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Karcher Board Ousts Chairman : Shake-up: Elizabeth Sanders replaces Carl Karcher as battle for control of Anaheim-based Carl's Jr. empire escalates. Founder says he may try to unseat his foes.

October 02, 1993|JAMES M. GOMEZ | TIMES STAFF WRITER

ANAHEIM — Carl N. Karcher, who founded Carl's Jr. and for years served as its TV pitchman, was ousted Friday as chairman, turning up the heat in a battle for control of the fast-food company.

"I feel like I've been stripped of my office by a bunch of turncoats," Karcher said in a statement released immediately after the company's directors voted him out. He said he may seek shareholder support to replace the board members.

Karcher, one of Orange County's best-known business and charity figures, was immediately replaced by board member Elizabeth A. Sanders, 48, a former Nordstrom Inc. executive. A longtime Karcher acquaintance, Sanders has been on the board of Carl Karcher Enterprises Inc. for 10 years.

The 5-2 decision by directors to remove Karcher as chairman came after an hourlong meeting at the company's Anaheim headquarters. Son Carl L. Karcher voted with his father to keep the 76-year-old founder as chairman.

At the headquarters, the staff seemed harried and well-dressed executives moved quickly through the main reception area.

"It's a very sad day for us," said Rosemary Ryan, a receptionist and employee of the company for 16 years. Of Karcher she said, "I feel bad for him."

A statement issued by the company said Karcher has disrupted its marketing strategy and is "motivated by his personal financial difficulties."

Karcher has lost millions of dollars in soured real estate and other investments, prompting his personal attorney to recommend recently that he consider filing for bankruptcy. Karcher has consistently denied that his financial problems have influenced his fight with the board.

The company said the directors' vote to oust Karcher "was taken with regret, in view of his long history with the company and the directors' personal friendships with him."

The statement added that Karcher "had rejected several proposals from the majority directors for an amicable settlement of a dispute involving board control, management, and the strategic direction of the company."

Though he is no longer at the helm of the enterprise he founded 52 years ago with a single hotdog stand, Karcher remains on the board until his term expires in June, 1994. The board also approved a lifetime retirement salary of $200,000 a year for him.

Karcher, who until recently was the impish straight man in Carl's Jr.'s TV commercials, has been at odds with Chief Executive Donald E. Doyle Jr. and the four outside board members since last month, when Karcher issued a scathing press release challenging the company's new marketing strategy.

He then threatened to replace the board with members who would be more amenable to his ideas, which included selling another company's Mexican-style food at some of Carl's Jr.'s 650 restaurants.

Friday's board action left Karcher in shock, his personal spokesman said. After leaving the meeting with his attorneys immediately after the vote, he went to St. Boniface Catholic Church, where he and his wife, Margaret, were married more than 50 years ago. He had prayed at St. Boniface earlier in the day, before the board meeting.

He later returned to company headquarters but refused to speak with reporters.

"This is a man with hamburger flowing through his veins," Karcher spokesman Steve Fink said. "Now his position has been taken from him by those whom he once considered to be his friends."

Chief Executive Doyle said the board has been struggling for some time to reach a compromise with Karcher. He said the founder "did a lot of good things" but suggested that he has lost touch with the business.

To settle the dispute with Karcher, the board met with him on Wednesday, sent a proposal to him and his advisers late Thursday, then met with him Friday to offer several solutions. All were rejected, Doyle said.

Among the proposals was a draft agreement offering to add an unspecified number of "mutually agreeable" new corporate directors. The board also offered to pay Karcher $16 million for his stake in the company--34% of its shares.

That offer, Doyle said, would have helped Karcher get himself out of debt.

Karcher has defaulted on $30 million in personal bank loans. About two-thirds of his company stock is pledged as security for those loans.

Union Bank has declared that $25.1 million in personal loans to Karcher are now due, while Commercial Center Bank in Santa Ana has told him that he would be in default on $5 million in loans if he did not repay them by Thursday. It was not known Friday if Commercial Center has taken any action to collect the money.

Doyle said the board members "were going into this with a view toward an amicable resolution."

But Karcher forced directors to remove him from the chairmanship Friday, Doyle said: "We were prepared to stay as long as necessary, but as it turned out we didn't have to stay very long."

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