Skip to main content

Chicago Pizza & Brewery, Inc.

Chicago Pizza & Brewery, Inc.

16162 Beach Boulevard, Suite 100
Huntington Beach, California 92647
U.S.A.
Telephone: (714) 848-3747
Fax: (714) 848-5578
Web site: http://www.bjsbrewhouse.com

Public Company
Founded:
1978
Employees: 1,510
Sales: $52.35 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: CHGO
NAIC: 72211 Full-Service Restaurants; 31212 Breweries

Chicago Pizza & Brewery, Inc. operates a chain of restaurants which are run under various names: BJs Pizza & Grill, BJs Restaurant & Brewery, BJs Restaurant & Brewhouse, and Pietros Pizza. Chicago Pizza & Brewery Inc. has grown steadily during the 1990s, and in 2001 it included 30 restaurants in all in five western states, California, Hawaii, Oregon, Washington, and Colorado. The company expects to continue its expansion and to move into Arizona as well. Chicago Pizza & Brewery restaurants have menus which offer a variety of items, including salads, burgers, pasta, sandwiches, and entrees, but the chain is best-known for its Chicago-style deep-dish pizza. The company also operates microbreweries in six of its restaurants. Those breweries supply the entire chain with a full line of regular and seasonal beers. Beer sales account for about 25 percent of Chicago Pizza & Brewery sales.

Amateur Pizzerias

The history of Chicago Pizza & Brewery is in large part the story of the attractiveness of the restaurant business to outsiders. It began in 1976 when two residents of Ohio, Bill Cunningham, a partner in a brokerage firm, and Michael Phillips, the marketing director for an appliance company, decided to strike out and go into business for themselves. Rather than selecting a business they knew, however, they decided to try their luck in restaurants. Neither partner had any experience whatsoever in running a restaurant; the deciding factor was that because there would be no accounts receivable or inventory to worry about, the bookkeeping would be simpler. Cunningham and Phillips quit their jobs and moved their families across the country to California where they purchased a Burger King franchise in San Pedro. They were attracted to Burger King primarily by the detailed training the company offered its franchisees. That training provided the basis for the success of their own chain of restaurants. While with Burger King, Phillips and Cunningham hoped eventually to purchase more franchises. They were forced to reconsider that plan, however, when Burger King adopted a new policy that prevented franchisees from owning stores themselves. Instead the partners turned to pizza.

Phillips and Cunningham had no experience in pizza either. They knew what they liked, though, and in their minds, there was a lot of room for improvement in California pizza restaurants. We didnt think they were very people-oriented, Cunningham once told the Orange County Register. It was: Get in line, order your pizza, put a number on your table. Kids screaming, peanuts on the floor. They made up their minds that pizza could be served just as well in a real restaurant, with wait people and a nice décor. So, in 1978, they founded a company called Roman Systems Inc. and opened the first BJs Chicago Pizzerias. The first restaurant was located in Santa Ana, California, followed shortly by one in Newport Beach, California. The concept was simple and it worked: traditional Chicago pan pizza, for under $5 per person, served by waiters and waitresses in an attractive restaurant setting rather than amid benches, spilled beer, and sawdust. Through the 1980s, BJs business increased by about ten percent a year, even during periods of economic recession. When the economy was hit by another recession in the early 1990s, however, even an inexpensive, full service restaurant like BJs found it was only just holding onnot losing money, but not growing either. The pizza garnered a solid reputation too. By 1991, BJs had won just about every Best Pizza award given in the Los Angeles area.

New Careers in Pizza

By 1991, BJs had six restaurants, all earning over $1 million annuallyabout twice the pizza industry average. Cunningham and Phillips began getting inquiries from outsiders interested in opening BJs franchises. Growth seemed to be in BJs future and the partners were looking at the addition of 15 new stores in the first half of the 1990s. One of their basic principles was to go slow with growth philosophy until they had adequate experienced staff in place for new openings. By the early 1990s, Cunningham and Phillips were also growing tired of running the business on a day-to-day basis. They were ready to step back and start to enjoy what they had built up. One day the BJs owners asked their accountants, Paul Motenko and Jerry Hennessey, how to scale back their involvement in the company. Motenko and Hennessey hardly hesitated. They would be willing to take over the management of BJs. Although they had no experience as restaurateurs, they closed their CPA firm and launched new careers in pizza.

One of Motenko and Hennesseys first decisions was to begin an aggressive expansion of the BJs chain. They opened a site in Long Beach in 1992, put a second location in La Jolla in 1993, and launched restaurants in Seal Beach, Huntington Beach, and Lahaina, Maui, in 1994. The quick expansion led to losses: in 1994, the company a suffered a $523,000 loss against revenues of $6.5 million, and in 1995 a loss of $1 million against revenues of $6.6 million. Nonetheless, 1995 Motenko and Hennessey were willing to purchase the business outright for about $4 million and stock in the firm, which had been newly incorporated.

Once they owned the firm, Hennessey and Motenko set to work revamping it. Consultants were hired to design a new logo and to create a consistent concept for a chain of restaurants. The results were first incorporated into a restaurant the firm opened in Brea, California, in April 1996. With 10,000 square-feet in floor space, the Brea restaurant was nearly five times larger than most then-existing BJs. It was also the first store in the chain with a microbrewery. It offered a much larger selection of food, adding pasta, salads, burgers, and sandwiches, and a greatly expanded pizza menu. The Brea restaurant was acquired and running in a remarkably short period of time. The building was first acquired on March 15 and the restaurant was opened on April 1, only two weeks laterafter the installation of completely new fixtures, a full renovation, and the hiring and training of 135 new employees.

The opening was not free of problems, however, and the owners spent the next two months getting the restaurants service up to speed. But once the Brea restaurant got on track, it became the flagship store of the BJs chain. An important part of the new concept was the adoption of a new name for the restaurants: BJs Pizza & Grill. New stores continued to be opened through the rest of the decade. By October 1996, the BJs chain was ten stores large, with locations in four states, California, Hawaii, Oregon, and Washington. The growth got an important boost in March 1996 with the purchase of the Pietros Corp., the owner of a chain of pizza restaurants in the states of Washington and Oregon.

Pietros was on the verge of bankruptcy at the time and Motenko and Hennessey were able to acquire it for $2.35 million and the assumption of about $500,000 in debt. Four Pietros restaurants were converted to BJs format; some others were shut down; in 2000, six were still operating under the old Pietros name. When Pietros was acquired, Motenko and Hennessey anticipated that Pietros might add as much as $11 million in annual sales to their coffers.

Pizza IPO in the Mid-1990s

In the first quarter of 1996, BJs lost about $367,000 against saleswhich had increased by 12 percentof $1.8 million. Despite the losses, which the owners attributed to the opening of the new restaurants, in October of that year, the firm, under the name of a newly-formed holding company, Chicago Pizza & Brewery Inc., took another major step. It made an initial public offering of company stock, selling 1.8 million shares for $5 a piece. Of the approximately $9 million that the IPO raised for Chicago Pizza & Brewery, nearly $7 million was to go toward the renovation of newly-acquired restaurants and another $1.6 million was to be used for debt reduction. The IPO had one completely unexpected consequence for the firm. Chicago Pizza had floated its offering with a relatively unknown underwriter, the Boston Group of Los Angeles. Not long afterwards, the Boston Group went out of business. From one day to the next, Motenko later said, Chicago Pizza seemed to lose all market support and its shares plunged from their $5 opening price to around $1 where they would hover for much of the next five years.

Despite such unfortunate occurrences, the company had found an effective formula. By the mid-1990s, BJs was attracting a diverse clientele. The restaurants with their generous portions and low prices drew families, students, and seniors, while the exciting atmosphere of the bars in BJs drew crowds of singles and young professionals. In March 1997, Chicago Pizza & Brewery announced the opening of its first restaurant in Boulder, Colorado. The site included a restaurant with more than 150 seats and a brewery with a capacity of ten barrels. As 1997 ended, the company boasted 27 restaurants with annual sales of $26 million. In November 1998 the firm announced it would open three more restaurants in the Los Angeles area.

Company Perspectives:

BJs Brewery and BJs Brewhouse serve markedly superior food and fresh, handcrafted beers in a casual, lively atmosphere. Our employees and experience exude a warm, friendly and energetic spirit that serves to convey a sense of honest value and a commitment to totally exceed the expectations of our guests. To assure the delight and continued loyalty of the guest, we are fanatical about each and every detail: from the use of only quality ingredients and preparation of our product and the well-trained, enthusiastic spirit of our employees to clean premises, a colorful presentation of our image and our on-going community involvement, the BJs Brand strives to make our guests say Wow!, I love this place!

Late 1990s: Outside Interest in Chicago Pizza

In December 1998, La Pizza Loca Inc., one of the largest Latino-owned businesses in Californias Orange County, approached Chicago Pizza & Brewery and offered to buy out the company. Pizza Locas chief executive, Alex Meruelo, who already held a 7.4 percent stake in Chicago Pizza & Brewery offered to purchase it for $2 per share, nearly 50 cents above the then-prevailing market price, an offer worth approximately $12.8 million in all. Under the terms of Meruelos offer, La Pizza Loca would purchase all Chicago Pizza shares except those held personally by Motenko and Hennessey. Those shares would be exchanged for shares in the newly-combined Pizza Loca-Chicago Pizza. Meruelo said he was pursuing the deal because he believed there were strong synergies between the two firms. The owners of Chicago Pizza rejected the offer, however, saying they felt it did not serve the best interests of the companys shareholders.

A little more than two months later, Chicago Pizza & Brewery announced that it was selling 1.25 million shares of its common stock to ASSI Inc., a real estate and hospitality company that had provided funds for the acquisition of the Pietros chain in 1996. In exchange for the stock, ASSI was to pay Chicago Pizza $ 1 million and cancel two consulting agreements it had with the company, as well as canceling 3.2 million of Chicago Pizzas outstanding warrants which it held. Those warrantsa kind of stock option certificate which allowed the holder, for a predetermined period of time, to purchase a share of stock at a predetermined pricemade up approximately 25 percent of all Chicago Pizzas outstanding warrants. Many saw the deal as linked directly to the retirement of those warrants, which were seen to be depressing the value of Chicago Pizzas stock. Another incentive for Chicago Pizza, however, was the promise of ASSIs real estate expertise as it pursued further expansion. Alex Meruelo, whose La Pizza Loca offer to take over the BJs chain had been rebuffed in December, immediately filed suit against Chicago Pizza in civil court, alleging that in accepting approximately 80 cents per share from ASSI instead of the $2.00 per share Pizza Loca had offered, Chicago Pizza had acted irresponsibly toward the interests of its stockholders. In March 1999, a California court refused Meruelos request for a temporary restraining order that would have blocked the transfer of stock to ASSI. The deal was consummated later in March.

Chicago Pizza earned its first profit under Motenko and Hennessey in 1998, when it reported earnings of $85,000, up from a loss of $315,000 in 1997. The company had 1998 revenues of $30.1 million, up 15 percent from the previous year. In mid-1999 the company announced an executive restructuring with the naming of Ernie Klinger as president. Jerry Hennessey gave up the position and became co-CEO with Paul Motenko. Chicago Pizza denied that the restructuring had anything to do with an attempt by Alex Mereulo, the holder by then of nearly 15 percent of the companys stock, to win a seat on the board of directors.

The year 1999 saw Chicago Pizzas annual sales jump to $37.4 million and same store sales at BJs restaurants increase by 7.8 percent. In 1999, it also opened new restaurants in Arcadia, Woodland Hills, and La Mesa, California, and planned several other new sites in the coming months. As 2000 began, the company was operating 19 BJs and eight Pietros. In spring 2000, Chicago Pizza opened a new restaurant in West Covina, California, which had 12,000 square feet in area as well as the chains largest microbrewery.

The ownership of Chicago Pizza underwent another change in December 2000, when the Jacmar Cos., one of Chicago Pizzas major restaurant suppliers, agreed to purchase approximately 2.9 million shares of the companys stock. Jacmar had a newly-formed affiliate called BJ Chicago, which had earlier in the year acquired more than 15 percent of Chicago Pizza common stock in open trading. BJ Chicago bought another 2.2 million shares at $4 each from ASSI Inc. and Louis Habash, and co-CEOs Motenko and Hennessey agreed to sell 661,358 of their own shares, about half of their personal holdings, as well. In all, the deal gave Jacmar a 51 percent holding in Chicago Pizza and control of the firm.

Chicago Pizza officials later admitted that debt financing had forced them to make the deal. The Union Bank would only agree to $8 million in loan financing to Chicago Pizza only if the company were able to come up with additional equity. Chicago Pizza & Brewery called 2000 the best year in its history. Four new restaurants were opened in California. It marked the fifth consecutive year of same-store sales increases. Company revenues increased by 40 percent over 1999, reaching $52.35 million.

Principal Divisions

Pietros Restaurants; BJs Pizza & Grill; BJs Restaurant & Brewery; BJs Restaurant & Brewhouse.

Principal Competitors

T.G.I. Fridays; Chilis Grill & Bar; Claim Jumper; The Cheesecake Factory; California Pizza Kitchen; Pizzeria Uno; Chicago Bar and Grill.

Key Dates:

1978:
Bill Cunningham and Michael Phillips open the first BJs Pizzeria and found Roman Systems Inc.
1991:
Cunningham and Phillips turn the management of company over to their accountants, Paul Motenko and Jerry Hennessey.
1992:
Motenko and Hennessey begin aggressive campaign of expansion.
1995:
Motenko and Hennessey purchase BJs chain.
1996:
Chicago Pizza and Brewery is incorporated as a holding company for the BJs chain and goes public; company acquires Pietros Corp. chain of pizzerias in Oregon and Washington states.
1998:
A brewery/restaurant in Boulder, Colorado, is opened.
1998:
Chicago Pizza & Brewery rejects a takeover bid from La Pizza Loca, Inc.
1999:
1.25 million shares of Chicago Pizza & Brewery stock are sold to ASSI Inc.
2000:
Jacmar Inc. obtains majority stake in Chicago Pizza & Brewery.

Further Reading

Aliar, Bruce, LagerHeads, Pizza Today, July 2000, p. 20.

Barron, Kelly, Investors Gobble Up Shares Of California-Based Chicago Pizza & Brewery Inc., Orange County Register, October 9, 1996.

BJs Pizza, Grill & Brewery Plans 18 Sites in Oregon, Washington, Portland Oregonian, September 4, 1997, p. C1.

Chicago Pizza & Brewery Inc. Announces the Opening of Its Boulder, Colo. Brewery and Grill, Business Wire, March 21, 1997.

Chicago Pizza & Brewery Names Klinger Prexy, Opens Largest Unit, Nations Restaurant News, July 26, 1999, p. 48.

Chicago Pizza & Brewery to Receive $8M Debt Financing, Dow Jones News Service, February 23, 2001.

Chicago Pizza Announces Agreement With Strategic Investor, Business Wire, February 19, 1999.

Chicago Pizza Trims Losses, Turns Small Profit for 98, Orange County Register, April 1, 1999, p. C2.

Crecca, Donna Hood, By The Numbers, Chain Leader, July 2000 pp. 63-70.

Deemer, Susan, Fast Growth, Slower Profits for Chicago Pizza, Orange County Business, Journal, September 6, 1999, p. 4.

Earnest, Leslie, Chicago Pizza, Assi Complete Stock Deal, Los Angeles Times, March 23, 1999, p. C15.

____, La Pizza Loca Offers to Buy Chicago Pizza for $12.8 Million Acquisitions, Los Angeles Times, December 16, 1998, p. C1.

____, Seeking a Bigger Slice, Los Angeles Times, November 11, 1998, p.C7.

Hardesty, Greg, Chicago Pizza Names Ernie Klinger President, Orange County Register, June 22, 1999, p. C2.

____,No Thanks, BJs Pizza Says to La Pizza Loca Buyout Bid, Orange County Register, December 19, 1998, C2.

Hughes, Paul, Pizza Push, Orange County Business Journal, August 26, 1996, p. 1.

Jacmar Arm Acquires Chicago Pizza and Brewery, Nation s Restaurant News, January 8, 2001, p. 47.

Jacmar Plans on Controlling Chicago Pizza Food Service, Los Angeles Times, December 22, 2000, p. C3.

La Pizza Loca Blasts Sweetheart Deal and Announces Filing of Lawsuit, Business Wire, February 24, 1999.

Morgan, Kitty, BJs Pizza Chain Thrives Despite Recession, Orange County Register, July 27, 1992, p. D4.

Sheridan, Margaret, Fast Forward, Restaurants & Institutions, August 1, 1998.

Gerald E. Brennan

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Chicago Pizza & Brewery, Inc.." International Directory of Company Histories. . Encyclopedia.com. 12 Nov. 2018 <https://www.encyclopedia.com>.

"Chicago Pizza & Brewery, Inc.." International Directory of Company Histories. . Encyclopedia.com. (November 12, 2018). https://www.encyclopedia.com/books/politics-and-business-magazines/chicago-pizza-brewery-inc

"Chicago Pizza & Brewery, Inc.." International Directory of Company Histories. . Retrieved November 12, 2018 from Encyclopedia.com: https://www.encyclopedia.com/books/politics-and-business-magazines/chicago-pizza-brewery-inc

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.