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Home , Jack in the Box, The Cheesecake Factory

& Industry Executive Summary

▪ Fast food / restaurant industry – among hardest hit by the pandemic – proved to be resilient thanks to its ability to innovate and quickly adapt to Covid-19

▪ However, not all have been equally impacted. We looked at select peers to identify companies that might be overvalued or have a further upside

▪ Restaurant valuations made a strong comeback with the current average NTM revenue multiple of ~4.7x, above YE2019 level of 4.2x. Multiple expansion was supported by a 5.7% increase in NTM revenue estimates during the same period (1)

▪ Bloomin Brands (: BLMN), Cheesecake Factory (NASDAQ: CAKE) and (NYSE: SHAK) are the top three most shorted companies among peers (2)

Select Company Commentary ▪ SHAK stock price almost doubled since Jan 2020 and has the second highest expected 2019-’22E revenue CAGR of 17% (1) vs. 6% peer average (2)

▪ Historically SHAK traded at a lower revenue multiple than that of its peers (2) but the trend has been reversed since Jan 2021

▪ Is the current valuation justified? Well, some short sellers strongly disagree with SHAK being among top 3 most shorted stocks out of 17 select peers

▪ In contrast, Wendy’s (NASDAQ: WEN) was the only company among peers with negative stock price return since Jan 2020 and one of the two peers with multiple contraction during the same period

▪ Investors seem unwilling to pay higher multiple given the company’s relatively low top line and bottom line growth in the coming years (based on the Street’s consensus estimates). Will the management prove them wrong?

▪ ’s (NASDAQ: WING) rich valuation is also noteworthy. While it could be justified with strong growth potential, is it necessarily a buy today?

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. Note: Large-cap peers defined as companies with EMC above $10 billion; mid-cap peers defined as companies with EMC between $2 billion and $10 billion. For peer set constituents refer to page 7. 1) 2020 revenue based on actual reported figures; NTM revenue based on the Wall Street consensus as of March 18, 2022. 1 2) Includes both large-cap and small-cap select peers. SEE DISCLAIMER ON GRABALPHA.COM Fast Food & Restaurant Industry Competitive Landscape

Most peers dwarfed by MCDONALD’S and in terms of both capitalization and revenues

Equity Market Capitalization (“EMC”) and Revenues $ in billions LARGE-CAP SELECT PEERS MID-CAP SELECT PEERS

$19.2 $23.5 $6.0 $5.0 $5.7 $8.3 $6.7 $4.1 $2.4 $0.5 $1.7 $0.2 $3.1 $2.0 $1.8 $1.0 $3.2

$168.5

2020 Revenue

$131.4 Equity Market Capitalization

$42.6 $37.7 $34.0 $26.8 $18.7 $14.3 $6.9 $5.3 $4.8 $4.0 $3.7 $3.5 $3.0 $2.7 $2.6

McDonald's Starbucks Chipotle Restaurant YUM! Yum China Darden Domino's Shake Wendy's Wingstop Brinker Cheesecake Papa Jack in Bloomin Brands Int. Holdings Restaurants Pizza Roadhouse Shack Int. Factory John’s the Box Brands

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. 2 Note: Large-cap peers defined as companies with EMC above $10 billion; Mid-cap peers defined as companies with EMC between $2 SEE DISCLAIMER ON GRABALPHA.COM billion and $10 billion. McDonald's and Starbucks capitalizations not to scale. Fast Food & Restaurant Industry Stock Price Return

Stock Price Return Since January 1, 2020

LARGE-CAP SELECT PEERS MID-CAP SELECT PEERS

Current Stock $1,429.36 $139.97 $60.55 $363.82 $107.62 $222.90 $108.31 $63.82 $118.78 $74.35 $96.17 $59.81 $127.39 $114.85 $86.55 $27.71 $20.53 Price

99% SHAK stock price almost doubled since Jan 2020 and has the second highest expected 2019-’22E revenue (1) CAGR of ~17% (vs. ~6% peer avg.) 77% 71% 71%

Mid-Cap Average: 50% 54% Stock The only peer Price 48% with negative Return 47% stock market Large-Cap Average: 24% 37% return and with the 28% 26% 26% 24% 22% second lowest 2019-’22E 13% revenue (1) 8% CAGR of ~3% 0.2%

(8%) Chipotle Darden Yum China Domino's Starbucks McDonald's YUM! Restaurant Shake Brinker Texas Cheesecake Wingstop Jack in Papa Bloomin Wendy's Restaurants Holdings Pizza Brands Int. Shack Int. Roadhouse Factory the Box John’s Brands

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. Note: Large-cap peers defined as companies with EMC above $10 billion; Mid-cap peers defined as companies with EMC between $2 billion and $10 billion. 3 1) 2020 revenue based on actual figures; 2022E revenue based on the Wall Street consensus as of March 18, 2022. SEE DISCLAIMER ON GRABALPHA.COM Fast Food & Restaurant Industry Valuation Multiples

LARGE-CAP SELECT PEERS MID-CAP SELECT PEERS

TEV / NTM Revenue 14.9x SHAK and WING valuation multiples are much higher than that of peers 9.0x 9.0x Large-Cap Average: 5.5x 6.9x 6.6x 5.6x 4.8x Mid-Cap Average: 4.0x 4.1x 3.6x 3.5x 2.2x 2.2x 2.2x 1.7x 1.4x 1.3x 0.9x

Restaurant McDonald's YUM! Chipotle Starbucks Domino's Darden Yum China Wingstop Shake Wendy's Bloomin Texas Papa Brinker Cheesecake Jack in Brands Int. Pizza Restaurants Holdings Shack Brands Roadhouse John’s Int. Factory the Box

TEV / NTM EBITDA 62.3x 51.7x Large-Cap Average: 20.7x 34.9x Mid-Cap Average: 24.2x 22.6x 21.5x 19.2x 18.9x 20.7x 19.8x 17.8x 14.8x 17.5x 13.7x 14.4x 12.4x 11.7x 9.8x

Chipotle Restaurant Starbucks Domino's YUM! McDonald's Darden Yum China Shake Wingstop Texas Cheesecake Papa Wendy's Jack in Brinker Bloomin Brands Int. Pizza Restaurants Holdings Shack Roadhouse Factory John’s the Box Int. Brands

Price / NTM Earnings Per Share SHAK plans on aggressively opening new 739.0x locations and investing in new store formats that is punitive to the bottom 93.0x line during the next twelve months Large-Cap Average: 31.2x 58.1x Mid-Cap Average: 36.9x 34.3x 38.9x 38.1x 37.5x 30.3x 27.4x 26.4x 26.0x 23.8x 23.3x 28.9x 21.2x 19.5x 17.6x

Starbucks McDonald's YUM! Darden Restaurant Company Yum China Chipotle Shake Wingstop Cheesecake Papa Texas Wendy's Bloomin Brinker Jack in Restaurants Brands Int. Holdings Shack Factory John’s Roadhouse Brands Int. the Box

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. 4 Note: Large-cap peers defined as companies with EMC above $10 billion; mid-cap peers defined as companies with EMC between $2 billion and $10 billion. SEE DISCLAIMER ON GRABALPHA.COM Shake Shack PE multiple not to scale. Fast Food & Restaurant Industry Revenue and EPS Growth Estimates

CMG and WING have the highest expected revenue growth rate among large-cap and small-cap peers, respectively

Revenue and EPS Growth Estimate (CAGR 2019–’22E) LARGE-CAP SELECT PEERS MID-CAP SELECT PEERS

Revenue CAGR (2019-'22E) 33.8% 32.8% EPS CAGR (2019-'22E)

29.4% 29.6%

17.9% 16.8% 15.7% 15.0% 13.5%

10.3% 10.6% 9.4% 8.6% 8.2% 7.8% 7.2% 7.0% 7.2% 6.6% 6.1% 6.6% 6.3% 5.2% 5.5% 5.5% 3.8% 4.0% 3.5% 3.3% 3.0% 2.0%

(0.4%) (0.4%)

(7.9%) Chipotle Domino's Yum China Darden YUM! Starbucks McDonald's Restaurant Wingstop Shake Papa Texas Cheesecake Jack in Brinker Wendy's Bloomin Pizza Holdings Restaurants Brands Int. Shack John’s Roadhouse Factory the Box Int. Brands

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. 5 Note: Large-cap peers defined as companies with EMC above $10 billion; mid-cap peers defined as companies with EMC between $2 billion and $10 billion. SEE DISCLAIMER ON GRABALPHA.COM Fast Food & Restaurant Industry Short Interest

BLMN, CAKE, SHAK among top three most shorted companies in the sector with investors generally more bearish on smaller fast food & restaurant names

Short Interest as % of Free Float LARGE-CAP SELECT PEERS MID-CAP SELECT PEERS

14.8% 13.7%

10.2%

8.3% 7.7% 7.5% 6.3%

4.5% 4.1% 4.0% 3.1% 2.8% 2.7% 2.4% 1.4% 1.0% 0.7%

Yum China Domino's Restaurant Darden Chipotle YUM! Starbucks McDonald's Bloomin Cheesecake Shake Jack in Wingstop Papa Brinker Texas Wendy's Holdings Pizza Brands Int. Restaurants Brands Factory Shack the Box John’s Int. Roadhouse

------Source: GrabAlpha.com, FactSet, company filings, as of March 18, 2021. Note: Large-cap peers defined as companies with EMC above $10 billion; mid-cap peers defined as companies with EMC between $2 billion and $10 billion. 6 SEE DISCLAIMER ON GRABALPHA.COM Fast Food & Restaurant Industry Companies Covered in the Material

Company Ticker

Large-Cap Select Peers: McDonald's MCD Starbucks SBUX Chipotle CMG Restaurant Brands Int. QSR YUM! YUM Yum China Holdings YUMC Darden Restaurants DRI Domino's Pizza DPZ

Mid-Cap Select Peers: Texas Roadhouse TXRH Shake Shack SHAK Wendy's WEN Wingstop WING Brinker Int. EAT CAKE Papa John’s PZZA Bloomin Brands BLMN JACK

------Source: GrabAlpha.com as of March 18, 2021. 7 Note: Large-cap peers defined as companies with EMC above $10 billion; mid-cap peers defined as companies with EMC between $2 billion and $10 billion. SEE DISCLAIMER ON GRABALPHA.COM Disclaimer

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The views contained in The Material are those of the author as of the date of the publication and are subject to change without notice.

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