Carl Karcher's rags-to-riches story is as all-American as a hamburger and fries.
From his start as a farm boy in the Midwest, Karcher has parlayed a $326 investment in a hot dog cart into a major fast-food chain. On Thursday, only one day after Anaheim-based Karcher Enterprises announced record earnings, the Securities and Exchange Commission filed a lawsuit accusing Karcher and members of his family of illegal insider trading in Karcher stock.
In a prepared statement, Karcher said the SEC allegations "are totally false."
The lawsuit was a major blow to a company that had only recently pulled itself out of several years of hard times. It was an even harsher blow to the 71-year-old entrepreneur whose life has been a classic success story.
In fact, the Horatio Alger aspect of Karcher's life is frequently mentioned by those who know him. It is reprinted on paper place mats in his Carl's Jr. restaurants. And Karcher received the Horatio Alger Award in 1979 from a private foundation of the same name.
"I never thought of being anything but a farmer," Karcher told The Times in an interview several years ago. That plain-speaking approach is typical for the big, blustery man who dropped out of school, then went on to make a name as Orange County's Hamburger King.
It all began in Upper Sandusky, Ohio, where Carl Nicholas Karcher grew up as one of eight children of German parents. Admirers point to his Depression-era childhood as evidence that Karcher learned firsthand the value of a hard day's work. Karcher dropped out of school after eighth grade to work on his family's 300-acre farm.
When an uncle asked Karcher, then 20, to move West to work in his Anaheim feed and seed store, Carl took him up. He started at $18 a week. In 1939, he married Margaret Heinz--a staunch Catholic, like himself--and got a job wrapping and delivering bread for a bakery.
Once married, Karcher decided to strike out on his own. In 1941, he borrowed money to buy a hot dog push-cart and set up shop in what is now Los Angeles' garment district while he continued to run his bakery route. The single cart was soon parlayed into three run by Karcher and his wife, who stood underneath bright red umbrellas selling hot dogs at 10 cents apiece.
Just for Effect
Within four years, Karcher had quit the bakery business and added hamburgers to his growing chain's menu. He did well with a one-third pound, 49-cent burger called the 49er and gradually expanded his business after returning from a 19-month stint with the Army.
The first Carl's Jr--named after Carl, but the "Jr" was added for verbal effect--was opened in 1956. At about that time, younger brother Don Karcher asked to join the company and started at the bottom rung, washing dishes in the kitchen.
Growth of the chain came slowly because Karcher was opposed to franchising and going public. But eventually, Don--by now out of the kitchen and into management--convinced Carl that Karcher Enterprises had to grow if it wasn't to be gobbled up by larger competitors.
The company went public in 1982 and signed its first franchise agreement two years later.
At the time, Karcher displayed the staunch paternalism that friends say is characteristic. The father of 12, he gave each of his children 67,500 shares worth about $1 million when the company went public.
According to the company's last proxy statement, Karcher received a salary of $436,544 in fiscal 1987 and owned 5 million shares of company stock. The company grew steadily until the early 1980s, when an overly aggressive expansion program and hard times in the restaurant industry caused Karcher Enterprises to close 20 company-owned restaurants and abandon plans to become a nationwide chain.
The company launched an austerity program that included a series of layoffs and tossed out several unsuccessful menu items. By late 1986, the company had gone "back to basics" by emphasizing burgers, Cokes and lower prices--and was on its way to recovery.
Today, the company has 449 restaurants in four states. Earlier this week, Karcher Enterprises reported record earnings and sales for fiscal 1988, posting a $16-million profit for the year after losing $7.1 million in fiscal 1987. The fiscal year ended Jan. 25.
Karcher is proud of the company and its growth. His trademark is keeping a pocketful of free coupons for Carl's Jr. burgers in his pocket, and he hands them out to just about everyone he meets.
A self-made man with an enormous ego, Karcher likes publicity and attention. He regularly appears in the chain's commercials. He described at length how the company got started in "Making It Happen. The Story of Carl Karcher Enterprises"--a 143-page book published by his company and that is handed out to VIPs who visit the company.