Factory tells its landlords it won't be able to pay April rent
Published Saturday, March 28, 2020 11:00AM EDT
The Cheesecake Factory won't be able to pay its April rent at its nearly 300 locations, highlighting how deeply the coronavirus pandemic is affecting the restaurant industry. (Shutterstock)
The Cheesecake Factory won't be able to pay its April rent at its nearly 300 locations, highlighting how deeply the coronavirus pandemic is affecting the restaurant industry.
Regulations instituted across several states forced restaurants to close as a way to help stop the spread of the virus. The closures have resulted in a significant revenue decrease for the company.
In a letter addressed to the company's landlords, CEO David Overton wrote that the "severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business."
The letter was first obtained by Eater and the company confirmed its authenticity to CNN Business. The Cheesecake Factory also owns a number of other restaurants including North Italia, Flower Child and Culinary Dropout. Some restaurants have remained open for delivery and take-out options.
"Please understand that we do not take this action or make this decision lightly, and while we hope to resume our rent payments as soon as reasonably possible, we simply cannot predict the extent or the duration of the current crisis," Overton wrote in the letter.
Many Cheesecake Factory restaurants are located in or near malls, which have also been forced to close in several states. Large mall owners Simon and Westfield didn't immediately respond to a request for comment about the letter.
Matthew Clark, chief financial officer for the Cheesecake Factory, said in a statement to CNN Business that the company has "very strong, longstanding relationships" with its landlords.
"We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner," Clark said.
The coronavirus pandemic has been a shock to casual dining chains because of the sudden closures and lack of clarity about when they can reopen.
That business model is now a liability. These days, those chains have to quickly figure out ways to ramp up off-site orders while keeping their companies afloat.
"Most of the bigger players will find a way to survive," R.J. Hottovy, a consumer strategist for Morningstar previously told CNN Business. But "it's not going to be easy."
-- CNN Business' Danielle Wiener-Bronner contributed to this report.