California Pizza Kitchen founders have a new food project in the oven
In the 2 1/2 years since selling California Pizza Kitchen, the popular chain he helped found in 1985, Richard L. Rosenfield has been golfing, fishing, hunting, pursuing hobbies and otherwise staying off the restaurant industry’s radar.
Not so much for Larry S. Flax, Rosenfield’s best friend and business partner of four decades, who’s been jetting around the world hunting for a new food project.
Turns out he didn’t have to go far for ideas. Sometime in the second half of 2014, Flax and Rosenfield said, they plan to revisit pizza by launching a line of fast-casual pie joints.
The former lawyers turned pizza moguls will compete in a fast-growing sector that includes brands such as Blaze Pizza, backed by former California First Lady Maria Shriver, and 800 Degrees, from Umami Burger kingpin Adam Fleischman.
In July, food industry data firm Technomic Inc. dubbed made-to-order pizza the “next big growth niche,” taking after the “better burger” trend.
“We look at this proliferation of Chipotle-like pizza restaurant concepts … and the truth is, we think a lot of them will be very successful,” said Flax and Rosenfield as they sat in their new Beverly Hills office overlooking their original CPK store.
“But ours will be different than the others’,” Rosenfield said. “This is not conceptual for us, this is full speed ahead.”
So far, their new venture remains mysterious. The duo, cautious of copycat competitors, is vague on the details, having shared them with only their wives and a few business intimates.
The food will be “moderately priced,” Flax said. And don’t call it an assembly line — the restaurants will feature a two-tiered menu with a selection of pre-designed signature pizzas and another section enabling patrons to customize their own pies. There will be a wider range of options than competitors offer, he said.
Rosenfield and Flax said they want to offer healthful ingredients. They won’t say, however, whether they’ll also offer sides such as salads and breadsticks.
They’re still playing around with possible names and need to hire a designer for the logo. They have a chief executive picked out, but he hasn’t yet informed his current employer. In the next few days, they plan to tap their vast real estate network to start finalizing “high profile locations” in retail and lifestyle centers and traditional malls.
And that’s just Plan A. Once the initial pipeline of stores is up and running, the team intends to start soliciting franchisees. It’s a change of pace from CPK, which outside of rare deals with early investor Steve Wynn and others, liked to keep its restaurants company-owned.
“It will be a DNA change in a sense,” Rosenfield said.
The unnamed concept will feature pizzas with Thai chicken, barbecue and pepperoni, like the ones they created for CPK. Still, the pair said the two chains won’t go head to head.
“We did not want to go and directly compete with our baby,” Flax said. “That’s not our competitor — we’re not intending this to be the fast-casual version of CPK. We are now going into a different segment.”
Adds Rosenfield: “Nobody will confuse it with CPK.”
In 2011, the pair sold CPK to San Francisco private investment firm Golden Gate Capital for about $470 million. At the time, the chain had 265 locations in the U.S. and abroad.
Though Rosenfield said he and Flax “would’ve been happy to be involved,” the new owners decided the founders weren’t needed. The parties split amicably and haven’t had any contact since.
“We all hugged,” Flax said. “It was a good deal. We did very well financially with CPK.”
After departing, Flax became drawn to the “exploding” fast-casual industry, which offered better fare than the fast-food sector and a simpler model than the struggling casual sit-down segment, which includes CPK. In the second quarter, traffic to fast-casual restaurants jumped 8% year over year, according to research firm NPD Group Inc.
“I wanted to see if it was a flash in the pan,” Flax said. “But I’m convinced this is going to be around for a long time.”
Their new pizza concept is part of a much larger business plan, which the pair is launching under the name Flax & Rosenfield Capital Partners Inc. They believe the company will eventually outgrow its new 2,600-square-foot, seventh-floor office.
One branch of the business will probably continue developing restaurant chains after the pizza concept takes off.
Another function will involve real estate acquisition and development. Flax and Rosenfield want to help property owners make the most of their restaurant tenants, shaping the “restaurant rows” they say are the industry’s future. But they also want to get in on the impending land grab that they believe is associated with a boom in franchising and strong food concepts.
And finally, the pair will raise capital and consult for young fast-casual companies. Their aim is to help clients avoid pitfalls they encountered while at CPK, such as allowing larger investors to swoop in and push for dangerously fast growth. So far, they are in discussions with a handful of companies, they said.
“We’ve been deluged with people who want our advice,” Flax said.
Flax is 71 years old. Rosenfield is 68. But, pointing to 83-year-old billionaire Warren Buffett, the two said they don’t intend to retire any time soon.
That’s despite reentering the market during a shaky period for the restaurant industry. Traffic is flat, according to NPD. The outlook is “foggy,” Flax said. Healthcare reform is causing the cost of doing business to escalate.
“We’re ambitious, but we’re growing slowly,” Flax said.
“We’ve learned to walk before we run,” Rosenfield added.