Texas to Gain 121 Carls Jr. Locations
Carpinteria, Calif. CKE Restaurants and RWJP Star Enterprises entered into a franchise development agreement that will open 121 Carls Jr. restaurants in the Dallas/Ft. Worth, Houston, Tyler/Longview and Beaumont, Texas markets. The locations will be opened during the next 10 years.
As many consumers cut restaurant-dining expenses out of their budgets, many companies have slowed expansion plans. However, CKE’s new plan will bolster its already-strong presence in Texas. The company has 16 franchised units across Texas, and three company-owned restaurants opened in 2008.
The agreement supports CKE’s plan to increase overall unit growth, specifically its franchise growth. During fiscal 2009, the company has inked 18 franchise development deals with commitments for 375 restaurants. There will be 231 domestic locations and 144 international units, including some in China, Pakistan and Kazakhstan — three new markets for CKE.
During the next five years, the company plans to add more than 800 new units to its global base. CKE expects franchised units to comprise 75% of the enterprise, and international locations will account for 20% of the portfolio.
iPhone coming to Target?
The increasing tendency on the part of Apple to sell its products through mass market retailers suggests that its popular iPhone could eventually be available at Target stores.
The iPhone was initially sold at Best Buy, and then last week distribution was extended to Walmart, where a major launch involved the use of special in-store fixtures and prominent positioning in advertising including the front cover of the retailer’s most recent circular.
From Apple’s standpoint, the move increases consumer access to the popular product, whereas for Walmart, the iPhone brings added brand cache to an electronics department that has undergone a significant makeover the past few years. Apparently, the brand halo of Apple was worth a considerable amount to Walmart as the company agreed to sell the iPhone for only $2 less than the price at which it is offered in Apple’s stores. However, as a company keen on protecting the image and equity of its brand, an Apple distribution agreement with Target would appear to have made more sense since the brand identities of Target and Apple are more closely aligned, even if the short-term sales potential with Walmart is greater.
Prediction: Target sells credit
A deteriorating credit environment could make it more likely that Target will sell the remainder of its credit card receivables, according to Citigroup investment analyst Deb Weinswig. That possibility and nine others were listed in a report highlighting 2009 predictions. According to Weinswig, the weak performance of the credit segment in 2008 and continued headwinds in 2009 may lead Target to sell its remaining receivables, possible at fire-sale prices. JP Morgan Chase would be a likely buyer in our view given its significant current investment in the portfolio as well as its strong consumer credit business.
On May 19, 2008, Target sold a 47% undivided interest in its credit receivables to JP Morgan Chase for an initial investment of $3.6 billion.
As for some of Weinswig’s other notable predictions, look for falling membership income at warehouse clubs, increased private brand penetration at Walmart and deteriorating drug store profitability due to prescription drug pressures.