Activist investor urging Cheesecake Factory to mull potential split – Per WSJ

Shares in Cheesecake Factory (NASDAQ: CAKE) jumped in premarket US trading on Tuesday on a report that an activist investor is urging the restaurant chain to explore spinning off three of its smaller brands into a separate public entity.

Citing people familiar with the matter, The Wall Street Journal reported that restaurant industry-focused JCP Investment Management has built about 2% stake in California-based Cheesecake Factory.

JCP has told executives at Cheesecake Factory that the group would best be served if its North Italia casual dining business, Flower Child healthy-option concept, and Culinary Dropout gastropub were bundled together into a stand-alone company, the WSJ said. Such a move would allow executives in each unit to focus on hitting their respective growth targets, it added.

Texas-based JCP has said it would be willing to plug capital into the spin-off to help bolster its growth prospects, the WSJ said. JCP has also argued that Cheesecake Factory should begin a strategic review of portions of the group that it believes are underperforming or could be offloaded to possible buyers, the paper noted.

The report comes as Cheesecake Factory — known in part for the extensive menus at its eponymous restaurants — has seen its financial performance trail that of peers like Texas Roadhouse (NASDAQ: TXRH) and Olive Garden-owner Darden Restaurants (NYSE: DRI). The group’s returns had previously improved during the COVID-19 pandemic when it pushed to offer more takeout and delivery options.

Cheesecake Factory currently has a market capitalization of just under $2.2 billion. Its shares have risen by over 23% so far this year.