Cold cash: with a little help from its friends, including the city of Los Angeles, refrigeration company KaiRak Inc. has grown its business tenfold since 1988.

KaiRak Inc. is a textbook case of what happens when a manufacturer, its customers and a local 'utility all work together.

It's also a good example of a growing effort by L.A. city officials to work with a local businesses to prevent them from leaving the city.

Harbor City-based KaiRak has manufactured remote refrigeration units since it was founded in the 1960s. The systems are typically installed on the roofs of restaurants and connected to refrigerator chambers indoors, allowing heavy and noisy cooling equipment to be stored outside.

In 1992, several of KaiRak's clients came to the finn with a tough problem.

At that time, local health departments nationwide were becoming stricter about the temperatures they allowed for open-air pan chilling racks often used in restaurants. Such racks are usually out on a restaurant floor, containing salad bar ingredients, or in the kitchen, giving cooks easy access to commonly used ingredients such as pizza toppings.

Under growing pressure from the U.S. Food and Drug Administration, local health departments in California were requiring a maximum temperature of 41 degrees for pan chilling systems, down from a previous 45 degrees. The problem was, most equipment on the market was incapable of achieving and keeping such low temperatures.

"We went to our good customers and wrote a list of everything they didn't like (about the units on the market)," said Chief Executive Craig Kushen. "Then we set out over a two-year period to come up with a design to resolve those issues."

The two years of work resulted in KaiRak's newly designed pan chilling rack, developed with input from restaurants, Southern California Edison (which consulted on energy conservation issues), and grants from the U.S. Department of Energy and California's defense conversion program. The patented chilling rack has cooling coils around the pans, unlike conventional systems that use cooled air below the pans to keep temperatures at required levels.

In the two years-plus since rolling out the rack, KaiRak has sold most of its pan chillers to two big chains - California Pizza Kitchen and Family Restaurant Group, which operates Cocos, El Torito and Charlie Brown's restaurants. The custom-made units range in price from $1,500 each to as much as $25,000.

California Pizza Kitchen was so impressed with the design that it used KaiRak pan chillers in the 30 to 40 restaurants it has opened since the product was introduced, according to Joseph Barbara, a vice president at California Pizza Kitchen from 1988 until 1995.

"It worked so well the cooks couldn't believe how cold the pans were," Barbara said. "The beauty of the whole thing is the fact that instead of a manufacturer blindly designing something, this was a combined effort between Southern California Edison, California Pizza Kitchen and KaiRak to create a product the market needed."

Work from the California Pizza Kitchen and Family Restaurant Group accounts began to slow down last year, and now KaiRak plans to bring its pan coolers to smaller customers using a newly completed mass production line.

Kushen said KaiRak only recently began advertising the new mass-market chillers, which will cost between $5,000 and $7,000 each depending on size.

He added that pan chillers now account for about 50 percent of company revenues, which have risen sharply from about $1 million in 1988 to an anticipated $10 million this year. Remaining revenues come from KaiRak's original line of remote refrigeration units.

KaiRak's growth has posed a challenge not only to the company - which faced all the usual problems associated with rapid expansion - but also to the City of Los Angeles.

KaiRak started searching for a new home last year, after it became clear that it would outgrow its original 30,000-square-foot facility in Gardena. Rather than limit its search to Los Angeles, KaiRak looked at other locations.

"We had some lucrative offers come," Kushen said. "For example, Kansas offered reduced taxes, free land and moving costs. We also had offers from San Bernardino and talked to the cities of Anaheim, Long Beach and Pomona."

On learning of KaiRak's plans to leave, L.A.'s Business Team, an organization formed by Mayor Richard Riordan to retain business in the city, worked with KaiRak's bank, California United Bank, to formulate a financing package that eventually convinced the company to stay.

At the centerpiece of the package is a bond issue, whereby California United Bank is the guarantor of $2.5 million in industrial development bonds issued by KaiRak. The bonds were attractive to KaiRak because they carry lower interest rates than traditional bank loans.

"Basically, the city initiated a path for us to work with the bank and the state to have an industrial development bond initiated through Sacramento. That gave us the ability to purchase a manufacturing facility and equipment for the company's future expansion," said Kushen, referring to KaiRak's new 80,000-square-foot facility in Harbor City and the company's new mass-production line.

Spotlight

KaiRak Inc.

Year Founded: 1964

Core Business: Manufacture of refrigeration equipment

Top Operational Executive: Craig Kushen

Revenues in 1988: $1 million

Revenues in 1996: $5.5 million

Revenues in 1997: $10 million (projected)

Employees in 1988: 10

Employees in 1997: 70

Goal: To develop, manufacture and market innovative refrigeration products.

Driving Force: Changing needs of restaurants, hospitals and other customers for refrigeration equipment.