A Texas-Sized Move for Carl's Jr.?

Katy Grimes: If everything really is bigger in Texas, then the departure of the Carl’s Jr. headquarters from California could be big, big, big news.

Today, Republican Assemblyman Dan Logue hosted another of his monthly Economic Recovery Group lunch meetings to hear firsthand from Andy Puzder, CEO of CKE Restaurants, Inc., the parent company of Carl’s Jr., Green Burrito and Hardees restaurants, on the imminent decision to move the headquarters from California, to Texas.

Carl’s Jr. has 700 restaurants in California, one-half of which are owned by CKE Restaurants, and the other one-half are franchises. The company has more than 72,000 employees total, 18,500 of which are in California.

And while Puzder made very clear that Carl’s Jr. would be “maintaining” status of their California restaurants, the company plans on opening 300 new restaurants in Texas.

Describing CKE Restaurants as a ” job creation machine,” Puzder said that the company had more than $4 billion last year in revenues, and paid $60 million in California taxes.

But more than just the large, Texas-sized revenue and tax bills, new Carl’s Jr. restaurants in Texas have already realized record opening-week sales figures, and much less upfront costs than the California restaurants.

“It costs us $250,000 more to build one California restaurant than in Texas” said Puzder. “And once it is opened, we’re not allowed to run it.”

Puzder discussed the difficult California permitting requirement process, and “oppressive environmental requirements.”  “It takes eight months to two years to get permits to build a restaurant in California,” said Puzder. “In Texas, it’s one and one-half months.”

As for the difficulty in operating a restaurant once it has opened, Puzder described how California’s restrictive overtime laws are a nightmare for food retail. Because California requires overtime to be paid after eight hours everyday, restaurant managers can’t determine their own hours based on actual production needs, and instead must take mandatory breaks, and collect overtime, instead of being flexible and working when and where needed.

Other states follow the federal overtime laws, and pay overtime after 40 hours in one week, allowing the Carl’s Jr. managers to work more flexible schedules based on actual need. And Puzder said that when there is a line out the door at a Carl’s Jr. restaurant and you see a couple of employees in the corner on break, it is because they aren’t allowed to help with the rush because the break time is mandatory in California.

Puzder said that California is quashing the entrepreneurial spirit. “People are just dying to get out there and make money. But California is setting a bar here,” said Puzder. “You can’t work smarter, harder, longer or better.”

Moving just the CKE Restaurants headquarters would take 500 high-paid California jobs to Texas. And with plans to build 300 more Carl’s Jr. restaurants means more than just the 7,500 restaurant jobs to the “friendship” state. Puzder said that every Carl’s Jr. restaurant is a $1.4 million business, costs $1.2 million to build, and has 25 employees, and feeds a great deal of money into the local and state economy through other jobs that support the operations of a Carl’s Jr. restaurant.

The company spends $120 million annually on advertising, $100 million on capital expenditures (remodeling and building), and $15 million on repair and maintenance.

“I know it would be a psychological blow to move to Texas, but it would be irresponsible of me not to discuss a move to Texas,” said Puzder. “We just want to build restaurants. It’s hard to stay in a place where you feel hated all of the time.”

MAR. 16, 2011

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