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Franchisees Clash With President of Carl’s Jr. : Restaurants: They vote no confidence in executive at shareholders meeting. Officials insist that value menu will work.

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TIMES STAFF WRITER

Carl’s Jr. restaurant franchisees used the burger chain’s annual shareholder meeting Monday as a forum to issue a vote of “no confidence” in President and Chief Executive Donald E. Doyle.

Owners of about 240 franchised restaurants have clashed with Doyle in recent months over a value-oriented menu instituted in April to help reverse a four-year revenue slide at the 650-unit Carl’s Jr. restaurant chain. Doyle maintains that the lower-cost menu will help Carl’s Jr. lure back customers lost in recent years to McDonald’s, Taco Bell and other national chains.

“The bottom line is being destroyed,” Ed Giammarino, a San Diego-based franchise owner, said after the morning meeting held at an Anaheim hotel. “The program is not working and we want to know what the company is doing to turn the company around.”

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On Monday, CKE Restaurants reported $656,000 in net income for the first quarter ended May 23, compared to $158,000 a year ago. Quarterly revenue slipped to $135 million, down from $140.1 million a year ago.

Chairman William P. Foley told shareholders that the menu makes Carl’s Jr. competitive with its major rivals, which early on recognized growing consumer demand for better values. Foley, who last year acquired a controlling stake in the company and was elected chairman, also acknowledged that it will take time to reverse the years-long revenue slide.

Foley and Doyle said that early returns are positive. “The value menu will work,” Foley said. “But it’s going to take time.”

But franchise owners Giammarino and Nick Trani of Modesto maintained that the new menu is not a success. “The numbers we’ve seen are nowhere near as (optimistic) as what the company is saying,” Trani said.

Doyle said that about 95% of franchise owners instituted the new menu. “Some of them thought this would be a silver bullet,” Doyle said. “But it’s not a quick fix. It’s going to take time.” Franchise owners are always free to set their own prices, but most elect to follow the lead set by the company in its advertising.

Giammarino said franchisees will continue to pressure management to restores the chain’s image as a higher-end fast food company.

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Monday’s shareholder meeting included an appearance by founder Carl N. Karcher, who led shareholders in a prayer and the Pledge of Allegiance at the start of the meeting. Last year, Karcher was tossed out as chairman during a painful fight with the company’s board of directors. Karcher came back to the company as chairman emeritus after Foley was elected chairman.

During the annual meeting held at the Anaheim Marriott hotel, the parent company of Carl’s Jr. changed its official corporate name to CKE Restaurants Inc. from Carl Karcher Enterprises and changed the company’s state of incorporation to Delaware from California.

Doyle said the company is on track to open 20 Boston Chicken restaurants by the end of this year. The first two restaurants will open early in July in Sacramento. The first Orange County location--in Fountain Valley at the corner of Brookhurst Street and Garfield Avenue--is scheduled to open July 25.

CKE Restaurants in January acquired the franchise rights to build as many as 300 Boston Chicken locations in Southern California and Sacramento.

Karcher Enterprises’ Profit Rises

Despite a decline in revenue, Carl Karcher Enterprises reported an increase in earnings for its latest quarter. The company’s results for the same period a year earlier were restated to reflect an accounting change. Figures in thousands of dollars except data per share:

1993 1994 % Change Total revenue $140,855 $135,006 -4.2 Net earnings 158 656 +315.2 Earnings per share 0.05 0.04 -20.0

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Source: Carl Karcher Enterprises Inc.

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