Karcher Plans Anaheim Layoffs : Cutback: Carl’s Jr. parent says up to 100 employees will lose their jobs at a pizza-making subsidiary, and 400 others at hamburger patty plant could be next.
Carl Karcher Enterprises Wednesday revealed plans to cut as many as 100 jobs at an Anaheim subsidiary where it makes pizzas, stir-fried vegetables and condiments for other companies.
And the Anaheim-based parent of the Carl’s Jr. hamburger chain also said it is considering laying off an additional 400 workers at the company’s food processing subsidiary where it prepares and distributes hamburger patties.
The news comes one day after the death of company President Donald F. Karcher following a yearlong bout with lung cancer, and two days after the company’s top executive in charge of manufacturing resigned.
David J. Brickner of Brea, group vice president of manufacturing and distribution, left Monday “to pursue other interests,” the company said. Brickner could not be reached Wednesday to comment.
A spokesman for Carl’s said consultants from A. T. Kearney of San Francisco studied the company’s manufacturing operation in Anaheim and suggested that the company dump its outside manufacturing business, which makes stir-fried vegetables; condiments such as barbecue sauce and salad dressing; and pizzas for big discount retailers to sell as their own house brands. The company declined to identify its subsidiary’s customers.
Carl’s officials met with the 100 employees who work at the plant April 22 and told them their jobs would be phased out over the rest of the year.
That business added only $4 million to the amount Carl’s took in last year from making and distributing hamburger patties to its own restaurants and to some other eateries and school systems.
Consultants are still studying whether Carl’s should close the food preparation plant, which employs an additional 400 in Anaheim, Karcher officials said. The operation is distinctive because some fast-food chains contract with outside suppliers for much of what they sell.
Most of those jobs are low-wage assembly-line positions, a company spokesman said. The plant is not unionized.
“We haven’t decided to close the plant,” the spokesman said, “but we’re not saying it won’t ever happen either.”
The move to cut staffing comes after two years of flat profits and sales and management changes.
Another top Karcher official, Executive Vice President Raymond J. Perry, resigned in November to “pursue other interests,” the company said then. Perry, who was considered by analysts to be in line to eventually replace company Chairman Carl Karcher, later confirmed that he was fired from Karcher Enterprises. Perry is now a part owner of Kelly’s Enterprises in Irvine, which operates the Kelly’s Fudge & Coffee Factory chain of stores.
Carl’s has been looking for ways to slash its costs and boost profits, according to analysts. As far back as two years ago it sold some restaurants in Arizona that were poor performers. That move resulted in a $9.5-million hit on Carl’s balance sheet. Now Carl’s is making some moves closer to home.
That’s because earnings have been uneven in the past few years. Carl’s rebounded from a $7-million loss in 1986 to post profits of $16 million in 1987 and $21 million in 1988. But earnings slipped to $5.5 million in 1989, rebounded to $13 million in 1990 and remained flat in 1991.
Last year, revenue grew by only 2% to $534 million over the previous year as the recession kept people out of restaurants. As a result, Karcher has attempted to cut operating costs.
And rather than follow the lead of much bigger chains, such as McDonald’s and Wendy’s, that competed by lowering prices during the recession, Carl’s has steadfastly tried to play on its image as a purveyor of high-quality fast food. But by not lowering prices much, the company may have hurt its sales.
Also, while other chains were expanding by franchising, there was resistance at publicly traded Karcher Enterprises. Company officials had said they were concerned the company wouldn’t be able to guarantee quality control over franchisees.
Now, however, Carl’s has taken the position that franchisees often know their local markets far better than the home office in Anaheim. Franchising is also a way to grow more quickly with less risk to the parent company. The company is aggressively franchising in the western United States and licensing overseas in such countries as Mexico, Malaysia, Japan and China.
Times staff writer Chris Woodyard contributed to this report.
