...California Pizza Kitchen (CPK) was co-founded in 1985 in Beverly Hills, California by Rick Rosenfield and Larry Flax. Rosenfield and Flax both hold the title of Co-President, Co-CEO, and Co-Chairman of the Board of Directors for California Pizza Kitchen. Susan Collyns, Chief Financial Officer, currently leads the financial team at California Pizza Kitchen which is faced with reducing the corporate income-tax liability while balancing the goal of the management team to grow the business. California Pizza Kitchen is in the food industry business. California Pizza Kitchen is a casual dining restaurant chain that specializes in innovative and non-traditional pizzas. California Pizza Kitchen also provides various soups, salads, pasta, sandwiches, and desserts at higher quality for lower prices. California Pizza Kitchen is in 213 locations in 28 states (41% located in California). California Pizza Kitchen’s core patrons tend to have an average household income of $75,000 (survey results from 2005); creating less of an impact on patron’s dining habits during times of inflated gas and food prices. California Pizza Kitchen’s inventive menu was not the only draw-in for patrons, their below average check (usually around $13.30) was much lower than their competitors such as, The Cheesecake Factory, Olive Garden, P.F. Chang’s, Chili’s, Red Lobster, and Panera Bread to name a few. The California Pizza Kitchen chain was labeled by RBC Capital Markets as the “Price-Value-Experience” leader...
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...acquisition of Carts of Colorado and California Pizza Kitchen. The acquisition of these restaurants would expand PepsiCo’s restaurant business, but PepsiCo must consider how each deal will affect the scope of the firm and potential synergies in each deal before making a decision to acquire these firms or not. There are several potential synergies in the Carts of Colorado (COC) deal. Specifically, there are operational synergies and financial synergies, along with a little strategic synergy. There is operational synergy because acquiring COC would create economies of scope. There could be shared resources or activities because PepsiCo could sell items, or at least similar items, from their other restaurants on these food carts. There is some strategic synergy in this deal because making this deal would mean entering a new market, the food cart industry, to extend market power. Even though food carts are also fast food, it is in a new segment that PepsiCo has not yet experienced. Financial synergies are also evident in this deal with COC because since they nearly tripled its income in one period, they could be a valuable asset. By investing in it, PepsiCo will be able to gain much revenue and capital from a new source. For California Pizza Kitchen, there are operational, strategic, and financial synergies. In terms of operational synergies, there are economies of scope because there are shared activities and items, like different kinds of pizza. There are strategic synergies...
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...DISTRIBUTION CHANNEL The California Pizza Kitchen strategy to build a strong company with leadership position in the pizza industry decided to expand their distribution channel by not just having company owned business but utilizing franchises to expand their customer base. Franchising provides the ability to expand business rapidly at less of a financial risk. Profits are higher due to lower costs. Another channel is their high quality fast-casual concept called California Pizza Kitchen ASAP. The ASAP restaurants are smaller than the full service restaurants and offer a limited menu in attractive high traffic areas. They offer in-house dining or take out. This channel allows the company to get their product out to the consumer at a lower cost with smaller overhead (smaller rents, less employees, lower utilities). They also teamed up with Kraft Pizza a division of Kraft Foods another distribution channel, which has a line of frozen pizzas that are sold to supermarkets. These additional channels provide growth opportunities and name recognition. Currently, Kraft distributes pizzas in supermarkets focusing on markets in which the restaurants are located in from east coast in Georgia, Maine, to the west coast in Arizona, Nevada and California. The extensive development process involved input from CPK so that they maintained the quality of the restaurant in the frozen product. From the Kraft Manufacturing building, the pizzas are delivered by trucks equipped...
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...I was born and raised in California and had never experienced dining at the California Pizza Kitchen. I have heard about it through a few other people and passed by it numerous times. It never occurred to me to go experience eating and dining at this traditional American restaurant. This restaurant was established in 1985 in Los Angeles, California. When I was growing up, my family use to take us on road trips every so often down south to Los Angeles and San Diego. Every time we went there, I would see the sign, but never had a desire to eat there. I would see this bright, yellow sign with a single palm tree, the name, California Pizza Kitchen right below on a square shape tilted so the points are pointing North, South, West, East. The yellow sign attracted my attention and grabs other people’s attention I would think. I believe the yellow is a symbol of sun, which describes the feel of southern California. After so many years of hearing about it by word of mouth, I finally made the decision to try this food, California Pizza Kitchen, that the American people have been raving about. As I come walking into this restaurant in Los Angeles, I noticed the outside had tables, seating for four, an umbrella, lighting/heater post, and a gate for privacy and distinction. It was also very clean. This patio area is very attractive and grabs my attention. As I enter, I notice immediately the feel of the place is extremely relaxing and intimate. There’s music playing in the background...
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...The proposed acquisitions of California Pizza Kitchen and Carts of Colorado by Pepsico 1. Should PepsiCo buy California Pizza Kitchen? For both acquisitions it's more about what they add to PepsiCo, not what value PepsiCo adds to them Pros: - needs to acquire CPK to learn casual dining. That's where the growth is, and internal attempts to develop casual dining in Pizza Hut Cafe have failed. whether CPK is merely a passing yuppie fad, or if it is a long-term market segment doesn’t matter to PepsiCo if it merely wants to learn casual dining. - PepsiCo startups failing Cons: - possibly PepsiCo’s failure to develop a casual chain internally, along with the real differences between fast food and sit-down dining, will prevent it from succeeding. •New segment that PepsiCo doesn't know - Yuppie casual dining • $11 check, dinner on pizza dough - PepsiCo ignorant of key success factors •high level waiter service •PR not advertising key to marketing •capital cost $1 - $2m, sales $3m not $800k, $800k. •New untested concept - 25 restaurants, 8 states, $34m sales, $3/4m net income - may be a "fad" •only seven years old - may not stretch beyond Yuppiedom 2. Should they buy Carts of Colorado? Pros: - while CoC's $8m sales is very small for Pepsico, the real market size is the revenue from non-traditional PODs, and this is potentially enormous ($2 billion to PepsiCo alone) The real reason to own CoC is to preempt Coke and MacDonalds in the best locations...
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...California Pizza Kitchen Company Background: White-collar criminal defense attorneys Larry Flax and Rick Rosenfield in Beverly Hills, California created California Pizza Kitchen in 1985. Famously known for its hearth-baked barbecue-chicken pizza, the “designer pizza at off-the-rack prices” concept thrived. Over the last twenty years, the company has expanded into 213 locations in 28 states and 6 foreign countries. Although approximately 41% of the U.S. stores are located in California the business model has done well throughout all regions. California Pizza Kitchen derives its revenues from three sources: sales at company-owned stores, royalties from franchised restaurants, and royalties with a partnership with Kraft Foods to sell CPK-branded frozen pizzas in grocery stores. In 1996, CPK extended its brand with franchised ASAPS located in airports that offered a limited selection of pizzas and an assortment of “grab and go” sandwiches and salads. In 2000, CPK launched company owned ASAP locations as well. In 2007, CPK ceased development for any future ASAP locations to focus more on continued expansion of both domestic and international franchised locations. With the recent 10% share price decline, CPK is questioning whether this is an ideal time to repurchase shares and potentially leverage the company’s balance sheet with its prevailing line of credit. CPK is considering repurchasing shares and using debt financing to fund the strong expansion outlined for the company. In...
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...needs by using access and analyze the customer information from many different departments to improve their products and quality. 2． In my opinions, the information cleansing is important for California Pizza kitchen because they can provide important information to the kitchen. Before using the BI tool, the California Pizza kitchen used the old system to manage the financial statements, it made a lot of trouble in data organizing and calculating. After using that tools, it provides the fast and accurate way in data organizing and data calculations. It can make the communication more efficiently and effectively. 3． It is impossible to have 100 percent accurate and complete information because it will cost too much money here. The perfect always means expensive. If the company wants to get the accurate and complete information, it will let them have more cost here. It has more than 70 restaurants throughout the US right now, it may also have the human mistakes in collecting data. Therefore, it is impossible for that company had no error in obtaining that information. 4． For Ben & Jerry, the BI helps them to improve the quality of product. It increases the popularity of the company and let more people know they have the highest quality ice-cream. For the California Pizza Kitchen, using BI is good for them to manage and calculate data. It helps them to make financial statements complete and accurate. For the Noodles & Company, using BI helps the manager to communicate...
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...California Pizza Kitchen November 16, 2013 ABSTRACT The purposes of this case study are to discuss the main issues of CPK (California Pizza Kitchen) and think critically to find solutions to the current situation. In order to achieve these purposes, we first analyze time frame of the CPK’s establishment and recent development to find the absolute advantages and disadvantages of CPK compared with its competitors. According to our calculation, we will discuss whether to use moderately levering up CPK’s equity. Finally, a more suitable and profitable model will be established to improve the competitiveness and market share percentage of CPK. Key words: time frame, stay power, levering up, and debt INTRODUCTION California Pizza Kitchen (CPK) was a casual dining restaurant that co-founded by Larry Flax and Rick Rosenfeld in 1985 in Beverly Hills. California. Larry Flax and Rick Rosenfeld both hold the title of co-present, co-CEO, and co-chairman of the Board of Directors for CPK. It is known for its health-baked barbeque-chicken pizza, the “designer pizza at off-at-the-rack prices” concept flourished. By 2007, the company expanded its chain to 213 locations in 28 states (about 41% in California) and 6 foreign countries. The casual dining model had won much brand awareness and brand loyalty with its family-friendly surrounding, excellent ingredients, and inventive offering. The current core customers of CPK had an average household income of $75,000 (results...
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...CALIFORNIA PIZZA KITCHEN Teaching Note Synopsis and Objectives This case examines the question of financial leverage at California Pizza Kitchen (CPK) in July 2007. With a highly profitable business and an aversion to debt, CPK management is considering a debt-financed stock buyback program. The case is intended to provide an introduction to the Modigliani-Miller capital structure irrelevance propositions and the concept of debt tax shields. With the background of a pizza company, the case provides an engaging context to discuss the “pizza graphs” that are commonly used in corporate finance curriculum to illustrate the wealth effects of capital structure decisions. The case serves to motivate the following teaching objectives: • Introduce the Modigliani-Miller intuition of capital structure irrelevance; • Establish how the cost of equity is affected by capital structure decisions by defining financial risk and introducing the levered-beta capital asset pricing model (CAPM) equation; • Discuss interest tax deductibility and the valuation tax shields; • Explore the importance of debt capacity in a growing business. Suggestion for Advance Assignment to Students Students may consider the following study questions: 1. In what ways can Susan Collyns facilitate the success of CPK? 2. Using the scenarios in case Exhibit 9, what role does leverage play in affecting the return on equity (ROE) for CPK? What about the cost of...
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...consuming on a daily basis. By just consuming 100 pounds over what is considered “healthy”daily, it causes people to gain around ten pounds per year. The average a person should gain year, is only two pounds once they are sixteen or eighteen. Consuming 3,500 calories equals one pound (Finkelstein and Zuckerman,2008, p. 18) . A study showed by gaining eleven pounds during adulthood, resulted 27 percent of diabetic cases ( Johnson 2006). Not Knowing What is inside the Food The problem is that people are consuming all of these foods, but are not realizing exactly what is in the food they are consuming. Many people tend to eat pizza very often; however, they do not realize just how many calories they are consuming. In just two slices of pizza from Pizza Hut, is 840 calories. Women are only supposed to ingest 1200 calories a day, so by just eating two slices of pizza (which most people do not, most people eat three or four), that means that they will only have 360 calories left to eat. Not only is the type of food important, but where it is bought also plays a key role between gaining and losing weight. Even though am order of chicken wings is still not the healthiest order, at Applebees, an order of Buffalo Chicken Wings, with Southern BBQ contains 710 calories, whereas the three way Buffalo wings at Uno Chicago grill contains 1,350 calories. Many people believe that every type of food has the same amount of calories no matter where it is bought. That is incorrect. This is because...
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...THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary - Public Date: 6/10/2013 GAIN Report Number: IN3056 India Post: New Delhi India’s Quick Service Restaurant Sector Growing Report Categories: Retail Foods Food Service - Hotel Restaurant Institutional Promotion Opportunities Approved By: David Williams Prepared By: Priya Jashnani Report Highlights: The first foreign quick service and casual dining restaurant brands entered the Indian market nearly 20 years ago. At the time, Indians rarely ate out and many wondered how the restaurants would overcome supply chain challenges and opposition to foreign investment. There are now an estimated 43 foreign restaurant brands operating 1,900 outlets across India. The number of home-grown chains is also rising as Indian firms adopt franchising or chain models to meet growing consumer demand for the dining-out experience. The rising number of restaurants does not present a significant opportunity for imported food products given relatively high tariffs and import restrictions on key products, but restaurants are introducing new cuisines and changing consumer tastes and preferences, a trend that could result in long-term opportunities for exporters. This report provides an estimated census of foreign and domestic casual and quick service restaurant brands operating in India. Things Have Changed Over the Past 20 Years...
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...CASE STUDIES Amy’s Kitchen Case Study From start-up to leading natural and organic frozen food brand Reference Code: CSCM0256 Publication Date: August 2009 DATAMONITOR VIEW CATALYST Amy’s Kitchen was established by Andy and Rachel Berliner in 1987, and concentrates on the production of natural and organic meals. The company has dramatically expanded its product range in the 22 years since its founding from its one initial vegetable pot pie and in the fiscal year 2008, recorded revenues of 240million USD. The global economic crisis has been problematic for Amy’s Kitchen, as consumers seeking to make savings to their household budgets have reduced their spending on organic and natural food. However, core customers remain and many will continue to both regularly purchase the brand and be unpaid ambassadors for it, which has been part of its marketing success since its inception. SUMMARY • The Amy’s Kitchen company began as a business in 1987 in California and is named after Amy Berliner, the daughter of the two founders Andy and Rachel Berliner. The company has grown into the leading natural frozen food brand in the US, benefiting from the rise of the organic foods market. • The two founders had previous experience of working in the food industry with the Magic Mountain Herbal Tea Company and in the case of Rachel Berliner’s family from organic farming. This placed them in good stead for the creation of their organics company. • The company is resolutely in favor of...
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...CASES IN FINANCIAL STRATEGY Professor J. Schallheim FOR CASE BRIEFS: The answers to the following preparatory questions are not necessary or sufficient for your Case Briefs. Rather, the questions are to serve as a guide for your group discussion of the cases and a help to getting started on each case. Your final solution the case and recommendations should not necessarily be limited to the answers to these question or the assumptions in the case. FOR INDVIDUAL ASSIGNMENTS: For individual assignments, you must answer the questions labeled “Memo.” Individual Memo for Rapid Repair Auto Parts Rapid Repair’s profitability appears good but their cash balance has shrunk. Write a report that provides a financial analysis and summarizes their current situation (Hint: ratios and cash flow analysis). What changes do your recommend, if any, in 2013? Preparatory Questions for Horniman Horticulture Horniman’s profitability appears good but their cash balance has shrunk just like the previous case. Write a report that forecasts the financial outlook for 2006 (including forecasted income statement and balance sheet). How much external funds are needed (EFN), if any, for 2006? Preparatory Questions for Panera Bread Company 1. Complete the financing portion of Panera Bread Company’s 2007 forecast financial statements, and provide a forecast for the next 5 years. A worksheet has been provided for this purpose. As an initial (base case) analysis...
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...FINANCIAL MANAGEMENT AND POLICIES FIRST YEAR REQUIRED COURSE PACKET Quarter III, Spring 2010 FACULTY Section I: Section II: Section III: SectionIV: Section V: FINANCIAL MANAGEMENT AND POLICIES Quarter III, Spring 2010 Elena Loutskina Marc Lipson Robert Conroy MarcLipson Elena Loutskina IMPORTANT SCHEDULE ANNOUNCEMENT: Thursday, February 19 is a DAY LONG exercise that requires your participation until 5:30pm that evening. By compressing the exercise into a single day we were able to designate Friday as a Reading Day. Please DO NOT schedule any travel until after your obligation for the exercise ends at 5:30pm Thursday evening. COURSE DESCRIPTION First-Year Financial Management and Policies (FMP) reflects three important features of the Darden MBA Program: (1) it is a general management program; (2) the program, through its frequent use of the case method of instruction, has a practical, pragmatic bias and a decision- orientation; and (3) the first-year program provides the basic training on which students can build in the second-year. Consistent with the first-year program, FMP aims to provide: 1. An Introduction. The course provides the basic framework necessary to pursue further study in finance in the second-year of the MBA program and on his or her own thereafter. This framework is an orientation towards valuation. 2. Basic Mastery. The course emphasizes essentials, the tools and concepts that every general manager, entrepreneur, or manager in other functional fields...
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...I. Synopsis of the Situation: During the 1980s and 1990s, PepsiCo’s business strategy was to increase its presence in the casual dining segment of the restaurant industry, initiated through the purchase of Carts of Colorado and California Pizza Kitchen. While on paper the acquisition plan stood to be lucrative and position PepsiCo as a major competitor in the restaurant industry, relationships between corporate and franchisee became strained. The source of the fracture in PepsiCo’s business strategy was decentralization led by the CEO’s of the company. For example, David M. Kendall set a tone for a competitive and ambitious business acquisition strategy. The strategy endorsed an aggressive stance for purchasing and with regard to employees’ culture, one employee in the following statement noted his aggressive tone, “The controlling management style brought in by Kendall in 1963 had completely changed the cultural emphasis at PepsiCo from passivity to aggressivity” (p. 24, Magnani). The business strategy appeared beneficial and able to generate large profits, yet relationships with the franchisee component suffered due to decentralized communication. In short, the lack of synergy and competition between franchisee and corporate, resulted in divisive franchisee culture and major communication errors from the top down. II. Define the Problem: The core issue is the decentralized business model, which spawned a corporate culture characterized by miscommunication and competitive...
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