Strategic Marketing Plan

Strategic Marketing Plan


Carl Karcher Enterprises, Inc. (CKE)

Fall

2011

Sarina El

Carl Karcher Enterprises, Inc.

Fall 2011


Table of Contents

Executive Summary Page 1

Current Marketing Situation

Figure A1.1 Financial Standing 5yr Term Page 3

Market Description Page 4

Potential Market Segment Page 4

Product Review Page 6

Figure A1.2 Customer Need & Our Solutions Page 7

Competitive Review Page 8

McDonald’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 11

Chart of Corporate Owned Restaurants vs. Franchise and Licensed Restaurants

Page 11

Franchise Information Overview Page 12

Franchise Information: Training and Support Page 12

SWOT Analysis Page 13

Strengths Page 13

Weaknesses Page 14

Opportunities Page 15

Threats Page 15

Objectives and Issues Page 17

1st Year Objectives Page 17

2nd Year Objectives Page 17

Issues Page 17

Marketing Strategy Page 18

Position Page 18

Product Page 18

Price Page 18

Distribution Page 18

Figure A1.3 Shows Domestic Map of all CKE Restaurants (USA)

Page 19

Marketing Communication Strategy Page 20

Promotion Mix Page 20

Advertising Page 20

Personal Selling Page 20

Sales Promotion Page 20

Public Relations Page 20

Direct Marketing Page 21

Market Research Page 21

Market Organization Page 22

Action Programs Page 23

Research Page 23

Test Page 23

Improve Page 23

Budgets Page 24

Controls 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 sti ll 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 line of Six Dollar Burgers featuring different variations of the “Original” such as Hawaiian Teriyaki, Guacamole, Portobello Swiss, etc. Our premium Signature Six Dollar Burger l ine 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 QSR1 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 stil l 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 wit h 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 2007

Revenue $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 $50.17M

Net Profit Margin

2.72% 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 $152,278 Shareholder’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

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


i. Market Description

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 $3.99

2011 Sales $1.33 Billion 1 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 $4.19

2011 Sales $24.07 Billion

1 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 $3.99

2011 Sales $2.5 Billion 1 year sales growth (6.85%) 2011 Net Income $1.34 Billion 2011 Net Growth (6.65%)


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%


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 Total

Corporate Owned

423 466 1 890

Franchised 674 1,226 10 1,910

Licensed 152 207 -- 359

Total 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 territory

o Submitting a Real Estate

package

o Committing to a Franchise

Agreement

o Developing a site

o Training your crew

o Getting the Grand

Opening approved

o Opening your unit


Franchise Information Overview5

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

Experience Previous Franchise or Restaurant Experience Preferred

Multi-Unit Development 3 Restaurant Minimum Development Fee $10,000 Franchise 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 years Franchise 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 conc ept 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 competitio n 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 Abajian EVP, CFO

Bradford R. Haley EVP, Hardee's &

Carl's Jr. Marketing

E. Michael Murphy President, CLO

Jeffrey P. Chasney EVP, CIO, Strategic

Planning

Richard Bruxton

EVP, 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

Allnoch, A. (1997). Forecasting software ensures fast food customers' satisfaction. Institute of

Industiral Engineers Solutions , 50.

Burger King Corporation. (2010, August 5). Press Room. Retrieved November 15, 2011, from Burger

King: http://www.bk.com/en/us/company-info/press/press-release1149.html

Carl's Jr. . (2011). The Carl's Jr. Story, Celebrating 70 Years. Retrieved October 10, 2011, from

http://www.carlsjr.com/company/story

CKE Restaurants. (2008-2011). Our History. Retrieved October 10, 2011, from CKE:

http://www.ckr.com/about.html

CKE Restaurants, Inc. (2011, April 14). Reports Results for Fourth Quarter and Full Year Fiscal 2011.

Retrieved December 3, 2011, from Investors: CKE : http://investor.ckr.com/press-release/cke/cke-

restaurants-inc-reports-results-fourth-quarter-and-full-year-fiscal-2011

CKE, I. (2011). Carl Karcher Enterprises, Inc. . Retrieved November 15, 2011, from Carl's Jr. Delicious

Food. Tasty Facts.: http://www.carlsjr.com/menu/charbroiled-burgers/the-original-six-dollar-burger

Commission, U. S. (2010, January 25). Form 10-K. Retrieved December 4, 2011, from

https://webvpn.ucr.edu/+CSCO+0h756767633A2F2F6A6A6A2E7A7265747261676261797661722E70

627A++/-CSCO-3h--documents.php?compnumber=13280

DataMonitor. (2011, April 15). CKE Restaurants, Inc. . Retrieved December 6, 2011, from Company

Profile: http://datamonitor.com/cke

DocStoc. (2011). Marketing Communication Strategies. Retrieved November 15, 2011, from .docstoc

> documents and resources for small businesses and professionals:

http://www.docstoc.com/docs/14622325/Marketing-Communication-Objectives

Gilbert, M. A. (2009). Carl's Jr. The Brand & Social Media. Retrieved November 10, 2001, from

Slideshare: http://www.slideshare.net/doctorious/the-social-media-marketing-secrets-of-carls-jr

Horovitz, B. (2009, September 18). McDonalds, Burger King Serve Up Premium Burgers. Retrieved

November 15, 2011, from USA Today: http://www.usatoday.com/money/industries/food/2009-09-

17-premium-fast-food-burgers_N.htm

Hoyland, C. (2009, June 22). QSR Web, Ideas and Trends for the Quick Service Restaurant. Retrieved

December 3, 2011, from NetWorld Alliance: http://www.qsrweb.com/article/98529/Can-QSR-

premium-burgers-survive-the-economy

Jin. (2011, October 27). Phoood. Retrieved December 6, 2011, from The best source for honest

reviews of food you shouldn't eat: http://www.phoood.com/weblog/archives/000393.html

Lash, D. (2011, August 21). Where Fast Food Flourishes. Retrieved November 13, 2011, from The

Morning Call:


https://webvpn.ucr.edu/+CSCO+d0756767633A2F2F7479626F6E792E736E706776696E2E70627A++/

ha/default.aspx

Mansfield, B. (2011, July 11). Carl's Jr. Celebrates 70th Anniversary. Retrieved November 15, 2011,

from Business Wire:

http://www.businesswire.com/news/home/20110711006885/en/Carl%E2%80%99s-Jr.-Celebrates-

70th-Anniversary

News Bites - Global Bonds. (2011). CKE Restaurants dips 0.46%, falling for a second day, a 2-day fall

of 0.69% November 09, 2011. New York City: CTGNBT.

Prewit, M. (1998, August). Business Library. Retrieved December 2011, from CBS Interactive Business

Network Resource Library: findarticles.com/p/articles/mi_m3190/is_n31/ai_20985437/

Ransohoff, J. (2011). Fast Food. Retrieved October 10, 2011, from Palo Alto Medical Foundation, A

Sutter Health Affiliate: http://www.pamf.org/teen/health/nutrition/fastfood.html

Schlosser, E. (2009, February 11). Americans are Obsessed with Fast Food. Retrieved October 10,

2011, from CBS News: http://www.cbsnews.com/stories/2002/01/31/health/main326858.shtml

Sunset, B. (2008, May 5). Six Dollar Burger Campaign. Retrieved November 15, 2011, from Marketing

Campaign Case Studies: http://marketing-case-studies.blogspot.com/2008/05/six-dollar-burger-

campaign.html

Thomadsen, R. (2007). Product Positioning and Competition: The Role of Location in the Fast Food

Industry. Marketing Science , 792-804.

Wikinvest. (2011). CKE Restaurants (CKR). Retrieved October 10, 2011, from Wikinvest:

http://www.wikinvest.com/stock/CKE_Restaurants_(CKR)

Yohn, D. L. (2011). Target Markets for Restaurants. QSR .

Strategic Marketing Plan

Documents

Transcript of Strategic Marketing Plan