Founder, Chairman & Chief Executive Officer, CHEESECAKE FACTORY INC
CEO talks The Cheesecake Factory success
The Cheesecake Factory started as one restaurant in Beverly Hills, and now it has more than 170 locations and is expanding ...
About David Overton
In a 2013 interview, David Overton discussed The Cheesecake Factory's expansion and operations. He stated that the company covers employees working over 25 hours for health care and was uncertain about the financial impact of the Affordable Care Act, suggesting that if costs increased they might be passed on to customers. Overton also described the company's international expansion, noting that they licensed their concept to Alshaya Group and had opened locations in Kuwait and Dubai, with plans for Jeddah, Beirut, Cairo, Istanbul, and Russia. He said the only menu changes for the Middle East were removing alcohol and pork and using halal ingredients. Overton attributed the company's success to "great food at a reasonable price" and noted that the chain introduced a SkinnyLicious menu with over 50 items under 590 calories in response to obesity concerns. He also mentioned that Dr. Atul Gawande had described the company as a model for the restaurant industry due to its training, innovation, and cost-cutting practices.
Transcript (25 segments)
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Interviewer0:00
The Cheesecake Factory started as just one restaurant in Beverly Hills. Now it's a chain with more than 170 locations. It's also being called a model for the healthcare system, providing good service to millions of people at a reasonable cost. Founder and CEO David Overton is here with us in Studio 57. Welcome.
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David Overton0:16
Thank you.
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Interviewer0:17
This is an American story too. I mean, you take up something and then you watch it grow. What's the secret to Cheesecake?
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David Overton0:22
Well, I think it started as a family business. My mother got the recipe out of a newspaper. She made it in her basement in Detroit for 25 years. They went in and out of businesses. She sold her home, had $10,000 to her name. They were in their 50s, drove across country, and started a little one in 1972 in LA. And people loved the cheesecake. The principal used to stand on the corner to get the Overton cheesecake on bake sale day. People responded. They were waiting in line from the beginning. Yes, we... I was too nervous to open it for lunch. This was 1978 in Beverly Hills. I wanted to open after lunch at 2:00 so I wouldn't be too busy. And a line formed in front of our store at 1:30 to the next store. And we opened the doors, we were full in 10 minutes.
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Interviewer1:12
Wow. It's a brilliant concept because not only do you have to just go there for dinner, but you got to go for the cheesecake because it's the Cheesecake Factory. So you end up getting everybody not only to just order an entree but also dessert.
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David Overton1:21
It's true. But we have over 250 items on the menu. There truly is something for everyone.
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Interviewer1:27
You do have one of the biggest menus I've ever seen at a restaurant. How can you do that? Offer so many items?
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David Overton1:33
I think if we weren't busy, we couldn't. But I didn't know what I was doing. I don't know what I was sounding like, Yogi Berra? I didn't know what I was doing. I had never worked in a restaurant, so I didn't know what I could or couldn't do. And so when I opened it, I just figured out how to do it.
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Interviewer1:50
I have a really important question for you. One of the things that's going to change, of course, in the new year is Obamacare, or the Affordable Care Act. How do you implement that at Cheesecake Factory? How will you pay for healthcare for all of your employees?
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David Overton2:02
Well, that's a big question. We are working on that right now. We have been waiting to see what people will do and what's really happening and what the different requirements will be. However, we do cover everyone that works over 25 hours today. So unlike a lot of businesses, we already are paying a great deal in healthcare. So we're not sure how much more it will be, or how much less, or what exactly we'll do. So for us, it won't be as bad as it will be for others, which it will be very costly.
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Interviewer2:32
But when you say it will be very costly, it will be passed on to who? Customers?
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David Overton2:37
Well, I believe most people will have to do that.
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Interviewer2:39
And how much do you think you will have to raise prices in order to pay for healthcare?
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David Overton2:43
Well, as I say, we don't know what we don't know. It is right now we don't know if what we're actually paying is very, very close and we won't have to raise prices. So we'll see. I'd love to answer that for you maybe in a year.
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Interviewer2:54
Okay. And so at that point, a year from now, what will we be able to learn from you? You think because the New Yorker magazine wrote this article saying that you had a lot of things that you could teach from your experiences with healthcare?
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David Overton3:03
Yeah, I think Dr. Gandhi... it's not that I teach. He's looking at us as a model. He thinks we're the gold standard of the restaurant business. We do so many things right. We train, we innovate, we cut costs, and we completely change the menu twice a year. And he's never had a bad meal. And he says, how can we cook a thousand meals a day and get consistency? Wouldn't that be a great model for the healthcare industry? So he's taking us and not linking us as much as saying these guys know what they're doing. Over the years, they've really built a model that works. Why can't we be more like them?
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Interviewer3:37
Are you worried about this Obamacare and how you provide the healthcare?
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David Overton3:40
I'm not worried yet. When I hear the numbers, I might be. But again, because we spend millions and millions of dollars today on healthcare, we don't know exactly how much more we'll pay. For those businesses that don't cover their employees, they'll be in for a very expensive situation.
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Interviewer3:57
You're expanding overseas.
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David Overton3:59
We are. It's a new, exciting time for us. We're going global. We licensed our concept to Alshaya, who is in 18 countries, has 200 Starbucks in the Middle East. We thought they were a partner that really knew what they were doing. And we just opened two for them, one in Kuwait and one in Dubai, which are our... wait, two-hour waits for fours and three-hour waits for anything more than six.
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Interviewer4:27
Is it the same food?
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David Overton4:28
You know what? The only thing we changed is we took out alcohol and pork, and we're using halal. And our portions are the same size, our menu is the same, and they love it. They absolutely love it. We have lines from the minute we open the door to the minute we close at midnight. It is really phenomenal. And next year we'll be going to Jeddah and Beirut, and believe it or not, Cairo, and Istanbul, and Russia.
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Interviewer4:57
For all of this, what's the one word that explains your success?
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David Overton5:00
I think it's great food at a reasonable price. A good product. Anything America wants to eat can go on our menu. When obesity came up, we responded with a SkinnyLicious menu, over 50 items under 590 calories. So you know, there's no veto votes when it comes to going to Cheesecake. Everybody can find what they want.
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Interviewer5:19
SkinnyLicious. David Overton, SkinnyLicious. I like that new word. All right, thanks so much. Appreciate it.