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California Pizza Kitchen (US) Arrives at Airports Abroad

29 Mar 2021 - With its emergence from Chapter 11 bankruptcy protection and $220 million less in debt, California Pizza Kitchen is turning its attention to growth with an eye toward an expanded international franchise footprint. About 46 of its 150-plus restaurants are spread across seven countries outside the United States, but until now the brand didn’t have a strategic plan to grow via franchising.

“I’m the first international CPK employee, really,” said Giorgio Minardi, who in late 2019 was hired as executive VP of global development and franchise operations. Drawing on his contacts from Madrid, Spain-based Telepizza Group, where he led its international franchising business, and from his role as international president at Dunkin’ Brands, Minardi said he’s since built a team to support calculated expansion abroad.

“Franchising is all I’ve done for my past 30 years,” he explained, often with “intensive growth” of 200 to 300 restaurants a year. “But opening a Dunkin’ is much different than opening a California Pizza Kitchen. Opening a CPK is like opening 20 Dunkin’s.”

That more demanding development process, which requires training of a kitchen manager and chef at each location to execute CPK’s from-scratch menu, means its growth pace is slower and, noted Minardi, is part of why it largely elected to grow via company units—until now. When Jim Hyatt was hired as CEO in 2018, bringing with him franchise experience as the chief executive at Church’s Chicken and Ruby Tuesday, leadership looked at alternatives to corporate expansion.

“Franchising is now one of our key focuses,” said Minardi, and on the international stage that includes opportunities in airports, settings in which, at least domestically, CPK performs “extremely well.”

“They’re captive markets,” continued Minardi of CPK’s affinity for airports, where it has 12 U.S. restaurants and where its fresh and healthy brand position resonates with travelers.

California Pizza Kitchen will find out if that same appeal exists among travelers in Latin America when it opens its first-ever international airport restaurants at Comodoro Arturo Merino Benítez International Airport in Santiago, Chile, and Juan Santamaría International Airport in San Jose, Costa Rica, later this year after signing a deal with Morpho Travel Retail. The Costa Rica-based specialty retailer is a subsidiary of Grupo Britt, which got its start in the coffee business in 1985 and today produces gourmet coffee, chocolate and specialty gift items. Morpho Travel Retail, meanwhile, has more than 175 stores in 11 countries, along with a food and beverage division that operates concepts Brioche Doree, Imperial Bar and Britt Café-Bakery.

“We fell in love immediately” with the group, said Minardi, largely because of Morpho’s knowledge going through the request for proposal process with the local airport authorities. “It’s not an easy thing and you really need to have a winning team that has that experience.”

Leading the Morpho team is CEO Adriana Echandi, who helped create the travel retail store division for Grupo Britt and said CPK offers the “perfect menu and innovation in meals” to adapt to different airports in Latin America.

“Our experience has shown us that passengers nowadays consider their gastronomic experience as a key point of their trip. There is a high appreciation and expectation from travelers to find trendy and high-quality food in each stage of their journey, and airports are no exception,” said Echandi. CPK aligns with the desires of travelers “especially since the concept is not available in their place of origin.”

Morpho Travel Retail is experienced in handling high volume operations thanks to 20-plus years running stores and restaurants in airports and hotels, she noted, with established purchasing, training, quality and operations teams. The purchasing group, in particular, is crucial given global supply chain issues brought by the coronavirus pandemic and the inherent complexity of CPK’s menu.

“One of the biggest challenges is guaranteeing the quality and flavor of the products, especially in this case that we are talking about Californian cuisine that has very specific raw materials,” said Echandi. She also noted the cultural challenge that comes with training kitchen staff on new recipes.

Morpho may open additional CPKs in other Latin American airports, but given the ongoing struggles of the travel industry during the pandemic, Echandi said any further expansion is largely dependent on an increase in passenger flow. Chile and Costa Rica both began allowing international travelers in November, with some COVID-19 testing and quarantine restrictions, but airport passenger counts remain sharply down.

With airport authorities around the world still contending with pandemic-related disruptions to operations and resulting vacant restaurant spaces, Minardi said he expects more opportunities to open up for CPK. The company is keeping close tabs on varying regulations, which does affect the planning process.

“Around the world, each government and each city official has approached COVID differently, and that’s a problem for us as operators,” he said. “In Hong Kong, say if they have a rise of 50 or 60 cases, they shut down,” while other markets are more nuanced.

CPK was able to open restaurants at the Evia Mall in Manila, Philippines, and Daegu Mall in Daegu, South Korea, last year, bringing its unit counts in those countries to five and seven, respectively. It’s also close to opening a location in India.

CPK, which in late July filed for Chapter 11 bankruptcy citing liquidity issues and impacts of the pandemic, completed its financial restructuring in November in a move that included a debt-for-equity transaction in which former creditors, led by Crescent Capital Group, now own substantially all of the operation. The reorganization eliminated more than $220 million in debt; the deal also included nearly $49 million in new financing to support ongoing operations.

“We’re much skinnier and lighter now,” said Minardi, “and much more confident than we were eight months ago when thing were much gloomier.

“We’re healthy and ready for a new journey.”

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