<PAGE>
June 15, 1999
Dear Shareholder:
By now you should have received a notice, proxy statement and proxy voting
card for the Annual Meeting of Shareholders of California Culinary Academy,
Inc. to be held on June 28, 1999. During the meeting, you will be asked to
retain the current Board of Directors and to vote on a proposed private
placement of convertible notes and warrants of the Company that the
management team and Board of Directors feel is necessary to implement the
Company's strategic plan.
Under the leadership of the new management team appointed on May 1, 1998 and
the current Board of Directors installed on July 7, 1998, the Company has
experienced a significant turnaround in profitability. Net Profit for the
first nine months of the current fiscal year totaled $713,000 compared to a
loss of $413,000 for the same period of the prior year. I have enclosed an
operating summary, for your review, which outlines in detail the many
accomplishments over the past year.
Under the direction of the Company's nationally recognized Board of
Directors, management has begun to implement the strategic plan announced at
last year's annual shareholders' meeting. Under this plan, new College of
Food campuses have been opened in San Diego and San Francisco and a site has
been secured for an additional location in Orange County, California. In
addition, a site has been acquired, architectural plans completed and
construction begun for the Culinary Academy of New Orleans, the Company's
next regional Core Campus, which management plans to open in early 2000.
Management and the Board of Directors have also set the stage for a number of
other education-related ventures which we believe will add significant value
for the shareholders in the future. I have enclosed a copy of the Company's
strategic plan for your review.
The current Board and management team succeeded a Board of Directors and
executive group led for many years by Ted Crocker. Under Ted Crocker's
leadership, several costly but failed attempts were made to sell the Company
and significant losses were reported. In addition, Ted Crocker owes the
Company over $500,000 for stock acquired through a loan from the Company that
was never repaid.
Despite the progress made in all areas of the Company, Ted Crocker and two
other shareholders, Bill DeMar (a former Board member) and Tom Green, have
announced that they intend to vote against the proposed private placement and
to replace the current Board of Directors. These three shareholders have
also expressed their desire that the Company be sold.
<PAGE>
Page 2
There is no assurance that they will be able to sell the company at a price
or on terms that would be satisfactory. They have neither articulated
alternative operating or strategic plans, nor proposed a slate for the Board
of Directors. It appears that their plan is to stop progress, gain control,
and then figure out what to do if a sale doesn't happen. So, your choice is,
vote for a Board of Directors and a plan that have been successful, or vote
for an unknown.
Management and the Board of Directors feel that the ultimate return to all
shareholders will be much greater through the full implementation of the
attached strategic plan and do not believe that it is in the best interest of
the Company and all of its shareholders to allow the former regime, headed by
Ted Crocker, to once again obtain management control of the organization.
THE VOTE TO BE TAKEN AT THE SHAREHOLDERS MEETING ON JUNE 28, 1999 INVOLVES
CRUCIAL ISSUES. IT IS IMPORTANT THAT EACH SHAREHOLDER VOTE, either through
the execution of a proxy card and/or attendance at the meeting, to determine
that appropriate action is taken for the ultimate benefit of all of the
Company's shareholders.
Members of the management team will attempt to be in contact with you within
the next few days to answer any questions you might have and to furnish
additional information as needed. In the meantime, feel free to contact me
or Chuck White at your convenience at the Company's headquarters in San
Francisco, (415) 292-8280.
Yours truly,
/s/ Keith Keogh
Keith Keogh
President & CEO
Enclosures
THE ATTACHED STRATEGIC PLAN CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS,
INCLUDING STATEMENTS CONCERNING THE COMPANY'S PROJECTED FINANCIAL REVENUES.
PROJECTED FINANCIAL STATEMENTS ARE INHERENTLY INACCURATE, AND SHOULD NOT BE
GIVEN UNDUE EMPHASIS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES
THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY. SUCH
RISKS AND UNCERTAINTIES INCLUDE BUT ARE NOT LIMITED TO THE COMPANY'S ABILITY
TO MAINTAIN AND INCREASE ITS STUDENT ENROLLMENT, ITS ABILITY TO CONTINUE TO
MEET THE REQUIREMENTS FOR PARTICIPATION IN TITLE IV FINANCIAL AID PROGRAMS
ADMINISTERED BY THE U.S. DEPARTMENT OF EDUCATION, COMPETITIVE CONDITIONS AND
OTHER FACTORS DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, AND
OTHER REPORTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE THESE
STATEMENTS.
<PAGE>
CALIFORNIA CULINARY ACADEMY
OPERATING SUMMARY
- --------------------------------------------------------------------------------
THE STATE OF THE CALIFORNIA CULINARY ACADEMY, INC.
Nineteen ninety-nine has been a year of both great challenges and great
opportunities. As you read through this summary, I'm sure that you will reflect
back, as I have, to the last two years of dramatic change in our organization.
The strategic plan outlined at the 1996 Shareholders meeting has taken shape and
the investments made in growth are showing returns.
<TABLE>
<CAPTION>
Revenue (in millions):
- --------------------------------------
1996 1997 1998 1999
- --------------------------------------
<S> <C> <C> <C>
13.6
14.9 15.3 16.7 18.5
</TABLE>
As you can see by the various graphs, the financial performance in 1999 is the
strongest in the organizations history. This is due to price increases at the
core campus and the completion of the ramp up to profitability of our two new
divisions, The College of Food Division and the Student Housing Division.
Even though we have experienced strong enrollments equal to previous years, we
recognize the important role that professional marketing will play in building
our company. Therefore, we added Laura Rivera to our executive team as Vice
President of Marketing. Her department has launched a reorganization of the
Marketing and Sales areas with the addition of national sales and marketing
support staff.
California Culinary Academy, Inc. Year to Date Operating Results
<TABLE>
<CAPTION>
1QTR 2QTR 3QTR 9MOS
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
FY 1998 (116,000) (132,000) (118,000) (413,000)
FY 1999 439,000 108,000 201,000 743,000
</TABLE>
The Academy offers a unique program, featuring advanced curriculum based on
global cuisine. By starting classes every two weeks, we deliver a consistent
sequential program that is more convenient to our market. With superior product
we expect that the new marketing team and sales staff will expand enrollments as
we phase in the Culinary Academy of New Orleans and add new College of Food
locations.
<TABLE>
<CAPTION>
Historical Enrollment (Starts)
-------------------------------
AOS COF B&P
- -------------------------------------------
<S> <C> <C> <C>
1995 416 107
- -------------------------------------------
1996 453 129
- -------------------------------------------
1997 463 29 141
- -------------------------------------------
1998 446 148 139
- -------------------------------------------
1999 437 268 121
- -------------------------------------------
</TABLE>
The COLLEGE OF FOOD DIVISION continues to grow with enrollment in both locations
up substantially from last year. The addition of the Spanish curriculum to the
COLLEGE OF FOOD SALINAS has had a direct impact on the student count and we
should see this trend continuing as more classes are scheduled. The addition of
sales representatives and a National Sales Director will also add continuity and
follow-up in the recruiting areas for both the College of Food and Academy
Divisions.
[Photo: classroom at College of Food San Diego]
The COLLEGE OF FOOD SAN DIEGO campus continues to show strong numbers, but has
recently shown a leveling off in enrollment. We believe this is a seasonal
effect and we should see the increased growth in numbers return during the 1st
quarter of 2000.
2
<PAGE>
[LOGO] CALIFORNIA CULINARY ACADEMY
OPERATING SUMMARY
- --------------------------------------------------------------------------------
The COLLEGE OF FOOD SAN FRANCISCO opened its doors in June. Responses gathered
during our open houses and feedback from the new students confirm our research
stating that there was a need for a program geared to the part time/second
career student.
[Photo: outside of building housing College of Food, San Francisco]
The STUDENT HOUSING DIVISION remains in a ramp up mode with the division
achieving profitability this year. In September the division opened its second
facility Napa Hall (formerly the Mayfair Hotel, directly across from the
Academy). Our goal of filling Napa Hall by late September is well underway.
<TABLE>
<CAPTION>
Student Housing Trends
Occupancy Trends
April 98 June 98 April 99
<S> <C> <C> <C>
Total Beds Occupied 79 82 129
</TABLE>
We are rewriting our curriculum to prepare for conversion to electronic media
with the goal to ultimately achieve a paperless delivery. All handouts, text and
pictures are being converted to digital format to enable this transition. We are
evaluating providers of laptops in order to replace texts, and examining both
the pricing and service to meet our specifications. Use of such technology will
be more efficient for our students, enhance their education and preparation for
entering an increasingly technical work environment, and bring us closer to
enabling the delivery of education anywhere, any time via distance learning
technologies.
3
<PAGE>
[LOGO] CALIFORNIA CULINARY ACADEMY
OPERATING SUMMARY
- --------------------------------------------------------------------------------
OUR AREAS OF EXPANSION CONTINUE TO MOVE FORWARD.
[photo: model of planned New Orleans Facility]
[photo: outside of Civic Theater building in New Orleans]
Construction of the New Orleans facility started in May in preparation for an
opening date of January 3, 2000. Unfortunately, we have been compelled to stop
work on this project due to the uncertainty surrounding approval of the Private
Placement financing. We will not be able to establish a new schedule until the
financing is resolved and we can reschedule the work with the contractor and
architects.
The ORANGE COUNTY COLLEGE OF FOOD AT THE GARDEN GROVE EDUCATION CENTER has been
on schedule to open in July. Meetings have been held and are on going with major
food service employers and our sales staff is in place. We will pursue major
corporations in the area for potential students and contract training
opportunities. Unfortunately, this 30 day construction project has also been put
on hold pending the approval of the Private Placement financing.
[drawing of Garden Grove Education Center]
4
<PAGE>
[LOGO] CALIFORNIA CULINARY ACADEMY
OPERATING SUMMARY
- --------------------------------------------------------------------------------
UPCOMING EVENTS:
We have reinvested in the ACF CONVENTION by sponsoring the BARON GALAND KNOWLEGE
BOWL that will be held July 9th - 13th in Chicago. As in the past, we will
follow up the event with an Alumni reception.
[photo of two men and 2 Academy Students]
OUR 3RD ANNUAL CULINARY ARTS FESTIVAL OR STREET FAIR is set for September 11th
and 12th. The size of the fair will once again be expanded to accommodate a
conservatively estimated attendance of 15,000-18,000. As you may remember, last
year's attendance was 12,000, up from 7,000 in 1997. This is becoming a very
popular event and offers tremendous exposure of the Academy to the regional
market.
[photo of 3 people speaking at Culinary Arts Festival]
Our new TV series "THE ACADEMY'S WONDERFUL WORLD OF FOOD" started production
June 7 in New Orleans. The series will feature our global cuisine philosophy
with each show featuring 3 instructors and students using a common ingredient in
preparing a dish from their native country or continent. This program is a very
important part of our marketing and branding plan, as our data from student
inquiries has shown, our television shows are the number one source of name
recognition.
We are pleased to report tremendous progress. It is very important to convey to
you the conviction and enthusiasm of your Board of Directors and management
team. We are on the right track and only beginning to see the benefits of our
strategy. We are building momentum and need your support to continue building
your company on the sound foundation of strong product, a vast and growing
market, a powerful strategy and a dedicated team. We urge you to maintain our
Board of Directors and approve the financing needed to continue our growth.
5
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[LOGO with added title, "We are THE resource to the food industry"]
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
OVERVIEW......................................................................1
THE CULINARY EDUCATION MARKET.................................................2
STRATEGIC PLAN (5 YEARS)......................................................5
Core Campuses..............................................................5
The College of Food Division...............................................7
Consumer Education.........................................................8
E*Commerce.................................................................9
Distance Learning.........................................................10
Media & Television Development............................................11
FUNDING REQUIREMENTS/ANTICIPATED BUDGETS.....................................14
PLANNED ANNUAL OPERATING RESULTS.............................................15
MANAGEMENT...................................................................16
The Board of Directors....................................................16
The Executive Team........................................................18
6
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
OVERVIEW
[photo of 3 people in Academy uniforms preparing food]
California Culinary Academy, Inc. is well positioned to fulfill its mission as
"THE Resource to the Food Industry".
The Company currently delivers culinary education through courses offered at its
main campus ("Core Campus) in San Francisco and three Colleges of Food (San
Francisco, Salinas, and La-Mesa/San Diego). The Academy offers degree and
certificate programs to individuals pursuing a career in the food service
industry, to consumers who are interested in cooking, and to food service
companies by means of custom contract training services.
The Company's strategic plan is to build a global brand in the food industry,
which is recognizable and valued by consumer and commercial markets. The Company
brand is built around the development and delivery of culinary information to
educate for professional and personal development and enjoyment. The Company
will use a range of media and delivery channels to build brand awareness, and
through acquisitions, partnerships, and licensing agreements, generate earnings
from the education, merchandise, and media revenue streams that are associated
with the brand.
The Company has several competitive advantages to enable its success:
7
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
Unlike its major competitors the Company is publicly held.
The Company is 100% focused on culinary education and food related
products and services.
The Company's sequential skill based curriculum is the foundation
for the national standard of excellence in culinary education.
The Company is the only culinary college that teaches a curriculum
based on "Global Cuisine".
The Company's College of Food concept takes a portion of the basic
skill curriculum to the student that is working full time in the
industry and to restaurant operators.
The Company's library consists of 22 years of curriculum, media and
publications, which can be tailored to the specific
needs of the food industry.
This memorandum summarizes the plans, finances and management of California
Culinary Academy that can build the company to over $300 million in revenues
with a 20% bottom line in the next 5 years.
THE CULINARY EDUCATION MARKET
8
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
FOOD & FOOD SERVICES
INDUSTRY
- - At $352 billion annually, is one of the fastest growing segments of US
economy and largest retail employer
- - 10 million employees in 1998--12 million by 2003
- - Average American dines out 4 times weekly
- - HMR is expected to contribute an additional $80-100 billion over next 5 years
The continuing growth in the food service and retail (grocery) industries
(combined revenues of approximately $700 billion) is creating a huge demand for
trained culinary workers at all levels.
9
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
The trend toward eating meals outside the home continues, with over 50% of meals
in the United States eaten outside the home. In addition, Home Meal Replacement
(HMR) in which fresh meals are prepared in a professional kitchen to be consumed
in the home (separate from restaurant take-out), is a fast growing segment of
the industry. While there are currently 10 million individuals employed in the
food service industry, the National Restaurant Association estimates that
employment will grow to 12 million by 2003. Combined with the almost daily news
coverage of food safety issues, the need for culinary education is clear.
10
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[Chart entitled "Food Industry Supply & Demand
Today -- Need for a New Career Learning Ladder"]
<TABLE>
<CAPTION>
Industry Demand Knowledge
-----------------------------
<S> <C>
1% Fine Dining
-----------------------------
45% Mid Scale
Home Meal
Replacement
-----------------------------
51% OSB
-----------------------------
</TABLE>
All the major culinary schools, including the Company's main campus in San
Francisco, train chefs primarily for high-end, white table cloth restaurants
which represent only 1% of the $352 billion food service industry. Training to
this 1% requires the most comprehensive curriculum,
11
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
from basic skills, safety and sanitation to restaurant design and preparation of
culinary Olympic style platters.
12
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
With the exception of the Company's Colleges of Food Division, no one is serving
the training needs of the mid-scale or casual dining and quick service sectors,
representing the other 99% of the food service industry. This larger market can
be served with components of the Company's highly regarded and comprehensive
curriculum.
13
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[Chart entitled "Life Long Learning Ladder" showing progression from
Colleges of Quick Service Consumer Education, to Colleges of Food, to
Academy Degree Programs]
14
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
The combination of the Company's main campus and College of Food locations
establishes, for the first time, the capability of a lifetime learning ladder in
the food service industry.
The mid-scale or casual dining sector (chain-operated sit down restaurants) and
the quick service sector need Safety, Sanitation and Basic Skills training. This
need is evident by the fact that over 6 million cases of food poisoning are
reported to the Center for Disease Control each year and over 9,000 people die
from food borne illnesses annually. With an entry-level management turnover rate
in excess of 120%, the quick service sector is challenged to maintain adequate
standards of safety and sanitation.
The food industry and its full-time employees need basic skills training
delivered directly to them through convenient user-friendly channels. Due to a
shortage of personnel, the industry cannot afford to send its employees away for
training, and typical workers cannot afford to leave their full-time jobs to go
to school. The Company's College of Food is responsive to the needs of both the
food service and grocery industries and their employees with convenient
locations and schedules.
[Photo of College of Food San Diego]
[Photo of College of Food dining hall]
15
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
Students can begin their culinary education at the consumer or College of Food
campus level and grow over the years to whatever skill level they desire. The
desire and need for this lifetime ladder is evident by the fact that:
4% of the students in the Company's Consumer Education classes go on
to enroll in Professional Skills classes;
After just one year of operation, College of Food students have
already begun to transfer into the Company's main campus AOS degree
program; and
A significant portion of adults in the country are seeking second
career training in the food service industry, as evidenced by the
fact that the age of the Company's students range from 18 to over
60.
16
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[Map entitled "The CCA Career Learning Ladder/Colleges of Food" and
showing markers throughout the United States]
The College of Food campuses are key to entry into the rapidly growing distance
learning field. Curriculum can now be brought to the student by print, CD Rom,
video, Internet and television broadcast. However, in the culinary field, the
training is not complete until the cooking techniques are observed, the food is
tasted by an instructor and competencies are verified. With the Company's
network of Colleges of Food, training can be delivered through distant learning
channels. Competency testing, verification and certification can be accomplished
at each College of Food location. Thus, a national standard of competency can be
realized, a benefit to employers as well as the certificate holder.
17
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
STRATEGIC PLAN (5 YEARS)
The Company will achieve its profitable growth by expansion of its
current core business and by exploitation of new technologies to
build its brand equity and reach a larger market. The Company
identifies these business areas as:
1. Core Campuses;
2. College of Food Division;
3. Consumer Education;
4. E*Commerce;
5. Distance Learning; and
6. Media and Television Development.
CORE CAMPUSES
[photo of Core Campus]
The San Francisco campus serves as the model for a "Core Campus." Over the next
five years, the Company plans to establish such campuses in New Orleans, Chicago
and New York City, each similar in scope to the San Francisco facility.
Including San Francisco, these are the top four culinary centers in the United
States.
18
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[Map entitled "The CCA Career Learning Ladder/Core Campuses" and showing
markers of 4 locations in the United States]
San Francisco is known for its natural California farm to fork cuisine.
New Orleans is influenced by seven different cultures translated into
Louisiana cuisine.
New York is famous for architecturally designed food and rich sauces.
Chicago is the home of a number of great restaurants and a melting pot of
the other
19
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
three regional styles.
20
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
The Company encourages its students to work in the fine dining industry while
they are in school, thus creating a 24-hour learning opportunity in these target
markets. By establishing main campuses in the four premier culinary centers and
transferring students between these locations, the Company's students have the
opportunity to experience the best that each location has to offer. The four
main campuses in the United States, along with planned sites in other countries,
will form the foundation for the Company's future Bachelor and Masters degree
programs.
[photo showing model of Culinary Academy of New Orleans]
[photo showing The Culinary Academy of New Orleans buildings under renovation]
At each core campus, the full curriculum is available to deliver degree
programs, certificate
21
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
programs, continuing education to food service professionals, consumer
education courses as well as contract training and R&D services for the food
industry.
Additionally, the Company plans to provide lodging for between 200 and 300
students at each of its core campus locations. Although the primary purpose of
this service is to increase enrollment, it will also contribute significantly to
both the growth of revenue and profit to the Company.
The Company estimates that each main campus will:
Cost $8 million to develop
At 80% of capacity (achievable in 18-months), generate $23 million
(1999 Pricing) in annual revenue with approximately a 30%
contribution to profit.
THE COLLEGE OF FOOD DIVISION
22
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[drawing of Garden Grove Education Center]
[photo of Salinas College of Food]
[photo of College of Food San Francisco]
The Company intends to develop College of Food locations throughout the United
States at the minimum rate of five per year. These campuses will be the basic
training and contract training facilities for the food service industry and its
more than 10 million employees throughout the country. The College of Food will
become the foundation for the implementation of comprehensive distance learning
programs.
23
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
The College of Food Division expansion will be accomplished through the opening
of new locations and the acquisition of existing cooking schools.
24
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[photo of 3 people in the Academy's uniform preparing food]
The Company estimates that each College of Food campus will:
Cost $400,000 to develop; and
At 80% of capacity (achievable in 12 months), generate $1 million
(1999 Pricing) in annual revenue with an approximate 30% contribution
to profit.
CONSUMER EDUCATION
[photo of culinary retail center]
The Company plans to significantly expand its activities in consumer education.
To accomplish this goal it has identified an ideal acquisition candidate, a
regional chain of nine culinary retail centers that generates 20% of its
revenues from consumer education programs. The targeted company currently has
annual revenues of approximately $15 million and a strong brand image in both
the Northern and Southern California markets. The Company believes that
additional retail and consumer education centers can be developed in combination
with College of Food locations, thereby expanding the product offered at these
local centers and significantly reducing the combined cost of developing these
25
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
products in each market.
The candidate's consumer education program is based on cooking demonstration
(the lowest level of consumer education) and is widely accepted in the markets
where the stores are located. The Company will expand the candidate's programs
to allow students to start at the beginning level, progress to advanced consumer
courses and ultimately enroll in the Company's professional programs at the
College of Food or Academy level.
The acquisition will also provide valuable support to the Company in the retail
area. The Company currently has a significant retail activity related to the
supply packages sold to each student. Utilization of the acquisition candidate's
buying, warehousing and fulfillment capability will generate savings to the
Company and open up a wide range of merchandise branding opportunities. The
operations of the acquired organization can form the foundation for the
Company's entrance into E*Commerce activities which are discussed below.
At least 20 additional retail and consumer education centers will be opened over
the five-year strategic plan period, both in conjunction with the new College of
Food campuses and stand-alone facilities. Within five years, this division will
generate annual revenues in excess of $60 million.
26
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
E*COMMERCE
[photo of interface design for website]
The Internet has changed commerce forever. It also offers a great challenge to
would-be E*Commerce vendors. With over 6,500 URLs being added to the Internet
hourly, it is no wonder that a recent search for "food" on Infoseek resulted in
over 13,700,000 results, and 77 categories on Yahoo! Portals that offer a range
of benefits and facilitate a convenient and successful customer experience will
prevail. Product catalogs aren't enough.
The Company has investigated the possibility of acquiring or partnering with an
existing cooking oriented Internet company. California Culinary Academy has an
extensive library, which includes thousands of recipes, video tapes, books and
reference material from around the world and is continuously generating new
content. These can add value and interest to food related E*Commerce sites.
Additionally, the Company's active television and media programs, discussed
later, can help drive users to the E*Commerce site.
27
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[photo of interface design for website]
It is also becoming clear that E*Commerce companies that have brick and mortar
facilities tend to enjoy a significant marketing advantage. With the combined
acquisition of the retail/consumer education company and an E*Commerce activity,
the Company will position itself to be a major, if not dominant, cooking and
culinary E*Commerce company. Through the E*Commerce and physical store
locations, the Company will be in a position to cross-market all the Company's
offerings.
The Company estimates that the E*Commerce entity will produce annual revenues of
least $60,000,000 by the end of the fifth year. However, by cross marketing the
E*Commerce activity with the retail/consumer education entity and all of the
Academy and College of Food locations, the E*Commerce division can generate
revenues Company wide far beyond $100 million a year.
28
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
[photo of interface design for website]
DISTANCE LEARNING
Technology is rapidly changing the delivery of education, and the Company plans
to be in the forefront of this fundamental change.
Heretofore, the Company has offered premier education through the most effective
means - personal instruction in the classroom and kitchen. But this limits the
customer base to those who can fit into the course schedule, travel to attend
such courses and pay the attendant cost.
The tools of the information age are making it possible for the Company to be in
touch with its customers all of the time, creating a learning experience and
adding cutting-edge culinary
29
<PAGE>
CALIFORNIA CULINARY ACADEMY
[LOGO] STRATEGIC PLAN
- -------------------------------------------------------------------------------
information that addresses individual needs and circumstances. Whether the
medium of content delivery is CD-ROM, print, DVD, video, Internet, or broadcast,
the Company will exploit technology to provide customers with what they want,
where and when they want it. Strategic acquisitions and partnerships with other
media development, production and distribution capabilities will be pursued to
accomplish this end.
Over the past three years there has been significant growth in the distance
learning segment of the Post Secondary Education field. In 1998, over 13% of all
degrees awarded in the country were through Internet and distance learning
systems. It is estimated that the 1999 figure will be approaching 25%. To date,
no one has developed a distance learning capability in the culinary field.
The Company has recently identified acquisition candidates that have developed
products and technologies that are ideal for the delivery of basic culinary
education through the Internet and other distance learning methods. The Company
intends to acquire or partner with companies or recruit technology professionals
to develop similar programs that allow the Company to teach, at minimum, its
basic skill programs through distance learning. The Company is in a unique
position to provide this type of service as the testing and the certification of
basic skills competencies can be accomplished at its locations throughout the
United States. It is anticipated that many of those who obtain certification at
the College of Food will enroll in additional programs that are best delivered
in the kitchen classroom.
The Company plans to deliver the basic skills training directly to students on a
course credit basis and to hotels and restaurants, so that the customer's
employees can study in break rooms and other locations at their place of
employment. Products will be licensed to employers on an annual fee basis and be
available to all of the customer's employees. The annual fees will be between
$250 to $600 per hotel and/or restaurant location. Within five years it is
anticipated that the distance learning programs will generate annual revenue in
the excess $14 million.
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MEDIA & TELEVISION DEVELOPMENT
[photo of a scene from "Cooking at the Academy"]
The Company recognizes the tremendous opportunity to develop its media
activities as a profit center, as a means to increase enrollments and as a means
to build its awareness and brand equity.
A SCENE FROM THE "COOKING AT THE ACADEMY"
The California Culinary Academy was the first culinary school to develop
national television programming. Its "Cooking at the Academy" series of 39
one-half hour shows featuring techniques and home entertaining established a
standard for successful television cooking programming:
Programs were broadcast to 80% to 95% of TV households.
Time Magazine named COOKING AT THE ACADEMY the #1 cooking show of the
year.
Programs were aired numerous times on each run, and many top 25
markets ran the series 2-3 times
Over 150,000 cookbooks and videos from the series have been sold.
The Company is currently in production of THE ACADEMY'S WONDERFUL WORLD OF FOOD,
a new television series of 26 shows that features the global influences found in
a range of dishes common to the American table. The new series is scheduled to
be released for PBS broadcast beginning in January 2000.
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Underwriting sponsorships are offered to food industry partners, in which the
sponsors pay for production and receive credits and promotional benefits from
the Company. Through these relationships with the food industry, appropriate
co-branding opportunities arise where the Company lends authority and
credibility to the sponsor's products and expands the presence of the Company
brand.
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The Academy's media development plan is to package its inventory of culinary
information in a variety of ways to generate exposure and produce revenues from
diverse market groups:
[photo of video tapes]
Entertaining television programming introduces the consumer to the
Academy.
Cookbooks and videos, sold as companions to the TV series and through
traditional book sales channels, carry the brand to additional consumers.
[photo of cookbooks]
Internet delivers the same content via distance learning to the food service
industry. Internet companies and publishers seeking to capture the interest of
the food enthusiast seek the Company's content.
Direct broadcast (cable or wireless) offers alternative channels to the 1.5
million eating establishments which can be targeted with distance learning
product.
CD-ROM and DVD can be packaged with computers and home entertainment equipment
to deliver the brand to a large consumer population.
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[photo of three people in the Academy's uniform preparing food]
Strategic acquisitions and partnerships with media production and distribution
channels will be pursued to implement the Company's media development plan. Such
partnerships will facilitate the production and delivery of distance learning
product as well.
The Company understands the power of mass communication channels like network or
cable television to leverage its brand. There are candidate TV partners that fit
the media development strategy. With the Company's significant knowledge base
and continuous access to content, the Academy is uniquely qualified to deliver
consistent and entertaining programming on television.
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[photo of woman in Academy uniform presenting food]
Either an outright acquisition or a partnering with a television broadcast
company will assure a mass distribution channel to allow the Company to dominate
the culinary education market in consumer and professional programs. With a
continuous presence on such a channel, the Company will leverage program content
and audience to promote the Company brand and drive revenues of its College and
Academy campuses, E*Commerce and Distance Learning products.
Management estimates that full ownership of a television channel will generate
annual revenues in excess of $50 million from advertising and merchandising
activities. However, the real value is in its ability to build brand awareness
and brand equity. Advertising on the Academy's television network in advance of
new openings will significantly shorten the ramp-up period of all new ventures
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FUNDING REQUIREMENTS/ANTICIPATED BUDGETS
The following is a summary of the capital budget for the development and/or
acquisition and operational ramp up of the above outlined programs. A
combination of new funding, internal cash flow and use of the Company common
stock for acquisitions will satisfy the capital requirements.
<TABLE>
<CAPTION>
CORE CAMPUS DEVELOPMENT - NEW ORLEANS, NEW YORK, CHICAGO
<S> <C>
Leasehold Improvements
And Equipment $24,000,000
Ramp up losses 3,000,000
-----------
Total 3 New Core Campuses $ 27,000,000
COLLEGE OF FOOD
25 New Campuses 10,000,000
RETAIL/CONSUMER EDUCATION DIVISION
Acquisition Costs $15,000,000
Expansion 10,000,000
-----------
Total Retail/Consumer Ed. 25,000,000
E*COMMERCE
Start Up or Acquisition 20,000,000
DISTANCE LEARNING
Start Up 2,000,000
FOOD NETWORK
Acquisition 60,000,000
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MEDIA DEVELOPMENT & OTHER VENTURES 6,000,000
------------
TOTAL CAPITAL BUDGET REQUIREMENTS $150,000,000
</TABLE>
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PLANNED ANNUAL OPERATING RESULTS
The planned operating results at the end of the five-year plan period are
as follows:
<TABLE>
<CAPTION>
<S> <C>
REVENUES
CORE CAMPUSES $100,000,000
COLLEGE OF FOOD DIVISION 27,000,000
RETAIL/CONSUMER EDUCATION DIVISION 60,000,000
E*COMMERCE DIVISION 60,000,000
DISTANCE LEARNING ACTIVITIES 14,000,000
FOOD NETWORK 50,000,000
STUDENT HOUSING 5,000,000
CONTRACT TRAINING 2,000,000
--------------------
TOTAL REVENUES $318,000,000
NET INCOME
20% OF REVENUE $ 63,600,000
</TABLE>
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MANAGEMENT
The Board of Directors and the management team have been assembled to
achieve this strategic plan. Following is a brief summary of the key
members of the team that has proven itself able to profitably grow
the Company.
THE BOARD OF DIRECTORS
[photo of Ralph Brennan]
RALPH BRENNAN, DIRECTOR. Mr. Brennan is the co-owner of Mr. B's Bistro and owner
of Bacco and Ralph Brennan's Red Fish Grill in New Orleans' French Quarter. He
is also a managing partner of the Storyville District Jazz Club. Mr. Brennan was
elected to the Academy's Board of Directors in 1998. He is 47 years old.
[photo of James D. Cockman]
JAMES D. COCKMAN, DIRECTOR. He formerly served as Chairman and Chief Executive
Officer of the Food Service Division of Sara Lee Corp. and is a partner in Woof
Gang Brand Development. Mr. Cockman serves on the boards of Ryans Family Steak
House, Greenville, South Carolina,
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and several charitable organizations. Mr. Cockman was elected to the Board of
Directors in 1997.
[photo of Bert P. Cutino]
BERT P. CUTINO, DIRECTOR. Since October 1968, Mr. Cutino has been Executive Chef
and Owner of the Sardine Factory Restaurant in Monterey, California. Mr. Cutino
served as a member of the Board of Advisors to the California Culinary Academy
from 1994 to 1998. Mr. Cutino was elected to the Board of Directors in July
1998.
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[photo of Paul H. Prudhomme]
PAUL H. PRUDHOMME, DIRECTOR. For more than five years, Chef Paul Prudhomme has
been the proprietor of K-Paul's Louisiana Kitchen, located in the French Quarter
of New Orleans, Louisiana. Chef Prudhomme also has developed and, for more than
five years, has been distributing a line of natural herbs and spices, "Chef Paul
Prudhomme's Magic Seasoning Blends." Chef Prudhomme is also the author of
several cookbooks. Chef Prudhomme was elected to the Board of Directors in 1997
[photo of Leenie Rubin]
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LEENIE RUBIN, DIRECTOR. Ms. Rubin is the founder and since 1982 has been
president of Marketing Spectrum, a marketing and research firm with major
clients in the food service industry. Ms. Rubin was elected to the Board of
Directors in 1998.
[photo of David Warnock]
DAVID WARNOCK, DIRECTOR. Mr. Warnock is a founding partner of Cahill, Warnock &
Company LLC, which is the general partner of Strategic Associates, L.P., and is
a general partner of the general partner of Cahill, Warnock Strategic Partners
Fund, L.P. Prior to founding Cahill, Warnock & Company, Mr. Warnock was employed
from 1983 to 1995 at T. Rowe Price Associates, Inc. He was founder and President
of T. Rowe Price Strategic Partners and T. Rowe Price Strategic Partners II,
private equity partnerships with committed capital of over $72 million. He also
served as an Executive Vice President of the T. Rowe Price New Horizons Fund. He
is on the board of directors of several portfolio companies including
Environmental Safeguards, Inc., Concord Career Colleges, Touchstone Applied
Science, and Children's Comprehensive Services, and of several charitable
organizations. David received a
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BA from the University of Delaware, an MS (in finance) from the University of
Wisconsin and is a CFA. Mr. Warnock was elected to the Board of Directors in May
1999.
THE EXECUTIVE TEAM
[photo of Keith H. Keogh]
KEITH H. KEOGH, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr. Keogh
joined the Academy as Executive Vice President of Education in June 1995. In
April 1996, he was appointed as President and Chief Operating Officer of the
Academy, and in May 1998, he was appointed Chief Executive Officer, joining the
Board of Directors. From 1971 until 1995, Mr. Keogh was employed at Walt Disney
World, Orlando, Florida, and held various positions, most recently as Executive
Chef, Research and Development - Theme Parks. Mr. Keogh was the Manager of the
Culinary Team USA (the US Culinary Olympic Team) from 1988 to 1996 and past
president of the World Association of Cooks Societies (representing 57 countries
and 1.75 million members) and the American Culinary Federation (the
certification and accrediting organization for cooks and chefs in the USA with
28,000 members).
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[photo of Charles E. White]
CHARLES E. WHITE, VICE PRESIDENT/CFO, Charles E. White joined the Academy in May
1998 as Vice President and Chief Financial Officer. Mr. White has provided
consulting and turn-around management services to a range of companies in the
restaurant, real estate development and hospitality industries. From 1996 until
1998, he was COO of Stars Restaurants. From June 1993 to June 1995, he was
General Manager and CEO of Lummi Casino, and since 1986, he has been President
and CEO of Pea Soup Andersen's. Mr. White is a CPA and Certified Hotel
Administrator. He holds a BS degree in Accounting from San Diego State
University, an MBA from Southland University, and an LLB degree from La Salle
Extension University.
[photo of Thomas A. Spanier]
THOMAS A. SPANIER, VICE PRESIDENT, DEVELOPMENT/COO. Thomas A. Spanier joined the
Academy in May 1998 as Vice President - Operations and Development/COO. From
February 1998 to May 1998, he consulted with the Academy as interim CFO. From
August 1994 until May 1998, he was an independent business consultant, providing
interim management services as well as consulting services to a range of high
technology and marketing companies. From May 1997 to February 1998, he was also
interim
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CFO of Nuko Information Systems. From April 1993 to August 1994, Mr.
Spanier was Executive Vice President and COO of the Academy. He is currently a
director of Pantechnicon. Mr. Spanier holds a degree in Business (Managerial
Economics) from the University of California, Berkeley, and an MBA from Harvard
Business School.
[photo of Laura Rivera]
LAURA RIVERA, VICE PRESIDENT
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MARKETING. Laura joins the Academy with over 10 years of marketing experience.
For the past four years, Laura worked for the Walt Disney Company in both the
resorts and motion picture groups. Most recently, she was Director of Marketing
and Publicity for the Feature Animation Division of the Walt Disney Company. In
addition, Laura worked for five years with the Alvin Ailey American Dance
Theater in New York City as the company's Director of Marketing and Public
Relations. Laura has earned both a Bachelors and Masters degree from the
University of Wisconsin and an MBA from the Harvard Business School.
[photo of Jerald W. Chesser]
JERALD W. CHESSER, ED.D, CEC, CCE, VICE PRESIDENT, CULINARY ACADEMY OF NEW
ORLEANS CAMPUS PRESIDENT. Dr. Chesser will be joining the CCA July 1, 1999 to
lead and manage the New Orleans campus. Dr. Chesser has an extensive background
in food education; he currently is Dean/Professor at the Chef John Folse
Culinary Institute, Nicholls State University Thibodaux, Louisiana. In addition
to his teaching background Dr. Chesser has authored two books and numerous
articles. Dr. Chesser has a Bachelors and Masters in History from Oklahoma State
University and his Ed.D. in Educational Leadership from University of Central
Florida, Orlando and is certified by the American Culinary Federation as an
executive chef and culinary educator.
46
