After the COVID-19 coronavirus took a large bite out of its first-quarter cash flow, The Cheesecake Factory (NASDAQ:CAKE) sent a letter to its landlords telling them it's unable to pay the rent on its restaurant locations for the upcoming month. With rent due for many of its 294 outlets on April 1, the company simply lacks the funds to meet its obligations on time. In the letter, CEO David Overton went on to write that no information is available on when the restaurant chain can resume paying, but says it will do so at the earliest possible opportunity.
Overton made a direct appeal to the company's landlords, stating, "I am asking for your patience, and frankly, your help." He added: "we realize the impact this action will have on our landlords. We appreciate our landlords' understanding." In follow-up statements, The Cheesecake Factory's executives revealed that the casual dining establishments gained through its recent acquisition of Fox Restaurant Concepts, such as North Italia, Flower Child, and The Arrogant Butcher, are also unable to meet their April rent obligations.
The response of The Cheesecake Factory's various landlords to this news is not yet public knowledge, though CFO Matthew Clark mentioned "landlord decisions to close properties" while speaking to Fox Business about these developments. Clark was confident that in most cases the stable relationship between the restaurant and property owners would enable the partners to wait out the crisis.
Most Cheesecake Factory locations are currently operating on a takeout and delivery-only basis, without dine-in available. Some 27 outlets, or slightly less than 10% of the total, are temporarily closed until the COVID-19 pandemic subsides.