Fight Ends With Karcher Given Company Role
Carl N. Karcher’s bitter fight with the board of the Carl’s Jr. fast-food company ended peacefully Wednesday, with directors unanimously embracing the 76-year-old businessman in a limited role as chairman emeritus.
Also, in a deal that could be completed as soon as Friday, two Orange County investors who helped bail Karcher out of a personal financial mess are in line to become directors of Carl Karcher Enterprises, the company announced.
Karcher, who founded the company in 1941 with a single hot dog stand and today is one of Orange County’s best-known businessmen, was elated by the board’s action.
“It’s been 2 1/2 months of stress,” he said in a phone interview minutes after the vote, “and I’m thankful to see it behind us.”
Set to join the board are William P. Foley II, chairman of Fidelity National Financial Inc. in Irvine, and Daniel D. (Ron) Lane, a developer whose Newport Beach company has built thousands of homes in Orange County.
Elizabeth A. Sanders remains chairman of Karcher Enterprises and Donald E. Doyle stays as president and a board member. As chairman emeritus, Karcher will remain on the board and play a largely advisory role: offering ideas and helping with marketing, but not being involved with day-to-day management, officials said. Karcher said he was gratified by the board’s vote.
“It will be a bit different not being chairman of the board,” Karcher said. “But I’ve spent 52 years here, and I didn’t want to be out in the cold and not participating at all. And that’s been my objective all the way.”
An investor group led by Foley orchestrated Karcher’s comeback by cutting a complicated deal that gives them control of 4.9 million shares, or 22%, of Karcher Enterprises stock. In return, the group is helping Karcher restructure nearly $30 million in personal debt.
Karcher won’t officially be chairman emeritus until the financial deal is completed. He and the Karcher Enterprises board also must work out an employment contract and salary for him.
But the directors sent a clear message Wednesday, said Bill Davenport, a broker at Kidder, Peabody’s Newport Beach office.
“This is tantamount to a rebirth at a company that’s had a chronic illness,” said Davenport, who has followed Carl’s Jr. for seven years. “What we’ve got is a group that’s invested $30 million (in Karcher Enterprises), a group that’s going to want to make a return on their investment. . . . It’s wonderful news.”
The Foley group’s holdings in Carl’s Jr., coupled with the Karcher family’s 18% stake, will give the alliance control of 40% of the company’s stock--the largest single block.
Foley, an entrepreneur who built Fidelity National into the nation’s fifth-largest title insurance company, said Wednesday that his first priority as a Karcher Enterprises director will be to “build shareholder value.”
Wednesday’s truce ended an often-bitter fight precipitated by a continuing decline in sales at Carl’s Jr. outlets.
Doyle’s strategy has been to find the right combination of menu items and pricing needed to compete more effectively with national fast-food companies. Karcher, however, has insisted that the solution might be to add Green Burrito-brand Mexican-style products at Carl’s Jr. restaurants, a plan that Doyle and the majority of the board rejected.
That disagreement escalated into a bitter boardroom battle.
By late August, the founder had demanded that three Karcher Enterprises board members resign. On Oct. 1, after a month of public bickering, the directors responded by removing Karcher as chairman and replacing him with longtime director Elizabeth A. Sanders. Along the way, Karcher threatened several times to rally shareholders to his cause by starting a proxy battle.
Karcher’s pending return stunned some former company executives and other observers who had doubted whether the founder and his handpicked board would ever be able to mend fences. At the time of Karcher’s ouster, board members said that the founder’s continued presence at the company’s Anaheim headquarters was creating a “disruptive and uncertain atmosphere.”
But Foley and Lane spent much of Wednesday brokering a peace treaty.
Foley and Lane first met with Doyle. Then the two businessmen huddled with board members Sanders and Peter Churm. “We wanted them to understand that we’re not threatening them or their efforts,” Foley said.
Finally, Foley said, he and Lane met with Karcher and his lawyer, Andrew Puzder, to extract a promise that the company founder would support the board.
All through the day, Foley pressed the board members to take Karcher back. “He built this company,” Foley said. “He deserves some respect.”
Doyle, who has been the target of Karcher’s ire in recent months, said after the board meeting, “What’s exciting is that Bill Foley is very supportive of the direction we’re taking the company in.”
As for his feud with Karcher, Doyle said, “Bill Foley spoke as a potential major shareholder, and as a major shareholder he let it be known that he thought the company would be better off if this dispute could be resolved amicably.”
Karcher, who just two weeks ago demanded that Doyle publicly apologize for alleged false statements, was more gracious on Wednesday. When asked if he would pursue the Green Burrito test, Karcher responded: “I’m not going to speak to that question. It might be something that can be discussed later on.”
Lane and Foley will join a board that now includes Karcher and his son, Carl L. Karcher. Other directors, in addition to Doyle, Churm and Sanders, are retired Vons supermarket executive Kenneth O. Olsen and attorney Daniel W. Holden.
Doyle said the Foley group’s investment should give stability to the company.
“I’ve met with Bill Foley several times and met with Ron Lane today,” Doyle said. “This is an affirmation of the future potential of this company. It’s in the best interest of all shareholders to get on with the business of selling lots of hamburgers and improving sales and earnings.”
Lane described the board vote as “real positive . . . I think we convinced everyone that we have no hidden agenda. . . . I think Betsy Sanders recognized that, Peter Churm recognized that and Carl recognized it.”
Karcher and his wife, Margaret, who celebrated their 54th wedding anniversary on Nov. 30, attended Wednesday’s board meeting together.
“I’m sitting in my office again (on land) that was my father-in-law’s orange grove,” said Karcher afterward, “It’s nice to be back.”
William P. Foley II
Chairman, CEO: Fidelity National Financial Inc., Irvine
Education: Law degree, University of Washington, 1974; MBA Seattle University, 1970; U.S. Military Academy at West Point, 1967.
Background: Air Force, 1967-1972; practiced real estate and tax law before investing in Security Savings & Loan; led buyout of the thrift’s title insurance company; built Fidelity into the nation’s fifth-largest title insurer.
Source: Fidelity National Financial Inc.
Daniel D. (Ron) Lane
President and owner: Lane Kuhn Pacific, Newport Beach
Education: Bachelor’s degree in real estate, USC, 1956
Background: Built thousands of houses in Southern California, his company’s most recent project being the Eastlake residential development in Chula Vista. Owns and manages a handful of golf courses. Served as baseball commissioner for the 1984 Olympic Games.
Source: Lane Kuhn Pacific