California Pizza Kitchen Inc. founders Rick Rosenfield and Larry Flax are back in the money again.
Since they retook the helm of the Los Angeles-based pizza chain a year ago, profits have climbed. Now the duo is preparing to add outlets, test out a new look for the chain’s restaurants and aim to draw more late-night diners who might have cocktails rather than sodas with their pies.
There’s little doubt the two defense-attorneys-turned-restaurateurs have a flair for turning out barbecue chicken studded pizzas. But these days Wall Street is watching to see if they make good on their ambitious plans and rebuild the chain they founded
19 years ago in Beverly Hills.
So far, so good: Sales at eateries open at least a year were up 6.6 percent in the second quarter, when CPK posted a $5.2 million profit, an 18 percent year-over-year increase.
Of course, 2003 wasn’t a great year.
After three years of steady improvement, earnings last year dropped sharply, due to what Rosenfield has said was a flawed real estate strategy backed by the former management team. It opened a string of new restaurants in 2002 and 2003 in such far-flung areas as Fresno, Calif., and Maple Grove, Minn., and sales have been disappointing.
The two co-founders had stepped aside from day-to-day operations in 1998 to develop new restaurant concepts, returning last July to share chief executive duties.
They said they have since devoted much of their energy to figuring out how to turn around the 26 stores they’ve identified as the most problematic and how to reassure investors that their core concept is still sound.
“This really is a real estate story,” said Rosenfield. The chain’s problems can be boiled down to “site selection and putting stores in wrong locations of malls without typical CPK demographics or putting them in the back of a good mall.”
The answer, Flax said, is to make the problem restaurants successful “either by waiting for the populations to play catch up or by using marketing and research to reach the public faster.”
Skeptics question Flax’s and Rosenfield’s ability to fully reverse the fortunes of the
26 problem stores, with one expert suggesting it could take years as opposed to quarters for those restaurants to play catch up.
According to Bryan Elliot, an analyst with Raymond James: “The jury is still out on whether this management team will be able to truly turn this back into a growth vehicle.”
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Edited by Lara Weber (lweber@tribune.com) and Victoria Rodriguez (vrodriguez@tribune.com)
