December 1, 2006
By Sam Gazdziak, Senior Editor
Hardee’s and Carl’s Jr. have found what their hungry customers are craving: large, high-quality hamburgers.
The days of sacrificing quality for convenience at a fast-food restaurant are over. The quick-service restaurants (QSRs) have raised the quality of their products in an attempt to compete with the fast-casual and casual-dining restaurants, and two of the chains that are at the forefront of the change are Carl’s Jr. and Hardee’s.
“Consumers can get a half-pound, charbroiled Angus burger at Carl’s Jr. or Hardee’s for four bucks, and they can get it faster than they can at a casual-dining restaurant,” says Brad Haley, executive vice president, Hardee’s and Carl’s Jr. marketing. “It makes it a lot easier for them to make that kind of a switch.”
Carl’s Jr., which is located west of the Rocky Mountains, primarily in the Southwest, and Hardee’s, which is mostly in the Midwest and Southeast, are two separate restaurants, although there are several similarities. Both chains do have a similar logo featuring a smiling star. They also both focus on the same demographic of “young, hungry guys,” as Haley calls them. Those would be men between the ages of 18 and 34 years old, who are heavy fast-food consumers.
The menus of the two chains have a few items in common, but Hardee’s places a heavier focus on breakfast. About 40 percent of the company’s total sales are from the breakfast menu, which is anchored by the made-from-scratch buttermilk biscuits. Carl’s Jr. has a more typical sales breakdown, with the bulk of sales coming from the lunch/dinner menu.
Haley says that having two regional brands is a strength for the parent company, CKE Restaurants Inc. “From a consumer standpoint, that allows us to do menu-development work that’s really geared to the tastes of consumers in a really limited geography,” he says. For instance, the Carl’s Jr. jalapeno burger is spicier than it would be if it were being sold coast-to-coast, because the chain’s Southwest customers are used to spicier foods.
Carl’s Jr. was founded by Carl Karcher in 1941 and is headquartered in Carpinteria, Calif. There are currently 1,072 restaurants in the country, with more than 60 percent of them being franchised. Hardee’s, founded in 1961 by Wilbur Hardee, was acquired by CKE in July 1997. There are a total of 1,945 of Hardee’s restaurants in operation, employing approximately 17,000 people. The chain is based in St. Louis, Mo. Along with their national restaurants, Carl’s Jr. has 78 international restaurants, located in Mexico and Singapore, and Hardee’s has 154 locations throughout Asia, the Middle East and Latin America.
The other restaurant chain owned by the company is La Salsa, a fast-casual Mexican restaurant chain acquired by CKE in 2002. Two new Mexican dining concepts are being introduced by pairing with the existing restaurants. Red Burrito is in the process of being co-branded with Hardee’s, and Green Burrito restaurants have been added to about 200 of the Carl’s Jr. locations.
Both restaurants have taken strides to stand out from the fast-casual competition. “In both cases, clearly it’s been our effort to target the menu quality of fast-casual or casual-dining restaurants. I think we were among the first in the industry to do that,” Haley says.
Haley said that conventional wisdom in the QSR segment was that a restaurant would have a difficult time trying to sell an item for $3, considering the importance that so many chains gave their 99-cent value menu items. Carl’s Jr. broke from that tradition by introducing the Six-Dollar Burger in July of 2001. It was a half-pound Angus burger with red onions and bread-and-butter pickles that cost $3.95.
“The idea was that it was a burger that was as big and as high-quality and delicious as a burger you would pay six dollars for at a casual dining restaurant,” Haley explains. Even the toppings were upper-end, as Carl’s was one of the first restaurants in the QSR industry to use red onions. The hamburger was a big success, and it came at a time when the company was looking to reinvigorate its Hardee’s lunch/dinner menu.
“The insight from the Six-Dollar Burger was if you give those fast-food customers a quality product that really does deliver the kind of quality they’re used to [getting] at a fast-casual or casual-dining venue, then they will in fact pay a fair price for it,” Haley says. That idea led to the creation of Hardee’s Thickburger menu.
The thick of it
At the time, Hardee’s had been going through a series of management changes, as well as a series of ad agency changes. Haley says that consumers had been seen a number of changes in the company’s advertising messages, while at the same time, the service and food quality at the restaurant hadn’t improved.
Hardee’s made a series of changes that went deeper than just the menu, as the chain made a conscientious effort to improve service first and foremost, and then improve the menu. The advertisements that were used to promote Hardee’s re-focusing were what Haley called “brutally frank.” They were shot in black and white to give the ads more gravity, and they featured people — some real and some actors — complaining about how and food and service used to be at Hardee’s and how they were pleasantly surprised by the changes. “That’s a pretty daring thing to do in advertising, but we felt it was important to admit our shortcomings, so that people truly believed that we had made the changes that they had been promised.”
The centerpiece of Hardee’s new menu was its line of Thickburgers, one-third, one-half and two-thirds pound Angus beef burgers featuring a variety of toppings, including jalapenos, chili, mushrooms, Swiss cheese, bacon and more. There are other items on the menu, but Haley estimates about two-thirds of the menu board consists of various kinds of hamburgers. “If you look at our menu compared to other quick-service or fast-food chains, you can see that we emphasize burgers more than anyone else.”
Chicken sandwiches and salads also have their place on the menu, largely as a way to eliminate a veto vote. “We don’t want women or other segments of the population believing there’s nothing at either place that they could get if they don’t feel like a burger that day,” he explains. “We have great-tasting options for them as well, but we still stay true to our ‘young, hungry guy’ target, to a greater extent than any other chain does today.”
The newest products add to the burger menu by focusing on the “meat-as-condiment” concept. Carl’s Jr. has just introduced its Philly Cheesesteak burger, which tops a beef patty with a cheesesteak, complete with peppers, onions and Swiss and American cheeses. Hardee’s now offers a Chili Cheese Thickburger, a one-third patty topped with chili, chipped onions and American cheese.
Haley says that each chain does its own product development for products that the other may never see. In the case of these two hamburgers, they both happened to have been successful at the other restaurant before getting introduced in their current chains. “If a product is successful at one chain, we still have to test it in the other chain to see if it will perform well. Sometimes it will, and sometimes it won’t,” he points out.
Product development at Hardee’s and Carl’s Jr. can take anywhere from six to nine months, depending on if the new product requires new ingredients or can be made from existing ones. The company also relies heavily on its suppliers to help with the R&D efforts.
“They invest a lot of R&D resources in developing a new product for us for testing purposes, many of which may not survive the testing process,” Haley says, adding that the chains work very closely with its suppliers, dealing with them in an upfront manner and keeping them in the loop on their progress.
“I [also] think they appreciate the fact that we’re not interested in the lowest-cost formula under any circumstances,” he adds. “We balance quality with cost, and I think that’s somewhat unusual and desirable for a lot of our meat and protein suppliers.”
Haley points out that the company’s push toward higher quality can be seen throughout the menu, not just the burgers. Hardee’s and Carl’s Jr. recently have added hand-scooped ice cream shakes and malts, following what he calls the gold standard set by malt shops of previous years.
“It’s targeting a higher standard of quality than other people in the industry, and we’re continuing to move down that path,” he says.