PIZZA PLAY: Chicago Pizza’s Growth Catches Wall Street’s Eye
By JENNIFER BELLANTONIO
Huntington Beach-based Chicago Pizza & Brewery Inc. is stepping up growth plans after raising $36 million in a debt offering and adding two industry veterans to its management.
The company, which operates 27 BJ’s restaurants, expects to open four sites this year in California and Lewisville, Texas. Last year, Chicago Pizza opened two sites in Irvine and Chandler, Ariz.
In 2003, plans call for six to eight more new sites in California, Texas, Arizona, Colorado and Chicago, according to co-Chief Executive Jerry Hennessy.
Expansion at Chicago Pizza isn’t new. What’s different now is that Wall Street seems to have taken notice of the company’s recent moves.
After languishing for years, Chicago Pizza’s shares have been on an upswing since last year with surges in April and earlier this month. For the year, the company’s stock is up 50% with a market value of about $150 million.
In the first quarter, the company saw revenue rise 13% to $17.4 million. Net income was down 3.5% to $736,000 on expansion spending. What the company calls store-level profits,income from operations plus restaurant opening and administrative expenses,rose 16% to $2.7 million.
In about a year’s time the company’s OC workforce went from 270 to about 723. Companywide, the chain counts 2,100 people.
To keep up with the hiring and to house an administration and accounting division that moved down from Seattle, Chicago Pizza recently moved its base from Mission Viejo to bigger digs in Huntington Beach.
And Chicago Pizza recently enlisted two seasoned executives to help steer the growth. Michael Nahkunst, who spent 17 years at Brinker International Inc.’s Chili’s chain, joined in March as chief operating officer. Most recently Nahkunst served as chief operating officer at Cheesecake Factory Inc.
Also in March, Doug Mitchell, former vice president and corporate controller at Laguna Hills-based Del Taco Inc., came aboard as chief financial officer.
As Chicago Pizza looks for new sites, the company is butting up against bigger rivals in the fight for prime space in malls and shopping centers in “densely-populated, affluent suburban markets,” Hennessy said.
“We have very demanding real estate criteria,” he said. “We’re out there competing with the P.F. Chang’s, Maggiano’s and Cheesecake Factory’s for the sites.”
William Tilly, chairman and chief executive of Alhambra-based Jacmar Cos.,Chicago Pizza’s biggest shareholder,said he thinks the company eventually could be “much larger” than Calabasas Hills-based Cheesecake Factory and its 41 restaurants and even Phoenix-based P.F. Chang’s China Bistro Inc. and its 65 eateries.
“We admire what they have done,” he said of the two rivals. “They’re ahead of us in market cap. But we believe our demographics and the customers that we serve have a broader appeal than they do. We see a huge opportunity here for this brand.”
Tilly’s Jacmar invests in restaurants and runs several Shakey’s under license from Chicago Pizza rival Shakey’s Inc. of Garden Grove as well as Sizzlers and Taco Bells.
“I’ve been associated with several companies that have become dominant national brands, and I think this company, in its segment of casual, full-service dining, has as much potential as any I know,” he said.
The draw, according to Tilly, is Chicago Pizza’s family environment and its prices.
