Author Topic: CAKE-The Cheesecake Factory  (Read 6197 times)

SharperDingaan

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Re: CAKE-The Cheesecake Factory
« Reply #40 on: November 13, 2017, 04:52:19 AM »
You hit the nail on the head on multiple levels nofreelunch. It's ultimately a commodity business with no real moat. Overton is 71 and will eventually have some tool replace him who will lever up the balance sheet and chase new concept growth with no sustainable advantage. I get the impression from the cc scripts he calls most if not all the shots and rightfully so, he's a genius. At this point though, Overton is showing no signs of slowing down and they have pretty easy access to their stated 9% growth target for the foreseeable future.

This misses most of what this business is really about. They sell quality cakes (product), in a congenial atmosphere (experience), and are the place to go to provision your event (story). The combination allows them to charge a higher price, and keep a higher margin. Good marketing, good operational execution.

Expansion for them isn't more of the same.
It's 1) splitting the offerings into a core of 'standards' at a lower price (volume > margin loss), and an unlimited array of 'customs' at a higher price (margin gain > volume loss); 2) selling cake by the slice in European style 'coffee shops' (luxury market); and 3) getting paid for apprenticing master cake makers. Turn the limitation (working life of the master cake maker) into an asset, raise the number of these people that you have (more product to sell), and reduce exposure to the loss of any one of them. Sustainability.

Great business, but not so much as an investment. You have to sit on it, get paid via dividend, and hope for a buy-out when Overton chooses to 'retire'. Awesome if this is for retirement cash flow (dividend); otherwise - not so great.

It's not enough to find a 'great' business,
it also has to be consistent with your philosophy and investment requirements.

SD

 
   


DooDiligence

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Re: CAKE-The Cheesecake Factory
« Reply #41 on: November 13, 2017, 06:00:24 AM »
You hit the nail on the head on multiple levels nofreelunch. It's ultimately a commodity business with no real moat. Overton is 71 and will eventually have some tool replace him who will lever up the balance sheet and chase new concept growth with no sustainable advantage. I get the impression from the cc scripts he calls most if not all the shots and rightfully so, he's a genius. At this point though, Overton is showing no signs of slowing down and they have pretty easy access to their stated 9% growth target for the foreseeable future.

This misses most of what this business is really about. They sell quality cakes (product), in a congenial atmosphere (experience), and are the place to go to provision your event (story). The combination allows them to charge a higher price, and keep a higher margin. Good marketing, good operational execution.

Expansion for them isn't more of the same.
It's 1) splitting the offerings into a core of 'standards' at a lower price (volume > margin loss), and an unlimited array of 'customs' at a higher price (margin gain > volume loss); 2) selling cake by the slice in European style 'coffee shops' (luxury market); and 3) getting paid for apprenticing master cake makers. Turn the limitation (working life of the master cake maker) into an asset, raise the number of these people that you have (more product to sell), and reduce exposure to the loss of any one of them. Sustainability.

Great business, but not so much as an investment. You have to sit on it, get paid via dividend, and hope for a buy-out when Overton chooses to 'retire'. Awesome if this is for retirement cash flow (dividend); otherwise - not so great.

It's not enough to find a 'great' business,
it also has to be consistent with your philosophy and investment requirements.

SD


Thanks, your statement re: expansion buckets & Master Cake Makers is provocative.

I'm gonna keep watching & if it gets egregiously cheap, I'll look again.

Sell side gets paid to say YES & buy side gets paid to say NO.
« Last Edit: November 13, 2017, 06:02:28 AM by DooDiligence »
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Gregmal

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Re: CAKE-The Cheesecake Factory
« Reply #42 on: November 13, 2017, 03:35:09 PM »
Would have to think Roark/BWLD is a big time positive in terms of implications for CAKE.