CKE announced its expected acquisition of Hardee's Food Systems last week (AA, April 21), for $327 million.
By late summer, CKE will open two tests-one in Peoria, Ill., and one in an undisclosed southern market-where stores will be converted to dual-branded units selling Hardee's breakfast and Carl's Jr. lunch and dinner menus.
"Teaming Carl's Jr.'s big, juicy charbroiled burgers with Hardee's superior breakfasts enables us to show-case each chain's strengths," said CKE Chairman William Foley in a statement last week.
BREAKFAST=30% OF SALES
Hardee's biscuit breakfasts represent about 30% of sales, said Hardee's President-CEO Steve McManus, while breakfast at Carl's Jr. and most other chains is a scant 10% of sales.
Beyond breakfast, however, the longevity of the Hardee's brand is still in question. The dual-branded test units will feature the Carl's Jr. logo more prominently, as will TV spots to run in the two test markets, Mr. McManus said.
Mendelsohn/Zien, Los Angeles, handles Carl's Jr. and is likely to produce the test-market spots.
As soon as the deal closes, Carl's Jr. and Hardee's will begin teaming up for national promotions, Mr. McManus said.
If the dual-branded test units prove successful, all Hardee's 790 company-owned restaurants will be converted to the format, Mr. McManus said, although it remains to be seen whether the Hardee's logo will appear on restaurant signage.
Mr. McManus admitted that maintaining two brand identities could be difficult.
Restaurant consultant Ron Paul called the CKE test "a bolder step than has ever been taken before in dual-branding," but added that contributions of Hardee's breakfast alone ultimately won't be great enough to support a second brand.
TRANSITION TO NAT'L CHAIN?
"It's a test and possibly a transition phase leading to Carl's becoming a [national] chain," he said.
In the coming months, CKE will begin adding its Carl's Jr. burgers to all company-owned Hardee's restaurants and will cease serving Hardee's fried chicken and roast beef sandwiches, which have-n't been profitable products, according to one analyst.
Since most Har-dee's restaurants fry their burgers, CKE will install new charcoal grills to prepare the Carl's Jr. products.
The strategy may work: One major Hardee's franchisee already testing grilled burgers in its restaurants in Virginia and North Carolina said the new sandwiches have helped reverse negative same-store sales.
HARDEE'S FRANCHISEES WARY
Hardee's long-suffering franchisees appear interested in their ambitious new parent, but are wary of a total conversion.
"No one on the East Coast knows what Carl's Jr. is," said Bill Boddie, president of franchisee Boddie-Noel in Rocky Mount, N.C.
Hardee's Mr. McManus said he believes franchisees-who've experienced years of declining sales-will want to convert to a dual-branded format, but that Hardee's will continue to support franchisees who don't wish to change.
"As long as there are [markets] that are all Hardee's, we will have Hardee's ads," he said.