The Cheesecake Shop says its avoidance of major shopping centres is enabling it to improve rental agreements for franchisees, who typically operate in regional areas or on suburban strips.
The dessert chain, which has more than 200 stores nationwide, says it recently renewed nine leases and obtained 14 months of rent free from various landlords.
According to Nick Avgerinos, national franchise development manager of The Cheesecake Shop, this is equivalent to a saving of approximately $50,000 for the company’s franchisees.
“On top of that, in a further three renewed leases we successfully negotiated no rent increase for at least two years,” Avgerinos said in a statement.
Ken Rosebery, general manager of The Cheesecake Shop, says the company has “been doing very well over the past 12 months in terms of renewing our leases as they come up for renewal”.
“There have been a lot of retailers in the franchising sector that have complained about the high cost of rents,” Rosebery told StartupSmart.
“[But] we’re getting reductions in rents and improved terms… The type of locations that The Cheesecake Shop has are in regional shopping centres or suburban strip locations.”
“We have very few stores in the large shopping centres, so there is a different sort of relationship with the landlord and the tenant.”
Rosebery is quick to point out The Cheesecake Shop is a large, nationally branded retailer, so landlords are “usually happy to have us as a tenant”.
“Having a nationally branded retailer… is a very attractive proposition,” he says.
Rosebery also sings the praises of Avgerinos, who is charged with the task of negotiating with landlords on behalf of franchisees.
“Nick does a terrific job – he knows what he’s doing. He’s always had that role within the business,” he says.
Rosebery says he doesn’t believe the company misses out on additional sales because of its avoidance of major shopping centres, explaining they’re not really the right fit.
“We’re like a destination business. People come to The Cheesecake Shop [specifically]. They travel to The Cheesecake Shop with that journey in mind – to purchase a cake,” he says.
“We don’t need to be in a place where there’s high foot traffic. You just need somewhere where you can park the car, duck in and get on your way home again.”
Rosebery says the fact that the company doesn’t rely on major shopping centres is one of the strengths of the system.
“Certainly, in the types of locations we’re in, we can keep our rents down and get good deals,” he says.
“Our cost of rent and occupancy cost generally is a lot less than those franchises located in shopping centres, so there is a lot more profit left over for our franchisees.”
“Around about 8% to 9% of revenue is devoted to rent. That’s pretty low by a lot of retailers’ standards, and one of the strengths of the system.”