Strategic Marketing Plan


Table of ContentsExecutive Summary Page 1Current Marketing Situation Figure A1.1 Financial Standing 5yr Term Page 3Market Description Page 4Potential Market Segment Page 4Product Review Page 6Figure A1.2 Customer Need & Our Solutions Page 7Competitive Review Page 8McDonald’s “Angus Third Pounder”Financial Overview and Nutritional Facts

Page 8

Burger King’s “XT Burger”Financial Overview and Nutritional Facts

Page 9

Jack in the Box’s “Sirloin Cheeseburger”Financial Overview and Nutritional Facts

Page 10

Channels and Logistics Page 11Chart of Corporate Owned Restaurants vs. Franchise and Licensed Restaurants

Page 11

Franchise Information Overview Page 12Franchise Information: Training and Support Page 12SWOT Analysis Page 13Strengths Page 13Weaknesses Page 14Opportunities Page 15Threats Page 15Objectives and Issues Page 171st Year Objectives Page 172nd Year Objectives Page 17Issues Page 17Marketing Strategy Page 18Position Page 18Product Page 18Price Page 18Distribution Page 18Figure A1.3 Shows Domestic Map of all CKE Restaurants (USA)

Page 19

Marketing Communication Strategy Page 20Promotion Mix Page 20Advertising Page 20Personal Selling Page 20Sales Promotion Page 20Public Relations Page 20Direct Marketing Page 21Market Research Page 21Market Organization Page 22Action Programs Page 23Research Page 23Test Page 23Improve Page 23Budgets Page 24Controls Page 24


I. Executive Summary

Carl Karcher Enterprises, Inc. (CKE) Restaurants is a California based holding company that operates through franchises and licenses for Carl’s Jr. , Hardee’s, Green Burrito, and Red Burrito concepts (CKE, 2011). A feature product for Carl’s Jr. and Hardee’s, the Six Dollar Burger was and still is the pioneer of premium Black Angus burgers in the Quick Service Restaurant industry. Following the introduction of the Six Dollar Burger in 2001, many other fast food chains emulated the concept; competitors include McDonald’s, Burger King, Jack in the Box, and Wendy’s.

The launch of CKE’s Six Dollar Burger into a mature market received positive reviews, which resulted in the introduction of a full l ine of Six Dollar Burgers featuring different variations of the “Original” such as Hawaiian Teriyaki, Guacamole, Portobello Swiss, etc. Our premium Signature Six Dollar Burger line offers a competitively unique combination of top quality ingredients and convenience at a value-added price. We are targeting nonspecific segments in the consumer market, taking advantage of the opportunities indicated by higher demand for better-quality and higher-priced offerings in the QSR 1 industry (Hoyland, 2009).

The primary financial objective in the next year is to increase blended sales by an additional 2.3%, comparable to the increase in fourth quarter sales of fiscal 2011 (CKE Restaurants, Inc. , 2011) . Furthermore, “for the fiscal 2012, the Company expects capital expenditures to be between $60.0 million and $70.0 million” (CKE Restaurants, Inc. , 2011) .

1 QSR is an acronym for Quick Service Restaurants.


II . Current Marketing Situation

CKE was founded in 1966 by fast food pioneer, Carl Karcher, with the intention to provide customers with an affordable, high quality fast food meal, styled around the “emerging car culture of Southern California during and post World War II” (CKE Restaurants, 2008-2011). Carl’s Jr. and Hardee’s introduction and overwhelming success of the signature “Six Dollar Burger” in 2001 and beyond confirms the chain’s “constant emphasis on product innovation and representing a desire to satisfy the tastes of young, hungry consumers” (Carl's Jr. , 2011).

Research shows that there are approximately more than 50,000 fast food chains scattered all across America, and over 500,000 worldwide (Ransohoff, 2011) . With the emphasis in America, about twenty five percent of Americans eat fast food on a daily basis, and will spend over $110 billion per year on fast food (Schlosser, 2009).

“The Quick Service Industry (QSR) is one of the largest components of the over 440 billion dollar restaurant and food service industry, and is one of the most competitive industries in the world” (Wikinvest, 2011). With steep competition, the CKE Company still manages to be a leading competitor in the fast food hamburger segment, alongside chains like McDonalds, Burger King, and Jack in the Box. While McDonald’s is the industry’s leading firm with the most global exposure, Burger King and Jack in the Box remain steady competitors in the Quick Service Industry. Most recently, Carl’s Jr. and Hardees concepts have incorporated a Mexican food element, Green Burrito and Red Burrito respectively, to reach out to families by giving them two options to choose from, as opposed to just a “regular” hamburger joint.

In addition to adding variety and diversity to the menu, to gain market share in this dynamic environment, CKE must carefully target specific segments by providing customers with the best premium quality foods and superlative personal service at very affordable prices, that provides benefits valued by each customer group.


Figure A1.1 shows varying financial findings for CKE Restaurants.

2011 2010 2009 2008 2007Revenue $1,330.65M $1,418.73M $1,482.71M $1,534.63M $1,588.41M

Net Income $36.26M $48.20M $36.96M $31.08 $50.17MNet Profit

Margin2.72% 3.40% 2.49% 2.02% 3.16%

Stock Price (Close)

N/A 8.36 8.30 13.12 19.77

Sales in FY -0.8% -3.9% +1.7%Current Assets $137,395 $145,855 $140,959 $161,005 $152,278Shareholder’s Equity

$423,917 $236,175 $194,276 $145,424 $378,846

Advertising Costs

$67,524 $64,443 $66,911 $70,324

Operating Costs and Expenses

$1,356,788 $1,339,238 $1,398,690 $1,446,307 $1,521,984

Dividends per common share

0.24 0.24 0.24 0.24 0.24

Long Term Debt & Lease Obligations

$329,008 $357,450 $392,036 $178,055 $264,662

(Commission, 2010) 2

i. Market Description

2 Financial data collected using Mergeant, Hoovers and Business Source online databases.


One of our main products that have made us famous is the Six Dollar Burger, a pioneer and original of its kind that was introduced into the market in 2001 (Sunset, 2008).

CKE’s market consists of people with the desire to consume quality foods at a quick, fast casual restaurant, via drive-thru or sit in atmosphere, in the most convenient way possible. Demographic studies help show the areas of density in which consumers highly demand fast foods. Typically, QSRs flourish where they are heavily concentrated and populated, working class neighborhoods whose citizens “tend not to be rich or college-educated. Households earn under the $50,000 national average. About half the people are minorities … slightly more than a third are high school graduates; while about fifteen percent hold bachelor’s degrees … it is ethnically diverse, densely populated people on a moderate income” (Lash, 2011)

Our target market for the Six Dollar Burger consists of young men in the age bracket of 18 to 34. The burgers that we offer are served in large proportions and are meant to successfully satisfy the appetites of “young, hungry guys” unwilling to forgo taste and quality on a budget.

Additionally, our restaurants appeal to those who have a limited amount of time, whether it is during a lunch or dinner break. We attract people in the workforce who are constrained for time, yet still desire dine in style restaurant quality food made and served quickly at their convenience. Our company’s main intent is to serve our customers better quality food not typically found in “fast food chain”.

The market segments also worth pursuing are the moms and Millennials.

“Both of these segments represent a significant portion of quick-serve spending, and each is driven by distinctive needs and desires when it comes to their quick-serve usage … Millennials comprise the group of about 80 million young men and women (and are) responsible for a huge portion of the quick-service industry … There are nearly 32 million moms in the U.S., and their purchasing power accounts for nearly $1.6 trillion in annual spending … Millennials say, ‘Value Me’ and moms say ‘Help Me’.” (Yohn, 2011).

Millennials, a specific group of consumers born during the eighties and nineties, are young individuals who typically prefer to eat out more than cook for themselves, and thus are likely to visit fast food restaurants twelve or more times a month, generally spending most of their income on edible consumption (Yohn, 2011). Historically, this generation of consumers is the most ethnically diverse age group and is more conscience of creativity and innovations in where they eat and what


they eat; because of the high exposure to cultural differences and influences, this group desires and expects bountiful options and is interested in a variety of different products and experiences. “Ethnic concepts or those that feature unusual items and ingredients have strong appeal” (Yohn, 2011). Furthermore, community engagement is the key to communicating with these individuals; concepts adopted by them are through the use of social media and located based tools to engage this group and maintain constant dialogue in order to listen and fulfill their needs and wants.

Moms in the market are also an important market to pursue because they are the primary decision makers for their families, mainly concerning what and where they eat. This is important to note because they are the deciding factor as to how many customers (families) our restaurants will be serving. Usually, moms choose restaurants that appear to have a balance of value, wholesomeness, and convenience. Most importantly, time is of the essence for busy moms; thus, they look to QSRs for assistance in feeding their families and shaping healthier futures.

ii. Product Review


Our signature product, the Six Dollar Burger, features3: A half pound, 100% premium grade Black Angus charbroiled burger

patty A slice of American cheese Fresh ice berg lettuce Two slices of tomatoes A stack of onion slices A choice between sweet or dill pickles Ketchup, mustard, and mayonnaise Served on a toasted sesame bun

“Carl's Jr. proves once again that it can make some of the best, if not the best

fast food burgers.4” (Jin, 2011)

Statistics of CKE & Six Dollar Burger

Price $3.992011 Sales $1.33 Billion1 year sales growth

(6.21%)

2011 Net Income ($36.26 Billion)2011 Net Growth ---Market Capital $462.23 Million

Nutritional Facts for Six Dollar Burger

3 CKE Restaurants serve very many variations of the original Six Dollar Burger. Depending on certain regions and locations, we offer fourteen different types of novelty Six Dollar Burgers. 4 Customer testimonial about a variation of the Six Dollar Burger, “Steakhouse Six Dollar Burger”.

910 Calories 54g fat 21g saturated fat

3g trans fat 125mg cholesterol

2030mg sodium

63g carbohydrates

3g fiber 45g protein


Figure A1.2 shows the customer’s need and how the Six Dollar Burger satisfies those needs.

The Six Dollar Burger is priced at $3.99, yet it rivals sit-in restaurant quality burgers priced above $6.The Six Dollar Burger is modeled after a "dine in experience burger" at a fraction of the cost, with the addition of convenience and the option to eat wherever, whenever; as opposed to eating in a crowded, loud and busy restaurant.

Quality Burger at a

Reasonable Price

Through brand extension, customers receive more choices on how their burgers are dressed. Our Six Dollar Burger line consists of six different ways to have your burger. Original Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, two slices of American cheese, lettuce, two slices of tomato, red onion slices, pickles, mustard, mayonnaise, and ketchup on a toasted sesame seed bun. Steakhouse Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, A.1 steak sauce, crumbled blue cheese, mayonnaise, crispy onion strings, Swiss cheese, lettuce and tomato placed on a sesame seed bun. Guacamole Bacon Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, guacamole, two strips of bacon, two slices of melted pepperjack cheese, lettuce, tomato, red onions and Santa Fe sauce served on a toasted sesame bun. Western Bacon Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, three strips of bacon, two slices of melted American cheese, crispy onion rings, and tangy barbecue sauce on a toasted sesame bun. Low Carb Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, two slices of American cheese, two slices of tomato, red onions, dill pickles, mustard, mayonnaise, and ketchup wrapped in fresh iceberg whole-leaf lettuce. Portobello Mushroom Six Dollar Burger: Charbroiled 100% Black Angus half pound Beef patty, portobello mushrooms, two slices of Swiss cheese, red onions, lettuce, two slices of tomato, and mayonnaise on a toasted sesame seed bun.

A Menu of Variety

All six variations of the Six Dollar Burger are readily available in Carl's Jr., and Hardees (CKE's sister restaurant to CJ) and are charbroiled, made to order. Consumers are given the option to either sit in and dine, which features semi-table service, or through the drive-thru window which is open later, to satisfy the appetites of those who prefer to eat later in the evening, and well into the night.

Convenience in Product

Served


III. Competitive Review

Following the launch of CKE’s new, innovative Six Dollar Burger, targeting those who care more for quality and fulfilment, other quick service firms replicated and resold their versions of our half pound, Black Angus Burger. Introduction of McDonald’s “Black Angus Burger” features, also, 100% Black Angus Beef on an artisan toasted bun, has increased competitive pressure, especially from a globally recognized brand. Competition from other internationally recognized brands is also a major factor. Key competitors include the following:

McDonald’s “I’m Lovin’ It”. The market leader in the quick service industry, McDonalds offers many innovative menu options that incorporate convenience and value priced items that iconize the American “diet” of burgers and fries, and everything in between. Recently, it has introduced variations of the “Angus Third Pounder” as well as other menu items. Globally recognized, McDonald’s restaurants in other countries, but not in the United States, serve as a “hang out spot” for locals trying to emulate the typical American persona and eat American food. Variations of the Angus Third Pounder include “Deluxe”, “Bacon and Cheese”, and “Mushroom Swiss”.

An Angus Third Pounder consists of:

1/3 Pound Angus Beef patty Premium bakery style bun 2 slices of American cheese Tomato slice

Whole leaf lettuce Red onion Pickles

Statistical Data of McDonald’s Angus Third Pounder and Corporation

Price $4.192011 Sales $24.07 Billion1 year sales growth 5.85%

2011 Net Income $4.95 Billion

2011 Net Growth 8.69%

Market Capital $80,874.34 Million

Nutritional Facts of McDonald’s Angus Third Pounder


2g trans fat 135mg cholesterol 1700mg sodium

61g carbohydrates 4g fiber 40g protein


Burger King “Have It Your Way”. A strong competitor in the quick service industry, Burger King offers many classic American fast food options ranging from a variety of burgers, fries, and the like, mostly approached using the value pricing mechanism. Also a global restaurant, Burger King serves as a place people flock to experience an “American” lifestyle. Burger King’s market offering of a premium burger takes shape as the XT line of top quality burgers. Variations of the XT burger include “Smoky Cheddar Steak House XT”, “A1 Steak House XT” and “Steak House XT”.

An XT premium burger consists of:

7 oz. Charbroiled Pound Angus Beef patty

Corn crusted roll American cheese

Tomato slice Whole leaf lettuce Onions Pickles

Statistical Data of Burger King’s XT burger and Corporation

Price $3.992011 Sales $2.5 Billion1 year sales growth (6.85%)2011 Net Income $1.34 Billion2011 Net Growth (6.65%)Market Capital $2,287.12 Million

Nutritional Facts of Burger King’s XT burger


1.5g trans fat 185mg cholesterol

1260mg sodium

55g carbohydrates



Jack in the Box “entire menu served all day”. A main competitor in the quick service industry, Jack in the Box serves a range of foods from very American staples such as burgers and fries, to American versions of ethnic cuisines such as eggrolls and tacos. The launch of Jack’s premium burgers took on a different route; instead of using Angus Beef, they differentiated themselves by using Sirloin beef patties which come two ways: Sirloin Cheeseburger or Sirloin Swiss and Grilled Onion Burger. What distinguishes Jack in the Box is the intent to satisfy customers without time constrictions on breakfast or lunch/dinner items; all items on the menu are served throughout the day without restriction.

A Sirloin Cheeseburger consists of:

1/3 lbs 100% Prime Cut burger patty

Bakery style bun American cheese Tomato slice

Peppercorn mayo Whole leaf lettuce Red onions Pickle strips

Statistical Data of Sirloin Cheeseburger and Corporation

Price $3.99

2011 Sales $2.19 Billion

1 year sales growth 27.78%

2011 Net Income $1.34 Billion

2011 Net Growth 14.80%

Market Capital $1,181.25 Million

Nutritional Facts of Sirloin Cheeseburger


2 trans fat 129mg cholesterol

1989mg sodium

51g carbohydrates


http://fastfood.ocregister.com/files/2007/07/jboxsirloin.jpg


IV. Channels and Logistics Review

Six Dollar Burgers will be distributed by all retailers of the Carl Karcher Enterprises, which includes Carl’s Jr. and Hardees. Hardees, however, will address the burger as the “Six Dollar Thick Burger”. CKE’s concept restaurants have expanded to forty two states and fourteen countries, and are planning to continue growth in the global market in order to gain brand recognition on a wider scale.

Carl’s Jr. Hardee’s Other TotalCorporate Owned

423 466 1 890

Franchised 674 1,226 10 1,910Licensed 152 207 -- 359Total 1,249 1,899 11 3,159

(as of January 2011)

Corporate Owned. With a total of 1,249 corporate owned CKE Restaurants in circulation, we hold total control and set all policies and procedures for each unit. Furthermore, our corporation yields and retains all profits from each unit. Corporate owned restaurants set the precedent and are prime examples of what the parent company plans for the firm, such as price setting, new menu items, promotional items, etc.

Franchised & Licensed. With a total of 1,899 franchised and licensed restaurants under the CKE parent company, each unit must follow the mandatory guidelines provided. Franchisees have an obligation to fill in terms of following procedures to sell the same products advertised and marketed by the parent company. Guidelines include menu items, operating procedures, promotional offers, and prices of goods sold. The developmental process of beginning a franchise with the CKE company begins with:

o Securing territoryo Submitting a Real Estate

packageo Committing to a Franchise

Agreement

o Developing a siteo Training your crewo Getting the Grand

Opening approvedo Opening your unit


Franchise Information Overview5

Minimum Financial Requirements Net Worth: $1,000,000Liquid Assets: $300,000

Experience Previous Franchise or Restaurant Experience Preferred

Multi-Unit Development 3 Restaurant MinimumDevelopment Fee $10,000Franchise Fee $25,000 (1st and 2nd)

$20,000 (3rd and 4th)$15,000 (5th or more)

Total Estimated Initial Investment $1.3 million+Royalty Fee 4% of Gross Sales

Unit Size 2,450 sq. ft. to 3,212 sq. ft. (w/o playground)

Term of Franchise Agreement 20 yearsFranchise Training 12 weeks

Franchise Information: Training & Support6

Before you open, we assist you through the following:

After you open, we continue to assist you with:

Site selection Restaurant design Equipment ordering Construction Training

Field support: we have a team of franchise business consultants who will assist you with your business.

Operations: we provide you with periodic information on a variety of items that helps you in operating a new business.

Franchise services: we are a phone call/email away from any questions you may have.

R&D: a qualified staff of professionals in our state of the art test kitchen for ongoing research and development.

Marketing/Advertising: our marketing team will support you with your strategic advertising and local store marketing.

5 This chart has been copied from the official website of CKE franchising opportunities. 6 This chart has been copied from the official website of CKE franchising opportunities.


V. Strengths Weaknesses Opportunities and Threat Analysis

While CKE has many powerful strengths to build on, there are some weaknesses that need to be assessed and improved upon, such as weakening financial performance and the inability to move into the global arena in a similar scale compared to our competitors. The major opportunities available in reach is the growth of our brand concept through restaurant development agreements, domestically and globally, to regions with high demand for American fast food made with quality yet have not been exposed to our chain before. On the contrary, potential threats to face include high competition from more recognized brand concepts, and strict laws and regulations, on a regional, as well as global scale.

Strengths. CKE Restaurants has four strengths to continue to build on internally to better represent and communicate to consumers, thus creating lifetime relationships.

o Strong Retail Network. All concept restaurants belonging, or in contract with, CKE all exhibit strong retail networks. Each unit communicates through a Corporate and Contractual Vertical Marketing System that consists of a chain of producers, wholesalers, and retailers all acting as a unified system. While corporate owned restaurants integrate successive stages of the production and distribution cycles under a single ownership, franchisees work with franchisors that link several stages in the production to distribution process.

o Co-Branding with Green Burrito and Red Burrito. All Carl’s Jr. concept restaurants have been co-branded with the Green Burrito, and Hardee’s concept restaurants have been co-branded with the Red Burrito. This fuse of different cuisines binds together the All American menu with a new take on South American food items; we feel that this change will encourage variety and diversity, and invite those who desire different culinary tastes. CKE is in the business to please consumers’ taste palettes, and by adding a new taste concept, studies already show increased foot traffic in our stores due to promotional efforts to increase consumption in South American entrees served in CKE Restaurants.

o Quick Service Software Design. Since 1997, CKE Restaurants have adopted a technologically advanced way to measure demand of all menu items; this technology is used to gauge the amount of products that will be distributed from CKE’s regional headquarters to chain restaurants surrounding the area, on a weekly basis. This process has been in use in order to efficiently supply products to different locations and allocate


amounts of fresh and frozen goods in accordance to trends of specific restaurants in certain regions (Allnoch, 1997).

o Franchise and License Agreements. CKE began establishing agreements for the sale of franchise and license agreements in order to “accelerate the development of its restaurant chains” (DataMonitor, 2011). In Fiscal Year 2010, sixty six percent of running Carl’s Jr. Restaurants was owned and operated by franchisee and licensed owners, which accounts to 802 restaurants. Furthermore, Hardee’s restaurants during the Fiscal Year 2010 had a total of 1,430 franchised and licensed operators which accounts to seventy five percent of the Hardee’s system. By distributing rights to the brand name and power, along with accordance to company protocol, CKE’s license agreements guarantee franchise fees, in addition to royalty and advertising fees. “Through franchisees and licensees the company is partially protected from a temporary downturn in the industry” (DataMonitor, 2011).

Weaknesses. With the integration of two main firms, Carl’s Jr. and Hardee’s, CKE accounts for the fluctuating returns on both firms; the results of sales and scale compared to competitors contribute to our weaknesses.

o Weakening Financial Performance. “CKE recorded declining efficiency in FY2010. The revenues of the company declined at a compound annual rate of change (CARC) of -4% from $1,524.6 million in FY2008 to $1,418.7 million in FY2010 … Carl’s Jr., the company’s largest business segment, accounted for 60.1% of the total revenues in FY2010. Revenues from Carl’s Jr. reached $852.5 million, a decrease of 3.8% compared to FY2009. Further, revenues from Hardee’s segment declined by 5% and other segment by 9.4%” (DataMonitor, 2011). Much of the decline in revenues and financials are due to a failing economy on a federal scale, as well as a regional scale. Since the majority of Carl’s Jr. Restaurants preside in California, the economic stance of the state has driven down business and caused a downturn in the financial position of the company. With the dropping numbers, the company faces risks that would hinder growth plans to expand.

o Lack of Scale Compared to Competitors. CKE does not have an advantageous scale of operations in comparison to many of its competitors, such as McDonald’s, Burger King, and Jack in the Box. The majority of CKE’s competitors is significantly larger in size and generates greater revenues. For example, McDonald’s recorded revenues of $24.07 billion, Jack in the Box recorded revenues of $2.19 billion, and Burger King recorded revenues of $2.50 billion – all significantly larger than CKE’s revenue of $1.33 billion. The company could potentially be facing


grave disadvantages that may hinder growth in a fiercely competitive market. “Lack of scale also reduces the bargaining power of CKE” (DataMonitor, 2011).

Opportunities. CKE can build on two major market opportunities.

o Growth through Restaurant Development Agreements. CKE has entered into development agreements with companies, both national and global, to expand its presence. We have merged with MDS Foods and Global Food connection, the Americana Group, RWJP Star Enterprises, Star Foods Investors Group with the intent to open new concepts in Pakistan, Kazakhstan, Dallas, and Houston within five to nine years. “CKE entered into 20 franchise development agreements, to build a total of 380 restaurants, consisting of 236 domestic and 144 international restaurants. Also in FY2010, the company signed four development agreements with new and existing franchisees to build a total of 106 restaurants domestically and internationally” (DataMonitor, 2011).

o Increased Demand for High Quality Food Served With Convenience. CKE has the opportunity to satisfy consumers’ wants for “bigger, better burgers” made with top quality ingredients, filled with flavor, and offered at a value added price. Consumers are gaining more than a flavorful bite with every burger sold; instead, they are consuming a better burger offered at a fraction of the cost compared to a sit in restaurant. In addition to that, consumers are the controllers of time—they control when and where to purchase their meals, and we control how quickly it gets from our facilities to their hands. The increase of mothers in the work force, nationally as well as globally, has marked an increase in the need for convenient restaurants serving wholesome foods, priced with value in mind.

Threats. We face two main threats as a Quick Service Restaurant, competing with several main stream concepts.

o High Competition. CKE competes with others on large scales, in terms of international, national, regional, and local retailers also serving and selling food products. “The company competes on the basis of price, convenience, service and quality of food products. The company’s competition in the broadest perspective includes restaurants, quick service eating establishments, pizza parlors, coffee shops, street vendors, convenience food stores, delicatessens, and supermarkets” (DataMonitor, 2011). On a global stance, competitors like McDonald’s and Burger King


are prominent in the market, and have the potential to shut down CKE’s market share and adversely affect its margins.

o Stringent Laws and Regulations. CKE headquarters reside in Carpenteria, California, and the majority of Carl’s Jr. Restaurants, about eighty percent, are located along the west coast, primarily in California. In addition to the national economic slump, California’s economic woes far outweigh those of the state, with record unemployment rates at twelve percent—an additional three percent higher than the national rate. With that, California’s laws and regulations on businesses have come down with an iron fist, requiring businesses to go through a minimum of two years of paperwork, licensing, registering, in addition to regulations regarding restaurant operations by state and local department officials relating to “health, food, preparation, sanitation and safety standards, federal and state labor and immigration law, federal and state laws prohibiting discrimination and other laws regulating the design and operation of facilities, such as the ADA. Also, CKE and its franchisees must comply with the Fair Labor Standards Act and various federal and state laws governing employment matters, such as minimum wage, overtime pay practices, child labor laws, citizenship requirements, and other working conditions. Further, the company’s operations are subject to various federal, state and local environmental laws and regulations that govern discharges to air and water, as well as handling and disposal practices for solid and hazardous wastes” (DataMonitor, 2011).


VI. Objectives and Issues

First Year Objectives.o CKE’s first year objective is to grow same-store sales in the short

run. By using market research via government studies, census, etc., we plan to tap into domestic markets that have high population densities where fast food consumption can potentially be high due to a great demand in convenient stores in the area. Our Projected Sales Revenue for the Six Dollar Burger is $26, 613,0007. Our goal is to sell 6,669,925 Six Dollar Burgers at the rate of $3.99 per burger. By placing locations of CKE concept restaurants, we plan to strengthen our brand recognition and expand our revenues through creating and maintaining customer relations with new consumers in the market.

Second Year Objectives.o CKE’s second year objectives are to protect the brand image for

the long run. By doing so, we will be carefully inspecting all CKE concept facilities to ensure that there are consistencies with the physical as well as internal structure of each unit, corporate as well as franchisee owned and operated. By creating a strong hold on our domestic locations, we will be able to generate strong revenues which will enable the increase and surge into the global market.

Issues.o In relation to our long term goals, the major issue we face is not

having the financial means to enter the global market with as much power as competitor, McDonald’s. Furthermore, we face risks pertaining to weak brand recognition on a global scale, due to declining profits, and inability to expand on a larger scale. As we head into the maturity phase of the product life cycle, it will be increasingly difficult to find the means to grow into the global market, unless charges are made via technological and innovational advances, as well as strengthening the general core of CKE through its subsidiaries.

7 These units were estimated by taking the total sales revenue for CKE and dividing it by 25, assuming that every 25th customer purchases a Six Dollar Burger.


VII. Marketing Strategy

CKE’s marketing strategy is based on a unique positioning of product differentiation. Our promotional strategies go beyond the sale of ‘a plain old burger’; we generate ad campaigns that feature the Six Dollar Burger with physical appeal and desire for premium burgers, prepared better than competitors. Our Six Dollar Burgers are publicized as “bigger and better” because we guarantee top quality Black Angus beef, fresh cut vegetables, and the concept of eating “restaurant quality food” on a fast food budget. Consumers pay for value, but receive great rewards of premium menu items sure to satisfy even the hungriest eater.

Though our primary target segment is the “hungry guy” age 18 to 34, the QSR market of consumers includes every individual, no matter what age, race, ethnicity, or region one may belong to. In order to appeal to all groups, CKE will need to adopt a new way to promote its products, or push for an increase in promotional items and deals.

Positioning. Using product differentiation, we are positioning the Six Dollar Burger as a one-of-a-kind burger that consumers will not be able to find elsewhere, at the same value. We model our burgers after “sit down restaurants” and offer our customers the same burger, at a fraction of the cost, minus the noise and interruptions of a chaotic sit-in restaurant.

Product Strategy. All burgers in the premium Six Dollar line will be supported by a quality satisfaction guarantee. Put into effect in 2005, consumers are able to contact the restaurant in which the burger was purchased and request a refund if they are unhappy with our services.

Pricing Strategy. The Six Dollar Burger is sold at $3.99 per burger; however some restaurant locations hold promotions and price the item differently for a short period of time. We expect to send out promotions and coupons to encourage potential customers to try the product and become loyal to premium burgers at a very affordable, fast food price.

Distribution Strategy. CKE Restaurants operates under a corporate owned, as well as franchisee-franchisor distribution channels1. In terms of distribution channels, focusing on the process of manufacturing of goods to the point where it reaches consumers is met through creating main distribution centers in prominent domestic regions, as well as international ones. Our goal is to evaluate our presence in the QSR market and gauge the profitability of our restaurant operation through delivering products from parent


company to our subsidiaries. Our main mission is to “integrate the buying functions of each chain so that all enjoy cost benefits ... we see that with combined volume purchases come scales of economies and reduced costs all across the board” (Prewit, 1998)Figure A1.3

Referring to the figure provided, in the areas of heavy concentration of CKE restaurants, we are supplying our products and services to consumers at convenient locations in which demand for fast food is growing. Further, it is evident that Hardee’s restaurants are heavily concentrated in the east to south east region of the domestic United States. Also, it is clearly evident that CKE has potential to penetrate the market with the launch of more restaurants ranging from the west to the Midwestern states of the domestic United States.


VIII. Marketing Communication Strategy

By integrating all messages in the media, CKE will strengthen the brand name and recognition of the product, the Six Dollar Burger, and capitalize on the product differentiation compared to similar items circulating in the market. Through using all forms of the promotional mix, we plan to create long lasting, lifetime relationships with our consumers.

In order to strengthen our brand recognition and equity, what is first and foremost important is the consistency in which we present the CKE brand. Without a doubt, our target market that we appeal to most is the male gender group within the ages of 18 to 24. Our marketing strategy through promotion has always been to appeal to this core group using provocative, suggestive, and sexually appealing ads and concepts. In this arena, “sex sells”. In addition to this, it is embedded our brand reputation to use humor as a means of communication to our customers. By generating controversial pieces of public display, we are able to instil in our consumer a brand image and position that is truly memorable after watching or seeing it for the first time.

o Case in point: Sex sells. Paris Hilton’s 2001 commercial for the Six Dollar Burger consisted of the celebrity washing her Bentley in a black, leather bikini, eating our premium burger. Following suit, we have been using beautiful women as spokes-models for our Six Dollar Burgers, salads, and Turkey Burgers.

o Case in point: memorably humorous. The commercial involving a farmer shaking a cow and dancing to the song “milkshake” by Kelis was advertising ‘Hand Scooped Ice Cream Shakes’ at all CKE restaurants.

Advertising. We will utilize television commercials, billboards, newspaper, radio, and print ads.

Personal Selling. All sales associates serving at CKE Restaurants will be required to ask customers if they would like to try a Six Dollar Burger feature menu item, via drive through and personal contact.

Sales Promotion. With every launch of an introductory item, or a customer favorite, we offer and circulate coupons, contests, cents-off deals, premiums, and use Android and iPhone apps that offer coupons and free items as an incentive to increase traffic into our restaurants.

Public Relations. On our CKE Restaurants website, we chronicle our events and post articles written for us, and about us. These articles include the progress of our company, as well as the philanthropic advances we have made to contribute to the improvement of society.


Direct Marketing. CKE will use direct mail and catalogs and online marketing to expand our brand. Through creating a Facebook page and Twitter account, fans are encouraged to follow our progress, keep up to date with promotional efforts, and engage in dialogue, in order to inform and communicate to us what works and what needs improvement. Furthermore, by using the “Happy Star” logo as a personality, consumers are able to relate to the brand on a personal level, since he is responsible for posting Facebook and Twitter updates.

i. Marketing Research

Through marketing research, we are investigating the best possible locations for future CKE restaurants. The tools we are planning to assist in decision making include Market Research for QSRs, Government Census data, and Index data. By examining our current stance in the domestic market, we are able to verify which regions have not been exposed to CKE concepts, and further analyze the demand that region has for convenient, QSR restaurants. By finding areas in which we are under-stored and under-represented, we are able to pinpoint possible locations. Furthermore, the supply of kitchenware should match the demand of consumers, i.e. consumer spending in the fast food market.

Through research provided by different companies and the federal government, we are able to analyze the population density in certain regions, account for differing demographics such as age group, income, education level, and socio-economic levels.

The end goal of utilizing marketing research is to pinpoint locations that could potentially generate increasing revenue where the demand for our products exceeds the supply in the area.


ii. Marketing Organization

Andrew F. Puzder CEO

Theodore AbajianEVP, CFO

Bradford R. HaleyEVP, Hardee's &

Carl's Jr. Marketing

E. Michael MurphyPresident, CLO

Jeffrey P. ChasneyEVP, CIO, Strategic

Planning

Richard BruxtonEVP, Real Estate

Development


IX. Action Programs8

The Six Dollar Burger will need to undergo some changes in order to meet consumer demands on a larger scale. By doing so, we have created an action program that enables us to research, test, and improve our products across the board.

i. Research. In this phase of the action program, we will be conducting research on improving the “bun” aspect of the burger. According to many consumers, our Six Dollar Burger is too hefty for the conventional sesame seed bun used in our other burger lines. Therefore, to satisfy these demands, we will research the best possible bun that complements the burger, and is of the highest quality possible while holding our budget’s integrity. Our approach is to find an artisan style bakery bun that is soft and chewy, and substantial enough to hold a half pound burger patty, along with sauces and fresh cut vegetables.

ii. Test. In this phase, we will test our market to see if the improvements we have made on the buns affect the demand for the Six Dollar Burger, itself. We will text these burgers in each region, domestically, before attempting to test in international and global markets. Our goal is to create the perfect value burger using top quality, premium ingredients that satisfies the craving for an “American Man’s Burger”.

iii. Improve. By using market research and testing the products directly to our consumers, we will determine the best possible way to make our burgers truly “bigger and better”. Following, we will use Public Relations to inform the public of the improvements made in order to cater to consumers’ demands, and launch promotional efforts to increase traffic into CKE restaurants. Furthermore, the use of social media, such as Facebook and Twitter, will be used in conjunction to showcase the new and improved Six Dollar Burger, and enable fans to communicate their likes and dislikes in order for us to continue to satisfy new demands.

8 The month to month was not used as a model for this action program primarily because it is irrelevant to gauge by month the process it takes to tailor our product to meet consumers’ demand and reach “customer delight” entirely.


X. Budgets

Projected revenue for the next year, in the sales of Six Dollar Burgers is $26,613,000, with a total of 6,669,925 units sold. The unit sales price of each Six Dollar Burger is set at $3.99 and holds a variable cost of $1.59 to produce. We anticipate a year loss at less an $3.5 million. Break even calculations indicate that:

Fixed Cost / Wholesale unit cost – Variable cost = Break-even point

$623,580,000 / $3.99 per unit – $1.59 per unit = 259,825,000 units

XI. Controls

Carl Karcher Enterprises is currently in the process of implementing new measures in its corporate as well as franchise licensed restaurants to monitor and control quality assurance in our products and services provided. Through these programs, we will be able to ensure 100% satisfaction in service in person to person contact between employees and customers, as well as products sold—from the oven to the consumer’s hands. With our action plan in place, our goal is to study the market of consumers and their reactions to the change in our premium burgers, and thus react in a way as to improve our burger, and improve our brand reputation.

Following the Domino’s Pizza model, we plan on publicly portraying what goes on in test kitchens, real customers’ reactions to the changes made to the Six Dollar Burger, and show the world how and what we plan on doing to improve the Six Dollar Burger to be an even better product for the value paid. This public campaign will be carried out by Public Relations, and place CKE in good lighting with the domestic as well as global community to show that we are, at the root of it all, a customer driven firm in the business of satisfying consumers’ hunger.

XII . Bibliography


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