BRAND IN TROUBLE: Hardee's blamed for much of CKE's 1st-quarter loss

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After CKE restaurants posted a first-quarter loss of $2.5 million, observers are wondering if the star shining above its Hardee's chain has burned out.

"[Hardee's] has been sliding for years and they can't seem to stop it," said Bob Goldin, exec VP of consultancy Technomic. CKE blamed much of its recent loss on Hardee's, which saw same-store sales for company-owned units fall 6.2% for the first quarter ended May 22 -- on top of a 4.9% drop in the fourth quarter of 1999.

Hardee's has become the industry's poster child for what can happen to a chain that tinkers too much with its advertising and focus. Its current agency, Johnson/Ukropina, Irvine, Calif., is its eighth in as many years. Its advertising creative also has jumped around, with taglines ranging from "Big taste little money" and "Go all out" to "Where the food's the star."

"They were looking for the strategy du jour," a former agency executive on the account said.

NOMADIC ACCOUNT

Even now, Johnson/Ukropina is said to have a tenuous hold on the nomadic $100 million account. Two conflicting sets of rumors have been boiling in recent weeks, including one that the chain is entertaining new-business pitches from other agencies. The other is that the account will be moved to the agency for CKE sibling Carl's Jr.'s, Mendelsohn/Zien, Los Angeles.

A CKE spokeswoman denied there would be any changes on the account.

When CKE, owner of Carl's Jr. and Taco Bueno, bought Hardee's Food Systems in 1997 from Imasco for $327 million, the plan was to convert the units into Carl's Jr.'s outlets.

Now Hardee's is creating a hybrid of the two in a major overhaul that wraps such equities from Carl's Jr. as charbroiled burgers, sit-down service and self-service beverage bars around Hardee's scratch breakfast biscuits (about 40% of Hardee's business is concentrated at breakfast). The rebranding creates Star Hardee's, which will be in place at all 2,800 Hardee's units by 2002.

"Star Hardee's in some markets is doing better . . . but it has not met expectations," said Andrew Barish, analyst with Robertson Stephens.

Hardee's media and advertising also have been overhauled. Following New York-based Western Initiative Media's resignation, Hardee's media buying was split among three regional agencies: Lewis Advertising, Rocky Mount, N.C.; Keller Crescent Co., Evansville, Ind.; and Jordan Associates, Oklahoma City, Okla.

Johnson/Ukropina got national creative in December from Leap Partnership, Chicago. Before that, Angotti, Thomas, Hedge, New York, handled Hardee's for eight months in 1998, succeeding Team One, El Segundo, Calif. Team One had acquired the business from Pearlstein Group, Los Angeles, which got it from Euro RSCG Tatham, Chicago. Tatham won the business from Deutsch, New York, in February 1995; Deutsch got the account in 1993 from Ogilvy & Mather, New York.

Agency executives said Hardee's problems lie far deeper than marketing. "Their biggest issue as a brand was that they didn't have a value proposition," said a second agency executive formerly on the business

"Even if they had the best advertising and marketing in the world, their other problems in operations and management don't make [marketing] matter as much," analyst Mr. Barish said.

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