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CKE Restaurants' Thompson Resigns; Puzder Named CEO

Eateries: Company also tells of plans to sell its Taco Bueno chain for $90 million to pay down debt, says it must turn Hardee's around.

September 08, 2000|DARYL STRICKLAND | TIMES STAFF WRITER

Bogged down by the money-losing Hardee's hamburger chain and a long commute from Northern California, the head of CKE Restaurants Inc. quit Thursday as the company announced plans to sell its Taco Bueno chain for $90 million to reduce its debts.

C. Thomas Thompson, 50, resigned as president and chief executive, effective immediately, though he will remain as a consultant through January and finish his term on the board.

Thompson, who was first named president six years ago and added the duties of chief executive in March, will return to Northern California where he has long operated a group of CKE's Carl's Jr. restaurants.

Andrew F. Puzder was promoted to replace Thompson as head of the nation's fourth-largest hamburger chain. Puzder also will retain his post as president of the Hardee's Food Systems Inc. subsidiary, a position he took only three months ago.

"The primary challenge is getting Hardee's back on track," said Puzder, 50. "We need to improve the service and the stature of the stores, and I think we'll do real well."

Indeed, CKE needs to focus on turning Hardee's around if it wants to post a profit and boost its stock price, said industry consultant Janet Lowder of Restaurant Management Services in Rancho Palos Verdes.

Anaheim-based CKE is struggling with sagging sales and soaring debt from its effort to absorb the Hardee's chain, which it acquired in 1997.

Executives have said that Hardee's, with 2,762 restaurants in 37 states and 11 foreign countries, has been a bigger challenge than anticipated because many of the restaurants were poorly run and needed costly remodeling.

Thompson, who said he had been considering stepping down for a while, said the company hasn't made the progress it has needed to make with Hardee's.

"It's like running a race," Thompson said. "You lose energy and you need to pass the baton to somebody. We need a fresh approach, and as a leader, Andy brings that energy."

Earlier this year, the company announced a plan to lower its debt by selling 500 Hardee's units, a move that was expected to raise $200 million and pare down its debt. So far, the company has sold only 190 units, resulting in $63 million.

To help promote the chain, CKE named Brad Haley as executive vice president of marketing for Hardee's, a position that had been open since June. He previously was head of marketing at Church's Chicken.

To reduce its debt further, CKE said Thursday that it has reached a tentative agreement to sell its chain of 125 Taco Bueno restaurants in Texas and Oklahoma to Red Tail Ventures LLC, an affiliate of Commercial Revolution LLC in San Diego for more than $90 million in cash.

The deal, expected to be completed by the end of December, would allow the company to reduce its overall debt of about $750 million, which includes $230 million in bank loans.

Puzder said that he's generally pleased with the Carl's Jr. operation, which consists of 962 fast-food eateries in 13 Western states. He said the company will continue to expand the chain, primarily in California, while promoting its brand name.

To bolster the chain, the company also promoted Richard Fortman to executive vice president of operations for Carl's Jr., assuming day-to-day operations. He had been senior area vice president for Hardee's.

Even so, the red ink at CKE has continued to flow.

The company lost $2.5 million, or 5 cents a share, in its fiscal first quarter, which ended May 22, surprising industry analysts with a weaker-than-expected performance. CKE attributed the loss largely to its Hardee's units.

The stock has plummeted 36% this year, losing 25 cents Thursday to close at $3.75 a share on the New York Stock Exchange.

Thompson said he also has tired of the commute for the past six years from the Bay Area city of Burlingame, where he lives with his wife and three children. He has been part owner for 16 years of a group of 24 Carl's Jr. restaurants in the Bay Area and Central California, and he now plans to concentrate on expanding that operation.

Puzder is a former executive vice president at Fidelity National Financial Inc. in Irvine, which operates the nation's largest title insurance company. Fidelity's chairman, William P. Foley II, and a group of investors control CKE through a minority stake in the company.

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