The Founding Fathers
Carl N. Karcher is one of the fast-food industry's pioneers and, at age eighty-one, perhaps the last of its founding fathers. His career extends from the industry's modest origins in postwar Southern California to its current dominance of the American diet. His life story seems at once to be an old-fashioned tale by Horatio Alger, a fulfillment of the American dream and a warning about unintended consequences.
Karcher was born in 1917 on a farm near Upper Sandusky, Ohio, His father was a sharecropper. Carl had six brothers and a sister. Their father always told them, "The harder you work, the luckier you become." Carl dropped out of school after the eighth grade, working twelve to fourteen hours a day on the farm. In 1937, an uncle offered him a job in Anaheim, California. He was twenty years old and six feet four, a big, strong farm boy who had never set foot outside northern Ohio. The drive to California took a week. When he arrived in Anaheim – a small town surrounded by orange groves, lemon groves, ranches and modest farms – Carl said to himself, "This is heaven."
His uncle's business, Karcher's Feed and Seed Store, was located in the middle of downtown Anaheim. Carl worked there seventy-two hours a week, delivering goods to the local farmers who raised chickens, cattle and hogs. During Sunday services at St. Boniface Catholic Church, he met an attractive young woman named Margaret Heinz, who had grown up on a local farm. Carl became a frequent visitor to the Heinz farm, which had ten acres of orange trees and a Spanish-style house. After returning briefly to Ohio, Carl went to work for the Armstrong Bakery in Los Angeles. The job soon paid twenty-four dollars a week, six dollars more than he had earned at the feed store. Carl and Margaret were married in 1939 and had their first child within a year.
Carl drove a truck for the bakery, delivering bread to restaurants and markets in West L.A. He was amazed by the number of hot dog stands that were opening and by the number of buns they went through each week. When Carl heard that a hot dog cart was for sale on Florence Avenue, across from the Goodyear factory, he decided to buy it. Margaret strongly opposed the idea and wondered where he'd find the money. Carl borrowed $311 from the Bank of America, using his car as collateral, and persuaded his wife to give him fifteen dollars in cash from her purse. "I'm in business for myself now," he thought after buying the cart. "I'm on my way." Five months after Carl bought the cart, the United States entered World War II and the Goodyear plant became very busy. He soon had enough money to buy a second hot dog cart, which Margaret often ran by herself while their daughter slept nearby in the car.
Southern California in the 1930s and 1940s gave birth to a new lifestyle that revolved around the automobile. "People with cars are so lazy, they don't want to get out of them to eat!" said Jesse G. Kirby, the founder of an early drive-in restaurant chain. Kirby's first "Pig Stand" was in Texas, but the chain soon thrived in Los Angeles alongside countless other food stands offering "curb service." Drive-ins like Stan's, Paul's, Tiny Naylor's and Bob's Big Boy featured waitresses carrying trays of food to customers in their parked cars. The waitresses, known as car hops, often wore short skirts and skimpy uniforms. The drive-ins fit perfectly with the youth culture emerging in Los Angeles: They offered a combination of girls and cars and late-night food.
By the end of 1943, Carl Karcher owned four hot dog carts in Los Angeles. In addition to running the carts, he still worked full time for the Armstrong Bakery. When a restaurant across the street from the Heinz farm went on sale, Carl decided to buy it. He quit the bakery, bought the restaurant, fixed it up and spent a few weeks learning how to cook. On January 16th, 1945, his twenty-eighth birthday, Carl's Drive-in Barbeque opened its doors. The restaurant was small and rectangular, with red tiles on the roof. During business hours, Carl cooked, Margaret worked behind the cash register and car hops served most of the food. After closing time, Carl cleaned the bathrooms and mopped the floors. When World War II ended, business at Carl's Drive-in Barbeque boomed, along with the economy of Southern California. Carl soon added grills to his hot dog carts and began serving hamburgers topped with a "special sauce." Every week, Carl made the sauce on his back porch, stirring it in huge kettles and pouring it into one-gallon jugs.
Carl and Margaret bought a house in Anaheim five blocks from the restaurant, adding new rooms as the family grew. They eventually had twelve children. Anaheim slowly became less rural and more suburban. Walt Disney bought up thousands of acres of local orange groves and started to build Disneyland. Carl's Drive-in Barbeque prospered. And then Carl heard about a restaurant in the "Inland Empire," fifty miles east of Los Angeles, that was selling high-quality hamburgers for fifteen cents – twenty cents less than what Carl charged. He drove to E Street in San Bernardino, a working-class, largely agricultural town, and saw the shape of things to come.
Brothers Richard and "Mac" McDonald had run a successful San Bernardino drive-in for years. By the end of the 1940s, however, Richard and "Mac" had grown dissatisfied with the drive-in business. They were tired of constantly looking for new car hops and short-order cooks as the old ones left for higher-paying jobs elsewhere. They were tired of replacing the dishes and silverware their teenage customers broke or ripped off. The brothers thought about selling the restaurant. Instead, they tried something new.
The McDonalds fired all their carhops in 1948, closed their restaurant, installed a larger grill and reopened three months later with a radically new method of preparing food. They eliminated almost two-thirds of the items on the menu. They got rid of every item that had to be eaten with a knife, spoon or fork. The only sandwiches now sold were hamburgers and cheeseburgers. The brothers got rid of their dishes and glassware, replacing them with paper cups, bags and plates. They divided the food preparation into separate tasks performed by different workers. The guiding principles of the factory assembly line were applied to the workings of a commercial kitchen. The new division of labor meant that a worker had to be taught how to perform only one task. Skilled and expensive short-order cooks were no longer necessary. All of the burgers were sold with the same condiments: ketchup, onions, mustard and two pickles. No substitutions were allowed. The McDonald brothers now aimed for a family crowd, refusing to hire any female employees, who might attract teenage males. In Behind the Arches (1995), a history of McDonald's, John F. Love notes the real significance of the new self-service system: "Working-class families could finally afford to feed their kids restaurant food."
After visiting San Bernardino, Carl Karcher decided to open his own self-service restaurant. The first Carl's Jr. Restaurant opened in 1956 – the same year that McDonald's launched its first major franchising drive and America got its first shopping mall. Carl instinctively grasped that the car culture would change America; he saw what was coming. The star atop his drive-in sign became the mascot of his fast-food chain: a smiling star in little booties, holding a burger and a drink.
Other entrepreneurs across the country were starting their own fast-food chains. The fast-food business seemed risky, but the start-up costs were low. Anyone willing to work hard had a shot. William Rosenberg was an eighth-grade dropout who delivered messages for Western Union, drove an ice cream truck and then in 1946 opened a doughnut shop in Quincy, Massachusetts, that he would call Dunkin' Donuts ("You pluck a chicken," he said, "you dunk a doughnut"). Glen Bell was a former Marine in San Bernardino who ate at the new McDonald's and decided to copy it, using the assembly-line system to make Mexican food. His first Taco Bell opened in 1962. Thomas S. Monaghan, the founder of Domino's Pizza, spent his childhood in a Catholic orphanage and in a series of foster homes, got kicked out of school in the tenth grade, joined the Marines, bought a pizzeria for $900 in Ypsilanti, Michigan, in the early 1960s, and met his wife while delivering a pizza to her college dorm room.
For every fast-food idea that swept the nation, there were countless others that never caught on. There were chains with homey names like Sandy's, Carroll's, Henry's and Winky's. There were chains with futuristic names like the Satellite Hamburger System and Kelly's Jet System. Most of all, there were chains named after their main dish: Burger Chefs, Burger Queens, Burgerville USAs, Yumy Burgers, Twitty Burgers, Dundee Burgers, Biff Burgers, O.K. Big Burgers and Burger Boy Food-O-Ramas. Biff Burgers were "roto-broiled" beneath glowing quartz tubes that worked just like a space heater.
During the 1960s and early 1970s, the fast-food chains spread nationwide, opening near strip malls in the new commercial districts of the suburbs. Between 1968 and 1974, the number of McDonald's restaurants tripled. Wall Street began to invest heavily in the business, and many of the early fast-food pioneers gave way to corporate management. The hamburger wars in Southern California were especially fierce. One by one, the old drive-ins closed, unable to compete against inexpensive fast-food joints.
Carl Karcher opened Carl's Jr. restaurants up and down the state of California, locating them near freeway offramps. In 1976, the new corporate headquarters of Carl Karcher Enterprises were built on the same land in Anaheim where the Heinz farm had once stood. Carl Karcher now controlled the largest privately owned fast-food chain in the United States. His nickname was Mr. Orange County. He considered many notable Americans to be his friends, including Ronald Reagan, Richard Nixon, Art Linkletter, Lawrence Welk and Pat Boone. He was a benefactor of Catholic charities, a Knight of Malta, a strong supporter of pro-life causes. He attended private masses at the Vatican with the pope. And then, despite all the hard work, Carl's luck began to change.
During the 1980s, CKE went public and opened Carl's Jr. restaurants in Texas. The new restaurants fared poorly, and the value of CKE's stock fell. In 1988, Carl was charged with insider trading by the Securities and Exchange Commission. He had sold large blocks of CKE stock right before its price tumbled. He vehemently denied the charges but agreed to a settlement with the SEC and paid almost $1 million in fines. A few years later, some of Carl's real estate investments proved unwise. When new subdivisions in Anaheim and the Inland Empire went bankrupt, Carl was saddled with many of their debts. He suddenly owed more than $70 million to various banks. The falling price of CKE stock hampered his ability to repay those loans.
Carl searched for ways to save his company. He proposed selling Mexican food at Carl's Jr. restaurants, but a number of top executives at CKE opposed the plan. Carl thought that CKE was being run into the ground. It now felt like a much different company from the one he founded. A new management team had ended the longtime practice of starting every executive meeting with the prayer of St. Francis of Assisi and the pledge of allegiance. Carl insisted that his Mexican-food idea would work and demanded that the board of directors vote on it. When the board rejected the plan, Carl tried to fire its members.
Instead, on October 1st, 1993, the board voted 5 to 2 to fire him. Only Carl and his son Carl Leo opposed the firing. Carl felt deeply betrayed. He had known many of the board members for years; he had made them rich. In a statement released after his dismissal, Carl described the board as "a bunch of turncoats" and called it "one of the saddest days" of his life. At the age of seventy-six, after more than five decades in the business, Carl N. Karcher was prevented from entering his own office, and new locks were put on the doors.
The headquarters of CKE are still located on the property where Margaret Heinz's family once grew oranges. Today there are no orange groves in sight. The population of Anaheim is now about 275,000, almost thirty times larger than it was in the years before World War II. On the corner where Carl's Drive-in Barbeque once stood, there's a strip mall. Near the CKE headquarters there's an Exxon station, a discount mattress store, a Shoe City, a Las Vegas Auto Sales store and an offramp of the Riverside Freeway. The CKE building has a modern, Spanish design, with white columns, red-brick arches and dark plate-glass windows. When I visited recently, it was cool and quiet inside. After passing a six-foot wooden statue of St. Francis of Assisi on a stairway landing, I was greeted at the top of the stairs by Carl N. Karcher.
Carl looked like a stylish figure from the big-band era, wearing a brown checked jacket, a brown tie and jaunty two-tone shoes. He was tall and strong, and seemed, in remarkably good shape. The walls of his office were covered with plaques and mementos. He removed a framed object from the wall and handed it to me. It was the original receipt for $326 confirming the purchase of Carl's first hot dog cart.
Eight weeks after being locked out of his office in 1993, Carl engineered a takeover of the company. Through a complex series of transactions, a partnership headed by financier William P. Foley II assumed some of Carl's debts, received much of his stock in return and took control of CKE. Foley became the new chairman of the board. Carl was named chairman emeritus and got his old office back. Almost all of the executives who opposed him left the company. His Mexican-food plan was adopted and has proved a tremendous success. During the past few years, Carl's Jr. has become one of the nation's most profitable fast-food chains. The value of its stock has risen from about $7 a share to $46 a share. In July 1997, CKE purchased Hardee's for $327 million, thereby becoming the nation's fourth-largest hamburger chain. Carl's Jr. restaurants will soon open all over the country, and the little star in booties may become a national icon.
Carl seemed amazed by his own life story as he told it. He has been married to Margaret for fifty-eight years. He has lived in the same Anaheim house for forty-eight years. He has twenty granddaughters and twenty grandsons. He shares the genial optimism and good humor of his old friend Ronald Reagan. "My whole philosophy is: Never give up," he told me. "The word can't should not exist.. . . Have a great attitude.. . . Watch the pennies and the dollars will take care of themselves.. . . Life is beautiful, life is fantastic." Despite the recent growth of CKE, Carl remains millions of dollars in debt. He has secured new loans to pay off the old ones. During the worst of his financial troubles, advisers pleaded with him to declare bankruptcy. Carl refused; he'd borrowed more than $8 million from family and friends, and he would not walk away from his obligations. Every weekday he attends Mass at 6 A.M. and gets to the office by seven. "My goal in the next two years," he said, "is to pay off all my debts."
I looked out the window and asked how he felt driving through Anaheim today, with all of its fastfood restaurants and malls. "Well, to be frank about it," he answered, "I couldn't be happier." Thinking that he'd misunderstood the question, I rephrased it, asking if he ever missed the old Anaheim, the ranches and farms.
"No," he said.
Carl grew up on a farm without running water or electricity, and he had escaped a hard rural life. The view out his window was not disturbing to him, I realized. It was a mark of success, "Progress," Carl said, "I believe in progress. When I first met my wife, this road here was gravel. . . and now it's blacktop."
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