Dive Brief:

• The Cheesecake Factory announced Wednesday that it will acquire Fox Restaurant Concepts and the remaining interest in North Italia for $308 million in cash at closing, according to a company release. An additional $45 million will be due ratably through 2023.
• The casual dining chain invested $88 million in North Italia and Flower Child over the last three years in anticipation of the deal. North Italia's operations will be moved to The Cheesecake Factory's corporate headquarters in Calabasas Hills, California to help scale the concept nationwide after the deal closes. 
• Cheesecake Factory president David Gordon said in an earnings call that he believes FRC, which operates 45 experience-focused restaurants in seven states and Washington, D.C., is "the ideal incubation engine to develop concepts of the future."

Dive Insight

The Cheesecake Factory has been diversifying at a rapid clip, and this latest acquisition reveals its priority for experiential, fast-moving concepts. CEO David Overton made it clear on the call, however, that the incubation opportunity it gains in Fox Restaurant Concepts will not impact Cheesecake's menu style or "Cheesecake-ize" the selections at its new brands. 

The move to bring so many new restaurants into its portfolio is a bold one, given the wide range of dining styles and ambiance at each Fox brand. But founder Sam Fox has established himself as a savvy restaurateur with trend-setting concepts, such as better-for-you brands True Food Kitchen and Flower Child. The Cheesecake Factory can now harness that innovation to glean ideas for its other concepts — including fast casual Social Monk Asian Kitchen and full-service brands RockSugar Southeast Asian Kitchen and Grand Lux Cafe in addition to its flagship — and use its infrastructure and capital to help the Fox concepts grow. Though Cheesecake now has 100% ownership of FRC, Fox will stay on and head the restaurant group as a free-standing subsidiary based in Phoenix. 

Ninety percent of the casual dining giant's business comes from its Cheesecake Factory division, Gordon said, which it projects will continue to expand at a 3% annual unit growth rate. But Gordon said the company is excited by the growth potential of North Italia, Fox's contemporary Italian restaurant, in both the near and long term. Cheesecake predicts that North Italia will expand at a 20% annual unit growth rate. 

"We see significant whitespace from an on-trend Italian concept, and believe North Italia is an ideal fit for the experiential dining occasions we want to offer," Gordon said on the call. 

The question now is how well Cheesecake can manage so many irons in the fire. Its long-awaited fast casual Social Monk just opened this year — it's first foray in the quickly growing restaurant segment. The company is putting a lot of focus on growing the brand, putting a hold on development of full-service brands RockSugar and Grand Lux. And though Asian cuisine is not as crowded as other U.S. restaurant segments, Chipotle's failed ShopHouse Southeast Asian Kitchen concept signals that this market can be challenging. It's unclear whether the modern Italian space could be similarly difficult for North Italia going forward, but the chain has performed well of late. 

Cheesecake's second-quarter earnings beat Wall Street expectations, but the company has underperformed overall this year, according to analysts. Amassing an eclectic restaurant portfolio rather than doubling down on its core business could further undermine its performance if integrating these brands is challenging. But with Sam Fox's talent and experience still at the helm of FRC, Cheesecake could have its cake and eat it, too.