As many businesses risk shutting down due to loss of income from the spread of COVID-19, The Cheesecake Factory is taking a stand against all of its landlords. In a letter dated March 18, the chain alerted landlords that it will not be able to make upcoming rent payments on all of its 300 storefronts come April 1 after seeing a significant decline in visits to the restaurant.
“Due to these extraordinary events, I am asking for your patience, and frankly, your help,” Cheesecake Factory chairman and CEO David Overton wrote in the letter, and added that the company hopes to be in a financial situation where it can afford to continue paying rent soon. The company has already temporarily closed at least 27 locations nationwide as a result of lost income and is stalling its plans to continue developing new restaurants.
The Cheesecake Factory later announced in a statement to investors that it would also draw on its $90 million of revolving credit to increase available cash. “While the situation remains fluid, we are taking decisive but difficult actions to enable our restaurants to manage through the specific circumstances in their communities, while further strengthening our liquidity position,” said Overton. At least 38,000 people are employed by the Cheesecake chain, making it one of the largest employers in the country.
Earlier this month, postings for restaurant jobs were already down 26 percent, The New York Times reported. Another report found that 75 percent of independent restaurants that have shut down operations during the pandemic will likely not make it out on the other side. While many small businesses have known they would be financially threatened by longterm shutdowns due to the novel coronavirus, large restaurant chains were expected to ride it out. That might not be the case anymore, as fears of a global economic recession increase.
Several other chains have had to roll back operations. Yum! Brands, the owner of the fast-food chains KFC, Pizza Hut, and Taco Bell, is closing 7,000 restaurants globally due to coronavirus. In some ways, The Cheesecake Factory withholding rent for the foreseeable future will set a precedent for chains impacted by these shutdowns, smaller businesses and individuals alike, as talks of a nationwide rent strike start to gain traction with many people struggling to make ends meet.
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