Dec. 26, 2007
Twenty-two years, ago, longtime friends and attorneys Rick Rosenfield and Larry Flax traded the courtroom for the dining room. The pair always wanted to get into the restaurant business, so in March 1985 they set out to reinvent pizza and opened the first California Pizza Kitchen in Beverly Hills, Calif.
Today, Flax and Rosenfield serve as co-CEOs of a company that operates more than 225 restaurants around the world. The company recorded revenue of $554.6 million in 2006 and is on track to top $600 million for 2007. And for the first nine months of 2007, same-store sales at CPK were up 4.5 percent, coming on the heels of a 5.9 percent comp increase in 2006 and a 7.5 percent increase in 2005.
For most companies, having dual CEOs would be a recipe for disaster. At California Pizza Kitchen, it's been one of the ingredients in the company's success.
"We've been best friends for 34 years, and as odd as it sounds, Larry and I really do not have conflicts," Rosenfield said. "We do vigorously debate, but at the end of the day we always come to a conclusion. The strength of our relationship has always been that while we both have healthy egos, neither one of us has that ego invested in being right."
Flax admitted the concept of having co-CEOS draws more questions than any other aspect of the company. People generally assume the two are always in conflict, he said.
"We've made mistakes and we've both been wrong, but we learn from those mistakes," he said. "If two people get together and they have a great idea and they respect each other, it can be a lot of fun."
Learning from the masters
The centerpiece of the California Pizza Kitchen concept is the hearth, which gives the pizza its signature taste. CPK's hearth-baked pizzas are cooked quickly, generally for three to seven minutes, at 500 degrees.
The restaurants serve a full menu of pizzas, pasta, soups, salads and appetizers. Signature dishes include a Five-Cheese and Fresh Tomato Pizza, a BLT Pizza and the restaurant's most popular BBQ Chicken Pizza.
"One of the things I thought was brilliant was the word "kitchen" in the name, because it invokes a little different image than California Pizza Company," said marketing expert Kamron Karington. "What I would think is that a lot of pizzerias today could say what they've benefited from was California Pizza Kitchen being the pioneer in gourmet pizza and taking it out to the mainstream. They pick good locations in high-traffic areas. They focus on personal-size pizzas, so everybody could either get their own or split one, which is a great way to get people sampling different offerings that you have."
When developing the concept that would become CPK, Flax and Rosenfield weren't shy about looking at other restaurant operations and trying to find out what made them successful.
Flax and Rosenfield bought copies of "McDonald's:Behind the Arches," by John F. Love, which outlines the business practices that made McDonald's successful, as well as books by McDonald's founder Ray Kroc.
"We used his formula of quality, value, service and cleanliness," Flax said. "Even though we weren't fast food, his approach to the industry serves every restaurant well."
Even today, the partners look at restaurants that are doing well to see what they are doing, and look at chains that are not doing well to determine why things changed.
"We always want to be better every day," Rosenfield said. "That's what it's all about."
The shotgun approach
California Pizza Kitchen didn't follow the traditional route of expanding outward geographically. Instead, the company built a restaurant in Atlanta, followed by ones in Hawaii, Chicago and elsewhere.
The scattershot expansion didn't happen strictly by chance, the partners said.
"We knew we had a hot concept, but we also knew that hot concepts when they are young are very subject to being ripped off," Rosenfield said. "We knew we were vulnerable to being copied by a bigger company, so the way to stop that was not to let anyone know where we were going to pop up next."
Unlike most growing restaurant concepts, the partners chose to build California Pizza Kitchen mainly by opening company-owned restaurants. Excluding CPK ASAP limited-menu locations, nearly all of the U.S. CPK restaurants are company-owned.
"Franchising has always been an enticing way for restaurants to expand without the need for capital infusion," Flax said. "But we've taken a pretty strong stance that we need our own controls and we operate our restaurants better than anybody."
Karington said another aspect of CPK's success is their ability to expand through their fast-casual ASAP restaurants in nontraditional locales such as airports.
"I think why they're experiencing growth is like why a lot of the big companies that experience growth even in a sluggish market: momentum," he said. "You know what you're getting, kind of like when you go to McDonald's. You know what's there."
A hallmark of CPK restaurants is community involvement. Restaurants conduct CPKids Restaurant Tours that offer children behind-the-scenes access, as well as a host of other school partnerships.
The company also has partnered with several established restaurant operators to open locations around the world. Recent openings include restaurants in Mexico City, Hong Kong and Seoul, South Korea.
"We say we are the world's premium pizza, not just the United States' premium pizza," Flax said. "In order to say that, we have to open up around the world. We partner with some pretty good people to do that."
Consumers can enjoy the company's pizzas even in areas where the company hasn't yet opened a restaurant. In 1997, the company partnered with Kraft Pizza Co. to offer a line of California Pizza Kitchen frozen pizza. Today, the frozen pizza line is available in 17,000 retail outlets in all 50 states.
"It primes the pump for us," Rosenfield said. "When we go open in a new area, people come in and tell us they've tried our frozen pizza and they are really thrilled to see the restaurant."
A look at the future
California Pizza Kitchen is slated to open approximately 17 new full-service restaurants in 2008, along with a minimum of six international full-service franchise restaurants. Also planned are at least four domestic CPK/ASAP franchise locations and one new LA Food Show restaurant.
The company projects revenue growth of approximately 14 percent to 15 percent and a comparable-store sales growth of 2 to 3 percent in 2008.
Flax and Rosenfield also have published "The California Pizza Kitchen Cookbook," outlining recipes for many of the dishes served in the restaurant. They aren't concerned, though, that a competitor might use those recipes to their own advantage.
"The moving parts of the restaurant business are much more than just coming up with a good concept and the same thing is true of the recipes," Rosenfield said. "At the end of the day, the success of a restaurant business has little to do with recipes. It's the menu coming together with the service and the ambiance. Everybody's copied our BBQ chicken pizza, but that's not what brings people back."
Despite how far the company has come, challenges remain the same as they were 22 years ago.
"We have over 14,000 employees right now," Rosenfield said. "It's always going to be getting the right people."
Flax agreed with Rosenfield's assessment.
"Developing great new interesting food is always a challenge," he said. "But ultimately it's the people who are going to execute the service."