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Little Caesars is 'optimistic' Kmart will survive

September 11, 2003

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DETROIT -- Weeks after contracts between Troy. Mich.-based Kmart and Detroit-based Little Caesar Enterprises Inc., expired, the Michigan firms say talks to keep their 11-year-old partnership alive continue.

According to a report in the Detroit News, Little Caesars is concerned about Kmart's ongoing bankruptcy problems, as it lost 98 locations when Kmart closed 283 storesearlier this year. Kmart also has said it may close more stores next year.

According to its January bankruptcy filings, Kmart also owes $5 million to Little Caesar and its subsidiary, Blue Line Distributing.

Currently Kmart franchises and operates 411 Little Caesars Pizza Stations and carries its pizza products at another 1,000 in-store KCafes. Kmart has about 1,800 U.S. stores.

Michael Scruggs, Little Caesar's senior vice president of global operations, has worked on the Kmart account almost from its beginning. More store closures, he said, would strain Little Caesar's business.

"(The partnership) put us into markets where we didn't have stores," Scruggs said. "We're optimistic we're going to get something worked out."

Still, Scruggs said Kmart must make some changes for the relationship to survive, such as improve the appearance of its locations.

"They're getting old, so it's time to update them," Scruggs said.

Over the past decade, co-branding between foodservice chains and retail stores has become a popular and profitable way for retailers to share space. Target Corp., a Kmart competitor, has Pizza Hut outlets inside its stores.