To: David M.

Overton From: Junior Analyst Lauren Grose Date: May 20, 2012 Subject: The Cheesecake Factory Has a Greater Market Position that Texas Roadhouse The Cheesecake Factory and Texas Roadhouse are similar in both size and performance over the past three years. Both companies specialize in particular foods, and target a specific clientele. By studying both companys revenue, net income, stock prices, EPS, and P/E ratio, it can be determined which company has a greater market position within the industry. Through the analysis of these five indices, The Cheesecake Factory is shown to have a greater market position than Texas Roadhouse. The Cheesecake Factory has the upper-hand because the company has reported consistent growth in the majority of the five indices studied. While it can be said that The Cheesecake Factory performs better, Texas Roadhouse is also performing well. However, while the company is still performing well, Texas Roadhouse cannot compare to the strength of The Cheesecake Factory. If The Cheesecake Factory continues to operate efficiently and produce at the current level, The Cheesecake Factory will continue to reign supreme over Texas Roadhouse. The Cheesecake Factory Has Earned More Revenue than Texas Roadhouse

Figure 1: Revenue of The Cheesecake Factory and Texas Roadhouse Sources: 2011 Cheesecake Factory Annual Report; 2011 Texas Roadhouse Annual Report

The Cheesecake Factory reported greater revenue from 2009-2011 than Texas Roadhouse. As figure 1 shows, both companies reported increases in revenue over the three year period. From 2009 to 2011, The Cheesecake Factory reported an increase in revenue of 9.7%. Texas Roadhouse reported an increase in revenue of 17.7%. While Texas Roadhouse does have a greater percentage change in revenue over the past three years, it is important to note that The Cheesecake Factory is still earning more revenue, while having fewer locations than Texas Roadhouse. According to The Cheesecake Factory Website, there are roughly 170 restauarants located across the country (Our Story, 2013). Texas Roadhouse reports on their website that they have over 300 locations (Steakhouse Locations, 2013). The fact that The Cheesecake Factory still earns more revenue while having half the physical locations Texas Roadhouse has shows the strength The Cheesecake Factory has over Texas Roadhouse. This strength tranfers

over through the fact that The Cheesecake Factory also has a greater net income than Texas Roadhouse. The Cheesecake Factorys Net Income is Greater Than Texas Roadhouse

Figure 2: Net income of The Cheesecake Factory and Texas Roadhouse Sources: 2011 Cheesecake Factory Annual Report; 2011 Texas Roadhouse Annual Report

The Cheesecake Factorys gross net income is greater than Texas Roadhouse. As figure 2 shows, both companies showed consistent growth over the past three years. While Texas Roadhouse had a greater net income than The Cheesecake Factory in 2009, by 2011 The Cheesecake Factory went on to earn more net income than Texas Roadhouse. From 2009-2011, The Cheesecake Factory had an increase of net income of 123.4%. Texas Roadhouse only reported a 34.7% increase in net income from 2009-2011. This is a clear indication that The Cheesecake Factory has a greater market position than Texas Roadhouse. The Cheesecake Factory went from earning less net income in 2009, to completely surpassing Texas Roadhouses net income in 2011. Only a company with fantastic market strength could do that. In addition to this stellar net income performance, The Cheesecake Factory also reported better stock prices. The Cheesecake Factorys Stock Prices are Greater Than Texas Roadhouse

Figure 3: The Cheesecake Factory and Texas Roadhouse Stock Prices Sources: The Cheesecake Factory: Historical Prices; Texas Roadhouse: Historical Prices

The Cheesecake Factory and Texas Roadhouses stocks compete with each other on a daily basis. While both stocks have shown reasonable growth, The Cheesecake Factorys stocks have performed better than Texas Roadhouse. As figure 3 shows, The Cheesecake Factorys stock has consistently increased in value from the first day, 6 month day, and intra-day. Their stock has had an increase in value of 20.5%. Consequently, Texas Roadhouse stock has increased in value by 23.4%. Even though Texas Roadhouse has greater percentage change over time, The Cheesecake Factorys stock still shows to be better performing. One reason for this is that Texas Roadhouse stock fluctuates more than The Cheesecake Factory. Between the first day and the 6 month day, the stock actually decreased in value. This could be a sign of an unstable company that could prove to be a risky investment. Finally, The Cheesecake Factory has a greater market position because the stock price is higher than Texas Roadhouse. With a higher stock price than Texas Roadhouse, investors of The Cheesecake Factory are earning greater returns on their investments. The Cheesecake Factorys EPS and P/E Ratio are Beneficial for Investors

EPS The Cheesecake Factory Texas Roadhouse

P/E $1.88 $21.66 $1.10 $21.97

Figure 4: Investor Relations on The Cheesecake Factory and Texas Roadhouse Sources: CAKE: Summary for The Cheesecake Factory; TXRH: Summary for Texas Roadhouse

While The Cheesecake Factory and Texas Roadhouse are successful companies, The Cheesecake Factory provides greater returns for investors. As figure 4 shows, The Cheesecake Factory has a higher EPS than Texas Roadhouse. Due to this greater EPS, it can be inferred that the investors of The Cheesecake Factory are earning more on their investments than those who are investing in Texas Roadhouse. Moving on to the P/E ratio, both companies have very similar P/E ratios. This is because they are in the same industry. In fact, it would be odd if their P/E ratios were not similar to each other. Regardless, the P/E ratio for The Cheesecake Factory is still high. A high P/E ratio is an indicator that the company has high growth prospects with little risk. Furthermore, The Cheesecake Factory having a greater EPS than Texas Roadhouse, and having a high P/E ratio are indicators that The Cheesecake Factory has the opportunity to continue to grow in the future. It is also projected that The Cheesecake Factory will continue to have greater market strength than Texas Roadhouse if they continue to perform well.

REFERENCES Texas Roadhouse. (2011). 2011 Annual Report. Retrieved from http://files.shareholder.com/downloads/TXRH/2480741100x0x558096/D6375B34 C67A-4ABB-9908-56A806214308/Texas_Roadhouse_Annual_Report.pdf Texas Roadhouse. (2013). Steakhouse Locations. Retrieved from http://www.texasroadhouse.com/locations The Cheesecake Factory. (2002). Our Story. Retrieved from http://www.thecheesecakefactory.com/aboutUs/ourStory/ourStory The Cheesecake Factory. (2011). 2011 Annual Report. Retrieved from http://thomson.mobular.net/thomson/7/3296/4637/ Yahoo! Finance. (2013). Texas Roadhouse: Historical Prices. Retrieved from http://finance.yahoo.com/q/hp?s=TXRH+Historical+Prices Yahoo! Finance. (2013). TXRH: Summary for Texas Roadhouse. Retrieved from http://finance.yahoo.com/q?s=TXRH Yahoo! Finance. (2013). CAKE: Summary for The Cheesecake Factory. Retrieved from http://finance.yahoo.com/q?s=CAKE Yahoo! Finance. (2013). The Cheesecake Factory: Historical Prices. Retrieved from http://finance.yahoo.com/q/hp?s=CAKE+Historical+Prices