Supreme leaders Featured

8:00pm EDT May 16, 2006
How many people does it take to create a successful business?

In the case of California Pizza Kitchen Inc., the answer isn’t black-and-white. While CPK was founded in 1985 by just two men — Rick Rosenfield and Larry Flax — there were many more minds that influenced the company’s growth.

That’s because Rosenfield and Flax followed a unique path to building their business — rather than go it alone, they turned to big industry players for advice and guidance. The co-founders looked to organizations such as McDonald’s, Starbucks and Baskin-Robbins and studied their philosophies, mistakes and successes to see what worked and what didn’t. And when they needed more in-depth assistance, they partnered with a more-experienced company that knew the ropes.

By learning from other business’s experiences and leveraging that experience through collaboration, Flax and Rosenfield have turned their pizza concept into a multimillion-dollar success.

Basic principles
Rosenfield and Flax weren’t born restaurateurs. Before CPK, they were lawyers — successful lawyers, at that. But both had dreamed of opening a restaurant, so when they joined forces to try their hands in a new field, they knew they were at a disadvantage.

How could lawyers compete against experienced restaurant owners? The answer was simple — learn from those with the experience. Rosenfield and Flax began by turning to one of the most successful restaurateurs in history: Ray Kroc, the founder of McDonald’s.

“If you go back, the first one we looked to and read everything about was Ray Kroc,” says Rosenfield. “There was a book called “Behind the Golden Arches,” and then Ray Kroc himself had an autobiography, so we sort of read those things cover to cover a lot of times.”

By reading about Kroc’s success, the co-founders discovered four elements that they knew their restaurants had to have.

“Quality, value, service and cleanliness — the all-time formula that has never changed to this day and defines every restaurant in its niche,” says Flax. “Whether you’re white tablecloth or fast food or in between, it’s always quality, value, service and cleanliness.”

Those four tenets are the foundation of any food-service business, and while they don’t guarantee success, missing even one is the quickest path to closing a restaurant’s doors forever. So the co-founders established a corporate culture that rewards employees who work with the four tenets in mind.

The culture is called R.O.C.K., which stands for Respect, Opportunity, Communication and Kindness.

Employees receive extensive training on the R.O.C.K. culture when they join CPK and throughout their employment. If they always treat customers and co-workers with respect and kindness, and they engage in honest and open communication with their superiors, they are rewarded with opportunities for growth and advancement.

By establishing and perpetuating this culture, the co-founders developed a way to motivate employees to provide the best service, ensure restaurant order and cleanliness, work toward the highest quality standards and, in the process, create value for the customer.

Once they established the tenets, the co-founders needed a concept for their restaurants. They found it in the kitchens of two other LA-area chefs, Alice Waters of Chez Panisse and Wolfgang Puck. These chefs were making high-end pizzas, using ingredients such as smoked salmon, duck sausage and goat cheese. And while these were inventive and flavorful pizzas, Rosenfield and Flax realized that they weren’t accessible to most Americans, either in price or palate.

“We sort of say (Alice Waters) created it, Puck introduced it sort of through his celebrity connections to a celebrity audience here in Los Angeles, and then we introduced it to the world,” says Rosenfield. “But we redefined it. ... We created flavors that Americans can identify with — barbecue chicken pizza, Italian chicken pizza, BLT, it goes on and on, ethnic flavors that Americans were familiar with but hadn’t associated with pizza before.”

By brainstorming off of Waters’ and Puck’s pizza creations, the co-founders came up with a dining concept that proved to be a winner.

Branding
CPK’s co-founders looked to others for strong guidance during the start-up phase of their restaurant venture and continued to do so as their company grew. In fact, when it came to branding, many of CPK’s concepts were influenced by other brands.

For example, in 2004, Flax and Rosenfield decided to update the company’s logo to highlight certain elements, such as the color yellow. The idea came from examining the Starbucks logo.

“I’ve often said I want to own yellow like Starbucks owns green,” says Flax. “The Starbucks logo, if you asked somebody to describe it, most people can’t tell you what it really is. [It’s a mermaid.] But you sure know it when you see it, you recognize that green, and you don’t have to read much about it. So we decided that that’s really an important part of the logo.”

CPK made its sunny yellow color more prominent in its logo to create a stronger brand-color association in customers’ minds. It also played up the use of its three letters, C, P, K. While the initials have always been included as part of the logo, they are bolder in the new version. And the co-founders emphasize the use of the brand’s shorthand with employees and with customers.

“We were always looking for the shorthand, for people to become very familiar with it. McDonald’s has Mickey D’s, we have CPK,” says Rosenfield. “That’s been very important to us.”

For nickname ideas, the co-founders looked to Col. Sanders.

“When we were doing our logo, it didn’t escape us that Kentucky Fried Chicken was KFC,” says Flax. “So there was something about our letters that worked in our mind. And now, little kids call it CPK. We’ve given little kids an easy way to identify with us. I wish I could say I thought of that back in 1984 [while planning the first restaurant], but it’s working that way now.”

Partnerships
As CPK has grown, the co-founders have looked at different options for brand expansion, from franchising their CPK/ASAP sites — smaller, faster versions of restaurants, located in malls and airports — to expanding into the frozen foods case. And it was the combination of these two expansion options that led the co-founders to study Baskin-Robbins.

“We studied Baskin-Robbins’ growth and some of the problems they had,” says Flax. “For instance, (when) we went into all of our franchise agreements, like with the Mirage Hotel, we always made sure we had the right to go into the frozen food case. Baskin-Robbins made the mistake of expanding and franchising before deciding to go into the frozen food case, and they were sort of locked out by their franchisee agreements. That’s what gave Haagen-Dazs the foothold to come in and really grow through the frozen food case.”

Entering into the frozen foods case was a great adventure for Flax and Rosenfield, and it took them into unfamiliar territory. Sure, they’d cornered the market on hot pizzas, but what did they know about frozen pizzas? This time, instead of simply studying what other companies had done, the co-founders decided to enter into a partnership.

In 1997, Kraft Pizza Co., a division of Kraft Foods Inc., approached Rosenfield and Flax and proposed a CPK-branded frozen pizza.

“In studying them and tasting their product and learning about them, we came to see that they had the best technology,” says Rosenfield.

And that was important because, as with all brand-expansion endeavors, Rosenfield and Flax’s greatest concern was for maintaining the brand’s quality.

“We knew that this was going to put our product in a lot of hands and touch people for the first time, so it was critical to us that (Kraft) maintain the product quality,” says Rosenfield.

More than the way the pizza was constructed, the co-founders were concerned about the way the pizzas would be handled.

“You can imagine, if a frozen pizza is allowed to thaw and is stored on its side, what can happen to it. It isn’t pretty,” says Flax.

If the frozen pizzas weren’t made or shipped just right, CPK could lose thousands or millions of potential restaurant customers before ever entering a new market. So the co-founders and Kraft spent several years negotiating and testing, and they came to a win-win agreement.

Kraft produced the pizza, using CPK’s recipes and brand, and agreed to control all of the shipping and handling, ensuring that the pizzas are treated with care. The result is a successful brand expansion strategy for CPK, and Kraft benefits by having a super-premium brand in its product line, one that can be sold at a higher price point than its original premium brand, DiGiorno.

Growing results
Rosenfield and Flax’s attention to other companies’ trials, successes and failures has paid off. In some cases, the co-founders skipped over trial-and-error because they already knew what could work, and in others, they were able to flat-out avoid mistakes. And all the while, their restaurant chain has grown.

From a single store in Beverly Hills in 1985, the company has expanded to more than 180 locations around the world, drawing in revenue of $479.6 million in 2005 — an increase of more than $100 million over 2002. And it is the uncontested leader in the California-style pizza marketplace.

“At this point, we are not only the leader in premium pizza, we are the category killer,” says Rosenfield. “We can’t identify who’s second, because we don’t know of a second. We’re it.”

How to reach: California Pizza Kitchen, www.cpk.com