Hardee's Food Systems, Inc.

views updated

Hardee's Food Systems, Inc.

505 N. Seventh St., Ste. 2000
St. Louis, Missouri 63101
USA
Telephone: (314) 259-6200
Fax: (314) 621-1778
Web site: www.hardees.com

REVOLUTION CAMPAIGN

OVERVIEW

In 1997, when it was acquired by CKE Restaurants, Hardee's Food Systems was a struggling chain in the Midwest and Southeast with a growing reputation for poor service and substandard food. By 2002 the chain had launched 10 different marketing campaigns in nine years, each designed to turn the chain's business around. The campaigns met with little success. To try and carve out a niche somewhere between inexpensive fast-food chains and pricier "quick-casual" restaurants, as well as to win back customers, Hardee's executives initiated the Hardee's "Revolution" in select test markets. The rebranding effort included a scaled-down menu featuring the chain's new premium Thickburgers, renovated restaurants, and a new emphasis on customer service.

In 2003 the "Revolution" program was expanded to the rest of the chain with a supporting marketing campaign created by Mendelsohn/Zein Advertising, an agency based in Los Angeles. Andrew Puzder, president and chief executive officer of Hardee's, told Nation's Restaurant News that the chain planned to devote all of its marketing energy in 2003 to the "Thickburger Revolution." According to Nation's Restaurant News the campaign had an estimated budget of $50 to $60 million. The commercials, which ran on television and radio, were honest and apologetic about the company's slip into substandard food and service. Puzder was featured in some spots, where he admitted that the food the chain used to serve was bad. In other spots former customers stated why they no longer ate at Hardee's.

Although it seemed that Hardee's was taking a risk by introducing higher-priced premium burgers at a time when competitors were slashing prices, the strategy paid off. In 2004, following the launch of "Revolution," the chain's fourth-quarter same-store sales increased 9.2 percent over 2003. In addition the "Revolution" campaign was awarded an EFFIE in 2005.

HISTORICAL CONTEXT

Hardee's started out in 1960 in Greenville, North Carolina, as a simple walk-up counter business owned by Wilbur Hardee. It eventually grew into a small-town hero to hungry diners throughout the South and Midwest. The chain built a reputation for good quality, nontraditional fast-food fare such as roast beef sandwiches and "made from scratch" biscuits. For a brief time, before Hardee's became known as the place to avoid if you were hungry for hamburgers, the chain bumped Wendy's International from its number three spot. But by 1990 its downward spiral had begun. The chain's food quality was unpredictable, and menu changes left customers confused, while poor service sent them running for the door.

In 1997 CKE Restaurants, which already owned the burger chain Carl's Jr., acquired Hardee's with a plan to transition the entire chain to Carl's Jr. restaurants. Hardee's franchisees and executives bitterly rejected the plan. Hardee's and Carl's Jr. maintained their separate identities, but the former became known as Star Hardee's and sported the Carl's Jr. happy-star logo on its signs. The menu at Hardee's also underwent changes to more closely match the offerings served by its sister chain, and stores were haphazardly remodeled to make their decor resemble that of Carl's Jr. The changes did little to boost business for Hardee's, and the brand slipped to number six among fast-food burger restaurants. In 2003 Puzder, who had become president of Hardee's in 2000, determined it was time to reestablish the brand's identity and to rebuild the neglected chain's business and reputation. The Hardee's "Revolution" was launched.

TARGET MARKET

Sister chain Carl's Jr. had focused its energies on being the place for young men to go for big, juicy burgers, but the goal for Hardee's was to appeal to adults by offering a broader range of menu items that included fast, tasty breakfasts and restaurant-style burgers for lunch or dinner. "The Hardee's brand is broader—it has more breakfast business, it's more adult," Brad Haley, the company's executive vice president for marketing, told Restaurants & Institutions.

The two brands not only appealed to different consumer groups but also were distinguished from each other by regional differences, which made it difficult to create a single marketing theme for both brands. Hardee's was centered in the Midwest and Southeast, whereas Carl's Jr. served the West. Haley said, "In the Southeast, Hardee's is a very strong breakfast brand. In other regions it's more a lunch/dinner [concept]. So when you're looking at the brand, it's not one-size-fits-all."

COMPETITION

While Hardee's was taking a risk by offering customers the kind of thick burgers served at casual-dining restaurants and selling them at a higher price (about $4 for a burger), the chain's key competitors, McDonald's (the number one burger chain) and Burger King (the number two chain), were promoting discount prices to attract customers. The tactic was dubbed the "99-cent menu war" by Jim Kirk of the Chicago Tribune. He wrote, "With No. 2 burger chain Burger King preparing a major national marketing assault around 99-cent menu items, executives at McDonald's are making their own value strategy a priority with franchisees."

McDonald's launched a national marketing campaign focused on its "Dollar Value Menu" in October 2002. Burger King launched its campaign just a month ahead of that of McDonald's. The Atlanta Journal-Constitution reported that, faced with complaints that fast-food restaurants were causing American obesity, the two chains had earlier "tinkered with their menus to add healthier choices and more sophisticated flavors. Now they're turning to price to win back customers." Individual items on the 99-cent value menu at McDonald's included two sandwiches, fries, salad, and beverages; Burger King's 99-cent offerings included hamburgers, tacos, and chili.

HARDEE'S SPOT FEATURING PARIS HILTON TOO HOT FOR SOME TO HANDLE

When Hardee's added the Spicy BBQ Thickburger to its popular line of Angus Thickburgers in 2005, it turned to hotel heiress and reality-TV star Paris Hilton to promote it. The resulting spot, which featured a bathing-suit-clad Hilton washing a Bentley automobile while eating a BBQ Thickburger, was first used by Carl's Jr. That chain pulled the controversial spot in early June, but Hardee's launched it later in the month, changing the product name and logo. The commercial came on the heels of another Hardee's spot, which starred a young woman described by the St. Louis Post-Dispatch as "seductively riding a mechanical bull." Brad Haley, executive vice president of marketing for Hardee's, explained that sexy women were used in the commercials to appeal to the young men that constituted the chain's target market. The Hilton spot may have resonated with the target audience, but some media watchdogs and consumer groups, such as the Los Angeles-based Parents Television Council, denounced it as "soft-core porn." Despite such complaints, the commercials produced results. Hardee's reported that its revenues had climbed 11 percent in 2004 and that for the first time since 1999 it was profitable.

For both chains the strategy behind the 99-cent value menu was to attract price-conscious consumers who were limiting their visits to restaurants because of the weak economy. Harry Balzer, vice president of the market research firm NPD Group, told the Atlanta Journal-Constitution, "The average cost of preparing a meal at home is $1.96, making it tempting to turn the cooking over to someone else for just a few pennies more." The 99-cent value menu strategy produced mixed results and weakened profits for the dueling chains. As Burger King's global marketing officer Chris Clouser noted during an interview with Time magazine, the problem with promotions offering deep discounts was that "you train customers to come only when there's a blue-light special."

MARKETING STRATEGY

"Revolution" was created to set the Hardee's chain apart from other fast-food restaurants and to establish it as a premier-burger specialist, according to Jack Hayes, writing for Nation's Restaurant News. The company was also trying to lure customers by carving out a niche somewhere between typical fast-food chains and higher-priced quick-casual dining establishments. To accomplish that, Hardee's introduced a selection of Angus-beef burgers and eliminated about 40 percent of its lunch and dinner items. The breakfast menu, popular with customers, was left intact.

In addition to a menu overhaul, the campaign included a series of television commercials that boldly tackled the chain's reputation for bad food and poor customer service. One spot, which opened with a scene shot in black-and-white, featured a young man stating that, while Hardee's "used to be cool," he no longer went there because when he wanted a burger, he wanted a big, juicy one. The spot then switched to a color shot of a Thickburger and the tagline "It's how the last place you'd go for a burger will become the first place." Other commercials featured company president Puzder humbly agreeing with customer complaints that the food quality at Hardee's had deteriorated and that service was substandard. The spots had been developed based on consumer research that included reviewing comment forms customers had filled out and left in suggestion boxes at Hardee's restaurants.

The "Revolution" campaign also signified the chain's shift away from the low-cost—and often low-quality—approach to fast-food menu items that had dominated the quick-service food arena almost since its beginnings. Puzder said that the chain's new campaign was intended to set Hardee's apart from the competition and to build its brand identity as the premium-burger specialist among fast-food restaurants. In an interview with QSR Magazine, he explained, "We not only made the burgers bigger and began using higher quality Angus beef, we also improved the quality of virtually every ingredient on the burgers … At a time when most of our competitors have turned to discounting tactics, Hardee's is banking on America's ongoing love affair with truly great burgers."

OUTCOME

After declining steadily for more than 10 years, Hardee's experienced a swing in the other direction following the January launch of "Revolution." The chain reported a 9.2 percent increase in same-store sales in the fourth quarter of 2003 compared to the same period the previous year. Sales growth continued, and Hardee's reported same-store sales increases for eight consecutive months through March 2004 at stores open for one year or more. Haley told QSR Magazine, "This was a pure quality strategy and it's very reassuring to see that fast food consumers appreciate what we have done." The success of the campaign was enhanced when CKE, reversing its original strategy, applied the Hardee's approach to sister chain Carl's Jr. and introduced to the latter's menu not only Thickburgers but also some of the Hardee's breakfast items. Further recognition of the campaign's success came in 2005, when it was awarded an EFFIE for meeting its goals of increasing sales, regaining consumer confidence in the brand, winning back the company's core customers (men aged 16 to 34), and earning credibility as the best place to go for a great burger.