With sales still down sharply, Carl Karcher Enterprises announced plans on Thursday to slash its 1985 building program by 25% in an attempt to save the company nearly $10 million.
The Anaheim-based fast-food restaurant chain, which owns or franchises more than 420 Carl’s Jr. restaurants in four states, also announced a new advertising campaign that will feature the company’s founder and chairman attempting to lure back lost customers with promises of lower prices and continued high quality.
To cut costs and garner money for this new ad campaign, the company said it will scale back 1985 expansion plans and open just 45 restaurants this year, instead of the planned 60. Ten of the 15 proposed restaurants that have been scrapped would have been company-owned and the other five franchised. Each company-owned restaurant would have cost $1 million, said Paul Mitchell, vice president of corporate affairs.
The building cutbacks also resulted in layoffs of 14 salaried workers, officials said.
“It was inevitable that it would come to this,” said Dennis Forst, an analyst at Seidler Amdec Securities Inc. in Los Angeles. “The company has been scaling back its operations for the past 12 months,” primarily by eliminating menu items.
Karcher has seen its earnings fall for three consecutive quarters and its customer count drop sharply for more than a year. The company, which employs 15,000, recently abandoned its vision of becoming the coffee shop of fast-food restaurants. Customers soundly rejected the new products and higher prices the company tested to meet that mark.
Trying to regain its lost market share, the company will pump hundreds of thousands of dollars into a so-called “back to basics” advertising campaign that touts lower prices but continued high quality.
In the campaign, Carl N. Karcher will try to sell burgers like Lee Iacocca pitches buggies.
He will promise at least 10% off the price of most hamburger items. And he will also announce a squeeze in the price--and size--of the lowest-priced burger, the Happy Star, from 79 cents to 49 cents.
The firm has tested lower prices in several markets and reports “double-digit” traffic increases.
The commercials, which have just begun, are being featured in television, radio, newspaper and billboard ads, said Paul Mitchell, vice president of corporate affairs.
Bob Wisely, the company’s recently appointed vice president of marketing, devised the campaign as an attempt by Karcher to promote its strength: the hamburger. In a statement, Wisely said, “Considering hamburgers account for up to 80% of sales . . . that is where Carl’s Jr. will concentrate its marketing efforts.”