THOUSAND OAKS CALIF. Baja Fresh Mexican Grill chain from Wendy’s International, the buyers are expanding their holdings with the purchase from CKE Restaurants of a perennially no-growth chain that helped define the Mexican fast-casual category. —Just months after acquiring the troubled
But the planned addition of the 96-unit La Salsa Fresh Mexican Grill chain to the Baja Fresh family has observers asking how two such similar brands will fare under the same parent. —Just months after acquiring the troubled
David Kim, majority owner of Baja Fresh parent B.F. Operations Holdings LLC, late last month agreed to purchase the La Salsa chain from CKE, the Carpinteria, Calif.-based parent of the Hardee’s and Carl’s Jr. burger brands. Kim picked up 292-unit Baja Fresh from Dublin, Ohio-based Wendy’s late last year for $31 million. —Just months after acquiring the troubled
Under the new deal, CKE’s Santa Barbara Restaurant Group subsidiary would sell its 100-percent equity interest in La Salsa Inc. and La Salsa of Nevada Inc. Terms were not immediately disclosed, but CKE said the sale is expected to close by the end of June. —Just months after acquiring the troubled
Kim, who is a former franchisee of CKE’s 1,087-unit Carl’s Jr. chain, said Baja Fresh officials were “pleased that we will have two great Mexican concept brands.” —Just months after acquiring the troubled
Andrew Puzder, CKE’s chief executive, said the sale would not have a material impact on the future earnings of his company, which is operator or franchisor of nearly 3,000 burger outlets. —Just months after acquiring the troubled
Kim was joined in both the Baja Fresh and La Salsa acquisition deals by structured-equity firm M Plus Capital, based in Santa Monica, Calif., and investment firms GarMark Advisors, based in Stamford, Conn., and J.H.W. Greentree Capital, based in New Canaan, Conn. —Just months after acquiring the troubled
Kim said he plans to maintain Baja Fresh and La Salsa as separate brands, though with “combined efficiencies and resources” to “create a dynamic growth company to compete in the Mexican-food restaurant market.” Kim also owns an Anaheim, Calif.-based Cinnabon franchisee, CinnaWorks, and the Sweet Factory candy store chain. —Just months after acquiring the troubled
James Walker, president of Thousand Oaks-based Baja Fresh, said his future role with La Salsa was yet to be determined. The company, however, will consider moving La Salsa’s headquarters to the same building where Baja Fresh is based. —Just months after acquiring the troubled
“We feel there are fantastic core equities with both brands that can be exemplified and allow both brands to flourish in one market,” Walker said. “But we are not looking to meld the two concepts.” —Just months after acquiring the troubled
Baja Fresh units are located nationwide, but La Salsa is primarily in California, where the two brands would compete. —Just months after acquiring the troubled
Walker also said Kim, who is known as a turnaround specialist, would continue to look for “undermanaged—as opposed to undervalued—brands.” —Just months after acquiring the troubled
“Baja Fresh and La Salsa are not broken brands,” Walker said. “They are fantastically healthy brands that were undermanaged.” —Just months after acquiring the troubled
The sale of La Salsa, which posted operating losses from CKE-owned units over the past several years, came as no surprise to observers. —Just months after acquiring the troubled
CKE officials said their focus is on growing the Carl’s Jr. and Hardee’s brands, as well as continuing dual-branding of two core burger brands with CKE’s Mexican quick-service concepts, Green Burrito and Red Burrito. —Just months after acquiring the troubled
Of the 1,087 Carl’s Jr. units, 300 are co-branded with Green Burrito. Another 20 to 25 company-owned dual units are expected to open this year. CKE last year began testing Red Burrito, a similar variant of Green Burrito, in Hardee’s restaurants. Currently, 35 of the 1,906 Hardee’s across the country are co-branded, and another 30 to 35 dual units are expected to open this year. —Just months after acquiring the troubled
CKE purchased La Salsa in 2002 as part of its acquisition of Santa Barbara Restaurant Group Inc., which at the time also included Green Burrito, whose former freestanding outlets have since been closed. —Just months after acquiring the troubled
Founded in 1979, La Salsa was one of the pioneers of the fast-casual Mexican segment, styled after a classic taqueria with cooked-to-order soft tacos and burritos as well as a fresh salsa bar. —Just months after acquiring the troubled
In fiscal 2007, which ended in January, La Salsa’s contribution to CKE revenues was $81 million from 55 CKE-owned and 41 franchised units, with an average-unit volume of $797,000, compared with the $1.2 million average reported by Baja Fresh under Wendy’s in 2005. —Just months after acquiring the troubled
La Salsa’s same-store sales for company-owned units, however, were up 1.2 percent for the latest year. In fiscal 2007, however, six company-operated and four franchised La Salsas were closed, though the company and franchisees each opened two outlets. —Just months after acquiring the troubled
In recent years, CKE launched a reimaging program for La Salsa. Last year a new prototype design opened in Huntington Beach, Calif., offering a more contemporary decor, with bolder colors, plasma TVs, a redesigned salsa bar and a signature beer bottle chandelier. —Just months after acquiring the troubled
Amir Siddiqi, La Salsa’s chief executive, said sales at the new-look units run higher than the system average, but he could not offer specifics. —Just months after acquiring the troubled
Meanwhile, franchisee Michael Katz, owner of Whole Enchilada LLC in St. Louis, last year also opened his own version of a La Salsa prototype, with the company’s blessing. That model includes a full bar featuring numerous tequilas and the new decor. Most La Salsa units offer only wine and beer, though the chain includes five full-service “cantina” units in Nevada, which also have full bars. —Just months after acquiring the troubled
Calling those new elements “very exciting,” Walker said the tests would continue to determine what new platforms La Salsa might adopt more broadly in the future. —Just months after acquiring the troubled
Franchisee Katz said the pending spinoff to Baja Fresh was “possibly the greatest thing to happen to La Salsa.” —Just months after acquiring the troubled
Like Baja Fresh under Wendy’s, La Salsa has suffered somewhat under CKE because of a lack of focus, he said. —Just months after acquiring the troubled
“Better to be the pretty stepchild [under a new owner] than just the stepchild,” Katz said. “If you can squeeze the synergies, there will be a bright future.” —Just months after acquiring the troubled
Some industry observers have said that Baja Fresh, which was founded in 1990, was modeled after La Salsa and that their menus are similar. —Just months after acquiring the troubled
Stuart Morris, president of QSR Consulting Group in Coronado, Calif., said the proposed acquisition demonstrates that Kim aims “to be a player” in the Mexican fast-casual segment, despite the segment dominance of 600-plus-unit Chipotle Mexican Grill, based in Denver, and the nearly 350-unit Qdoba Mexican Grill brand, owned by San Diego-based Jack in the Box Inc. —Just months after acquiring the troubled
Still, Morris said, the question remains: “How do you co-exist both brands in the same market and not hurt each other?” —Just months after acquiring the troubled
