Andrew F. Puzder is the CEO of CKE Restaurants Inc., and co-author of "Job Creation: How It Really Works and Why the Government Doesn't Understand It". Below is an Op-Ed piece that Andy wrote for the Orange County Register about CKE's founders Carl and Margaret Karcher.
On July 17, our company will celebrate the 70th anniversary of an event that drew modest attention when it occurred but which has positively impacted the lives of thousands of people over three generations, and particularly Californians.
That event was Carl and Margaret Karcher pursuing their uniquely American dream by purchasing a hot dog cart, which they located at the corner of Florence and Central avenues in South Central Los Angeles, near what was then the Goodyear Tire factory.
Carl and Margaret bought that hot dog cart for $326. With strong personal conviction, they raised this imposing sum by getting a loan using their car as collateral and adding $15 Margaret had hidden in her purse. On that date, Carl, an Ohio native with an eighth-grade education, and Margaret, the eldest of 15 children, started a business that today employs over 72,000 people in the United States and owns or franchises over 3,150 restaurants in 42 states and 21 foreign countries under the Carl's Jr. and Hardee's brand names. The company was listed on the New York Stock Exchange until July 2010, when Apollo Global Management took the company private in a buyout valued at over $1 billion.
While this quintessentially American success story is something in which all those who believe in free enterprise can take pride, the reality is that regulatory issues almost killed this business at its inception. The Health Department complained that Carl's fledgling business lacked restroom facilities, so he had to persuade the owner of the gas station across the street to let his employees use the station's restrooms. The State Board of Equalization complained that Carl didn't have a sales tax permit and ridiculously claimed that he owed back sales taxes from before he bought the cart in an amount in excess of the $326 he paid for the cart.
Carl hired a lawyer for $100 and argued that he owed no tax because his customers consumed their hot dogs off premises – and he won. He then was hit with a state law requiring that he carry workers' compensation insurance, which he purchased for an additional $15.
Clearly, even back in 1941, there were issues with government and small businesses. As Carl wrote in his book "Never Stop Dreaming," these issues caused him to wonder if his decision to purchase that hot dog cart "had been a good one." Luckily for all of us who have benefited over these past 70 years from Carl and Margaret's vision and persistence, Carl decided to put his faith in his ability to succeed in spite of the government.
Would Carl and Margaret's dream have come true had they started their business today? It is sad to say that it is far more likely their business would have failed, assuming it even got started. While American entrepreneurs pursuing startup businesses have historically been able to overcome the hurdles state and federal regulations pose, the burdens have become so onerous that they all but destroy the businesses of tomorrow before they begin. This is particularly true in California.
Today, the company Carl and Margaret founded has an internal list of statutes and regulations – with which it must comply to open and operate even one Carl's Jr. quick service restaurant – that is 11 pages long and encompasses 57 separate categories of regulations. This list covers vast bureaucratic structures implementing and enforcing laws and regulations that include (but are not limited to) those covering site development and construction, the environment, illegal immigration, workers compensation, credit reporting, wages and hours, labor relations, numerous forms of discrimination and occupational safety, not to mention laws as esoteric as the Polygraph Protection Act and the Genetic Information Non-Discrimination Act.
And just around the corner are the numerous and burdensome reporting requirements under the ironically named Patient Protection and Affordable Care Act (Obamacare). Importantly, such onerous regulations only multiply over time; they almost never decrease, so the Karchers of tomorrow will face even more of them than we do today.
Certainly, when viewed independently of their collective impact, there is usually a well-intentioned reason for each of these laws and each regulation the bureaucrats create to implement them. The danger lies in their overlapping and often inconsistent nature, their continued existence despite changed circumstances that render them irrelevant, and the inability of government to simplify or rationalize compliance. These structural impediments to opening and operating a business cause all but some of the largest businesses to give up in frustration, dampening the entrepreneurial spirit so essential to our prosperity.
Virtually every large business enterprise in this country, including McDonald's, Apple, Ford, Coca-Cola and Wal-Mart – as well as Carl's Jr. -- started under the most humble of circumstances with an entrepreneur and an idea or product. From where will the business giants of tomorrow come if over-regulation strangles them in their infancy? Our nation's loss would be tremendous as the growth from humble startups to massive employers has fueled productivity gains, technological advancement and job creation, producing the world's greatest economy.
This entrepreneurial engine has created more wealth for more people than anything else in human history, and we only impoverish ourselves by excessively encumbering it.
Humble startups like Carl and Margaret's hot dog cart contribute far more than simply leading to larger companies. They serve as an inspiration for future generations. Small business is a tremendous avenue of upward mobility, even, or perhaps especially, for those who can least afford or attain college or postgraduate degrees. There are budding entrepreneurs in every part of America, from every ethnic and racial background. They need to know they, too, can succeed if they have an idea and are willing to work harder, longer and smarter than the next person. How many entrepreneurs or successful corporate executives in this country got their initial experience working at McDonald's, Burger King, Wendy's, Hardee's or Carl's Jr.? You would be hard-pressed to find a major American company without such individuals.
This is Carl's and Margaret's true heritage. It is a heritage we should respect and nurture. Although Carl passed away three years ago at the age of 91, nothing would make him happier than having the 70th anniversary of his small-business venture serve as a reminder that the American Dream – a dream he and Margaret lived – remains an essential part of our nation's creed and one in which Americans of all political persuasions still believe.
