Doing business is getting tough for many industries in California, and the burger business has not been spared either. Factors such as wage pressure, rising food prices, tax policy and the added cost of healthcare have helped to aggravate matters for these businesses.
This has forced big companies like CKE to re-think about their growth strategy by considering shifting to other states that they consider to be business-friendly.
Andy Puzder, the chief executive of CKE has strong feelings about these issues and how they impact his business.
Puzder admits he has challenges building his burger business and says his choice to focus to Texas is underway right now.
But why would he choose Texas over California? Puzder mentioned taxes and wages. “You don’t have the very burdensome wage and hour laws that you have in California. Even permitting procedures become a factor in growth prospects for certain states” he said.
Puzder stressed much on the number of days it takes to get a permit. “In Texas it takes 60-63 days to get permits. In Los Angeles it takes 280 days and in San Francisco we’re not sure how many days it takes because it has been so long since anyone could open a restaurant there,” he said.
Puzder said that these factors are very crucial for new businesses as losses may be created as they wait for permission to start construction, during which time, the property will sit idle.
His company has announced that it is going to open many restaurants in Texas buoyed by the state’s speedy permit processing. Their intent is to build up to 300 stores in Texas in the next ten years, but only a few restaurants in California.
He said that being close to customers is important in the food business and he listed the best states to do this business as Texas, North Carolina, South Carolina, Oklahoma, Florida, Kansas, New York and Tennessee.
These states are business-friendly and also have large populations of his target customers; the 18-26 year-olds who like meat and potatoes.
How is this shift going to benefit Texas? According to Puzder, this is going to bring new jobs to Texas as well as tax revenues to the community. His stores are $1.3 million businesses, and are able to create 25 direct employments and 75 indirect employments including contracting.
CKE is not abandoning California entirely because its base operations will still remain there. Governor Rick Perry of Texas is known to lure businesses to his state with lax regulations and low tax rates.
Other businesses that have considered moving from California include Occidental Petroleum Corporation and Toyota. Occidental said it would move its base to the energy-friendly Houston state, while Toyota said in April that it would move its US headquarters to Dallas, Texas.
Responding to rumors about CKE’s headquarters being moved from Anaheim to more business-friendly states, Puzder said he had no intention of moving from California, but his two other corporate offices in Santa Barbara and St. Louis could consolidate as soon as 2017 for business-friendly purposes.