KMART RENDERS FOOD-SERVICE CONTRACT UNTO LITTLE CAESARS

JACK ROBERTIELLO

TROY, Mich. -- In an attempt to revive its food-service operations, Kmart here has reached an agreement with Little Caesars Pizza, Detroit, for the chain to supply all of Kmart's in-store restaurants.

The company unveiled a redesigned prototype of its KCafe with a new format that will offer Little Caesars pizza and other national brand-name foods, including those manufactured by Tyson, Springdale, Ark., and Sara Lee Corp., Chicago.

The new KCafe program will be introduced to all existing in-store restaurants and newly remodeled Big Kmart stores.

In Kmarts and Big Kmarts where Little Caesars already operates, the company will introduce a new format, "KCafe featuring Little Caesars Pizza Station," which will include a range of Little Caesars offerings as well as some national brand name foods. Most of the remaining restaurants will open a smaller format, "KCafe featuring Little Caesars' Express," where mainly individual 6-inch pizzas will be served.

Kmart will charge between $1.99 and $17.99 for Little Caesars items.

The KCafe revamp is expected to be completed by 1999.

Kmart signed the agreement with a division of Little Caesars to serve as the company's national distributor for the KCafes. The arrangement will allow Kmart to consolidate its distribution process by replacing more than 25 separate agreements it had with regional or local companies.

Little Caesars already supplies food to more than 500 of Kmart's in-store restaurants.

Kmart said sales at the 1,850 KCafes currently exceed $350 million annually, an average of about $190,00 per unit.