Key Points:
- Q3 comp-sales from Chili’s (+10%) and Cheesecake Factory (+15%) were powered by strong execution, social media savvy, favorable value perception, and capturing the Americana-zeitgeist of international visitors during the World Cup.
- Advan estimates that 2.0 ppts of Chili’s comp came from the zeitgeist, and 4.5 ppts for Cheesecake.
- Cheesecake’s July menu refresh (an annual happening) was also highly successful this year as comp-traffic remained strong through October. Q4 top-line guidance looks conservative.
- Per Advan data, Chili’s is improving its guest throughput; Cheesecake is crushing it on the 20-40 years old age segment (+16%).
As shown in the following figure, the two’s observed traffic built during June and July, and CAKE’s has remained at a high level since, demonstrating strong success with its annual July menu refresh. What’s also notable is that the two’s observed traffic was less than the reported traffic, Chili’s (+6%) and Cheesecake Factory (+9%). Normally, the observed figures are close to the reported figures. Why not this period? Because Advan doesn’t observe international visitors. The upside to our observed figures suggests that Chili’s enjoyed a +200bps sales bump to the quarter during the World Cup (July) of international visitors celebrating Americana (as well as the matches), the “Americana-zeitgeist”. For Cheesecake, the bump was much larger at +450bps.
As a reminder, Chili’s +10.0% was on top of last year’s +21.4%, which was on top of a +14.1% in ‘24; the resulting 3-yr compounded is a stunning +52%. This quarter’s +5% traffic, takes the 3-yr compounded to +26%. While Chili’s traffic has lessened during October, it’s also lapping very large gains (+20%) in 2024. 52% doesn’t come from zeitgeists; it’s earned by consistently giving diners what they want, quickly, again and again. Satisfied diners return again and again.
Turning to Cheesecake, it was lapping two rather soft years, and so the +15% comp only takes the 3-yr compounded to +17.4% (still a strong figure!) and 3-yr traffic to +5.9%. And while Cheesecake’s October 1-year is well above Chili’s, observed traffic for last October was soft at -1.3%. CEO David Overton said, “Bowls & Bites are performing well and helping increase frequency. [2025’s innovation] Our broad, made-from-scratch menu allows us to respond to changing guest preferences and offer compelling choices across a wide range of price points. Our rewards program, app and broader marketing efforts are also driving awareness and engagement across the digital and social channels. We are especially encouraged by the traction we are seeing with our younger guests.” Advan observed shows that 26.9% of Q3 visitors were within 20-40 years of age, up from 26.7% LY, which works out to a +16% increase on a comp-basis.
In terms of Cheesecake’s marketing strategy, President David Gordon said, “We're engaging in the organic social content at a greater level and frequency than we were 12 months ago. 12 months ago, maybe we were a little more gun-shy to engage, and today, where appropriate, when appropriate, we're talking about the brand, we're sharing more about what we're doing that's new. We've actually taken a new approach in some of our content and how our menu items look in social, and we think that's resonating really, really well with guests also. And I would say the experiential elements of Cheesecake Factory today are resonating as well as they ever have, whether it's the hospitality, the way the restaurants feel, the vast menu and the ability for people to get just about anything they want today and then share that content is really relevant.”
On a “relatively mature” restaurant brand, double-digit comps demonstrate operational excellence, as does segment margin expansion with Chili’s +140bps and Cheesecake +240bps. Chili’s is also investing in systems simplification and the North of $6 initiatives*) and training to improve table turns, which leads to leverage on labor hours and margin expansion. YoY, Chili’s reduced the average stay by an incredible 2.9 minutes to 62.4 minutes.
In addition to operational excellence, menu innovations are driving traffic. For Chili’s, this is margaritas and Big Crispy Chicken (sandwich). CEO Kevin Hochman said, “Crispy was a key driver of incremental traffic throughout the quarter. Customers are responding to the size and quality of the sandwich versus fast food, as well as the price certainty of $10.99 for a large and abundant complete meal.” We emboldened the word “certainty” because Chili’s must be picking up on consumer dissatisfaction with McDonald’s dynamic and localized price strategy (frequently in the news recently). Hochman went on, “In Q1, we maintained the 55 sandwiches sold per restaurant per day we saw in Q4. Customer social media comments tell the story. Quotes include "Those commercials weren't lying. This thing is the bomb," and "Chili's is making it affordable to go out to eat again."
For both, execution, innovation, and marketing translated into guidance for healthy comp in Q4. A +5% comp for Chili’s would put the 3-yr compounded at +50%. For Cheesecake, its Q4 guided comp of +3% would put the 3-yr at +6.4%, above Q3’s +5.9% level. As noted above, October is running strong; management’s conservatism stems from the ability to push against capacity limits during the holidays. Pre-Christmas December daily traffic averages 12% above October’s level.
‘* “North of $6” – Chili’s top locations produce annualized sales in the $6M+ range. The current average is now $4.0M.
