For most of its life, California Pizza Kitchen has been a virtually 100% company-run outfit.
Even when the innovative, LA-based concept was growing quickly in the late 90s and early 2000s, its stores remained company-owned under the guidance of founders Rick Rosenfield and Larry Flax.
But over the past decade, the chain has closed more U.S. restaurants than it has opened. The number of company-owned California Pizza Kitchens has fallen more than 18% since 2010, to 159 last year from 195, according to Technomic data. U.S. sales also fell, by nearly 34%, over that time period.
The pandemic only exacerbated the downward slide, and CPK filed for bankruptcy in July 2020 as cash dwindled and rent came due.
It emerged from the ordeal in October with less debt and fresh capital, and was reportedly exploring an initial public offering. It also had a new plan to grow in the U.S.—this time, through franchising.
“We’re coming out of the pandemic, we have a lot of energy, and we have a lot of ambitions to be able to push the brand beyond some of the typical just opening company stores,” said Giorgio Minardi, EVP of global development and franchise operations since 2019. “We’re trying to be a bit more available to certain markets and certain franchisees.”
“We don’t want to go too fast and too big because that would jeopardize the brand.” —Giorgio Minardi
Historically, he said, CPK has chosen to focus on the strong profit margins generated by company-owned restaurants rather than collecting royalties from operators. But franchising presented a chance to do more with the 36-year-old brand.
“The reality is, we are very, very strong in California, and Hawaii and some other areas, but we need to now grow and take advantage of this opportunity that the pandemic has given,” he said.
The faster path to growth will provide greater scale, easing the costs of food and marketing. But don’t expect to see a sudden explosion of California Pizza Kitchens.
“We can’t go too fast,” Minardi said. “We don’t want to go too fast and too big because that would jeopardize the brand,” which prides itself on quality food above all else.
Rather than target specific markets, it’s looking for good partners just about anywhere in the U.S. The goal is to find 25 of them to eventually open 100 restaurants, starting with two franchisees and 10 to 12 new stores next year.
Six Southwestern states and Hawaii will be reserved for company-operated outlets. The chain will continue to open two to four of those annually.
“Franchisees will bring that extra push to get the brand recognized around areas that we probably wouldn’t go.” —Giorgio Minardi
CPK appears to be in a good spot financially as it embarks on this new chapter. 2021 has been an “incredible year” for the chain as it bounces back from the pandemic, Minardi said.
“This year’s results are exceeding 2019 in a great way,” he said, noting those results are coming from a smaller base of stores.
Part of that success can be attributed to a booming off-premise business, the product of changing consumer habits that were once a source of CPK’s struggles. Before the pandemic, about 22% of the chain’s sales were for to-go; now, that number is 40%. Delivery alone accounts for 20% of sales, Minardi said, up from 3%-5% in 2019.
And yet the company is still devoted to its full-service roots. As it seeks franchisees, it will continue to push its 6,000-square-foot flagship format, which remains its most profitable. That also tends to be the hardest real estate to find, though business closures rendered by the pandemic have opened up more opportunities.
“Not that prices and rents have gone down, but you at least have a choice,” Minardi said. “In the past, the bigger difficulty was that you would have to compromise your location and pay a pretty high rent.”
The chain has also developed smaller store models for greater flexibility, including grab-and-go-focused units for food courts and stadiums. Airport units, which until now had been the only ones run by franchisees in the U.S., also remain a big part of its strategy going forward.
“We are really in a good position right now to start sailing again with the brand,” Minardi said. “Franchisees will bring that extra push to get the brand recognized around areas that we probably wouldn’t go.”