The Cheesecake Factory Tells Landlords It Won't Be Able To Pay Rent in April
Illustrating how ripples of the restrictions imposed upon America to slow the spread of the coronavirus are touching all parts of the American economy, one of America’s top food chains has alerted all of its landlords that it cannot pay rent.
The Cheesecake Factory founder and CEO David Overton recently sent all of the company’s landlords a letter saying that its April rents can’t be paid because of lost income attributed to the coronavirus crisis, according to Eater Los Angeles.
The chain, which earlier this year was nearing 300 locations, has closed 27 locations and converted others to take-out only during the COVID-19 outbreak. The chain employs about 38,000 people.
“As you know from news reports, we have had to close numerous restaurants in order to comply with emergency governmental restrictions,” the March 18 letter said.
“In some locations we are only allowed to provide delivery and to-go orders; in other locations we are required to totally close. This situation is unprecedented and rapidly evolving.”
“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business. Due to these extraordinary events, I am asking for your patience and, frankly, your help,” he said, explaining that rent checks will not go out next week for April.
The letter said that The Cheesecake Factory’s affiliated restaurants, including Rock Sugar and North Italia, will also not make their April rent payments.
“Please understand that we do not take this action or make this decision lightly, and while we hope to resume our rent payments as soon as reasonably possible, we simply cannot predict the extent or the duration of the current crisis. We are continuing to evaluate the implications of this situation on our business and we realize the impact this action will have on our landlords. We appreciate our landlords’ understanding given the exigency of the current situation,” the letter said.
News that the company will stop paying rent sparked a reaction on Twitter.
in solidarity with the Cheesecake Factory I will not be paying rent either https://t.co/ZF9BIethKU
— JP (@jpbrammer) March 25, 2020
Who knew the Cheesecake Factory would spark off the revolution. https://t.co/4OAFt8bqZB
— Chris Paul Thompson (@chrispimages) March 25, 2020
If the Cheesecake Factory can’t pay its rent, you think working Americans can? https://t.co/bwkiszdTDc
— Saagar Enjeti (@esaagar) March 26, 2020
The company issued a statement on the matter to Eater Los Angeles.
“In these unprecedented times, there are many factors that are changing on a daily basis given governmental regulations and landlord decisions to close properties. We have to take both into consideration in terms of understanding the nature of our rent obligations and with respect to managing our financial position,” the statement said.
“We have very strong, longstanding relationships with our landlords. We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner.”
One commentator said that when coronavirus-required restrictions end, some chain restaurants are likely to fall by the wayside.
“Most of the bigger players will find a way to survive,” said R.J. Hottovy, a consumer strategist for Morningstar, according to CNN, adding that, “it’s not going to be easy.”
President Donald Trump, though, voiced optimism that when restrictions end, the economic rebound would be a sight to behold.
“I don’t think it’s going to end up being such a rough patch. I think it’s going to, when we open — especially, if we can open it — the sooner, the better — it’s going to open up like a rocket ship. I think it’s going to go very good and very quickly,” he said during Wednesday’s coronavirus task force briefing, according to a White House media pool report.
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