In 1972, Evelyn and Oscar Overton took the last of their savings and moved from Detroit, Michigan, to Los Angeles, California, to try their hand, one last time, at entrepreneurship. Evelyn had been selling cheesecakes from a small kitchen in her basement for almost 30 years, but she dreamed of something bigger. It wasn’t until 1978 that their son, David, opened the first restaurant dedicated to showcasing his mother’s creations. With an extensive menu of both meals and desserts, the first Cheesecake Factory was a huge success. The family incorporated the business and took it public in 1992 with plans to open 3–4 new restaurants every year, but just 13 years later, in 2005, the company had 103 locations and had surpassed $1 billion in revenue. By 2016, the Cheesecake Factory Incorporated owned and operated over 200 full-service, casual dining restaurants throughout the United States and Puerto Rico, and 15 more restaurants operated internationally under licensing agreements. Their mission: creating an environment where absolute guest satisfaction is the highest priority.

The Cheesecake Factory’s kitchen is organized like a production line. Orders, with the recipes, appear on computer monitors above the food prep stations, where prep staff chop veggies, meat, and seasonings while a timer counts down. The cook assembles the final product and it is quality checked by the head cook before going out to the customer. The system is streamlined, efficient, and highly replicable. Every Cheesecake Factory follows the same formula and uses the same system, ensuring both quality of food and quality of service.

The Cheesecake Factory’s lunch and dinner menus include seafood, pasta, burgers, and more, designed to appeal to a broad audience, and most of the food is made from scratch. The only thing not made on demand, ironically, is the cheesecake. The iconic dessert comes from the Company’s bakery division, which operates two bakery production facilities, one in Calabasas Hills, California, and one in Rocky Mount, North Carolina, that produce quality cheesecakes and other baked products for its restaurants, international licensees, and third-party bakery customers.

Atul Gawande wrote a piece for the New Yorker in 2012, praising the operations management of the Cheesecake Factory and musing about why his own industry, health care, couldn’t seem to integrate some of the obvious operational efficiencies that the restaurant chain had implemented to combine both profit and service.

In addition to quality control, Atul noticed that “the managers monitored the pace, too—scanning the screens for a station stacking up red flags, indicating orders past the target time, and deciding whether to give the cooks at the station a nudge or an extra pair of hands. They watched for waste—wasted food, wasted time, wasted effort. The formula was Business 101: Use the right amount of goods and labor to deliver what customers want and no more. Anything more is waste, and waste is lost profit.”¹

The company uses data analytics to forecast not only how many guests to expect on a given night but also what they will likely order. The model allows each restaurant to order the right kinds and the right amount of groceries, and to have just the right number of staff on board.

However, according to David Overton, who is still running the company as CEO, his focus is on people. In an interview with Fortune magazine in 2011, he boiled his operational philosophy down into three main points:

• Focus on people: “You have to devote resources to training, from the cooks to customer service. In this business, it’s all location, location, location. But once you grow, it’s all people, people, people.”

• Let some things go: “Don’t limit your business for the sake of control. Whether building our infrastructure or thinking about growth, I focused on allowing us to be as successful as we could be, not trying to control everything.”

• Prevent copycats: "I created a unique concept with the broadest and deepest menu in casual dining. It’s a big part of what attracts guests, but it’s also highly complicated, which makes it a huge barrier to entry.”²

Overton claims that people are his greatest asset, and his employees back him up on that. In 2017, the Company was named to the Fortune magazine “100 Best Companies to Work For” list for the fourth consecutive year. The stock, which went public at $20, was trading above $60 by the end of 2016, and, according to Overton, “We delivered our 28th consecutive quarter of positive comparable sales, marking seven years of strong financial performance and meaningful shareholder value creation.”³ (After studying the content in this chapter, you should be able to answer a set of discussion questions found at the end of the chapter.)