Rumble over Cheesecake

There's nothing like an activist shareholder to make things interesting. Soon after news of billionaire Nelson Peltz acquiring a 14 percent stake in Cheesecake Factory, another big investor called for the resignation of the company's founder and CEO, David Overton. Robert Olstein, whose management firm holds a 2 percent stake, told Cheesecake's directors that the company "requires a proven, professional management team which can balance orderly growth with consistent improvement in operations, profitability and ultimately shareholder value." Olstein said he would wait for the board's response before taking matters into his own hands (no sign that he's in cahoots with Peltz). Olstein main beefs are that the Calabasas Hills-based chain doesn't charge enough and that the portions are too big. "Profitless prosperity - that's what Cheesecake Factory is involved with. Their revenues are growing like crazy and they can't bring it to the bottom line," Olstein told Dow Jones Newswires.

The restaurant company, which Overton founded in 1978, has an enviable reputation as commanding among the highest sales per square foot in casual dining, and for having a concept that shopping mall developers covet as a traffic magnet. But Cheesecake Factory's stock price has languished since hitting an all-time high of $39.28 in February of 2006. In recent late trading shares were down to $23.72 after closing Thursday at $24.10, down 44 cents, or 1.8%. Shares reached a 52-week low of $21.22 Wednesday. Its market capitalization is about $1.7 billion. While Olstein complimented Overton for having "done a great job as an entrepreneur," he contended that Cheesecake's 139 namesake restaurants could significantly increase returns to shareholders by charging more for food and, perhaps, trimming portion sizes.