Slice of success: The Cheesecake Shop is undergoing a renovation

The Cheesecake Shop (TCS) is an Australian icon. Its fun cakes have been celebrating birthdays, anniversaries and other festivities since 1991. Today, the network of more than 225 stores and headquarters employs more than 2,000 people, and the brand has expanded to New Zealand.

The success of the brand attracted the attention of foreign investors again in 2017, when the founding family saw the opportunity for the cake bakery business to go to the next level with bigger investments.

At the time, Warwick Konopaki, co-founder and former managing director of TCS, commented: “It is time for a new owner to move forward with the business and network and we very much look forward to seeing the future success of The Cheesecake Shop outperform what the team has achieved thus far.”

Cake hands change

The buyer was PAG, a multi-billion dollar international investment manager, able to provide TCS with strong financial backing and significant operational experience across Asia.

Two years later, PAG Asia also acquired parent company Oporto, Red Rooster and Chicken Treat – Craveable Brands.

In early 2022, PAG sold TCS to Melbourne-based River Capital.

So is ultimate ownership important to franchisees? Some Cheesecake Shop franchisees will attest that the businesses they run change three times.

Ken Roseberry, Managing Director of TCS, says, “Our franchisees are surprisingly uninterested in ultimate ownership and rarely find an eyelid when we sold to PAG. They have never met anyone from PAG, they do business with me and my team and we stay put.

“When we announced the news, we told them business was going on as usual.”

As Kane points out, what everyone wants most is to get a return on their investment, from global private equity firms to franchisees to the general manager.

“I’ve renewed my shares in the company, I have a reasonable stake, and I’m running it,” he says.

Meet the new boss

Kane is confident the company made the right choice, rather than taking the long route to listing, leading to short-term incentives and pressure to perform the initial public offering.

“We didn’t feel it was appropriate,” Kane explains. “The management team had options, many buyers were interested, and PAG asked us which one was the best.”

He says River Capital is a mid-range view. “We have to make decisions about quality, longevity and continuity. River Capital will be an excellent shareholder.”

Among those at River Capital is former Domino CEO Andrew Rainey, who will join the TCS Board of Directors as chairman and independent shareholder. Andrew has served as Head of European Operations for Australia’s Domino’s Pizza Enterprises.

Josh Lodsky, Director – Direct Investment at River Capital, says, “River Capital and Andrew have had a strong relationship that spans the past decade. We are delighted to have someone from Andrew stand with us on this journey.

River Capital and management are committed first and foremost to the long-term success of TCS franchisees, and are passionate about supporting franchisees to achieve their long-term ambitions.

“[We have] It looks directly at the positive impact successful franchise systems can have on the lives of franchisees. TCS has demonstrated this effect for 30 years.”

The brand is one that encourages loyalty and longevity, from management – Ken has 12 years with TCS, and Controller 15 years – to loyal and established franchisees.

“It’s a tremendous relief,” says Ken.

chance to update

This does not mean that things are stagnant. far from it. He adds that the new owners bring a welcome new perspective.

“The management team needs to be updated and revised, it’s a good opportunity to see if you can do things better.

“The new owners want the best profitability in the business, but they also want sustainability, and this is a huge relief for franchisees. Not only does this year and maximizing immediate returns. They will support the decision making of profitable franchisees.

“[We’re asking] How can we open more stores and improve sales and what should franchisees think?

“For us as a management team, it is business as usual and an opportunity to review and revitalize. The strategy is there – the franchise business model around celebration cakes baked in-store.”

So what would they do differently? “There won’t be big changes, and we won’t focus bread or stop franchising,” he says.

Instead, the focus will be on enhancing existing success – recruiting more franchisees, good marketing, opening more sites, ensuring compliance and quality products and service.

“Can we do it better? Of course we can. These are tactical improvements, ways to do things better,” Kane says.

The company has won a number of awards, including the 2020 Australian Franchisor of the Year award, the second of its kind. And in November 2021, TCS was awarded a 5-star franchise rating for its high performance and commercial transparency.

“I’m proud of the fact that we’re running a good, profitable franchise model, with happy, profitable franchisees…and we want new franchisees,” says Kane.

This was originally published in Inside Franchise

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