A Carl’s Jr. franchisee is trying to close and sell his 59 locations in California after filing for bankruptcy protection in April.
The franchisee, Harshad Dharod, who has branches mostly in Southern California, intends to close 10 of the branches he controls and find a buyer for the remainder, according to a broker helping find buyers.
In earlier bankruptcy filings, Dharod had blamed California and Carl’s Jr. for his stores’ struggles. Dharod said a lack of support and innovation from Carl’s Jr. and an increase in labor costs from a $20 minimum wage left him unable to cover his expenses.
Dharod couldn’t be reached for comment.
A spokesperson for Carl’s Jr. and its parent company CKE Restaurants, said they are aware of Dharod’s decision to sell.
“This situation is specific to this individual franchisee’s financial and business circumstances,” said the spokesperson. “This has no impact on the operations of any other Carl’s Jr. locations.”
National Franchise Sales will oversee the sale, which spans Southern and Northern California.
A spokesperson for the broker said it already has interest from prospective buyers. The spokesperson said that when a franchise changes owners, employees and managers usually keep their jobs.
Carl’s Jr. began in 1941 as a hot dog cart on the corner of Florence and Central in Los Angeles and grew into one of the region’s best-known burger chains. It opened its first sit-down restaurants with expanded menus in Anaheim in 1946. Its smiling yellow star was born in the 1950s and rapidly spread across California throughout the 1970s.
Although it moved its headquarters from Carpinteria to Tennessee in the last 10 years, its menu still reflects its California origins, with items such as the Cali XL, a double cheeseburger. The chain was among the first to spot the meat-free trend and introduced plant-based burgers and the charbroiled turkey burger. In the early 2000s, it made a splash with commercials pointing to its California origins.
It has had a tough time this year remaining relevant amid new competitors and fast-food consumers who are becoming more picky about what they will pay for and eat, analysts say.
Like most restaurants, Carl’s Jr. has been struggling to attract customers at a time when many are increasingly concerned about inflation and the health of the economy. Some chains are slashing prices. Smaller chains can’t compete well in the price wars. Those without a strong brand identity and fan base have been suffering.
Dharod told the bankruptcy court that business had become particularly bad in the last two years, leaving him without sufficient access to cash to cover wages, rent, supplies and insurance. Although his outlets have generated more than $6 million in monthly revenue, they have been losing more than $600,000 per month this year.
He had to ask for special permission to use his daily cash flow to fund expenses, or risk running out of money and being forced to close his outlets.
A small group of the close to 1,000 employees working for the franchisee say the efforts to cut costs to the bone have left them overworked, understaffed and exposed to violence.
Some say they are getting injured as they have to do the work of multiple people. Some detailed violent interactions with customers, including robberies and physical assaults, and said the company didn’t provide safety training. Some have staged multiple walkouts in recent months to bring attention to their concerns.
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