Dive Brief:

• California Pizza Kitchen has reportedly hired advisors to refinance its $177 million debt and better position itself for either a sale or an IPO, according to Bloomberg, which cited people with knowledge of the matter. This move comes a year after the 200-unit chain filed for bankruptcy.
• The report notes the chain's average weekly sales have increased to about $10 million versus $8 million to $9 million in April and May, as full-capacity dining has returned to California and restrictions ease around the country.
• CPK's move comes as both M&A and IPO activity heat up in the restaurant space. There have been nearly 30 transactions in the industry since January 2020, for example. U.S. IPOs have surpassed the 2020 record with more than six months remaining in the year, driven by pent-up demand for investments, low interest rates and high valuations.

Dive Insight:

There could be some obstacles ahead for CPK, though considerations of a sale or IPO signal renewed health at the chain. If the company prepares to go public, it would join a growing list of restaurant chains doing so — or rumored to be doing so — in recent months, including Portillo's, P.F. Chang's, Krispy Kreme, Sweetgreen and Dutch Bros Coffee. Investors may be interested in the restaurant industry as demand returns, but there could also be a tipping point to that interest as so many concepts vie to go public in such a short amount of time, particularly for investors who prefer diversified portfolios.

The pizza chain recently put a new CFO in place to lead its restructuring strategy. At the time the CFO was brought on, the company was focused on expanding its global franchise footprint, innovating its menu and investing in marketing and digital channels. These efforts could be enough to intrigue potential buyers or investors flush with cash, especially on the heels of CPK's emergence from bankruptcy in November.

Bloomberg also reports CPK's annualized earnings for June are expected to be more than $10 million higher than they were before the pandemic, which could also position the chain favorably.

The casual dining segment, in general, is also becoming more of an attractive market, with foot traffic exceeding 2019 levels at some chains. Placer.ai predicts recovery in the casual segment could continue to intensify in the next few months, noting "… casual dining chains still seeing declines could find rebounds, especially those well aligned for the summer and back to school seasons."

But there is also concern about how rising COVID-19 cases could impact the segment as the Delta variant proliferates. Restaurants in some global markets have increased restrictions. Italy will require people to show proof of vaccination or a negative COVID-19 test to dine indoors. In the U.S., some markets are returning to mask mandates, including Los Angeles in CPK's home state of California. This lingering uncertainty could spook not just diners, but also investors.