Why business is leaving California for Texas

Business is tough out there for many industries, and the burger business is no different. Rising food prices, wage pressures and the added cost of healthcare are forcing big burger chains to think very strategically about growth.

CKE Restaurants – the parent company of Carl’s Jr. and Hardee’s, among other chains – is famous for its series of racy advertisements featuring supermodels like Kate Upton voraciously consuming a burger. But with its growth strategy, it takes a more disciplined and less sexy approach. These days the big opportunities take the company not to California but to Kansas to Kazakstan.

Don’t mess with Texas

CKE’s outspoken chief executive, Andy Puzder, has strong feelings about some recent issues and how they impact his business, including minimum wage hikes and tax policy.

He spoke to Yahoo Finance’s Shibani Joshi about his burger-building challenges and his choice to focus more on Texas and the “midwestern renaissance” he believes is under way right now.

Part of the appeal of the Lone Star state, in addition to lower taxes, says Puzder, is that “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.

Puzder gave the example that, “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.” These factors are crucial for new businesses because the property sits idle until permitting allows construction to begin, creating losses for every day there’s a delay, according to Puzder.

Puzder's company has announced plans to open hundreds of new restaurants in Texas, thanks in large part to the state's speedy permitting process. “Our intent is to built 300 (stores) in Texas in this decade, whereas in California we’ll build very few restaurants."

In the food business, being close to the customer is key and Puzder listed the best states to do business for CKE: “Texas, Tennessee, North Carolina, South Carolina, Florida, Kansas, Oklahoma and New York.”

It's no coincidence many of those geographies are not just business-friendly, but also a great fit with his key customers, 18-26 year-old males who are meat and potato eaters. Many of those young men also happen to live in cities that are seeing economic growth thanks to industries like oil and natural gas.

To the state come the spoils

The shift from California brings jobs to new locations. According to Puzder, his general managers run a $1.3 million business which brings in tax revenues to the community. In addition, each store that is built creates 25 jobs in the store and 75 jobs outside of it, including contracting work.

Exodus from California

While CKE isn’t abandoning the Golden State entirely just yet - its base of operation remains in California - others are. Texas Governor Rick Perry has had some success luring businesses to his state with lower taxes and more lax regulation.

In April of this year, Toyota delivered the state of California a pink slip, announcing it would move its U.S. headquarters to Dallas, Texas. Occidental Petroleum Corporation made a similar switcheroo, departing Los Angeles for the energy-friendly base of Houston.

When asked about rumors that CKE may move its corporate headquarters from Anaheim, California to more “business-friendly” states, Puzder said he had no intention of moving from the Golden State. But his two other corporate offices in St. Louis, Missouri and Santa Barbara, California could consolidate as soon as 2017 for “business-friendly purposes."

Shibani Joshi is the creator of www.ShibaniOnTech.com and can be followed on Twitter @shibanijoshi

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Shibani Joshi is the creator of Shibaniontech.com and you can follow her on Twitter: @shibanijoshi

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