With Cheesecake Factory Sale Looming, North Italia Ready for ‘Hyper Growth’
Since The Cheesecake Factory outlined a plan to take full control of North Italia in October 2018, the brand has grown by four locations, and now has 18 across nine states. There are also first-to-market entries “coming soon” to Tennessee and North Carolina. But one recent opening in particular has The Cheesecake Factory thinking big about its upcoming addition.
North Italia, which is being sold from Phoenix-based Fox Restaurants Concepts, recently debuted a store in Miami, Florida—more than 2,000 miles from its base. In the first six or so weeks, it’s been the most successful year-to-date opening in brand history. “The portability appears to be very, very strong,” David Gordon, Cheesecake Factory president, said in the company’s recent first-quarter review.
The Cheesecake Factory has fueled North Italia’s expansion for a while now. It bought into the chain, along with fast casual Flower Child, in November 2016 and became a minority stakeholder. Per the agreement, The Cheesecake Factory reserved the right to acquire both at a later date—a time that is now fast approaching.
Matthew Clark, the company’s CFO, predicted the $150 million transaction would complete in late Q3 or perhaps Q4. Before then, The Cheesecake Factory expects to provide another $20–$25 million in growth capital. Heading into this fiscal calendar, The Cheesecake Factory had already poured between $40–$45 million into North Italia.
Clark called the chain’s current trajectory “hyper growth,” and said its pipeline and economics support 20-plus percent annual expansion.
And don’t expect The Cheesecake Factory to mess with a working model. North Italia units generate north of 7 million in sales on average, which equates to roughly $1,200 per square foot. “Everything that’s going on at North [Italia] today is why guests love it so much,” Gordon said.
The Cheesecake Factory will lend some of its operating muscle, however. Gordon said it would leverage supply chain scale, IT infrastructure, human resource practices, and “whatever we can do to add more value to the concept.”
“And over time, we’ll see what happens with the menu,” Gordon added. “But the menu is delicious today and we’ll do everything we can to make sure that it says that way.”
North Italia is the kind of chef-driven concept you’d expect from Sam Fox’s umbrella of concepts. It showcases a different made-from-scratch item each day, like a Chef’s daily pizza. The chain’s menu also definitely lives more in the polished arena than the casual one, with items like Squid Ink Mafaldine and Roasted Mushroom Tortelloni.
Behind the scenes, Gordon said, The Cheesecake Factory is taking the reins of a sound operation that doesn’t need a makeover. “It’s a very sound business and the restaurants run very, very well,” he said. “So we feel good about how they're being handled today and we still think there are some things that we can do to add a lot of value across the bigger company.”
Joe Hyslop, division vice president of restaurant operations at North Italia, took some time to chat with FSR and Sapore about the brand’s growth, ability to stand out in a crowded segment, and where North Italia goes from here.
The Italian segment is crowded with brands across every category—fine dining, casual, quick service—where does North Italia carve out its niche? What are some of its differentiating factors?
We’re focused on creating special moments for each and every one of our guests, first and foremost. There’s a thoughtfulness to every detail, from the design of the location and training of our staff, to the build of each of our hand-crafted dishes. North Italia is not your traditional Italian restaurant, and we take pride in providing a modern and handmade experience that delivers consistently.
How has North Italia evolved since its founding in 2002, from a directional standpoint? How different is today’s consumer and how is the chain changing to meet that demand?
While we are a large brand with multiple locations across the country, each restaurant has a strong local identity. We take great care to ingrain ourselves into the community and have adjusted over the years to make sure that stays a priority. Today’s guest is looking for more than just a great meal, and because there are so many more options, we strive to deliver on that as well as the experience they’ve come to expect from us every day.
Talk about the group dining and private events opportunity for North Italia? How has that matured?
Thankfully, there are so many occasions that North Italia has become synonymous with in our guests’ minds. That has really pushed us to consider how we best facilitate those experiences for them. Group dining is a major part of our business, and many of our locations are designed with private dining spaces to accommodate larger parties, on top of the great patio and main dining spaces available. Making that experience special (and as handcrafted as our dishes) is a priority for our teams, and we work to give them the tools they need to execute.
How does North Italia approach technology and the off-premises opportunity?
Part of that guest evolution over the past several years has been this move into convenience and delivery. Like many brands, we’ve realized there is a real opportunity for us to adapt to this new method of reaching customers. However, we took our time to do it the right way for us. There’s an experience that our guests have come to expect from us, and in wanting to keep that promise made, our goal was to replicate that as much as possible. That means being just as thoughtful about our delivery partners, menu availability and item preparation, to-go materials, etc. as we are about the in-restaurant experience.
With The Cheesecake Factory coming in, how will that expertise help North Italia grow and improve operations?
TCF is an impressive organization with an incredibly strong brand with similar values to ours. They’ve been able to maintain both as they’ve grown nationwide and internationally, and those lessons they’ve learned along the way will be invaluable in North’s continued growth.
What are some of the growth goals going forward?
More restaurants and more opportunities to treat people to something worth savoring. Our goal is to provide real value to the markets we enter and communities we become a part of, and we intend to keep doing so whenever the right opportunity reveals itself.
What does the ideal market look like for North Italia, and what are some of the grand opening and marketing strategies?
As we continue to grow and enter markets where we don’t necessarily have a historical North Italia or Sam Fox Restaurants presence, there is a need for us to be very intentional about building brand equity. We’re very much a “new” restaurant in terms of both the physical location and in awareness, so building phased plans that start with an introduction and then reinforce those messages with reasons to believe or rather, visit again, becomes important. Our goal with our marketing is to be where our customer is, provide the right message at the right time and ultimately influence their next visit and positively affect sales.