CKE Restaurants Initiates a Refranchising Program


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Add CKE Restaurants to the growing list of franchisors selling a significant number of company-owned restaurants to franchisees. A lender who attended the company's annual convention in Las Vegas earlier this month told the Monitor that CEO Andy Puzder announced 540 Carl's Jr. and Hardee's units would be sold to franchisees. 

Moreover, the sale process would take three years and trim company-store ownership to approximately 18 percent. Franchisees currently control 66 percent of some 3,400 Carl’s Jr. and Hardee’s restaurants. AUVs, a combined $1.2 million, have fully recovered since the recession, the lender added.

The number of units and the time-frame, however, were disputed by Puzder in an interview this week with the Monitor. He insisted there wasn’t a time frame and claimed the number 540 hadn’t fallen from his lips. Puzder did concede company-owned units were for sale but offered no total. He also allowed a peek into the sale process. Here are excerpts from the interview:

RFM: What did you say at the annual conference?

Puzder: What you heard is probably a lot more definitive than what I actually said. Carl’s and Hardee’s are on the upswing. Hardee’s is on a monster comeback, particularly in the Midwest and Southeast. So we have a lot of interest in purchasing restaurants and signing development agreements. We are also to a point size-wise, that makes sense to own a smaller percentage of company restaurants.

Are you selling to existing franchisees or franchisees of non-competing brands that have met development agreements and now want to franchise another brand?

Both of those plus people who would like to invest in the restaurant industry. There’s also private equity money out there that’s now interested in buying franchised restaurants and developing territory.

What’s a realistic EBITDA multiple for the company stores?

We do have a good idea of what it is but various factors influence it. I can’t tell you what it is because we are negotiating right now.

Are you selling stores in your best markets, those with the highest AUVs?

Probably not. Our highest AUV market is Los Angeles for Carl’s. Yet we may be selling restaurants in the L.A. market. Not every sale will be a market. Hopefully, we’re selling groups of restaurants, but they may be in markets where we keep other restaurants.

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