Karcher Enterprises Posts Flat Yearly Earnings

Emphasizing growth through franchising and international licensing, the parent company of the Carl’s Jr. hamburger restaurant chain posted flat earnings of about $13 million last year.

“Our financial results for the year were affected by the recession, but the company is optimistic that an economic upturn is in sight,” said Don Karcher, president of Carl Karcher Enterprises in Anaheim.

Earnings for the fiscal year ended Jan. 27 amounted to 72 cents a share, unchanged from 1991. Sales were $533.6 million, up 2.2% over last year’s $522.3 million.

Karcher stock closed Thursday at $8.75, up 25 cents a share, in over-the-counter trading.

Karcher said the company has made progress in cutting costs while at the same time not sacrificing sales or product quality. For instance, the company is saving $150,000 a year by no longer rounding off the corners of its paper tray liners.

Company earnings were helped by lowering operating costs, aggressive franchising and licensing, and stronger cash management, said Loren Pannier, Karcher’s chief financial officer.

Revenue from franchised and licensed stores grew 5%, the company said. The number of franchised restaurants increased from 149 to 196, while the number of company-owned restaurants shrank from 424 to 414. Pannier said that in the present fiscal year, the company plans to open about 10 company units, 10 to 15 franchise eateries and 15 licensed restaurants in foreign countries.

Company founder Carl Karcher and his brother Don resisted franchising for years, even as rival chains such as McDonald’s grew to monolithic size. Carl Karcher has said he feared that the company would lose direct control of operations and that the poor performance of a franchisee would reflect poorly on the company.

But the company has found that franchisees work hard because they have a financial stake in their business, and that they know more about their territories.

For the fourth quarter, the company posted earnings of $4.6 million, up from $617,000 last year. Sales declined 2.6% to $115.8 million.

Doug Christopher, a restaurant analyst for Crowell, Weedon & Co. in Los Angeles, expressed concern about the earnings report. He said he wished the company’s food sales were stronger.

“Here’s a company with nice restaurants, good locations and good food, and yet they are earning less than they were a few years ago,” he said. Karcher earned $5.6 million in fiscal 1990.

But Dave Rose, who follows Karcher for the Newport Beach investment firm Cruttenden & Co., said he is impressed by the company’s cost-cutting efforts. He also said he expects continued growth in international markets.

Karcher Enterprises: Flat Earnings For its fiscal year ended Jan. 27, Carl Karcher Enterprises reported flat earnings of $13 million. The company said it benefited from cost cutting and sales of company units to franchisees. Figures are in thousands, except per-share data.

4th Qtr 4th Qtr 12 Months 12 Months 1991 1990 1991 1990 Revenue $115.8 $118.9 $533.6 $522.3 Net income (loss) 4,665 617 13,038 13,036 Per share (loss) 0.26 0.03 0.72 0.72

Source: Carl Karcher Enterprises Inc.