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Andrew Puzder on Hardee’s turnaround

CEO takes a look back on the rise, fall and return of Hardee’s

In an “overnight success” story that took nearly 15 years, Hardee’s is blossoming as the soon-to-be-stronger sibling of CKE Restaurants Inc., said chief executive Andrew Puzder.

Over the past decade, average unit volumes for the St. Louis, Mo.-based chain have climbed steadily from $715,000 in 2001 to $1.05 million this year, catching up to now-struggling sister brand Carl’s Jr. , where units average about $1.3 million.

Hardee’s same-store sales were up 4.4 percent in the January-ended fiscal 2011, despite the still-struggling economy. Carl’s Jr., meanwhile, saw same-store sales decline 4.8 percent.

Puzder spoke with Nation’s Restaurant News this week about the history of Hardee’s, which CKE acquired in 1997, and the brand’s progression over the past several years.

Hardee’s was founded in 1960 by Wilber Hardee, who opened the first restaurant in Greenville, N.C. Within five months, Hardee started franchising and the chain began to grow, establishing footholds in cities across the South and Midwest before McDonald’s, Arby’s or Kentucky Fried Chicken moved in, Puzder said.

In the 1970s, Hardee’s pioneered the made-from-scratch biscuit at breakfast, an item that helped establish the chain as a breakfast leader and remains a signature menu platform during the morning hours. About 45 percent of Hardee’s sales today come from breakfast, Puzder said.

In 1981, Hardee’s was acquired by Canada-based Imasco, a conglomerate that also acquired the Burger Chef brand during that decade, as well as Roy Rogers restaurants.

At one point, the owners of Hardee’s even considered buying Carl’s Jr., said Puzder, who at the time was an attorney for that brand’s founder, Carl Karcher.

“Carl Karcher would never have agreed to it,” he said.

By the early 1990s, Hardee’s had grown to about 4,000 locations, offering a broadly diverse menu that included fried chicken, roast beef sandwiches and more.

“That’s when the wheels began to come off,” Puzder said. “Hardee’s had become a jack of all trades, master of none.”

In 1997, CKE’s then-chief executive William Foley decided to buy Hardee’s with plans to convert its restaurants, which were mostly in the Midwest and South, to Carl’s Jr., a primarily West Coast brand.

Puzder, however, thought it was a bad idea to convert what was an established brand in the regions where it operated. A test of converting two units to Carl’s Jr. confirmed that Hardee’s should remain Hardee’s, he said.

In part because he pushed the idea of maintaining the Hardee’s brand, Puzder was named president of the struggling chain in June of 2000. Later that year, he was promoted to president and chief executive of parent company CKE.

Describing Hardee’s as “in freefall,” Puzder said it was expected when he was first tapped to lead the brand that he would prepare it for a sale or put it into bankruptcy — though he insisted that was never his directive.

At the time, the restaurants were dirty, Puzder said. Service was terrible and the menu was too complicated. Efforts to remodel lifted sales temporarily, but then they would drop again.

“When you go into a store and there’s a guy with a dirty shirt who is rude, and then you remodel the store, but customers still go in and find a guy with a dirty shirt who is rude. All you’ve done is change the building,” he said.

Puzder said the first thing he did was issue a memo: “No more people behind the counter unless they have all their teeth. And anyone who says ‘this is how we’ve always done it’ is fired.”

Over the next several years, Puzder implemented “Operation Quality Service Cleanliness,” which is now referred to as “the revolution.”

Employees were scripted to be friendly and cheerful. The menu was pared down significantly, though the strong breakfast lineup remained in place.

Puzder then brought in the Thickburger line of charbroiled black Angus burgers — similar to Carl’s Jr.’s Six Dollar burgers — which steadily built lunch and dinner business.

Like at Carl’s Jr., Hardee’s marketing began to focus on “young hungry men,” with advertising that featured “hot chicks eating burgers,” from Paris Hilton eating a burger while washing a car, to a more recent ad starring a bikini-clad Turkish beauty queen, who promoted the chain’s new turkey burgers.

Hardee’s also launched a refranchising initiative in 2007 that resulted in the sale of 238 corporate locations to franchisees by early 2009.

The 1,899-unit Hardee’s chain currently includes about 466 corporate units. Now company officials are looking at opening corporate locations again for the brand.

In April of last year, CKE was acquired by an affiliate of Apollo Global Management in a going-private deal valued at about $1 billion.

Puzder said sales at Hardee’s have continued to grow with the introduction of hand-breaded chicken tenders last year and the new turkey burgers this year.

In the fourth quarter ended Jan. 31, same-store sales at Hardee’s were up 5.7 percent, while Carl’s Jr. was down 0.4 percent.

Puzder blames the difference on the respective locations of the chains. Carl’s Jr. restaurants are primarily in California, where unemployment levels have remained above 12 percent., he noted.

“That high an unemployment rate doesn’t exist in any Hardee’s market,” he said.

Bringing Hardee’s back to its “burger roots” has been the answer, said Puzder. “I see no limit to Hardee’s potential.”

Contact Lisa Jennings at [email protected].
 

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