The myriadmadre y papa
taco stands in Southern California will prevent Santa Monica investor David Kim from ever owning the whole enchilada when it comes to Mexican fast food, but he's taking a run at it.
He recently put together a deal to acquire the 96 La Salsa fast food restaurants from the Santa Barbara Restaurant Group Inc., a wholly-owned subsidiary of CKE Restaurants Inc. That's on top of last October's $30 million acquisition of the 300-outlet Baja Fresh chain from Wendy's International Inc. last October.
Dean Haskell, analyst of Morgan Joseph & Co. Inc. wasn't surprised at the news.
"On the CKE side, it was a brand that really wasn't going anywhere, it was continuing to lose money and it was time to get rid of it," he said. Carpinteria-based CKE also owns Carl's Jr. and Hardee's. CKE has struggled to build La Salsa's market share. Competition from Chipotle, El Pollo Loco and Baja Fresh kept first quarter revenues at $13 million. By contrast, Hardee's raked in $199 million at 1,906 restaurants in CKE's first quarter of fiscal 2008.
"While we believe in La Salsa's potential, we also believe our best opportunity to improve earnings and cash flow is to devote our resources to the future of Carl's Jr. and Hardee's," CKE President Andrew Pudzer said in a statement. CKE also owns the Green Burrito restaurants.
Haskell expects La Salsa and Baja Fresh to merge eventually.
"The two brands offer themselves to two different demographics," he said. La Salsa offers traditional Mexican fare at low prices, while Baja Fresh markets itself as healthier and charges slightly more for its meals. "I think the answer is to combine them using what works best at each restaurant, from an operational standpoint, what tastes the best and is the easiest to put together."
Even though terms of the deal have yet to be disclosed, Wall Street has responded positively. CKE shares are up about 10 percent since the May 30 announcement, closing Tuesday at $22.37.
Kim did not return calls for comment.
Pacific Park, the amusement park on Santa Monica Pier, is offering a new attraction this summer, a bicycle-swing hybrid called Crazy Cruiser.
"Each year we literally search the world over for new and exciting games to feature at Pacific Park," said Jeff Klocke, director of marketing and sales at the park. "Crazy Cruiser is the perfect fit for the park."
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- CKE Restaurants to Expand Into Russia
- CKE Shares Up Steeply as Firm Slashes Debt, Sells Restaurants
- Business Briefs: Levine Leichtman Capital Partners, Hot Topic, CKE, CSC
- Proposal to Study a Ban on Trans Fat Elicits Cheers and Jeers From Eateries
- Business Briefs: Guitar Center, Disney, CKE Restaurants, WPT Enterprises, 3D Systems, Northrop
- Shareholders Approve CKE Sale
- Wendy's Rollout of Stores Falters
- Same-Store Sales Fall at CKE