Fill ‘Er Up 2 Ways: CKE to Put Eateries at Gas Stations
Carl’s Jr. parent CKE Restaurants Inc. said Wednesday that it is teaming up with oil giants Shell and Texaco to open at least 45 Carl’s Jr. and Hardee’s restaurants alongside gas stations over the next two years.
If the partnership proves successful, CKE and the oil companies hope to open up to 1,000 of the businesses across the country, boosting the number of CKE units by 25%, to more than 5,000.
“This venture not only helps us to expand into new markets but it does so in conjunction with two very respected gasoline brands,” said William P. Foley, chairman and chief executive of Anaheim-based CKE.
Competitors such as Taco Bell, Subway and Blimpies have been appearing inside gas stations for several years, typically offering limited menus. The Carl’s and Hardee’s units will be full-scale restaurants, with indoor seating and drive-through windows.
The deal “allows a chain like Carl’s or Subway to get more points of distribution because convenience is such an important factor in the fast-food industry,” said Robert Sandelman, a Brea-based restaurant industry consultant. “The more convenient your chain can be when people are hungry, the more likely they are to select your chain when they are hungry.”
CKE shares rose 4.4%, or 69 cents, on the news, closing at $16.25 in New York Stock Exchange trading.
The planned expansion comes as CKE, the nation’s fourth-largest hamburger chain, is struggling to improve the operations of both Carl’s Jr. and Hardee’s. Last month, the company announced that its earnings in the fiscal first quarter fell significantly below analysts’ estimates because of slumping sales at the two chains. To recapture some lost ground, Carl’s Jr. introduced a cheaper bacon cheeseburger in May and plans to add a new burger to its menu this summer. CKE also is converting its entire Hardee’s system to a new Star Hardee’s concept.
Combining a gas station and a fast-food restaurant is not exactly new for Carl’s Jr. or Hardee’s. There are currently 22 smaller Carl’s Jr. eateries with a modified menu inside Texaco, Unocal, Shell and Beacon stations. There are also 85 full-size Hardee’s restaurants already paired up with Texaco and other gasoline stations. But those partnerships are individual franchise agreements.
“What makes this different is that this is truly a 50-50 partnership,” said Carl’s Jr. spokeswoman Suzy Brown. “This is a first for CKE Restaurants.”
The restaurant/gas station operations will be built on existing Shell or Texaco sites and on additional property still to be purchased. The plan calls for CKE and two oil-company partnerships to split the $1 million-per-unit cost of building full-scale restaurants.
The program’s initial phase calls for 15 locations to be completed by the end of next year and 30 more by the end of 2001. The first 45 locations would be Carl’s Jr. restaurants located in two markets that have not been announced.
The second phase includes plans for 200 more sites over the next several years. The sites could be either Carl’s Jr. or Hardee’s. Brown said the final 800 locations would come “a ways down the road.”
The expansion is a joint venture of CKE Restaurants, Equilon Enterprises LLC and Motiva Enterprises LLC. Equilon is a joint venture between Shell Oil Co. and Texaco Inc. Motiva is a joint venture among Shell, Texaco and Saudi Aramco. Together, the companies market Texaco and Shell products at more than 22,000 stations nationwide.
