Cheesecake Factory shares soared 4% after private equity firm Roark Capital invested $200 million in the company.
The restaurant chain has struggled as the coronavirus pandemic has closed dining rooms around the country. It previously said that it would not be paying rent in April because of the serious financial blow the outbreak has dealt to its revenue.
“This transaction not only meaningfully enhances our liquidity position to navigate the near-term Covid-19 landscape and get our affected staff members back to work as soon as practicable, but also importantly, solidifies our ability to manage the business for the long-term,” Cheesecake Factory Chairman and CEO David Overton said in a statement.
Cheesecake Factory operates nearly 300 restaurants in the U.S. and Canada, including those with its North Italia and Fox Restaurant Concept brands. It has temporarily closed 30 restaurants and those that remain open now offer take-out and delivery service only.
The company gave a preliminary update on first-quarter results on April 2 and said it expected first-quarter comparable restaurant sales to be down about 13%. It also reported that March same-store sales declined about 46% because of the impact of Covid-19.
The update follows an SEC filing from March 27, in which the company said it had furloughed 41,000 hourly restaurant workers, who will retain their benefits and insurance until June 1. The restaurant chain also announced pay cuts for all corporate employees and bakery administration employees that ranged between 10% and 20%.
Roark Capital specializes in investing in franchised and multiunit restaurant businesses. The Atlanta-based private equity firm currently has investments in franchises that include Arby’s, Carvel Ice Cream and Jimmy John’s. Roark Capital President Paul Ginsberg will join Cheesecake Factory’s board as an independent member.
“We believe The Cheesecake Factory, North Italia and the FRC brands are uniquely positioned to maintain their leadership in experiential dining and look forward to a partnership with the board and management team to drive long-term value for all shareholders,” Ginsberg said in a statement.
Cheesecake Factory shares, which have a market value of $870 million, have fallen nearly 50% since the start of the year. The stock closed at $18.93, up 1.1%, after earlier reaching a igh of $20.41 for the day.