CKE Restaurants Focuses on Franchises

Andrew F. Puzder, president and chief executive officer of CKE, commented that "We undertook a number of important steps" during the first quarter to improve the company, including the refranchising plans. The refranchising of Hardee's restaurants will occur in a number of markets across the Midwest and Southeast.

In its refranchising push, CKE is selling company-operated restaurants to franchisees in selected markets. "Refranchising these markets will accelerate their development and will allow us to focus our corporate development efforts in our core markets," Puzder commented during the conference call Thursday. In addition, he said, the refranchising allows the company to allocate its financial and operating resources more efficiently, "thereby facilitating our growth plans for company-operated restaurants," he added.

During the first quarter, CKE completed 28 company-operated refranchises with three franchisees, generating $10.7 million in selling the franchises. It also entered into agreements to sell 74 more company-operated locations for $29M and is in negotiations to sell 81 additional stores for more than $33 million.

Another strategic move mentioned by Puzder is CKE's decision to sell its La Salsa Fresh Mexican Grill. CKE is selling La Salsa to Thousand Oaks-based Baja Fresh Mexican Grill. "This transaction will allow us to direct our resources and focus on growing our burger brands as well as expanding our dual-branded Mexican concepts," Puzder said of the sale, which is expected to close in the second quarter.

During the conference call Thursday, CKE reported that net income for the first quarter totaled $15.4 million and 23 cents per diluted share for the period ended May 21, compared with $16.2 million and 23 cents per share in the first quarter of the previous fiscal year. Same-store sales for the first fiscal quarter of fiscal 2008 were flat at Carl's Jr. and increased 1.8% at Hardee's company-operated restaurants.

As of the end of its fiscal 2008 first quarter, CKE had a total of 3,022 franchised, licensed or company-operated restaurants in 43 states and in 13 countries. The total included 1,101 Carl's Jr. restaurants and 1,905 Hardee's locations.