Pepsico Buys Large Slice of ‘Designer Pizza’ Chain

Pepsico, an old-timer in the quick-service restaurant business with its Kentucky Fried Chicken, Taco Bell and Pizza Hut chains, is venturing into full-service eateries with its purchase of a 50% stake in California Pizza Kitchen Inc., the companies said Wednesday.

California Pizza Kitchen, a highly successful chain started seven years ago in Beverly Hills by two former U.S. prosecutors, specializes in “designer pizzas” with offbeat toppings such as bacon, lettuce, tomato and mayonnaise.

From its initial location on Beverly Drive, the company has grown to 25 units nationwide, including 14 in California, with sales projected to reach $60 million this year.

Both sides declined to disclose details, but it is safe to say that a lot of dough was involved in the deal. Larry Flax, co-founder of California Pizza Kitchen, said Pepsico came to the partners in early February “with a deal we couldn’t refuse” as the restaurant company was preparing to do a public stock offering.

Under the deal, Flax and his partner, Rick Rosenfield, will continue to run the business. Pepsico will get two seats on the chain’s four-member board of directors. The Pepsico representatives will be Robert G. Dettmer, executive vice president and chief financial officer, and Kenneth T. Stevens, senior vice president of strategic planning, who cooked up the deal. Stevens is a former Los Angeles-based management consultant for McKinsey & Co.

Flax and Rosenfield anticipate that the infusion of Pepsico money will enable them to step up the pace of new restaurant openings from the current one per month.

Robert T. Patterson, director of hospitality consulting for the Coopers & Lybrand accounting firm in Los Angeles, described the move as an “intelligent diversification” on Pepsico’s part.

Flax said he anticipates only one change in the restaurant’s offerings: Pepsi will replace Coke on the menu.