Carl’s Jr. Hopes Its Star Will Rise in Mexican Market

ANAHEIM —  The Happy Star is about to become La Estrella Feliz.

The translation is expected to become be official today as Carl Karcher Enterprises Inc. signs a licensing agreement that will result in the opening of at least 10 Carl’s Jr. restaurants--with the signature yellow shooting star--over the next five years in Mexico.

The agreement with Valores Metalicos, a company based in Monterrey, marks Karcher’s first move south of the border and third international venture. The company, confronting an increasingly saturated U.S. fast-food market, has opened units through a licensee in Japan and signed an agreement for outlets throughout the Pacific Rim.

“Mexico is definitely a goal. It was one of our targets,” said Carl’s spokeswoman Patty Parks.

The Mexican restaurants will probably be developed in the Monterrey area, in the Mexican state of Nuevo Leon about 100 miles south of Laredo, Tex. The agreement also gives Valores Metalicos the option of expanding into the states of Tamaulipas, just south of Brownsville on the Gulf coast, and Coahuila, northeast of Monterrey, also along the Texas border.

“Basically, what we are seeing with our entry into Monterrey is the beginning of a commitment to expand further to Mexico City and other parts of the country,” Parks said.

She said that Valores Metalicos is a diversified company, whose operations include the air taxi, travel agency and automobile dealership businesses. The firm will open a food division to handle the new Carl’s Jr. restaurants. Parks said the Mexican company has the same entrepreneurial spirit as the Carl’s chain, which started when founder Carl Karcher started hawking hot dogs from a cart on the streets of Los Angeles in the early 1940s. “This company is an excellent fit,” she said.

The vast majority of the 557 Carl’s Jr. restaurants are company owned, but Karcher has looked to licensees to run its international operations. Under the arrangement, the foreign companies usually provide the building and royalties in exchange for the Carl’s Jr. name, products, know-how and marketing expertise.

Carl’s Jr. has made no secret of its international intentions but until now has chosen the Pacific Rim for most of its new growth. Its Japanese partner has already opened three stores and plans to build seven more.

And MBF of Kuala Lumpur has a license to develop Carl’s Jr. units in Malaysia. That company is also studying the possibilities for Carl’s Jr. in Singapore, Australia and Hong Kong. Eventually, MBF hopes to open Carl’s Jr. outlets in Indonesia, the Philippines, Thailand, Taiwan and New Zealand.

One stock brokerage analyst said the latest deal with the Mexican franchisee appears to be a smart move.

“I think the concept is OK,” said Doug Christopher of Crowell, Weedon & Co. “In general, American food does pretty well down there.”

The move beyond U.S. borders comes at a time that the company has been struggling due to increasing competition and discounting in the U.S. market.

Last year, the company’s net earnings dipped after it took a $14.5-million charge related to losses and restructuring of its Arizona operations. The company reported earnings of $5.6 million in the year ended Jan. 29, contrasted with net income of $20.5 million the year before.

For the six months ended Aug. 13, the company reported net income of $10.3 million on revenues of $282.1 million, compared to net earnings of $10.4 million on revenues of $271.7 million.

CARL’S JR. IN MEXICO

Karcher Enterprises has agreed to open at least 10 Carl’s Jr. restaurants in Mexico. The first restaurants will open in the Mexican state of Nuevo Leon, about 100 miles south of Laredo, Tex. The agreement includes an option to expand in two other states along the Texas border.