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Carl's Jr. Buys Hardee's Chain for $327M; Some...

Posted April 28, 1997

— It's a merger made in hamburger heaven: Carl's Jr. gets a better breakfast menu and struggling Hardee's gets a new owner.

The parent firm of Carl's Jr. paid $327 million for Hardee's, the No. 4 fast-food chain in the nation, in a deal announced Monday.

The takeover gives Carl's a better breakfast menu and gives Hardee's a stronger lineup for lunch and dinner, said William P. Foley II, chairman of Anaheim, Calif.-based CKE Restaurants.

``You're going to see both names on the door,'' Foley said.

North Carolina-grown Hardee's will be a subsidiary of CKE and 27-year veteran H. Stephen McManus stays as Hardee's Food Systems president. Hardee's will remain headquartered here.

Hardee's - fourth behind No. 1 McDonald's, No. 2 Burger King and No. 3 Wendy's - reported an operating loss of 11 million Canadian dollars in the first quarter. Hardee's was sold by Montreal-based Imasco Ltd.

Hardee's slack sales could be reversed by a plan already in the works to convert from frying food to grilling it, McManus said. He said many customers were turned off years ago when Hardee's changed to frying. Carl's Jr. grills food.

``Those of you who know us thought more of us when we were char-grilling burgers,'' McManus said at a news conference. ``That's the roots of Hardee's and part of the success that Carl's has had.''

Hardee's sales last year totaled $2.98 billion. CKE had $742 million, including sales from its Rally's, Green Burrito, Taco Bueno, JB's, HomeTown Buffet and Galaxy Diner restaurants.

Foley said Hardee's offered too many menu items and those that don't sell will be eliminated during test marketing. McManus said Hardee's fried chicken would be eliminated in the first test market of the combined companies in Peoria, Ill.

Carl's menu features large burgers that are advertized with a slogan, ``If it doesn't get all over the place, it doesn't belong in your face.'' One ad features construction workers eating on a scaffolding, where the burger dripping narrowly miss pedestrians but hit a pigeon.

The merger creates a chain of 3,828 restaurants - 3,152 Hardee's outlets in 40 states and 10 foreign countries and 676 Carl's Jr. outlets primarily in California. Foley said as the combination of the outlets takes place, restaurants will display both Hardee's and Carl's logos and signs.

McManus said the sales price was book value for the company and represented a fair deal for stockholders.

There is no overlap among the restaurant locations, Foley said. But the merger could result in some lost jobs, said McManus, adding that the most secure jobs probably are in the restaurants.

Hardee's was attractive to Carl's Jr. because of its strong breakfast trade - 30 percent of the company's business is breakfast centered on biscuits. Carl's breakfast menu accounts for 10 percent of its business, Foley said.

McManus and Foley made statements and answered questions with a backdrop of the two company's premier products. Foley said the Carl's Jr. burgers will have more taste than Hardee's current fare.

``What the Hardee's customers want is taste and we'll be able to give them taste all day long,'' Mcmanus said.

Foley said the Carl's Jr. customer profile is male between the ages of 15 and 34 who want large burgers. Carl's menu that will replace Hardee's lunch and supper offerings include Big Star and Super Star burgers as well as chicken sandwiches, a salad bar and baked potatoes.

Since taking control of CKE following a bitter boardroom battle with founder Carl N. Karcher in 1993, Foley has waged an aggressive acquisition program to extend the company's reach.

Last year, CKE's earnings more than doubled to a record $22.3 million.

Imasco bought Fast Food Merchandisers, a food processing and distribution business, from Hardee's.

The largest franchisee of Hardee's restaurants, Flagstar Cos. Inc. of Spartanburg, S.C., said it would pursue an arbitration claim against Hardee's for failure to properly manage the brand. The claim was filed March 19, but the company refused to say what damages it sought.

-- From Staff and Wire Reports


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