California Pizza Kitchen Inc. (CPKI) is trying to step up its growth plans in India with the second restaurant in Mumbai. The restaurant will be opened in association with its franchise partner JSMGGC India Pvt. Ltd., a joint-venture between Mumbai-based JSM Corporation and Dubai-based Gourmet Gulf Company.
California Pizza Kitchen opened its first restaurant in India in 2009, after it entered into an agreement with this franchise partner to do business in that country.
The company plans to open at least 15 restaurants in India over the next 10 years. We believe that these planned openings are indicative of the company’s efforts to gain market share in India. As one of the largest emerging markets in the world, India provides a huge potential.
Moreover, the burgeoning middle income group is an important driver of the company’s India focus. Although the company operates in eleven international markets, it is concentrating on the Asia Pacific region owing to its rapidly growing economy.
The Los Angeles-based chain opened the first Indian restaurant in the commercial district of Bandra Kurla Complex. This is a 4,000 square feet restaurant, seating 180 guests. The new restaurant will have the same square feet coverage but an increased seating capacity. It will be located in High Street Phoenix, Mumbai’s largest shopping and entertainment destination. Both restaurants are strategically positioned for driving traffic.
California Pizza Kitchen currently owns and operates 207 restaurants and franchises 59 restaurants. The company is widening its presence internationally. There are currently 34 restaurants located in China, Japan, Philippines, Malaysia, Singapore, Mexico, South Korea, Guam, India, Indonesia and United Arab Emirates.
Overseas development in Mexico, Asia and the Middle East is also on the cards. But California Pizza Kitchen will have to brave tremendous competitive pressure in the markets it is eying for expansion.
In India itself, Yum! Brands Inc. (YUM) and McDonald’s Corp. (MCD) enjoy a large coverage. Moreover, commodity and other inflationary pressures are also heating up compelling California Pizza Kitchen to undertake several cost reduction programs.
California Pizza Kitchen currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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