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Carl's Jr., Hardee's bank on value comparison
September 17, 2009
CKE Restaurants Inc. CEO Andrew Puzder told investors and analysts in the company's second quarter earnings call that Carl's Jr. and Hardee's plan to improve same-store sales in part by dispelling the consumer misconception that its premium burgers are more expensive than its competitors. Yesterday, the company reported that blended same-store sales were down 4.6 percent for the quarter.
The company began the strategy with ads comparing Carl's Jr.'s Big Carl and Hardee's Big Hardee with McDonald's Big Mac. The chains also began running ads emphasizing their premium burgers' superior quality, taste and value compared to McDonald's Angus Third Pounders.
The ads may already be having an impact, with Carl's Jr. seeing stronger sales in the latter half of the quarter after the launch of the Big Carl, Puzder told analysts.
The company will also stick to its strategy of focusing on its premium burgers and has added Carl's Jr.'s recent limited-time Teriyaki Burger to the permanent menu based on its success.
Carl's Jr.'s single-store test of Hardee's Made from Scratch Biscuits has been successful enough that the chain has decided to expand the test, Puzder told analysts. Carl's Jr. does not have a breakfast menu but experiences about 15 percent of sales during the daypart, and adding Hardee's menu items could potentially increase sales in the morning, if the test proves successful. However, it is too early to do more than speculate since the test has been limited to one store, he added.
Puzder would not share specific product development plans but said the company would continue to launch new limited-offer Six Dollar Burgers and Thickburgers at the chains, with the possibility of a new chicken sandwich.
Growth strategy
With Carl's Jr.'s same-store sales impacted by high unemployment in California, where most of its stores are located, the company's domestic growth strategy is now targeting Texas because it "is deemed to be more business-friendly," Puzder said. To date, the company has 25 restaurants in Texas, six of them company-operated.The company also plans to lessen its exposure in California over time, even though stores will likely benefit in that state as the economy improves.
Hardee's growth plans include filling in some of its southern markets, starting in the Carolinas. "Doing so will aid us with our media buys as it will enable us to have more media purchasing power in certain regions," he said.
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