CHEESECAKE FACTORY INCORPORATED, 10-K405, 2000-03-27

CHEESECAKE FACTORY INCORPORATED
10-K405, 2000-03-27
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 28, 1999
COMMISSION FILE NUMBER 0-20574
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THE CHEESECAKE FACTORY INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
DELAWARE 51-0340466
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)

26950 AGOURA ROAD 91301
CALABASAS HILLS, CALIFORNIA (Zip Code)
(Address of principal executive offices)
</TABLE>

(818) 871-3000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS

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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. /X/

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 20, 2000 was $604,620,633.

As of March 20, 2000, 20,337,538 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive proxy
statement for the 2000 Annual Meeting of Stockholders to be held on May 30,
2000.

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS FORM 10-K WHICH ARE NOT HISTORICAL FACTS MAY
CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE
ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY AND ITS SUBSIDIARIES
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY FORWARD-LOOKING STATEMENTS. SUCH RISKS, UNCERTAINTIES,
AND OTHER FACTORS INCLUDE, BUT ARE NOT LIMITED TO: CHANGES IN GENERAL ECONOMIC
CONDITIONS WHICH AFFECT CONSUMER SPENDING FOR RESTAURANT DINING OCCASIONS;
INCREASING COMPETITION IN THE UPSCALE CASUAL DINING SEGMENT OF THE RESTAURANT
INDUSTRY; ADVERSE WEATHER CONDITIONS WHICH IMPACT CUSTOMER TRAFFIC AT THE
COMPANY'S RESTAURANTS IN GENERAL AND WHICH CAUSE THE TEMPORARY UNDERUTILIZATION
OF OUTDOOR PATIO SEATING AVAILABLE AT SEVERAL OF THE COMPANY'S RESTAURANTS;
VARIOUS FACTORS WHICH INCREASE THE COST TO DEVELOP OR DELAY THE DEVELOPMENT AND
OPENING OF THE COMPANY'S NEW, HIGHLY CUSTOMIZED RESTAURANTS; CHANGES IN THE
AVAILABILITY OR COST OF RAW MATERIALS, MANAGEMENT AND HOURLY LABOR, OR OTHER
RESOURCES NECESSARY TO SUCCESSFULLY OPERATE THE COMPANY'S RESTAURANTS AND BAKERY
PRODUCTION FACILITY; THE COMPANY'S ABILITY TO RAISE PRICES SUFFICIENTLY TO
OFFSET COST INCREASES; THE SUCCESS OF STRATEGIC AND OPERATING INITIATIVES,
INCLUDING NEW RESTAURANT CONCEPTS AND NEW BAKERY PRODUCTS; DEPTH OF MANAGEMENT;
ADVERSE PUBLICITY ABOUT THE COMPANY, ITS RESTAURANTS OR BAKERY PRODUCTS; THE
COMPANY'S DEPENDENCE ON A SINGLE BAKERY PRODUCTION FACILITY; THE COMPANY'S
ABILITY TO OBTAIN AND RETAIN THIRD-PARTY CUSTOMERS FOR ITS BAKERY OPERATIONS;
CHANGES IN TIMING AND/OR SCOPE OF THE PURCHASING PLANS OF THIRD-PARTY BAKERY
CUSTOMERS WHICH CAUSE FLUCTUATIONS IN THIRD-PARTY BAKERY SALES AND THE COMPANY'S
CONSOLIDATED OPERATING RESULTS; THE RATE OF GROWTH OF GENERAL AND ADMINISTRATIVE
EXPENSES ASSOCIATED WITH BUILDING A STRENGTHENED CORPORATE INFRASTRUCTURE TO
SUPPORT THE COMPANY'S GROWING OPERATIONS; RELATIONS BETWEEN THE COMPANY AND ITS
EMPLOYEES; THE AVAILABILITY, AMOUNT, TYPE, AND COST OF CAPITAL FOR THE COMPANY
AND THE DEPLOYMENT OF SUCH CAPITAL; CHANGES IN, OR ANY FAILURE TO COMPLY WITH,
GOVERNMENTAL REGULATIONS; THE REVALUATION OF ANY OF THE COMPANY'S ASSETS; THE
AMOUNT OF, AND ANY CHANGES TO, TAX RATES; AND OTHER FACTORS REFERENCED IN THIS
FORM 10-K.

ITEM 1: BUSINESS

GENERAL

As of March 20, 2000, the Company operated 34 upscale, full-service, casual
dining restaurants under The Cheesecake Factory-Registered Trademark- name in
California, Colorado, Florida, Georgia, Illinois, Maryland, Massachusetts,
Missouri, Nevada, New York, Ohio, Rhode Island, Texas and Washington, DC. The
Company also operated Grand Lux Cafe-Registered Trademark-, an upscale casual
dining restaurant located in the Venetian Resort-Hotel-Casino in Las Vegas,
Nevada; two self-service, limited menu "express" foodservice operations under
The Cheesecake Factory Express-Registered Trademark- name inside the
DisneyQuest-TM- family entertainment centers in Orlando, Florida and Chicago,
Illinois; and a bakery production facility. The Company also licensed three
bakery cafes under The Cheesecake Factory name to another foodservice operator.

The Company's full-service Cheesecake Factory restaurants offer over 200
menu items including appetizers, pizza, seafood, steaks, chicken, burgers,
pasta, specialty items, salads, sandwiches, omelets and desserts including
approximately 40 varieties of cheesecake and other baked desserts. In contrast
to many chain restaurant operations, substantially all menu items (except
desserts manufactured by the Company's bakery production facility) are prepared
on the restaurant premises using high quality, fresh ingredients based on
innovative and proprietary recipes. The Company believes its restaurants are
recognized by consumers for offering exceptional value with generous food
portions at moderate prices. The Company's restaurants possess a distinctive,
contemporary design and decor that creates a high-energy ambiance in a casual
setting. The Company's full-service Cheesecake Factory restaurants currently
range in size from 5,400 to 17,300 interior square feet, provide full liquor
service and are generally open seven days a week

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for lunch and dinner, including Sunday brunch. Restaurant sales represented
92.2%, 91.8% and 90.8% of the Company's total revenues for fiscal 1999, 1998 and
1997, respectively.

The Company believes its ability to select suitable locations and operate
successful restaurants, coupled with the continuing popularity of its restaurant
concept with consumers, is reflected in its average food and beverage sales per
restaurant which management believes are among the highest of any publicly-held
restaurant company. Average sales per full-service restaurant open for the full
year were approximately $10.3 million, $10.1 million and $9.8 million for fiscal
1999, 1998 and 1997, respectively. Since each of the Company's restaurants has a
customized layout and differs in size (measured in square feet), management
believes the most effective method to measure sales productivity is by square
foot. Average sales per productive square foot (defined as interior plus patio
square feet, seasonally adjusted) for full-service restaurants open for the full
year were approximately $942, $907 and $881 for fiscal 1999, 1998 and 1997,
respectively.

The Company intends to continue developing full-service restaurants in high
profile locations within densely populated areas. During fiscal 1999, the
Company opened six full-service restaurants under The Cheesecake Factory name;
the first Grand Lux Cafe at the Venetian Resort-Hotel-Casino; and a self-
service, limited menu foodservice "express" operation under The Cheesecake
Factory Express name inside the second DisneyQuest-TM- family entertainment
concept located in Chicago, Illinois. The Company's primary restaurant expansion
objective is to increase its total restaurant productive square feet at least
25% during each of fiscal 2000 and 2001. The Company opened one restaurant
during the first quarter of fiscal 2000 and currently expects to open as many as
eight additional restaurants during the remainder of fiscal 2000. As of
March 20, 2000, seven leases and several letters of intent have been signed for
potential restaurant openings during fiscal 2000 and 2001.

The Company's operations originated in 1972 as a producer and distributor of
high quality cheesecakes and other baked desserts. The Company's first
restaurant opened in Beverly Hills, California in 1978 for the primary purpose
of promoting the sale of cheesecakes and other baked desserts to other
foodservice operators and distributors ("third party" sales). Although the
Company's restaurant operations have grown substantially during recent years,
the Company continues to focus on increasing branded and private-label sales of
bakery products to third parties in order to leverage its brand identity with
consumers and to take advantage of excess bakery production capacity.
Third-party bakery sales represented 7.8%, 8.2% and 9.2% of the Company's total
revenues for fiscal 1999, 1998 and 1997, respectively.

The Company's principal business strategy is to develop and operate
full-service Cheesecake Factory restaurants on a national scale, supported by
its bakery production operations. The Company's competitive positioning is
focused on offering consumers broad selections of high quality food and bakery
products at exceptional values in distinctive settings with superior customer
service. In addition to expanding its full-service restaurants, the Company
plans to selectively pursue other opportunities to leverage the competitive
strengths of its restaurant and bakery operations, which may include new
restaurant concepts and new bakery product lines and distribution channels. In
order to facilitate its expansion strategy, the Company plans to continue
building its operating and corporate support infrastructure to focus on the
achievement of optimal leverage and efficiencies in all of its operations.

The Company was incorporated as a Delaware corporation in February 1992 to
succeed to the restaurant and bakery business of its predecessors operating
under The Cheesecake Factory name. The Company's initial public offering of
common stock was completed in September 1992. The executive offices of the
Company are located at 26950 Agoura Road, Calabasas Hills, California 91301,
and its telephone number is (818) 871-3000. The Company's internet site can be
accessed at www.thecheesecakefactory.com.

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COMPETITIVE POSITIONING

The key elements of the Company's competitive positioning are as follows:

EXTENSIVE, CREATIVE AND CONTEMPORARY MENU AND BAKERY PRODUCT OFFERINGS. The
Company's restaurants offer over 200 items, including appetizers, pizza,
seafood, steaks, chicken, burgers, pasta, specialty items, salads, sandwiches,
and omelets. The menu is generally updated twice each year to respond to
changing consumer dining preferences and trends. The Company's bakery production
facility produces over 50 varieties of quality cheesecake and other baked
desserts, of which approximately 40 varieties are offered at any one time in the
Company's restaurants.

HIGH QUALITY PRODUCTS. Substantially all menu items (except the desserts
manufactured at the Company's bakery production facility) are prepared on the
restaurant premises using high quality, fresh ingredients based on innovative
and proprietary recipes. The Company uses high quality dairy and other raw
ingredients in its bakery products.

EXCEPTIONAL VALUE. The Company believes its restaurants are recognized by
consumers for offering exceptional value with generous food portions at moderate
price points. The average check per restaurant guest, including beverages and
desserts, was approximately $15.00 for fiscal 1999.

SUPERIOR SERVICE. The Company's goal is to consistently meet or exceed the
expectations of every restaurant guest in all facets of the dining experience.
Management believes that its restaurant-level employee recruitment, selection,
training and incentive programs allow the Company to attract and retain
qualified employees who are motivated to provide consistent excellence in
customer service.

FLEXIBLE KITCHEN CAPABILITIES AND OPERATING SYSTEMS. The Company's
restaurants have been strategically designed with sufficient capacity, equipment
and operating systems to allow for the successful preparation and delivery of an
extensive, contemporary and flexible menu which requires multiple food
preparation and cooking methods executed simultaneously.

DISTINCTIVE RESTAURANT DESIGN AND DECOR. The Company's restaurants have a
distinctive contemporary design and decor that creates a high-energy ambiance in
a casual setting. Whenever possible, outdoor patio seating is also incorporated
in the design of the restaurants, thus allowing for additional restaurant
capacity (weather permitting) at a relatively low occupancy cost per seat.

HIGH PROFILE RESTAURANT LOCATIONS AND FLEXIBLE SITE LAYOUTS. The Company
locates its restaurants in high profile locations within densely populated areas
with a balanced mix of residences, businesses, shopping and entertainment
outlets. In contrast to many "theme" restaurant operations that rely heavily on
tourist traffic, the Company's restaurants principally rely on the visit
frequency and loyalty of consumers who work, reside or shop near each of its
restaurants. The design of the Company's restaurants is flexible to accommodate
a wide variety of urban and suburban site layouts, including multi-level
locations.

COMMITMENT TO SELECTING, TRAINING, REWARDING, AND RETAINING HIGH QUALITY
EMPLOYEES. The Company believes its employee recruitment and selection criteria
are among the most rigorous in the restaurant industry. By providing extensive
training and innovative compensation programs, the Company believes its
employees develop a sense of personal commitment to its core values and culture
of customer service. Management believes these programs have resulted in
employee turnover rates which are generally lower than average for the
restaurant industry.

THE CHEESECAKE FACTORY RESTAURANT CONCEPT AND MENU

The Company strives to provide a distinctive dining experience at good value
by offering an extensive, original and evolving menu in an upscale, high energy
casual setting with efficient, attentive and friendly service. As a result, the
Company's restaurants appeal to a diverse customer base. The Cheesecake

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Factory's extensive menu enables it to compete for substantially all dining
preferences and occasions, including the mid-afternoon and late-night dayparts
which are traditionally weaker dayparts for most chain restaurant operations.
The Company's restaurants are not open for breakfast, but do offer Sunday
brunch. All of the Company's restaurants are open seven days a week. All items
on the menu, including approximately 40 varieties of cheesecake and other
quality baked desserts, may be purchased for off-premise consumption,
representing approximately 10% of total restaurant sales.

The Company's menu currently consists of approximately 19 pages and features
approximately 200 items including appetizers, pizza, seafood, steaks, chicken,
burgers, specialty items, pastas, salads, sandwiches and omelets. Examples of
menu offerings include Tex-Mex Eggrolls, Roadside Sliders, Crusted Chicken
Romano, Shrimp Scampi, Cajun Jambalaya Pasta, Santa Fe Salad, Orange Chicken and
Caribbean Steak. Menu items (except those desserts manufactured at the Company's
bakery production facility) are prepared daily on the restaurant premises with
high quality, fresh ingredients using innovative and proprietary recipes. The
Company considers the extensive selection of items on its menu to be an
important factor in the differentiation of its restaurants from its competitors.
Menu entrees range in price from approximately $5.95 to $21.95. Appetizers range
in price from $3.00 to $8.95, and desserts range from $3.95 to $6.95. The
average check per customer at the Company's restaurants, including beverages and
desserts was approximately $15.00 and $14.63 for fiscal 1999 and 1998,
respectively.

One of the Company's competitive strengths is its ability to anticipate
consumer dining and taste preferences and adapt its menu to the latest trends in
food consumption. The Company develops new menu items to keep pace with changing
consumer tastes and preferences and regularly updates its ingredients and
cooking methods to improve the quality and consistency of its food offerings.
Generally every six months, the Company reviews the appeal and pricing of all of
its menu items and either updates or replaces 10 to 20 of the items. All new
menu items are tested and selected based on uniqueness, sales popularity, ease
of preparation and profitability.

The ability of the Company to create, promote and attractively display its
unique line of baked desserts is also important to the competitive positioning
and financial success of the Company's restaurants. The Company believes that
its brand identity and reputation for offering high quality desserts results in
a higher percentage of dessert sales relative to that of most chain restaurant
operators. Dessert sales represented approximately 15% of total restaurant sales
for both fiscal 1999 and 1998.

Each restaurant maintains a full-service bar where appetizers or the full
menu may also be purchased. The sale of alcoholic beverages represented
approximately 13% and 14% of total restaurant sales for fiscal 1999 and 1998,
respectively. Management believes the majority of alcoholic beverage sales occur
with meal purchases.

The Company places significant emphasis on the unique interior design and
decor of its restaurants which results in a higher investment per square foot of
restaurant space than is typical for the industry. However, each of the
Company's restaurants has historically generated annual sales per square foot
that is also typically higher than other competitors in the industry. The
Company believes its stylish design and decor package contribute to the
distinctive dining experience enjoyed by its customers. Each restaurant features
large, open dining areas and a contemporary kitchen design featuring exhibition
cooking. Five restaurants offer banquet facilities. Approximately two-thirds of
the Company's restaurants offer outdoor patio seating (weather permitting), and
three of the Company's restaurants overlook waterfronts which complement the
overall dining experience. The table and seating layouts of the Company's
restaurants are flexible, permitting tables and seats to be easily rearranged to
accommodate large groups or parties, thus permitting more effective utilization
of seating capacity. See "Restaurant Sales and Investment Characteristics."

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RESTAURANT LOCATIONS AND SITE SELECTION

As of March 20, 2000, the Company operated 34 upscale, full-service casual
dining restaurants under The Cheesecake Factory name in 13 states and the
District of Columbia. The Company also operated Grand Lux Cafe at the
Venetian-Resort-Hotel-Casino in Las Vegas, Nevada and two self-service, limited
menu "express" operations at DisneyQuest-TM--Orlando and Chicago. The Company
also licensed three bakery cafes under The Cheesecake Factory name to another
foodservice operator. The following table sets forth information with respect to
the restaurant locations operated by the Company:

EXISTING RESTAURANT LOCATIONS

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
OPENING INTERIOR INTERIOR
RESTAURANT LOCATION YEAR SQUARE FEET(1) SEATS(2)
- ------------------- -------- -------------- -----------
<S> <C> <C> <C>
Beverly Hills, CA.......................... 1978 5,400 160
Marina del Rey, CA......................... 1983 6,000 195
Redondo Beach, CA.......................... 1988 14,000(3) 500
Woodland Hills, CA......................... 1989 10,500 323
Washington, DC............................. 1991 12,500 410
Newport Beach, CA.......................... 1993 9,500 252
Brentwood, CA.............................. 1993 7,000 200
Atlanta, GA................................ 1993 14,000 446
North Bethesda, MD......................... 1994 9,900 265
Coconut Grove, FL.......................... 1994 6,100 193
Boca Raton, FL............................. 1995 15,800 426
Chicago, IL................................ 1995 15,600 430
Houston, TX................................ 1995 12,500 336
Boston, MA................................. 1995 10,600 292
Skokie, IL................................. 1996 17,300 439
Baltimore, MD.............................. 1996 7,200 258
Kansas City, MO............................ 1996 12,800 264
Pasadena, CA............................... 1997 8,000 212
Denver, CO................................. 1997 11,500 280
Westbury, NY............................... 1997 12,700 350
Las Vegas, NV (Forum Shops)................ 1997 11,500 375
Cambridge, MA.............................. 1997 9,600 275
Miami, FL.................................. 1997 10,000 312
Aventura, FL............................... 1998 10,500 285
Orlando, FL (DisneyQuest-TM-).............. 1998 8,900 150
Irvine, CA................................. 1998 7,500 182
Dallas, TX................................. 1998 10,000 292
Sunrise, FL................................ 1998 9,200 260
San Diego, CA.............................. 1999 8,800 252
Thousand Oaks, CA.......................... 1999 6,500 180
Las Vegas, NV (Grand Lux Cafe)............. 1999 19,100 550
Chicago, IL (DisneyQuest-TM-).............. 1999 6,300 105
Columbus, OH............................... 1999 10,700 292
Boulder, CO................................ 1999 8,000 222
Providence, RI............................. 1999 9,400 329
Mission Viejo, CA.......................... 1999 8,500 208
San Francisco, CA.......................... 2000 11,000 280
------- ------
Total.................................... 384,400 10,780
======= ======
</TABLE>

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(1) Excludes outside patio area, if applicable.

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(2) Average seats, including bar and banquet facilities. Excludes outdoor patio
seating of approximately 22 at Beverly Hills, 256 at Marina del Rey, 125 at
Redondo Beach, 92 at Woodland Hills, 112 at Brentwood, 138 at Atlanta, 80 at
Chicago, 40 at Boston, 132 at Baltimore, 125 at Kansas City, 80 at Denver,
40 at Cambridge, 68 at Aventura, 62 at Irvine, 32 at Dallas, 120 at Sunrise,
110 at San Diego, 65 at Thousand Oaks, 46 at Boulder, 79 at Mission Viejo,
and 105 at San Francisco. Outdoor patio seating is typically available,
weather permitting, in the Southern California and South Florida locations
during most of each year and during the spring and summer seasons for the
other locations.

(3) Excludes approximately 7,000 square feet of dedicated banquet space.

While the Company's restaurants typically share common interior decor
elements, the layouts of the restaurants differ to accommodate different types
of buildings and different square feet of available space. Restaurants have been
opened both as freestanding structures and as components of existing shopping
malls, entertainment centers and office complexes, and are located in both urban
and suburban areas.

The Company believes the locations of its restaurants are critical to its
long-term success and devotes significant time and resources to analyzing each
prospective site. Since The Cheesecake Factory concept can be executed within a
wide range of restaurant sizes and site types, management can be highly
selective in choosing suitable locations. In general, the Company prefers to
open its restaurants at high profile sites within larger metropolitan areas with
dense population and above-average household incomes. In addition to carefully
analyzing demographic information for each prospective site, management
considers other factors such as visibility, traffic patterns and general
accessibility; the availability of suitable parking; the proximity of residences
and shopping areas, office parks and tourist attractions; the degree of
competition within the site's trade area; and the general availability of
restaurant-level employees. In contrast to many "theme" restaurant operations
that rely heavily on tourist traffic, the Company's restaurants principally rely
on the visit frequency and loyalty of consumers who work, reside or shop in each
of its trade areas.

Management believes the relatively high and consistent sales productivity of
its restaurants provide opportunities to obtain suitable leasing terms from
landlords, including contributions toward restaurant development and
construction costs in many cases. Due to the uniquely flexible and customized
nature of its restaurant operations and the complex design, construction and
preopening processes for each new location, the Company's lease negotiation and
restaurant development timeframes vary from location to location and can be
subject to unforeseen delays. The entire development process ranges from six to
eighteen months after lease signing, depending on the timing of the delivery of
the leased building shell from the landlord to the Company.

As a result of the highly customized and operationally complex nature of the
Company's restaurants, the restaurant preopening process is extensive and costly
relative to that of most chain restaurant operations. Effective with fiscal
1998, the definition of preopening costs was modified to include only those
non-capitalizable, incremental out-of-pocket costs that are directly related to
the openings of new restaurants. Preopening costs include, but are not limited
to: costs to relocate and compensate restaurant management employees prior to
opening; costs to recruit and train hourly restaurant employees; and costs for
"mock" service activities prior to opening. Preopening costs will vary from
location to location depending on a number of factors, which include the
proximity of existing Company restaurants; the size and physical layout of each
location; the relative difficulty of the restaurant staffing process; and travel
and lodging costs for the corporate opening team and support staff. The direct
preopening cost for a 10,000 square foot, single-story restaurant in an
established Company market averages approximately $600,000. During fiscal 1998,
the Company elected early adoption of AICPA Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities," which requires most business
entities to expense preopening costs as they are incurred.

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The timing and number of new restaurants actually opened by the Company will
depend on a number of factors including, but not limited to: the availability of
suitable locations and leases for such locations; the availability of suitable
financing to develop the restaurants; the Company's ability to obtain all
necessary governmental licenses and permits to operate the restaurants; the
Company's ability to successfully manage the development and preopening
processes for each restaurant; the availability of suitable restaurant
management and hourly employees; and general economic conditions.

EXPANSION STRATEGY

The Company plans to continue to expand its restaurant operations
principally through the opening of additional upscale, casual dining restaurants
under The Cheesecake Factory name. The Company also plans to take advantage of
opportunities to leverage both its brand and its operational strengths in other
venues. The following table sets forth information with respect to future
full-service Cheesecake Factory locations under development as of March 20, 2000
for which leases have been signed:

FUTURE RESTAURANTS WITH SIGNED LEASES

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
LOCATION POTENTIAL OPENING DATE SQUARE FEET
- -------- ---------------------- -----------
<S> <C> <C>
Atlanta, Georgia........................... Second Quarter 2000 9,900
Scottsdale, Arizona........................ Third Quarter 2000 10,000
Indianapolis, Indiana...................... Third Quarter 2000 11,000
Hackensack, New Jersey..................... Fourth Quarter 2000 10,000
Schaumburg, Illinois....................... Fourth Quarter 2000 10,200
West Palm Beach, Florida................... Fourth Quarter 2000 8,500
Sherman Oaks, California................... Second Quarter 2001 9,500
</TABLE>

The Company is currently negotiating leases for potential future locations.
From time to time, management will evaluate opportunities to acquire and convert
other restaurant locations to The Cheesecake Factory concept. However, the
Company currently has no understandings, binding commitments (other than the
signed leases set forth in the table above) or agreements to acquire or convert
any other restaurant locations to its concepts.

The Company developed a bakery cafe format during fiscal 1997 to extend The
Cheesecake Factory brand and provide a potential additional source of sales and
operating leverage for its bakery production facility. As of March 20, 2000,
there were three licensed bakery cafe outlets in operation which range in size
from 250 to 2,000 square feet and feature many of the Company's unique desserts
and a limited selection of beverages, sandwiches and salads in a self-service
format. The first bakery cafe opened in July 1997 in the Ontario Mills shopping
mall complex near Los Angeles, followed by the opening of two kiosk-type outlets
in August 1997 located in the Ronald Reagan National Airport in Washington, DC.
A third licensed bakery cafe opened at the MacArthur Center in Norfolk, Virginia
in August 1999. All bakery cafes are operated by Host Marriott Services
Corporation under licensing agreements with the Company. The Company will
continue to evaluate the development potential of the bakery cafe. As of
March 20, 2000, the Company has no binding commitments to license any future
bakery cafes.

The Cheesecake Factory Express is currently the exclusive foodservice
operator for the two DisneyQuest-TM- family entertainment centers located in
Orlando, Florida and Chicago, Illinois. DisneyQuest features innovative,
interactive technologies together with Disney characters to create an
entertainment adventure for families and guests of all ages. The Company's
foodservice operation in DisneyQuest consists of a limited selection of The
Cheesecake Factory's quality menu items and desserts in a self-service format at
an average check of approximately $7.50 per guest. As of March 20, 2000, the
Company has no binding commitments to develop and operate any additional
"express" operations.

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Grand Lux Cafe, the Company's upscale casual dining restaurant created for
the Venetian Resort-Hotel-Casino in Las Vegas, Nevada opened in May 1999. Open
24 hours a day, seven days a week, Grand Lux Cafe offers a creative, high
quality selection of breakfast fare, appetizers, seafood, steaks, chicken,
burgers, specialty items, pastas, salads, sandwiches, omelets and desserts. The
Company intends to further refine the menu and operations of Grand Lux Cafe
during fiscal 2000 and may consider opening one or two additional locations
outside of the Las Vegas market during fiscal 2001.

RESTAURANT SALES AND INVESTMENT CHARACTERISTICS

Since each of the Company's restaurants has a customized layout and differs
in size (measured in square feet), management believes the most effective method
to measure the unit economics of the concept is by square foot. Average sales
per productive square foot for full-service Cheesecake Factory restaurants open
during the entire period were $942, $907 and $881 for fiscal 1999, 1998 and
1997, respectively. The Company currently leases the land and building shell for
each of its restaurants, but is required to expend cash for leasehold
improvements and furnishings, fixtures and equipment which is targeted, on
average, from $375 to $425 per square foot (excluding preopening costs). The
Company seeks to obtain construction contributions from its landlords that, if
obtained, usually take the form of up-front cash, full or partial credits
against minimum or percentage rents otherwise payable by the Company or a
combination thereof. While the Company has been generally successful in
obtaining landlord construction contributions in the past, there can be no
assurance that such contributions will be available in similar amounts, if at
all, for every potential location the Company seeks to develop into a new
restaurant. On average, the Company targets a minimum 2.5 to 1 sales-to-cash
investment ratio and a 50% cash-on-cash return when evaluating potential
restaurant locations. If a potential restaurant location is selected for
acquisition and development by the Company, the actual performance of the
location, may differ from its originally targeted performance.

RESTAURANT OPERATIONS AND MANAGEMENT

The Company's ability to successfully and correctly execute a high quality,
complex menu and effectively manage high volume restaurants is critical to its
overall success. Detailed operating procedures, standards, controls, food line
management systems, and cooking methods and processes have been implemented at
the Company's restaurants to accommodate its extensive menu and relatively high
sales productivity. However, the successful day-to-day operation of the
Company's restaurants remains critically dependent on the quality, ability,
dedication and enthusiasm of the general manager, executive kitchen manager and
all other management and hourly employees working at each restaurant.

Excluding The Cheesecake Factory restaurant located at the Forum Shops in
Las Vegas and Grand Lux Cafe (which are both open 365 days a year), the
Company's restaurants are open every day of the year except Thanksgiving and
Christmas. Hours of operation are generally from 11:00 a.m. to 11:00 p.m.,
except for Sunday when the restaurants open at 10:00 a.m. for brunch.
Additionally, most restaurants remain open past midnight on weekends. Outdoor
patio seating is available (weather permitting) at approximately two-thirds of
the Company's restaurants.

Management believes the relatively high average sales volume and popularity
of its restaurants with consumers allow the Company to attract and retain higher
quality, experienced restaurant-level management and other operational
personnel. Management also believes the Company's restaurants have experienced a
lower level of employee turnover than the restaurant industry in general. Each
full-service restaurant is typically staffed with one general manager, one
executive kitchen manager and from six to twelve additional management
personnel, depending on the sales volume of each restaurant. On average, general
managers possess at least five years of experience with the Company and
typically have at least five additional years of management experience with
other foodservice operators. All restaurant management personnel complete an
extensive training program during which they receive both classroom and on-the-
job instruction in food quality and preparation, customer service, alcoholic
beverage service, liquor liability

8
<PAGE>
avoidance, financial management and cost controls, risk management and human
relations. Restaurant managers are also provided with detailed manuals covering
food and beverage standards and the proper operation of the Company's
restaurants. Management is committed to operational excellence in every
component of its restaurant operations.

Efficient, attentive and friendly guest service is integral to the Company's
overall concept and brand identity. Each restaurant is staffed, on average, with
approximately 200 hourly employees. The Company requires each hourly employee to
participate in a formal training program for their respective position in the
restaurant. For example, new servers at each restaurant currently participate in
approximately three weeks of training during which the server works under the
supervision of restaurant management. Management strives to instill enthusiasm
and dedication in its employees and regularly solicits suggestions concerning
restaurant operations and all aspects of its business.

The success of the Company will continue to be highly dependent upon its
ability to attract, develop and retain qualified employees who are capable of
successfully managing high volume restaurants and consistently executing the
Company's extensive and complex menu. The availability and retention of
qualified restaurant management employees continues to be a significant
industry-wide issue facing chain restaurant operators. To enable it to more
effectively compete for and retain the highest quality restaurant management
personnel available, the Company adopted in fiscal 1997 an innovative and
comprehensive compensation program for its restaurant general managers and
executive kitchen managers. Each participant in the program receives a
competitive base salary and has the opportunity to earn an annual cash bonus
(calculated and paid quarterly) based on the performance of his or her
restaurant. Participating restaurant general managers also are eligible to
utilize a company-leased vehicle, for which all nonbusiness use thereof is
valued and added to the participants' taxable income pursuant to income tax
regulations. A longer-term capital accumulation opportunity, based principally
on stock options, is also available to participating restaurant general managers
and executive kitchen managers which is dependent upon the participants'
extended service to the Company in their respective positions (at least five
years) and their achievement of certain agreed-upon performance objectives
during that five-year period.

Each restaurant general manager reports to an area director of operations,
who typically supervises the operations of five to seven restaurants, depending
upon geographical and management experience considerations. In turn, each area
director of operations currently reports to the senior vice president for
restaurant operations. The restaurant field supervision organization also
includes area kitchen operations and performance development professionals, who
are responsible for managing new restaurant openings and training for all
operational employees. As the Company opens new restaurants, its field
supervision and performance development resources will also expand
appropriately.

The Company maintains financial and accounting controls in its restaurants
through the use of a point-of-sale (POS) cash register and personal computer
system in each location. The POS and personal computer system provides
restaurant management with daily and weekly information regarding sales, cash
receipts, inventory, food and beverage costs, labor costs and other controllable
operating expenses. Each restaurant also has an onsite accounting technician who
assists in the accumulation and processing of accounting and other
administrative information. During fiscal 1999, the Company completed a review
of various POS systems available in the marketplace which incorporate the latest
technological advancements for such systems. A new POS system will be tested in
one restaurant during fiscal 2000. Depending on the results of the test, the
Company may consider installing the new POS system in all new restaurants and
may also consider a gradual replacement of its current POS system in existing
restaurants over time.

BAKERY OPERATIONS

The Company originated in 1972 as a producer and distributor of high quality
cheesecakes and other baked desserts. The creation, production and marketing of
quality cheesecakes and other baked desserts remain a cornerstone of the
Company's brand identity. At its state-of-the-art bakery production facility,

9
<PAGE>
the Company produces approximately 50 varieties of cheesecake based on the
Company's proprietary recipes. Some of the Company's popular cheesecakes include
the Original Cheesecake, White Chocolate Raspberry Truffle-Registered
Trademark-, Chocolate Peanut Butter Cookie-Dough, Kahlua Almond Fudge, Dutch
Apple Caramel Streusel, Fresh Strawberry and Triple Chocolate Brownie
Truffle-Registered Trademark-. Other popular baked desserts include chocolate
fudge cake, carrot cake, blackout cake and apple dumplings. In the aggregate,
the bakery production facility currently produces approximately 600 product
SKUs.

The commissary role of the Company's bakery operations is to produce
innovative, high quality cheesecakes and other baked desserts for sale at the
Company's restaurants. Dessert sales represented approximately 15% of the
Company's total restaurant sales for both fiscal 1999 and 1998 and are important
to restaurant-level profitability. The Company also markets its cheesecakes and
other baked products on a wholesale basis to third-party customers.
Approximately 70% to 75% of the bakery's production is currently devoted to
third-party foodservice wholesalers and retailers. The remaining 25% to 30% of
production is devoted to supplying the Company's restaurants. Cheesecakes and
other items produced for third-party accounts are marketed under The Cheesecake
Factory name as well as private labels. Current large-account customers include
warehouse club operators, institutional foodservice marketers and distributors,
supermarkets, and other restaurant and foodservice operators. Sales to warehouse
club operators represented approximately 57% and 63% of total third-party bakery
sales for fiscal 1999 and 1998, respectively. The Company's bakery products are
delivered daily to customers in the Southern California area by the bakery's
delivery vehicles, and are shipped throughout the United States by common
carrier. The Company also contracts with an outside fulfillment company to
process mail order sales. Frozen bakery products are also shipped
internationally.

As a result of the Company's growth plans and the ultimate capacity
constraints of its former bakery production facility, the Company substantially
completed the construction of a new 60,000 square foot bakery production
facility and corporate center in Calabasas Hills, California during fiscal 1995,
of which approximately 45,000 square feet is currently devoted to bakery
production. The new production facility was fully commissioned from an
engineering and operational perspective in October 1996 at a total cost of
approximately $18.6 million. The Company currently owns the land, building and
all of the equipment at the production facility. During fiscal 1999, the
facility operated at approximately 50% of its practical capacity. By the end of
fiscal 2000, the Company believes that its capacity utilization rate could
increase to approximately 60% on a run-rate basis, based on the Company's
expected production plan for the year.

ADVERTISING AND PROMOTION

The Company competes in the upscale, casual dining segment of the restaurant
industry. This segment is generally positioned between easily-replicated casual
dining operations and highly customized, expensive "fine dining" operations.
Management believes the Company's commitment to providing consistent,
exceptional value to consumers in an upscale casual dining environment continues
to be the most effective approach to attracting and retaining customers.
Accordingly, the Company has historically focused its resources on consistently
meeting and exceeding customer expectations and has relied primarily on high
profile locations and "word of mouth" advertising to attract and retain
customers. The Company would consider more traditional forms of advertising if
the need arose. During fiscal 1999, the Company's expenditures for advertising
were less than 1% of total revenues.

Management believes that its commitment to delivering exceptional value to
its customers has enabled newer restaurants to benefit from the name recognition
and reputation for quality developed by existing restaurants. From time to time,
the Company participates in local promotional activities of a community service
nature in each of its restaurant trade areas. With respect to its bakery
operations, the Company currently maintains a full-time staff of four
salespeople and two product development professionals. Additionally, outside
foodservice brokers are utilized from time to time for certain bakery products
and distribution channels.

10
<PAGE>
PURCHASING AND DISTRIBUTION

The Company strives to obtain quality menu ingredients, raw materials and
other supplies and services for its operations from reliable sources at
competitive prices. Management continually researches and evaluates various
ingredients and products in an effort to maintain high quality and to be
responsive to changing consumer tastes. Other than for cheesecakes and other
baked products, the Company's restaurants do not utilize a central food
commissary. Substantially all menu items are prepared from scratch using fresh
ingredients. In order to maximize purchasing efficiencies and to provide for the
freshest ingredients for its menu items while obtaining the lowest possible
prices for the required quality and consistency, each restaurant's management
determines the quantities of food and supplies required and orders the items
from local and regional suppliers on terms negotiated by each restaurant's
management or by the Company's centralized purchasing staff. Management believes
that all essential food and beverage products are available from several
qualified suppliers in all cities in which its operations are located. Most food
and supply items are delivered daily to the Company's restaurants by independent
foodservice distributors, including the largest foodservice distributor in North
America.

COMPETITION

The restaurant industry is highly competitive. There are a substantial
number of restaurant operations that compete directly and indirectly with the
Company, many of which have significantly greater financial resources, higher
revenues and greater economies of scale. The restaurant business is often
affected by changes in consumer tastes and discretionary spending patterns;
national and regional economic conditions; demographic trends; the cost and
availability of raw materials and labor; purchasing power; governmental
regulations and local competitive factors. Any change in these factors could
adversely affect the Company's restaurant operations. Multi-unit foodservice
operations such as those of the Company can also be substantially affected by
adverse publicity resulting from food quality, illness, injury, health concerns
or operating issues stemming from a single restaurant or, with respect to the
Company's bakery operations, a single production run of bakery products. The
Company attempts to manage these factors, but the occurrence of any one of these
factors could cause the entire Company to be adversely affected. With regard to
the Company's bakery operations, competition within the premium baked dessert
market has historically been regional and fragmented. However, overall
competition within that market remains intense. The Company believes that its
restaurant and bakery operations compete favorably with consumers on the
critical attributes of quality, variety, taste, service, consistency and overall
value.

GOVERNMENT REGULATION

The Company is subject to various federal, state and local laws affecting
its business. Each of the Company's restaurants is subject to licensing and
regulation by a number of governmental authorities which may include alcoholic
beverage control, health and safety and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining or
failures to obtain the required licenses or approvals could delay or prevent the
development of new restaurants in particular areas. However, management believes
the Company is in compliance in all material respects with all relevant
governmental regulations, and the Company has not experienced abnormal
difficulties or delays in obtaining the required licenses or approvals required
to open any new restaurant to date.

11
<PAGE>
Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a state authority and, in certain locations, county and
municipal authorities for licenses and permits to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of the daily operations of the Company's restaurants,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, and storage and dispensing
of alcoholic beverages. The Company has not encountered any material problems
relating to alcoholic beverage licenses to date. The failure to receive or
retain, or a delay in obtaining, a liquor license in a particular location could
adversely affect the Company's ability to obtain such licenses elsewhere.

The Company is subject to "dram-shop" statutes in most of the states in
which it has operations, which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment which
wrongfully served alcoholic beverages to such person. The Company carries liquor
liability coverage as part of its existing comprehensive general liability
insurance that it believes is consistent with coverage carried by other entities
in the restaurant industry. Even though the Company is covered by general
liability insurance, a judgment against the Company under a "dram-shop" statute
in excess of the Company's liability coverage could have a material adverse
effect on its operations.

Various federal and state labor laws govern the Company's relationship with
its employees, including such matters as minimum wage and citizenship
requirements, overtime, safety and other working conditions. Significant
additional government-imposed increases in minimum wages, paid leaves of absence
and mandated health benefits, or increased tax reporting and tax payment
requirements for Company employees who receive gratuities could be detrimental
to the profitability of the Company's restaurants and bakery operations. Even
though the Company carries employment practices insurance, a judgment against
the Company in excess of its coverage limitations could have a material adverse
effect on its operations. Management is not aware of any environmental
regulations that have had a material effect on the operations of the Company to
date.

EMPLOYEES

As of March 20, 2000, the Company employed approximately 7,952 persons of
which approximately 7,507 employees worked in the Company's restaurants,
approximately 331 worked in the Company's bakery operations and approximately
114 employees worked in the Company's corporate center and restaurant field
supervision organization. None of the Company's employees are currently covered
by collective bargaining agreements, and the Company has never experienced an
organized work stoppage, strike or labor dispute. The Company believes its
working conditions and compensation packages are generally comparable with those
offered by its competitors and considers overall relations with its employees to
be favorable.

TRADEMARKS

The Company has registered, among other marks, "The Cheesecake Factory",
"Grand Lux Cafe", "The Cheesecake Factory Bakery", "The Cheesecake Factory
Express", and "The Cheesecake Factory Bakery Cafe" as trademarks with the United
States Patent and Trademark Office. Additional trademark applications are
pending. The Company regards its trademarks as having substantial value and as
being important factors in the marketing of its restaurants and bakery products.
The Company has registered or has pending applications to register one or more
of its trademarks in more than 70 foreign countries, although there can be no
assurance that its name and marks are registerable in every country for which
registration is being sought.

12
<PAGE>
EXECUTIVE OFFICERS

David Overton, age 53, co-founded the Company's predecessor in 1972 with his
parents. He has served as the Company's Chairman of the Board, President and
Chief Executive Officer since the Company was incorporated in February 1992.

Gerald W. Deitchle, age 48, joined the Company as Senior Vice President,
Finance and Administration and Chief Financial Officer in July 1995. He was
named Executive Vice President and Chief Financial Officer in March 1997. From
September 1984 to June 1995, Mr. Deitchle was employed by Long John Silver's
Restaurants, Inc. and its predecessor company in various executive and financial
management positions.

Linda J. Candioty, age 45, joined the Company's predecessor in 1977 and
currently serves as Executive Vice President and Secretary.

Debby R. Zurzolo, age 43, joined the Company as Senior Vice President and
General Counsel in April 1999. From 1982 until joining the Company, Ms. Zurzolo
practiced law at Greenberg Glusker Fields Claman & Machtinger LLP in Los
Angeles, California. As a partner with that firm, Ms. Zurzolo represented the
Company on various real estate matters and negotiated several of the Company's
restaurant leases.

ITEM 2: PROPERTIES

All of the Company's 37 existing restaurants are located on leased
properties, and the Company has no current plans to own land and buildings for
future restaurants. The Company owns substantially all of the fixtures and
equipment in its restaurants. Existing restaurant leases have primary terms with
expiration dates ranging from August 5, 2003 to September 14, 2019 (excluding
existing renewal options). The Company does not anticipate any difficulties
renewing its existing leases as they expire; however, there can be no assurance
that the Company will be able to renew such leases after the expiration of all
remaining renewal options. Leases generally provide for rent based on a
percentage of restaurant sales (versus a minimum base rental) and payment of
certain lease-related expenses. See Note 6 of the Notes to the Company's
Consolidated Financial Statements for information regarding aggregate minimum
and percentage rentals paid by the Company for recent periods and information
regarding the Company's obligation to pay minimum rentals in future years.

The Company's corporate center and bakery production facility are located in
Calabasas Hills, California in a 60,000 square-foot facility on a 3.3-acre
parcel of land. The Company currently owns this entire facility (land, building
and equipment) in fee simple.

ITEM 3: LEGAL PROCEEDINGS

From time to time, lawsuits are filed against the Company in the ordinary
course of its business. Such lawsuits typically involve claims from customers
and others related to operational issues common to the foodservice industry. A
number of such claims may exist at any given time. In addition, the Company also
encounters complaints and allegations from current and former employees or
others from time to time which are believed to be common for businesses similar
to that of the Company's. The Company is currently not a party to any litigation
that could have a material adverse effect on the Company's results of
operations, liquidity, financial position or its business and is not aware that
any such litigation is threatened.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of stockholders of the Company during the
fourth quarter of the fiscal year ended December 28, 1999.

13
<PAGE>
PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's common stock is listed on the Nasdaq Stock
Market-Registered Trademark- under the symbol CAKE. The following table sets
forth, for the periods indicated, the high and low sales prices as reported on
the Nasdaq Stock Market.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1998
First Quarter............................................... $22.50 $17.17
Second Quarter.............................................. 27.00 18.88
Third Quarter............................................... 25.00 14.25
Fourth Quarter.............................................. 30.38 14.63

FISCAL 1999
First Quarter............................................... $29.75 $19.00
Second Quarter.............................................. 30.38 21.38
Third Quarter............................................... 32.88 25.75
Fourth Quarter.............................................. 33.50 24.50
</TABLE>

Since its initial public offering in September 1992, the Company has not
declared or paid any cash dividends on its common stock. The Company currently
intends to retain all earnings for the operation and expansion of its business
and does not anticipate paying any cash dividends in the foreseeable future.
There were 558 holders of record of the Company's common stock at March 20,
2000, and the Company estimates there were approximately 10,895 beneficial
stockholders on that date.

14
<PAGE>
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth, for the periods indicated, selected
consolidated financial data which has been derived from the audited Consolidated
Financial Statements of the Company. The following selected consolidated
financial data should be read in conjunction with the Company's Consolidated
Financial Statements and related notes thereto, and with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<CAPTION>
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Restaurant sales................................. $320,450 $243,415 $189,475 $139,715 $ 99,840
Third-party bakery sales......................... 27,032 21,808 19,114 20,590 17,325
-------- -------- -------- -------- --------
Total revenues................................. 347,482 265,223 208,589 160,305 117,165
-------- -------- -------- -------- --------
Costs and expenses:
Restaurant cost of sales......................... 82,496 65,480 50,084 38,643 27,357
Third-party bakery cost of sales................. 12,685 10,626 7,805 8,715 7,027
Labor expenses................................... 105,796 81,475 64,708 49,075 35,161
Other operating costs and expenses............... 77,247 60,452 48,320 37,134 26,804
General and administrative expenses.............. 21,266 17,333 10,096 7,238 4,635
Depreciation and amortization expenses........... 10,913 8,540 6,696 5,350 2,985
Preopening costs................................. 6,217 3,603 6,646 5,394 2,870
-------- -------- -------- -------- --------
Total costs and expenses....................... 316,620 247,509 194,355 151,549 106,839
-------- -------- -------- -------- --------
Income from operations............................. 30,862 17,714 14,234 8,756 10,326
Interest income, net............................... 2,807 2,955 520 499 1,127
Other income (expense), net........................ 555 435 420 (360) 197
-------- -------- -------- -------- --------
Income before income taxes and cumulative effect of
change in accounting principle................... 34,224 21,104 15,174 8,895 11,650
Income tax provision............................... 12,492 7,073 5,235 2,983 3,041
-------- -------- -------- -------- --------
Income before cumulative effect of change in
accounting principle............................. 21,732 14,031 9,939 5,912 8,609
Cumulative effect of change in accounting
principle, net of income tax benefit
of $3,343........................................ -- 6,347 -- -- --
-------- -------- -------- -------- --------
Net income......................................... $ 21,732 $ 7,684 $ 9,939 $ 5,912 $ 8,609
======== ======== ======== ======== ========
Net income per share:
Basic:
Income before cumulative effect of change in
accounting principle........................... $ 1.08 $ 0.70 $ 0.59 $ 0.36 $ 0.53
Cumulative effect of change in accounting
principle...................................... -- (0.32) -- -- --
-------- -------- -------- -------- --------
Net income....................................... $ 1.08 $ 0.38 $ 0.59 $ 0.36 $ 0.53
======== ======== ======== ======== ========
Diluted:
Income before cumulative effect of change in
accounting principle........................... $ 1.03 $ 0.68 $ 0.58 $ 0.36 $ 0.52
Cumulative effect of change in accounting
principle...................................... -- (0.31) -- -- --
-------- -------- -------- -------- --------
Net income....................................... $ 1.03 $ 0.37 $ 0.58 $ 0.36 $ 0.52
======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic............................................ 20,061 19,984 16,842 16,350 16,203
Diluted.......................................... 21,189 20,572 17,132 16,619 16,557
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital................................ $ 35,542 $ 30,264 $ 57,123 $ 8,757 $ 14,019
Total assets....................................... $221,785 $185,420 $177,702 $108,155 $ 91,767
Total long-term debt (including current portion)... $ -- $ -- $ -- $ 6,000 $ --
Stockholders' equity............................... $185,573 $160,291 $152,545 $ 83,512 $ 76,206
</TABLE>

15
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

As of March 20, 2000, the Company operated 34 upscale, high volume, casual
dining restaurants under The Cheesecake Factory name; Grand Lux Cafe at the
Venetian Resort-Hotel-Casino; two self-service "express" foodservice operations
at DisneyQuest-TM- in Orlando and Chicago; and a bakery production facility. The
Company's revenues consist of sales from its restaurant operations and sales
from its bakery operations to third-party foodservice operators and
distributors. Sales and cost of sales are reported separately for restaurant and
third-party bakery activity. All other operating cost and expense categories are
reported on a combined basis for both restaurant and bakery operations.
Comparable restaurant sales include the sales of restaurants open for the full
period of each period being compared. New restaurants enter the comparable sales
base in their thirteenth month of operations.

The Company utilizes a 52/53 week fiscal year ending on the Sunday closest
to December 31 for financial reporting purposes. Commencing with the start of
fiscal 1998, the Company changed its fiscal week and year-end from Sunday to
Tuesday to facilitate certain operational efficiencies. Fiscal 1999, 1998 and
1997 each consisted of 52 weeks. Fiscal 2000 will consist of 53 weeks and will
end on Tuesday, January 2, 2001.

The Company elected early adoption of AICPA Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities," during fiscal 1998. This
accounting standard requires most entities to expense all noncapitalizable
start-up and preopening costs as incurred. Consistent with the practice of most
casual dining restaurant entities, the Company previously deferred such costs
and then amortized them over the twelve-month period following openings. The SOP
does not permit the restatement of previously issued financial statements, and
does not require the presentation of the pro forma effect of retroactive
application. For a discussion of the potential impact of the SOP for future
periods, see "Preopening Costs" in this Item 7. In connection with its adoption
of the SOP, the Company modified its definition of preopening costs to include
only those direct, incremental out-of-pocket costs incurred to open new
restaurants which are not otherwise capitalizable. Prior to fiscal 1998,
deferred preopening costs (and their related amortization expense) included
those costs plus allocated costs for management recruitment and training, as
well as allocated costs related to field supervision and corporate support
resources which were specifically identifiable to restaurant openings. Effective
with fiscal 1998, these allocated costs were reclassified to the general and
administrative expense category. For all periods presented in the Consolidated
Financial Statements, certain prior year amounts for restaurant cost of sales,
labor, other operating costs and expenses, and general and administrative
expenses have also been reclassified to further improve their comparability to
similar cost and expense categories reported by other restaurant entities.

16
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Consolidated
Statements of Operations of the Company expressed as percentages of total
revenues.

<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
<S> <C> <C> <C>
1999 1998 1997
----- ----- -----
Revenues:
Restaurant sales.......................................... 92.2% 91.8% 90.8%
Third-party bakery sales.................................. 7.8 8.2 9.2
----- ----- -----
Total revenues.......................................... 100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Restaurant cost of sales.................................. 23.7 24.7 24.0
Third-party bakery cost of sales.......................... 3.7 4.0 3.8
Labor expenses............................................ 30.5 30.7 31.0
Other operating costs and expenses........................ 22.2 22.8 23.2
General and administrative expenses....................... 6.1 6.5 4.8
Depreciation and amortization expenses.................... 3.1 3.2 3.2
Preopening costs.......................................... 1.8 1.4 3.2
----- ----- -----
Total costs and expenses................................ 91.1 93.3 93.2
----- ----- -----
Income from operations...................................... 8.9 6.7 6.8
Interest income, net........................................ 0.8 1.1 0.3
Other income, net........................................... 0.2 0.2 0.2
----- ----- -----
Income before income taxes and cumulative effect of change
in accounting principle................................... 9.9 8.0 7.3
Income tax provision........................................ 3.6 2.7 2.5
----- ----- -----
Income before cumulative effect of change in accounting
principle................................................. 6.3 5.3 4.8
Cumulative effect of change in accounting principle, net of
income tax benefit........................................ -- 2.4 --
----- ----- -----
Net income.................................................. 6.3% 2.9% 4.8%
===== ===== =====
</TABLE>

FISCAL 1999 COMPARED TO FISCAL 1998

REVENUES

Total revenues increased 31% to $347.5 million for fiscal 1999 compared to
$265.2 million for fiscal 1998. Restaurant sales increased $77.0 million or 32%
to $320.5 million for fiscal 1999 compared to $243.5 million for the prior
fiscal year. The $77.0 million increase in restaurant sales for fiscal 1999
consists of the following components: the eight new restaurants opened during
fiscal 1999 accounted for approximately $39.6 million or 51% of the increase;
noncomparable sales from restaurants opened during fiscal 1998 accounted for
approximately $28.3 million or 37% of the increase; and comparable restaurant
sales accounted for approximately $9.1 million or 12% of the increase.
Restaurant operating weeks increased 29% to 1,661 for fiscal 1999 compared to
1,286 for fiscal 1998. Average sales per restaurant operating week increased to
$192,900 for fiscal 1999 compared to $189,300 for the prior fiscal year. Sales
for comparable restaurants, which increased 3.8% during fiscal 1999, benefited
from an effective menu price increase of approximately 2% which was taken in
February 1999.

Third-party bakery sales increased 24% to $27.0 million for fiscal 1999
versus $21.8 million for the prior fiscal year. Sales to warehouse club
operators represented approximately 57% of total third-party bakery sales for
fiscal 1999 compared to 63% for fiscal 1998.

17
<PAGE>
RESTAURANT COST OF SALES

Restaurant cost of sales increased $17.0 million or 26% to $82.5 million in
fiscal 1999 versus $65.5 million in fiscal 1998. This increase was primarily
attributable to the 32% increase in restaurant sales in fiscal 1999. As a
percentage of restaurant sales, these costs decreased to 25.7% during fiscal
1999 versus 26.9% for fiscal 1998, principally as a result of the impact of menu
price increases.

The menu at the Company's restaurants is one of the most diversified in the
industry and, accordingly, is not overly dependent on a single commodity. For
new restaurants, cost of sales will typically be higher than normal during the
first 90-120 days of operations until each restaurant's staff becomes more
accustomed to optimally predicting, managing and servicing the high sales
volumes typically experienced by the Company's restaurants.

THIRD-PARTY BAKERY COST OF SALES

Cost of sales for third-party bakery sales, which include ingredient,
packaging and production supply costs, were $12.7 million for fiscal 1999 versus
$10.6 million for the same period of the prior year. The increase of $2.1
million or 20% was principally attributable to the 24% increase in third-party
bakery sales for fiscal 1999. As a percentage of related third-party bakery
sales, cost of sales for fiscal 1999 decreased to 46.9% versus 48.7% for fiscal
1998, principally as a result of lower dairy-related commodity costs. The
Company's costs for certain of its dairy-related commodities (principally cream
cheese, manufacturing cream and butter) increased as much as 50% to 75% during
certain weeks of fiscal 1998 when the overall level of such costs rose across
the country as a result of unfavorable supply and demand conditions. Since
December 1998, the Company's costs for its dairy-related commodities have
gradually returned to their historical norms, but remain potentially volatile.
There can be no assurance that future costs for these commodities, or any
commodities used in the Company's bakery or restaurant operations, will not
begin to rise again due to market conditions beyond the Company's control.

LABOR EXPENSES

Labor expenses, which include restaurant-level labor costs and bakery direct
production labor (including associated fringe benefits), were $105.8 million for
fiscal 1999 versus $81.5 million for fiscal 1998, an increase of $24.3 million
or 30%. This increase was principally due to the 31% increase in total revenues
during fiscal 1999. As a percentage of total revenues, labor expenses decreased
slightly to 30.5% compared to 30.7% for fiscal 1998. For new restaurants, labor
expenses will typically be higher than normal during the first 90-120 days of
operations until each restaurant's staff becomes more accustomed to optimally
predicting, managing and servicing the high sales volumes typically experienced
by the Company's restaurants.

OTHER OPERATING COSTS AND EXPENSES

Other operating costs and expenses consist of restaurant-level occupancy and
other operating expenses (excluding food costs and labor expenses reported
separately) and bakery production overhead, selling and distribution expenses.
Other operating costs and expenses increased 28% to $77.2 million for fiscal
1999 versus $60.5 million for fiscal 1998. This increase was principally
attributable to the 31% increase in total revenues for fiscal 1999. As a
percentage of total revenues, other operating costs and expenses decreased
slightly to 22.2% for fiscal 1999 versus 22.8% for fiscal 1998, reflecting lower
insurance costs and the leveraging of the fixed component of this expense
category with higher revenues.

18
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of restaurant support expenses
(field supervision, manager recruitment and training, relocation and other
related expenses), bakery administrative expenses, and corporate support and
governance expenses. General and administrative expenses increased to $21.3
million for fiscal 1999 versus $17.3 million for fiscal 1998, an increase of
$4.0 million or 23%. As a percentage of total revenues, general and
administrative expenses decreased to 6.1% for fiscal 1999 versus 6.5% for the
prior fiscal year.

During the three years ended with fiscal 1999, the Company made significant
investments to strengthen and add capacity to its operational support
infrastructure in order to continue its growth plan in a controlled manner. Most
of these investments were directly related to supporting the growth and
operational execution of the Company's core restaurant and bakery operations.
Additional resources were allocated to building the field supervision and
training organizations, strengthening the opening teams for new restaurants,
recruiting and training additional qualified restaurant management personnel,
and improving accounting and information systems. Additionally, the Company
aggressively pursued new large-account customers for its third-party bakery
operations that required additional investments in bakery support resources.
During fiscal 1999, the Company was able to more effectively leverage the
investment in its operational support infrastructure with higher sales volumes.
The Company plans to continue its efforts to leverage further investments in its
operational support infrastructure during fiscal 2000.

DEPRECIATION AND AMORTIZATION EXPENSES

Depreciation and amortization expenses increased to $10.9 million for fiscal
1999 versus $8.5 million for fiscal 1998, an increase of $2.4 million or 28%.
This increase was principally due to new restaurant openings. As a percentage of
total revenues, depreciation and amortization expenses were 3.1% for fiscal 1999
versus 3.2% for fiscal 1998.

PREOPENING COSTS

Preopening costs increased to $6.2 million for fiscal 1999 versus $3.6
million for fiscal 1998, an increase of $2.6 million or 72%. The Company opened
eight restaurants during fiscal 1999, including Grand Lux Cafe that was an
entirely new concept with unusually heavy preopening costs, versus five
restaurant openings during fiscal 1998.

Preopening costs will fluctuate from period to period, based on the number
and timing of restaurant openings and the specific preopening costs incurred for
each restaurant. These fluctuations in preopening costs could be significant.
Based on the Company's current growth objectives for fiscal 2000 and 2001,
preopening costs for each of those years will likely exceed the respective
amount of preopening costs as compared to the prior year. As a result of the
highly customized and operationally complex nature of the Company's restaurants,
the preopening process is significantly more extensive and costly for the
Company relative to that of other chain restaurant operations. Preopening costs
will also vary from location to location depending on a number of factors,
including (but not limited to) the proximity of other established Company
restaurants, the size and physical layout of each location, and the relative
difficulty of the restaurant staffing and training process. Additionally, new
concepts such as Grand Lux Cafe are expected to incur initial preopening costs
that could be significantly higher than preopening costs for established Company
restaurant concepts.

FISCAL 1998 COMPARED TO FISCAL 1997

REVENUES

Total revenues increased 27% to $265.2 million for fiscal 1998 versus $208.6
million for fiscal 1997. Restaurant sales increased to $243.5 million for fiscal
1998 versus $189.5 million for the prior fiscal year, an

19
<PAGE>
increase of $54.0 million or 28%. The $54.0 million increase in restaurant sales
for fiscal 1998 consists of the following components: the five new restaurants
opened during fiscal 1998 accounted for approximately $11.9 million or 22% of
the increase; noncomparable sales from restaurants opened during fiscal 1997
accounted for approximately $37.5 million or 70% of the increase; and comparable
restaurant sales accounted for approximately $4.6 million or 8% of the increase.
The impact of two additional days for fiscal 1997 has been excluded from all
comparable and average sales comparisons included herein. Restaurant operating
weeks increased 27% to 1,286 for fiscal 1998 versus 1,013 for fiscal 1997.
Average sales per restaurant operating week increased to $189,300 for fiscal
1998 versus $185,700 for the prior fiscal year. Sales for comparable
restaurants, which increased 4.0% for fiscal 1998, benefited from menu price
increases of approximately 1.5% which were taken during
December 1997/January 1998 and again in June/ July 1998.

Third-party bakery sales increased 14% to $21.8 million for fiscal 1998
versus $19.1 million for the prior fiscal year. This increase was principally
attributable to higher sales volumes to warehouse club operators. For fiscal
1998, sales to warehouse club operators represented approximately 63% of total
third-party bakery sales.

RESTAURANT COST OF SALES

Restaurant cost of sales increased to $65.5 million in fiscal 1998 from
$50.1 million in fiscal 1997, an increase of $15.4 million or 31%. This increase
was primarily attributable to the 28% increase in restaurant sales in fiscal
1998. As a percentage of restaurant sales, these costs increased slightly to
26.9% during fiscal 1998 versus 26.4% for fiscal 1997 principally as a result of
higher costs for produce, poultry and dairy commodities, offset in part by menu
price increases.

THIRD-PARTY BAKERY COST OF SALES

Cost of sales for third-party bakery sales were $10.6 million for fiscal
1998 versus $7.8 million for the same period of the prior year. The increase of
$2.8 million or 36% was attributable to the 14% increase in third-party bakery
sales for fiscal 1998, coupled with significantly higher dairy commodity costs.
As a percentage of their related third-party bakery sales, cost of sales for
fiscal 1998 increased to 48.7% versus 40.8% for fiscal 1997. This increase was
primarily due to significantly higher costs for dairy-related commodities.

LABOR EXPENSES

Labor expenses were $81.5 million for fiscal 1998 versus $64.7 million for
fiscal 1997, an increase of $16.8 million or 26%. This increase was principally
due to the 27% increase in total revenues during fiscal 1998. As a percentage of
total revenues, labor expenses were 30.7% versus 31.0% for fiscal 1997. The
slight decrease in labor as a percentage of total revenues for fiscal 1998 was
principally attributable to improved labor productivity at the restaurants and
the leveraging of the fixed component of such costs by higher sales volumes.

OTHER OPERATING COSTS AND EXPENSES

Other operating costs and expenses increased 25% to $60.5 million for fiscal
1998 versus $48.3 million for fiscal 1997. This increase was principally
attributable to the 27% increase in total revenues for fiscal 1998. As a
percentage of total revenues, other operating costs and expenses decreased
slightly to 22.8% for fiscal 1998 versus 23.2% for fiscal 1997, reflecting lower
costs for workers' compensation insurance and the leveraging of the fixed
component of this expense category with higher revenues.

20
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased to $17.3 million for fiscal
1998 versus $10.1 million for fiscal 1997, an increase of $7.2 million or 72%.
As a percentage of total revenues, general and administrative expenses increased
to 6.5% for fiscal 1998 versus 4.8% for the prior fiscal year. As a result of
the Company's fiscal 1998 adoption of SOP 98-5, "Reporting on the Costs of
Start-Up Activities," certain costs and expenses previously included in the
preopening cost category were reclassified to the general and administrative
expense category. Refer to the "General" section of this Item 7. Accordingly,
reported general and administrative expenses for fiscal 1998 are not comparable
to those reported in fiscal 1997 and prior years.

DEPRECIATION AND AMORTIZATION EXPENSES

Depreciation and amortization expenses increased to $8.5 million for fiscal
1998 versus $6.7 million for fiscal 1997, an increase of $1.8 million or 27%.
This increase was principally due to new restaurant openings. As a percentage of
total revenues, depreciation and amortization expenses were 3.2% for both fiscal
1998 and 1997.

PREOPENING COSTS

As a result of the Company's fiscal 1998 adoption of SOP 98-5, "Reporting on
the Costs of Start-Up Activities," the Company modified its definition of
preopening costs and expensed those costs as incurred. Refer to the "General"
section of this Item 7. Accordingly, incurred preopening costs of $3.6 million
reported for fiscal 1998 are not comparable to preopening amortization reported
for fiscal 1997 and prior years. The Company opened five restaurants during
fiscal 1998 versus six during fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents, for the periods indicated, a summary of the
Company's key liquidity measurements.

<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
<S> <C> <C> <C>
1999 1998 1997
----- ----- -----
<CAPTION>
(DOLLAR AMOUNTS IN
MILLIONS)
<S> <C> <C> <C>
Cash and marketable securities on hand, end of year.... $55.2 $52.7 $53.6
Net working capital, end of year....................... $35.5 $30.3 $57.1
Current ratio, end of year............................. 2.1:1 2.2:1 3.7:1
Long-term debt, end of year............................ $ -- $ -- $ --
Cash provided by operations............................ $37.8 $27.0 $11.5
Capital expenditures................................... $38.6 $28.0 $21.7
</TABLE>

During fiscal 1999, the Company's total amount of cash and marketable
securities on hand increased by $2.5 million to $55.2 million as of
December 28, 1999 versus $52.7 million as of the end of fiscal 1998. The
Company's net working capital position increased by $5.2 million to $35.5
million as of the end of fiscal 1999.

As of March 20, 2000, there were no borrowings outstanding under the
Company's $25 million revolving credit and term loan facility (the "Credit
Facility"). The terms of the Credit Facility were amended in March 1998 to
provide for, among other things, borrowings under the Credit Facility to bear
interest at variable rates based, at the Company's option, on either the prime
rate of interest, the lending institution's cost of funds rate plus 0.75%, or
the applicable LIBOR rate plus 0.75%. The Credit Facility expires on May 31,
2000. On that date, a maximum of $25 million of any borrowings outstanding under
the Credit Facility automatically convert into a four-year term loan, payable in
equal quarterly installments at

21
<PAGE>
interest rates of 0.5% higher than the applicable revolving credit rates. The
Credit Facility is not collateralized and requires the Company to maintain
certain financial ratios and to observe certain restrictive covenants with
respect to the conduct of its operations, with which the Company is currently in
compliance. The Company intends to pursue the renewal of the Credit Facility for
another two years to provide backup liquidity.

During fiscal 1999, the Company's total capital expenditures were
approximately $38.6 million, most of which were related to its restaurant
operations. For fiscal 2000, the Company currently estimates its total capital
expenditure requirement to range between $33-$38 million, excluding
approximately $7-$8 million of expected noncapitalizable preopening costs and
net of agreed-upon landlord construction contributions. This estimate
contemplates nine new restaurants to be opened during fiscal 2000 and also
provides for an anticipated increase in construction-in-progress disbursements
for anticipated fiscal 2001 openings. The Company has historically leased the
land and building shells for its restaurant locations and has expended cash for
leasehold improvements and furnishings, fixtures and equipment for the
locations. As of March 20, 2000, the Company had seven signed leases and several
letters of intent for potential new restaurant locations. The Company's primary
expansion objective is to increase its total restaurant productive square feet
at least 25% during fiscal 2000.

Based on its current expansion objectives, the Company believes its existing
cash and short-term investments on hand, coupled with cash provided by
operations, available borrowings under its Credit Facility, and landlord
construction contributions (when available) should be sufficient to finance its
planned capital expenditures and other operating activities through fiscal 2001.
Thereafter, the Company may seek additional funds to finance its future growth.
However, there can be no assurance that such funds will be available when needed
or be available on terms acceptable to the Company.

In November 1999, the Company's Board of Directors authorized an increase
from 450,000 to 750,000 in the number of shares of its common stock the Company
may repurchase for reissuance upon the exercise of stock options under the
Company's current stock option plans. A source of funding for share repurchases
will be the proceeds to the Company from the exercise of employee stock options.
Shares may be repurchased in the open market or through privately negotiated
transactions at times and prices considered appropriate by the Company. As of
March 20, 2000, the Company had repurchased 321,000 shares at a total cost of
approximately $6.6 million.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company elected early adoption of Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities," during fiscal 1998. This
accounting standard, issued in 1998 by the American Institute of CPAs, requires
most entities to expense all start-up and preopening costs as they are incurred.
Consistent with the practice of most casual dining restaurant companies, the
Company previously deferred such costs and then wrote them off over the
twelve-month period following the opening of each restaurant. The early adoption
of SOP 98-5 was made retroactive to the first quarter of fiscal 1998. The
cumulative effect of this change in accounting principle, net of income tax
benefit, was $6.3 million or $0.31 per diluted share and was recorded
retroactively to the first quarter of 1998 as a one-time charge. This accounting
standard accelerates the Company's recognition of preopening costs but benefits
the post-opening results of new restaurants.

In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives will
be recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designed as part of a hedge transaction
and, if it is, the type of hedge transaction. The new statement will be
effective the first quarter of 2001. The Company does not believe the new
standard will have a material impact on the Company's results of operations.

22
<PAGE>
IMPACT OF INFLATION AND CHANGES IN THE COSTS OF KEY OPERATING RESOURCES

The Company's profitability is dependent, among other things, upon its
ability to anticipate and react to changes in the costs of key operating
resources, including food and other raw materials, labor, and other supplies and
services. Various factors beyond the Company's control, including adverse
weather and general marketplace conditions, may affect the availability and cost
of food and other raw materials. As a result of unfavorable supply and demand
conditions, the Company's cost for dairy-related commodities increased to 4.3%
of total revenues for fiscal 1998 compared to 3.4% for fiscal 1997. These costs
decreased to 3.7% of total revenues for fiscal 1999; however, there can be no
assurance that future costs for these commodities, or any commodities used in
the Company's restaurant or bakery operations, will not fluctuate due to market
conditions beyond the Company's control. The impact of inflation on food, labor
and occupancy costs can significantly affect the Company's operations. Many of
the Company's restaurant and bakery employees are paid hourly rates related to
the federal minimum wage which increased in 1988, 1991, 1996 and 1997. Proposals
are currently pending in Congress to again increase the minimum wage.
Additionally, a general shortage in the availability of qualified restaurant
management and hourly workers in certain geographical areas in which the Company
operates has caused related increases in the costs of recruiting and
compensating such employees. Certain operating costs, such as utilities, taxes,
insurance and outside services, continue to increase with the general level of
inflation.

While management has been able to react to inflation and other changes in
the costs of key operating resources by increasing prices for its menu items and
bakery products, coupled with more efficient purchasing practices, productivity
improvements and greater economies of scale, there can be no assurance that it
will be able to continue to do so in the future. Substantially all of the leases
for the Company's restaurants provide for additional rent obligations based on a
percentage of sales. As a result, rent expense will absorb a proportionate share
of any menu price increases in the restaurants. There can be no assurance that
the Company will continue to generate increases in comparable restaurant sales
and third-party bakery sales in amounts sufficient to offset inflationary or
other cost pressures.

SEASONALITY AND QUARTERLY RESULTS

The Company's business is subject to seasonal fluctuations. Historically,
the Company's highest earnings have occurred in the second and third quarters of
the fiscal year, as the Company's sales in its existing restaurants have
typically been higher during the second and third quarters of the fiscal year.
Approximately one-half of the Company's restaurants are located in or near
shopping centers and malls that typically experience seasonal fluctuations in
sales. The Company's third-party bakery operations are seasonal to the extent
that the fourth quarter's sales are typically higher due to holiday business.
Additionally, third-party bakery sales comparisons may significantly fluctuate
from quarter to quarter due to the timing and scope of large orders of seasonal
or promotional bakery products from third-party bakery customers. As a result of
the seasonality of the Company's business, results for any quarter are not
necessarily indicative of the results that may be achieved for a full fiscal
year. Quarterly results have been, and in the future are likely to be,
significantly impacted by the timing of new restaurant openings and their
respective preopening costs.

YEAR 2000 READINESS

To address the year 2000 issue, the Company began to formulate a plan during
fiscal 1998 to assess, remediate and test all mission-critical internal computer
systems and processes. The Company's plan also included an assessment of the
readiness of key suppliers of mission-critical goods and services to its
restaurant and bakery operations. All phases of the Company's year 2000
readiness plan were completed as scheduled. To date, the Company has not
experienced any year 2000 issues with respect to its internal computer systems
and key suppliers, and did not experience any loss of revenues as a result of
the issue. The Company's total costs to address the year 2000 issues were not
material, and any additional costs are expected to be minimal. Although the
Company has not experienced any year 2000 issues to date and

23
<PAGE>
believes that it is unlikely that any such issues will arise in the future,
there can be no assurance that unforeseen year 2000 issues will not arise in the
future and adversely affect the Company's results of operations, liquidity and
financial position.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates on
funded debt. This exposure relates to its $25 million revolving credit and term
loan facility (the "Credit Facility"). There were no borrowings outstanding
under the Credit Facility during fiscal 1998, 1999 or fiscal 2000 through
March 20, 2000. Borrowings under the Credit Facility bear interest at variable
rates based on either the prime rate of interest, the lending institution's cost
of funds plus 0.75% or LIBOR plus 0.75%. A hypothetical 1% interest rate change
would not have any impact on the Company's results of operations.

A change in market prices also exposes the Company to market risk related to
its investments in marketable securities. As of December 28, 1999, the Company
held $31.2 million in available-for-sale marketable securities. A hypothetical
10% decline in the market value of those securities would result in a $3.1
million unrealized loss and a corresponding decline in their fair value. This
hypothetical decline would not affect cash flow from operations and would not
have an impact on net income until the securities were disposed of.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required to be filed hereunder are set forth on
pages 25 through 42 of this report.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEMS 10, 11, 12 AND 13:

The information required by Items 10, 11, 12 and 13 is hereby incorporated
by reference from the Registrant's definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 30, 2000 and which will be filed with
the Commission within 120 days after the close of the Company's fiscal year.

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K

The following documents are filed as a part of this Report:

(a) The Financial Statements required to be filed hereunder are listed in
the Index to Financial Statements on page 25 of this report.

(b) The Exhibits required to be filed hereunder are listed in the exhibit
index included herein at page 43.

(c) The Registrant did not file any reports on Form 8-K during the last
quarter of its fiscal year ended December 28, 1999.

24
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NO.
--------
<S> <C>
Report of Independent Accountants........................... 26

Consolidated Balance Sheets as of December 28, 1999 and
December 29, 1998......................................... 27

Consolidated Statements of Operations for Fiscal Years 1999,
1998 and 1997............................................. 28

Consolidated Statements of Equity for Fiscal Years 1999,
1998 and 1997............................................. 29

Consolidated Statements of Cash Flows for Fiscal Years 1999,
1998 and 1997............................................. 30

Notes to Consolidated Financial Statements.................. 31
</TABLE>

25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
The Cheesecake Factory Incorporated:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, equity and cash flows present fairly, in
all material respects, the financial position of The Cheesecake Factory
Incorporated and Subsidiaries at December 28, 1999 and December 29, 1998, and
the consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended December 28, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

As discussed in Note 10 to the consolidated financial statements, the
Company changed its method of accounting for the cost of start-up activities in
1998.

PRICEWATERHOUSECOOPERS LLP

Los Angeles, California
February 4, 2000

26
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 24,026 $ 17,467
Investments and marketable securities..................... 21,686 21,596
Accounts receivable....................................... 5,333 3,473
Other receivables......................................... 6,760 5,478
Inventories............................................... 8,121 5,854
Prepaid expenses.......................................... 2,295 826
Deferred income taxes..................................... 257 --
-------- --------
Total current assets.................................... 68,478 54,694
-------- --------
Property and equipment, net................................. 135,512 107,660
-------- --------
Other assets:
Marketable securities..................................... 9,524 13,609
Other receivables......................................... 3,922 5,286
Trademarks................................................ 1,794 1,614
Other..................................................... 2,555 2,557
-------- --------
Total other assets...................................... 17,795 23,066
-------- --------
Total assets.......................................... $221,785 $185,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 13,104 $ 11,303
Income taxes payable...................................... 1,973 1,421
Other accrued expenses.................................... 17,859 11,290
Deferred income taxes..................................... -- 416
-------- --------
Total current liabilities............................... 32,936 24,430
-------- --------
Deferred income taxes....................................... 3,276 699
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued and outstanding................. -- --
Junior participating cumulative preferred stock, $.01 par
value, 150,000 shares authorized; none issued and
outstanding............................................. -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 20,409,863 and 20,108,102 issued and
outstanding for 1999 and 1998, respectively............. 204 201
Additional paid-in capital................................ 123,677 117,713
Retained earnings......................................... 67,612 45,880
Unrealized loss on available-for-sale securities.......... (115) (35)
Treasury stock, 295,500 and 211,000 shares at cost for
1999 and 1998, respectively............................. (5,805) (3,468)
-------- --------
Total stockholders' equity.............................. 185,573 160,291
-------- --------
Total liabilities and stockholders' equity............ $221,785 $185,420
======== ========
</TABLE>

See the accompanying notes to the consolidated financial statements.

27
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
<S> <C> <C> <C>
1999 1998 1997
-------- -------- --------
Revenues:
Restaurant sales.......................................... $320,450 $243,415 $189,475
Third-party bakery sales.................................. 27,032 21,808 19,114
-------- -------- --------
Total revenues.......................................... 347,482 265,223 208,589
-------- -------- --------
Costs and expenses:
Restaurant cost of sales.................................. 82,496 65,480 50,084
Third-party bakery cost of sales.......................... 12,685 10,626 7,805
Labor expenses............................................ 105,796 81,475 64,708
Other operating costs and expenses........................ 77,247 60,452 48,320
General and administrative expenses....................... 21,266 17,333 10,096
Depreciation and amortization expenses.................... 10,913 8,540 6,696
Preopening costs.......................................... 6,217 3,603 6,646
-------- -------- --------
Total costs and expenses................................ 316,620 247,509 194,355
-------- -------- --------
Income from operations...................................... 30,862 17,714 14,234
Interest income, net........................................ 2,807 2,955 520
Other income, net........................................... 555 435 420
-------- -------- --------
Income before income taxes and cumulative effect of change
in accounting principle................................... 34,224 21,104 15,174
Income tax provision........................................ 12,492 7,073 5,235
-------- -------- --------
Income before cumulative effect of change in accounting
principle................................................. 21,732 14,031 9,939
Cumulative effect of change in accounting principle, net of
income tax benefit of $3,343.............................. -- 6,347 --
-------- -------- --------
Net income.................................................. $ 21,732 $ 7,684 $ 9,939
======== ======== ========

Net income per share:
Basic:
Income before cumulative effect of change in accounting
principle............................................... $ 1.08 $ 0.70 $ 0.59
Cumulative effect of change in accounting principle....... -- (0.32) --
-------- -------- --------
Net income................................................ $ 1.08 $ 0.38 $ 0.59
======== ======== ========
Diluted:
Income before cumulative effect of change in accounting
principle............................................... $ 1.03 $ 0.68 $ 0.58
Cumulative effect of change in accounting principle....... -- (0.31) --
-------- -------- --------
Net income................................................ $ 1.03 $ 0.37 $ 0.58
======== ======== ========
Weighted average shares outstanding:
Basic..................................................... 20,061 19,984 16,842
Diluted................................................... 21,189 20,572 17,132
</TABLE>

See the accompanying notes to the consolidated financial statements.

28
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAIN (LOSS) ON
COMMON PAID-IN RETAINED AVAILABLE-FOR-SALE TREASURY
STOCK CAPITAL EARNINGS SECURITIES STOCK TOTAL
-------- ---------- -------- ------------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1996............ $109 $ 55,264 $28,323 $ (184) $ -- $ 83,512

Net income............................ -- -- 9,939 -- -- 9,939
Issuance of common stock pursuant to
stock option plan, including tax
benefit............................. 1 323 -- -- -- 324
Issuance of common stock pursuant to
follow-on public offering........... 23 58,598 -- -- -- 58,621
Net unrealized gain................... -- -- -- 149 -- 149
Three-for-two stock split............. 66 -- (66) -- -- --
---- -------- ------- ------- ------- --------
Balance, December 30, 1997............ 199 114,185 38,196 (35) -- 152,545

Net income............................ -- -- 7,684 -- -- 7,684
Issuance of common stock pursuant to
stock option plan, including tax
benefit............................. 2 3,528 -- -- -- 3,530
Purchase of treasury stock............ -- -- -- -- (3,468) (3,468)
---- -------- ------- ------- ------- --------
Balance, December 29, 1998............ 201 117,713 45,880 (35) (3,468) 160,291

Net income............................ -- -- 21,732 -- -- 21,732
Issuance of common stock pursuant to
stock option plan, including tax
benefit............................. 3 5,964 -- -- -- 5,967
Net unrealized loss................... -- -- -- (80) -- (80)
Purchase of treasury stock............ -- -- -- -- (2,337) (2,337)
---- -------- ------- ------- ------- --------
Balance, December 28, 1999............ $204 $123,677 $67,612 $ (115) $(5,805) $185,573
==== ======== ======= ======= ======= ========
</TABLE>

See the accompanying notes to the consolidated financial statements.

29
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
<S> <C> <C> <C>
1999 1998 1997
-------- -------- --------
Cash flows from operating activities:
Net income................................................ $ 21,732 $ 7,684 $ 9,939
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization........................... 10,913 8,540 6,696
Cumulative effect of change in accounting principle..... -- 6,347 --
Preopening amortization................................. -- -- 6,646
Loss on asset sale...................................... -- -- 122
Loss on available-for-sale securities................... 122 9 64
Deferred income taxes................................... 1,904 (2,965) 2,447
Changes in assets and liabilities:
Accounts receivable................................... (1,860) (1,309) 219
Other receivables..................................... 82 4,198 (7,658)
Inventories........................................... (2,267) (785) (863)
Prepaid expenses...................................... (1,469) 137 119
Deferred preopening costs............................. -- -- (9,411)
Trademarks............................................ (248) (416) (1,006)
Other................................................. (79) (774) (504)
Accounts payable...................................... 1,801 (768) 3,162
Income taxes payable.................................. 598 4,097 (168)
Other accrued expenses................................ 6,569 3,039 1,687
-------- -------- --------
Cash provided by operating activities............... 37,798 27,034 11,491
-------- -------- --------
Cash flows from investing activities:
Additions to property and equipment....................... (38,616) (27,966) (21,703)
Sales of property and equipment........................... -- -- 47
Investments in available-for-sale securities.............. (35,763) (51,774) (10,605)
Sales of available-for-sale securities.................... 39,510 26,568 2,833
-------- -------- --------
Cash used by investing activities................... (34,869) (53,172) (29,428)
-------- -------- --------
Cash flows from financing activities:
Net repayments under revolving credit facility............ -- -- (6,000)
Issuance of common stock.................................. 3 2 23
Proceeds from exercise of employee stock options.......... 5,964 3,528 323
Proceeds from follow-on public offering of common stock... -- -- 58,598
Purchase of treasury stock................................ (2,337) (3,468) --
-------- -------- --------
Cash provided by financing activities............... 3,630 62 52,944
-------- -------- --------
Net change in cash and cash equivalents..................... 6,559 (26,076) 35,007
Cash and cash equivalents at beginning of period............ 17,467 43,543 8,536
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 24,026 $ 17,467 $ 43,543
======== ======== ========
</TABLE>

See the accompanying notes to the consolidated financial statements.

30
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION:

The accompanying consolidated financial statements include the accounts of
The Cheesecake Factory Incorporated and its wholly owned subsidiaries (The
Cheesecake Factory Restaurants, Inc.; The Cheesecake Factory Bakery
Incorporated; The Houston Cheesecake Factory Corporation; and Grand Lux Cafe
LLC). All of the Company's restaurants and its bakery production facility are
located within the United States. All significant intercompany accounts and
transactions for the periods presented have been eliminated in consolidation.

FISCAL YEAR:

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with an original
maturity of three months or less at date of purchase to be cash equivalents.

INVESTMENTS AND MARKETABLE SECURITIES:

The Company records investments and marketable securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115 establishes
accounting and reporting requirements for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. All investment securities must be classified as one of the
following: held-to-maturity, trading or available-for-sale. Debt securities that
the Company expects to hold to maturity are classified as held-to-maturity
securities and are reported at their amortized costs. Debt securities that the
Company classifies as available-for-sale securities are reported at fair value,
with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity (net of related tax effect) until
realized. Fair value is determined by the most recently traded price of each
security at the Company's balance sheet date, plus any accrued interest. Net
realized gains or losses are determined on the specific identification cost
method. At December 28, 1999 and December 29, 1998, all of the Company's
investments and marketable securities were classified in the available-for-sale
category.

ACCOUNTS AND OTHER RECEIVABLES:

The Company's accounts receivable principally result from credit sales to
third-party bakery customers. Other receivables consist of various amounts due
from landlords, insurance providers and others in the ordinary course of
business.

CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to a
concentration of credit risk are cash and cash equivalents, investments and
marketable securities, and accounts receivable. The Company

31
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
currently maintains a majority of its day-to-day operating cash balances with
two major financial institutions. At times, cash balances may be in excess of
FDIC insurance limits. The Company places its temporary excess cash with major
financial institutions that, in turn, invest in investment-grade commercial
paper and other corporate obligations, certificates of deposit, government
obligations and other investments and marketable securities. The Company's
investment policy limits the amount of exposure to any one financial institution
or investment. With respect to marketable securities, the net unrealized loss on
the Company's investment portfolio as of December 28, 1999 and December 29, 1998
has been reported (net of tax effect) as a separate component within the
stockholders' equity section of the Consolidated Balance Sheet. Concentration of
credit risk for accounts receivable is considered by the Company to be minimal
as a result of the large number of third-party bakery customers, as well as the
payment histories and general financial condition of the larger third-party
bakery customers.

INVENTORIES:

Inventories are stated at the lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Improvements are capitalized
while repair and maintenance costs are expensed as incurred. Depreciation is
calculated using the straight-line method over the estimated economic lives of
the assets or the primary terms of the respective leases. Depreciation periods
are as follows:

<TABLE>
<S> <C>
Land improvements..................................... 25 years
Buildings............................................. 30 years
Leasehold improvements................................ Primary term of lease
Restaurant fixtures and equipment..................... 10 years
Bakery equipment...................................... 15 years
Automotive equipment.................................. 5 years
Computer equipment.................................... 3 years
</TABLE>

PREOPENING COSTS:

Effective with fiscal 1998, preopening costs are expensed as incurred. For
fiscal 1997 and prior years, preopening costs were deferred and then amortized
over the twelve-month period following the opening of the respective facilities.

INCOME TAXES:

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS
No. 109, deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory rates applicable to future
years to the difference between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. Under SFAS No. 109, the effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.

32
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
NET INCOME PER SHARE:

In accordance with the provisions of SFAS No. 128, "Earnings Per Share",
basic EPS is computed by dividing net income available to common stockholders by
the weighted average number of common shares outstanding during the period.
Diluted EPS includes the dilutive effect of potential stock option exercises,
calculated using the treasury stock method.

RECENT ACCOUNTING PRONOUNCEMENTS:

During fiscal 1998, the Company elected early adoption of AICPA Statement of
Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities." This
accounting standard requires most entities to expense all start-up and
preopening costs as they are incurred. Consistent with the practice of most
casual dining restaurant companies, the Company previously deferred such costs
and then wrote them off over the twelve-month period following the opening of
each restaurant. Restatement of previously issued financial statements was not
permitted by SOP 98-5 and entities were not required to report the pro forma
effects of the retroactive application of the accounting standard.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives will be recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designed as
part of a hedge transaction and, if it is, the type of hedge transaction. This
statement will be effective the first quarter of 2001. The Company does not
believe that the new standard will have a material impact on the Company's
financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS:

During fiscal 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amounts. SFAS No. 121 also addresses the accounting for long-lived
assets that are held for disposal. The Company's adoption of SFAS No. 121 did
not result in a material impact on its financial position or results of
operations.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions for the reporting period and as of the financial
statement date. These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent liabilities and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.

REVENUE RECOGNITION:

Revenue from restaurant sales is recognized when food and beverage products
are sold. Revenue from third-party bakery sales is recognized when the products
are shipped.

33
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING COSTS:

Advertising costs are expensed as incurred. Advertising expenses for the
fiscal years 1999, 1998 and 1997 were insignificant.

2. INVESTMENTS AND MARKETABLE SECURITIES:

Investments and marketable securities consisted of (in thousands):

<TABLE>
<CAPTION>
BALANCE
UNREALIZED SHEET
CLASSIFICATION COST FAIR VALUE GAIN/(LOSS) AMOUNT MATURITY
- -------------- -------- ---------- ----------- -------- -----------------------------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 28, 1999:
Current assets:
Available-for-sale
securities:
Corporate debt
securities............... $21,029 $20,940 $(89) $20,940 March 2000 to December 2000
U.S. Treasury securities... 748 746 (2) 746 August 2000
------- ------- ---- -------
Total.................... $21,777 $21,686 $(91) $21,686
======= ======= ==== =======
Other assets:
Available-for-sale
securities:
Corporate debt January 2001 to
securities............... $ 8,458 $ 8,387 $(71) $ 8,387 December 2001
U.S. Treasury securities... 1,152 1,137 (16) 1,137 December 2000 to April 2001
------- ------- ---- -------
Total.................. $ 9,610 $ 9,524 $(87) $ 9,524
======= ======= ==== =======
AT DECEMBER 29, 1998:
Current assets:
Available-for-sale
securities:
Corporate debt January 1999 to
securities............... $21,590 $21,596 $ 6 $21,596 December 1999
======= ======= ==== =======
Other assets:
Available-for-sale
securities:
Equity securities.......... $ 1,010 $ 956 $(54) $ 956 No maturity dates
Corporate debt
securities............... 11,911 11,902 (9) 11,902 June 2000 to December 2033
U.S. Treasury securities... 753 751 (2) 751 November 2000
------- ------- ---- -------
Total.................... $13,674 $13,609 $(65) $13,609
======= ======= ==== =======
</TABLE>

34
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. OTHER RECEIVABLES:

Other receivables consisted of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, 1999 DECEMBER 29, 1998
------------------ ------------------
<S> <C> <C>
Tenant improvement allowances from
landlords................................. $ 9,550 $ 9,518
Accrued income on investments............... 622 483
Other....................................... 510 763
------- -------
Total other receivables..................... 10,682 10,764
Less: current portion....................... (6,760) (5,478)
------- -------
Other receivables........................... $ 3,922 $ 5,286
======= =======
</TABLE>

4. INVENTORIES:

Inventories consisted of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, 1999 DECEMBER 29, 1998
------------------ ------------------
<S> <C> <C>
Restaurant food and supplies................ $5,142 $4,043
Bakery raw materials........................ 1,605 1,076
Bakery finished goods....................... 1,374 735
------ ------
Total....................................... $8,121 $5,854
====== ======
</TABLE>

The amounts for restaurant food and supplies as of December 28, 1999 and
December 29, 1998 include $2.3 million and $1.9 million, respectively, for
certain smallware inventories in the restaurants.

5. PROPERTY AND EQUIPMENT:

Property and equipment consisted of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, 1999 DECEMBER 29, 1998
------------------ ------------------
<S> <C> <C>
Land and related improvements............... $ 1,394 $ 1,227
Building.................................... 6,464 6,464
Fixtures and equipment...................... 63,217 48,673
Leasehold improvements...................... 94,339 69,556
Computer equipment.......................... 1,483 1,084
Automotive equipment........................ 390 390
Construction in progress.................... 9,403 10,679
-------- --------
Property and equipment, total............... 176,690 138,073
Less: accumulated depreciation and
amortization.............................. (41,178) (30,413)
-------- --------
Property and equipment, net................. $135,512 $107,660
======== ========
</TABLE>

Repair and maintenance expenses for fiscal 1999, 1998 and 1997 were $2.8
million, $2.3 million and $2.2 million, respectively.

35
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES:

The Company leases all its restaurant locations under operating leases, with
primary terms ranging from 10 to 20 years. The restaurant leases include land
and building shells, require contingent rent above the minimum lease payments
based on a percentage of sales ranging from 3.5% to 8%, and require various
expenses incidental to the use of the property. Most leases have renewal
options. Management has always exercised its renewal options in the past. The
Company also leases certain restaurant and bakery equipment under operating
lease agreements.

The aggregate minimum annual lease payments under operating leases
(including those for seven restaurants with executed leases as of December 28,
1999 that are planned for fiscal 2000 or 2001 openings) are as follows (in
thousands):

<TABLE>
<S> <C>
2000........................................................ $ 11,510
2001........................................................ 12,838
2002........................................................ 13,028
2003........................................................ 12,313
2004........................................................ 12,198
Thereafter.................................................. 131,789
--------
Total minimum lease commitments........................... $193,676
========
</TABLE>

Rent expenses charged to operations on all operating leases were as follows
(in thousands):

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Base rent.................................... $ 9,384 $ 7,334 $ 5,289
Contingent rent.............................. 9,079 7,303 5,853
Other charges................................ 4,135 3,535 2,093
------- ------- -------
Total...................................... $22,598 $18,172 $13,235
======= ======= =======
</TABLE>

With respect to seven restaurants with executed leases as of December 28,
1999 that are currently planned for openings in fiscal 2000 and 2001, the
Company has estimated construction commitments (leasehold improvements and
fixtures and equipment), net of agreed-upon landlord construction contributions,
totaling approximately $19 million.

36
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INCOME TAXES:

The provision for income taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Income before income taxes and cumulative
effect of change in accounting principle... $34,224 $21,104 $15,174
Cumulative effect of change in accounting
principle.................................. -- (9,690) --
------- ------- -------
Income before income taxes................... $34,224 $11,414 $15,174
======= ======= =======

Income tax provision:
Current:
Federal.................................... $ 8,385 $ 5,132 $ 2,831
State...................................... 2,203 1,563 703
------- ------- -------
Total current............................ 10,588 6,695 3,534
Deferred..................................... 1,904 378 1,701
------- ------- -------
Provision before cumulative effect of change
in accounting principle.................... 12,492 7,073 5,235
Benefit (deferred provision) from cumulative
effect of change in accounting principle... -- (3,343) --
------- ------- -------
Total.................................... $12,492 $ 3,730 $ 5,235
======= ======= =======
</TABLE>

The following is a reconciliation between the U.S. federal statutory rate
and the effective tax rate:

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate........... 35.0% 35.0% 34.0%
State and district income taxes net of
federal income tax benefit................. 5.2 4.6 5.9
FICA tip credit and research credits......... (2.5) (6.4) (4.6)
Municipal bond income, dividends received
deduction and other........................ (1.2) (0.5) (0.8)
---- ---- ----
Effective tax rate........................... 36.5% 32.7% 34.5%
==== ==== ====
</TABLE>

37
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INCOME TAXES: (CONTINUED)
The temporary differences which give rise to deferred income tax assets and
liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, 1999 DECEMBER 29, 1998
----------------- -----------------
<S> <C> <C>
Current deferred tax asset/(liability):
State tax current provision................. $ 399 $ (480)
Other, net.................................. (142) 64
------- -------
Total....................................... $ 257 $ (416)
======= =======

Noncurrent deferred tax asset/(liability):
Property and equipment...................... $(2,948) $(5,053)
Accrued rent................................ (1,272) 2,566
Tax credit carryforwards.................... 640 1,689
Capital losses.............................. 277 272
Other, net.................................. 27 (173)
------- -------
Total....................................... $(3,276) $ (699)
======= =======
</TABLE>

8. LONG-TERM DEBT:

The Company maintains a $25 million revolving credit and term loan facility
(the "Credit Facility") with a major financial institution. As of December 28,
1999 and December 29, 1998, there were no borrowings outstanding under the
Credit Facility. The terms of the Credit Facility were amended in March 1998 to
provide for, among other things, borrowings under the Credit Facility to bear
interest at variable rates based, at the Company's option, on either the prime
rate of interest, the lending institution's cost of funds rate plus 0.75% or the
applicable LIBOR rate plus 0.75%. The Credit Facility expires on May 31, 2000.
On that date, a maximum of $25 million of any borrowings outstanding under the
Credit Facility automatically convert into a four-year term loan payable in
equal quarterly installments at interest rates of 0.5% higher than the
applicable revolving credit rates. The Credit Facility is not collateralized and
requires the Company to maintain certain financial ratios and to observe certain
restrictive covenants with respect to the conduct of its operations, with which
the Company is currently in compliance.

9. STOCKHOLDERS' EQUITY:

The Company effected a stock dividend in the form of a three-for-two stock
split on April 1, 1998. In connection with this stock dividend and split,
$66,000 was transferred to common stock from retained earnings in the
December 30, 1997 Consolidated Balance Sheet. All references in the Consolidated
Financial Statements to shares of common stock and related prices, weighted
average number of shares, per share amounts and stock option plan data have been
adjusted to reflect the stock split.

The Company is also authorized to repurchase up to 750,000 shares of its
common stock for reissuance upon the exercise of stock options under the
Company's current stock option plans. A source of funding for share repurchases
will be the proceeds to the Company from the exercise of stock options. Shares
may be repurchased in the open market or through privately negotiated
transactions at times and prices considered appropriate by the Company. As of
December 28, 1999, the Company had repurchased 295,500 shares at a total cost of
$5.8 million.

38
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. ADOPTION OF STATEMENT OF POSITION 98-5, "REPORTING ON THE COSTS OF START-UP
ACTIVITIES":

11. STOCK OPTIONS:

The Board of Directors has authorized the Company to grant options to
certain employees and outside directors to acquire a total of 4,746,750 shares
of common stock, pursuant to the terms of the Company's employee and
non-employee director stock option plans. Options are granted at market value on
the date of the grant, generally vest at 20% per year, and become exercisable
provided the Company meets or exceeds certain performance standards. The options
generally expire ten years from the date of grant. During fiscal 1999, 1998 and
1997, the Board of Directors and stockholders authorized the Company to grant an
additional 1,650,000 shares of common stock under the Company's non-employee
director and employee stock option plans. Transactions during fiscal 1999, 1998
and 1997 under the option plans were as follows:

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding at start of year........ 1,897,814 1,656,975 1,210,875
Options granted............................. 1,685,900 501,000 637,425
Options exercised........................... (301,761) (215,011) (33,900)
Options cancelled........................... (139,200) (45,150) (157,425)
--------- --------- ---------
Options outstanding at end of year.......... 3,142,753 1,897,814 1,656,975
========= ========= =========
Options exercisable at end of year.......... 767,550 571,462 518,100
Options available for grant at end of
year...................................... 481,038 1,432,237 688,087
</TABLE>

Weighted average option exercise price information for the fiscal years
1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding at start of year......... $14.92 $13.39 $12.97
Options granted.............................. $20.80 $18.84 $14.14
Options exercised............................ $15.02 $12.01 $ 9.53
Options cancelled............................ $18.28 $15.46 $13.91
Options outstanding at end of year........... $17.92 $14.92 $13.39
</TABLE>

39
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. STOCK OPTIONS: (CONTINUED)
The following table sets forth information with respect to fixed stock
options as of December 28, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------------
AMOUNT WEIGHTED AMOUNT
OUTSTANDING WEIGHTED AVERAGE AVERAGE EXERCISABLE WEIGHTED
RANGE OF AS OF REMAINING EXERCISE AS OF AVERAGE
EXERCISE PRICES 12/28/99 CONTRACTUAL LIFE PRICE 12/28/99 EXERCISE PRICE
- --------------------- ----------- ---------------- -------- ----------- --------------
<C> <C> <S> <C> <C> <C>
$ 8.89-$12.08 407,200 4.75 years $10.37 334,000 $ 9.99
$12.17-$14.33 438,225 6.69 $13.73 199,500 $13.89
$14.50-$17.67 267,078 6.69 $16.42 122,850 $16.79
$17.92-$17.92 672,450 3.08 $17.92 -- $ --
$18.00-$18.67 314,650 8.03 $18.05 54,350 $18.08
$18.92-$21.56 582,250 8.87 $20.46 34,350 $19.13
$22.06-$27.00 383,400 9.59 $25.74 22,500 $22.91
$27.06-$28.75 67,500 9.62 $27.58 -- $ --
$29.88-$29.88 5,000 9.59 $29.88 -- $ --
$31.38-$31.38 5,000 9.51 $31.38 -- $ --
--------- -------
$ 8.89-$31.38 3,142,753 6.63 $17.92 767,550 $13.45
========= =======
</TABLE>

The Company has adopted the "disclosure only" provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," and will continue to use the
intrinsic value-based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
no compensation expense has been recognized for the Company's stock option
plans. Had compensation expense for the Company's stock option plans been
determined based on the fair value at the grant date for awards in fiscal 1999,
1998 and 1997 consistent with the provisions of SFAS No. 123, the Company's net
income and net income per share would have been reduced to the pro forma amounts
indicated below (in thousands, except net income per share):

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income, as reported...................... $21,732 $7,684 $9,939
Net income, pro forma........................ $17,521 $4,535 $7,287
Basic net income per share, as reported...... $ 1.08 $ 0.38 $ 0.59
Basic net income per share, pro forma........ $ 0.87 $ 0.23 $ 0.43
Diluted net income per share, as reported.... $ 1.03 $ 0.37 $ 0.58
Diluted net income per share, pro forma...... $ 0.83 $ 0.22 $ 0.43
</TABLE>

The fair value of each option issued in fiscal 1999, 1998 and 1997 is
estimated at the date of the grant using the Black-Scholes option pricing model
with the following weighted average assumptions for each respective year:
(a) no dividend yield on the Company's stock, (b) expected volatility of the
Company's stock of 49.9%, 49.6% and 47.3%, (c) a risk free interest rate of
4.88%, 5.78% and 6.31%, and (d) expected option lives of seven years.

40
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. OTHER SUPPLEMENTAL DATA:

Other accrued expenses consisted of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, 1999 DECEMBER 29, 1998
----------------- -----------------
<S> <C> <C>
Salaries and wages.......................... $ 5,093 $ 2,315
Payroll and sales taxes..................... 1,850 2,116
Rent and related expenses................... 1,679 1,357
Compensated absences........................ 2,057 1,677
Gift certificates........................... 3,202 1,698
Medical insurance........................... 757 --
Other....................................... 3,221 2,127
------- -------
Total....................................... $17,859 $11,290
======= =======
</TABLE>

13. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Supplemental cash flow disclosures consisted of (in thousands):

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998 FISCAL 1997
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid................................ $ 44 $ 24 $ 543
====== ====== ======
Income taxes paid............................ $8,675 $4,994 $2,987
====== ====== ======
</TABLE>

14. EMPLOYEE BENEFIT PLANS:

During fiscal 1998, the Company established a defined contribution benefit
plan (the "401(k) Plan") in accordance with section 401(k) of the Internal
Revenue Code. The 401(k) Plan is open to all employees who meet certain
compensation and eligibility requirements. The 401(k) Plan allows participating
employees to defer the receipt of a portion of their compensation and contribute
such amount to one or more investment options. The Company matches a certain
percentage of the employee contributions to the 401(k) Plan and also pays for
administrative expenses, neither of which were significant amounts during fiscal
1999 and 1998.

Effective October 1999, the Company adopted an Executive Savings Plan (the
"ESP"). The ESP is a nonqualified deferred compensation plan for highly
compensated Company employees as defined in the ESP and who are otherwise
ineligible for participation in the Company's 401(k) plan. The ESP allows
participating executives to defer the receipt of up to 15% of their salaries and
100% of their eligible bonuses. Non-employee directors can also participate in
the ESP and defer the receipt of their fees. The Company matches 1% of the first
4% of annual salaries deferred by participating employees and also pays for
administrative expenses, neither of which were significant amounts during fiscal
1999. The Company's match vests 25% annually beginning with the end of the
employee's second year of participation in the ESP. Employee deferrals and the
Company match are deposited into a "rabbi" trust established by the Company, and
the funds are generally invested in individual variable life insurance contracts
owned by the Company which are specifically designed to informally fund savings
plans of this nature.

Effective May 1999, the Company adopted a self-insured medical benefits plan
for its employees. The Company has purchased stop-loss coverage in order to
limit its exposure to any significant medical claims. Self-insured losses are
accrued based upon the Company's estimates of the aggregate liability for
uninsured claims incurred using certain actuarial assumptions followed in the
insurance industry and the

41
<PAGE>
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. EMPLOYEE BENEFIT PLANS: (CONTINUED)
Company's historical experience. The amount of accrued liabilities for
self-insured losses included in other accrued expenses for fiscal 1999 were
$757,000.

15. STOCKHOLDER RIGHTS PLAN:

During fiscal 1998, the Company's Board of Directors adopted a stockholder
rights plan (the "Rights Plan"). The Rights Plan provides for the distribution
to stockholders of one right to purchase a unit equal to 1/100 of a share of a
newly created series of junior participating cumulative preferred stock. The
rights are evidenced by the Company's common stock certificates and
automatically trade with its common stock. The rights are not exercisable unless
a person or group acquires (or commences a tender or exchange offer or announces
an intention to acquire) 15% or more of the Company's common stock without the
approval of the Board of Directors. When declared exercisable, holders of the
rights (other than the acquiring person or group) would have the right to
purchase units of junior participating cumulative preferred stock having a
market value equal to two times the exercise price of each right, which is $110.
Additionally, if the Company is thereafter merged into another entity, or more
than 50% of its consolidated assets or earning power is sold or transferred,
holders of the rights will be entitled to buy common stock of the acquiring
person or group equal to two times the exercise price of each right. The rights
expire on August 4, 2008, unless redeemed earlier by the Company.

16. QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized unaudited quarterly financial data (in thousands, except net
income per share) for fiscal 1999 and 1998 was as follows:

<TABLE>
<CAPTION>
QUARTER ENDED: MARCH 30, 1999 JUNE 29, 1999 SEPTEMBER 28, 1999 DECEMBER 28, 1999
- -------------- -------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Total revenues..................... $74,824 $85,767 $91,854 $95,037
Income from operations............. $ 5,033 $ 7,416 $ 8,332 $10,081
Net income......................... $ 3,619 $ 5,272 $ 5,823 $ 7,018
Diluted net income per share....... $ 0.18 $ 0.25 $ 0.27 $ 0.33
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED: MARCH 31, 1998(A) JUNE 30, 1998 SEPTEMBER 29, 1998 DECEMBER 29, 1998
- -------------- ----------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Total revenues................... $59,501 $64,273 $68,577 $72,872
Income from operations........... $ 4,659 $ 4,500 $ 4,749 $ 3,806
Net income (loss)................ $(2,743) $ 3,515 $ 3,897 $ 3,015
Diluted net income (loss) per
share(b)....................... $ (0.13) $ 0.17 $ 0.19 $ 0.15
</TABLE>

- ------------------------

(a) The results for the quarter ended March 31, 1998 include the cumulative
effect of a change in accounting principle of $6.3 million, net of income
tax benefit.

(b) Diluted net income (loss) per share calculations for each quarter are based
on the weighted average diluted shares outstanding for that quarter and may
not total to the full-year amount.

42
<PAGE>
EXHIBIT INDEX

<TABLE>
<C> <S>
2.1 Form of Reorganization Agreement(1)

3.1 Certificate of Incorporation of the Company(1)

3.2 Bylaws of the Company(1)

3.3 Certificate of Designation of Series A Junior Participating
Cumulative Preferred Stock, $.01 par value(2)

3.4 Form of Rights Agreement dated as of August 4, 1998 between
the Company and U.S. Stock Transfer Corporation(2)

10.1 David Overton Employment Agreement(1)

10.2 Gerald Deitchle Employment Agreement(3)

10.3 The Cheesecake Factory Incorporated 1992 Performance
Employee Stock Option Plan(1)

10.4 Performance Incentive Plan(1)

10.6 The Cheesecake Factory Incorporated Non-Employee Director
Stock Option Plan(4)

10.7 David Overton Employment Contract(5)

10.8 Linda Candioty Employment Contract(5)

10.9 Amendment to The Cheesecake Factory Incorporated 1992
Performance Employee Stock Option Plan(6)

10.10 Debby R. Zurzolo Employment Agreement(7)

11.0 Statement Regarding Computation of Net Income Per Share

21.0 Subsidiaries of the Company

23.0 Consent of PricewaterhouseCoopers LLP

27.1 Financial Data Schedule for fiscal 1999
</TABLE>

- ------------------------

(1) Previously filed and incorporated by reference herein from the Registrant's
Registration Statement on Form S-1 (No. 33-47936).

(2) Previously filed and incorporated by reference herein from the Registrant's
Form 8-A dated August 19, 1998.

(3) Previously filed and incorporated by reference herein from the Registrant's
Form 10-K for the fiscal year ended December 29, 1996.

(4) Previously filed and incorporated by reference herein from the Registrant's
Form S-8 dated August 8, 1997.

(5) Previously filed and incorporated by reference herein from the Registrant's
Form 10-Q for the quarterly period ended June 30, 1998.

(6) Previously filed and incorporated by reference herein from the Registrant's
Form S-8 dated January 8, 1999.

(7) Previously filed and incorporated by reference herein from the Registrant's
Form 10-Q for the quarterly period ended June 29, 1999.

43
<PAGE>
SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 27th day of
March, 2000.

<TABLE>
<S> <C> <C>
THE CHEESECAKE FACTORY INCORPORATED

By: /s/ DAVID OVERTON
-----------------------------------------
David Overton
CHAIRMAN OF THE BOARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, in the capacities indicated, on this 27th day of March, 2000.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Chairman of the Board,
/s/ DAVID OVERTON President and Chief
------------------------------------------- Executive Officer March 27, 2000
David Overton (Principal Executive
Officer)

Executive Vice President
/s/ GERALD W. DEITCHLE and Chief Financial
------------------------------------------- Officer (Principal March 27, 2000
Gerald W. Deitchle Financial and Accounting
Officer)

/s/ THOMAS L. GREGORY
------------------------------------------- Director March 27, 2000
Thomas L. Gregory

/s/ WAYNE H. WHITE
------------------------------------------- Director March 27, 2000
Wayne H. White

/s/ JEROME I. KRANSDORF
------------------------------------------- Director March 27, 2000
Jerome I. Kransdorf
</TABLE>

<PAGE>

EXHIBIT 11
THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
1999 1998 1997
---- ---- ----
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE-BASIC:

Weighted average shares outstanding.................................................. 20,061 19,984 16,842

Net income(1)........................................................................ $21,732 $7,684 $9,939

Net income per share-basic........................................................... $1.08 $0.38 $0.59

NET INCOME PER COMMON SHARE-DILUTED:

Weighted average shares outstanding.................................................. 20,061 19,984 16,842

Net effect of dilutive stock options based on the treasury stock method using
average market price.............................................................. 1,128 588 290

Total shares outstanding for computation of per share earnings....................... 21,189 20,572 17,132

Net income(1)........................................................................ $21,732 $7,684 $9,939

Net income per share-diluted......................................................... $1.03 $0.37 $0.58
</TABLE>

- -----------

(1) The results for fiscal 1998 include the cumulative effect of a change in
accounting principle of $6.3 million ($0.32 per basic share and $0.31 per
diluted share), net of income tax benefit.

<PAGE>

EXHIBIT 21.0
THE CHEESECAKE FACTORY INCORPORATED

LIST OF SUBSIDIARIES

The Cheesecake Factory Restaurants, Inc., a California corporation

The Cheesecake Factory Bakery Incorporated, a California corporation

The Houston Cheesecake Factory Corporation, a Texas corporation

Grand Lux Cafe LLC, a Nevada limited liability company

<PAGE>

EXHIBIT 23.0
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration
Statement of The Cheesecake Factory Incorporated on Form S-8 (File No.
033-88414) of our report dated February 4, 2000, on our audits of the
consolidated financial statements of The Cheesecake Factory Incorporated and
Subsidiaries as of December 28, 1999 and December 29, 1998 and for each of
the three fiscal years in the period ended December 28, 1999, which report is
included in this Annual Report on Form 10-K.

PricewaterhouseCoopers LLP

Los Angeles, California
March 27, 2000

- --------------------------

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1999
<PERIOD-START> DEC-30-1998
<PERIOD-END> DEC-28-1999
<CASH> 24,026
<SECURITIES> 21,686
<RECEIVABLES> 5,333
<ALLOWANCES> 0
<INVENTORY> 8,121
<CURRENT-ASSETS> 68,478
<PP&E> 176,689
<DEPRECIATION> 41,177
<TOTAL-ASSETS> 221,785
<CURRENT-LIABILITIES> 32,936
<BONDS> 0
0
0
<COMMON> 204
<OTHER-SE> 185,369
<TOTAL-LIABILITY-AND-EQUITY> 221,785
<SALES> 347,482
<TOTAL-REVENUES> 347,482
<CGS> 95,181
<TOTAL-COSTS> 95,181
<OTHER-EXPENSES> 221,439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> 34,224
<INCOME-TAX> 12,492
<INCOME-CONTINUING> 21,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,732
<EPS-BASIC> 1.08
<EPS-DILUTED> 1.03

</TABLE>