Struggling Carls Jr. franchisee plans to close 10 and sell 49 California locations
A Carl’s Jr. The franchisee is trying to close and sell its 59 California locations after filing for bankruptcy protection in April.
Franchise owner Harshad Dharod, which has branches mostly in Southern California, plans to close 10 of the branches he controls and find a buyer for the rest, according to a broker who helped find a buyer.
In previous bankruptcy filings, Dharod had blamed California and Carl’s Jr. for difficulties at its stores. Dharod said Carl’s Jr.’s lack of support and innovation and the increase in labor costs from the $20 minimum wage left it unable to cover its expenses.
Dharod could not be reached for comment.
Carl’s Jr. and a spokesperson for its parent company, CKE Restaurants, said they were aware of Dharod’s decision to sell.
“This situation is specific to the financial and business circumstances of this individual franchisee,” the spokesperson said. “This has no impact on the operations of other Carl’s Jr. locations.”
National Franchise Sales will oversee the sale, which covers Southern and Northern California.
A spokesman for the broker said it has already received interest from potential buyers. When a franchise changes owners, employees and managers generally keep their jobs, the spokesman said.
Carl’s Jr. started as a hot dog cart on the corner of Florence and Central in Los Angeles in 1941 and has grown to become one of the area’s best-known burger chains. He opened his first sit-down restaurants with expanded menus in Anaheim in 1946. The smiling yellow star was born in the 1950s and quickly spread throughout California during the 1970s.
Although it moved its headquarters from Carpinteria to Tennessee in the last 10 years, its menu still reflects its California roots with items like the double cheeseburger Cali XL. The chain was one of the first to recognize the meat-free trend, introducing plant-based burgers and a charbroiled turkey burger. It gained a lot of attention in the early 2000s with advertisements pointing to its California roots.
This year, analysts say it has struggled to stay relevant among new competitors and fast-food consumers who are becoming more selective about what they pay for and eat.
Like most restaurants, Carl’s Jr. It is also struggling to attract customers at a time when many are increasingly worried about inflation and the health of the economy. Some chains are lowering prices. Small chains cannot compete well in price wars. Those without a strong brand identity and fan base suffer.
Dharod told the bankruptcy court that business had gotten particularly bad in the last two years, and that he did not have access to enough cash to cover wages, rent, supplies and insurance. Even though the outlets generate more than $6 million in monthly revenue, they are losing more than $600,000 a month this year.
He had to ask for special permission to use his daily cash flow to finance expenses or risk running out of money and having to close his outlets.
A small group of nearly 1,000 employees who work for the franchisee say efforts to cut costs have left them exposed to overwork, understaffing and violence.
Some say they were injured because they had to do the work of more than one person. Some violent interactions with customers, including robberies and physical attacks, were detailed and it was noted that the company did not provide safety training. Some have staged several strikes in recent months to draw attention to their concerns.
