The Case of Pepsico's Restaurant

I. The case of PepsiCo’s Restaurant

1. Should PepsiCo acquire Carts of Colorado (CoC) or California Pizza Kitchens (CPK), or both? Why? (40 points)

PepsiCo should acquire Carts of Colorado. For California Pizza Kitchens, the acquisition may not be right, as it will depends on several factors. We will look into the specific situations based on the understandings of the company PepsiCo’s business situation.

According to Exhibit 4, PepsiCo’s existed restaurant business section has been developing stably and healthily. The capital spent on restaurant part also increased by $ 200 million per year from 1989 to 1991. Meanwhile, the operating profits also went up each year for the period of time. Both Pizza Hut and Taco Bell had healthy organic growth, even though the performance of KFC slumped a bit as in 1991. Thus, it is plain to understand that PepsiCo had sufficient money to do more acquisition to expand further on the restaurant business, and this was actually the trend of the company’s strategy for that period of time.

Carts of Colorado should be acquired. There are several compelling reasons for PepsiCo to do so.

First, PepsiCo had yet owned a restaurant business model like Carts of Colorado. PepsiCo already owned many chain restaurants but carts. Carts, instead of fixed chain stores, could be very flexible and convenient. This kind of business mode is going to fill up the gap of PepsiCo’s existed restaurant business.

Second, Carts of Colorado’s income situation in 1991 was doubled as the income in 1990, according to Exhibit 7. It is pretty healthy to take over a healthy brand image instead of a dead label that is likely to be kicked out of industry.

Third, Carts of Colorado had the most advanced engineering technology than other competitors in the same field. It was eighteen months ahead than others according to the report. Food preparation area was redesigned and became more efficient. The food storage and cooking capacity was also larger.

Last, Carts of Colorado had been suffering from location problems given that the long carts may block other restaurants and threaten their businesses. With PepsiCo’s resources all over the US, CoC carts would be placed in more places with better layout plans. CoC’s should be better off under the cover of PepsiCo.

Thus, the whole situation suggested that acquiring Carts of Colorado should be a right move to take.

For California Pizza Kitchens (CPK), the acquisition might not be a good choice. There are several factors that needed to be considered:

First,