California Pizza Kitchen Case Study

California Pizza Kitchen Case Study

        California Pizza Kitchen is one of my favorite pizza and pasta restaurants here. I firstly saw this restaurant at Tempe Market Place. I was attracted by its yellow parasols in front of the store. When I had the pizza and pasta in it, I was surprised by its delicate dishes. And the interior decoration is very nice and with great taste. I think this is why it can appeal to well-paid clients with low average checks. I learned a lot about this restaurant through this case.

        The first California Pizza Kitchen was created by Larry Flax and Rick Rosenfield in 1985 in Beverly Hills, California. CPK grows very fast, it expanded geographically throughout the US. By the end of the second quarter of 2007, the corporation has 213 locations in 28 states. And it even has opened abroad in six foreign countries. Nowadays, California Pizza Kitchen is not only a restaurant. It has three sources to make revenues, the first one is the company-owned restaurants, the second one is the royalties from franchised restaurants, and the last one is the royalties from Kraft Foods to sell its frozen pizzas in supermarkets. At the second quarter of 2007, CPK’s revenues increased more than 16% to $159 million. In the other hand, comparable restaurant’s sales up over 5%. By contrasting with the data of comparable restaurant, we can obviously learn that CPK is performing well in the overall industry.

CPK’s strategy in operation makes an important role in its today’s performance. As one of its founders, Rick Rosenfield said that, “You have to have the financial staying power. You could have the greatest idea, but many restaurants do not start out making money--- they build over time. So it is really about having the capital and the staying power.” We can learn that staying power is the main point in CPK’s operation. To make it come true, CPK requires a creative menu with high-quality ingredients as a top priority. And its menu items offer more customized options, for example you can choose to add meat or not and you also can choose which kind of meat you want to add in your dish. It also has many innovation or new recipes in the flavors in common recognized food. No doubt, it will bring clients a fresh sense. I still remember when I firstly saw Kung Pao Spaghetti, I was very shocked by that name. Kung Pao chicken is a very normal dish in China. I can’t imagine the spaghetti with a flavor of Kung Pao. My friend was very interested in all kinds of strange flavor food. So she has ordered it. Surprisingly, the taste of the dish is really good. That was the most popular dish among the dished we ordered that day. So, I think CPK did do a good job on it. Another advantage is CPK’s price. Its average check is $13.30, which was below many of its upscale dinning casual peers. And CPK doesn’t spend a lot of money on advertisement. According to the data in the case, CPK spent only 1% of its sales on advertising. This number is far below its competitors, which commonly invested 3% to 4% of sales in advertising. They prefer word-of-mouth of their patrons, which is more valuable. Instead of spending money on advertising, CPK spent around 50% of marketing dollars on menu-development. These differentiations of CPK’s strategies tell us why its revenue can be higher than most of his rivals. Another of its differentiation I want to talk about is CPK’s buyer power.

CPK has contended in 2005 that its core customer had an average of household income of more than $75,000. Customer’s affluence sheltered the company from macroeconomic pressures. For example, if the price of necessities goes up, the sales could be affected in result of in short of well-off patrons. Cause people may reduce dinning out and choose to purchase ingredients from grocery stores and cook at home to balance their living cost. In this case, it has mentioned a recent AAA Mid-Atlantic survey. In this survey, we can learn that travelers might reduce the cost of food to make up for the elevated gas prices. In a word, the macroeconomic can affect restaurant’s sales in both direct and indirect ways.