Carl Karcher Enterprises Begins Layoff of 60 Workers : Restructuring: Cuts at Anaheim headquarters range from vice presidents down. Aim is to trim $10 million annually.
Carl Karcher Enterprises on Thursday began laying off about 60 of the 460 employees at its Anaheim headquarters and cutting several corporate functions in a restructuring designed to trim annual operating costs by $10 million.
Those being laid off by the parent company of the Carl’s Jr. hamburger chain range from corporate vice presidents to blue-collar workers. The restructuring is driven by a “mandate from the board to increase profitability,” said Donald E. Doyle, the company’s president and chief executive.
The layoffs come less than a month after Karcher’s outside board members rejected a leveraged buyout bid by Karcher founder Carl N. Karcher, 75, and Freeman Spogli & Co., a Los Angeles investment group.
In December, Karcher board members strongly suggested that a restructuring was forthcoming. Board members directed management to deal “aggressively” with operating costs so that the company could “achieve its full (profit) potential.” And they hired Doyle, a former Kentucky Fried Chicken executive.
Karcher’s restructuring incorporates a strong back-to-basics message, said Dave Rose, an analyst with the brokerage L.H. Friend, Weinress & Frankson in Irvine.
Karcher is “getting up to speed” with other fast-food companies that previously dropped food-processing and other operations “that they didn’t need to be in,” Rose said.
The layoffs resulted in part from a slow national economy that is forcing consumers to cut spending and prompting restaurants to hold market share by emphasizing value, said Loren Pannier, Karcher’s chief financial officer.
But Karcher also is seeking the most efficient way to do business, Pannier said. “We’re focusing on restaurant operations, which sounds basic . . . but which is something that needs to happen.”
The corporate streamlining began last summer when Karcher dropped an in-house beef-processing operation. The company also stopped making salad dressings and other food items. That decision to buy goods rather than manufacture them, Pannier said, “is now working its way through the organization.”
Karcher, which has more than 600 restaurants and $465.8 million in annual revenue, will also transfer a maintenance and repair operation to outside vendors. And some white-collar functions will be dropped if “outsourcing that service is more economical than doing it ourselves,” Pannier said.
He would not say which Karcher executives will be laid off.
Analysts applauded Karcher’s decision to concentrate on its basic restaurant business.
“What’s encouraging is that they’re being specific about what they’re planning to cut,” Rose said. “They gave some (dollar) numbers, and that’s encouraging.”
In Thursday’s trading on the NASDAQ market, Karcher’s stock was unchanged at $8.25 a share. The rejected buyout offer would have been worth $9.50 a share. Some analysts have valued the company at as much as $14.
