Building a 5-Year 3-Statement Financial Model for a Public Company

The Cheesecake Factory (CAKE) | Corporate Finance Case Study | FY2022A–FY2028P

Why the 3-Statement Model Is the Foundation of Corporate Finance

In every FP&A role, financial analyst position, or corporate finance interview, the 3-statement model is the baseline skill. It links three financial statements — the Income Statement, Balance Sheet, and Cash Flow Statement — into a single dynamic model that updates when any assumption changes.

For The Cheesecake Factory, we anchor all projections to four years of actual reported data (FY2021–FY2024) and extend through FY2028. Every line item either flows from a stated assumption or is derived by formula from another line. Nothing is hardcoded into a projection cell.

Step 1 — Revenue Forecast Drivers

Revenue for a restaurant operator is decomposed into three levers: unit count growth, comparable sales growth, and average check expansion. These are the drivers management actually controls and reports each quarter.

Revenue Driver	FY2022A	FY2023A	FY2024A	FY2025P	FY2026P	FY2027P	FY2028P
Unit Count (EOP)	305	319	328	337	347	358	369
Same-Store Sales Growth	2.1%	3.2%	1.4%	2.5%	2.8%	3.0%	3.2%
Avg Check Growth	3.8%	2.7%	3.8%	2.5%	2.0%	2.0%	2.0%
Revenue Growth (Total)	—	2.3%	1.9%	3.0%	3.2%	3.3%	3.5%
Total Revenue ($M)	$3,467	$3,549	$3,617	$3,726	$3,845	$3,972	$4,111

Assumption rationale: The projection assumes modest same-store sales recovery as CAKE stabilizes after the post-pandemic traffic normalization. Unit expansion is conservative at 9–11 net new locations per year, consistent with management guidance in the FY2024 10-K. Average check growth decelerates as the pricing power cycle matures.

Step 2 — Income Statement Projection

Each cost line is expressed as a percentage of revenue, anchored to historical averages and adjusted for known trends. This percentage-of-revenue approach is standard in FP&A modeling because it scales automatically as the top line changes.

Income Statement ($M)	FY2022A	FY2023A	FY2024A	FY2025P	FY2026P	FY2027P	FY2028P
Revenue	$3,467	$3,549	$3,617	$3,726	$3,845	$3,972	$4,111
Cost Structure
Food & Bev Cost %	27.2%	27.1%	27.0%	26.8%	26.7%	26.6%	26.5%
Food & Bev Cost ($M)	($942)	($962)	($977)	($999)	($1,026)	($1,057)	($1,089)
Labor Cost %	35.5%	35.3%	35.2%	35.1%	35.0%	34.9%	34.8%
Labor Cost ($M)	($1,231)	($1,253)	($1,273)	($1,308)	($1,346)	($1,386)	($1,431)
Other Restaurant Costs ($M)	($423)	($430)	($434)	($447)	($461)	($477)	($493)
Gross Profit ($M)	$871	$904	$933	$972	$1,012	$1,052	$1,098
Gross Margin %	25.1%	25.5%	25.8%	26.1%	26.3%	26.5%	26.7%
SG&A ($M)	($208)	($209)	($213)	($216)	($219)	($226)	($230)
D&A ($M)	($156)	($160)	($163)	($168)	($173)	($179)	($185)
EBIT — Operating Income ($M)	$507	$535	$557	$588	$620	$647	$683
EBIT Margin %	14.6%	15.1%	15.4%	15.8%	16.1%	16.3%	16.6%
Interest Expense ($M)	($27)	($29)	($31)	($31)	($32)	($32)	($33)
Income Tax	($62)	($70)	($74)	($78)	($83)	($86)	($91)
Net Income ($M)	$418	$436	$452	$479	$505	$529	$559
Net Margin %	12.1%	12.3%	12.5%	12.9%	13.1%	13.3%	13.6%
EBITDA ($M)	$663	$695	$720	$756	$793	$826	$868
EBITDA Margin %	19.1%	19.6%	19.9%	20.3%	20.6%	20.8%	21.1%

Step 3 — Cash Flow Statement

The Cash Flow Statement bridges Net Income to actual cash generation. For restaurant operators, D&A add-back is significant due to heavy leasehold improvement capitalization, and CapEx is the primary reinvestment burden.

Cash Flow Statement ($M)	FY2022A	FY2023A	FY2024A	FY2025P	FY2026P	FY2027P	FY2028P
Net Income	$418	$436	$452	$479	$505	$529	$559
Add: D&A	$156	$160	$163	$168	$173	$179	$185
Working Capital Changes	$69	$71	$72	$75	$77	$79	$82
Operating Cash Flow	$643	$667	$687	$722	$755	$787	$826
Less: CapEx	($139)	($138)	($137)	($149)	($154)	($155)	($156)
Free Cash Flow	$504	$529	$550	$573	$601	$632	$670
FCF Margin %	14.5%	14.9%	15.2%	15.4%	15.6%	15.9%	16.3%

Step 4 — Sensitivity Analysis

A financial model without sensitivity analysis is incomplete. The table below shows how FY2026P Net Income changes as we vary the two most impactful assumptions: revenue growth and EBITDA margin. Management uses this to understand downside scenarios before committing capital.

Net Income FY2026P ($M) | Rev Growth →	+1%	+2%	+3% Base	+4%	+5%
Margin +100 bps	$532	$547	$562	$578	$595
Margin +50 bps	$519	$534	$548	$563	$579
Base Case Margin	$491	$505	$520	$536	$552
Margin -50 bps	$463	$476	$490	$504	$519
Margin -100 bps	$436	$449	$462	$476	$490

Executive Summary

Revenue trajectory is positive but moderate. CAKE is projected to grow from $3.6B to $4.1B over the forecast period, a CAGR of approximately 2.6%. Growth is driven by unit expansion and modest same-store sales recovery rather than aggressive pricing.

Margin expansion is achievable but not guaranteed. EBITDA margin expands from 19.9% in FY2024A to 21.1% in FY2028P, a 120-basis-point improvement requiring disciplined cost management in food, labor, and SG&A simultaneously.

Free cash flow generation is strong. FCF grows from $550M to $670M over the forecast, supporting continued capital return to shareholders through buybacks and dividends while funding new unit development.

Primary risk: labor cost inflation. Labor at 35% of revenue is the largest cost item. Minimum wage increases in California and other key markets represent the most significant downside risk to the model. A 100-bps labor cost increase reduces net income by approximately $36M annually.

Secondary risk: traffic softness. Same-store traffic has been under pressure as the casual dining consumer rebalances post-pandemic. The model assumes gradual recovery; if traffic remains flat, revenue and operating leverage both miss the projection.

Liquidity position is adequate. With $670M in projected free cash flow by FY2028 and manageable debt service of ~$33M annually, CAKE maintains significant financial flexibility to invest in growth or return capital.