Article
Building a better burger chain
Carl's Jr., Hardee's CEO shares insights into the brands' plans for the future.
September 8, 2008
Click hereto view of slideshow of CKE Restaurant Inc.'s corporate headquarters.
At a time when other burger chains are trying to attract customers with new items on their value menu, CKE Restaurants Inc. continues to promote its premium burger offerings — the Six Dollar Burger at Carl's Jr. and the Thickburger at Hardee's.
And CKE president and chief executive officer Andrew Puzder plans to keep it that way.
"We do have lower-priced value items on the menu," Puzder said. "But we don't promote those. … We don't go out there and brag about our 99-cent menu. We brag about the product we think is the best."
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Carl's Jr. Prime Rib Burger |
At Hardee's, with stores in the U.S. Midwest and Southeast, there are nine varieties of the Thickburger, which comes in third-pound and half-pound Black Angus patty varieties.
Both burgers are doing well for the brands. Comparable sales for the second quarterending Aug. 11, 2008, were up 3.6 percent at Carl's Jr. and 3.3 percent at Hardee's.
"And we were selling the highest-priced Prime Rib Thickburger, which is the highest priced Thickburger we've ever sold (at $4.49 suggested retail)," Puzder said.
The call for quality
For CKE, quality is part of its calculated differentiation strategy.
Orders are delivered to the table, atypical at most quick-service restaurants, but customary at both burger brands. At Carl's Jr., the service is a long-standing tradition, while Hardee's added it around 1998.
Two years ago, both chains underwent renovations to create a more fast casual feel, with 178 Carl's Jr. and 97 Hardee's stores getting updates so far. Other QSR chains, including McDonald's and Captain D's, also underwent more upscale redesigns, but Puzder said CKE was the first.
"This is a trend we started," he said. "I think we'll do real well with it. We have table service. They don't have table service. We have Black Angus. They have a sort of Angus. It's a whole different approach."
Puzder's has emphasized quality at both chains since he was chosen in 2000 to move from legal counsel to CEO. And customers seem willing to pay the higher price point the products require.
He said other brands that are selling double burgers for $1, for example, have to be sacrificing their profit margins and possibly quality.
"We don't do that," he said. "We want to make sure that we are able to maintain the quality of our products, and to do that you have to sell products that, if you want a really good product, you have to pay a little more for it."
Reviving Hardee's
When Puzder took over CKE, Hardee's was quickly losing ground. It had earned a reputation for dirty stores, poor service and an overloaded menu that lacked focus. Even CKE's advertising agency of record, Los Angeles-based Mendelsohn/Zien Advertising was reluctant to take on promoting the brand, Puzder said.
So Puzder cleaned house, from instilling service scripts and cleaning standards to closing unprofitable stores and selling a number of company stores to franchisees. Then it was time to look at the menu.
Mendelsohn/Zien had introduced the premium Six Dollar Burger at Carl's Jr. in 2001, doubling the size of its quarter-pound Famous Star patty and upgrading the meat. Puzder liked the idea of having a casual-dining restaurant burger in a QSR, something customers wouldn't expect. But introducing the burger at Hardee's was not so simple.
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Even before Puzder took the helm, CKE didn't quite know what to do with Hardee's. A trial to turn Hardee's into Carl's Jr. flopped. Hardee's breakfast — which Carl's Jr. doesn't have — was still strong, but the lunch/dinner menu consisted of menu items with recipes too difficult to execute in the QSR kitchen.
Finally Mendelsohn/Zien accepted Puzder's request to revamp Hardee's menu. But the agency's executive creative director, Jordin Mendelsohn, wanted to tear down the stores and rebrand them with the name Thickburger, cutting out breakfast.
Puzder liked part of the idea.
"I said, ‘Well, Jordin, I like this idea except where we tear down the restaurants, change the name and take out breakfast,'" Puzder said. "‘But the Thickburger part, that's a pretty good idea. Let's see what we can do.'"
Puzder gave his menu-development team the directive to come up with something unique to QSR chains.
"That was what we really needed to do to really distinguish Hardee's, to make it so that it wasn't just another run-of-the-mill fast food restaurant," he said. The market was ready for "something more significant, something better. And so we came up with the Thickburger, and it worked really well."
Trends in bigger burgers In July 2007:
In August 2008, the trend is to increase the number of patties:
Source: Datassential, a Chicago-based menu-research firm. |
Franchisees in 2003 were initially nervous about the changes, such as taking on the Thickburger and cutting 40 menu items, including roast beef sandwiches and fried chicken.
But sales of the Thickburger were so significant during the trial, the rebranding was quickly accepted.
So, Carl's Jr. and Hardee's keep creating and promoting their premium burgers. Carl's Jr. even added the Monster Breakfast Sandwich to its menu in July. The sandwich, made with two eggs, two bacon strips, a sausage patty and two types of sliced cheese, is doing well, Puzder said.
Carl's Jr. and Hardee's continue to have different menus, although limited-time burgers that succeed at Carl's move onto the Hardee's LTO menu, usually as Thickburger offerings.
Looking forward in a tough economy
As consumers and QSRs struggle with rising food and energy costs, CKE's brands have raised their price points. So far, consumers continue to pay around $4 for the premium burgers.
Puzder cited the chains' average unit volume as an example, with Carl's Jr. going from $1.1 million in 2000 to $1.6 million as of mid-August 2008. Hardee's went from $716,000 in 2000 to $973,000 in mid-August.
"We're actually at the highest-average unit volumes in both brands as far back as anybody can check," he said.
Puzder hopes that the company will stabilize and mature in the next few years.
"We're a company that's kind of jumped up and down in stock price and profitability and I want to see us (become) a more level, steady prosperous company," he said.
While Puzder plans to stay focused on differentiating CKE's brands as better quality, he'd also like to see the number of stores grow, domestically and internationally.
One area of growth for Carl's Jr. is Southeast Asia. The brand is developing 25 stores in Singapore over the next three or four years. And it has plans for 100 restaurants over the next eight years in Shanghai and Beijing, China.
"As a team we're really just having fun, and we're not afraid to try things, we're not afraid to be an experiment," he said.
CKE/Carl's Jr. company headquarters:Carpenteria, Calif. (including ocean-side view)Hardee's company headquarters:St. Louis
Corporate amenities: In-house gym accessible to employees; CKE site offers personal trainer.
Stores:(as of May 19, 2008)3,101 total in 42 states and 13 countries — 1.162 Carl's Jr. and 1,923 Hardee's.
Employees:about 30,000, including 160 at CKE corporate and 110 Hardee's corporate.
Latest revenue figures:For second quarter ending Aug. 11, 2008, Carl's Jr. about $147.1 million; Hardee's about $119.9 million.
Latest same-store sales report:For period seven ending Aug. 11, 2008, Carl's Jr. up 4.2 percent (unchanged from same period 2007), Hardee's up 1.4 percent (up 5 percent from 2007).
Read also Carl's Jr., Hardee's CEO on value, marketing.
