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Carl's Jr. Founder Has a Beef With Chain's Board : Restaurants: Karcher, upset with declining stock and family income, issues ultimatum: Take my suggestions or face a coup.

September 02, 1993|JOHN O'DELL GREG JOHNSON and CHRIS WOODYARD | TIMES STAFF WRITERS

ANAHEIM — Frustrated hamburger magnate Carl N. Karcher has declared war against Carl Karcher Enterprises Inc.'s board of directors to determine the future of the 648-restaurant chain that carries his name.

Karcher, 76, has seen his personal fortune sag along with the California economy in the last three years and now is threatening to oust members of the board that selected a new chief executive and charted a new course for the company without Karcher at the helm.

The new strategy of the Carl's Jr. chain calls for lower prices, better value and new commercials that no longer feature the husky founder. Karcher initially seemed supportive. But the stock price languished and a plan to bolster the Karcher family fortunes by having the corporation buy $10 million worth of the family's stock fell through in July.

After the board rejected his proposals to revive the Anaheim-based chain, Karcher--whose family controls 34% of the company--rebelled and late Tuesday night leveled an ultimatum: Adopt my suggestions or face an embarrassing boardroom coup.

Company officials Wednesday declined to comment on the brewing battle. Loren Pannier, Karcher Enterprises' chief financial officer, said a committee of outside directors will evaluate Karcher's statements and attempt to resolve their differences.

The apparent catalyst for Karcher's uprising was the board's rejection of a radical joint marketing proposal for the fast-food chain. Karcher wants the hamburger chain to start selling Mexican food entrees supplied by GB Foods' Green Burrito restaurants and carrying the Green Burrito name. He sees the plan as essential to restoring the value of company stock as well as his own flagging fortunes.

Karcher apparently split with the board after former Kentucky Fried Chicken President Donald E. Doyle joined the company in late 1992 as president, chief executive and director. Doyle quickly moved to impose his stamp on the business, laying off 70 headquarters employees and simplifying menus at the franchise and company-owned restaurants.

The company's new "less-is-more" philosophy clashes with Karcher's desire to further broaden Carl's Jr. menus. But the dual deal with GB Foods of Anaheim raised eyebrows in the restaurant industry.

"What they're doing right now is the right thing," said Douglas Christopher, a food industry analyst with Crowell, Weedon & Co. in Los Angeles. "They've got some good 99-cents offerings on the menu, they have attractive-looking food, it looks like they're building volume. . . . It seems like the company is on a very consistent, well-thought-out plan."

Karcher Enterprises stock closed up 62.5 cents Wednesday at $9.625 in NASDAQ trading, its highest level this year.

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