California Kitchen

California Pizza Kitchen

California Pizza Kitchen (CPK) is a casual dining restaurant chain that is well known for its hearth-baked barbecue-chicken pizza and the designer pizza at off-the-rack prices. It was co-founded in 1985 in Beverly Hills, California by Larry Flax and Rick Rosenfield. They both hold the title of Co-President. In early July 2007, Susan Collyns, a current Chief Financial Officer, was preparing a preliminary result with a financial team at California Pizza Kitchen. The result was strong compared to the difficulty in the industry. However, CPK’s stock price had dropped 10% to $22.10 during June that caused a lot of attention from investors. The team suggested repurchasing CPK’s shares as a solution. It is unaffordable for CPK with a little money in excess cash. Susan was aware of the benefit of levering up the firm in order to finance the repurchasing plan.

California Pizza Kitchen is in the food industry business. California Pizza Kitchen’s revenue come from three primary sources: sales at company owned restaurant, royalties from franchised restaurants, and royalties from a partnership with Kraft Food. California Pizza Kitchen also owns ASAP restaurant chain, which serve various salads and sandwiches at higher quality for lower prices. At the end of 2007, the firm had 213 locations in 28 states (41% located in California) and 6 foreign countries. California Pizza Kitchen’s core customers tend to have an average household income of $75,000. Its customer base is helpful for the company during times of inflated gas and food prices. California Pizza Kitchen’s main focus is “dedication to guest satisfaction and menu innovation and sustainable culture of service”. A high quality menu with a lower price is its top priority. In fact, its average checks that usually around $13.30 was lower than competitors’ dinning casual peer such as, The Cheesecake Factory and P.F. Chang’s. The CPK chain was labeled as the “Price-Value-Experience” leader in its...