California Pizza Kitchen Logo

California Pizza Kitchen

CPK Franchise Inc.
https://www.cpk.com
1-310-342-5000
575 Anton Blvd., Suite 100, Costa Mesa, CA 92626

Initial Investment Range

$720,000 to $5,375,000

Franchise Fee

$68,000 to $73,000

We offer franchises for full service restaurants that offer oven-fired 'California style' pizzas, as well as pastas, salads, specialty alcoholic and non-alcoholic beverages, and related products.

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California Pizza Kitchen March 28, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
4
2
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

CPK Franchise Inc. (CPK) explicitly warns of its financial condition as a “Special Risk.” Audited financials show a net loss of over $585,000 in 2023 and a large accumulated deficit. The franchisor’s predecessors filed for Chapter 11 bankruptcy in 2020. Several states have mandated that CPK defer collecting initial fees due to its financial state. This combination of factors may indicate a potential inability to provide promised support or invest in the brand's growth.

Potential Mitigations

  • A franchise accountant should meticulously analyze the audited financial statements, including footnotes and cash flow statements, to assess the franchisor's viability.
  • Understanding the full implications of the prior bankruptcy and current financial weakness requires a detailed review with your franchise attorney.
  • Inquire with current franchisees about the quality and consistency of support they have received from the franchisor.
Citations: Item 4, Item 21, FDD page 4

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals a significant, multi-year trend of system shrinkage. Total outlets declined from 168 to 131 between 2022 and 2024. In 2024 alone, the number of franchised outlets decreased by 20% (from 15 to 12) due to non-renewals and cessations. Concurrently, the company has consistently closed its own restaurants. This high rate of unit closure and franchisee exit could indicate systemic issues with profitability, support, or the business model.

Potential Mitigations

  • Your accountant should perform a detailed analysis of the Item 20 tables to calculate the annual turnover rate and compare it to industry averages.
  • It is crucial to contact former franchisees listed in Exhibit G to understand their reasons for leaving the system.
  • A thorough discussion with your business advisor is needed to weigh the risks associated with investing in a shrinking franchise system.
Citations: Item 20 Tables 1, 3, 4

Rapid System Growth

Low Risk

Explanation

The franchisor has not demonstrated a pattern of rapid growth that would strain its resources. Instead, Item 20 data indicates the system has been contracting in recent years. Therefore, the specific risk of support dilution due to excessively fast expansion was not identified in the FDD package. Generally, rapid growth can be a concern if a franchisor's support infrastructure does not keep pace, leading to diminished franchisee assistance.

Potential Mitigations

  • Your business advisor can help evaluate whether a franchisor's growth plans are sustainable and adequately supported.
  • Discussions with franchisees in rapidly growing systems are useful to gauge the quality of support, which your attorney can help structure.
  • An accountant's review of the franchisor's financials can help determine if they have the capital to support planned expansion.
Citations: Item 20, Item 21

New/Unproven Franchise System

High Risk

Explanation

CPK Franchise Inc. is a relatively new franchising entity, formed in September 2021, and it began franchising in 2022. While the brand itself is long-established, the franchisor entity lacks a long track record of its own. Item 20 shows a very small number of franchised outlets and a declining number of total system outlets. The combination of a new franchising entity, limited franchising history, and a shrinking system presents significant risks regarding the long-term viability of the franchise program.

Potential Mitigations

  • Engaging a business advisor to perform deep due diligence on the management team's experience in successfully managing a franchise system is critical.
  • Your accountant should carefully scrutinize the financials of this newer franchising entity to assess its stability and reliance on franchise fees.
  • Speaking with the earliest franchisees about their experience with this specific franchisor entity is highly recommended.
Citations: Item 1, Item 2, Item 20, Item 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified. California Pizza Kitchen is a well-established brand in the full-service casual dining sector, having been founded in 1985. The concept is not tied to a recent or fleeting trend, suggesting a lower risk of being a fad business. However, any restaurant concept must evolve to stay relevant. Long-term success depends on the franchisor's ability to innovate and adapt to changing consumer tastes and economic conditions, which is a consideration for any franchise investment.

Potential Mitigations

  • A business advisor can help you analyze the long-term market trends for the casual dining industry.
  • Questioning the franchisor about their strategies for menu innovation and brand evolution is an important step.
  • To better assess the brand's competitive position, consider discussing it with current franchisees.
Citations: Item 1

Inexperienced Management

Medium Risk

Explanation

The business experience of some key executives presents a mixed picture. While many have extensive restaurant industry experience, the President and CEO, Jeff Warne, previously served as CEO for another restaurant company, Perkins & Marie Callender's, which filed for Chapter 11 bankruptcy in 2019. This history, combined with the 2020 bankruptcy of the CPK predecessor entities, could suggest a pattern of challenges in managing large restaurant systems through financial difficulties.

Potential Mitigations

  • A business advisor should be engaged to help you thoroughly vet the specific franchising and turnaround experience of the current management team.
  • Discuss the management team's leadership and strategic direction with current franchisees to gauge their confidence.
  • Your attorney can help you formulate questions for the franchisor regarding the past bankruptcies and the lessons learned.
Citations: Item 2, Item 4

Private Equity Ownership

Low Risk

Explanation

This risk was not identified, as the FDD does not disclose ownership by a private equity firm. The ultimate parent is CPK Parent Inc. However, Item 1 does disclose a pending sale of the parent company to a consortium of investment firms, which introduces a similar type of risk regarding future ownership priorities and strategy. This specific issue is addressed in the Miscellaneous Risks category.

Potential Mitigations

  • It is wise to have your attorney investigate the ownership structure of any franchisor to understand who ultimately controls the brand.
  • A business advisor can help research the track record of any parent investment firm with other franchise concepts.
  • Discussing any changes in support or strategy since an ownership change with existing franchisees provides valuable insight.
Citations: Item 1

Non-Disclosure of Parent Company

Medium Risk

Explanation

This risk was not identified. The FDD discloses the parent companies, CPK Holdings Inc. and CPK Parent Inc. However, it does not provide their financial statements. The franchisor entity, CPK Franchise Inc., is a wholly-owned subsidiary of CPK Holdings. Given the franchisor's limited operating history and financial weakness, the financial health of the parent company is a material factor that appears to be missing from the disclosure, potentially obscuring the true financial backing of the system.

Potential Mitigations

  • An experienced franchise attorney can help determine if the parent company's financial statements should have been included under franchise disclosure rules.
  • Your accountant should assess the franchisor's financials to see if it appears to be a thinly capitalized entity dependent on its parent.
  • You should inquire with the franchisor about the financial health of the parent company and its commitment to supporting the franchise system.
Citations: Item 1, Item 21

Predecessor History Issues

High Risk

Explanation

Item 1 discloses predecessors, and Item 4 details their Chapter 11 bankruptcy filing in 2020. This indicates a significant negative history for the brand's operating entities prior to the formation of the current franchisor. While disclosed, this history of financial failure is a critical risk factor, suggesting potential underlying issues with the business model, debt structure, or market competitiveness that may not have been fully resolved despite the reorganization.

Potential Mitigations

  • Your attorney should carefully review the details of the predecessor bankruptcy to understand the causes and outcomes.
  • It is important to discuss with long-term franchisees their experience before, during, and after the bankruptcy.
  • An accountant can help assess how the reorganization may have impacted the brand's current financial structure and ongoing liabilities.
Citations: Item 1, Item 4

Pattern of Litigation

Low Risk

Explanation

This risk was not identified in the FDD package. Item 3 explicitly states, "No litigation is required to be disclosed in this Item." The absence of significant litigation, particularly claims from franchisees alleging fraud or misrepresentation, is a positive factor. However, it is still important to be aware that disputes can arise in any franchise system, and the terms of the Franchise Agreement will govern how they are resolved.

Potential Mitigations

  • Your attorney should confirm that no litigation is pending by performing independent searches of court records.
  • It is still advisable to ask current and former franchisees about any disputes they may have had with the franchisor, even if they did not result in litigation.
  • A comprehensive review of the dispute resolution clauses in the Franchise Agreement with your attorney is always recommended.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
1
11

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
4
4
2

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

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4

Legal & Contract Risks

Total: 16
5
6
5

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
2
2
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
4
4
2

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
1
2
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
4
5
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
9
6
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 2
2
0
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.