StreetVerse

Why Carl’s Jr. Is a Bad Investment (Introduction)

Posted By: The Rational Investor
Filed Under: Finance, Food, News, Opinion on March 14, 2010

Ever since I was a young bleed growing up on the East Coast, there were two options for after school food. Either a happy meal with the lead encrusted toy, or wendy’s for a more fulfilling meal.  I always preferred the latter. The old-fashioned flavoring and quadruple siding of the all-baif patties alongside a small chocolate frosty to wash it down. All this for the grand total of $1.98. Plus, it was a good way to beat the Reds during the cold war (see commercial below).  Yes I was a value shopper back then, the same way I am now. After my 13th birthday, Burger King started making its weekly rounds through my colon. The burgers were just as cheap as Wendy’s, had that kerosene flavor to them, and were twice the size. Fast forward 10 years to Southern California. My first experience placing a Carl’s Jr. 6 dollar burger on my tongue. Magic. Fast forward 4 years. My first experience tasting Jack in the box’s Sirloin Burger. Expensive Magic. Fast forward 1 year. My first experience tasting In-n-out’s burger. Now rewind 1 year. Much better.

My childhood memories eating at Wendy’s live with me, but they are somewhat forgotten. Why? Because their burgers plain suck now. Soggy, flavorless, and the burger patty size of a DVD.  When I bite into these burgers I should be brought back to my childhood.  The same way the food critic in Ratatouille was reacted when he tasted the rat’s ratatouille dish, I should react when biting into a Wendy’s burger today. Instead my reaction is one of guilt and regret. One that says I should have spent my money at Jack in the box.

Since Wendy’s has no idea how to fix itself and continues to sit like a bunch of trapped dolphin being massacred in Tajiti Japan, its going to attempt to buy Carl’s Jr.’s parent company to escape this red ocean.  Coincidentally, the day they announced interest is the same day the lady that said she found a finger in her chili admitted she actually cooked the finger before she dropped it into the chili.  Despite what Wendy’s and many of you might think, Carl’s is actually a poorly managed business.  Their burgers are the best in business, but their fast food, marketing and management are not.  Right now, it seems the only fast food companies managing their changes strategically and that are worth considering any kind of investment are McDonald’s and Jack in the box.

Like Wendy’s, Carl’s is slowly becoming a dead franchise.  Their target demographic is much too focused.  No targets for kids (i.e. a mascot like ronald or even partnerships to bring toys into the restaurant), no targets for women (i.e. parfaits, pita alternatives), no targets for the morning person (i.e. coffee to compete with starbucks like mcdonalds did), no targets for the health conscious (they introduced salads wow, great idea (back in 1990)), no targets for dessert lovers (the most interesting dessert on their menu is the oreo cookie shake). They never offer anything new in terms of products unless they’re in burger or chicken sandwich form.  They introduced the energy drinks and vitamin water, but once again this only targets the young male demographic.

Wendy’s is out of their minds to buy Carl’s Jr. Not only because Wendy’s itself is mismanaged, but because Carl’s is not a good value right now, is not a growth business and does not have a management that has the interests of the shareholders in mind.  Since McDonald’s is in a league of its own let’s compare an investment in Carl’s with an investment in Jack in the box. I think Jack in the box is a much more rational buy for an investor. To prove this point, over the next three posts, I’ll look at both restaurant’s menu selections, their ad campaigns, and their financials.

About the Author

The Rational Investor whirlwinds through streetverse at a crazy rate. He holds a G.E.D. in Illness.