David Overton
CHEESECAKE FACTORYAbout David Overton
David Overton, age 78, is the founder of The Cheesecake Factory and has served as Chairman and Chief Executive Officer since the company’s incorporation in 1992, after opening the first restaurant in 1978 and building the brand into an international multi-concept platform including Grand Lux Cafe, North Italia, and Flower Child through the FRC acquisition . In fiscal 2024, CAKE posted record revenue of $3.58 billion (+4.1% y/y), net income of $156.8 million (+55% y/y), diluted EPS of $3.20, EBITDA of $283 million, and adjusted EBITDA of $329 million; the proxy highlights increasing TSR over the last three years and that Overton’s “actual” pay exceeded “target” in each year, consistent with rising shareholder returns .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| The Cheesecake Factory Incorporated | Chairman & CEO | 1992–present | Founder-operator; scaled CAKE into an international brand; added Grand Lux Cafe; acquired FRC (North Italia, Flower Child) to expand growth concepts |
| The Cheesecake Factory (concept) | Creator/Founder | 1978–1992 | Created namesake concept; opened first restaurant (1978, Beverly Hills) establishing operating model and brand DNA |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| The Cheesecake Factory Oscar and Evelyn Overton Charitable Foundation (501(c)(3)) | Founding member & Director | Not stated | Supports community initiatives; reflects governance/ESG engagement |
Fixed Compensation
Multi-year compensation (as reported, grant-date values; USD):
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | $1,014,135 | $995,000 | $1,073,423 |
| Stock Awards ($) | $5,301,316 | $5,600,595 | $5,700,105 |
| Option Awards ($) | — | — | — |
| Non-Equity Incentive (Annual Bonus Paid) ($) | $835,377 | $1,020,621 | $1,353,484 |
| All Other Compensation ($) | $30,916 | $42,703 | $36,823 |
| Total ($) | $7,181,744 | $7,658,919 | $8,163,835 |
2024 pay components and perquisites:
- Employment agreement base salary: $1,030,000 (agreement term auto-renews annually) .
- Perquisites: automobile program $28,479; life insurance $8,343; total “All other compensation” $36,822 .
- Deferred compensation: aggregate balance $425,663 with $68,948 2024 earnings; no company contributions .
2024 target bonus opportunity (as % of salary):
| Executive | Threshold | Target | Maximum |
|---|---|---|---|
| David Overton | 23.4% | 125.0% | 171.9% |
Performance Compensation
Annual incentive design (Corporate):
| Metric | Weighting | Target | Actual (FY2024) | Payout | Vesting/Timing |
|---|---|---|---|---|---|
| Adjusted EBITDAR (two 6-month periods) | 75% | Not disclosed | 1H: 102.2%; 2H: 105.5% | 1H: 103.0%; 2H: 112.0%; Overall: 107.5% | Paid after year-end |
| Strategic Initiatives | 25% | Not disclosed | Not disclosed | 98.0% | Paid after year-end |
Long-term equity (granted Feb 15, 2024):
| Grant Type | Shares | Grant-Date Fair Value | Performance Metrics | Vesting |
|---|---|---|---|---|
| Performance-Based Restricted Stock | 81,640 | $2,850,052 | 3 equally weighted goals over 3 years: total annual revenue growth; adjusted annual EPS; adjusted annual controllable profit | Earned shares vest 60% at year 3, 20% at year 4, 20% at year 5 |
| Time-Based Restricted Stock | 81,640 | $2,850,052 | n/a | 60% at year 3; 20% at year 4; 20% at year 5 |
Prior performance equity outcome (2012–2024 cycle):
- 2022–2024 RSAs earned at 78% of target based on revenue growth, adjusted sales per productive sq. ft., and adjusted controllable profit metrics; earned tranches vest 60%/20%/20% starting year 3 .
Emphasis on at-risk pay:
- 87% of CEO target total direct compensation is at-risk; proxy notes increasing TSR and “actual” pay exceeding “target” over the last three years .
Equity Ownership & Alignment
Beneficial ownership and award status:
| Category | Amount | Notes |
|---|---|---|
| Restricted shares not yet vested (direct) | 282,936 | As of Mar 24, 2025 |
| Shares held by David M. Overton Family Trust (trustee: Overton) | 3,012,847 | As of Mar 24, 2025 |
| Options exercisable within 60 days | 171,380 | As of Mar 24, 2025 |
| Common shares outstanding | 49,448,859 | As of Mar 24, 2025 |
| Estimated beneficial ownership % | ~7.0% | 3,012,847 + 282,936 + 171,380 = 3,467,163; 3,467,163 / 49,448,859 ≈ 7.0% |
Options detail (as of Dec 31, 2024):
- Exercisable tranches: 179,300 @ $47.06 (exp. 02/15/2026) ; 104,000 @ $46.03 (exp. 02/13/2027) ; 73,500 @ $61.59 (exp. 03/02/2025) .
- Market price $47.44 on 12/31/2024; $46.03 and $47.06 tranches were in-the-money; $61.59 tranche out-of-the-money .
- Hedging/pledging prohibited; no margin accounts allowed (reduces forced-sale risk) .
- Executive stock ownership guidelines: CEO 6x salary; all NEOs were in compliance as of end of 2024 .
Upcoming vesting schedule (time-based RS; per standard terms):
| Grant Date | Shares | Next Vest Event | Shares Vesting |
|---|---|---|---|
| 02/10/2022 | 133,400 | 02/10/2025 (3rd anniversary) | 60% = 80,040 |
| 02/16/2023 | 69,280 | 02/16/2026 (3rd anniversary) | 60% = 41,568 |
| 02/15/2024 | 81,640 | 02/15/2027 (3rd anniversary) | 60% = 48,984 |
Employment Terms
- Agreement: one-year term auto-renews annually unless notice given ≥90 days before expiration; eligible for annual bonus, equity grants, and standard benefits .
- Severance (no-Cause or Constructive Termination): 24 months of base salary continuation; pro-rata annual bonus based on actual performance; continuation of health & welfare benefits and company car; acceleration of installments scheduled to vest within 24 months (performance awards remain subject to goal attainment); vested equity exercisable up to 36 months post-termination (subject to earlier expiration) .
- Change-in-control: awards do not automatically accelerate; if not assumed/replaced, full vesting occurs immediately prior to the transaction; if assumed and Overton is terminated without Cause or resigns for Good Reason within 12 months post-CIC, awards vest in full .
- Founder’s Retirement Benefit: $650,000 per year for ten years (unfunded unsecured obligation) .
- Excise tax: “best-net” cutback; no gross-ups .
Potential payments table (scenario-based, Dec 31, 2024 assumptions):
| Component | CIC (awards assumed) | CIC (awards not assumed) | Termination w/o Cause or Constructive Termination | Death/Disability | Termination w/ Cause or voluntary (incl. retirement) |
|---|---|---|---|---|---|
| Cash Severance ($) | — | — | $253,538 | — | — |
| Pro-Rata Bonus ($) | — | — | $1,353,484 | — | — |
| Intrinsic Value of Equity Acceleration ($) | — | $22,793,588 | $29,539,441 | $27,918,588 | $18,037,651 |
| Benefits & Perqs ($) | — | — | $9,206 | — | — |
| Health & Welfare Benefits ($) | — | — | $4,625 | — | — |
| Gross-up on Excise Tax | — | — | — | — | — |
| Founder’s Retirement Benefit ($) | — | — | $5,125,000 | $5,125,000 | $5,125,000 |
Definitions and protections:
- “Cause” includes willful failure to perform, willful misconduct materially injurious to CAKE, or dishonesty/fraud/moral turpitude preventing effective performance .
- “Constructive Termination” includes relocation >50 miles, material diminution in role, salary/benefit reduction not applied company-wide, or non-assumption of equity upon CIC .
Board Governance
- Board service: Director since 1992; Chairman & CEO (non-independent) .
- Independence: Seven of eight directors are independent; Overton is not independent .
- Committees: Audit, Compensation, and Governance Committees staffed entirely by independent directors; Overton is not a member of any board committee .
- Lead Independent Director: Jerome I. Kransdorf; responsibilities include presiding over executive sessions, liaising with Chair, agenda setting, advisor retention, stockholder communications, and CEO performance evaluation .
- Meetings: Board held 11 meetings; independent directors held 3 executive sessions; all directors attended ≥75% of meetings in FY2024 .
- Director compensation: non-employee directors receive cash and equity retainers; Overton, as an employee, does not receive separate director compensation .
Dual-role implications:
- The combined CEO/Chair role is mitigated by a formal Lead Independent Director structure and fully independent committees overseeing compensation, governance, and audit (reducing independence concerns) .
Related Policies and Governance Controls
- Clawback policy compliant with SEC/Nasdaq; mandatory recovery of erroneously awarded incentive compensation, with discretionary recovery of time-based awards if fraud/intentional misconduct contributed to a restatement .
- Hedging/short sales/derivatives/margin accounts/pledging prohibited (alignment safeguard) .
- Stock ownership guidelines: CEO 6x salary; compliance verified for all NEOs as of 2024 .
- Say-on-pay: 98% approval in 2024 (strong shareholder support for pay program) .
- Related party transactions: none requiring disclosure since beginning of FY2024 .
Compensation Structure Analysis
- Pay-for-performance emphasis: CEO’s at-risk pay 87% of target total direct compensation; annual and long-term metrics (EBITDAR, revenue growth, adjusted EPS, controllable profit) tie pay to operating and financial outcomes .
- 2024 changes: CEO target bonus opportunity increased by 15%; LTIP metric mix transitioned back to adjusted EPS (pre-pandemic metric) alongside revenue growth and controllable profit .
- Equity program and dilution: Board seeks to increase Stock Plan shares by 6,000,000 (to 13,150,000); projected dilution ~17.6% including request; three-year burn rate ~2.1% .
- Shareholder-friendly features: no excise tax gross-ups; prohibited option repricing; one-year minimum vesting; no dividends on unvested awards .
Investment Implications
- Alignment: High at-risk pay, strict ownership and anti-hedging policies, and robust clawbacks indicate strong alignment; Overton’s significant beneficial ownership (~7%) further aligns interests with shareholders .
- Retention and succession: Severance terms provide continuity; Founder’s Retirement Benefit is notable but finite; board governance with Lead Independent Director mitigates dual-role concerns; however, Overton’s centrality to brand strategy underscores key-person risk .
- Vesting and potential selling pressure: Large time-based RS tranches vesting on 3rd anniversaries (e.g., ~80k shares from the 02/10/2022 grant in Feb 2025) could create periodic liquidity events; prohibitions on pledging/margins reduce forced selling risk .
- Equity overhang: Proposed share reserve increase supports ongoing equity-heavy compensation philosophy; monitor shareholder vote and future burn rates/dilution for valuation impact .
- Pay support: 98% say-on-pay suggests low near-term governance friction; continued performance delivery against EBITDAR/EPS/revenue growth metrics is key to sustaining support and multiple .