California has changed dramatically since 1941 when Carl and Margaret Karcher scraped together about $325 to start a hot-dog cart in Los Angeles — a precursor to a drive-through restaurant they later opened in Anaheim and which grew into the Carl’s Jr. fast-food empire.
You’ve got to love the entrepreneurial story that surrounds their success and what it said about California in its heyday. California has beckoned many Midwesterners — and people from every part of America and the globe — not just because of its pleasant weather, but because of a culture of openness that allowed creative people to go as far as their ideas would take them. Unfortunately, people with energy and creativity are now likely to go elsewhere, to places where the state government has different attitudes toward the private sector.
Indeed, Carl’s Jr.’s parent company, CKE Restaurants, is likely to move its headquarters to Texas and is undergoing a rapid expansion of restaurants in the Lone Star State. Right before the budget circus got going Wednesday, CKE’s CEO Andrew Puzder spoke at the California Chamber of Commerce, blocks from the Capitol dome. Like most of us, Puzder loves California and has no interest in leaving it, but he told harrowing tales about doing business in a state that has gone from an entrepreneurial heaven to a bureaucratic nightmare.
“It costs us $250,000 more to build one California restaurant than in Texas,” he said. “And once it is opened, we’re not allowed to run it.” This explains why Carl’s is opening 300 restaurants in Texas and only maintaining its presence in California. Texas has lower taxes than California, but the reason for the shift has more to do with regulation and with the attitude of the respective governments.
Puzder complained about the permitting process here, where it takes eight months to two years to open a new restaurant compared with an average of six weeks in Texas. Once the restaurant is open, Puzder said, the store’s general managers are not allowed to run the business as if they own it. If a busload of customers comes to a store, these general managers must sit back and do nothing if they are on a break period. Most states have 40-hour work week requirements, meaning that employees are paid overtime after exceeding 40 hours of work in a single week. In California it is based on a eight-hour workday, which limits the ability of managers to work, say, six hours one day and 10 hours the next day.
Puzder complains about these industrial-era requirements that impede flexibility and harm customer service. He wonders how all these nonsensical rules teach people about being independent from the government rather than dependent on it. I’d argue that the rules are designed specifically to impede private enterprise and to hobble entrepreneurship. After all, the unions, trial attorneys and liberal legislators writing these rules believe that government is the answer to most problems and that private industry is a cancer.
“We can bring economic prosperity back to this state,” Puzder added. “We don’t need to be stimulated. We don’t need to be subsidized. We need to be left alone.”
California officials mock such sentiments, just as they routinely mock Texas. But which state do you think will recover more quickly and better accommodates the dreams of today’s version of the Karchers?
Steven Greenhut is editor of www.calwatchdog.com; write to him at email@example.com.