The following appeared as an opionin piece in El Nuevo Herald on January 30, 2012.
The Attack on Free Enterprise
If our nation is to recover from economic stagnation and if we want to keep the American Dream alive for future generations, we need to elect a president who understands the energy and creativity of our people and the incredible potential of our free enterprise system. We need someone who has immersed himself in the private sector and seen its potential first hand; who knows that government-engineered solutions will never equal the pragmatic actions of American entrepreneurs whose work improves their lives and creates jobs, economic security and prosperity for the rest of us. A career in government does not impart this knowledge. To understand the potential of free enterprise and unleash it, at some point in your life, you have to live it.
Nothing makes this point as well as the recent attacks by certain Republican presidential candidates on our free enterprise system. Incredibly, these attacks come during an election year in which economic recovery is of utmost concern. Perhaps less surprising, they come from candidates who have spent the majority of their careers in government, academics or consulting. Surely these candidates know free enterprise is the only way out of our economic decline. Yet, they have attacked the very nature of the free enterprise system and Governor Romney’s very successful experience at Bain Capital. Perhaps of greater concern, their attacks demonstrate a failure to understand how the free enterprise system really works and what’s needed to restore our economic health.
Our economic health, indeed the future of our nation, is at stake. The United States of America has become the great nation that it is and a beacon of hope for people around the world because it has embraced free enterprise. Imagine what this country would be like if we did not have such a system in place.
With free enterprise, there exists the potential for failure. There are countless economic success stories that underscore the entrepreneurs’ potential for failure. Nothing motivates success-driven decision-making more meaningfully than the specter and consequences of failure. Yes, businesses do fail, companies go bankrupt, and jobs are lost. This is true even for companies in which successful and sophisticated firms such as Bain Capital choose to invest. Through this process, opportunities open for new businesses with better products, services or plans, companies come out of bankruptcy proceedings and reach new levels of success, new industries arise and create new jobs. For this to occur, entrepreneurs have to make the hard decisions that may cause short term pain but have the potential to lead to long term success. Our experience at CKE Restaurants and Hardee’s is one example of how this can work to everyone’s benefit.
When our management team took over in 2000, CKE was close to bankruptcy. The Carl’s Jr. fast food brand had borrowed too much money to purchase the struggling Hardee’s brand and its efforts to turn Hardee’s around were failing. The investment community believed that CKE’s board brought me in as CEO because I was an attorney who could either sell the company or take it into bankruptcy. Our team decided that the best course was to negotiate with our lenders to avoid bankruptcy, fix the business and return the company to economic health. There were risks but we decided to take them. We closed hundreds of underperforming restaurants and often sold the underlying properties to pay down our debt. Unfortunately, closing restaurants meant that thousands of people lost their jobs. Yet, this bought us time with our lenders and allowed us to chart a path to growth.
To this day, I regret that we had to close restaurants and eliminate jobs. Had we failed to do so, however, there might well be no company today, which would have meant that many more people would have lost their jobs. We made difficult decisions; bought ourselves time; changed Hardee’s menu; and improved food quality, guest service and advertising. Subsequently, we invested capital to remodel our restaurants. Performance at both brands improved and the company became profitable.
In 2006, we started building restaurants and began to grow. Over the past five years, we built hundreds of new restaurants which created thousands of jobs despite the financial crisis. With our franchisees, we employ about 70,000 people in the US and we have restaurants in 42 states and 24 foreign countries, including Mexico, Panama, Costa Rica and Ecuador. Everyday there is still the risk of failure but risk motivates us to work tirelessly to make the best decisions for our customers, employees and investors. This is how free enterprise works and this is why it works.
We took risks and succeeded but there was no guarantee of success. That’s the “free” part of free enterprise. We were free to succeed and free to fail. Fixing a broken business can cause pain, but it’s more painful when you fail. Bain and Governor Romney had their failures but they also had more than their fair share of successes. It’s easy for others who have never been in the fray to criticize one’s failures and ignore one’s successes. Not everything in the business world comes easily or with the safety of government protection.
We are all better off—and our American Dream lives on—when we rely on the dynamic energy of the private sector rather than protectionist government programs. We need a president who knows this in his heart and mind. If you are opposed to doing what’s necessary to fix a business, how can you ever fix a nation? If you lack the experience to know what it takes, you should stop criticizing those who do and get out of their way.