Over the weekend, the Wall Street Journal published an interview conducted by editorial writer Allysia Finley with Andy Puzder, president of CKE Restaurants, headquartered in California. CKE operates Carl’s Jr. restaurants and other establishments. While the entire interview can be found here, below are a number of paragraphs detailing Puzder’s eye-opening view of conducting business in California.
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These days, California is one of the few states where the company isn’t looking to expand. “Like many businesses, we love California and would love to build more restaurants,” he says. But “California is not interested in having businesses grow,” even though many multinational companies, including CKE, have headquarters there.
Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it’s 285. “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” he says.
Then there are California’s cumbersome labor regulations, which appear designed to encourage litigation. The company has spent $20 million in the state over the past eight years on damages and attorney fees related to class-action lawsuits.
Mr. Puzder’s favorite California-bites-business story is a law that requires employers to pay general managers overtime if they spend 50% of their time on non-managerial tasks like working the register if they’re short-staffed, “which is what we pay and bonus them to do in just about every other state.” Since managers were filing class-action lawsuits against the company for not being paid overtime, “every retailer in the state basically has now taken their general managers and made them hourly employees.”
The managers hated the change “because they worked all their careers to get off the base to become managers,” he says, and paying themselves overtime could hurt their restaurants’ bottom lines and chances of a bonus. Mr. Puzder adds that his company must now fire managers who don’t report their work hours because they present a legal risk.
He tells the fired managers “to go to Tennessee or Texas, where we’ll rehire them and they’ll learn entrepreneurial skills.” General managers for CKE restaurants earn on average $50,000, Mr. Puzder says, and can make 100% of their salary in bonuses.
A couple of years ago Mr. Puzder created a stir in California by suggesting that he might move his corporate headquarters to Texas. Is he still pondering the switch? Nah, he says. Now his eyes are on Nashville, Tenn. Like Texas, Tennessee doesn’t have an income tax. But in any case, he says, “Who cares where our corporate offices are? Quite honestly, what difference does that make? . . . The important point is where are you building?”