COVID-19 Might Lead the Cheesecake Factory, among many others, to Face Bankruptcy

The COVID-19 pandemic has rendered many businesses moving towards bankruptcy or closing down stores as people continue to stay inside their homes. Many have already closed down, and now the Cheesecake Factory restaurant chain is also going through the same.

In a report by Standard and Poor Global Market Intelligence, Cheesecake Factory is among the list of six other restaurant chains in the U.S. facing the situation of bankruptcy because of the current global pandemic.

Denny’s is another restaurant chain to have been included in the list. Both Cheesecake factory and Denny’s have their outlets in Pasadena and are respectively No.3 and No.4 on the list that has been released stating companies with the highest one-year probability of default scores.

The same list has been topped by other very significant brands, Dave & Buster’s and Bloomin’ Brands. The last restaurant chain to be listed as the Chipotle Mexican Grill, which can be considered as lest likely to default.

Each restaurant chain has been scored based on their records, where Chipotle Mexican Grill has achieved a score of 0.1, showing they are least likely to move towards bankruptcy. As for other restaurant chains on the list, Denny’s scored 11.9 percent, while The Cheesecake Factory scored 11.7 percent.

As businesses have been allowed to slowly open, the chances of them defaulting have reduced. They are still running at a reduced capacity as per the guidelines that have been issued. Although, the financial storm that the world is going through will have its due impact on the industry as many firms have gone into bankruptcy. Customers are still coming in hesitatingly, and the unemployment benefits being given to employees continue to put more pressure on the food chains.

In the usual scenario, companies are asked to file for bankruptcy protection when they default on loans and closing locations or liquidating assets that come after that. In May, the previously mentioned companies on the list were the ones that were most likely to default shortly.

Cheesecake factory was onto preserving their financial flexibility in March when $90 million were taken down from their revolving credit facility. All developmental goals were also put aside at the same time, along with the financial guidance for this year.

Already 27 outlets of the Cheesecake factory have been closed down, despite them running on take outs and delivery. It was a sustainable method for most outlets, but not for all. In June also, 87 of their locations were seen cutting back on operations because of the riots that followed the death of George Floyd.

The sales decrease reported by Denny’s in the second quarter, compared to the second quarter last year, is surprising. The same-store sales have gone down by 56.9 percent, and the total operating revenues have been able to reach only $40.2 million. The same results forced the restaurant chain to close 15 stores and lay off 524 employees from their payroll.

Jonas Whites

Jonas Whites is an SEO Analyst who is highly skilled in various advanced tools for SEO research and analysis to generate traffic on website performing SEO, SMO, SMM, Link Building, Blogs marketing strategies. Out of the office environment, you will see him enjoying with his DSLR camera capturing some cool pictures around the beautiful spots.

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