Karcher Enterprises Switches Ad Agencies

In yet another bid to boost its sagging earnings, Carl Karcher Enterprises has dumped its local advertising agency and taken its $12-million annual ad budget to one of New York’s flashier firms.

The Anaheim-based owner of more than 440 Carl’s Jr. restaurants said Friday that after nearly 12 years with the Newport Beach firm of Cochrane Chase, Livingston & Co., it has switched its account to Della Femina, Travisano & Partners, a large Manhattan agency that posted billings of $250 million last year. Della Femina clients include Rolls Royce Ltd., Airborne Freight Corp., Dow Chemical Co. and the New York Mets. The account will be handled from the agency’s Los Angeles office.

At Cochrane Chase, Orange County’s largest advertising firm, Chairman and Chief Executive Cochrane Chase said he was “very disappointed” with Karcher’s decision, “but we are very proud of our contribution.” During the years Cochrane Chase had the account, Karcher’s annual revenues grew from $23 million to more than $300 million, Chase said.

The move by Karcher is one is a series of changes the company has undertaken since the beginning of the year. With its earnings down sharply for four consecutive quarters, the fast-food company has been groping for a way to reverse the trend.

In January, it laid off 35 corporate workers and restructured a number of divisions. In April, it announced plans to get back to basics by dropping its fancier dinner platters and re-emphasising its hamburger items at reduced prices. Three months ago, the company slashed its 1985 building program by 25% in an effort to save millions of dollars.

Last month, the company reported one of the largest earning drops in its 44-year history, when first quarter net income fell 82%. A few days later, at its annual meeting, the company announced a plan to trim the construction costs of new restaurants.

The latest move comes as no surprise. Karcher has been reviewing its ad agency account for more than four months, interviewing 11 perspective agencies. “Clients change agencies because they perceive a problem,” said Maryanne McNellis, editor of Adweek. Advertising agency executives say that Carl’s Jr.’s biggest problem is that it has failed to fully develop a clear image. Although the public is generally aware of the quality of its products, many consumers have been confused by its high fast-food prices. Also, Carl’s Jr. restaurants have never been identified with a recognizable song or slogan, and while the chain’s Happy Star logo is widely recognized, advertising agency executives say that consumers are not attracted to it.