CKE Chief Quits; Firm to Sell Taco Bueno Unit

Bogged down by the money-losing Hardee’s hamburger chain and a long commute from Northern California, the head of CKE Restaurants Inc. quit Thursday as the company announced plans to sell its Taco Bueno chain for $90 million to reduce its debts.

C. Thomas Thompson resigned as president and chief executive, effective immediately, though he will remain as a consultant through January and finish his term on the board.

Thompson, 50, who was named president six years ago and added the duties of chief executive in March, will return to Northern California, where he has long operated a group of CKE’s Carl’s Jr. restaurants.

Andrew F. Puzder was promoted to replace Thompson as head of the nation’s fourth-largest hamburger chain. Puzder also will retain his post as president of the Hardee’s Food Systems Inc. subsidiary, a position he took only three months ago.

“The primary challenge is getting Hardee’s back on track,” said Puzder, 50. “We need to improve the service and the stature of the stores, and I think we’ll do real well.”

Indeed, Anaheim-based CKE needs to focus on turning Hardee’s around if it wants to post a profit and boost its stock price, said industry consultant Janet Lowder of Restaurant Management Services in Rancho Palos Verdes.

CKE is struggling with sagging sales and soaring debt from its effort to absorb the Hardee’s chain, which it acquired in 1997.

Executives have said that Hardee’s, with 2,762 restaurants in 37 states and 11 foreign countries, has been a bigger challenge than anticipated because many of the restaurants were poorly run and needed costly remodeling.

Thompson, who said he had been considering stepping down for a while, said the company hasn’t made the progress it has needed to make with Hardee’s.

“It’s like running a race,” Thompson said. “You lose energy and you need to pass the baton to somebody. We need a fresh approach, and as a leader, Andy brings that energy.”

This year, the company announced a plan to lower its debt by selling 500 Hardee’s units, a move that was expected to raise $200 million and pare down its debt. So far, the company has sold only 190 units, resulting in $63 million.

To reduce its debt further, CKE said Thursday that it has reached a tentative agreement to sell its chain of 125 Taco Bueno restaurants in Texas and Oklahoma to Red Tail Ventures, an affiliate of Commercial Revolution in San Diego, for more than $90 million in cash.

The deal, expected to be completed by the end of December, would allow CKE to reduce its overall debt of about $750 million, which includes $230 million in bank loans.

Puzder said he’s generally pleased with the Carl’s Jr. operation, which consists of 962 fast-food eateries in 13 Western states. He said the company will continue to expand the chain, primarily in California, while promoting its brand name.

The company lost $2.5 million, or 5 cents a share, in its fiscal first quarter, which ended May 22, surprising industry analysts with a weaker-than-expected performance. CKE attributed the loss largely to its Hardee’s units.

The stock has plummeted 36% this year, losing 25 cents Thursday to close at $3.75 a share on the New York Stock Exchange.