Bigger is always better for this burger chain
May 24, 2007
Andrew Puzder, CEO of Hardee's and Carl's Jr. parent CKE Restaurants, says he's sticking to big burgers at big prices because Americans want them.
By Parija B. Kavilanz, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- As long as young and hungry guys continue to crave big and juicy burgers, bigger will always be better as far as fast-food chains Carl's Jr. and Hardee's are concerned.
"My opinion is that the media is the main supporter of healthy eating. We're certainly not hearing it from our customers," said Andrew Puzder, who is the CEO of CKE Restaurants, the parent company of Carl's Jr. and Hardee's."And [surveys] show that while consumers say they want to eat healthier, what they actually want is a big juicy burger," Puzder said during an interview Tuesday with CNNMoney.com.
Indeed, while bigger competitors like McDonald's (Charts, Fortune 500), Burger King (Charts) and Wendy's (Charts) are rushing to introduce salads, fresh fruits, low-fat yogurt and chicken wraps in an effort to appease an anti-obesity lobby that blames fast-food menu for the nation's battle with the bulge, Puzder makes no apology for selling what he called "decadent" food.
Best-known for pioneering super-thick and pricey "Six Dollar" premium beef burgers, Carl's Jr. and Hardee's menus embrace gluttony.
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Consider the "Original Six Dollar Burger" on the Carl's Jr. menu. It consists of a charbroiled, 100-percent Angus beef patty with two slices of melted American cheese, lettuce, tomato, onions, pickle, mustard, mayonnaise and ketchup on a toasted sesame seed bun. Total calories:1,010. That's almost half of the recommended daily calorie intake for an adult.
On Wednesday, the chain will roll out a beef Teriyaki charbroiled burger topped with teriyaki sauce, Swiss cheese and what Puzder claims is the first-ever fast-food burger featuring a slice of grilled pineapple. Total calories: 1,060.
And the price? About $2.89 for a single patty, $3.89 for a double patty burger and $4.59 for the deluxe Angus beef variety (tax not included).
For its part, Hardee's last week unveiled the "Patty Melt Thickburger" -- a charbroiled 1/3-pound Angus beef patty, grilled onions and melted American cheese piled between two slices of grilled rye bread. Total calories: 790.
Said Puzder: "What sets us apart from the competition is our focus on quality and service, our advertising and our constant innovation." Who doesn't remember the infamous Carl's Jr. ad featuring a sultry Paris Hilton in a skimpy swimsuit munching on a burger?
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Wall Street, for one, likes what Puzder is serving. Shares of CKE (Charts), which operates 3,105 franchised or company-owned Carl's Jr., Hardee's and La Salsa Fresh Mexican Grill restaurants, are up 13.2 percent year-to-date and almost 30 percent over the past 12 months.
What's more, rivals are quietly starting to copy CKE's ideas. Sixteen months after CKE introduced the Angus beef Thickburgers, Burger King rolled out its own Angus Steak burger.
And, according to a news report Monday, McDonald's (Charts, Fortune 500), the world's largest fast-food chain, plans to expand a test of premium Angus beef burgers this summer to a select number of its restaurants in the northeast.
"You could say that imitation is the nicest form of flattery. But that could go both ways," said Conrad Lyon, analyst with FTN Midwest Securities.
On the one hand, McDonald's entrance into the premium burger category could expand the market for bigger burger. On the other hand, said Lyon, McDonald's could end up stealing market share from CKE.
To be sure, both McDonald's and Burger King continue to be formidable threats to CKE. While year-to-date sales at Carl's Jr. and Hardee's locations open at least a year -- a key measure of retail performance known as same-store sales -- are up slightly more than 2 percent, both McDonald's and Burger King appear to be outselling their rival.
McDonald's reported a 5.9 percent rise in its U.S. same-store sales year-to-date while Burger King reported a 2.6 percent same-store sales increase in its U.S. and Canadian locations in the first three months of 2007.
Moreover, McDonald's and Burger King shares have jumped 18 percent and 17 percent, respectively, so far this year. Be Indian, buy American
Is Puzder worried about mounting competition? If he is, he's not showing it. "For the same size Angus beef burger that McDonald's is testing, ours is better quality and 50 percent bigger for the same price," Puzder said. He vowed not to discount prices to compete with McDonald's.
"It's a positive for the whole fast-food industry when the 800-pound gorilla gets behind something," continued Puzder. "But it's going to be very hard for McDonald's to become a place where young, hungry guys want to eat -- like we are -- when you're trying to attract more women and kids."
One threat that Puzder isn't so quick to dismiss: the runup in gas prices.
"Gas prices are a real issue," said Puzder, who blamed record-level prices at the pump for slower same-store sales growth this year. Once again, however, Puzder said he wouldn't consider trimming menu prices to counter any drop in sales.
"We don't play that way. I mean, even if the economy falters, people have to eat," he said.
He also promised more tongue-in-cheek ads to keep the brand strong.
"Look, McDonald's spends $800 million a year on advertising. We only spend $150 million a year. We can't hit you over the head with the same message over and over again," Puzder said. "We always have to do something that you remember the first time because it's edgy."