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Califonia Pizza Kitchen

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by

kamol amini

on 12 November 2012

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Transcript of Califonia Pizza Kitchen

Case Study
Javier Díaz ovín - Kamol amini History First CPK created in 1985 in Beverly Hills, California

By 2007:
- 213 locations in 28 states
- 15 international franchises in 6 foreign countries

Three sources of income
- sales at company owned restaurants
- royalties from franchised restaurants
- royalties from partnership with Kraft Foods Effect of leverage ROE
Cost of Equity
WACC
Share Price Effect of leverage on ROE Effect of leverage on Cost of Equity The effect of leverage on WACC Share price Restaurant Industry Two main sectors:
Full-service
Limited-service Challenges in the restaurant industry
increasing commodity prices
higher labor costs
deteriorating housing wealth Current Situation Early July 2007 results :
near-record quarterly profit of over $6million
strong revenue growth up over 5%
competitors with sharp decline in customer traffic
CPK's share price declined 10% to $22.10 Should we repurchase shares or not? and how many? Expected benefits of repurchase Shares signal to the market
expecting a higher value in the future
facilitating operating business
actual low cost of debt Recommendation debt-equity ratio is industry specific
consider interest expense
high debt- equity ratio probability of going bankrupt
staying power one of the most important ability in the food sector Agenda History
Restaurant Industry
Current Situation
Expected Benefits of repurchasing shares
Effect of leverage
RoE
Cost of Equity
WACC
Share price
Recommendation Thank you for your attention
Full transcript