Newspaper article St Louis Post-Dispatch (MO)

Checkers Injured in Burger Wars Price Battle Takes Away Chain's Edge

Newspaper article St Louis Post-Dispatch (MO)

Checkers Injured in Burger Wars Price Battle Takes Away Chain's Edge

Article excerpt

A few years ago Checkers Drive-In Restaurants Inc. seemed to have it all.

Its initial public offering in November 1991 was snapped up, banks were eagerly lending it money and would-be franchisees were clamoring to sign on - all because the company had created a restaurant concept touted as the best thing to hit the burger business since the sesame-seed bun.

The concept was a restaurant with twin drive-through lanes and a limited menu featuring 99-cent burgers. Checkers not only offered "great food, fast," as it boasted, but the small modular units were inexpensive and quick to build. By the end of 1992, it was operating 223 restaurants, twice as many as a year earlier. It talked of 1,000 restaurants by the end of 1995.

What Checkers didn't plug into its success formula was a savage marketing war among the burger giants, who took aim at each other and maimed Checkers in the process. Now the once-soaring upstart is reeling and grasping to regain its momentum.

Once the onslaught began, Checkers, of Clearwater, Fla., just "didn't have a sustainable competitive advantage," said Ron Paul, president of Technomic, a restaurant consultancy in Chicago .

"At one time we had the niche, which was the 99-cent hamburger," said James White, Checkers' chief executive. No more, he sadly acknowledged.

Nor are there signs of a letup anytime soon, not with McDonald's Corp. slashing its Big Macs to 95 cents and promising price cuts throughout the year, and with Wendy's International Inc. and Grand Metropolitan PLC's Burger King fighting back.

Checkers' stock traded at an all-time low of $2.12 1/2 last week. It closed Friday at $2.22, a plunge of nearly 90 percent from its peak of almost $18.

Checkers can't obtain bank financing on what it considers reasonable terms, and has scaled back its expansion plans. It opened 60 restaurants last year instead of the planned 110, ending the year with 496 units.

One of Checkers' major franchisees last month filed for bankruptcy protection. Earnings in the third quarter plunged 90 percent. Analysts estimate it earned 9 cents a share in the year ended Jan. …

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