The Cheesecake Factory and P.F. Chang’s China Bistro

One risk management issue identified by The Cheesecake Factory is “continuing effects

from the global economic crisis and recession, including a decline in consumer discretionary

spending.” 1

economic conditions affect consumer behavior and spending, the global economic crisis has had

a material adverse effect on many aspects of their business in 2008-2010 and could also affect

them in 2011 and beyond. Another risk management issue is “future growth in [their] revenues,

profitability, and earnings per share [depending] heavily on improving comparable restaurant

sales.” 2

In order to increase revenues and profitability, they must increase comparable restaurant

sales through an increase in guest traffic levels, menu pricing, and menu mix shifts.

One risk management issue identified by P.F. Chang’s China Bistro is “the failure of

[their] existing or new restaurants to achieve expected results.” 3

negative impact on their revenues and financial results, because new restaurants take several

months to reach planned operating levels due to the inefficiencies and risks associated with

them. Another risk management issue is “damage to [their] brands or reputation negatively

[impacting their] business.” 4

or ambiance or they have widespread negative publicity, their brand value could suffer which

could cause adverse effects on their business.

Management’s report on internal control is virtually identical for the two companies.

Both companies say their “management is responsible for establishing and maintaining adequate

Since dining in casual, upscale restaurants is generally a discretionary expense and

There could be a significant

If their customers experience a reduction in food quality, service,