Karcher Named Chair Emeritus of Parent Firm : Management: Move brings peaceful end to Carl’s Jr. dispute as directors also give seats to two of his key supporters.

ANAHEIM —  Carl N. Karcher’s bitter fight with the board of his namesake fast-food company ended peacefully Wednesday, with directors unanimously embracing the 76-year-old businessman in a limited role as chairman emeritus, and both sides agreeing to work together cooperatively.

The directors who ousted Karcher as chairman Oct. 1 also granted title insurance industry executive William P. Foley II’s request for two seats on the Carl Karcher Enterprises board.

Foley is leading an Orange County investor group that has allied itself with Karcher, amassing a 40% stake in the parent of the Carl’s Jr. chain. The investor group now will have four of the company’s nine board seats, including the two seats held by Karcher and his son Carl L. Karcher.

Foley, 48, and fellow investor Daniel D. (Ron) Lane, 49, a Newport Beach-based developer, will join the Karcher Enterprises board as early as Friday.

Karcher, who founded the fast-food company in 1941 with a single hot dog stand, will largely serve in a ceremonial role as chairman emeritus, offering ideas and helping with marketing but not being involved in day-to-day management, officials said. Karcher said he was gratified by the board’s vote.

“It’s been 2 1/2 months of stress, and I’m thankful to see it behind us,” Karcher said in a telephone interview minutes after the vote. “It’s nice to be back.”

Wednesday’s move “is tantamount to a rebirth at a company that’s had a chronic illness,” said Bill Davenport, a broker at Kidder, Peabody’s Newport Beach office.

“What we’ve got is a group that’s invested $30 million, a group that’s going to want to make a return on their investment,” said Davenport, who has followed Carl’s Jr. for seven years. “It’s wonderful news.”

But Karcher’s return stunned some former company officials and other observers, who questioned whether the founder and board will be able to mend fences. When the board replaced Karcher as chairman, several directors said privately that Karcher’s continued presence at the company’s Anaheim headquarters--he remained as a director--had produced a “disruptive and uncertain atmosphere.”

Karcher responded with a hard-fought campaign to regain a more active role in the company. He demanded that company President Donald E. Doyle apologize for alleged false statements about him, and he continued to demand that the company test-market Green Burrito-brand Mexican-style products at a handful of Carl’s Jr. restaurants as a way to boost sales and reverse an earnings slump.

Karcher on Wednesday declined to comment on whether he will continue his fight to test-market Green Burrito.

But company officials suggested that the bitter tone of their disagreements with Karcher are over, and Doyle didn’t count out a possible test of Karcher’s Mexican food idea. “We always listen to new ideas, and it’s in our best interest to get on with the business of selling lots of hamburgers and improving sales and earnings,” he said.

Foley added that Karcher lawyer Andrew Puzder promised that the company founder will support the board.

Precipitating the boardroom battle was a continuing decline in sales at Carl’s Jr. outlets. Doyle’s strategy was to find the right combination of menu items and pricing needed to compete more effectively with national fast-food companies. In late August, the founder demanded that three board members resign. After a month of bickering, the directors responded by removing Karcher as chairman and replacing him with longtime board member Elizabeth A. Sanders.

Karcher’s return as chairman emeritus was the result of an alliance with Foley, chairman of Fidelity National Financial Inc., an Irvine-based company that Foley built into the nation’s fifth-largest title insurance company. Foley led the group of Orange County investors who are helping to bail Karcher out of serious personal financial difficulties. In return for the paying off of delinquent loans, Karcher is giving the group 22% of his personal stake in the chain.

Foley said Wednesday that his first priority as a Karcher Enterprises board member is to “build shareholder value” by perfecting a new value menu now being tested in Bakersfield and cutting costs where appropriate.

Wednesday’s board vote followed a whirlwind of meetings. Foley and Lane first met with Doyle. Then the two met with directors Sanders and Peter Churm. “We wanted them to understand that we’re not threatening them or their efforts,” Foley said.

Foley pressed the board members to take Karcher back. “He built this company,” Foley said. “He deserves some respect.”

Lane and Foley will join the seven-member board that includes Karcher and his son, Carl L. Karcher. The board also includes Doyle, Churm, Sanders, retired Vons supermarket executive Kenneth O. Olsen and attorney Daniel W. Holden.

Both the board seats and Karcher’s return are contingent upon Karcher restructuring a defaulted, $26-million personal loan from Union Bank.

Karcher Enterprises stock closed at $9.875 a share, unchanged, in Wednesday’s Nasdaq trading.

Bios:

William P. Foley II

Chairman, CEO: Fidelity National Financial Inc., Irvine

Age: 48

Education: Law degree, University of Washington, 1974; MBA, Seattle University, 1970; U.S. Military Academy at West Point, 1967.

Background: Air Force, 1967-1972; practiced real estate and tax law before investing in Security Savings & Loan; led buyout of the thrift’s title insurance company; built Fidelity into the nation’s fifth-largest title insurer.

Source: Fidelity National Financial Inc.

Daniel D. (Ron) Lane

President and owner: Lane Kuhn Pacific, Newport Beach

Age: 59

Education: Bachelor’s degree in real estate, USC, 1956

Background: Built thousands of houses in Southern California, his company’s most recent project being the Eastlake residential development in Chula Vista. Owns and manages a handful of golf courses. Served as baseball commissioner for the 1984 Olympic Games.

Source: Lane Kuhn Pacific