California Pizza Kitchen California Pizza Kitchen (abbreviated CPK) is a casual dining restaurant chain that specializes in California-style

pizza and was founded in 1985 by Rick Rosenfield and Larry Flax. Although it started humbly with a single restaurant in Beverly Hills, it has become a successful international restaurant chain. With company expansion, a unique product line, and excellent store locations, CPK has become a major player in the restaurant industry. Although CPK has not been significantly fazed from our current economic downturn, we still feel that CPK must maintain their critical success factors within four specific categories: Financial, Customer, Learning and Growth, and Internal Business Processes. Finance In terms of Finance, CPK can improve three critical success factors: asset turnover, gross profit margin, and working capital. In 2008, CPK was operating with an asset turnover of 1.84x; however, we would like to see this increase by 2% this year. With an increase in efficiency in using its assets, CPK will greatly improve its return on investment and make their investors happier. With this increase in revenue, we hope to see that the gross profit margin will improve by 2% from its 2008 level of 18.3%. Through increased sales and better efficiency, we hope to push the restaurant chains negative working capital of $42 million toward the positive end of the spectrum. As their expansion is starting to curb, a negative working capital is becoming less and less practical. We feel they need to begin the process of establishing their credit by meeting their current liabilities and clearing their balance sheets of costly payment penalties and interest expenses. We feel an achievable goal for CPK would be a decrease by 25% to a negative working capital of $31.5 million in 2009. From there, we can only advise them to get closer and closer to a neutral or positive amount in working capital. With the struggles of the current recession we would like CPK to continue to show improvement in these categories while dealing with the economic downturn and rising food prices. Working capital has been declining at a rapid rate, and as the chain begins to slow its expansion we would like to see working capital have a positive balance within the next 3 years. Customer In terms of the customer, CPK should focus on the critical success factors of customer satisfaction, food service wait time, and organic food options. The level of customer satisfaction in 2008 was 3.5 stars (based on a 5 star system). Satisfaction was seen to decrease largely due to food service wait times of 20 minutes per table and the lack of healthy, eco-friendly choices available on the menu. CPK should look to increase customer satisfaction to a 4 star rating by decreasing food service wait time to at most 15 minutes per table. A possible solution is to assign less numbers of tables per waiter/waitress to minimize service wait time. Although this may be a costly venture, with more attention per customer, customer satisfaction will surely increase. However, if the wait time per table increases, negative reviews for CPKS service will persist which, in turn, will attract fewer customers and inhibit revenue growth. In todays food industry,

there is a great emphasis on organic vegetables and growth hormone free (non-rBGH treated) meats. Currently, CPK lacks organic food choices on its menu but should seek to increase this by offering organic options to at least 15% of its menu. A higher percentage of healthy food choices will attract more customers and increase customer satisfaction. By not including organic food choices on the menu, CPK would be negatively impacted by falling behind competitors with full organic menu choices. Learning and Growth While focusing on customer needs to meet the target levels set in the customer section, CPK should also simultaneously focus on company learning and growth. The current employee turnover rate at CPK is at an alarming 78%. The current training time per employee is 8 hours in total. The monetary and time investment that goes into training results in a loss for the company when employees leave their jobs after a short period of time. This could be due to the lack of long-term growth potential and benefits seen in their employment. By decreasing employee-training time to 4 hours per employee, the investment made to train employees would be more worthwhile. By cutting these costs the company will not only save expenses but also time, creating a more efficient and productive environment. Another important critical success factor is employee satisfaction, which is directly related to employee turnover since satisfied employees maintain their jobs. The reported current level of employee satisfaction at CPK is 65%. It is suggested that they increase employee satisfaction to at least 75% and decrease turnover rate to 50% by offering incentives such as signing bonuses and raising wages for workers who stay for at least a year. This would not only boost employee morale but would in turn reduce turnover rate because employees would feel a greater sense of belonging to the company and the company culture. When an employee is invested into the company and there is buy-in, an employees productivity is also likely to increase. However, by not engaging employees into a companys culture, unsatisfied employees are more likely to leave their jobs causing a negative perception of working at CPK which also may lead to hiring issues for the company in the future. Internal Business Processes If the target aspects of the learning and growth critical success factors can be achieved, internal business processes can also be improved. Same store sales growth is heavily dependent on the success and overall job satisfaction of employees as mentioned in the learning and growth section. With happier, harder working employees, we anticipate same store sales will increase from the loss of 5.4% it showed in 2008 to a 2.5% increase in 2009. If this critical success factor is achieved, ultimately profit margins will increase as same store sales will move out of the red. Increasing same store sales to a positive percentage is the most important of the three critical success factors in internal business processes. If this target level is not met, gross profit margin will surely decrease and make it difficult to address other critical success factors, such as eliminating expansion store expenses from 2008, and would leave the company financially unable to address these issues properly. Next, internal business processes contains another important critical success factor: new pizza selection. In 2008 new pizzas made up 15% of total

menu items over the year. Customer satisfaction surveys listed new pizza items such as the hamburger pizza the leading cause for their high ratings. 15% is an excellent target level, and there is no need to change it for 2009. If this level is decreased, customer satisfaction may drop and food inventory costs may increase for specialty items that many pizzas need. However, maintaining this level will lead to similar profit trends seen in the past, as long as new items are introduced according to schedule. Finally, the last critical success factor for internal business processes is inventory costs. Currently inventory costs are at $5.41 million, and we would like to see this amount decrease by 5% in 2009. If inventory costs are cut, more money can be used in R+D to develop new menu items. If they are not cut, low profit margins as well as diminished asset turnover will become detrimental to the organization. In conclusion, critical success factors such as gross profit margin, customer satisfaction, employee satisfaction, and same store sales growth, in the areas of financial, customer, learning and growth, and internal business processes are all extremely important to the success of California Pizza Kitchen. By increasing profit margins, decreasing unnecessary losses, increasing customer and employee satisfaction, the organization can maintain a helpful staff, happy customers, and strengthen profits for the company and its investors. California Pizza Kitchen has shown itself to be successful relative to their competition in nearly all of its critical success factors during these tough economic times, and if it heeds the advice given here regarding all of these 12 critical success factors, there is no reason the restaurant cannot operate towards higher profit margins in the 2009 fiscal year.

Works Cited

http://caps.fool.com/Ticker/CPKI.aspx http://www.chainleader.com/article/CA6483640.html http://www.cpk.com/ http://finance.yahoo.com/q?s=cpk http://www.yelp.com/